EXHIBIT 2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
BOSS INVESTMENT LLC
and
BUILDING ONE SERVICES CORPORATION
Dated as of December 23, 1998
TABLE OF CONTENTS
ARTICLE I THE MERGER......................................................................................................2
1.1 The Merger......................................................................................................2
1.2 Consummation of the Merger......................................................................................2
1.3 Effects of the Merger...........................................................................................2
1.4 Certificate of Incorporation and Bylaws.........................................................................2
1.5 Directors and Officers..........................................................................................3
1.6 Company Actions.................................................................................................3
1.7 Stockholders' Meeting...........................................................................................3
ARTICLE II EFFECTS OF THE MERGER..........................................................................................4
2.1 Retained Share Elections........................................................................................4
2.2 Conversion of Shares............................................................................................5
2.3 Proration.......................................................................................................6
2.4 Conversion of Capital Stock of Newco............................................................................7
2.5 Exchange of Certificates........................................................................................7
2.6 Warrants and Company Stock Options..............................................................................9
2.7 FBR.............................................................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................................9
3.1 Organization....................................................................................................9
3.2 Capitalization.................................................................................................10
3.3 Subsidiaries...................................................................................................11
3.4 Authority......................................................................................................11
3.5 Consents and Approvals; No Violations..........................................................................12
3.6 SEC Documents; Financial Statements; Other Financial Information...............................................12
3.7 Company Acquisitions...........................................................................................13
3.8 Information Supplied...........................................................................................13
3.9 Absence of Certain Changes or Events...........................................................................14
3.10 Litigation.....................................................................................................14
3.11 Contracts......................................................................................................15
3.12 Compliance with Laws...........................................................................................15
3.13 Environmental Matters..........................................................................................16
3.14 Absence of Changes in Benefit Plans; Labor Relations...........................................................17
3.15 Employment Matters; Affiliate Transactions.....................................................................18
3.16 ERISA Compliance...............................................................................................18
3.17 Taxes..........................................................................................................20
3.18 Title to Properties; Condition of Assets.......................................................................21
3.19 Intellectual Property..........................................................................................21
3.20 Non-Compete....................................................................................................22
3.21 Voting Requirements............................................................................................22
3.22 State Takeover Statutes........................................................................................22
3.23 Brokers........................................................................................................22
3.24 Opinion of Financial Advisor...................................................................................23
3.25 Government Contracts...........................................................................................23
3.26 Insurance......................................................................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTOR AND NEWCO..........................................................23
4.1 Organization...................................................................................................24
4.2 Authority......................................................................................................24
4.3 Consents and Approvals; No Violations..........................................................................24
4.4 Information Supplied...........................................................................................25
4.5 Capitalization of Newco; Ownership of Company Common Stock.....................................................25
4.6 Financing......................................................................................................26
4.7 Brokers........................................................................................................26
ARTICLE V COVENANTS......................................................................................................26
5.1 Conduct of Business............................................................................................26
5.2 No Solicitation................................................................................................28
5.3 Certain Tax Matters............................................................................................29
5.4 Other Actions..................................................................................................30
5.5 Advice of Changes; Filings.....................................................................................30
5.6 Financial Information..........................................................................................30
5.7 Financing......................................................................................................30
5.8 Management and Employee Stockholders...........................................................................31
5.9 Update to Schedules............................................................................................31
ARTICLE VI ADDITIONAL AGREEMENTS.........................................................................................31
6.1 Preparation of Proxy Statement/Prospectus; Schedule 13E-3......................................................31
6.2 Access to Information; Confidentiality.........................................................................32
6.3 Reasonable Efforts; Notification...............................................................................32
6.4 Fees and Expenses..............................................................................................33
6.5 Director and Officer Liability.................................................................................35
6.6 NASDAQ Listing.................................................................................................36
6.7 Public Announcements...........................................................................................36
6.8 Stop Transfer..................................................................................................36
6.9 Further Assurances.............................................................................................36
ARTICLE VII CONDITIONS...................................................................................................37
7.1 Conditions to Each Party's Obligation to Effect the Merger.....................................................37
7.2 Conditions to the Company's Obligation To Effect the Merger....................................................38
7.3 Conditions to the Investor's and Newco's Obligations to Effect the Merger......................................38
ARTICLE VIII TERMINATION AND AMENDMENT...................................................................................39
8.1 Termination....................................................................................................39
8.2 Effect of Termination..........................................................................................41
ARTICLE IX MISCELLANEOUS.................................................................................................41
9.1 Amendment......................................................................................................41
9.2 Extension; Waiver..............................................................................................42
9.3 Nonsurvival of Representations, Warranties and Agreements......................................................42
9.4 Notices........................................................................................................42
9.5 Interpretation.................................................................................................43
9.6 Entire Agreement; Third Party Beneficiaries....................................................................44
9.7 Governing Law..................................................................................................44
9.8 Counterparts...................................................................................................44
9.9 Assignment.....................................................................................................44
9.10 Enforcement....................................................................................................45
ii
List of Schedules
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Schedule 3.2(b): Company Stock Options and Warrants
Schedule 3.2(c): Employee Ownership of Capital Stock
Schedule 3.3(a): Subsidiaries
Schedule 3.3(b): Stock Ownership of Subsidiaries
Schedule 3.3(c): Letters of Intent
Schedule 3.3(d): Investments
Schedule 3.5(b): Governmental Consents
Schedule 3.5(d): Third Party Consents
Schedule 3.5(f): Loss of Permits
Schedule 3.6: Undisclosed Liabilities
Schedule 3.7: Company Acquisitions
Schedule 3.9: Absence of Certain Changes or Events
Schedule 3.10: Litigation
Schedule 3.11(a): Material Contracts
Schedule 3.12: Compliance with Laws
Schedule 3.13(a): Compliance with Environmental Laws
Schedule 3.13(b): Release of Hazardous Materials
Schedule 3.13(c): Environmental Litigation
Schedule 3.13(d): Assumption of Environmental Liabilities
Schedule 3.13(e): Storage Tanks
Schedule 3.14(a): Absence of Changes in Benefit Plans and Labor Relations
Schedule 3.14(b): Employment Agreements
Schedule 3.14(c): Payments to Employees as a Result of the Merger
Schedule 3.14(d): Collective Bargaining Agreements
Schedule 3.14(e): Labor Unionizing Activity
Schedule 3.15(a): List of Directors, Officers and Key Employees
Schedule 3.15(b): Affiliate Transactions
Schedule 3.15(c): Related Party Agreements
Schedule 3.15(d): Affiliate Ownership of Business Assets
Schedule 3.16(e): Welfare Benefit Plans
Schedule 3.16(f): Post-Retirement Medical and Life Insurance Benefits Coverage
Schedule 3.16(g): Acceleration of Benefits as a Result of the Merger
Schedule 3.17(a): Audits of Tax Returns
Schedule 3.17(b): Net Operating Loss Carryovers
Schedule 3.17(c): Excess Parachute Payments
Schedule 3.17(d): Right to Receive Parachute Gross-Up Payments
Schedule 3.18(a): Owned Real Property
Schedule 3.18(b): Leased Real Property
Schedule 3.18(d): Title to Real Property; Xxxxx on Real Property
Schedule 3.20: Non-Competition Agreements
Schedule 3.25: Government Contracts
Schedule 3.26: Insurance
Schedule 5.1(d): Pending Acquisitions
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Schedule 5.1(k): Certain Matters with Respect to Options and Bonuses
Schedule 5.8: Parties to Stockholders Agreement
iv
List of Exhibits
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Exhibit 1.4(a): Preferred Stock Term Sheet
Exhibit 5.8: Form of Stockholders Agreement
Exhibit 7.3(a): Form of Opinion of Xxxxxx, Xxxxx & Bockius
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Index of Defined Terms
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Defined Term Section
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Acquisition Agreement........................................................................................5.2(b)
Acquisition Proposals........................................................................................5.2(a)
Actual Retained Share Number.................................................................................2.3(a)
Agreement.....................................................................................................Intro
Alternative Transaction......................................................................................5.2(a)
By-laws......................................................................................................1.4(b)
Benefit Plans...............................................................................................3.16(a)
Cash Merger Price........................................................................................2.2(c)(ii)
Certificate of Incorporation.................................................................................1.4(a)
Closing.........................................................................................................1.2
Code........................................................................................................3.16(a)
Commonly Controlled Entity..................................................................................3.16(a)
Company.......................................................................................................Intro
Company Acquisitions............................................................................................3.7
Company Stock Options........................................................................................3.2(a)
Company Stockholders Approval...................................................................................3.4
Contracts...................................................................................................3.11(a)
DGCL..........................................................................................................Intro
Dissenting Shares............................................................................................2.2(b)
Effective Time..................................................................................................1.2
Elected Cash Share...........................................................................................2.1(d)
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Elected Retained Share.......................................................................................2.1(d)
Elected Retained Share Number................................................................................2.3(b)
Election Date................................................................................................2.1(a)
Election Form................................................................................................2.1(a)
Environmental Laws..........................................................................................3.13(a)
Equity Investment Amount.....................................................................................2.4(b)
Exchange Fund................................................................................................2.5(f)
Excluded Shares..............................................................................................2.2(a)
Expense Reimbursement Event..................................................................................6.4(h)
Financial Advisor...............................................................................................1.6
Financing Letters...............................................................................................5.7
Formation.......................................................................................................4.1
GAAP.........................................................................................................3.6(a)
Governmental Entity.............................................................................................3.5
Hazardous Materials.........................................................................................3.13(b)
HSR Act.........................................................................................................3.5
Intellectual Property Right.................................................................................3.19(a)
Investor's Expenses..........................................................................................6.4(f)
Laws...........................................................................................................3.12
Leased Property.............................................................................................3.18(b)
Xxxxx........................................................................................................3.3(b)
knowledge.......................................................................................................9.5
key employee................................................................................................3.15(a)
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material adverse change.........................................................................................9.5
Material Adverse Effect.........................................................................................9.5
Material Contracts..........................................................................................3.11(a)
Merger........................................................................................................Intro
NASDAQ..........................................................................................................6.6
New Preferred Stock..........................................................................................1.4(a)
Newco...........................................................................................................1.1
Notice of Guaranteed Delivery................................................................................2.1(b)
NOL Carryforwards...........................................................................................3.17(b)
Non-Elected Cash Share.......................................................................................2.3(b)
Non-Elected Retained Share...................................................................................2.3(c)
Outside Date.................................................................................................8.1(b)
Owned Property..............................................................................................3.18(a)
Parachute Gross-Up Payment..................................................................................3.17(c)
Paying Agent.................................................................................................1.7(b)
Payment Event................................................................................................6.4(g)
PCBs........................................................................................................3.13(b)
Pension Plans...............................................................................................3.16(b)
Permits........................................................................................................3.12
Post-Signing Returns............................................................................................5.3
Proceeding.....................................................................................................3.10
Proxy Statement/Prospectus...................................................................................1.7(a)
Release.....................................................................................................3.13(a)
viii
Retained Share............................................................................................2.2(c)(i)
Schedule 13E-3...............................................................................................6.1(b)
Shares........................................................................................................Intro
Securities Act..................................................................................................3.5
SEC..........................................................................................................1.7(a)
SEC Documents................................................................................................3.6(a)
Special Committee...............................................................................................1.6
Special Meeting..............................................................................................1.7(a)
Stockholder Agreement.........................................................................................Intro
Subject Litigation...........................................................................................6.5(b)
Subsidiaries.................................................................................................3.3(a)
Surviving Corporation...........................................................................................1.1
SRLY........................................................................................................3.17(b)
taxes.......................................................................................................3.17(b)
Termination Fee..............................................................................................6.4(e)
Termination Right Expiration Date............................................................................8.1(j)
Third Party..................................................................................................5.2(a)
Warrants.....................................................................................................3.2(a)
ix
AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of December 23, 1998,
----------
between BOSS INVESTMENT LLC, a limited liability
company (the "Investor"), and BUILDING ONE
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SERVICES CORPORATION, a Delaware corporation (the
"Company").
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WHEREAS, the Board of Directors of the Company has determined that it
is fair and in the best interests of its stockholders for a Delaware corporation
to be formed, and wholly-owned, by the Investor, to merge with and into the
Company (the "Merger") pursuant to Section 251 of the Delaware General
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Corporation Law ("DGCL") upon the terms and subject to the conditions set forth
----
herein;
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving and declaring advisable the Merger, this Agreement and the
transactions to which the Company is a party contemplated hereby, and has
agreed, upon the terms and subject to the conditions set forth herein, to
recommend that the Company's stockholders approve the Merger and this Agreement;
WHEREAS, the parties have agreed (subject to the terms and conditions
of this Agreement) to effect the Merger as soon as practicable following the
approval by the stockholders of the Company, as more fully described herein;
WHEREAS, it is intended that the Merger be treated as a
recapitalization of the Company for financial reporting purposes;
WHEREAS, as soon as practicable following the execution of this
Agreement and as an inducement to the Investor to enter into this Agreement, the
Investor and certain stockholders of the Company are entering into a Stockholder
Agreement (the "Stockholder Agreement") pursuant to which such stockholders
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have, among other things, granted to the Investor an irrevocable proxy to vote
his or its shares of common stock, par value $.001, of the Company ("Shares") in
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favor of the Merger and all other actions necessary to consummate the Merger,
upon the terms and subject to the conditions set forth in the Stockholder
Agreement; and
WHEREAS, the Investor and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Investor and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
Prior to the Effective Time (as defined below), the Investor shall form a
new corporation to be called Boss Acquisition Corp. ("Newco") in accordance with
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the relevant provisions of the DGCL. After the formation of Newco, Investor
shall (a) cause Newco to execute and deliver a joinder agreement pursuant to
which it will become a party to this Agreement and (b) execute and deliver a
formal written consent under Section 228 of Delaware Law as the sole stockholder
of Newco, approving the execution, delivery and performance of this Agreement by
Newco. Upon the terms and subject to the conditions hereof, and in accordance
with the relevant provisions of the DGCL, Newco shall be merged with and into
the Company as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VII. The Company shall be
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the surviving corporation in the Merger (the "Surviving Corporation") and shall
---------------------
continue its existence under the laws of Delaware. From and after the Effective
Time, the separate corporate existence of Newco shall cease.
1.2 CONSUMMATION OF THE MERGER.
Subject to the provisions of this Agreement, the parties hereto shall cause
the Merger to be consummated by filing with the Secretary of State of the State
of Delaware a duly executed certificate of merger, as required by the DGCL, and
shall take all such other and further actions as may be required by law to make
the Merger effective as promptly as practicable. Prior to the filing referred
to in this Section, a closing (the "Closing") will be held at the offices of
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X'Xxxxxxxx Graev & Karabell, LLP, 30 Rockefeller Plaza, 24th Floor, New York,
New York (or such other place as the parties may agree) for the purpose of
confirming all the foregoing. The time the Merger becomes effective in
accordance with applicable law is referred to as the "Effective Time."
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1.3 EFFECTS OF THE MERGER.
The Merger shall have the effects set forth in the applicable provisions of
the DGCL and set forth herein.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation; provided that by and in the
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Merger, the Restated Certificate of Incorporation shall be amended (i) to
prohibit holders of Shares from taking action by written consent of less
than all of the holders of the class or classes of capital stock entitled
to vote thereon and (ii) to authorize 11,000,000 shares of series preferred
stock, of which 6,000,000 shares shall be designated as a new series of
Convertible Preferred Stock of the Company containing the relative rights,
terms, limitations and preferences set forth in EXHIBIT 1.4(A) (the "New
-------------- ---
Preferred Stock")) (as amended, the "Certificate of Incorporation"). The
--------------- ----------------------------
amendments to the certificate of incorporation shall be in form reasonably
satisfactory to the Investor. The Certificate of Incorporation shall be
the
2
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The by-laws of Newco (the "By-laws") as in effect immediately
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prior to the Effective Time shall be the by-laws of the Surviving Corporation,
until thereafter changed or amended as provided therein or by applicable law.
1.5 DIRECTORS AND OFFICERS.
The directors and officers of the Company immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
until their respective successors are duly elected and qualified; provided that
-------- ----
as part of the Merger, the size of the board of directors shall be automatically
increased to the size set forth in EXHIBIT 1.4(A) and the persons elected by the
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Investor in accordance with the terms of the New Preferred Stock shall
automatically become directors of the Company.
1.6 COMPANY ACTIONS.
The Company hereby represents and warrants that (a) at meetings duly called
and held, its Board of Directors and a special committee consisting of
disinterested directors (the "Special Committee")), has (i) determined that the
-----------------
Merger (upon the terms and subject to the conditions of this Agreement) is fair
to and in the best interests of the stockholders of the Company, (ii) approved
and declared advisable this Agreement and the Merger, (iii) determined to
recommend (subject to Section 5.2 of this Agreement) approval of the Merger and
-----------
this Agreement by the stockholders of the Company, (iv) taken all necessary
steps to render the restrictions of Section 203 of the DGCL inapplicable to the
Merger and the transactions contemplated by this Agreement (including the
execution, delivery and performance of the Stockholder Agreement by the
stockholders of the Company), (v) resolved to elect not to be subject, to the
extent permitted by Law, to any state takeover law other than Section 203 of the
DGCL that may purport to be applicable to the Merger, or the transactions
contemplated by this Agreement and (vi) determined not to accelerate the vesting
of any Company Stock Options or Warrants except as permitted by Section 5.1(k)
--------------
and (b) Friedman, Billings, Xxxxxx & Co., Inc. (the "Financial Advisor") has
-----------------
advised the Special Committee and the Company's Board of Directors that, in its
opinion, the consideration to be received and retained by the Company's
stockholders (other than the Investor and its Affiliates) in the Merger is fair,
from a financial point of view, to such stockholders.
1.7 STOCKHOLDERS' MEETING.
(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable Law, duly call, give notice of, convene and hold a
special meeting (the "Special Meeting") of its stockholders as soon as is
---------------
reasonably practicable for the purpose of obtaining the approval of this
Agreement and the Merger, include in the registration statement on Form S-4 that
includes a proxy statement relating to any required approval by or meeting of
the Company's stockholders with respect to this Agreement and the Merger,
including the amendment to the Restated Certificate of Incorporation of the
Company (the "Proxy Statement/Prospectus") for use in connection with the
--------------------------
Special Meeting and, subject to Section 5.2, the recommendation of the
-----------
3
Company's Board of Directors that stockholders of the Company vote in favor of
the adoption of this Agreement and approval of the Merger. The Company agrees to
use commercially reasonable efforts to cause the Special Meeting to occur as
soon as possible under applicable law and the Company's Bylaws after the Company
has responded to all comments from the Securities and Exchange Commission (the
"SEC") with respect to the preliminary Proxy Statement/Prospectus as provided
---
in Section 6.1.
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(b) Prior to the mailing of the Proxy Statement/Prospectus, the Company
shall appoint an independent bank or trust company to act as paying agent (the
"Paying Agent"), which Paying Agent shall be reasonably
------------
satisfactory to the Investor, for the payment of the cash portion of the Merger
Consideration.
ARTICLE II
EFFECTS OF THE MERGER
2.1 RETAINED SHARE ELECTIONS.
(a) Each person who is a record holder of Shares as of 11:59 p.m., New
York City time, on the business day immediately preceding the date of the
Special Meeting or the date of any meeting of stockholders held pursuant to any
adjournment of the Special Meeting (the "Election Date") will be entitled, with
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respect to all or any portion of his or its Shares, to make an election to
retain Shares as set forth in, and subject to the provisions of this Section
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2.1.
---
(b) The Company shall prepare and mail a form of election, which form
shall be subject to the approval of the Investor which shall not be unreasonably
withheld (the "Election Form"), with the Proxy
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Statement/Prospectus to the record holders of Shares as of the record date for
the Special Meeting, which Election Form shall be used by each record holder of
Shares who wishes to elect to retain Shares in lieu of such Shares being
converted into the right to receive the Cash Merger Price (as defined below) for
each such Share. Notwithstanding anything to the contrary contained in this
Agreement, any such election shall be subject to proration as set forth below.
The Company will use commercially reasonable efforts to make the Election Form
and the Proxy Statement/Prospectus available to all persons who become holders
of Shares during the period between such record date and the Election Date. Any
such holder's election to retain Shares shall have been validly made only if the
Paying Agent shall have received at its designated office, on or prior to the
Election Date, an Election Form properly completed and signed in accordance with
such rules as the Paying Agent may establish pursuant to Section 2.1(e), and
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accompanied by either (i) certificates for the Shares to which such Election
Form relates, duly endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company or (ii) an appropriate guarantee of
delivery of such certificates as set forth in such Election Form from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States (a "Notice of
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Guaranteed Delivery"). Notwithstanding anything to the contrary contained
-------------------
herein, any Election Form accompanied by a Notice of Guaranteed Delivery shall
be deemed not validly made if the certificate or certificates are in fact
delivered to the Paying Agent after three (3) Nasdaq Stock Market trading days
after the date of execution of such guarantee of delivery.
4
(c) Any Election Form may be revoked only by the stockholder submitting
such Election Form if a written notice of revocation is received by the Paying
Agent prior to 5:00 p.m., New York City time, on the Election Date. In addition,
all Election Forms shall be revoked automatically if this Agreement is
terminated pursuant to Section 8.1. If an Election Form is revoked, the
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certificate or certificates (or guarantees of delivery, as appropriate) for the
Shares to which such Election Form relates shall be returned by the Paying Agent
to the stockholder submitting the same to the Paying Agent.
(d) For purposes of this Agreement, (i) "Elected Retained Share" shall
----------------------
mean a Share in respect of which an election to retain such Share is validly
made and not validly revoked prior to the Election Date and (ii) "Elected Cash
------------
Share" shall mean a Share in respect of which either an election to retain
-----
such Share is not validly made prior to the Election Date or an election to
retain such Share is validly revoked prior to the Election Date.
(e) The Paying Agent may, with the mutual agreement of Newco and the
Company, make such rules as are consistent with this Section 2.1 for the
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implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
(f) The Paying Agent shall determine (i) whether or not elections to
retain Shares have been validly made or validly revoked pursuant to this Section
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2.1 and (ii) when elections and revocations have been received by it. If the
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Paying Agent determines that any election to retain Shares was not validly made,
such Shares shall be converted in the Merger into the right to receive the Cash
Merger Price (as defined below). The Paying Agent shall also make all
computations as to the allocation and the proration contemplated by Section 2.3.
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All determinations and calculations by the Paying Agent shall be conclusive and
binding on the holders of Shares.
2.2 CONVERSION OF SHARES.
(a) All Shares held in the treasury of the Company (the "Excluded
--------
Shares") shall be canceled and shall cease to exist as of the Effective Time,
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without any consideration being payable therefore.
(b) Notwithstanding anything in this Agreement to the contrary, Shares
which would otherwise constitute Elected Cash Shares or Non-Elected Cash Shares
hereunder, which are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who did not vote in favor of the Merger
and who comply with all of the relevant provisions of Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
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right to receive the Cash Merger Price (as defined below), but instead shall be
converted into the right to receive payment from the Surviving Corporation with
respect to such Dissenting Shares in accordance with the DGCL, unless and until
such holders shall have effectively withdrawn or lost their rights to appraisal
under the DGCL. If any such holder shall have effectively withdrawn or lost such
right, such holder's Shares shall be converted into the right to receive the
Cash Merger Price (as defined below). The Company shall give prompt notice to
the Investor of any demands received by the Company for appraisal of Shares, and
the Investor shall have the right to participate in and direct all negotiations
and proceedings with
5
respect to such demands. The Company shall not, except with the prior written
consent of the Investor, make any payment with respect to, or settle or offer to
settle, any such demands.
(c) By virtue of the Merger, each Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares and
Dissenting Shares, shall be retained or converted into the right to receive cash
as follows:
(i) Each Share that is an Elected Retained Share and each Share
that is a Non-Elected Retained Share (as defined in Section 2.3(c)) (in
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either case, a "Retained Share") shall be retained by the holder thereof
--------------
following the Effective Time, shall remain outstanding and shall represent
one share of Common Stock, par value $.001 per share, of the Surviving
Corporation; and
(ii) Each Share that is an Elected Cash Share and each Share
that is a Non-Elected Cash Share (as defined in Section 2.3(b)) shall be
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converted into the right to receive from the Surviving Corporation $25 in
cash (the "Cash Merger Price").
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2.3 PRORATION.
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of Retained Shares (the "Actual Retained Share Number") shall
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be equal to 10,578,000 Shares.
(b) If the aggregate number of Shares constituting Elected Retained
Shares (the "Elected Retained Share Number") exceeds the Actual Retained Share
-----------------------------
Number, then the number of Shares which shall be Retained Shares pursuant to
Section 2.2(c)(i) shall be reduced by such excess number of Shares (each such
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Share included among such excess, a "Non-Elected Cash Share"). In such event,
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each holder of Elected Retained Shares shall be allocated Non-Elected Cash
Shares in lieu of Retained Shares such that (after giving effect to Section
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2.5(e)) each such holder shall be deemed to hold Non-Elected Cash Shares in an
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amount equal to (i) the total number of Elected Retained Shares held by such
holderless (ii) the product of (A) a fraction, the numerator of which is the
----Actual Retained Share Number, and the denominator of which is the
Elected Retained Share Number, multiplied by (B) the total number of Elected
Retained Shares held by such holder.
(c) If the Actual Retained Share Number is greater than the Elected
Retained Share Number, then the aggregate number of Shares which shall be
converted into the right to receive cash pursuant to Section 2.2(c)(ii) shall be
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decreased by a number of Shares equal to the excess of the Actual Retained Share
Number over the Elected Retained Share Number (each Share included among such
excess, a "Non-Elected Retained Share"). In such event, each holder of Elected
--------------------------
Cash Shares shall be allocated a portion of the Non-Elected Retained Shares in
lieu of Elected Cash Shares (after giving effect to Section 2.5(e)) equal to (i)
--------------
the number of Elected Cash Shares held by such holder, multiplied by (ii) a
fraction, the numerator of which is the number of Non-Elected Retained Shares
and the denominator of which is the aggregate number of Elected Cash Shares held
by all holders.
6
2.4 CONVERSION OF CAPITAL STOCK OF NEWCO.
(a) Each share of common stock, par value $.01, of Newco, issued and
outstanding immediately prior to the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, shall be converted into
and become at the Effective Time one share of common stock, par value $.001, of
the Surviving Corporation.
(b) The shares of preferred stock of Newco issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, shall be converted into and become at
the Effective Time shares of New Preferred Stock of the Surviving Corporation
having an initial liquidation preference equal to $200 million (the "Equity
------
Investment Amount").
-----------------
2.5 EXCHANGE OF CERTIFICATES.
(a) As soon as reasonably practicable as of or after the Effective Time
of the Merger, the Surviving Corporation shall deposit with the Paying Agent,
for payment in accordance with this Article II, the funds necessary to pay the
----------
product of (i) the number Shares outstanding immediately prior to the Effective
Time less the Actual Retained Share Number multiplied by (ii) the Cash Merger
Price.
(b) As soon as practicable after the Effective Time of the Merger, each
holder of an outstanding certificate or certificates which prior thereto
represented Shares, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the Paying Agent, shall be entitled to a
certificate or certificates representing the number of full Retained Shares of
the Surviving Corporation, if any, to be retained by the holder thereof as
Retained Shares pursuant to this Agreement and the amount of cash, if any, into
which the number of Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement.
The Paying Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Paying Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After the
Effective Time of the Merger, there shall be no further transfer on the records
of the Company or its transfer agent of certificates representing Shares which
have been converted, in whole or in part, pursuant to this Agreement, into the
right to receive cash, and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of such cash. If any
certificate for Retained Shares is to be issued in, or if cash is to be remitted
to, a name other than that in which the certificate for Shares surrendered for
exchange is registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed, with signature guaranteed
or otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Company or its transfer agent any transfer or other
taxes required by reason of the issuance of certificates for such Retained
Shares in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or its transfer
agent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.5(b), each certificate for Shares shall be
--------------
deemed at any time after the Effective Time of the Merger to represent only the
right to receive upon such surrender the Cash Merger Price for each Share (other
than any Retained Share) and a new certificate for each Retained Share.
7
(c) No dividends or other distributions with a record date after the
Effective Time shall be paid to the holder of any certificate for Shares not
surrendered with respect to the Retained Shares represented thereby and no cash
payment in lieu of fractional Shares shall be paid to any such holder pursuant
to Section 2.5(e) until the surrender of such certificate in accordance with
--------------
this Article II. Subject to applicable Law, following surrender of any such
certificate, there shall be paid to the holder of the certificate representing
whole Retained Shares issued in connection therewith, without interest (i) at
the time of such surrender, the amount of any cash payable in lieu of a
fractional retained share to which such holder is entitled pursuant to Section
-------
2.5(e) and the proportionate amount of dividends or other distributions with a
------
record date after the Effective Time of the Merger therefor paid with respect to
such Retained Shares, and (ii) at the appropriate payment date, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time of the Merger but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such whole Retained
Shares.
(d) All cash paid upon the surrender for exchange of certificates
representing Shares in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.5(e)) shall be deemed to
--------------
have been paid in full satisfaction of all rights pertaining to the Shares
exchanged for cash theretofore represented by such certificates.
(e) Notwithstanding any other provision of this Agreement, each holder
of Shares retained pursuant to the Merger who would otherwise have been entitled
to retain a fraction of a Retained Share (after taking into account all Shares
delivered by such holder) shall receive, in lieu thereof, a cash payment
(without interest) equal to such fraction multiplied by the Cash Merger Price.
(f) Any cash deposited with the Paying Agent pursuant to this Section
-------
2.5 (the "Exchange Fund") which remains undistributed to the holders of
--- -------------
the certificates representing Shares 180 days after the Effective Time of the
Merger shall be delivered to the Surviving Corporation at such time and any
holders of Shares prior to the Merger who have not theretofore complied with
this Article II shall thereafter look only to the Surviving Corporation and only
as general unsecured creditors thereof for payment of their claim for cash, if
any.
(g) None of Newco or the Company or the Paying Agent shall be liable
to any person in respect of any cash from the Exchange Fund delivered to a
public office pursuant to any applicable abandoned property, escheat or similar
law. If any certificates representing Shares shall not have been surrendered
prior to one year after the Effective Time of the Merger (or immediately prior
to such earlier date on which any cash in respect of such certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined below)), any such cash in respect of such certificate shall, to the
extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) The Paying Agent shall invest any cash included in the Exchange
Fund, as directed by the Company, on a daily basis. Any interest and other
income resulting from such investments shall be paid to the Company.
8
(i) The Surviving Corporation shall pay all charges and expenses of the
Paying Agent.
2.6 WARRANTS AND COMPANY STOCK OPTIONS.
(a) Except as set forth in Section 2.6(b), Outstanding Warrants and
--------------
Company Stock Options shall not be affected by the Merger and shall remain
outstanding and exercisable for Shares in accordance with their terms, except
that Company Stock Options and Warrants may be accelerated to the extent
permitted by Section 5.1(k) hereof .
--------------
(b) Each holder of an outstanding Company Stock Option that is
exercisable immediately prior to the Effective Time into Shares (including those
Company Stock Options, the vesting of which has been accelerated pursuant to
Section 5.1(k)), may elect to have such Company Stock Option cancelled at the
--------------
Effective Time in exchange for an amount in cash, payable at the time of such
cancellation, equal to the product of (i) the number of Shares subject to such
Company Stock Option immediately prior to the Effective Time multiplied by (ii)
the excess of the Cash Merger Price over the per Share exercise price of such
Company Stock Option; provided, that,
--------
no such cash payment has been made. Such election shall be made by delivery of a
written notice to the Company at least five business days prior to the Effective
Time.
2.7 FBR.
The Financial Advisor or its Affiliates shall be entitled to exercise any
Warrants held by any of them in accordance with such Warrant's terms and, with
respect to any Shares (including Shares issued upon exercise of any Warrant) can
make an election to retain Shares or receive the Cash Merger Price in the
Merger. FBR shall agree not to transfer any such Warrants prior to the mailing
of the Proxy Statement/Prospectus to the Company's stockholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor and, when formed in
accordance with the terms of this Agreement, Newco, as follows (all schedule
references in this Article III are to the schedules to the Disclosure Statement
provided by the Company to the Investor as of the date hereof):
3.1 ORGANIZATION.
The Company and each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of its organization
and has all requisite corporate power and authority to carry on its business as
now being conducted. The Company and each Subsidiary is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had a Material Adverse Effect (as defined in Section 9.5 of
-----------
this Agreement) that has not been cured and reasonably would not be
9
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the Merger. As soon as practicable after the date hereof, the
Company will make available to the Investor complete and correct copies of its
and each Subsidiary's Certificate of Incorporation and By-laws, as amended to
the date supplied.
3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 250,000,000
Shares and 500,000 shares of Convertible Non-Voting Common Stock, par value
$.001. At the close of business the business day immediately preceding the date
hereof, (a) 45,232,292 Shares were issued and outstanding, (b) 2,990,000 Shares
were held by the Company in its treasury, (c) no shares of Convertible Non-
Voting Common Stock were outstanding, (d) 3,822,971 Shares were reserved for
issuance upon exercise of outstanding options to purchase Shares ("Company Stock
-------------
Options") and 360,984 Shares were reserved for issuance upon exercise of options
-------
to purchase Shares that the Company has agreed to grant but that have not been
granted, (e) 3,080,000 Shares were issuable upon the exercise of outstanding
warrants, rights or other options to purchase Shares ("Warrants") and (f)
--------
1,000,000 Shares are reserved for issuance pursuant to the Company's Employee
Stock Purchase Plan. Except as set forth above, and except for Shares issued
since the close of business on the business day immediately preceding the date
hereof upon the exercise of any then outstanding Company Stock Option or any
then outstanding Warrant, since such date no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance, issuable or
outstanding. All outstanding Shares are, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth above, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company.
(b) SCHEDULE 3.2(B) sets forth a true, correct and complete list, with
---------------
respect o each Company Stock Option or Warrant, of (i) the holder thereof, (ii)
the number of Shares issuable upon exercise of each such vested Company Stock
Option or Warrant, (iii) the number of Shares issuable upon exercise of each
such unvested Company Stock Option or Warrant, (iv) the date of grant, (v) the
exercise price thereof and (vi) the vesting schedule.
(c) SCHEDULE 3.2(C) sets forth a true, correct and complete list of
---------------
all holders of the Company's capital stock as of the date hereof who are
employed by the Company or any Subsidiary and own in excess of 50,000 Shares
(assuming all Company Stock Options owned by such person have been exercised).
10
3.3 SUBSIDIARIES.
(a) The name and location of each of the subsidiaries (as defined in
Section 9.5 of this Agreement) of the Company (the "Subsidiaries") is set
---------- ------------
forth on SCHEDULE 3.3(A).
---------------
(b) Except as set forth on SCHEDULE 3.3(B), all of the outstanding
---------------
shares of capital stock of Subsidiaries are owned of record and beneficially by
the Company, free and clear of all mortgages, liens, pledges, charges,
encumbrances or other security interests (collectively, "Liens").
-----
(c) All outstanding shares of capital stock of Subsidiaries are, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of any Subsidiary having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of Subsidiaries may vote. There are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any Subsidiary is a party or by which any of them is bound
obligating the Company or any Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other voting
securities of any Subsidiary or obligating the Company or any Subsidiary to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking other than pursuant to
the non-binding letters of intent set forth in SCHEDULE 3.3(C) or pursuant to
---------------
arrangements described on SCHEDULE 3.7. There are no
------------
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock of any Subsidiary.
(d) Except for the Company's interest in the Subsidiaries or as set
forth on SCHEDULE 3.3(D), neither the Company nor any Subsidiary owns directly
--------------
or indirectly any interest or investment in the form of debt or equity in, and
neither the Company nor any Subsidiary is subject to any obligation or
requirement to provide for or to make any investment in, any person (in each
case, other than non-recourse interests or investments in an amount not in
excess of $500,000).
3.4 AUTHORITY.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
(other than, with respect to the Merger and this Agreement, the approval of the
Merger and the approval and adoption of this Agreement by the holders of a
majority of the Shares outstanding as of the record date for the Special Meeting
(the "Company Stockholder Approval")). The execution, delivery and performance
----------------------------
of this Agreement and the consummation by the Company of the Merger and of the
other transactions to which the Company is a party contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company
(and the Special Committee) and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (in each case, other than, with respect to the
Merger and this Agreement, the Company Stockholder Approval). This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
11
binding obligation of the Company enforceable against the Company in accordance
with its terms.
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS.
Except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act of
1933 as amended (the "Securities Act"), the Exchange Act (including the filing
--------------
with the SEC of the Proxy Statement/Prospectus) and applicable foreign and state
securities or blue sky laws and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), neither the execution, delivery or
-------
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the Certificate of Incorporation or By-laws or
partnership agreement, as applicable, of the Company or any of its Subsidiaries,
(b) except as set forth on SCHEDULE 3.5(B) require any filing with, notice to,
---------------
or Permit (as defined in Section 3.12), authorization, consent or approval of,
------------
any Federal, state or local government or any court, tribunal, administrative
agency or commission or other governmental or other regulatory authority or
agency, domestic, foreign or supranational (a "Governmental Entity"), (c) result
-------------------
in the creation or imposition of any Liens upon the properties or assets of the
Company or any Subsidiary, (d) except as set forth on SCHEDULE 3.5(D), result in
---------------
a violation or breach of, require any notice to any party pursuant to, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation, acceleration or
right of non-renewal or require any prepayment or offer to purchase any debt or
give rise to the loss of a material benefit) under, any of the terms, conditions
or provisions of any Material Contract (as defined in Section 3.11) to which the
Company or any of its Subsidiaries is a party or by which the Company's or any
of its Subsidiaries' properties or assets may be bound, (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its Subsidiaries or any of their respective properties or assets or
(f) except as set forth on SCHEDULE 3.5(F) result in the loss, forfeiture,
---------------
revocation, termination or diminution of any Permit.
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; OTHER FINANCIAL INFORMATION.
(a) The Company has filed with the SEC all reports, forms, schedules and
statements and other documents required to be filed by it (the "SEC Documents").
--- ---------
As of their respective filing dates, (i) the 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 SEC Documents, and (ii) as of its filing date,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements included in the SEC
Documents complied in all material respects, as of their respective filing
dates, as to form with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the
12
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except (x) as set forth on SCHEDULE 3.6, (y)
------------
as set forth in the most recently publicly available consolidated balance sheet
included in the SEC Documents and (z) for liabilities and obligations incurred
in the ordinary course of business consistent with past practice since the date
of such balance sheet, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a balance sheet or in the
notes thereto.
3.7 COMPANY ACQUISITIONS.
SCHEDULE 3.7 sets forth a true, correct and complete description of all the
------------
following information with respect to all pending and completed acquisitions by
the Company or any Subsidiary (the "Company Acquisitions"):
--------------------
(a) the name of the acquired Person,
(b) in respect of the post-closing performance of the Person acquired,
the potential maximum cash consideration that the Company or any Subsidiary may
be required to pay, the potential maximum value of the Shares that the Company
may be required to issue and the method for valuing such Shares and the timing,
and the formula which will determine the amount, of any cash or stock
consideration that could be payable in respect of the post-closing performance
of the Person acquired,
(c) a good faith estimate of any post-closing adjustments for each
Company Acquisition, the cash portion thereof and the portion thereof payable in
Shares and the method for valuing such Shares,
(d) a schedule of the amount of cash held in escrow or otherwise
securing the indemnification obligations to the Company or any Subsidiary in
respect of such Company Acquisition or any holdback arrangement for Shares or
cash in respect of any such indemnification obligation, and
(e) a description of all indemnification claims submitted or proposed
to be submitted by the Company or any Subsidiary in respect of each such Company
Acquisition.
3.8 INFORMATION SUPPLIED.
None of the information supplied or to be supplied by the Company
specifically for inclusion or incorporation by reference in any documents to be
filed by the Company with the SEC or any other Governmental Entity in connection
with the Merger and the other transactions contemplated hereby (including,
without limitation, the registration statement on Form S-4, the Proxy
Statement/Prospectus and the Schedule 13E-3) will, on the date of its filing or,
with respect to the Proxy Statement/Prospectus, as supplemented if necessary, on
the date it is sent or given to stockholders or at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
13
misleading; provided that no representation or warranty is made by the Company
-------- ----
with respect to statements made or incorporated by reference therein based on
information supplied by the Investor or Newco specifically for inclusion or
incorporation by reference therein. The registration statement on Form S-4, the
Proxy Statement/Prospectus, the Schedule 13E-3 and any such other documents
filed by the Company with the SEC or with any other Governmental Entity will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth on SCHEDULE 3.9, since the date of the most recent
------------
financial statements included in the SEC Documents that have been publicly
available prior to the date hereof, the Company and its Subsidiaries (only from
the date such Subsidiary was acquired by the Company) have conducted their
respective businesses only in the ordinary course consistent with prior
practice, and there has not been (a) any material adverse change, (b) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (c) any split, combination or reclassification of any of the
capital stock of the Company or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of the Company, (d) any incurrence, assumption or
guarantee by the Company or any Subsidiary of any indebtedness for borrowed
money, other than in the ordinary course of business and in amounts and on terms
consistent with past practices; (e) (i) any granting by the Company or any
Subsidiary to any officer of the Company of any material increase in
compensation, (ii) any granting by the Company or any Subsidiary to any officer,
director or consultant or an employee who earned more than $200,000 in the most
recent fiscal year or is currently earning (on an annualized basis) more than
$200,000 (in salary, bonus and other cash compensation), of any material
increase in severance or termination pay or (iii) any entry by the Company or
any Subsidiary into any written or oral employment agreement, or any severance
or termination agreement or arrangement with any officer, director or consultant
or an employee who earned more than $200,000 in the most recent fiscal year or
is currently earning (on an annualized basis) more than $200,000 (in salary,
bonus and other cash compensation), (f) any damage, destruction or loss to
property, whether or not covered by insurance, that, individually or in the
aggregate, has not been cured and may be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect, (g) any material
change in accounting methods, principles or practices by the Company or any
Subsidiary other than those required by GAAP, (h) any delivery of a notice of
non-renewal or any other failure to renew Contracts between the Company or any
Subsidiary, on the one hand, and its customers, on the other hand, which are
material, individually or in the aggregate or (i) any loss of any employee who
earned more than $200,000 in the most recent fiscal year (in salary, bonus and
other cash compensation).
3.10 LITIGATION.
Except as disclosed on SCHEDULE 3.10, there is no material claim, suit,
-------------
action, proceeding or investigation (each, a "Proceeding") pending or, to the
----------
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries and there is no judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary.
14
3.11 CONTRACTS.
(a) SCHEDULE 3.11(A) sets forth a true, correct and complete list of
----------------
all loan or credit agreement, note, bond, mortgage, indenture, lease, sublease,
purchase order or other contract, agreement, commitment, instrument, Permit,
concession, franchise or license ("Contracts") to which the Company or any
---------
Subsidiary is a party or by which any of their respective assets or properties
are bound that (i) involves payment over the remaining term (without regard to
any early termination or cancellation rights) of such Contract of more than
$1,000,000 or requires the Company and/or its Subsidiaries, or any of their
Affiliates, to provide goods or services with a value of more than such amount,
(ii) evidences or provides for any Indebtedness of the Company or any
Subsidiary, or any of their Affiliates, in an amount in excess of $500,000, or
any Encumbrance securing such Indebtedness, (iii) guarantees the performance,
liabilities or obligations of any other Person except for those guarantees which
are entered into in the ordinary course of business, (iv) restricts the Company
or any Subsidiary, or any of their Affiliates, from engaging in any line of
business, (v) provides for the payment of material commissions or fees in
respect of the sale, distribution or marketing of products or services of the
Company or any Subsidiary, or any of their Affiliates, (vi) are with any current
officer, director, Affiliate or "associate" (as defined in Rule 12b-2 under the
Exchange Act), (vii) relate to the ownership, leasing, licensing or use of real
property or any material Intellectual Property Right, (viii) relate to any
proposed Alternative Transaction as to which discussions have not been
terminated prior to the date hereof, including all Contracts containing
confidentiality, standstill, non-solicitation or similar provisions, (ix) are
otherwise material to the business, financial condition or results of operations
or prospects of the Company and its Subsidiaries, or any of their Affiliates,
taken as a whole (collectively, "Material Contracts").
-------------------
(b) Neither the Company nor any Subsidiary, nor any of their
Affiliates, is and, to the knowledge of the Company, no other party is in
violation of or in default under (nor does there exist any condition
affecting the Company or any Subsidiary, or to the knowledge of the
Company, other parties to such Material Contracts which upon the passage of
time or the giving of notice or both would reasonably be expected to cause
such a violation of or default under) any Material Contract to which it is
a party or by which it or any of its properties or assets is bound, except
for any such violations or defaults which have not had, and would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Each Material Contract constitutes a valid and
binding obligation of the Company and/or Subsidiary, or any of their
Affiliates, party thereto and, to the knowledge of the Company, each other
party thereto, enforceable against such other party in accordance with its
terms, except as enforceability may be limited by equitable principles of
bankruptcy, fraudulent conveyance or insolvency laws affecting creditors'
rights generally.
3.12 COMPLIANCE WITH LAWS.
Neither the Company nor any Subsidiary is in violation of, and to the
knowledge of the Company none is under investigation with respect to or has been
threatened to be charged with or given notice of any violation of, in each case,
by any Governmental Entity, any applicable statute, law, rule, regulation,
ordinance, Permit, consent, license, judgment, injunction, order or decree
("Laws"), except for violations that have not had, and would not reasonably be
----
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth on
15
SCHEDULE 3.12 or except as has not had, and would not reasonably be expected to
-------------
have, individually or in the aggregate, a Material Adverse Effect, (a) the
Permits are valid and in full force and effect, (b) neither the Company nor any
Subsidiary is in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, the Permits and (c) none
of the Permits will be terminated or impaired or become terminable, in whole or
in part, as a result of the transactions contemplated hereby. "Permits" means
-------
any license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Company and its Subsidiaries.
3.13 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 3.13(A), the Company and each
----------------
Subsidiary is in compliance with all applicable Environmental Laws (as defined
below) except for non-compliances which have not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. The term "Environmental Laws" means any Law, and any common law,
------------------
relating to: (i) Releases (as defined below) or threatened Releases of Hazardous
Materials (as defined below) into the environment; (ii) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation or
shipment of Hazardous Materials; or (iii) otherwise relating to pollution or
protection of health or safety or the environment.
(b) Except as set forth in SCHEDULE 3.13(B), there has been no Release
----------------
or threatened Release of Hazardous Materials, in, on, under or affecting any
property owned, leased, controlled or operated by the Company or any Subsidiary,
except for releases which have not had, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The term
"Release" has the meaning set forth in
-------
42 U.S.C. (S) 9601(22). The term "Hazardous Materials" means any pollutant,
-------------------
contaminant, hazardous, radioactive or toxic substance, material, constituent or
waste, or any other waste, substance, chemical or material regulated under any
Environmental Law, including (1) petroleum, crude oil and any fractions thereof,
(2) natural gas, synthetic gas and any mixtures thereof, (3) asbestos and/or
asbestos-containing material, (4) radon and (5) polychlorinated biphenyls
("PCBs"), or materials or fluids containing PCBs.
----
(c) Except as set forth in SCHEDULE 3.13(C), there is no pending, or,
----------------
to the knowledge of the Company, threatened claim, action, demand, investigation
or inquiry of or against the Company by any Governmental Entity or other person
relating to any actual or potential violations or liability under of
Environmental Law or any actual or potential obligation to investigate or
remediate a Release or threatened Release of any Hazardous Materials except for
Proceedings which have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(d) Except in connection with the Company Acquisitions (for which the
Company is indemnified except as set forth in SCHEDULE 3.13(D)), neither
----------------
the Company nor any Subsidiary has assumed any liabilities or obligations
arising under Environmental Laws in connection with properties or facilities
previously owned, leased or operated by the Company or any Subsidiary or their
predecessors.
16
(e) Except as set forth in SCHEDULE 3.13(E), to the knowledge of the
----------------
Company, there are no underground or aboveground storage tanks, incinerators or
surface impoundments at, on or about, under or within any property, owned,
leased, controlled or operated by the Company or any Subsidiary, and no such
tanks, incinerators or impoundments have been removed from any such property.
(f) Neither the Company nor any Subsidiary has used any waste disposal
site, or otherwise disposed of, transported, or arranged for the transportation
of, any Hazardous Materials to any place or location, with respect to which it
has incurred or, in the future, could reasonably be expected to incur, liability
under CERCLA or any other Environmental Law which would reasonably be expected
to have, individually, or in the aggregate, a Material Adverse Effect.
3.14 ABSENCE OF CHANGES IN BENEFIT PLANS; LABOR RELATIONS.
(a) Except as disclosed on SCHEDULE 3.14(A), since the date of the
----------------
most recent audited financial statements included in the SEC Documents (or in
the case of a Subsidiary, if later, the date of its acquisition by the Company),
there has not been any adoption or amendment by the Company or any Subsidiary of
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan or arrangement providing
benefits to any current or former employee, officer or director of the Company
or any Subsidiary (for the avoidance of doubt, regular salary and/or wage
increases and modifications to bonus, commission and other incentive
compensation arrangements in case with respect to non-officer employees of the
Company or any Subsidiary in the ordinary course of business and consistent with
past practice are excluded from the foregoing).
(b) Except as set forth in SCHEDULE 3.14(B), there exist no employment,
----------------
consulting, severance, termination or indemnification agreements or arrangements
between the Company and any current or former employee, officer or director of
the Company which involve the payment on or after the date hereof of more than
$200,000 per year.
(c) SCHEDULE 3.14(C) sets forth a true, correct and complete list of
----------------
all amounts payable or that will or may become payable to each director, officer
or employee or former director, officer or employee of the Company or any
Subsidiary pursuant to any employment, change-in-control, severance or
termination agreement or arrangement as a result of the Merger.
(d) Except as set forth in SCHEDULE 3.14(D), there are no collective
----------------
bargaining or other labor union agreements to which the Company or any
Subsidiary is a party or by which it is bound.
(e) Except as set forth on SCHEDULE 3.14(E), to the knowledge of the
----------------
Company, since February 1, 1997 (or in the case of a Subsidiary, if later, the
date of its acquisition by the Company), neither the Company nor any Subsidiary
has encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
17
3.15 EMPLOYMENT MATTERS; AFFILIATE TRANSACTIONS.
(a) SCHEDULE 3.15(A) sets forth a true, correct and complete list of
----------------
all directors, officers and key employees of the Company and each Subsidiary as
of the date hereof and the aggregate salary, bonus and other cash compensation
paid to each such officer, director and employee of the Company or any
Subsidiary in the most recently completed fiscal year and paid to each such
person from the beginning of the current fiscal through the date hereof. For
purposes hereof, "key employee" shall mean any person whose current salary is
------------
at least $100,000 per annum.
(b) SCHEDULE 3.15(B) sets forth a true, correct and complete
----------------
description of all transactions between the Company or its Subsidiaries, on the
one hand, and any of their respective Affiliates, directors, officers,
employees, or consultants, on the other hand, in each case consummated at any
time since February 1, 1997 or, in the case of a Subsidiary, since the date of
its acquisition by the Company.
(c) Except as set forth on SCHEDULE 3.15(C), there are no agreements or
----------------
arrangements between the Company or its Subsidiaries, on the one hand, and any
of their respective Affiliates, directors, officers, employees or consultants,
on the other hand, with respect to any such transactions.
(d) Except as set forth on SCHEDULE 3.15(D) no Affiliate, director,
----------------
officer, employee or consultant of the Company owns any interest in any asset or
property (real or personal, tangible or intangible), business or contract used
or intended for use or otherwise relating to the business currently conducted or
proposed to be conducted by the Company or any Subsidiary except for such assets
or properties, the loss of which to the Company or its Subsidiaries would not be
reasonably expected to have a Material Adverse Effect.
3.16 ERISA COMPLIANCE.
(a) The Company and certain other persons or entities that, together
with the Company, are treated as single employer under Section 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986, as amended (the "Code") (the
----
Company and each such other person or entity, a "Commonly Controlled Entity"),
--------------------------
maintain or contribute to "employee welfare benefit plans" (as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and other benefit plans for the benefit of any
-----
current or former employees, officers or directors of the Company or dependents
of any such person (collectively, "Benefit Plans"). None of the following has
-------------
occurred which has had, or reasonably would be expected to have a Material
Adverse Effect: (A) any failure to administer any Benefit Plan in accordance
with its terms (B) any failure by the Company or any Subsidiary or any Benefit
Plan to comply, or any failure of any Benefit Plan to be operated and
administered in accordance with the applicable provisions of ERISA and the Code,
(C) any "reportable event" or "prohibited transaction" (as such terms are
defined in ERISA and the Code), (D) any termination of any Benefit Plan which
results in a "reportable event," or (E) the consummation of the transactions
entered into pursuant to this Agreement if such transactions result in a
"reportable event."
18
(b) None of the Company, any Subsidiary or any Commonly Controlled
Entity has any "employee pension benefit plans" (as defined in Section 3(2) of
ERISA) that are subject to Title IV of ERISA (sometimes referred to herein as
"Pension Plans").
--------------
(c) There have been no violations of ERISA or the Code that could
reasonably be expected to have a Material Adverse Effect with respect to the
filing of applicable documents, notices or reports (including, without
limitation, annual reports filed on IRS Form 5500) relating to any Benefit Plan
maintained by the Company or any Commonly Controlled Entity with any
Governmental Authority or the furnishing of such required documents to the
participants or beneficiaries of such Benefit Plans.
(d) Neither the Company nor any Commonly Controlled Entity has within
the five year period immediately preceding the date hereof maintained,
contributed to or been obligated to contribute to any Benefit Plan that is
subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor
any Commonly Controlled Entity is required to contribute to any "multiemployer
plan" (as defined in Section 4001(a) (3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or would result in any
"withdrawal liability" (within the meaning of Section 4201 of ERISA) that has
not been fully paid.
(e) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in SCHEDULE 3.16(E), (i) no such Benefit Plan
----------------
is funded through a "welfare benefits fund", as such term is defined in Section
419 (e) of the Code, (ii) each such Benefit Plan that is a "group health plan",
as such term is defined in Section 5000 (b)(1) of the Code, complies
substantially with the applicable requirements of Section 4980B(f) of the Code
and (iii) except as provided in writing in such plan, there are no
understandings, agreements or undertakings, written or oral, that would prevent
any such plan (including any such plan covering retirees or other former
employees) from being amended or terminated without liability to the Company or
any Subsidiary on or at any time after the Effective Time.
(f) Except as set forth in SCHEDULE 3.16(F), no Benefit Plan that is
----------------
a welfare benefit plan provides for post-retirement medical or life insurance
benefits coverage to any current or former employee, officer, or director of the
Company or any Subsidiary or any dependent of any such individual except as may
be required under Section 4980B of the Code.
(g) Except as set forth on SCHEDULE 3.16(G), no employee or director
----------------
of the Company or any Subsidiary will be entitled to any additional compensation
or benefits or any acceleration of the time of payment or vesting of any
compensation or benefits under any Benefit Plan in connection with the
transactions contemplated by this Agreement.
(h) All contributions due and payable in respect of any Benefit Plan
have been made in full and proper form, or adequate accruals have been
provided for in the financial statements for all other contributions or
amounts in respect of the Benefit Plans, or, in the case of any
contributory Benefit Plan, amounts have been contributed to such Benefit
Plan within the time prescribed by the Code, ERISA, or any regulations
thereunder or interpretations thereof by the Internal Revenue Service or
the Department of Labor.
19
(i) As of the Closing Date, there are no actions, suits, disputes,
arbitrations or claims pending (other than routine claims for benefits) or
legal, administrative or other proceedings or governmental investigations
pending or, to the knowledge of the Company and any Commonly Controlled Entity,
threatened against any Benefit Plan or against the assets of any Benefit Plan
which could reasonably be expected to have a Material Adverse Effect.
3.17 TAXES.
(a) The Company and each Subsidiary has filed all tax returns and
reports required to be filed by it (which returns are true and complete in all
material respects) and has paid all taxes due and required to be paid by it. The
most recent financial statements contained in the SEC Documents that are
publicly available as of the date hereof reflect an adequate reserve for all
taxes payable by the Company or any Subsidiary for all taxable periods and
portions thereof through the date of such financial statements and there has
been no tax liability incurred by the Company or any Subsidiary since such date
other than in the ordinary course of business. No deficiencies for any taxes
which remain outstanding have been proposed, asserted or assessed against the
Company or any Subsidiary, and no requests for waivers of the time to assess any
such taxes are pending. Except as disclosed in SCHEDULE 3.17(A), no income tax
----------------
return of the Company or any Subsidiary has been or is currently being examined
by the United States Internal Revenue Service or any other Governmental Entity.
(b) SCHEDULE 3.17(B) sets forth the periods during which the Company's
----------------
and its Subsidiaries' Consolidated Federal net operating loss carryforwards (the
"NOL Carryforwards") arose and the expiration dates of the NOL Carryforwards,
identifies which portions thereof are currently limited under Section 382 of the
Code or the "separate return limitation year" ("SRLY") rules of the consolidated
----
return regulations, and, in the case of NOL Carryforwards currently limited
under Section 382 of the Code, the relevant Section 382 limitation (within the
meaning of Section 382(b) (1) of the Code). As used in this Agreement, "taxes"
-----
shall mean all Federal, state, local and foreign income, property, sales,
payroll, employment, excise, withholding and other taxes, tariffs or other
governmental charges in the nature of a tax as well as any interest, penalties
and additions to tax.
(c) Except as set forth on SCHEDULE 3.17(C), no amount that could be
----------------
received pursuant to the Benefit Plans or any executed and delivered agreements
between the Company or any Subsidiary and any officer, director or employee
thereof in effect as of the date hereof (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any Subsidiary
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance, change-in-control
or termination agreement, other compensation arrangement or Benefit Plan
currently in effect would be an "excess parachute payment" (as such term is
defined in Section 280G(b) (1) of the Code). No disqualified individual is
entitled to receive any additional payment from the Company, any Subsidiary, the
Surviving Corporation, or any other person referred to in Q&A 10 under proposed
Treasury Regulation Section 1.280G-1 (a "Parachute Gross-Up Payment") in the
--------------------------
event that the 20 per cent parachute excise tax of Section 4999(a) of the Code
is imposed on such person.
20
(d) Except as set forth in SCHEDULE 3.17(D), neither the Board of
----------------
Directors of the Company nor the Board of Directors of any Subsidiary has during
the six months prior to the date hereof (or in the case of a Subsidiary, if
later, the date of its acquisition by the Company) granted to any officer,
director or employee of the Company or any Subsidiary any right to receive any
Parachute Gross-Up Payment.
3.18 TITLE TO PROPERTIES; CONDITION OF ASSETS.
(a) SCHEDULE 3.18(A) sets forth a true, correct and complete list, as
----------------
of the date hereof, by location of all of the real property owned by
Company or any of its Subsidiaries (the "Owned Property"), including the name
--------------
of the owner thereof. All Owned Property is located in the United States and,
except as set forth on SCHEDULE 3.18(A), is owned by the Company or one of its
----------------
wholly owned Subsidiaries free and clear of all Encumbrances except Permitted
Encumbrances. There are no rights of first refusal or other options to purchase
any parcel of Owned Property or any portion or interest therein.
(b) SCHEDULE 3.18(B) sets forth a true, correct and complete list, as
----------------
of the date hereof, by location of all of the real property leased by the
Company or any Subsidiary subject to one or more leases (the "Leased Property"),
---------------
including the names of the lessor and the lessee. The Company or such Subsidiary
is the owner and holder of all the leasehold estates purported to be granted by
such leases .
(c) The Leased Property and the Owned Property constitute all real
property used or occupied by the Company or any Subsidiary of the Company.
(d) Except as set forth in SCHEDULE 3.18(D), the Company and each
----------------
Subsidiary has good and marketable title to, or valid leasehold interests in,
all its material properties and assets except for such as are no longer used in
the conduct of its businesses or as have been disposed of in the ordinary course
of business. All such assets and properties are free and clear of all Liens
other than those set forth in SCHEDULE 3.18(D) and except for Liens that,
----------------
individually or in the aggregate, do not interfere with the ability of the
Company or any Subsidiary to conduct its business as currently conducted and do
not materially adversely affect the value of, or the ability to sell such assets
and properties.
(e) The material personal properties and assets of the Company and its
Subsidiaries are in reasonably good repair and operating condition, ordinary
wear and tear excepted and are sufficient for the conduct of the business of the
Company and Subsidiaries as presently conducted.
3.19 INTELLECTUAL PROPERTY.
(a) The Company and the Subsidiaries own or possess adequate licenses
or other rights to use all Intellectual Property Rights necessary to conduct the
business now operated by them, except where the failure to own or possess such
licenses or rights, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect. To the knowledge of
the Company, the Intellectual Property Rights of the Company and the
Subsidiaries do not conflict with or infringe upon any Intellectual Property
Rights of others to the extent that, if sustained, such conflict or
infringement, individually or in the aggregate,
21
would reasonably be expected to have a Material Adverse Effect. For purposes of
this Agreement, "Intellectual Property Right" means any trademark, service xxxx,
---------------------------
trade name, mask work, copyright, patent, software license, other data base,
invention, trade secret, know-how (including any registrations or applications
for registration of any of the foregoing) or any other similar type of
proprietary intellectual property right.
(b) All information technology (including, without limitation, software
and firmware) presently expected to be used by the Company or by any Subsidiary
after December 31, 1999 in the administration and the operations of the Company
or such Subsidiary, as the case may be, including, without limitation, in all
services and products provided by the Company or any such Subsidiary, whether to
third parties or for internal use, or, to the knowledge of the Company after
reasonable investigation, used in combination with any information technology of
its customers or suppliers, and which is material to the conduct of the business
of the Company in the ordinary course of business , accurately processes or will
process date and time data (including, without limitation, calculating,
comparing and sequencing) from, into and between the years 1999 and 2000 and the
twentieth century and the twenty-first century, including leap year calculations
and neither performance nor functionality of such technology will be affected by
dates prior to, during and after the year 2000. Neither the Company nor any
Subsidiary has any material obligations under warranty agreements, service
agreements or otherwise to remedy any information technology defect relating to
the year 2000.
3.20 NON-COMPETE.
Except as set forth on SCHEDULE 3.20, neither the Company nor any
-------------
Subsidiary is subject to any agreement, covenant or understanding that restricts
the Company or any Subsidiary from entering or conducting any line of business
in any location at any time.
3.21 VOTING REQUIREMENTS.
The affirmative vote of the holders of a majority of the outstanding Shares
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 Merger.
3.22 STATE TAKEOVER STATUTES.
The Board of Directors of the Company has approved and declared advisable
the Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Merger, this Agreement and the transactions contemplated by
this Agreement, the provisions of Section 203 of the DGCL to the extent, if any,
such Section is applicable to the Merger, this Agreement and the transactions
contemplated by this Agreement and the Stockholder Agreement. No other state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger, this Agreement or the transactions contemplated by this
Agreement.
3.23 BROKERS.
With the exception of fees payable to the Financial Advisor, a copy of
whose engagement agreement has been provided to the Investor, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of, the Company
22
or any Subsidiary who might be entitled to any fee or commission from the
Company or any Subsidiary or any of its affiliates upon consummation of the
transactions contemplated by this Agreement.
3.24 OPINION OF FINANCIAL ADVISOR.
The Special Committee and the Board of Directors of the Company has
received the opinion of the Financial Advisor, addressed to the Special
Committee and the Board of Directors of the Company, dated the date of this
Agreement to the effect that, as of such date and based upon and subject to the
matters set forth therein, the consideration to be received and retained by
holders of Shares pursuant to the Merger is fair from a financial point of view
to such holders, and a copy of such opinion, signed and addressed to the
Company's Board, has been delivered to the Investor.
3.25 GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 3.25(A), neither the Company nor
----------------
any Subsidiary is a party to any contract (i) with any local Governmental Entity
that may give rise to obligations or liabilities exceeding, prior to any renewal
thereof, $500,000 individually, or that may generate revenues or income
exceeding, prior to any renewal thereof, $500,000 individually, or (ii) with any
agency or instrumentality of the United States Government or any state
Governmental Entity.
(b) Neither the Company nor any Subsidiary (since the date of its
acquisition by the Company) has been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any other Governmental Entity and, to the knowledge of the
Company, no suspension or debarment action has been threatened or commenced. To
the knowledge of the Company, there is no valid basis for the Company's or any
Subsidiary's suspension or debarment from bidding on contracts or subcontracts
for any agency of the United States Government or any other Governmental Entity.
3.26 INSURANCE.
SCHEDULE 3.26 accurately sets forth as of the day preceding the date hereof
-------------
all policies of insurance, other than title insurance policies, held by or on
behalf of the Company and all outstanding claims thereunder in excess,
individually or in the aggregate, of $100,000. All such policies of insurance
are in full force and effect, and no notice of cancellation has been received.
In the reasonable judgment of the Company, such policies are in amounts which
are adequate in relation to the business and properties of the Company, and all
premiums to date have been paid in full.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR AND NEWCO
The Investor represents and warrants to the Company, with respect to itself
and Newco and, when formed in accordance with the terms hereof, Newco represents
and warrants to the Company, as follows:
23
4.1 ORGANIZATION.
The Investor is, and Newco, from and after formation in accordance with
Section 1.1 (hereinafter, such formation shall be referred to as the
-----------
"Formation"), will be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to carry on its business as now being conducted. The
Investor is and, from and after Formation, Newco will be, 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 qualifications or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not be reasonably expected to either prevent or materially
delay the consummation of the Merger or impair its ability to perform its
obligations hereunder. The Investor has made, and from and after Formation,
Newco will make available to the Company complete and correct copies of their
certificate of formation, operating agreement, certificate of incorporation and
by-laws, as amended to the date hereof. From the date of its incorporation,
Newco shall not engage in any activities other than in connection with or as
contemplated by this Agreement and the Merger or in connection with or as
contemplated by this Agreement and the Merger or in connection with arranging
any financing required to consummate the transactions contemplated hereby.
4.2 AUTHORITY.
The Investor has, and Newco, from and after Formation, will have the
requisite power and authority to execute and deliver this Agreement and the
Stockholder Agreement, and to consummate the transactions contemplated by this
Agreement and the Stockholder Agreement. The execution, delivery and
performance of this Agreement and the Stockholder Agreement, and the
consummation of the transactions contemplated by this Agreement and the
Stockholder Agreement, have been (or, will be, in case of Newco) duly authorized
by all necessary action on the part of the Investor and Newco and no other
proceedings on the part of the Investor and Newco are (or, will be, in the case
of Newco) necessary to authorize this Agreement or the Stockholder Agreement or
to consummate the transactions contemplated hereby or thereby. Each of this
Agreement and the Stockholder Agreement has been (or, will be, in the case of
Newco) duly executed and delivered by the Investor and Newco and constitutes
(or, will constitute, in the case of Newco) a valid and binding obligation of
the Investor and Newco enforceable against the Investor and Newco in accordance
with its terms.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
Except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of the Exchange Act,
applicable foreign and state securities or blue sky laws, the HSR Act, the DGCL
and state takeover laws, neither the execution, delivery or performance of this
Agreement or the Stockholder Agreement by the Investor and Newco, nor the
consummation by the Investor and Newco of the transactions contemplated hereby
or thereby will (i) conflict with or result in any breach of any provision of
the respective certificate of incorporation or formation or by-laws or operating
agreement, or comparable documents of the Investor and Newco, as the case may
be, (ii) require any filing with, notice to, or permit, authorization, consent
or approval of, any Governmental Entity (except
24
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings would not reasonably be expected to prevent or
materially delay the consummation of the Merger), (iii) result in a violation or
breach of, require any notice to any party pursuant to, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which the
Investor or any of its subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Investor, any
of its subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which could not,
individually or in the aggregate, be reasonably expected to either prevent or
materially delay the consummation of the Merger or impair its ability to perform
its obligations hereunder.
4.4 INFORMATION SUPPLIED.
None of the written information supplied or to be supplied by the Investor
or Newco specifically for inclusion or incorporation by reference in the Proxy
Statement/Prospectus, as supplemented if necessary, and any other documents to
be filed by the Company with the SEC or any Governmental Entity in connection
with the Merger and the other transactions contemplated hereby will, on the date
of its filing or, with respect to the Proxy Statement/Prospectus, as
supplemented if necessary, on the date it is sent or given to stockholders or at
the time of the Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
4.5 CAPITALIZATION OF NEWCO; OWNERSHIP OF COMPANY COMMON STOCK.
(a) The authorized capital stock of Newco will consist solely of (i)
1,000 shares of Newco Common Stock, of which there will be outstanding 100
shares and (ii) 2,000,000 shares of Newco preferred stock, all of which will be
outstanding immediately prior to the Effective Time and will then be duly
authorized, validly issued and fully paid and nonassessable. Immediately prior
to the Effective Time will be no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which Newco
is a party or by which it is bound obligating Newco to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of Newco or obligating Newco to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding obligations of
Newco to repurchase, redeem or otherwise acquire any shares of capital stock of
Newco.
(b) As of the date hereof, neither Investor nor Newco nor their
respective affiliates own, of record or beneficially, a number of Shares which,
in the aggregate, exceed 1% of the outstanding Shares on the date hereof and,
without the consent of the Company, which consent will not be unreasonably
withheld, the Investor shall not acquire or dispose of any Shares until after
the Effective Time except in connection with the transactions contemplated by
this Agreement.
25
4.6 FINANCING.
The Investor will have available $200 million to purchase preferred stock
of Newco that that will be converted into shares of New Preferred Stock of the
Surviving Corporation pursuant to Section 2.4(b) hereof.
--------------
4.7 BROKERS.
No broker, investment banker, financial advisor, finder or other person is
entitled to any brokerage, investment banker's, financial advisor's, finder's or
other fee or commission for which the Company will be liable in connection with
the execution of this Agreement by the Investor and Newco or the performance by
the Investor and Newco of their obligations hereunder, except as otherwise set
forth in this Agreement.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS.
From the date hereof to the Effective Time, the Company shall, and shall
cause each Subsidiary to, carry on its business in the ordinary course
consistent with past practice and use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees and others having significant business dealings with it.
Without limiting the generality of the foregoing, from the date hereof to the
Effective Time, the Company shall not and shall cause each Subsidiary not to
(except as expressly permitted by this Agreement or with the Investor's consent,
which consent will not be unreasonably withheld):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (other than cash dividends
and distributions by a wholly-owned Subsidiary to the Company or to a Subsidiary
all of the capital stock of which is owned directly or indirectly by the
Company), (ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for Shares of its capital stock, or (iii) purchase, redeem or
otherwise acquire any Shares or any capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, including any issuance of securities in
any mergers or acquisitions;
(c) amend its Certificate of Incorporation or Bylaws or other
comparable charter or organizational documents (other than as contemplated by
this Agreement);
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets or stock of, or by any
other manner, any business or
26
any person or (ii) any assets except for the purchase of equipment or other
assets in the ordinary course of business, including, without the Investor's
consent, any such acquisition or agreement pursuant to any letter of intent or
other arrangement pursuant to which the Company or any Subsidiary is a party,
provided that the amount thereof does not exceed, individually or in the
-------- ----
aggregate, $2,000,000, other than as set forth on SCHEDULE 5.1(D);
---------------
(e) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except (i)
immaterial assets, (ii) in the ordinary course of business (including for trade-
ins) and (iii) where the amount of such sales does not exceed, individually or
in the aggregate, $2,000,000;
(f) except in the ordinary course of business consistent with past
practice (i) incur any Indebtedness or guarantee any such Indebtedness of
another Person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any Subsidiary, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (ii) make any
loans, advances (other than advances to Subsidiaries or among Subsidiaries) or
capital contributions to, or investments in, any other Person;
(g) make or agree to make any capital expenditure or expenditures with
respect to property, plant or equipment which, individually, is in excess of
$250,000 or is in excess of $1,500,000 per month, except in the ordinary course
of business consistent with past practice in order to satisfy actual or expected
contractual commitments to customers;
(h) make any material tax election or settle or compromise any material
income tax liability;
(i) pay, discharge, settle or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the SEC Documents or incurred thereafter in the ordinary course of business
consistent with past practice, or waive any material benefits of, or agree to
modify any confidentiality, standstill, non-solicitation or similar agreement to
which the Company or any Subsidiary is a party;
(j) modify, amend in any material respect or terminate any Material
Contract to which the Company or any Subsidiary is a party, or waive, release or
assign any material rights or claims (including any restrictions on transfer of
Shares issued or to be issued pursuant to Company Acquisitions except transfers
pursuant to the Stockholder Agreement), other than in the ordinary course of
business consistent with past practice;
(k) except as set forth in SCHEDULE 5.1(K), or as required to comply
---------------
with applicable Law or with the Investor's consent, (i) adopt, enter into,
terminate or amend any Benefit Plan or other arrangement for the benefit or
welfare of any director, officer or current or former employee, other than, in
the case of non-officer or non-key employees, in the ordinary course of
27
business consistent with past practice, (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or key employee except pursuant to existing written agreements, (iii) pay any
material benefit not provided for under any Benefit Plan, (iv) except as
permitted in clause (ii), 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 agreement or awards made
thereunder), (v) accelerate the vesting of any Company Stock Option or (vi) take
any action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or Benefit
Plan; or
(l) authorize any of, or commit or agree to take any of, the foregoing
actions.
5.2 NO SOLICITATION.
(a) The Company shall not and shall cause each Subsidiary and its
Subsidiaries' officers and directors not to, and each of the foregoing shall not
permit their respective agents, representatives, advisors or subsidiaries to
(whether directly or indirectly) (i) solicit, initiate or take any action
knowingly to facilitate the submission of inquiries, proposals or offers
("Acquisition Proposals") from any Third Party (as defined below) relating to
---------------------
(A) any acquisition or purchase of 20% or more of the consolidated assets of the
Company and its Subsidiaries or of over 20% of any class of equity securities of
the Company or any of its Subsidiaries, (B) any tender offer (including a self
tender offer) or exchange offer that if consummated would result in any Third
Party beneficially owning 20% or more of any class of equity securities of the
Company or any of its Subsidiaries, (C) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company, or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute more
than 20% of the consolidated assets of the Company, other than the transactions
contemplated by this Agreement, or (D) any other transaction the consummation of
which would, or could reasonably be expected to impede, interfere with, prevent
or materially delay the Merger or which would, or could reasonably be expected
to, materially dilute the benefits to the Investor of the transactions
contemplated hereby (each of the foregoing items set forth in (A) through (D),
an "Alternative Transaction"), or agree to or endorse any Alternative
-----------------------
Transaction, or (ii) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any Third Party any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or knowingly assist or
participate in, facilitate or encourage, any effort or attempt by any Third
Party (other than the Investor) to do or seek any of the foregoing; provided,
however, that the foregoing shall not prohibit the Company (either directly or
indirectly through advisors, agents or other intermediaries) from (i) publicly
disclosing in a press release, in a general manner, the Company's permitted
activities hereunder, (ii) furnishing information pursuant to an appropriate
confidentiality letter (which letter shall not be less favorable to the Company
in any material respect than the Confidentiality Agreement, and a copy of which
shall be provided for informational purposes only to the Investor) concerning
the Company and its businesses, properties or assets to a Third Party who has
made a bona fide Acquisition Proposal, (iii) engaging in discussions or
negotiations with such a Third Party who has made a bona fide Acquisition
Proposal, (iv) following receipt of a bona fide Acquisition Proposal, taking and
28
disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule
14e-2(a) under the Exchange Act or otherwise making disclosure to its
stockholders, (v) following receipt of a bona fide Acquisition Proposal, failing
to make or withdrawing or modifying its recommendation referred to in Section
1.6 and/or (vi) taking any non-appealable, final action ordered to be taken by
the Company by any court of competent jurisdiction but in each case referred to
in the foregoing clauses (ii) through (vi) only to the extent that the Board of
Directors of the Company shall have concluded in good faith after consultation
with outside counsel that such action is required to prevent the Board of
Directors of the Company from breaching its fiduciary duties to the stockholders
of the Company under applicable law; provided, further, that (A) the Board of
-------- -------
Directors of the Company shall not take any of the foregoing actions until
reasonable notice to the Investor of its intent to take such action shall have
been given to Newco; and (B) if the Board of Directors of the Company receives
an Acquisition Proposal, to the extent it may do so without breaching its
fiduciary duties to stockholders as advised by counsel and as determined in good
faith, then the Company shall promptly inform the Investor of the terms and
conditions of such proposal and the identity of the person making it. Subject to
the provisions of the previous sentence, the Company shall immediately cease and
cause its Subsidiaries and its and their advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations with any Third Party (other than Newco) conducted heretofore with
respect to any of the foregoing, and shall use its reasonable best efforts to
cause any such parties in possession of confidential information about the
Company that was furnished by or on behalf of the Company to return or destroy
all such information in the possession of any such Third Party (other than
Newco) or in the possession of any agent or advisor of any such Third Party. As
used in this Agreement, the term "Third Party" means any Person or "group," as
-----------
described in Rule 13d-5(b) promulgated under the Exchange Act, other than Newco
or any of its affiliates.
(b) Neither the Board of Directors of the Company nor any committee
thereof (including the Special Committee) shall (i) withdraw or modify, the
approval or recommendation by such Board of Directors or such committee of this
Agreement or the Merger, (ii) approve or recommend, any Alternative Transaction,
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other agreement or arrangement, including
any exclusivity agreement (an "Acquisition Agreement"), other than as permitted
---------------------
pursuant to Section 5.2(a)(ii), with respect to an Alternative Transaction or
(iv) fail to call or hold the Special Meeting, unless the Board of Directors
determines in good faith after consultation with counsel and the Financial
Advisor that one of the foregoing actions is required under applicable law in
the exercise of the Board of Director's fiduciary duties to its stockholders,
the Company has complied and is in compliance with Section 5.2(a) and the
--------------
Company has simultaneously with such action paid to the Investor the Termination
Fee and reimbursed all the Investor's Expenses.
5.3 CERTAIN TAX MATTERS.
From the date hereof until the Effective Time, (i) the Company and each
Subsidiary will file all material tax returns and reports ("Post-Signing
------------
Returns") required to be filed; (ii) the Company and each Subsidiary will timely
pay all taxes shown as due and payable on the Company's Post-Signing Returns
that are so filed; (iii) the Company and each Subsidiary will make provision for
all taxes payable by the Company for which no Post-Signing Return is due prior
to the Effective Time; and (iv) the Company will promptly notify the Investor of
any
29
action, suit, proceeding, claim or audit pending against or with respect to the
Company and each Subsidiary in respect of any tax where there is a reasonable
possibility of a determination or decision which would reasonably be expected to
have a significant adverse effect on the Company's or any Subsidiary's tax
liabilities or tax attributes.
5.4 OTHER ACTIONS.
The Company shall not, and shall cause each Subsidiary not to, take or omit
to take any action, the taking or omission of which would reasonably be expected
to result in (a) any of the representations and warranties of the Company set
forth in this Agreement becoming untrue or inaccurate in any material respect or
(b) any of the conditions set forth in Section 7.2 not being satisfied (subject
-----------
to the Company's right to take actions specifically permitted by Section 5.1,
-----------
Section 5.2 or Section 8.1).
----------- -----------
5.5 ADVICE OF CHANGES; FILINGS.
The Company shall confer with the Investor on a regular and frequent basis
as reasonably requested by the Investor, report on operational matters and
promptly advise the Investor orally and, if requested by the Investor, in
writing of any material change with respect to the Company or any Subsidiary.
The Company shall promptly provide to the Investor (or its counsel) copies of
all filings made by the Company or any Subsidiary with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
5.6 FINANCIAL INFORMATION.
The Company shall furnish to the Investor all documents filed with or
submitted to the SEC by the Company simultaneously with such filing or
submission. The Company shall also furnish to the Investor the following
financial information (all to be prepared in accordance with GAAP consistently
applied):
(a) as soon as available but in any event within 30 days of each
calendar month, the unaudited consolidated and consolidating balance sheets and
income statements of the Company and its Subsidiaries, showing its financial
condition as of the close of such month and the results of operations during
such month and for then elapsed portion of the Company's fiscal year, in each
case, setting forth, to the extent available, the comparative figures for the
corresponding month in the prior fiscal year, the corresponding elapsed portion
of the prior fiscal year and the budget amount for such month; and
(b) as soon as practicable, but prior to March 31, 1999, an audit of
the consolidated financial statements of the Company and its Subsidiaries as of
December 31, 1998 and for the fiscal year then ended, together with the audit
report of PricewaterhouseCoopers LLP.
5.7 FINANCING.
The Investor will use commercially reasonable efforts to obtain on or prior
to the Termination Right Expiration Date, on behalf of Newco, (a) a commitment
letter from a reputable commercial bank providing for (i) senior bank financing
to be used to pay a portion of
30
the Cash Merger Price and the fees and expenses in connection with the Merger
and the other transactions contemplated by this Agreement and (ii) a working
capital facility which can be used by the Surviving Corporation for its working
capital needs and to finance future acquisitions and/or (b) a highly confident
letter from a reputable investment bank with respect to the private placement or
public offering of subordinated debt securities, each containing terms and
conditions reasonably satisfactory to the Investor and the Company, in an
aggregate amount equal to $440 million and in such proportions as the Investor
shall reasonably determine (the letters to be obtained pursuant to this Section
-------
5.7, the "Financing Letters").
--- -----------------
5.8 MANAGEMENT AND EMPLOYEE STOCKHOLDERS.
(a) The Company shall use its commercially reasonable efforts to cause
each of the persons set forth on SCHEDULE 5.8 to execute and deliver as promptly
------------
as practicable after the date hereof a Stockholder Agreement in substantially
the form set forth in EXHIBIT 5.8.
-----------
(b) The Company shall comply with all applicable securities Laws in
performing its obligations under this Section 5.8.
-----------
5.9 UPDATE TO SCHEDULES
From and after the date hereof until the 30th day after the date hereof,
the Company shall be entitled to modify, amend or supplement the schedules
referred to in Article III of this Agreement.
-----------
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PREPARATION OF PROXY STATEMENT/PROSPECTUS; SCHEDULE 13E-3.
(a) The Company shall, as soon as practicable, prepare and file a
preliminary Proxy Statement/Prospectus with the SEC, reasonably satisfactory to
the Investor, and will use its commercially reasonable efforts to respond to any
comments of the SEC and its staff and to cause the Proxy Statement/Prospectus to
be declared effective and mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the satisfaction of the SEC
or its staff. The Company will notify the Investor promptly of the receipt of
any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement/Prospectus or for
additional information and will supply the Investor with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement/Prospectus or the Merger. If at any time prior to the Stockholders
Meeting there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement/Prospectus, the Company will promptly prepare
and mail to its stockholders such an amendment or supplement. The Company will
not mail any Proxy Statement/Prospectus, or any amendment or supplement thereto,
to which the Investor reasonably objects, unless required by law, rule,
regulation or the SEC staff, in the opinion of outside counsel; provided, that
--------
the Investor shall identify its objections and fully cooperate with the Company
to create a mutually satisfactory Proxy Statement/Prospectus. In connection with
such preliminary Proxy
31
Statement/Prospectus, Proxy Statement/Prospectus and any amendment or supplement
thereto, the Investor and, from and after formation, Newco shall promptly
provide all information reasonably requested by the Company.
(b) If, in the opinion of Company's counsel, after consultation with
counsel to the Investor, the filing with the SEC of a Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3") in connection with the Merger is required
--------------
by Rule 13e-3 under the Exchange Act, the Company will file the Schedule 13E-3
at the time of filing of the Proxy Statement/Prospectus. If the Schedule 13E-3
is filed, at the time of any amendment to the Proxy Statement, the parties will
cause to be filed with the SEC an appropriate amendment to the Schedule 13E-3.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
The Company and its Subsidiaries shall afford to the Investor, and to the
Investor's officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours from the
date hereof to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to the Investor (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as the
Investor may reasonably request. The Investor will hold, and will cause its
officers, employees, accountants, counsel, financial advisers and other
representatives and Affiliates to hold, any and all information received from
the Company, directly or indirectly, in confidence, according to the terms of
the confidentiality agreement dated as of November 11, 1998, between the Company
and an affiliate of the Investor (the "Confidentiality Agreement").
-------------------------
6.3 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially 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 Merger, and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement, (v)
reasonably cooperating with all potential sources of financing to the Investor
and Newco in
32
connection with the Merger, and the other transactions contemplated by this
Agreement, and the taking of all reasonable steps as may be necessary or
advisable to consummate one or more financing transactions with such potential
sources of financing, including participating in "road shows" with respect to
the issuance of securities in one or more private placements or transactions
registered under the Securities Act and (vi) if necessary to obtain
recapitalization accounting treatment of the Merger and the transactions
contemplated by that Agreement, restructuring the Merger and the transactions
contemplated by this Agreement. In connection with and without limiting the
foregoing, the Company and its Board of Directors shall (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement, the
Stockholder Agreement or any of the other transactions contemplated by this
Agreement or the Stockholder Agreement and (ii) if any state takeover statute or
similar statute or regulation becomes applicable to the Merger, this Agreement,
the Stockholder Agreement or any other transaction contemplated by this
Agreement or the Stockholder Agreement, take all action reasonably necessary to
ensure that the Merger and the other transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement, the Stockholder Agreement and the other transactions
contemplated by this Agreement or the Stockholder Agreement. Nothing in this
Agreement shall be deemed to require the Investor to dispose of or hold separate
any asset or collection of assets.
(b) The Company shall give prompt notice to the Investor of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it or any
Subsidiary to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it or any Subsidiary
under this Agreement; provided, however, that no such notification shall
-------- -------
affect the representations, warranties, covenants or agreement of the parties or
the conditions to the obligations of the parties under this Agreement.
(c) The Investor shall give prompt notice to the Company of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, or any material
adverse development with respect to the financing contemplated by Section 5.7;
-----------
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.
6.4 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated.
(b) If a Payment Event (as hereinafter defined) shall occur (i) prior
to the earlier to occur of the Termination Right Expiration Date and the time
that the Investor notifies the
33
Company in writing that it waives its right to terminate this Agreement under
Section 8.1(j) and (ii) prior to the time that the Investor delivers to the
--------------
Company copies of the Financing Letters, then, within two business days
following such Payment Event, the Company shall pay to the Investor a fee in an
amount equal to one half of the Termination Fee and shall reimburse the Investor
for up to $3 million of the Investor's Expenses not previously reimbursed.
(c) If a Payment Event shall occur at any other time, then, within two
business days following such Payment Event, the Company shall pay to the
Investor a fee in an amount equal to the Termination Fee and shall reimburse the
Investor for up to $3 million of the Investor's Expenses not previously
reimbursed.
(d) If an Expense Reimbursement Event shall occur at any time, then,
within two business days following such Expense Reimbursement Event, the Company
shall reimburse the Investor for up to $3 million of the Investor's Expenses not
previously reimbursed; provided that if such Expense Reimbursement Event is
--------
pursuant to Section 8.1(b) or Section 8.1(c), then the Company shall reimburse
-------------- --------------
the Investor for 50% of the Investor's Expenses.
(e) For purposes of this Agreement, "Termination Fee" shall mean $25
---------------
million.
(f) For purposes of this Agreement, "Investor's Expenses" shall mean
-------------------
all out-of-pocket expenses (including reasonable attorneys fees) incurred by or
on behalf of the Investor in connection with the Merger and the other
transactions contemplated by this Agreement, including, without limitation, the
Indebtedness incurred in connection with the Merger and the other transactions
contemplated by this Agreement.
(g) For purposes of this Agreement, "Payment Event" shall mean any of
------- -----
the following shall have occurred:
(i) this Agreement shall have been terminated pursuant to Section
-------
8.1(g) or Section 8.1(h); or
------ --------------
(ii) this Agreement shall have been terminated pursuant to Section
-------
8.1(d) or Section 8.1(e)(ii) (in a situation in which the breach of covenant
------ ------------------
fundamentally affects (A) the viability or the consummation of the Merger or (B)
the benefits expected by the Investor at the Effective Time from the
transactions contemplated hereby) and, prior to the earlier of nine months after
such termination and December 31, 1999, the Company shall have entered into an
agreement or arrangement providing for an Alternative Transaction for a higher
value per Share to the stockholders of the Company.
(h) For purposes of this Agreement, "Expense Reimbursement Event"
---------------------------
shall mean that this Agreement is terminated pursuant to Section 8.1 (other than
-----------
pursuant to Section 8.1(a), Section 8.1(i), Section 8.1(j), Section 8.1(k),
-------------- -------------- -------------- --------------
Section 8.1(l) or Section 8.1(m)).
-------------- --------------
(i) Notwithstanding anything to the contrary set forth in this
Agreement, if this Agreement shall have been terminated for any reason and at
the time of termination, this Agreement could have been terminated pursuant to
more than one subsection of Section 8.1, then the Investor shall be entitled to
-----------
choose which such subsection this Agreement shall have been terminated
pursuant to.
34
(j) The Company acknowledges that the agreements contained in this
Section 6.4 are an integral part of the transactions contemplated by this
-----------
Agreement and that, without these agreements, the Investor would not enter into
this Agreement. Accordingly, if the Company fails to pay the Termination Fee or
the Investor's Expenses and, in order to obtain such payment, the Investor
commences a suit which results in a judgment against the Company for the
Termination Fee and/or the Investor's Expenses, the Company shall pay to the
Investor all costs and expenses (including attorneys fees and expenses) incurred
by or on behalf of the Investor in connection with such suit, together with
interest on the amount of the Termination Fee and the Investor's Expenses that
are the subject of such judgment at the prime rate of the Bankers Trust Company
in effect on the date such payment was required to be made.
6.5 DIRECTOR AND OFFICER LIABILITY.
(a) For a period of 6 years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless the present and former officers
and directors of the Company in respect of acts or omissions occurring prior to
the Effective Time to the extent provided under the Company's Restated
Certificate of Incorporation and bylaws in effect on the date hereof; provided
--------
that such indemnification shall be subject to any limitation imposed from time
----
to time under applicable Law. For a period of 6 years after the Effective Time,
the Surviving Corporation shall provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective Time
covering each such Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof
(or, if such insurance policy cannot be obtained, such insurance policy on terms
with respect to coverage and amount as favorable as can be obtained, subject to
the proviso at the conclusion of this sentence), provided that in satisfying its
-------- ----
obligation under this Section, the Company shall not be obligated to cause the
Surviving Corporation to pay premiums in excess of 150% of the amount per annum
the Company paid in its last full fiscal year, which amount has been disclosed
to the Investor.
(b) In furtherance of and not in limitation of the preceding paragraph,
the Investor agrees that the officers and directors of the Company that are
defendants in all litigation commenced by stockholders of the Company with
respect to (i) the performance of their duties as such officers and/or directors
under federal or state law (including litigation under federal and state
securities laws) and (ii) the Merger, including, without limitation, any and all
such litigation commenced on or after the date of this Agreement (the "Subject
-------
Litigation") shall be entitled to be represented, at the reasonable expenses of
----------
the Company, in any Subject Litigation by one counsel (and Delaware counsel if
appropriate and one local counsel in each jurisdiction in which a case is
pending) each of which counsel shall be selected by a plurality of such director
defendants; provided that the Company shall not be liable for any settlement
-------- ----
effected without its prior written consent (which consent shall not be
unreasonably withheld) and that a condition to the indemnification payments
provided in Section 6.5(a) shall be that such officer/director defendant not
--------------
have settled any Subject Litigation without the consent of the Surviving
Corporation (such consent not to be unreasonably withheld) and, prior to the
Effective Time, the Company (which consent shall not be unreasonably withheld);
and provided, further, that the Surviving Corporation shall not have any
-------- -------
obligation hereunder to any officer/director defendant when and if a court of
competent jurisdiction shall ultimately determine, and such determination
35
shall have become final and non-appealable, that indemnification of such
officer/director defendant in the manner contemplated hereby is prohibited by
applicable law.
6.6 NASDAQ LISTING.
Neither the Company nor the Investor will take any affirmative action
(other than the consummation of the Merger and the other transactions
contemplated by this Agreement), for at least three years after the Effective
Time of the Merger, to cause the Company's Common Stock to be de-listed from The
NASDAQ National Market System ("NASDAQ") unless such action is approved by a
------
majority of the directors of the Company who at the time of such decision and
were directors of the Company immediately prior to the Effective Time; provided,
--------
however, that the Company may cause or permit the Company's Common Stock to be
de-listed if the Company's Common Stock ceases to be registered under Section 12
of the Exchange Act.
6.7 PUBLIC ANNOUNCEMENTS.
The Investor and, from and after formation, Newco, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, except as may be
required by applicable Law.
6.8 STOP TRANSFER.
The Company shall not register the transfer of any certificate representing
any Subject Shares (as defined in the Stockholder Agreement), unless such
transfer is made to the Investor or Newco or otherwise in compliance with the
Stockholder Agreement. The Company will inscribe upon any certificates
representing Subject Shares submitted by a Stockholder (as defined in the
Stockholder Agreement) for such purpose the following legend:
"THE SHARES OF COMMON STOCK OF [TARGET] CORPORATION (THE "COMPANY")
-------
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT DATED AS OF DECEMBER __, 1998, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED, EXCEPT IN ACCORDANCE THEREWITH. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY."
6.9 FURTHER ASSURANCES.
After the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company or Newco, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of the Company or Newco, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of
36
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger are subject
to the satisfaction or waiver, where permissible, prior to the Effective Time,
of the following conditions:
(a) The Company Stockholder Approval shall have been obtained as
required by and in accordance with applicable law and the Certificate of
Incorporation.
(b) No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Entity that prohibits or restricts the consummation of the Merger
or makes such consummation illegal (each party agreeing to use commercially
reasonable efforts to have any such prohibition lifted).
(c) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(d) The Registration Statement on Form S-4 (or an alternative form
prescribed by the SEC) shall have been declared effective and shall not be the
subject of any stop order and no proceedings for such purpose shall be pending
before or threatened by the SEC, unless the parties shall have mutually
determined that registration under the Securities Act is not required with
respect to the Merger.
(e) All consents, approvals and licenses of any Governmental Entity
required in connection with the execution, delivery and performance of this
Agreement and for the Surviving Corporation to conduct the business of the
Company in substantially the manner now conducted, shall have been obtained,
unless the failure to obtain such consents, authorizations, orders or approvals
would not have a Material Adverse Effect after giving effect to the transactions
contemplated by this Agreement.
(f) The conditions set forth in the Financing Letters shall have been
satisfied or waived and the funding referred to therein shall be available to
Newco on terms and conditions satisfactory to the Investor and the Company.
(g) The Company and the Investor shall have executed and delivered a
registration rights agreement in respect of the New Preferred Stock containing
the relative rights, terms, limitations and preferences set forth in EXHIBIT
-------
1.4(A), in form and substance reasonably satisfactory to the Investor and the
------
Company.
37
7.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver, prior to the proposed Effective Time, of the following
conditions: All of the representations and warranties of the Investor and Newco
set forth in this Agreement shall be true and correct in all material respects
(except for those representations and warranties that are qualified as to
materiality, which shall be true and correct in all respects) as of the date
hereof and (except for those that are expressly made only as of another date) as
of the Effective Time as though made on and as of such time, and the Investor
and Newco shall have performed in all material respects all covenants and
agreements required to be performed by then under this Agreement at or prior to
the Effective Time and the Company shall have received a certificate signed by
an executive officer of the Investor to the foregoing effect.
7.3 CONDITIONS TO THE INVESTOR'S AND NEWCO'S OBLIGATIONS TO EFFECT THE MERGER.
The obligations of the Investor and Newco to effect the Merger shall be
subject to the satisfaction or waiver by the Investor and Newco, prior to the
proposed Effective Time, of the following conditions:
(a) All of the representations and warranties of the Company set forth
in this Agreement, shall be true and correct in all material respects (except
for those representations and warranties that are qualified as to materiality,
which shall be true and correct in all respects) as of the date hereof and
(except for those that are expressly made only as of another date) as of the
Effective Time as though made on and as of such time, and the Company shall have
performed in all material respects all covenants and agreements required to be
performed by it under this Agreement at or prior to the Effective Time and the
Investor shall have received a certificate signed by an executive officer of the
Company to the foregoing effect.
(b) None of the following shall have occurred and then be continuing
(i) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange or the NASDAQ, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or any limitation by federal or state authorities on the extension
of credit by lending institutions, or a disruption of or material adverse change
in either the syndication market for credit or subordinated debt facilities or
the financial, banking or capital markets or (iii) in the case of any of the
foregoing existing as of the date hereof, a material acceleration or worsening
thereof.
(c) All notices required to be given prior to the Effective Time with,
and all consents, approvals, authorizations, waivers and amendments required to
be obtained prior to the Effective Time from, any third party in connection with
the consummation of the Merger and the transactions contemplated by this
Agreement, have been made and/or obtained.
(d) The Investor shall be satisfied, based on advice from
PricewaterhouseCoopers LLP that the Merger will qualify for recapitalization
accounting treatment in accordance with GAAP consistently applied.
38
(e) The Investor shall have been provided with a certificate from an
officer of the Company certifying that the conditions precedent to the
Investor's obligations set forth in this Section shall have been satisfied.
(f) The Investor shall have been provided with an opinion of Xxxxxx,
Xxxxx & Xxxxxxx, counsel to the Company, in substantially the form attached
hereto as EXHIBIT 7.3(G).
--------------
(g) The holders of no more than 3% of the outstanding Shares shall have
validly elected to demand the appraisal of their Shares pursuant to Section 262
of the DGCL.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the terms of this Agreement by the
stockholders of the Company as follows:
(a) By mutual written consent of the Investor and the Company.
(b) By either the Investor or the Company if the Effective Time shall
not have occurred on or before the 180th day immediately following the date
hereof (the "Outside Date"); provided that the right to terminate this Agreement
------------ -------- ----
under this Section 8.1(b) shall not be available to any party whose failure to
--------------
fulfill any obligation under this Agreement has been the cause of or resulted in
the failure of the Effective Time to occur on or before such date.
(c) By either the Investor or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable.
(d) By either the Investor or the Company if the Company Stockholder
Approval is not obtained by reason of the failure to obtain the required vote
upon a vote held at a duly called meeting of stockholders or at any adjournment
thereof.
(e) By the Investor, if (i) any of the representations and warranties
of the Company contained in this Agreement shall fail to be true and correct in
any material respect, in each case either as of the date hereof or have since
become untrue in any material respect or (ii) the Company shall have breached or
failed to comply in any material respect with any of its obligations under this
Agreement, and such failure to be true and correct, breach or failure shall
continue unremedied for 15 days after the Company has received written notice
from the Investor of the occurrence of such failure to be true and correct,
breach or failure; provided, however, that in remedying any such failure to be
-------- -------
true and correct, breach or failure the Company shall not have spent any money,
incurred any liabilities or undertaken any obligations that, individually or
together with the breach or failure so remedied, would itself constitute a
39
material breach of or failure to perform any representation, warranty or
covenant of this Agreement.
(f) By the Investor if there shall have occurred any material adverse
change since the date of the audited financial statements included in the most
recently publicly available SEC Documents.
(g) By the Investor if the Board of Directors of the Company shall have
withdrawn or modified or amended, in a manner adverse to the Investor, its
approval or recommendation of this Agreement and the Merger or its
recommendation that stockholders of the Company adopt and approve this Agreement
and the Merger, or approved, recommended or endorsed any proposal for an
Alternative Transaction or if the Company has failed to call the Company
Stockholders Meeting or failed to hold the Special Meeting prior to the Outside
Date or failed to include in the Proxy Statement/Prospectus the recommendation
referred to above;
(h) By the Company if prior to the Effective Time the Board of
Directors of the Company shall have withdrawn or modified or amended, in a
manner adverse to the Investor, its approval or recommendation of this Agreement
and the Merger or its recommendation that stockholders of the Company adopt and
approve this Agreement and the Merger in order to permit the Company to execute
a definitive agreement providing for an Alternative Transaction; provided that,
-------- ----
in any such case, (i) the Company has complied and is in compliance with Section
-------
5.2, (ii) in the case of any Acquisition Proposal, prior to being entitled to
---
terminate this Agreement under this Section 8.1(h), the Company shall have
--------------
provided to the Investor at least 7 days prior written notice (which notice
shall set forth the terms and conditions of such Acquisition Proposal and
identify the applicable Third Party), the Company shall have cooperated with the
Investor during such 7 day period with the intent of enabling the Investor (if
it so desires) and the Company to agree to a modification of the terms and
conditions of this Agreement and (iii) the Company shall have paid to the
Investor the Termination Fee and reimbursed all of the Investor's Expenses;
(i) By the Company if (i) any of the representations and warranties of
the Investor or Newco contained in this Agreement shall fail to be true and
correct in any material respect, in each case either as of the date hereof or
have since become, and at the time of termination remain, untrue in any material
respect, or (ii) the Investor or Newco shall have breached or failed to comply
in any material respect with any of its obligations under this Agreement (other
than as a result of a breach by the Company of any of its obligations under this
Agreement) and such failure to be true and correct, breach or failure shall
continue unremedied for 15 days after the Investor or Newco has received written
notice from the Company of the occurrence of such breach or failure.
(j) By the Investor at any time prior to 11:59 p.m. Eastern Standard
Time on the 45th day immediately following the date of this Agreement (the
"Termination Right Expiration Date") if, at the time of termination, the
----------------------------------
Investor (based on input from its financial advisors, sources of financing,
accountants, counsel, consultants and other representatives) is not satisfied
with the results of its due diligence review of the Company based on factors
that a reasonably prudent investor in the Investor's position would consider
appropriate to evaluate whether to pursue the transactions contemplated hereby.
Without limiting the foregoing, the Investor shall
40
be entitled, in the exercise of this termination right, to consider the extent
to which members of management of the Company and its Subsidiaries are likely to
maintain a sufficient level investment in the equity of the Company, after
giving effect to the transactions contemplated hereby, including the Stockholder
Agreement and the proration set forth in Section 2.3.
-----------
(k) By the Investor at any time after the Termination Right Expiration
Date if at the time of termination:
(i) The Investor shall not be satisfied with the result of the
Company's effort to obtain executed and delivered Stockholders Agreements
from members of management of the Company and its Subsidiaries.
(ii) The Investor shall not have obtained the Financing Letters;
or
(l) By the Company at any time after the Termination Right Expiration
Date if, at the time of termination Newco shall not have obtained the Financing
Letters.
(m) By the Investor, within 10 days of receipt of the audited financial
statements prepared pursuant to Section 5.6(b), if the Investor shall have
--------------
received such audited financial statements more than 35 days after the date
hereof and shall not be reasonably satisfied that such financial statements are
consistent with the information provided to the Investor with respect to the
Company's and its Subsidiaries' financial performance and condition.
8.2 EFFECT OF TERMINATION.
In the event of a termination of this Agreement by either the Company or
the Investor as provided in Section 8.1, this Agreement shall forthwith become
-----------
void and there shall be no liability or obligation on the part of the Investor,
Newco or the Company or their respective officers, directors or Affiliates,
except that Section 6.2, Section 6.4, Section 8.1, this Section 8.2 and Article
----------- ----------- ----------- ----------- -------
IX shall survive any such termination and except that nothing herein shall
--
relieve any party for liability for any breach hereof.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT.
To the extent permitted by applicable Law, this Agreement may be amended by
action taken by or on behalf of the Investor and the Board of Directors of the
Company at any time before or after obtaining Company Stockholder Approval;
provided that any amendment made after obtaining Company Stockholder Approval,
-------- ----
shall not, without the approval of the stockholders of the Company, (a) alter or
change the amount or kind of Merger Consideration, (b) alter or change any term
of the Certificate of Incorporation, (c) alter or change any term of the terms
and conditions of this Agreement if such alteration or change would adversely
affect the rights of the Company's stockholders hereunder. This Agreement may
not be amended except by an instrument in writing signed on behalf of all of the
parties.
41
9.2 EXTENSION; WAIVER.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) subject to Section 9.1, waive
-----------
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
9.3 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties or covenants (subject to the
succeeding sentence) in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time. This Section 9.3 shall not
-----------
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
9.4 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed),
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to the Investor or Newco, to
Boss Investment LLC
c/o Apollo Management, L.P.
1301 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
and
42
if to the Company, to
Building One Services Corporation
000 Xxxxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
and
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: N. Xxxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
and
Dechert, Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Nassau
Telecopy No.: (000) 000-0000
9.5 INTERPRETATION.
When a reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Unless the context otherwise requires, words
importing the singular shall include the plural, and vice versa. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
------- -------- ---------
shall be deemed to be followed by the words "without limitation". The phrase
------------------
"made available" in this Agreement shall mean that the information referred to
---------------
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, the term "subsidiary" of any
----------
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person. As used in this Agreement,
"Material Adverse Effect" means, when used in respect of the Company and its
------------------------
Subsidiaries, any effect or condition that, individually or in the aggregate
with any other effect or condition, is materially adverse to the assets,
properties, business, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole. As used in this Agreement,
"material adverse change" means, when used in respect of the Company and its
------------------------
Subsidiaries, any change or event that, individually or in the aggregate with
any other change or
43
event, is materially adverse to the assets, properties, business, financial
condition or results of operations of the Company and its Subsidiaries, but
excluding (i) any change resulting from general economic conditions and (ii) a
failure of the Company's earnings per Share for the fiscal quarter ending
December 31, 1998 (without giving effect to any charges, accruals or
extraordinary items arising from the execution and delivery of this Agreement or
the transactions contemplated hereby) to equal or exceed 85% of the consensus
estimate of the Company's earnings per share for such period as of the date
immediately preceding the date hereof; provided, however, that the failure of
-------- -------
any facts or circumstances that constitute a material adverse change shall not
affect in any way the Investor's rights pursuant to Section 8.1(j). As used in
--------------
this Agreement, except where expressly indicated otherwise, the phrase
"knowledge" with respect to the Company, means to the actual knowledge, after
----------
due inquiry (i.e., the amount of inquiry that would be undertaken by a
----
reasonably prudent business person given like facts and circumstances) of (x)
prior to the Termination Right Expiration Date, any of the following officers of
the Company or any of their successors: Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx,
Xxxxx Xxxxxxx, X. Xxxxxxx Xxxx and Xxxxxxx X. Love, Jr. and (y) after the
Termination Right Expiration Date the Company, its Subsidiaries, each of the
Company's directors and officers and the President of each Subsidiary. As used
in this Agreement, the term "person" shall be interpreted broadly and shall
include any person, individual, corporation, limited partnership, limited
liability company, trust, association or other entity or business organization
of any kind or division thereof.
9.6 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder,
except for the provisions of Section 6.5.
-----------
9.7 GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware.
9.8 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
9.9 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.
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.
44
9.10 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 Delaware or
in a Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit such party to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal court sitting in the state of Delaware or a Delaware state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
45
IN WITNESS WHEREOF, the Investor and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
BOSS INVESTMENT LLC
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: Manager
BUILDING ONE SERVICES CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxx
-----------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
46
AGREEMENT AND PLAN OF MERGER
dated as of December 23, 1998
SCHEDULE 5.8
Management/Employee Stockholders
--------------------------------
STOCKHOLDERS
Ledecky, Xxxxxxxx X.
Xxxxxx, Xxxxxxx X.
Xxxxx, Xxxxx X. and Xxxx X., Joint Tenants with Right of Survivorship
Green, Xxxx X.
Xxxxxxx, W. E.
Xxxxxxxx, Xxxxxx X.
BLEP, Inc (Xxxxxxx, Xxx)
Xxxxxx, W. Xxxxxx
Xxxxx, Xxxxx X.
Xxxxx, Xxxxxx X.
Xxxx, Xxxxxx X.
XxXxxxxx, Xxxxxxx X.
Xxxxxxxx, Xxxxxxxxx
Xxxxxxxxxx, Xxxxxx X.
Xxxxx, Xxxxxx X. and Xxxxx X., Joint Tenants
Love, Xxxxxxx X., Jr.
Love, Xxxxx
Xxxxx, Xxxxxxx
Xxxxx, Xxxxx
Xxxxx, Xxxxx, X.
Xxxxxxx, Xxxxx
Xxxxxx, Xxxxxx X., as Trustee or Successor of the Xxxxxx Xxxxxx Family Trust
U/A dated 9/13/89
XxxXxxxxx, Xxxx
Tess, Xxxxxx X.
Xxxxxxx, Xxxxxxxx X.
Xxxxxxxx, Xxxxxxx
Xxxxx, Xxxxxxx X.
Xxxxxx, Xxxxxxxx X.
Xxxxxxxx, Xxxx
SCHEDULE 5.1(D)
CONFIDENTIAL
PENDING DEALS SUMMARY
SIGNED/PENDING LOI'S
--------------------
ADJ- PURCHASE
COMPANY REVENUES EBIT PRICE
Electrical COMPANY Location TYPE DEAL TYPE ($MM) ($MM) ($MM)
signed Advent Electric Knoxville, TN Platform 50/50 Debenture 20 1.35 6.8
pending Xxxx Electric Salt Lake City, UT Satellite 50/50 Stock 10 1.28 6.1
signed Potter Electric Las Vegas, NV Platform 50/50 Debenture 14 1.4 4.8
signed Xxxxxxxx Brothers Fond du Lac, WI Tuck-in All Cash Asset 1 0.13 0.44
------- -------
Total 46 18.14
MECHANICAL
-------------------------------------------------------------------------------------------------------------------
signed American Air Company Bakersfield, CA Platform 50/50 Stock 22 1.64 6.5
signed Beltline Mechanical Dallas, TX Tuck-in All Cash Asset 1 0.175 0.4
signed DFW Mechanical Dallas, TX Platform 50/50 Stock 6 1.21 6
signed Xxxxxxx Brothers Xxxxxxx, SC Platform 50/50 Stock 84 4.7 25.2
------- -------
113..3 38.1
Xxx Mechanical St. Louis 16.0
REVENUES
($MM)
-----------------------------
GRAND TOTAL 159
PURCHASE
PRICE MULTIPLE CASH STOCK SHARES 12 MONTHS
Electrical COMPANY ($MM) OF EBIT ($MM) ($MM) ISSUED ACCRETION
signed Advent Electric 6.8 4.00 3.40 3.40 168,070 0.008605778
pending Xxxx Electric 6.1 4.77 3.05 3.40 152,500 0.007563627
signed Potter Electric 4.8 3.43 2.4 2.40 120,000 0.011426197
signed Xxxxxxxx Brothers 0.44 3.44 0.44 0.44 0 0.001139556
------- ------------------------------------------
18.14 9.29 9.64 440,570 0.028735157
MECHANICAL
---------------------------------------------------------------------------------------------------
signed American Air Company 6.5 3.96 3.25 3.25 197,851 0.011017099
signed Beltline Mechanical 0.4 2.29 0.4 0.00 0 0.001817778
signed DFW Mechanical 6 3.93 3 3.00 182,728 0.006133148
signed Xxxxxxx Brothers 25.2 4.72 12.6 12.60 771,959 0.019278652
------- -------------------------------------------
38.1 19.25 18.85 771,959 0.038246676
PURCHASE
PRICE CASH STOCK SHARES 12 MONTHS
($MM) ($MM) ($MM) ($MM) ACCRETION
---------------------------------------------------------------
GRAND TOTAL 56 29 28 1,212,529 0.06698
AGREEMENT AND PLAN OF MERGER
dated as of December 23, 1998
SCHEDULE 5.1(K)
CERTAIN MATTERS WITH RESPECT TO
Option and Bonuses
------------------
(ii) The company may pay bonuses to certain corporate level employees in an
aggregate amount not to exceed the amount that the Company has accrued for
such purposes ($1,500,000.00); also, the Subsidiaries may pay bonuses
(which have been properly accrued) to their employees pursuant to existing
bonus arrangements and in the ordinary course of business; the Company
shall, on the Effective Date, xxxxx Xxxxxxxx X. Xxxxxxx options to purchase
750,000 shares of common stock of the Company and shall grant to each of
Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxxxx and X. Xxxxxxx Xxxx options to purchase
250,000 shares of common stock of the Company, in each case with an
exercise price equal to $25.00 per share.
(iv) 500,000 Company Stock Options held by each of Xxxxx Xxxxxxx, Xxxxxxx X.
Xxxxxxx and F. Xxxxxx Xxxx with an exercise price of $20.00 per share
(1,500,000 options total) shall be accelerated and cashed out at the
Effective Time at a price of $25.00 per share, less the exercise price
thereof; PROVIDED, HOWEVER, that in lieu of accelerating all such options
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and in lieu of the grant discussed in (ii) above, the Company may, at the
Effective Time, (i) accelerate and cash out 250,000 Company Stock Options
held by such individuals in accordance with the foregoing terms; (ii) pay
each of such individuals $1,250,000.00 in cash in return for such
individuals waiving their rights to have all such options accelerate and
(iii) amend each of such individuals options to purchase 250,000 shares of
common stock of the Company to provide for an exercise price of $25.00 per
share; Company Stock Options granted to their employees of the Company and
its Subsidiaries may be accelerated and cashed out at the Effective Time at
a price of $25.00 per share, less the exercise price thereof so that 50% of
each such other employee's options will be vested, including options that
have vested before such acceleration (it being understood that the options
shall be accelerated temporarily in accordance with the vesting schedule).
