EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
ALLIED MOTION TECHNOLOGIES, INC.,
AMOT, INC.
and
OWOSSO CORPORATION
Dated as of February 10, 2004
TABLE OF CONTENTS
TABLE OF DEFINITIONS ...................................................................................................... a
ARTICLE I THE MERGER ..................................................................................................... 1
Section 1.1 The Merger........................................................................................ 1
Section 1.2 Closing; Effective Time........................................................................... 2
Section 1.3 Effects of Merger................................................................................. 2
Section 1.4 Tax Consequence................................................................................... 2
ARTICLE II DIRECTORS, OFFICERS AND CHARTER DOCUMENTS ..................................................................... 2
Section 2.1 Directors......................................................................................... 2
Section 2.2 Officers.......................................................................................... 2
Section 2.3 Articles of Incorporation and Bylaws of Surviving Corporation..................................... 3
ARTICLE III TREATMENT OF SECURITIES ...................................................................................... 3
Section 3.1 Effect of the Merger on Capital Stock............................................................. 3
Section 3.2 Additional Preferred Merger Consideration......................................................... 4
Section 3.3 Exchange of Certificates.......................................................................... 6
Section 3.4 Company Options; Stock Plans...................................................................... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................................................. 10
Section 4.1 Corporate Organization............................................................................ 10
Section 4.2 Capitalization.................................................................................... 11
Section 4.3 Authority; No Violation........................................................................... 12
Section 4.4 Consents and Approvals............................................................................ 13
Section 4.5 SEC Reports; Financial Statements................................................................. 13
Section 4.6 Broker's Fees..................................................................................... 14
Section 4.7 Absence of Certain Changes or Events.............................................................. 14
Section 4.8 Legal Proceedings................................................................................. 15
Section 4.9 Taxes and Tax Returns............................................................................. 15
Section 4.10 Certain Other Tax Matters......................................................................... 16
Section 4.11 Employees; Benefit Plans.......................................................................... 16
Section 4.12 Securities Laws Matters........................................................................... 18
Section 4.13 Compliance with Applicable Law, Permits and Licenses.............................................. 19
Section 4.14 Intellectual Property; Proprietary Rights; Employee Restrictions; Assets.......................... 19
Section 4.15 Certain Contracts; Leases......................................................................... 21
Section 4.16 Indebtedness; Absence of Undisclosed Liabilities.................................................. 22
Section 4.17 Insurance......................................................................................... 22
Section 4.18 Environmental Liability........................................................................... 23
Section 4.19 State Takeover Law................................................................................ 23
Section 4.20 Form S-4 Joint Proxy Statement/Prospectus......................................................... 23
Section 4.21 Transactions with Affiliates...................................................................... 23
Section 4.22 Labor Relations; Collective Bargaining Agreements................................................. 24
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Section 4.23 Dividends ........................................................................................... 24
Section 4.24 Product Labeling, Product Liability and Product Warranty ............................................ 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB .................................................................. 24
Section 5.1 Corporate Organization .............................................................................. 25
Section 5.2 Capitalization. ..................................................................................... 25
Section 5.3 Authority; No Violation. ............................................................................ 26
Section 5.4 Consents and Approvals .............................................................................. 27
Section 5.5 SEC Reports; Financial Statements. .................................................................. 27
Section 5.6 Broker's Fees ....................................................................................... 28
Section 5.7 Absence of Certain Changes or Events. ............................................................... 28
Section 5.8 Legal Proceedings ................................................................................... 29
Section 5.9 Taxes and Tax Returns ............................................................................... 29
Section 5.10 Certain Tax Matters ................................................................................. 30
Section 5.11 Employees; Benefit Plans ............................................................................ 30
Section 5.12 Securities Laws Matters. ............................................................................ 32
Section 5.13 Compliance with Applicable Law, Permits and Licenses. ............................................... 32
Section 5.14 Intellectual Property; Proprietary Rights; Employee Restrictions; Assets. ........................... 33
Section 5.15 Certain Contracts; Leases. .......................................................................... 34
Section 5.16 Absence of Undisclosed Liabilities .................................................................. 35
Section 5.17 Insurance ........................................................................................... 35
Section 5.18 Environmental Liability ............................................................................. 36
Section 5.19 Form S-4 Joint Proxy Statement/Prospectus ........................................................... 36
Section 5.20 Transactions with Affiliates ........................................................................ 36
Section 5.21 Labor Relations; Collective Bargaining Agreements ................................................... 36
Section 5.22 Dividends ........................................................................................... 37
Section 5.23 Product Labeling, Product Liability and Product Warranty ............................................ 37
Section 5.24 Conduct of Business ................................................................................. 37
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER ........................................................................ 37
Section 6.1 Conduct of Businesses Prior to the Merger Closing ................................................... 37
Section 6.2 Company Forbearances ................................................................................ 38
Section 6.3 Parent Obligations .................................................................................. 40
Section 6.4 Certain Tax Matters ................................................................................. 40
Section 6.5 Other Matters ....................................................................................... 40
ARTICLE VII ADDITIONAL AGREEMENTS ........................................................................................ 40
Section 7.1 Filings Under Securities Laws ....................................................................... 40
Section 7.2 Access to Information. .............................................................................. 41
Section 7.3 Acquisition Transactions. ........................................................................... 42
Section 7.4 Shareholders' Approval .............................................................................. 44
Section 7.5 Legal Conditions to the Merger. ..................................................................... 45
Section 7.6 Affiliates .......................................................................................... 46
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Section 7.7 Stock Exchange Quotation or Listing............................................................... 46
Section 7.8 Additional Agreements............................................................................. 46
Section 7.9 Advise of Changes................................................................................. 46
Section 7.10 Directors' and Officers' Indemnification and Insurance............................................ 46
Section 7.11 Taxable Stock Purchase............................................................................ 48
Section 7.12 Employee Matters.................................................................................. 48
Section 7.13 Registration Statement............................................................................ 49
Section 7.14 Company Industrial Revenue Bonds.................................................................. 50
Section 7.15 Subordinated Debt Settlement...................................................................... 50
ARTICLE VIII CONDITIONS .................................................................................................. 50
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger........................................ 50
Section 8.2 Conditions to Obligations of the Company.......................................................... 51
Section 8.3 Conditions to Obligations of Parent............................................................... 51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER ............................................................................. 55
Section 9.1 Termination....................................................................................... 55
Section 9.2 Effect of Termination............................................................................. 56
Section 9.3 Amendment......................................................................................... 57
Section 9.4 Extension; Waiver................................................................................. 57
ARTICLE X GENERAL PROVISIONS ............................................................................................. 57
Section 10.1 Nonsurvival of Representations, Warranties and Agreements......................................... 57
Section 10.2 Expenses.......................................................................................... 57
Section 10.3 Notices........................................................................................... 58
Section 10.4 Interpretation.................................................................................... 59
Section 10.5 Counterparts...................................................................................... 59
Section 10.6 Entire Agreement.................................................................................. 59
Section 10.7 Governing Law..................................................................................... 59
Section 10.8 Publicity; Announcements.......................................................................... 59
Section 10.9 Assignment; Third Party Beneficiaries............................................................. 60
Section 10.10 Specific Enforcement.............................................................................. 60
Section 10.11 Disclosure of Tax Treatment/Structure............................................................. 60
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TABLE OF DEFINITIONS
DEFINITION SECTION DEFINED
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Acquisition Proposal 7.3(b)
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Acquisition Transaction 7.3(a)
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Additional Preferred Merger Consideration 3.2(a)
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Agreement 1st paragraph
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Articles of Merger 1.2
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Assumed Employees 7.12(b)
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Business Day 1.2
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Cash Payment 3.4(a)
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CERCLA 4.18
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Certificates 3.3(b)
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Claims 4.18
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Closing 1.2
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Closing Date 1.2
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Code Recitals
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Common Exchange Ratio 3.1(b)(i)
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Common Merger Consideration 3.1(b)(i)
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Company 1st paragraph
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Company Audited Balance Sheets 4.5(b)
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Company Audited Financial Statements 4.5(b)
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Company Benefit Plan 4.11(a)
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Company Board Approval 4.3(a)
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Company Board Recommendation 7.3(c)
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Company Charter 4.1(a)
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Company Common Stock 3.1(b)(i)
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Company Contract 4.15(a)
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Company Disclosure Schedule Article 4 preamble
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Company ERISA Affiliate 4.11(a)
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Company Insurance Policies 4.17
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Company Intellectual Property 4.14(a)
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Company Leased Real Property 4.15(c)
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Company Leases 4.15(c)
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Company Intellectual Property Licensed 4.14(a)
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Company Options 3.4
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Company Owned Intellectual Property 4.14(a)
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Company Permits 4.13(b)
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Company Encumbrances Permitted 4.14(e)
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Company Preferred Stock 3.1(b)(ii)
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Company Reports 4.5(a)
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Company Securities 3.3(b)
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Company Shareholder Approval 4.3(a)
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Confidentiality Agreement 7.2(c)
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a
DEFINITION SECTION DEFINED
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D&O Insurance Policy 7.10(a)
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Effective Time 1.2
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ERISA 4.11(c)
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Excess Parent Common Stock 3.3(d)
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Exchange Act 4.5(a)
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Exchange Agent 3.3(a)
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Existing Products 3.2(a)
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GAAP 3.2(a)
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Governmental Entity 4.4
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Gross Revenues 3.2(a)
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Indemnified Parties 7.10(b)
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Independent Accountant 3.2(c)
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Industrial Revenue Bonds 7.14
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Intellectual Property 4.14(a)
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"knowledge" 4.8
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Liability Notice of Disagreement 8.3(f)
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Liens 4.2(b)
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Material Adverse Effect 4.1(a)
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Merger Recitals
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Merger Consideration 3.1(b)(ii)
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Merger Sub 1st paragraph
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Multiemployer Plan 4.11(c) & 5.11(c)
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Multiple Employer Plan 4.11(c) & 5.11(c)
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Net Liabilities 8.3(f)
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Non-Competition Agreements Recitals
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Notice of Disagreement 3.2(c)
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Parent 1st paragraph
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Parent Audited Balance Sheets 5.5(b)
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Parent Audited Financial Statements 5.5(b)
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Parent Benefit Plan 5.11(a)
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Parent Common Stock 3.1(b)(i)
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Parent Contract 5.15(a)
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Parent Disclosure Schedule Article 5 preamble
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Parent ERISA Affiliate 5.11(a)
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Parent Insurance Policies 5.17
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Parent Intellectual Property 5.14(a)
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Parent Leased Real Property 5.15(c)
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Parent Leases 5.15(c)
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Parent Intellectual Property Licensed 5.14(a)
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Parent Owned Intellectual Property 5.14(a)
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Parent Permits 5.13(b)
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Parent Encumbrances Permitted 5.14(e)
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Parent Preferred Stock 5.2(a)
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b
DEFINITION SECTION DEFINED
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Parent Reports 5.5(a)
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Parent Subsidiaries Significant 5.1
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Parties 1st paragraph
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PBCL 1.1
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Preferred Exchange Ratio 3.1(b)(ii)
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Preferred Consideration Merger 3.1(b)(ii)
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Preferred Representative 3.2(c)
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Preferred Shareholders 3.2(a)
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Proxy Statement/Prospectus 7.1
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Registration Statement 5.4
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Released Person 8.3(n)
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Releasing Person 8.3(n)
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Report 3.2(c)
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Requisite Regulatory Approval 8.1(c)
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Reserved Shares 5.2(a)
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S1 1.4
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S2 1.4
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S3 1.4
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Response Actions 4.18
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SEC 4.4
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Securities Act 4.5(a)
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Shareholder Meeting 7.4
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Shareholder Proposal 7.4
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Special Committee 7.3(b)
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Statement of Liabilities 8.3(f)
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Stature 3.2(a)
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Stature Balance Sheets 4.5(b)
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Stature Products 3.2(a)
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Stock Plans 3.4(a)
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Subordinated Debt 4.16
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Subordinated Notes 3.2(a)
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Subordination Agreement 3.2(a)
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Subsidiary 4.1(a)
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Superior Proposal 7.3(b)
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Surviving Corporation Recitals
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Tax/Taxes 4.9(c)
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Tax Return 4.9(c)
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Termination Date 9.1(c)
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Third Party Intellectual Property 4.14(a)
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Voting Agreements Recitals
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Warrant/Warrants 3.1(b)(ii)
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c
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 10, 2004 (the
"Agreement"), is by and among Allied Motion Technologies, Inc., a Colorado
corporation ("Parent"), AMOT, Inc., a Pennsylvania corporation and wholly owned
Subsidiary of Parent ("Merger Sub"), and Owosso Corporation, a Pennsylvania
corporation (the "Company") (collectively, the "Parties").
RECITALS
WHEREAS, the respective Boards of Directors of each of the Parties have, by
unanimous vote, approved and declared advisable this Agreement, pursuant to
which the Company shall merge with Merger Sub (the "Merger"), with Merger Sub
being the surviving corporation in the Merger (the "Surviving Corporation"),
upon the terms and subject to the conditions, and with the effects, set forth in
this Agreement;
WHEREAS, as a condition to, and simultaneously with, the execution of this
Agreement, certain shareholders of the Company listed on Exhibit A are entering
into agreements in the form attached hereto as Exhibit A (the "Voting
Agreements") with Parent, pursuant to which they have agreed, among other
things, to vote in favor of approval of this Agreement;
WHEREAS, as a condition to the completion of the transactions contemplated
by this Agreement, certain shareholders of the Company listed on Exhibit B are
entering into non-competition agreements with Parent in the forms attached
hereto as Exhibit B (the "Non-Competition Agreements");
WHEREAS, as a condition to the Closing of the transactions contemplated by
this Agreement, prior to the Merger, the Company shall merge with its wholly
owned subsidiary, Stature (as defined below in Section 3.2(a)), with the Company
being the surviving corporation;
WHEREAS, the Parties intend that the Merger shall constitute a taxable sale
of assets and liquidation of the Company under the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, the Parties desire to make certain representations, warranties and
agreements in connection with the Merger and other transactions contemplated
hereby and also to prescribe certain conditions to the Merger and other
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Pennsylvania Business Corporation
Law (the "PBCL"), at the Effective Time, Merger Sub shall be merged with the
Company in accordance with the
applicable provisions of the PBCL. Following the Effective Time, the Merger Sub
shall continue as the Surviving Corporation and shall be a direct or indirect,
wholly owned Subsidiary of Parent and the Merger Sub shall succeed to all of the
rights and obligations of the Company, and the separate corporate existence of
the Company shall cease, all as specified in the PBCL.
Section 1.2 Closing; Effective Time. The closing of the Merger (the "Closing")
shall take place at the offices of Xxxxxxx Xxxxxxxxxxx & Mugel, LLP, Twelve
Xxxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 at 10:00 a.m., Eastern time, on the
third Business Day immediately following the date on which the last of the
conditions set forth in Article VIII hereof is satisfied or waived (other than
conditions that by their nature cannot be satisfied until the Closing Date, but
subject to satisfaction or waiver of such conditions), or at such other time and
date and place as Parent and the Company shall mutually agree (the "Closing
Date"). The term "Effective Time" shall mean the time and date of the filing by
the Company of properly executed articles of merger (the "Articles of Merger")
with the Department of State of the Commonwealth of Pennsylvania in accordance
with the PBCL, or at such later time as agreed to by the Parties and set forth
in the Articles of Merger. The term "Business Day" shall mean any day, other
than a Saturday, Sunday or a day on which the commercial banks in the State of
New York are authorized or required by law to remain closed.
Section 1.3 Effects of Merger. The Merger will have the effects set forth in the
applicable provisions of the PBCL and this Agreement. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all of the property, rights, privileges, powers
and franchises of the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 1.4 Tax Consequence. It is intended that the Merger constitute a taxable
sale of assets and liquidation of the Company under the Code, and the Parties
hereto agree to treat the Merger consistently with this intention for all
purposes at all times prior to and following the Closing, unless required to do
otherwise by law. Prior to the Effective Time, the following will occur: Parent
will create a wholly-owned subsidiary ("S1") which will create two wholly-owned
subsidiaries ("S2" and "S3"); Parent will contribute the stock of Merger Sub to
S1; and Parent will cause S1 to contribute 50% of the stock of Merger Sub to
each of S2 and S3.
ARTICLE II
DIRECTORS, OFFICERS AND CHARTER DOCUMENTS
Section 2.1 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, which
individuals shall serve as directors of the Surviving Corporation until the
earlier of their resignation or removal or their otherwise ceasing to be
directors or until their respective successors are duly appointed or elected in
accordance with applicable law.
Section 2.2 Officers. The officers of the Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and shall serve until their resignation or removal or their
otherwise ceasing to be officers or until their respective successors are duly
appointed or elected in accordance with applicable law.
2
Section 2.3 Articles of Incorporation and Bylaws of Surviving Corporation. At
the Effective Time: (i) the Articles of Incorporation of the Merger Sub in
effect immediately before the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, and (ii) the Bylaws of Merger Sub in
effect immediately before the Effective Time shall become the Bylaws of the
Surviving Corporation until altered, amended or repealed as provided under the
PBCL or in the Articles of Incorporation or Bylaws of the Surviving Corporation
(which Articles of Incorporation and Bylaws shall include provisions consistent
with the requirements of Section 7.10(b) of this Agreement).
ARTICLE III
TREATMENT OF SECURITIES
Section 3.1 Effect of the Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of the Company or Merger Sub:
(a) Cancellation of Certain Company Securities. Each share, if any, of
Company Common Stock and Company Preferred Stock that is held in the treasury of
the Company and all shares of Company Common Stock and Company Preferred Stock,
if any, that are owned by Parent or Merger Sub immediately prior to the
Effective Time shall be cancelled and retired and shall cease to exist, and no
payment or distribution shall be made with respect thereto.
(b) Conversion of Company Securities. By virtue of the Merger and without
any action on the part of any holder thereof:
(i) Each share of common stock, par value $.01 per share, of the Company
(the "Company Common Stock") issued and outstanding immediately prior to the
Effective Time, other than shares cancelled pursuant to Section 3.1(a) of this
Agreement, and shares as to which appraisal rights have been exercised pursuant
to Section 3.1(e) below, shall cease to be outstanding and shall cease to exist
and shall be converted automatically, subject to Sections 3.1(d) and 3.3(d)
below, into the right to receive .068 (the "Common Exchange Ratio") fully paid
and nonassessable shares of common stock, no par value per share, of Parent (the
"Parent Common Stock") (such fraction of a share of Parent Common Stock,
together with any cash in lieu of fractional shares of Parent Common Stock to be
paid pursuant to Section 3.3(d), collectively are referred to as the "Common
Merger Consideration").
(ii) Each share of class A convertible preferred stock, par value $.01 per
share, of the Company (the "Company Preferred Stock") issued and outstanding
immediately prior to the Effective Time, other than shares cancelled pursuant to
Section 3.1(a) of this Agreement, shall cease to be outstanding and shall be
retired and cease to exist and be converted automatically, subject to Section
3.1(d) and 3.3(d) below, into the right to receive: (A) cash in the amount of
$.9333 per share; (B) .127 (the "Preferred Exchange Ratio") fully paid and
nonassessable shares of Parent Common Stock; and (C) a warrant to purchase .28
shares of Parent Common Stock pursuant to a warrant substantially in the form of
Exhibit C attached hereto (each a "Warrant" and collectively the "Warrants")
(the "Preferred Merger Consideration" and, together with the Common Merger
Consideration and the Additional Preferred Merger Consideration, the "Merger
Consideration").
3
(iii) At the Effective Time, each Certificate theretofore representing
shares of Company Common Stock (except as provided in Section 3.1(e) with
respect to shares of Company Common Stock as to which appraisal rights have been
exercised) or shares of Company Preferred Stock, as the case may be shall,
without any action on the part of the Company, Parent or the holder thereof,
represent, and shall be deemed to represent from and after the Effective Time,
the right to receive the applicable Merger Consideration as determined in
accordance with Sections 3.1(b)(i) and 3.1(b)(ii) above and shall cease to
represent any rights in any shares of capital stock of the Company or the
Surviving Corporation.
(c) Certain Adjustments. If between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock, Company Common
Stock or Company Preferred Stock shall be changed into a different number of
shares by reason of any stock split, combination of shares, or any dividend
payable in stock shall be declared thereon with a record date within such
period, the Common Exchange Ratio and the Preferred Exchange Ratio shall be
appropriately adjusted to provide the holders of Company Common Stock and
Company Preferred Stock the same economic effect contemplated by this Agreement
prior to such event.
(d) Appraisal Rights. Notwithstanding Sections 3.1(b)(i), shares of Company
Common Stock outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger Agreement or consented thereto
in writing and who has demanded appraisal for such shares of Company Common
Stock in accordance with the PBCL shall not be converted into the Common Merger
Consideration unless such holder fails to perfect or withdraws or otherwise
loses his right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses his right to appraisal, such shares of Company
Common Stock shall be treated as if they had been converted as of the Effective
Time into the Common Merger Consideration, as applicable. The Company shall give
Parent prompt notice of any demands received by the Company for appraisal of
shares of Company Common Stock and Parent shall have the right to participate in
all negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands. Payments to holders
of Company Common Stock under this Section 3.1(d) shall be made by the Company
out of its own funds.
Section 3.2 Additional Preferred Merger Consideration.
(a) Amount of Additional Preferred Merger Consideration. In the event that
the Company's wholly-owned subsidiary, Stature Electric Inc. ("Stature"), or any
division or business which succeeds to the business operations of Stature,
achieves Gross Revenues (as hereinafter defined) of at least eighteen million
three hundred seventy thousand dollars ($18,370,000) during the calendar year
ending December 31, 2004, the Parent shall issue subordinated promissory notes
substantially in the form attached hereto as Exhibit D (the "Subordinated
Notes") to holders of Company Preferred Stock immediately prior to the Effective
Time (the "Preferred Shareholders"), prorated by such Preferred Shareholders'
Company Preferred Stock ownership as follows (the "Additional Preferred Merger
Consideration") and
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each Preferred Shareholder shall execute a subordination agreement substantially
in the form attached hereto as Exhibit D (each a "Subordination Agreement"): (i)
if Gross Revenues for such period are less than eighteen million three hundred
seventy thousand dollars ($18,370,000), then no Subordinated Notes will be
issued; (ii) if Gross Revenues are equal to or greater than nineteen million six
hundred thousand dollars ($19,600,000) then Subordinated Notes for a total
principal amount of five hundred thousand dollars ($500,000) will be issued;
(iii) if Gross Revenues are greater than eighteen million three hundred and
seventy thousand dollars ($18,370,000) but less than nineteen million six
hundred thousand dollars ($19,600,000), then the total principal amount of the
Subordinated Notes will equal the product of five hundred thousand dollars
($500,000) multiplied by a fraction the numerator of which is the difference
between the actual amount of the Gross Revenues minus eighteen million three
hundred and seventy thousand dollars ($18,370,000) and the denominator of which
is one million two hundred and thirty thousand dollars ($1,230,000). "Gross
Revenues" shall mean all revenues of Stature for calendar year 2004 calculated:
(A) in accordance with accounting principles generally accepted in the United
States ("GAAP"), applied on a consistent basis and in accordance with past
practice; (B) in a manner consistent with Stature's previous calculation of such
revenues for its three previous fiscal years; and (C) based on all sales of
Stature Products by Stature, Parent or any affiliate of Parent to third parties
not affiliated with the Parent. "Stature Products" shall mean all motors and
related products in the existing product lines of Stature at the Effective Time
(the "Existing Products"), all motors and related products which constitute
improvements or modifications to the Existing Products, and any motors or
related products which are based on or derived from the proprietary technology
of Stature at the Effective Time, and shall include any transaction involving
the sale or licensing of any such proprietary technology.
For purposes of clarification and the elimination of ambiguity, the following
sets forth the calculation of Additional Merger Consideration under this Section
3.2(a) based on Gross Revenues of $19,000,000. The calculation of Additional
Merger Consideration based on Gross Revenues of $19,000,000 would be governed by
clause (iii) of foregoing paragraph. Consequently, Additional Merger
Consideration based on Gross Revenues of $19,000,000 would be equal to $256,098,
calculated pursuant to the following formula:
$500,000 x [($19,000,000* - $18,370,000)/$1,230,000] = $256,098
*represents actual amount of Gross Revenues
(b) Issuance of Subordinated Notes. Any Subordinated Notes to be issued
pursuant to Section 3.2(a) above shall be issued promptly after the final Gross
Revenues are determined in accordance with Section 3.2(c); provided, however,
that such Subordinated Notes shall be effective as of January 1, 2005 such that
interest on the principal amounts thereof shall accrue commencing on January 1,
2005. At such time, Parent shall issue to each Preferred Shareholder a
Subordinated Note in the principal amount obtained by multiplying the Additional
Preferred Merger Consideration by a fraction the numerator of which is the
number of shares of Company Preferred Stock owned by such Preferred Shareholder
at the Effective Time and the denominator of which is 1,071,428.
5
(c) Calculation of Stature Gross Revenues. No later than February 28, 2005,
the Surviving Corporation shall prepare a statement of Stature's Gross Revenues
(the "Report") and deliver such report to the Preferred Shareholders at the last
address provided to Parent by each Preferred Shareholder (in a notice to Parent
delivered in accordance with the provisions of Section 10.3 below). In the event
that any of the Preferred Shareholders dispute the amount of Stature's Gross
Revenues set forth in the Report, within thirty (30) days following delivery of
the Report: (i) the Preferred Shareholders shall appoint a single Preferred
Shareholder with legal authority to represent all the Preferred Shareholders in
such dispute (the "Preferred Representative"); and (ii) the Preferred
Representative shall give written notice of the nature of such dispute to
Parent, which notice shall set forth in reasonable detail the specific objection
("Notice of Disagreement"). Calculation of Gross Revenues set forth in the
Report shall become final and binding upon the Parties if the Surviving
Corporation does not receive the Notice of Disagreement from the Preferred
Representative prior to the expiration of such thirty (30) day period. During
such thirty (30) day period the Preferred Shareholders shall be given reasonable
access during normal business hours to relevant records of the Surviving
Corporation (and Parent and its affiliates, if applicable) relating to, and the
procedures carried out by the Surviving Corporation in connection with the
Surviving Corporation's preparation of the Report and the determination of
Stature's Gross Revenues set forth in the Report. Parent and the Preferred
Representative shall use good faith efforts to resolve, in writing, the disputed
amounts identified in the Notice of Disagreement within fifteen (15) calendar
days after the Surviving Corporation's receipt thereof. If such dispute has not
been resolved by the parties within the fifteen (15) day period, the disputed
amounts, and the final amount of the Gross Revenues shall be recalculated by an
independent accounting firm mutually agreed upon by Parent and the Preferred
Representative, or in the event that the Parties are unable to agree, the
Buffalo, New York office of PriceWaterhouseCoopers, LLP (the "Independent
Accountant"). The Independent Accountant shall make a ratable allocation of its
charges for such work as a part of its determination, based on the proportion by
which the amount in dispute was determined in favor of Parent or the Preferred
Shareholders respectively, and the Independent Accountant's charges shall be
payable by such parties based on such determination. In such event, the amount
of Gross Revenues as calculated by the Independent Accountant shall be final and
binding on the parties.
Section 3.3 Exchange of Certificates for Merger Consideration.
(a) Deposit with Exchange Agent. As soon as practicable after the Effective
Time, Parent shall deposit or cause to be deposited with a bank or trust company
selected by Parent that is reasonably acceptable to the Company (the "Exchange
Agent"), pursuant to an agreement in form and substance reasonably acceptable to
Parent and the Company, certificates representing the shares of Parent Common
Stock, the Warrants and the cash that constitute the Merger Consideration.
(b) Exchange and Payment Procedures. As soon as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (collectively, the "Certificates") that
immediately prior to the Effective Time represented issued and outstanding
shares of Company Common Stock or Company Preferred Stock (collectively,
"Company Securities") whose shares were converted into the right to receive the
applicable Preferred Merger Consideration or Common Merger Consideration
pursuant to Section 3.1(b): (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
shall pass, only upon actual delivery of the certificates to the Exchange Agent
(and which shall be in such form as is reasonably satisfactory to the
6
Company); and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for Preferred Merger Consideration or Common Merger
Consideration, as applicable, and any cash in lieu of fractional shares of
Parent Common Stock. Following the Merger, (i) each former holder of Company
Common Stock shall be entitled to receive: (a) a book-entry statement reflecting
ownership of (or, if requested, a certificate representing) that number of whole
shares of Parent Common Stock into which the shares of Company Common Stock held
by such holder (after taking into account all shares of Company Common Stock
then held by such holder) were converted in accordance with Section 3.1(b); and
(ii) cash in lieu of fractional shares of Parent Common Stock which such holder
has the right to receive pursuant to Section 3.3(d); and (ii) each former holder
of Company Preferred Stock shall be entitled to receive: (a) a book-entry
statement reflecting ownership of (or, if requested, a certificate representing)
that number of whole shares of Parent Common Stock into which the shares of
Company Preferred Stock held by such holder (after taking into account all
shares of Company Preferred Stock then held by such holder) were converted in
accordance with Section 3.1(b); (ii) cash and Warrants as determined pursuant to
Section 3.1(b)(ii); and (iii) cash in lieu of fractional shares of Parent Common
Stock which such holder has the right to receive pursuant to Section 3.3(d). In
the event that the Merger Consideration is to be delivered to any person who is
not the person in whose name the Certificate surrendered in exchange therefor is
registered in the transfer records of the Company, the Merger Consideration may
be delivered to a transferee if the Certificate is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence satisfactory to the Exchange Agent that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated by this
Section 3.3, each Certificate (other than a certificate representing shares of
Company Common Stock or Company Preferred Stock (i) to be cancelled in
accordance with Section 3.1(a), or (ii) with respect to which appraisal rights
have been exercised pursuant to Section 3.1(e)) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the applicable Merger Consideration contemplated by this Section 3.3.
No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to provisions of this Article III.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of unclaimed property, escheat
and other applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest: (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock; and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Parent Common Stock.
(d) No Fractional Securities. In lieu of any fractional securities, each
holder of Company Securities who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article III will be paid an amount in cash (without
interest) equal to such holder's respective proportionate
17
interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
shares of Parent Common Stock issued pursuant to this Article III. As soon as
practicable following the Effective Time, the Exchange Agent shall determine the
excess of: (i) the number of whole shares of Parent Common Stock delivered to
the Exchange Agent by Parent over (ii) the aggregate number of whole shares of
Parent Common Stock to be distributed to former holders of Company Securities
(such excess being collectively called the "Excess Parent Common Stock"). The
Exchange Agent, as agent for the former holders of Company Securities, shall
sell the Excess Parent Common Stock at the prevailing prices on NASDAQ (or on
the principal exchange on which the Parent Common Stock is then traded or
quoted). The sales of the Excess Parent Common Stock by the Exchange Agent shall
be executed on NASDAQ (or such other exchange) through one or more member firms
of NASDAQ (or such other exchange) and shall be executed in round lots to the
extent practicable. Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sales of Excess Parent Common
Stock. Until the net proceeds of such sales have been distributed to the former
holders of Company Securities that were converted into the right to receive
Parent Common Stock, the Exchange Agent will hold such proceeds in trust for
such former holders. As soon as practicable after the determination of the
amount of cash to be paid to former holders of Company Securities in lieu of any
fractional interests in shares of Parent Common Stock, the Exchange Agent shall
make available in accordance with this Agreement such amounts to such former
holders.
(e) Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and thereafter, there shall be no further
registration of transfers of shares of Company Common Stock or Company Preferred
Stock then outstanding on the records of the Company. Certificates presented to
the Surviving Corporation after the Effective Time shall be cancelled and
represent the right to receive the Common Merger Consideration or Preferred
Merger Consideration, as applicable, as provided in Section 3.1 and in this
Section 3.3.
(f) Termination of Exchange Agent. All funds or securities held by the
Exchange Agent for payment to the holders of unsurrendered Certificates and
unclaimed on the first anniversary of the Effective Time shall be returned to
Parent, after which time any holder of unsurrendered Certificates shall look as
a general creditor only to Parent for payment the applicable Merger
Consideration to which such holder may be due, subject to applicable law.
(g) Escheat. To the fullest extent permitted by applicable law, neither
Parent nor the Surviving Corporation shall be liable to any person for any funds
or securities delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Lost Certificates. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if reasonably
required by Parent, the posting by such person of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed certificate the applicable
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
8
(i) Withholding Rights. Each of the Exchange Agent, the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Certificates which, prior to the Effective Time, represented shares of Company
Common Stock or Company Preferred Stock, such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code
and the rules and regulations promulgated thereunder, or any provision of state,
local or foreign tax law, and shall pay all amounts so deducted and withheld for
the account of, or for the benefit of, the applicable holder on or prior to the
date such amounts are required to be paid to the applicable Tax authority or
Governmental Entity. To the extent that amounts are so withheld or deducted and
paid, such withheld or deducted amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Common
Stock or Company Preferred Stock, as the case may be, in respect of which such
deduction and withholding was made by the Exchange Agent, the Surviving
Corporation or Parent, as the case may be.
(j) No Further Ownership Rights in Company Common Stock and Company
Preferred Stock. All Preferred Merger Consideration and Common Merger
Consideration paid upon the conversion of shares of Company Preferred Stock and
Company Common Stock, respectively, in accordance with the terms of Articles I,
II and III (including any cash paid pursuant to Section 3.3(d)) shall be deemed
to have been issued or paid in full satisfaction of all rights pertaining to
such shares of Company Preferred Stock or Company Common Stock, as the case may
be. From and after the Effective Time, the Certificates evidencing shares of
Company Common Stock or Company Preferred Stock shall no longer represent
ownership or equity interests in the Company, but rather the right to receive
the applicable Merger Consideration (or, appraisal rights if such are perfected
and not withdrawn as provided in Section 3.1(e) (relating to appraisal rights))
as set forth above in this Agreement.
Section 3.4 Company Options; Stock Plans.
(a) Prior to the Effective Time, the Company's Board of Directors (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide for the cancellation, effective at the
Effective Time, of all the outstanding stock options or similar rights (the
"Company Options") heretofore granted under any stock option or similar plan of
the Company (the "Stock Plans") without any payment therefore except as
otherwise provided in this Section 3.4. Immediately prior to the Effective Time,
the Company shall accelerate the vesting of all Company Options which are listed
on Schedule 3.4 of the Company Disclosure Schedule and each then vested Company
Option shall no longer be exercisable but shall entitle each holder thereof, in
cancellation and settlement therefore, to a payment in cash by the Company
(subject to any applicable withholding taxes), at the Effective Time, equal to
the product of: (i) the total number of Company Common Shares subject to such
vested Company Option; and (ii) the excess, if any, of $.30 over the exercise
price per Company Common Share subject to such vested Company Option (such
amounts payable hereunder being referred to as the "Cash Payment"). All other
Stock Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time. The Company
will use its reasonable best efforts to obtain all necessary consents to ensure
that after the Effective Time, holders of Company Options will have no rights
other than the rights of the holders of vested Company Options to receive the
Cash Payment in cancellation and settlement thereof.
9
(b) As soon as practicable following the Effective Time (and in any event
not later than ten Business Days following the Effective Time), Parent shall
file a registration statement on Form S-8 (or any successor form, or if Form S-8
is not available, other appropriate forms), if required, with respect to the
Company's 401(k) Retirement Savings Plan, and shall maintain the effectiveness
of such registration statement or registrations statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as plan participation interests in the Company's 401(k) Retirement Savings Plan
are required to be registered.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company Disclosure Schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), which shall identify exceptions by specific section
references, the Company hereby represents and warrants to Parent and Merger Sub
as follows:
Section 4.1 Corporate Organization.
(a) The Company is duly organized and validly existing as a corporation in
good standing under the laws of the Commonwealth of Pennsylvania. The Company
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect on the Company.
As used in this Agreement, the term "Material Adverse Effect" means, with
respect to Parent or the Company, or their Subsidiaries, as the case may be, any
change or effect that is or would reasonably be expected to be materially
adverse to: (i) the business, operations, results of operations or financial
condition of such Party and its Subsidiaries taken as a whole; or (ii) the
ability of such Party to timely consummate the transactions contemplated hereby;
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of any change or effect relating to or arising from the execution,
announcement, or consummation of this Agreement and the transactions
contemplated hereby, including any impact thereof on relationships, contractual
or otherwise, with customers, suppliers or employees. As used in this Agreement,
the word "Subsidiary" or "Subsidiaries" when used with respect to any entity,
means any corporation, partnership, limited liability company, or other
organization, whether incorporated or unincorporated, which is consolidated with
such entity for financial reporting purposes. The Company has previously made
available to Parent true and complete copies of: (i) the Articles of
Incorporation of the Company (the "Company Charter") and the Bylaws of the
Company, each as in effect as of the date of this Agreement; and (ii) the
minutes of the meetings of the Board of Directors and any committee thereof in
respect of meetings of the Board of Directors and such committees held since
October 28, 2001 through the date hereof, other than meetings of the Board of
Directors for which minutes have not heretofore been prepared (the proceedings
of which have been described in all material respects to counsel for Parent) or
the subject of which was this Agreement and the transactions contemplated
hereby.
10
(b) Each Company Subsidiary: (i) is duly organized and validly existing
under the laws of its jurisdiction of organization; (ii) is duly qualified to do
business and, where such status is recognized, in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company; and (iii)
has all requisite corporate power and authority to own or lease its properties
and assets and to carry on its business as now conducted.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of: (i) 15,000,000
shares of Company Common Stock, par value $.01 per share, of which, 5,874,345
shares are issued, 50,039 such shares are held in the Company's treasury, and
5,824,306 are outstanding; and (ii) 10,000,000 shares of Company Preferred
Stock, par value $.01 per share, of which, 1,071,428 shares are issued and
outstanding and no such shares are held in the Company's treasury. Except as set
forth on Schedule 4.2(a) of the Company Disclosure Schedule, no shares of
Company Common Stock or Company Preferred Stock were reserved for issuance. All
of the issued and outstanding shares of Company Common Stock and Company
Preferred Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 4.2(a) of
the Company Disclosure Schedule, the Company does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, preemptive rights,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Company Securities or any other equity securities of the
Company or any securities representing the right to purchase or otherwise
receive any shares of Company Securities. Schedule 4.2(a) contains a list of all
option holders of the Company, the number of shares subject to each option, the
exercise price of each option and the expiration date of each option.
(b) Schedule 4.2(b) of the Company Disclosure Schedule sets forth, for each
Subsidiary of the Company, the name and state of incorporation of such
Subsidiary, and the number and type(s) of its outstanding shares of capital
stock or other equity interests. The Company owns, directly or indirectly, all
of the issued and outstanding shares of capital stock or other equity ownership
interests of each of the Company's Subsidiaries, free and clear of any liens,
pledges, charges, encumbrances and security interests whatsoever ("Liens"), and
all of such shares or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. None of the Company's
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security of
such Subsidiary. Except for interests in its Subsidiaries, neither the Company
nor any of its Subsidiaries owns directly or indirectly any equity interest in
any firm, corporation, partnership or other entity, whether incorporated or
unincorporated, or has any obligation or has made any commitment to acquire any
such interest or to make any investment. No Company Subsidiary owns any capital
stock of the Company.
11
Section 4.3 Authority; No Violation.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the Company Shareholder
Approval, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including the Merger, have been duly and validly authorized and this
Agreement has been duly and validly adopted by the Company's Board of Directors.
Except for: (i) the filing of the Articles of Merger with the Department of
State of the Commonwealth of Pennsylvania pursuant to the PBCL; and (ii) the
affirmative votes of both (a) the holders of shares representing a majority of
the voting power of the shares of Company Common Stock and Company Preferred
Stock outstanding on the record date of such vote, voting together as a single
class; and (b) the holders of a majority of the shares of the Company Preferred
Stock outstanding on the record date of such vote (the "Company Shareholder
Approval"), no other corporate proceedings on the part of the Company are
necessary to approve this Agreement or to consummate the transactions
contemplated hereby. The Company's Board of Directors, by unanimous vote
thereof: (i) has adopted this Agreement and the transactions contemplated hereby
and declared this Agreement advisable (the "Company Board Approval"); (ii) has
directed that this Agreement and the Merger be submitted to the shareholders of
the Company for approval at the Shareholder Meeting; and (iii) subject to
Sections 7.3 and 7.4, recommends that shareholders of the Company approve this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by the other Parties) constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by the Company, nor
the consummation by the Company of the transactions contemplated hereby,
including the Merger, nor compliance by the Company with any of the terms or
provisions hereof, will: (i) violate any provision of the Company Charter or the
Bylaws of the Company, or violate or conflict with any agreement or instrument
pursuant to which any shares of capital stock of the Company, or securities
exercisable for or convertible into shares of capital stock of the Company, have
been issued; or (ii) subject to the making of the filings and obtaining the
approvals referred to in Section 4.4 and the effectiveness of such filings
and/or receipt of the consents and approvals in connection therewith: (A)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to the Company, any of its Subsidiaries or any
of their respective properties or assets; or (B) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by,
result in the creation of any Lien upon any of the respective properties or
assets of the Company or any of its Subsidiaries under, or require any increased
payment under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches, defaults, terminations, cancellations,
accelerations, Liens or payments which, individually or in the aggregate, will
not have a Material Adverse Effect on the Company.
12
Section 4.4 Consents and Approvals. Except for: (a) the filing with the
Securities and Exchange Commission (the "SEC") of: (i) the Proxy Statement/
Prospectus; and (ii) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement; (b) the filing of the Articles of Merger with the Department of State
of the Commonwealth of Pennsylvania pursuant to the PBCL; (c) the filings with
any court, administrative agency or commission or other governmental, regulatory
or self-regulatory authority or instrumentality (each a "Governmental Entity")
as required under applicable law in each case as set forth in Schedule 4.4 of
the Company Disclosure Schedule; (d) the Company Shareholder Approval; (e) such
filings, consents and approvals required by applicable law with respect to any
Company Permit; and (f) such other filings, the failure of which to make would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company, no consents or approvals of or filings or registrations with any
Governmental Entity or third party are necessary in connection with: (A) the
execution and delivery by the Company of this Agreement; and (B) the
consummation by the Company of the transactions contemplated hereby.
Section 4.5 SEC Reports; Financial Statements.
(a) The Company has made available to Parent an accurate and complete copy
of each: (i) report, schedule, final registration statement, prospectus and
definitive proxy statement filed by the Company with the SEC on or after October
29, 2001 and prior to the date hereof pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934 (the
"Exchange Act") (the "Company Reports"), which are all the forms, reports and
documents required to be filed by the Company with the SEC since such date,
provided that, if the Company amends any of the Company Reports, the fact of the
filing of such amendment shall not, in and of itself, be deemed to mean or imply
that any representation or warranty in this Agreement was not true when made or
became untrue thereafter; and (ii) communication mailed by the Company to its
shareholders since October 29, 2001 and prior to the date hereof. As of their
respective dates, the Company Reports and communications: (A) complied in all
material respects with requirements of the Securities Act or the Exchange Act,
as the case may be, and the published rules and regulations of the SEC
thereunder applicable thereto; and (B) did not 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 in which they were made, not misleading, except that information
as of a later date (but before the date hereof) shall be deemed to modify
information as of an earlier date.
(b) The Company has previously made available to Parent copies of: (i) the
consolidated balance sheets (the "Company Audited Balance Sheets") of the
Company and its Subsidiaries as of October 28, 2001, October 27, 2002 and
October 26, 2003, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the fiscal years ended October
28, 2001, October 27, 2002 and October 26, 2003, as reported in the Company's
Annual Report on Form 10-K for the fiscal years ended October 28, 2001, October
27, 2002 and October 26, 2003 filed with the SEC under the Exchange Act; and
(ii) the
13
unaudited balance sheets of Stature as of October 28, 2001, October 27, 2002 and
October 26, 2003 (the "Stature Balance Sheets"), and the related statements of
operations and cash flows of Stature for the fiscal years then ended (such
financial statements included in such Annual Report, together with the Company
Audited Balance Sheets and the Stature Balance Sheets, are collectively referred
to herein as the "Company Audited Financial Statements"), in each case,
accompanied by the audit report of Deloitte & Touche LLP, independent public
accountants with respect to the Company. The Company Audited Financial
Statements (including the related notes, where applicable): (i) fairly present
in all material respects the consolidated financial position of the Company and
its Subsidiaries as at the respective dates thereof and the consolidated results
of operations, cash flows and, in the case of the Company Audited Financial
Statements, changes in shareholders' equity (deficit), of the Company and its
Subsidiaries for the periods indicated (subject, in the case of the unaudited
financial statements, to normal audit adjustments which are not expected,
individually or in the aggregate, to be material); (ii) have been prepared
consistent with the books and records of the Company and its Subsidiaries and
consistent with the Company's accounting policies and procedures; (iii) comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
(iv) have been prepared in all material respects in accordance with GAAP applied
on a consistent basis during the periods involved, except, in each case, as
indicated in such statements or in the notes thereto. The books and records of
the Company and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP (to the extent applicable) and any
other applicable legal and accounting requirements and reflect only actual
transactions.
Section 4.6 Broker's Fees. Except as set forth on Schedule 4.6 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees
payable on behalf of the Company in connection with the Merger or the other
transactions contemplated by this Agreement.
Section 4.7 Absence of Certain Changes or Events.
(a) Since October 26, 2003, no event or events have occurred which have had
or would have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(b) Since October 26, 2003 through the date hereof, other than the execution
and delivery of this Agreement, the Company and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary course
consistent with past practice.
(c) Neither the Company nor any of its Subsidiaries has, since October 26,
2003 through the date hereof: (i) except in the ordinary course of business or
as required by applicable law or an agreement which has been disclosed prior to
the date hereof in the Company Reports and a copy provided by the Company to
Parent: (A) increased the wages, salaries, compensation, pension, or other
fringe benefits or perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of October 26, 2003; or (B)
granted any severance or termination pay, entered into any contract to make or
grant any severance or termination pay, or paid any bonuses or commissions
(other than bonuses for fiscal year 2003, including, without limitation, those
bonuses identified in the minutes of the Company's Compensation Committee
14
dated December 18, 2003, which are to be paid to employees of the Company other
than Xxxxxx Xxxxxx Xx., whose bonus and severance will be provided for in the
agreement referred to in Section 8.3(m) below, and customary commissions for
fiscal year 2003) or (ii) suffered any material strike, work stoppage, slowdown,
or other labor disturbance.
(d) Except as disclosed on Schedule 4.7(d) of the Company Disclosure
Schedule, since October 26, 2003 through the date hereof, the Company has not
granted any stock options with respect to Company Common Stock or Company
Preferred Stock to any director, officer, employee, or independent contractor of
the Company or any of its Subsidiaries.
(e) Since October 26, 2003 through the date hereof, neither the Company nor
any of its Subsidiaries has taken any action described in Section 6.2 that if
taken after the date hereof and prior to the Effective Time would violate such
provision.
Section 4.8 Legal Proceedings. Neither the Company nor any of its Subsidiaries
is a party to any, and there are no pending or, to the Company's knowledge,
threatened, legal, administrative, arbitration or other proceedings, claims,
actions or governmental or regulatory investigations: (i) of any nature against
the Company or any of its Subsidiaries; or (ii) as of the date hereof,
challenging the validity or propriety of the transactions contemplated by this
Agreement. For purposes of this Agreement, the "knowledge" of any person that is
not an individual means, with respect to any matter, in question, the actual
knowledge of such person's executive officers and other officers having primary
responsibility for such matter in each case, based upon reasonable inquiry
consistent with such person's title and responsibilities.
Section 4.9 Taxes and Tax Returns.
(a) Except as disclosed on Schedule 4.9 of the Company Disclosure Schedule:
(i) each of the Company and its Subsidiaries has duly and timely filed and will
duly and timely file all Tax Returns required to be filed by it and has duly
paid or made adequate provision for the payment of all Taxes and other
governmental charges which have been incurred (including, without limitation, if
and to the extent applicable, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls),
and all such Tax Returns are accurate and complete in all material respects; and
(ii) neither the Company nor any of its Subsidiaries is currently the
beneficiary of any extension of time within which to file any material Tax
Return. There are no disputes pending related to, or claims asserted for, Taxes
or assessments upon the Company or any of its Subsidiaries for which the Company
does not have adequate reserves. Proper and accurate amounts have been withheld
by the Company and its Subsidiaries from their employees for all prior periods
in compliance with the tax withholding provisions of applicable federal, state
and local laws. There are no liens for Taxes upon any property or assets of the
Company or its Subsidiaries except liens for current Taxes not yet due. There
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Taxes of the Company or any of its Subsidiaries for
any period. Neither the Company nor any of its Subsidiaries has filed a consent
to the application of Section 341(f) of the Code. Neither the Company nor any of
its Subsidiaries has been a "distributing corporation" or a "controlled
corporation" in a distribution intended to qualify under Section 355(a) of the
Code. Neither the Company nor any of its Subsidiaries is a party to any Tax
sharing, allocation or indemnification agreement or arrangement. Neither the
Company nor any of its Subsidiaries
15
has been a member of an affiliated group filing a consolidated, combined or
unitary Tax Return (other than the affiliated group of which the Company is the
common parent) or has any liability for the Taxes of any person (other than the
Company or its Subsidiaries) under Treasury Regulation ss.1.1502-6 (or any
similar provision of state, local or foreign law).
(b) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount that will not be
fully deductible as a result of Section 162(m) of the Code (or any similar
provision of state, local or foreign law).
(c) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, local and foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon, and the term "Tax
Return" means any return, declaration, report, claim for refund, information
return or statement relating to Taxes.
Section 4.10 Certain Other Tax Matters. Neither the Company nor any of its
Subsidiaries has taken or agreed to take any action, has failed to take any
action or knows of any fact, agreement, plan or other circumstance, in each case
that could reasonably be expected to prevent the Merger from qualifying as a
taxable sale of assets and liquidation of the Company under the Code.
Section 4.11 Employees; Benefit Plans.
(a) Set forth on Schedule 4.11(a) of the Company Disclosure Schedule is a
true and complete list of each Company Benefit Plan but excluding government-
sponsored programs. For purposes of this Agreement, "Company Benefit Plan" means
any employee benefit plan, program, policy, practices, agreement or other
arrangement providing benefits to any current or former employee, officer,
director or consultant of the Company or any Company ERISA Affiliate or any
beneficiary or dependent thereof that is sponsored or maintained by the Company
or any Company ERISA Affiliate or to which the Company or any Company ERISA
Affiliate contributes or is obligated to contribute, whether or not written,
including without limitation any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA)
and any bonus, incentive, deferred compensation, vacation, stock purchase, stock
option, severance, employment, change of control or fringe benefit plan,
program, policy, practices, agreement or other arrangement, but excluding any
government-sponsored programs (e.g., social security or national health
coverage). A "Company ERISA Affiliate" is any trade or business, whether or not
incorporated, which together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA.
(b) The Company has heretofore made available to Parent true and complete
copies of each of the Company Benefit Plans (including a written description of
any unwritten Company Benefit Plan) and: (i) the actuarial report for such
Company Benefit Plan (if applicable) for each of the last two years; (ii) the
most recent determination letter from the Internal Revenue Service (if
applicable) for such Company Benefit Plan; (iii) the summary plan
16
description for such Company Benefit Plan (if any); and (iv) the Form 5500 for
such Company Benefit Plan (if applicable) for each of the last three years.
Except as specifically provided in the foregoing documents made available to
Parent or as required by this Agreement, there are no amendments to any Company
Benefit Plan that have been adopted or approved nor has the Company or any
Company ERISA Affiliate undertaken to make any such amendments or to adopt or
approve any new Company Benefit Plan, other than such amendments as may be
required by changes in applicable law.
(c) With respect to the Company Benefit Plans: (i) each of the Company
Benefit Plans has been operated and administered in all material respects in
compliance with applicable laws, including, but not limited to, ERISA and the
Code; (ii) each Company Benefit Plan has been administered in all material
respects in accordance with its terms; (iii) each of the Company Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(except for such Company Benefit Plans that: (A) have not yet received a
determination letter but for which the remedial amendment period for submitting
a determination letter has not yet expired; or (B) are maintained under a
prototype plan (or similar form or pattern plan) for which the Internal Revenue
Service has issued a favorable opinion letter (or similar approval letter) that,
in the Company's reasonable judgment, adequately addresses such plan's qualified
status), and there are no existing circumstances nor any events that have
occurred that would be reasonably expected to affect adversely the qualified
status of any such Company Benefit Plan; (iv) except as set forth on Schedule
4.11(c) of the Company Disclosure Schedule, no Company Benefit Plan is subject
to Title IV of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 302 of ERISA or Section 412 or 4971 of the Code; (v) no
Company Benefit Plan provides benefits coverage, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees or directors of the Company or its Subsidiaries beyond the last
day of the month in which their retirement or other termination of service
occurred, other than coverage mandated by applicable law and other than any
post-termination exercise periods for stock options; (vi) except as set forth on
Schedule 4.11(c) of the Company Disclosure Schedule, no material liability under
Title IV of ERISA or Part 6 of Title I of ERISA has been incurred by the Company
or any Company ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any Company
ERISA Affiliate of incurring a material liability thereunder; (vii) no Company
Benefit Plan is a "multiemployer pension plan" (as such term is defined in
Section 3(37) of ERISA) (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control (a
"Multiple Employer Plan"), within the meaning of Section 4063 of ERISA and none
of the Company and its Subsidiaries nor any of their respective ERISA Affiliates
has, at any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan; (viii) except as
set forth on Schedule 4.11(c) of the Company Disclosure Schedule, all
contributions or other amounts payable by the Company or any Company ERISA
Affiliate with respect to each Company Benefit Plan and all premiums due or
payable with respect to insurance policies funding any Company Benefit Plan for
any period through the date hereof have been timely made or paid in full or, to
the extent not required to be made or paid on or before the date hereof, have
been fully reflected on the Company's financial statements; (ix) none of the
Company, any Company ERISA Affiliate or, to the Company's knowledge, any other
person, including any fiduciary, has engaged in a transaction in connection with
which the Company, any Company ERISA Affiliate or any
17
Company Benefit Plan will be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material Tax imposed pursuant to
Section 4975 or 4976 of the Code; (x) to the knowledge of the Company there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Company Benefit Plans or any
trusts related thereto; and (xi) each individual who renders services to the
Company or any of its Subsidiaries who is classified by the Company or such
Subsidiary, as applicable, as having the status of an independent contractor or
other non-employee status for any purpose (including for purposes of taxation
and tax reporting and under Company Benefit Plans) is properly so characterized.
(d) Schedule 4.11(d) of the Company Disclosure Schedule sets forth: (i) an
accurate and complete description of each provision of any Company Benefit Plan
under which the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby could (either alone or in conjunction with
any other event) result in, cause the accelerated vesting, funding or delivery
of, or increase the amount or value of, any payment or benefit to any employee,
officer or director of the Company or any of its Subsidiaries, or could limit
the right of the Company or any of its Subsidiaries to amend, merge, terminate
or receive a reversion of assets from any Company Benefit Plan or related trust;
and (ii) to the Company's knowledge a good faith estimate of the maximum amount
of the "excess parachute payments" within the meaning of Section 280G of the
Code that could become payable by the Company and its Subsidiaries in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(e) Except to the extent required by any Company Benefit Plan or by
operation of the provisions of any individual employment or change in control
agreement previously disclosed to Parent and set forth in Schedule 4.11(e) of
the Company Disclosure Schedule, as of the date hereof, neither the Company nor
the Company's Board of Directors has taken any action to accelerate the vesting
of any stock options or other equity-based compensation awards in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.12 Securities Laws Matters.
(a) With respect to each Annual Report on Form 10-K and each Quarterly
Report on Form 10-Q included in the Company Reports filed since August 29, 2002,
the financial statements and other financial information included in such
reports fairly present (within the meaning of the Xxxxxxxx-Xxxxx Act of 2002) in
all material respects the financial condition and results of operations of the
Company.
(b) The Company's principal executive officer and its principal financial
officer have disclosed, based on their most recent evaluation, to the Company's
auditors and the audit committee of the Board of Directors of the Company: (i)
all significant deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as such term is defined in rule
13(a)-15(f) under the Exchange Act) which are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report financial
information; and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal control over financial reporting.
18
(c) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act);
such disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries, is
made known to the Company's principal executive officer and its principal
financial officer by others within those entities, particularly during the
periods in which the periodic reports required under the Exchange Act are being
prepared; and, to the Company's knowledge, such disclosure controls and
procedures are effective in timely alerting the Company's principal executive
officer and its principal financial officer to material information required to
be included in the Company's periodic reports required under the Exchange Act.
Section 4.13 Compliance with Applicable Law, Permits and Licenses.
(a) Neither the Company nor any of its Subsidiaries: (i) is in any material
respect in conflict with, or in default or violation in any material respect of;
or (ii) has been charged by any Governmental Entity with any unresolved
violation of: any material law, rule, regulation, order, directive, injunction,
judgment or decree applicable to the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries or any of their respective owned or
leased properties is bound or affected.
(b) The Company, its Subsidiaries and their respective employees hold all
material permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the businesses of the Company and its Subsidiaries (the "Company Permits"). Each
of the Company and its Subsidiaries is, and for the past five years has been, in
compliance in all material respects with the terms of the Company Permits, all
of the Company Permits are in full force and effect and no suspension,
revocation or material modification of any of them is pending or, to the
knowledge of the Company, threatened, nor, to the knowledge of the Company, do
reasonable grounds exist for any such action.
Section 4.14 Intellectual Property; Proprietary Rights; Employee Restrictions;
Assets.
(a) All material: (i) copyrights, including copyright registrations and
copyright applications; (ii) trademarks, including trademark registrations and
applications for registration; (iii) patents and patent applications; (iv)
service marks, including service xxxx registrations and applications for
registration; (v) trade names; (vi) Internet domain names; (vii) databases;
(viii) computer programs, including source code, object code, algorithms,
structure, display screens, layouts, development tools, instructions, templates,
and computer software user interfaces; (ix) know-how; (x) trade secrets; (xi)
customer lists; (xii) proprietary technology; (xiii) processes and formulae;
(xiv) marketing materials; (xv) inventions; (xvi) trade dress; (xvii) logos; and
(xviii) designs (collectively "Intellectual Property") used by the Company or
its Subsidiaries in their respective businesses (collectively, "Company
Intellectual Property") are owned by the Company or such Subsidiaries by
operation of law, or have been validly assigned to the Company or such
Subsidiaries ("Company Owned Intellectual Property") or the Company or its
Subsidiaries otherwise have the right to use such Intellectual Property in their
business as currently conducted ("Company Licensed Intellectual Property"). The
Company Intellectual Property is sufficient in all material respects to carry on
the business of the Company as presently conducted. The Company or one of its
Subsidiaries has exclusive ownership of all Company Owned Intellectual
19
Property used by the Company or its Subsidiaries, or is entitled to use all
Company Licensed Intellectual Property, in the Company's business as presently
conducted, subject, in the case of Company Licensed Intellectual Property, to
the terms of the license agreements covering such Company Licensed Intellectual
Property a summary of which is set forth in Schedule 4.14(a) of the Company
Disclosure Schedule. The Company and its Subsidiaries, and to the knowledge of
the Company, the other parties thereto are not in material breach of any of the
license agreements covering the Company Licensed Intellectual Property. The
present business activities or products of the Company do not infringe on any
Intellectual Property of others ("Third Party Intellectual Property").
(b) To its knowledge, the Company has not received any notice or other claim
from any third party asserting that any of the Company's present activities or
products infringe or may infringe any Third Party Intellectual Property of such
third party.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company: (i) the Company has the right to use all trade
secrets, customer lists, hardware designs, programming processes, software and
other information material to its business as presently conducted; (ii) the
Company has taken all reasonable measures in accordance with customary industry
practice to protect and preserve the security and confidentiality of its trade
secrets and other confidential information; (iii) to the knowledge of the
Company, all trade secrets and other confidential information of the Company
that are material to its business are not part of the public domain or
knowledge, nor, to the knowledge of the Company, have they been misappropriated
by any person having an obligation to maintain such trade secrets or other
confidential information in confidence for the Company; and (iv) to the
knowledge of the Company, no employee or consultant of the Company or any of its
Subsidiaries has used any trade secrets or other confidential information of any
other person in the course of their work for the Company or such Subsidiary.
(d) To the knowledge of the Company, no university or government agency
(whether federal or state) has any claim of right to or ownership in the Company
Owned Intellectual Property. The Company is not aware of any material
infringement, dilution or misappropriation by others of the Company Owned
Intellectual Property, or any material violation of the confidentiality of any
of its proprietary information. To the Company's knowledge, the Company is not
making unlawful use of any confidential information or trade secrets of any past
or present employees of the Company or any of its Subsidiaries.
(e) Each of the Company and its Subsidiaries has good, valid and marketable
title to, or good, valid and marketable leasehold interests in, all its
properties and other assets (other than Company Intellectual Property, which is
addressed in Section 4.14 (a) through (d)) as are necessary in the conduct of,
or material to the business of the Company and its Subsidiaries as currently
conducted, except for defects in title, easements, restrictive covenants and
similar encumbrances that, either individually or in the aggregate, do not
interfere in any material respect, with the Company's conduct of its business or
affect in any material respect the value of such property or other assets (the
"Company Permitted Encumbrances"). Except as disclosed on Schedule 4.14(e) of
the Company Disclosure Schedule or the Company Permitted Encumbrances, all such
properties and other assets, other than properties or other assets in which the
Company or any of its Subsidiaries has a leasehold interest, are owned by the
Company or a Subsidiary free and clear of all Liens.
20
(f) (i) Each lease of real or personal property which is material to the
conduct of the business of the Company and its Subsidiaries and to which the
Company or its Subsidiaries is a party is valid and binding on the Company or
any of its Subsidiaries, as applicable, and in full force and effect, (ii) the
Company and each of its Subsidiaries have in all material respects performed all
material obligations required to be performed by it to date under each such
lease, and (iii) no event or condition exists which constitutes or, after notice
or lapse of time or both, will constitute, a material default under any such
lease.
Section 4.15 Certain Contracts; Leases.
(a) Except as set forth on Schedule 4.15 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral):
(i) which is a "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Company Reports;
(ii) which materially restricts the conduct of any line of business by the
Company or upon consummation of the transactions contemplated by this Agreement
will restrict the conduct of any line of business by Parent, or Parent's
Subsidiaries or the ability of Parent or any of Parent's Subsidiaries to engage
in any line of business; (iii) which upon consummation of the transactions
contemplated by this Agreement will subject any of the Company or any of its
affiliates to any exclusivity arrangements with or to a labor union or guild
(including any collective bargaining agreement); or (iv) (other than any plan or
agreement covered by Section 4.11 hereof) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any shareholder approval or the consummation of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement. Each contract, arrangement, commitment or understanding of the type
described in this Section 4.15(a), together with any material license or
contract relating to Company Intellectual Property, whether or not set forth in
the Company Disclosure Schedule, is referred to herein as a "Company Contract,"
and neither the Company nor any of its Subsidiaries knows of, or has received
notice of, any material violation of the above by any of the other parties
thereto. The Company has heretofore made available to Parent a true and complete
copy of each Company Contract.
(b) (i) Each Company Contract is valid and binding on the Company or any of
its Subsidiaries, as applicable, and in full force and effect; (ii) the Company
and each of its Subsidiaries has in all material respects performed all material
obligations required to be performed by it to date under each Company Contract;
and (iii) to the knowledge of the Company, no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default under any such Company Contract.
(c) Schedule 4.15(c) of the Company Disclosure Schedule sets forth a
complete and accurate list and description of all real property leased,
subleased or otherwise occupied by the Company or its Subsidiaries (the "Company
Leased Real Property"). Except as set forth on
21
Schedule 4.15(c) of the Company Disclosure Schedule, the Company and its
Subsidiaries do not own any real property. All of the leases or subleases of the
Company Leased Real Property (the "Company Leases") are valid, binding and in
full force and effect. The Company and its Subsidiaries have not subjected any
Lease to any mortgage, pledge, lien, encumbrance, sublease, assignment, license,
or other agreement granting to any third party any material interest in such
Lease or any right to the use or occupancy of any Company Leased Real Property.
The Company or a Subsidiary, as lessee under each Lease, is now in possession of
all of the applicable Company Leased Real Property except for the sublease to
Communications Media Incorporated dated June 1, 2000.
(d) The Merger will not cause an event of default under any of the Company
Leases or, in the alternative, the Company will obtain the consent and waiver of
the landlord under any applicable Company Leases relative to the Merger. In any
event, the Company shall obtain an estoppel certificate from each landlord under
the Company Leases, in form reasonably acceptable to each Party: (i) confirming
the material terms of the Company Leases; and (ii) stating that no event or
condition exists which constitutes, or after notice or lapse of time or both
would constitute, a material default under any Company Leases or as a result of
the Merger.
Section 4.16 Indebtedness; Absence of Undisclosed Liabilities. Except as set
forth in Schedule 4.16 of the Company Disclosure Schedule, all liabilities of
the Company are current. Except for: (a) those liabilities that are disclosed in
the footnotes to or reserved against on the Company Audited Financial Statements
(and only to the extent of such disclosure or reserve); (b) liabilities incurred
pursuant to this Agreement and the transactions contemplated hereby or for fees
and expenses incurred in connection with this Agreement and the consummation of
the transactions contemplated hereby; and (c) liabilities or obligations not
required by GAAP to be disclosed or provided for in the Company Audited
Financial Statements and that were incurred in the ordinary course of business
consistent with past practice which have not had or would not have, individually
or in the aggregate, a Material Adverse Effect on the Company, neither the
Company nor any of its Subsidiaries has incurred any indebtedness, obligation,
or liability of any nature whatsoever (whether known or unknown, absolute,
accrued, asserted or unasserted, determined, determinable, contingent or
otherwise and whether due or to become due whether relating to operations of, or
property currently or previously owned by, the Company or any of its present or
past Subsidiaries). Schedule 4.16 of the Company Disclosure Schedule sets forth
all indebtedness for money borrowed by the Company or any of its Subsidiaries,
including all subordinated debt of the Company (the "Subordinated Debt") and all
debt owing to the Jefferson County Industrial Development Agency (the "JCIDA
Debt"), and accurately discloses for each such indebtedness the payee, the
original amount of the loan, the current unpaid balance of the loan, the
interest rate and the maturity date.
Section 4.17 Insurance. The Company has made available to Parent a copy of all
material insurance policies and all material self insurance programs and
arrangements relating to the business, assets and operations of the Company and
its Subsidiaries (the "Company Insurance Policies"). Each of such Company
Insurance Policies is in full force and effect as of the date of this Agreement.
From October 28, 2001 through the date hereof, neither the Company nor any of
its Subsidiaries has received any notice or other communication regarding any
actual or possible: (a) cancellation of any Company Insurance Policy that has
not been renewed in the ordinary course without any lapse in coverage; (b)
invalidation of any Company Insurance Policy; (c) refusal of any coverage or
rejection of any material claim under any Insurance Policy; or (d) material
adjustment in the amount of the premiums payable with respect to any Company
Insurance Policy.
22
Section 4.18 Environmental Liability. There are no legal, judicial,
administrative, arbitration or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations or remediation activities (collectively "Claims" or
"Response Actions") of any nature seeking to impose, or that reasonably could
result in the imposition of, on the Company or any of its Subsidiaries, of any
liability or obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), pending or, to the Company's knowledge,
threatened against the Company or any of its Subsidiaries, which liability or
obligation could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company. To the knowledge of the
Company there is no reasonable basis for any such Claim or Response Action that
could reasonably be expected to impose any liability or obligation that will
have, either individually or in the aggregate, a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, directive, injunction, letter or memorandum
by or with any court, governmental authority, regulatory agency, Governmental
Entity or third party imposing any liability or obligation with respect to the
foregoing that will have, either individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.19 State Takeover Law. The Company has taken all appropriate actions
so that the provisions contained in Chapter 25 of the PBCL will not apply with
respect to or as a result of the execution or performance of this Agreement or
the transactions contemplated by this Agreement, including the execution and
performance of the Voting Agreements.
Section 4.20 Form S-4 Proxy Statement/Prospectus. None of the information to be
supplied by Company or its Subsidiaries for inclusion in the Form S-4 or the
Proxy Statement/Prospectus will, at the time of the filing of the Form S-4 and
the mailing of the Proxy Statement/Prospectus and any amendments or supplements
thereto, and at the time of the Shareholder 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 the
light of the circumstances under which they are made, not misleading. The Form
S-4 and the Proxy Statement/Prospectus will comply, as of the date of filing, in
the case of the Form S-4, and the date of mailing, in the case of the Proxy
Statement/Prospectus, as to form in all material respects with all applicable
laws, including the provisions of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder, except that no representation
is made by Company with respect to information supplied by Parent for inclusion
therein.
Section 4.21 Transactions with Affiliates. Except as set forth in Schedule 4.21
of the Company Disclosure Schedule, there are no transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries,
on the one hand, and any affiliate (including any officer or director) thereof,
but not including any wholly owned Subsidiary of the Company, on the other hand.
23
Section 4.22 Labor Relations; Collective Bargaining Agreements. Neither Company
nor any of its Subsidiaries is a party to any collective bargaining or other
labor union contract applicable to persons employed by Company or its
Subsidiaries, and no collective bargaining agreement or other labor union
contract is being negotiated by Company or any of its Subsidiaries. No labor
organization or group of employees of Company or any of its Subsidiaries has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority. There are no labor disputes, strikes, slowdowns or work
stoppages against Company or any of its Subsidiaries pending or threatened
against Company or any of its Subsidiaries. Since October 29, 2000, no unfair
labor practice or labor charge or complaint has been made or is outstanding with
respect to Company or any of its Subsidiaries. The Company and its Subsidiaries
have complied in all material respects with all provisions of applicable law
pertaining to the employment of employees, including such laws relating to labor
relations, equal employment, fair employment practices, immigration, workers'
compensation, terms and conditions of employment, employee classification,
wages, hours or work, equal opportunity and occupational health and safety.
Section 4.23 Dividends. Since October 26, 2003, neither the Company nor any of
its Subsidiaries have declared or paid any dividends or other distributions upon
any of its capital stock or returned any capital to the shareholders of the
Company or paid or made any distribution of property or cash to the shareholders
of the Company.
Section 4.24 Product Labeling, Product Liability and Product Warranty. The
Company and its Subsidiaries are in compliance with all federal, state and local
laws and regulations relating to product labeling, product safety and public
health and safety. Except as set forth in Schedule 4.24 of the Company
Disclosure Schedule or in connection with routine warranty claims, neither the
Company nor any of its Subsidiaries has received any notice of any claim that
any product now or heretofore offered for sale or sold by the Company or
distributed by the Company in connection with product sales is injurious to the
health and safety of any person or is not in conformity with its specifications
or not suitable for any purpose or application for which it is offered for sale,
sold or distributed. Neither the Company nor its Subsidiaries has ever been
ordered by a government agency to recall a product, and to the Company's
knowledge, there are no circumstances that could give rise to such a product
recall. To the Company's knowledge, there are no circumstances that could cause
the Company to experience costs for warranty claims in the future that are
materially higher than the costs historically experienced by the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the Parent Disclosure Schedule delivered by the
Parent to the Company prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), which shall identify exceptions by specific section
references, the Parent and Merger Sub hereby represent and warrant to the
Company as follows:
24
Section 5.1 Corporate Organization. Each of Parent, Merger Sub and Parent's
"Significant Subsidiaries" (as defined in Regulation S-X promulgated by the SEC)
(the "Parent Significant Subsidiaries") is duly organized and validly existing
as a corporation in good standing under the laws of the state of its
incorporation. Each of Parent, Merger Sub and the Parent Significant
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not, either individually or in the aggregate, have a Material Adverse
Effect on Parent. The Parent has previously made available to the Company true
and complete copies of the Articles of Incorporation and Bylaws of Parent and
Merger Sub, each in effect as of the date of this Agreement.
Section 5.2 Capitalization.
(a) The authorized capital stock of Parent consists of 50,000,000 shares of
Parent Common Stock, no par value per share, and 5,000,000 shares of preferred
stock, par value $1 per share ("Parent Preferred Stock"). As of December 31,
2003, 5,021,221 shares of Parent Common Stock are issued and outstanding and no
shares of Parent Preferred Stock are issued and outstanding, in each case, not
subject to any preemptive rights. No shares of Parent Common Stock and no shares
of Parent Preferred Stock are held in treasury by Parent or by Subsidiaries of
Parent. Except in connection with this Agreement and except as set forth on
Schedule 5.2(a) of the Parent Disclosure Schedule: (i) there are no options,
warrants, rights, puts, calls, commitments or other contracts, arrangements or
understandings issued by or binding upon Parent requiring or providing for; and
(ii) there are no outstanding debt or equity securities of Parent which upon the
conversion, exchange or exercise thereof would require or provide for the
issuance by Parent of any new or additional shares of Parent Common Stock or
Parent Preferred Stock (or any other securities of Parent) which, with or
without notice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for Parent Common Stock or
Parent Preferred Stock (or any other securities of Parent). Except as set forth
on Schedule 5.2(a) of the Parent Disclosure Schedule, since December 31, 2002
through the date hereof, Parent has not issued any shares of its capital stock
or any securities convertible into or exercisable for any shares of its capital
stock, other than pursuant to the exercise of employee stock options granted
prior to such date and the vesting of restricted stock units. The authorized
capital stock of Merger Sub consists of 200 shares of Common Stock of Merger
Sub, of which, as of the date hereof, 100 shares are issued and outstanding and
are owned beneficially and of record by Parent or a wholly owned indirect or
direct subsidiary of Parent. Parent has reserved for issuance the total number
of shares of Parent Common Stock issuable upon exercise of the Warrants to be
issued pursuant to Section 3.1(b)(ii) (the "Reserved Shares"). The Reserved
Shares, the shares of Parent Common Stock to be issued as Common Merger
Consideration or Preferred Merger Consideration hereunder, and the Warrants to
be issued pursuant to Section 3.1(b)(ii) have been duly authorized and validly
reserved and all such shares shall, upon issuance, be validly issued, fully
paid, nonassessable, and not subject to any preemptive rights, free and clear of
all security interests, liens, claims, pledges or other encumbrances of any
nature whatsoever (except for any such rights, securities interests, liens,
claims, pledges or other encumbrances arising from any action taken by a
shareholder of the Company and except for any
25
encumbrances imposed by federal, state or foreign securities laws) and with no
personal liability attaching to the ownership thereof. Neither Parent nor any of
its controlled affiliates owns, in the aggregate, in excess of 0.1% of the total
voting power of the outstanding Company Securities (other than pursuant to this
Agreement or the Voting Agreements).
(b) Each Parent Subsidiary: (i) is duly organized and validly existing under
the laws of its jurisdiction of organization; (ii) is duly qualified to do
business and, where such status is recognized, in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Parent; and (iii) has
all requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
Section 5.3 Authority; No Violation.
(a) Each of Parent and Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Merger Sub and the consummation by them of the transactions contemplated hereby,
including the Merger, have been duly and validly authorized. This Agreement has,
by unanimous vote, been duly and validly approved and declared advisable by the
Board of Directors of each of Parent and Merger Sub. No other corporate
proceedings on the part of Parent and Merger Sub, other than the approval by
Parent as the sole shareholder of Merger Sub of this Agreement (which shall be
obtained prior to the Effective Time), are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and (assuming
due authorization, execution and delivery by the Company) constitutes a valid
and binding obligation of each of Parent and Merger Sub, enforceable against
each in accordance with its terms (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors generally and the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by each of Parent
and Merger Sub, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby, nor compliance by Parent or Merger Sub with
any of the terms or provisions of this Agreement will: (i) violate any provision
of the Articles of Incorporation or Bylaws of Parent, or the Articles of
Incorporation or Bylaws of Merger Sub; or (ii) subject to the making of the
filings referred to in Section 5.5 of this Agreement and the effectiveness of
such filings and/or receipt of the consents and approvals in connection
therewith: (A) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or Merger Sub; or (B)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, result in the creation of any Lien upon any of the respective
properties or assets of Parent or any of its Subsidiaries under, or require any
increased payment under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party,
or by which they or any of their respective properties
26
or assets may be bound or affected, except (in the case of clause (ii) above)
for such violations, conflicts, breaches, defaults, terminations, cancellations,
accelerations, liens or payments which, individually or in the aggregate, will
not have a Material Adverse Effect on Parent.
Section 5.4 Consents and Approvals. Except for (a) the filing with the SEC of:
(i) the Proxy Statement/Prospectus; (ii) a Registration Statement of Parent on
Form S-4 with respect to shares of Parent Common Stock and Warrants which may be
issued to shareholders of the Company in the Merger (together with any
amendments or supplements thereto, the "Registration Statement"); and (iii) such
reports under the Exchange Act as may be required in connection with this
Agreement and the Voting Agreements and the transactions contemplated hereby and
thereby; (b) such filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states in connection with the
issuance of the shares of Parent Common Stock pursuant to this Agreement; (c)
the filing of applications for the authorization of quotation on NASDAQ or such
other national exchange on which the Parent Common Stock is quoted or listed at
the Effective Time of the Parent Common Stock issuable under this Agreement and
such other filings as may be required under the rules and regulations of NASDAQ
or other exchange; (d) the approval of this Agreement and the Merger by the
requisite vote of the shareholders of the Company; (e) the filings with any
Governmental Entity as required under applicable law in each case as expressly
set forth in Schedule 5.4 of the Parent Disclosure Schedule; (f) the filing of
the Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania pursuant to the PBCL; (g) consents and approvals previously
obtained; (h) such filings, consents and approvals required by applicable law
with respect to any Company Permits or Parent Permits; and (i) such other
filings the failure of which to make would not have a Material Adverse Effect on
Parent, no consents or approvals of or filings or registrations with any
Governmental Entity or third party are necessary in connection with: (A) the
execution and delivery by Parent or Merger Sub of this Agreement; and (B) the
consummation by Parent or Merger Sub of the transactions contemplated hereby.
Section 5.5 SEC Reports; Financial Statements.
(a) Parent has made available to the Company an accurate and complete copy
of each: (i) report, schedule, final registration statement, prospectus and
definitive proxy statement filed by Parent with the SEC on or after June 30,
2002 and prior to the date hereof pursuant to the Securities Act or the Exchange
Act (the "Parent Reports"), which are all the forms, reports and documents
required to be filed by Parent with the SEC since such date, provided that, if
Parent amends any of the Parent Reports, the fact of the filing of such
amendment shall not, in and of itself, be deemed to mean or imply that any
representation or warranty in this Agreement was not true when made or became
untrue thereafter; and (ii) communication mailed by Parent to its shareholders
since June 30, 2002 and prior to the date hereof. As of their respective dates,
the Parent Reports and communications: (A) complied in all material respects
with requirements of the Securities Act or the Exchange Act, as the case may be,
and the published rules and regulations of the SEC thereunder applicable
thereto; and (B) did not 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 in which they were
made, not misleading, except that information as of a later date (but before the
date hereof) shall be deemed to modify information as of an earlier date.
27
(b) Parent has previously made available to the Company copies of: (i) the
consolidated balance sheets (the "Parent Audited Balance Sheets") of Parent and
its Subsidiaries as of June 30, 2002 and December 31, 2002 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the fiscal year ended June 30, 2002, and the transitional period ended December
31, 2002 as reported in Parent's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002 and Parent's Report on Form 10-KT for the transitional
period ended December 31, 2002 filed with the SEC under the Exchange Act (such
financial statements included in such Annual Report, together with the Parent
Audited Balance Sheets, the "Parent Audited Financial Statements"), in each
case, accompanied by the audit report of KPMG LLP, independent public
accountants with respect to Parent. The Parent Audited Financial Statements
(including the related notes, where applicable): (i) fairly present in all
material respects the consolidated financial position of Parent and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations, cash flows and, in the case of the Parent Audited Financial
Statements, changes in shareholders' equity, of Parent and its Subsidiaries for
the periods indicated (subject, in the case of the unaudited financial
statements, to normal audit adjustments which are not expected, individually or
in the aggregate, to be material); (ii) have been prepared consistent with the
books and records of Parent and its Subsidiaries and consistent with Parent's
accounting policies and procedures; (iii) comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and (iv) have been prepared in
all material respects in accordance with GAAP applied on a consistent basis
during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP (to the extent applicable) and any other applicable legal
and accounting requirements and reflect only actual transactions.
(c) With respect to each Annual Report on Form 10-K, each Report on Form
10-KT and each Quarterly Report on Form 10-Q included in the Parent Reports
filed since August 29, 2002 and prior to the date hereof, the financial
statements and other financial information included in such reports fairly
present (within the meaning of the Xxxxxxxx-Xxxxx Act of 2002) in all material
respects the financial condition and results of operations of Parent.
Section 5.6 Broker's Fees. Except for the agreement between Parent and Blitzer,
Xxxxxxxxx and Fine Co., neither Parent nor any Parent Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees
payable on behalf of Parent in connection with the Merger or the other
transactions contemplated by this Agreement.
Section 5.7 Absence of Certain Changes or Events.
(a) Since December 31, 2002, no event or events have occurred which have had
or would have, individually or in the aggregate, a Material Adverse Effect on
Parent.
(b) Since December 31, 2002 through the date hereof, except as disclosed in
the Parent Reports, Parent and its Subsidiaries have carried on their respective
businesses in all material respects in the ordinary course consistent with past
practice.
28
(c) Neither Parent nor any of its Subsidiaries has, since December 31, 2002
through the date hereof: (i) except in the ordinary course of business or as
required by applicable law or an agreement which has been disclosed prior to the
date hereof in the Parent Reports and a copy provided by Parent to the Company:
(A) increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer, employee, or director
from the amount thereof in effect as of December 31, 2002; or (B) granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonuses or commissions (other than
customary bonuses for fiscal year 2003 and customary commissions for fiscal year
2003) or (ii) suffered any material strike, work stoppage, slowdown, or other
labor disturbance.
(d) Except as disclosed on Schedule 5.7(d) of the Parent Disclosure
Schedule, since December 31, 2002 through the date hereof, Parent has not
granted any stock options or warrants with respect to Parent Common Stock or
Parent Preferred Stock to any director, officer, employee, or independent
contractor of Parent or any of its Subsidiaries.
Section 5.8 Legal Proceedings. Except as set forth on Schedule 5.8 of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to
any, and there are no pending or, to Parent's knowledge, threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations: (i) of any nature against Parent or
any of its Subsidiaries; or (ii) as of the date hereof, challenging the validity
or propriety of the transactions contemplated by this Agreement.
Section 5.9 Taxes and Tax Returns.
(a) Except as disclosed on Schedule 5.9 of the Parent Disclosure Schedule:
(i) each of Parent and its Subsidiaries has duly and timely filed and will duly
and timely file all Tax Returns required to be filed by it and has duly paid or
made adequate provision for the payment of all Taxes and other governmental
charges which have been incurred (including, without limitation, if and to the
extent applicable, those due in respect of its properties, income, business,
capital stock, deposits, franchises, licenses, sales and payrolls), and all such
Tax Returns are accurate and complete in all material respects; and (ii) neither
Parent nor any of its Subsidiaries is currently the beneficiary of any extension
of time within which to file any material Tax Return. There are no disputes
pending related to, or claims asserted for, Taxes or assessments upon Parent or
any of its Subsidiaries for which Parent does not have adequate reserves. Proper
and accurate amounts have been withheld by Parent and its Subsidiaries from
their employees for all prior periods in compliance with the tax withholding
provisions of applicable federal, state and local laws. There are no liens for
Taxes upon any property or assets of Parent or its Subsidiaries except liens for
current Taxes not yet due. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Taxes of Parent
or any of its Subsidiaries for any period. Neither Parent nor any of its
Subsidiaries has filed a consent to the application of Section 341(f) of the
Code. Neither Parent nor any of its Subsidiaries has been a "distributing
corporation" or a "controlled corporation" in a distribution intended to qualify
under Section 355(a) of the Code. Neither Parent nor any of its Subsidiaries is
a party to any Tax sharing, allocation or indemnification agreement or
arrangement. Neither Parent nor any of its Subsidiaries has been a member of an
affiliated group filing a consolidated, combined or unitary Tax Return (other
than the affiliated group of which Parent is the common parent) or has any
liability for the Taxes of any person (other than Parent or its Subsidiaries)
under Treasury Regulation ss.1.1502-6 (or any similar provision of state, local
or foreign law).
29
(b) Neither Parent nor any of its Subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any amount that will not be fully deductible
as a result of Section 162(m) of the Code (or any similar provision of state,
local or foreign law).
Section 5.10 Certain Tax Matters. Parent has not taken or agreed to take any
action, has not failed to take any action and does not know of any fact,
agreement, plan or other circumstance, in each case that could reasonably be
expected to prevent the Merger from qualifying as a taxable sale of assets and
liquidation of the Company under the Code.
Section 5.11 Employees; Benefit Plans.
(a) Set forth on Schedule 5.11(a) of Parent Disclosure Schedule is a true
and complete list of each Parent Benefit Plan but excluding government-
sponsored programs. For purposes of this Agreement, "Parent Benefit Plan" means
any employee benefit plan, program, policy, practices, agreement or other
arrangement providing benefits to any current or former employee, officer,
director or consultant of Parent or any Parent ERISA Affiliate or any
beneficiary or dependent thereof that is sponsored or maintained by Parent or
any Parent ERISA Affiliate or to which Parent or any Parent ERISA Affiliate
contributes or is obligated to contribute, whether or not written, including
without limitation any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any
bonus, incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program,
policy, practices, agreement or other arrangement, but excluding any
government-sponsored programs (e.g., social security or national health
coverage). A "Parent ERISA Affiliate" is any trade or business, whether or not
incorporated, which together with the Parent would be deemed a "single employer"
within the meaning of Section 4001 of ERISA.
(b) Parent has heretofore made available to the Company true and complete
copies of each Parent Benefit Plan (including a written description of any
unwritten Parent Benefit Plan) and: (i) the actuarial report for such Parent
Benefit Plan (if applicable) for each of the last three years; (ii) the most
recent determination letter from the Internal Revenue Service (if applicable)
for such Parent Benefit Plan; (iii) the summary plan description for such Parent
Benefit Plan (if any); and (iv) the Form 5500 for such Parent Benefit Plan (if
applicable) for each of the last two years. Except as specifically provided in
the foregoing documents made available to the Company or as required by this
Agreement, there are no amendments to any Parent Benefit Plan that have been
adopted or approved nor has Parent or any Parent ERISA Affiliate undertaken to
make any such amendments or to adopt or approve any new Parent Benefit Plan,
other than such amendments as may be required by changes in applicable law.
(c) With respect to Parent Benefit Plans: (i) each of the Parent Benefit
Plans has been operated and administered in all material respects in compliance
with applicable laws, including, but not limited to, ERISA and the Code; (ii)
each Parent Benefit Plan has been administered in
30
all material respects in accordance with its terms; (iii) each of the Parent
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service (except for such Parent Benefit Plans that: (A) have not yet received a
determination letter but for which the remedial amendment period for submitting
a determination letter has not yet expired; or (B) are maintained under a
prototype plan (or similar form or pattern plan) for which the Internal Revenue
Service has issued a favorable opinion letter (or similar approval letter) that,
in Parent's reasonable judgment, adequately addresses such plan's qualified
status), and there are no existing circumstances nor any events that have
occurred that would be reasonably expected to affect adversely the qualified
status of any such Parent Benefit Plan; (iv) except as set forth on Schedule
5.11(c) of the Parent Disclosure Schedule, no Parent Benefit Plan is subject to
Title IV of ERISA or Section 302 of ERISA or Section 412 or 4971 of the Code;
(v) except as set forth on Schedule 5.11(c) of the Parent Disclosure Schedule,
no Parent Benefit Plan provides benefits coverage, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees or directors of Parent or its Subsidiaries beyond
the last day of the month in which their retirement or other termination of
service occurred, other than coverage mandated by applicable law and other than
any post-termination exercise periods for stock options; (vi) except as set
forth on Schedule 5.11(c) of the Parent Disclosure Schedule, no material
liability under Title IV of ERISA or Part 6 of Title I of ERISA has been
incurred by Parent, or any Parent ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to Parent or any
Parent ERISA Affiliate of incurring a material liability thereunder; (vii)
except as set forth on Schedule 5.11(c) of the Parent Disclosure Schedule, no
Parent Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA) (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control (a
"Multiple Employer Plan"), within the meaning of Section 4063 of ERISA and none
of the Parent and its Subsidiaries nor any of their respective ERISA Affiliates
has, at any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan; (viii) except as
set forth on Schedule 5.11(c) of Parent Disclosure Schedule, all contributions
or other amounts payable by Parent or any Parent ERISA Affiliate with respect to
each Parent Benefit Plan and all premiums due or payable with respect to
insurance policies funding any Parent Benefit Plan for any period through the
date hereof have been timely made or paid in full or, to the extent not required
to be made or paid on or before the date hereof, have been fully reflected on
Parent's financial statements; (ix) none of Parent, any Parent ERISA Affiliate
or, to Parent's knowledge, any other person, including any fiduciary, has
engaged in a transaction in connection with which Parent, any Parent ERISA
Affiliate or any Parent Benefit Plan will be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material Tax
imposed pursuant to Section 4975 or 4976 of the Code; (x) to the knowledge of
Parent there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of Parent Benefit
Plans or any trusts related thereto; and (xi) each individual who renders
services to Parent or any of its Subsidiaries who is classified by Parent or
such Subsidiary, as applicable, as having the status of an independent
contractor or other non-employee status for any purpose (including for purposes
of taxation and tax reporting and under Parent Benefit Plans) is properly so
characterized.
(d) Schedule 5.11(d) of Parent Disclosure Schedule sets forth: (i) an
accurate and complete description of each provision of any Parent Benefit Plan
under which the execution and
31
delivery of this Agreement or the consummation of the transactions contemplated
hereby could (either alone or in conjunction with any other event) result in,
cause the accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer or director of Parent
or any of its Subsidiaries, or could limit the right of Parent or any of its
Subsidiaries to amend, merge, terminate or receive a reversion of assets from
any Parent Benefit Plan or related trust; and (ii) to Parent's knowledge a good
faith estimate of the maximum amount of the "excess parachute payments" within
the meaning of Section 280G of the Code that could become payable by Parent and
its Subsidiaries in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
(e) Except to the extent required by any Parent Benefit Plan or by operation
of the provisions of any individual employment or change in control agreement
previously disclosed to Parent and set forth in Schedule 5.11(e) of Parent
Disclosure Schedule, as of the date hereof, neither Parent nor Parent's Board of
Directors has taken any action to accelerate the vesting of any stock options or
other equity-based compensation awards in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
Section 5.12 Securities Laws Matters.
(a) Parent's principal executive officer and its principal financial officer
have disclosed, based on their most recent evaluation, to Parent's auditors: (i)
all significant deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as such term is defined in Rule
13a-15(f) under the Exchange Act) which are reasonably likely to adversely
affect Parent's ability to record, process, summarize and report financial
information; and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in Parent's internal
control over financial reporting.
(b) Parent has established and maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15(e) under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to Parent, including its consolidated Subsidiaries, is made
known to Parent's principal executive officer and its principal financial
officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared;
and, to Parent's knowledge, such disclosure controls and procedures are
effective in timely alerting Parent's principal executive officer and its
principal financial officer to material information required to be included in
Parent's periodic reports required under the Exchange Act.
Section 5.13 Compliance with Applicable Law, Permits and Licenses.
(a) Neither Parent nor any of its Subsidiaries: (i) is in any material
respect in conflict with, or in default or violation in any material respect of;
or (ii) has been charged by any Governmental Entity with any unresolved
violation of: any material law, rule, regulation, order, directive, injunction,
judgment or decree applicable to Parent or any of its Subsidiaries or by which
Parent or any of its Subsidiaries or any of their respective owned or leased
properties is bound or affected.
32
(b) Parent, its Subsidiaries and their respective employees hold all
material permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the businesses of Parent and its Subsidiaries (the "Parent Permits"). Each of
Parent and its Subsidiaries is, and for the past five years has been, in
compliance in all material respects with the terms of Parent Permits, all of the
Parent Permits are in full force and effect and no suspension, revocation or
material modification of any of them is pending or, to the knowledge of Parent,
threatened, nor, to the knowledge of Parent, do reasonable grounds exist for any
such action.
Section 5.14 Intellectual Property; Proprietary Rights; Employee Restrictions;
Assets.
(a) All Intellectual Property used by Parent or its Subsidiaries in their
respective businesses (collectively, "Parent Intellectual Property") are owned
by Parent or such Subsidiaries by operation of law, or have been validly
assigned to Parent or such Subsidiaries ("Parent Owned Intellectual Property")
or Parent or its Subsidiaries otherwise have the right to use such Intellectual
Property in their business as currently conducted ("Parent Licensed Intellectual
Property"). Parent Intellectual Property is sufficient in all material respects
to carry on the business of Parent as presently conducted. Parent or one of its
Subsidiaries has exclusive ownership of all Parent Owned Intellectual Property
used by Parent or its Subsidiaries, or is entitled to use all Parent Licensed
Intellectual Property, in Parent's business as presently conducted, subject, in
the case of Parent Licensed Intellectual Property, to the terms of the license
agreements covering such Parent Licensed Intellectual Property. Parent and its
Subsidiaries, and to the knowledge of Parent, the other parties thereto are not
in material breach of any of the license agreements covering the Parent Licensed
Intellectual Property. The present business activities or products of Parent do
not infringe on any Third Party Intellectual Property.
(b) To its knowledge, Parent has not received any notice or other claim from
any third party asserting that any of Parent's present activities or products
infringe or may infringe any Third Party Intellectual Property of such third
party.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent: (i) Parent has the right to use all trade secrets,
customer lists, hardware designs, programming processes, software and other
information material to its business as presently conducted; (ii) Parent has
taken all reasonable measures in accordance with customary industry practice to
protect and preserve the security and confidentiality of its trade secrets and
other confidential information; (iii) to the knowledge of Parent, all trade
secrets and other confidential information of Parent that are material to its
business are not part of the public domain or knowledge, nor, to the knowledge
of Parent, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence for
Parent; and (iv) to the knowledge of Parent, no employee or consultant of Parent
or any of its Subsidiaries has used any trade secrets or other confidential
information of any other person in the course of their work for Parent or such
Subsidiary.
(d) To the knowledge of Parent, no university or government agency (whether
federal or state) has any claim of right to or ownership in the Parent Owned
Intellectual Property. Parent is not aware of any material infringement,
dilution or misappropriation by others of the Parent Owned Intellectual
Property, or any material violation of the confidentiality of any of its
proprietary information. To Parent's knowledge, Parent is not making unlawful
use of any confidential information or trade secrets of any past or present
employees of Parent or any of its Subsidiaries.
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(e) Each of Parent and its Subsidiaries has good, valid and marketable title
to, or good, valid and marketable leasehold interests in, all its properties and
other assets (other than Parent Intellectual Property, which is addressed in
Section 5.14 (a) through (d)) as are necessary in the conduct of, or material to
the business of Parent and its Subsidiaries as currently conducted, except for
defects in title, easements, restrictive covenants and similar encumbrances
that, either individually or in the aggregate, do not interfere in any material
respect, with Parent's conduct of its business or affect in any material respect
the value of such property or other assets (the "Parent Permitted
Encumbrances"). Except as disclosed on Schedule 5.14(e) of the Parent Disclosure
Schedule or for Parent Permitted Encumbrances, all such properties and other
assets, other than properties or other assets in which Parent or any of its
Subsidiaries has a leasehold interest, are owned by Parent or a Subsidiary free
and clear of all Liens.
(f) (i) Each lease of real or personal property which is material to the
conduct of the business of Parent and its Subsidiaries and to which Parent or
its Subsidiaries is a party is valid and binding on Parent or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) Parent and each
of its Subsidiaries have in all material respects performed all material
obligations required to be performed by it to date under each such lease, and
(iii) no event or condition exists which constitutes or, after notice or lapse
of time or both, will constitute, a material default under any such lease.
Section 5.15 Certain Contracts; Leases.
(a) Except as set forth on Schedule 5.15 of the Parent Disclosure Schedule,
neither Parent nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral):
(i) which is a "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Parent Reports; (ii)
which materially restricts the conduct of any line of business by Parent or upon
consummation of the transactions contemplated by this Agreement will restrict
the conduct of any line of business by Parent, or Parent's Subsidiaries or the
ability of Parent or any of Parent's Subsidiaries to engage in any line of
business; (iii) which upon consummation of the transactions contemplated by this
Agreement will subject Parent or any of its affiliates to any exclusivity
arrangements with or to a labor union or guild (including any collective
bargaining agreement); or (iv) (other than any plan or agreement covered by
Section 5.11 hereof) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
shareholder approval or the consummation of the transactions contemplated by
this Agreement, or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement. Each
contract, arrangement, commitment or understanding of the type described in this
Section 5.15(a), together with any material license or contract relating to
Parent Intellectual Property, whether or not set forth in the Parent Disclosure
Schedule, is referred to herein as a "Parent Contract," and neither Parent nor
any of its Subsidiaries knows of, or has received notice of, any material
violation of the above by any of the other parties thereto. Parent has
heretofore made available to the Company a true and complete copy of each Parent
Contract.
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(b) (i) Each Parent Contract is valid and binding on Parent or any of its
Subsidiaries, as applicable, and in full force and effect; (ii) Parent and each
of its Subsidiaries has in all material respects performed all material
obligations required to be performed by it to date under each Parent Contract;
and (iii) to the knowledge of the Parent, no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default under any such Parent Contract.
(c) Schedule 5.15(c) of the Parent Disclosure Schedule sets forth a complete
and accurate list and description of all real property leased, subleased or
otherwise occupied by Parent or its Subsidiaries (the "Parent Leased Real
Property"). Except as set forth on Schedule 5.15(c) of the Parent Disclosure
Schedule, Parent and its Subsidiaries do not own any real property. All of the
leases or subleases of the Parent Leased Real Property (the "Parent Leases") are
valid, binding and in full force and effect. Parent and its Subsidiaries have
not subjected any Parent Lease to any mortgage, pledge, lien, encumbrance,
sublease, assignment, license, or other agreement granting to any third party
any material interest in such Parent Lease or any right to the use or occupancy
of any Parent Leased Real Property. Parent or a Subsidiary, as lessee under each
Parent Lease, is now in possession of all of the applicable Parent Leased Real
Property.
Section 5.16 Absence of Undisclosed Liabilities. Except as set forth in Schedule
5.16 of the Parent Disclosure Schedule, all liabilities of Parent are current.
Except for: (a) those liabilities that are disclosed in the footnotes to or
reserved against on the Parent Audited Financial Statements (and only to the
extent of such disclosure or reserve); (b) liabilities incurred pursuant to this
Agreement and the transactions contemplated hereby or for fees and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby; and (c) liabilities or obligations not
required by GAAP to be disclosed or provided for in the Parent Audited Financial
Statements and that were incurred in the ordinary course of business consistent
with past practice which have not had or would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, neither Parent nor any of its
Subsidiaries has incurred any indebtedness, obligation or liability of any
nature whatsoever (whether known or unknown, absolute, accrued, asserted or
unasserted, determined, determinable, contingent or otherwise and whether due or
to become due whether relating to operations of, or property currently or
previously owned by, Parent or any of its present or past Subsidiaries).
Schedule 5.16 of the Parent Disclosure Schedule sets forth all indebtedness for
money borrowed by the Parent or any of its subsidiaries and accurately discloses
for each such indebtedness the payee, the original amount of the loan, the
current balance of the loan, the interest rate and the maturity date.
Section 5.17 Insurance. Parent has made available to the Company a copy of all
material insurance policies and all material self insurance programs and
arrangements relating to the business, assets and operations of Parent and its
Subsidiaries (the "Parent Insurance Policies"). Each of such Parent Insurance
Policies is in full force and effect as of the date of this Agreement. From June
30, 2001 through the date hereof, neither Parent nor any of its Subsidiaries has
received any notice or other communication regarding any actual or possible: (a)
cancellation of any Parent Insurance Policy that has not been renewed in the
ordinary course without any lapse
35
in coverage; (b) invalidation of any Parent Insurance Policy; (c) refusal of any
coverage or rejection of any material claim under any Parent Insurance Policy;
or (d) material adjustment in the amount of the premiums payable with respect to
any Parent Insurance Policy.
Section 5.18 Environmental Liability. There are no Claims or Response Actions of
any nature seeking to impose, or that reasonably could result in the imposition
of, on Parent or any of its Subsidiaries any liability or obligation arising
under common law or under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, CERCLA, pending or, to
Parent's knowledge, threatened against Parent or any of its Subsidiaries, which
liability or obligation could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Parent. To the
knowledge of Parent there is no reasonable basis for any such Claim or Response
Action that could reasonably be expected to impose any liability or obligation
that will have, either individually or in the aggregate, a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, directive, injunction, letter or memorandum
by or with any court, governmental authority, regulatory agency, Governmental
Entity or third party imposing any liability or obligation with respect to the
foregoing that will have, either individually or in the aggregate, a Material
Adverse Effect on Parent.
Section 5.19 Form S-4 Proxy Statement/Prospectus. None of the information to be
supplied by Parent or its Subsidiaries for inclusion in the Form S-4 or the
Proxy Statement/Prospectus will, at the time of the filing of the Form S-4 and
the mailing of the Proxy Statement/Prospectus and any amendments or supplements
thereto 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 the light of the circumstances under which they are made,
not misleading. The Form S-4 and the Proxy Statement/Prospectus will comply, as
of the date of filing, in the case of the Form S-4, and the date of mailing, in
the case of the Proxy Statement/Prospectus, as to form in all material respects
with all applicable laws, including the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation is made by Parent with respect to information supplied by the
Company for inclusion therein.
Section 5.20 Transactions with Affiliates. Except as set forth in Schedule 5.20
of the Parent Disclosure Schedule, there are no transactions, agreements,
arrangements or understandings between Parent or any of its Subsidiaries, on the
one hand, and any affiliate (including any officer or director) thereof, but not
including any wholly owned Subsidiary of Parent, on the other hand.
Section 5.21 Labor Relations; Collective Bargaining Agreements. Except as set
forth on Schedule 5.21 of the Parent Disclosure Schedule, neither Parent nor any
of its Subsidiaries is a party to any collective bargaining or other labor union
contract applicable to persons employed by Parent or its Subsidiaries, and no
collective bargaining agreement or other labor union contract is being
negotiated by Parent or any of its Subsidiaries. No labor organization or group
of employees of Parent or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. There are no
36
labor disputes, strikes, slowdowns or work stoppages against Parent or any of
its Subsidiaries pending or threatened against Parent or any of its
Subsidiaries. Since June 30, 2000 no unfair labor practice or labor charge or
complaint has been made or is outstanding with respect to Parent or any of its
Subsidiaries. Parent and its Subsidiaries have complied in all material respects
with all provisions of applicable law pertaining to the employment of employees,
including such laws relating to labor relations, equal employment, fair
employment practices, immigration, workers' compensation, terms and conditions
of employment, employee classification, wages, hours or work, equal opportunity
and occupational health and safety.
Section 5.22 Dividends. Since December 31 2002, neither Parent nor any of its
Subsidiaries have declared or paid any dividends or other distributions upon any
of its capital stock or returned any capital to the shareholders of Parent or
paid or made any distribution of property or cash to the shareholders of Parent.
Section 5.23 Product Labeling, Product Liability and Product Warranty. Parent
and its Subsidiaries are in compliance in all material respects with all
federal, state and local laws and regulations relating to product labeling,
product safety and public health and safety. Except as set forth in Schedule
5.23 of the Parent Disclosure Schedule or in connection with routine warranty
claims, neither Parent nor any of its Subsidiaries has received any notice of
any claim that any product now or heretofore offered for sale or sold by Parent
or distributed by Parent in connection with product sales is injurious to the
health and safety of any person or is not in conformity with its specifications
or not suitable for any purpose or application for which it is offered for sale,
sold or distributed. Neither Parent nor its Subsidiaries has ever been ordered
by a government agency to recall a product, and to Parent's knowledge, there are
no circumstances that could give rise to such a product recall. To Parent's
knowledge, there are no circumstances that could cause Parent to experience
costs for warranty claims in the future that are materially higher than the
costs historically experienced by Parent.
Section 5.24 Conduct of Business. Merger Sub is a corporation formed solely for
the purpose of consummating the Merger and the other transactions contemplated
hereby and has not engaged in any business activity except as contemplated by
this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Businesses Prior to the Merger Closing. Commencing upon
execution of this Agreement and continuing through to the Closing, except as
expressly contemplated or permitted by this Agreement the Company shall, and
shall cause its Subsidiaries to: (i) conduct its business in the ordinary course
consistent with past practices; (ii) use its best efforts to maintain and
preserve intact its business organization and business relationships and to
retain the services of its key officers and key employees; and (iii) use its
good faith best efforts to limit the Company's legal expenses to be incurred in
connection with the transactions contemplated by this Agreement to two hundred
thousand dollars ($200,000) (plus disbursements), and it shall promptly notify
Parent in the event that it anticipates that such legal expenses will exceed
such amount.
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Section 6.2 Company Forbearances. Commencing upon execution of this Agreement
and continuing through to the Closing, except as expressly contemplated by this
Agreement, the Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent (which consent or refusal shall
not be unreasonably delayed or withheld):
(a) incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity, or make any loan or advance,
provided, however, that the Company shall be entitled to draw against its
operating line of credit in a manner consistent with past practice;
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend (other than dividends or
distributions by a direct or indirect wholly owned Subsidiary of the Company to
its parent), or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire or encumber, any shares of its capital
stock or any securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the occurrence of
certain events) into or exchangeable for any shares of its capital stock, except
in connection with cashless exercises or similar transactions pursuant to the
exercise of stock options issued and outstanding as of the date hereof under the
Company Stock Plans;
(iii) grant any individual, corporation or other entity any right to
acquire any shares of its capital stock; or
(iv) issue any additional shares of capital stock except pursuant to the
exercise of stock options under the Company Stock Plans issued and outstanding
as of the date hereof and in accordance with the terms of such instrument;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
lines of business, material properties or assets to any individual, corporation
or other entity, other than to a wholly owned Subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, except pursuant to contracts or agreements in force at the date hereof;
(d) except pursuant to contracts or agreements in force at the date of this
Agreement and made available to Parent prior to the date of this Agreement, make
any material investment or acquisition, whether by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation or other entity other
than a wholly owned Subsidiary of the Company or any wholly owned Subsidiary
thereof;
(e) except for transactions in the ordinary course of business consistent
with past practice which would not reasonably be expected to have a Material
Adverse Effect on the Company, terminate, or amend or waive any material
provision of, any Company Contract, as the case may be, or make any material
change in any instrument or agreement governing the terms of any lease or
contract other than normal renewals of contracts and leases without material
adverse changes of terms, or its securities;
38
(f) Except to the extent required by law or an existing agreement, increase
in any manner the compensation or benefits of any of its employees, directors,
consultants, independent contractors or service providers, pay any pension,
severance or retirement benefits not required by any existing plan or agreement
to any such employees, directors, consultants, independent contractors or
service providers or enter into, amend, alter, adopt, implement or otherwise
commit itself to any compensation or benefit plan, program, policy, arrangement
or agreement including without limitation any pension, retirement,
profit-sharing, bonus or other employee benefit or welfare benefit plan, policy,
arrangement or agreement or employment or consulting agreement with or for the
benefit of any employee, director, consultant, independent contractor or service
provider or accelerate the vesting of, or the lapsing of restrictions with
respect to, any stock options or other stock-based compensation or cause the
funding of any rabbi trust or similar arrangement;
(g) settle any material claim, action or proceeding;
(h) amend its Articles of Incorporation or its Bylaws or enter into any
agreement with its shareholders in their capacity as such;
(i) other than in the ordinary course of business consistent with past
practice, (i) sell or enter into any material license agreement with respect to
any Company Intellectual Property used by it in its business with any person or
entity or buy or enter into any material license agreement with respect to Third
Party Intellectual Property of any person or entity; (ii) sell or transfer to
any person or entity any material rights to any Company Intellectual Property
used by it in its business; or (iii) enter into or materially amend any Company
Contract, as the case may be, pursuant to which any other party is granted
marketing or distribution rights of any type or scope with respect to any
material products of its or any of its Subsidiaries;
(j) enter into any "non-compete" or similar agreement that would materially
restrict the businesses of the Surviving Corporation or its Subsidiaries
following the Effective Time or that would in any way restrict the businesses of
Parent and its Subsidiaries (excluding the Surviving Corporation and its
Subsidiaries);
(k) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of such
entity;
(l) implement or adopt any change in its accounting principles, practices or
methods, other than as consistent with or as may be required by law, GAAP or
regulatory guidelines;
(m) settle or compromise any material liability for Taxes, file any material
Tax Return (including any amended Tax Return), make any material Tax election or
change any method of accounting for Tax purposes;
(n) enter into any new, or amend or otherwise alter any current, Company
Affiliate Transaction;
39
(o) agree to take, make any commitment to take, or adopt any resolutions of
its board of directors in support of, any of the actions prohibited by this
Section 6.2; or
(p) Permit the Company's 401(k) Retirement Savings Plan to purchase or
otherwise acquire additional shares of Company Common Stock.
Section 6.3 Parent Obligations. During the period from the date hereof to the
Effective Time: (a) Parent shall not without the prior written consent of the
Company, adopt any amendments to its Articles of Incorporation which would
materially adversely affect the terms and provisions of the Parent Common Stock
or the rights of the holders of such shares; (b) without the Company's consent,
neither Parent nor any of its affiliates shall, directly or indirectly, except
pursuant to this Agreement or the Voting Agreements, purchase or otherwise
acquire any Company Securities or otherwise intentionally vote or acquire the
right to vote Company Securities; and (c) Parent shall cause Merger Sub to
perform its obligations hereunder.
Section 6.4 Certain Tax Matters. Commencing upon execution of this Agreement and
continuing through to the Closing, each Party hereto shall use its reasonable
best efforts to cause the Merger to qualify, and will not knowingly take any
action, cause any action to be taken, fail to take any commercially reasonable
action or cause any commercially reasonable action to fail to be taken, which
action or failure to act would reasonably be expected to prevent the Merger from
qualifying as a taxable sale of assets and liquidation of the Company under the
Code.
Section 6.5 Other Matters. Commencing upon the execution of this Agreement and
continuing through the Closing, neither the Company nor Parent shall, and each
of them shall cause its respective Subsidiaries not to, take any action that is
intended or would reasonably be expected to result in: (a) any of its
representations and warranties (or, in the case of Parent, the representations
and warranties of Parent and Merger Sub) set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective Time;
(b) any of the conditions to the Merger set forth in Article VIII not being
satisfied; or (c) a violation of any provision of this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Filings Under Securities Laws. As promptly as practicable after the
date hereof, Parent shall prepare and file with the SEC the Registration
Statement, which will contain: (i) the prospectus of Parent relating to the
shares of Parent Common Stock and the Warrants to be issued in connection with
the Merger (the "Prospectus"); and (ii) the proxy statement of the Company
relating to the Shareholder Meeting (the "Proxy Statement" and, together with
the Prospectus, the "Proxy Statement/Prospectus"). Each of the Company and
Parent shall use their reasonable best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing, and the Company shall thereafter mail or deliver the Proxy
Statement/Prospectus to its shareholders. Parent and the Company will promptly
notify each other of the receipt of comments from the SEC and of any request by
the SEC for amendments or supplements to the Registration Statement or the Proxy
Statement or for additional information, and will promptly supply each other
with copies of all correspondence between the parties and the SEC with respect
thereto. If, at any time prior to the Effective Time,
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any event should occur relating to or affecting the Company, Parent or Merger
Sub, or to their respective Subsidiaries, officers or directors, which event
should be described in an amendment or supplement to the Registration Statement
or the Proxy Statement, the parties promptly will inform each other and
cooperate in preparing, filing and having declared effective or clearing with
the SEC and, if required by applicable federal or state securities laws,
distributing to the Company's shareholders such amendment or supplement. Parent
shall use its reasonable best efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and the Company shall cooperate with Parent and
furnish all information concerning the Company and the holders of the Company
Securities as may be reasonably requested by Parent in connection with any such
action.
Section 7.2 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, each of the Parties shall, and shall cause each of
their respective Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other Parties, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records. Access shall be
reasonably related to the purposes of verifying the representations and
warranties of the other and preparing for the Merger and the other matters
contemplated by this Agreement. During such period, each of the Parties shall,
and shall cause their respective Subsidiaries to, make available to the other
Parties: (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of federal securities laws (other than reports or documents which such party is
not permitted to disclose under applicable law); and (ii) all other information
concerning its business, properties and personnel as such party may reasonably
request. No Party shall be required to provide access to or to disclose
information where such access or disclosure would violate the rights of its
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(b) Each of the Parties shall hold all information furnished by or on behalf
of any other Party or any of such Party's Subsidiaries or representatives
pursuant to Section 7.2(a) in confidence except to the extent that failure to
disclose would constitute a violation of law and, in that case, the Party
required to disclose such information will, to the extent practicable, provide
prior notice of its intent to disclose such information to the other Party. The
Company acknowledges and agrees that the execution, delivery and performance by
Parent and its affiliates of this Agreement, the Voting Agreements and the
transactions contemplated hereby and thereby shall not be deemed a breach of
Parent's obligations under this Section 7.2(b).
(c) Each of the Parties shall hold all information furnished by or on behalf
of any other Party or any of such Party's Subsidiaries or representatives
pursuant to Section 7.2(a) or 7.2(b) in confidence to the extent required by,
and in accordance with, the provisions of this Agreement and the provisions of
the Confidentiality Agreement between Parent and the Company, dated as of
November 26, 2002 (the "Confidentiality Agreement") except to the extent
41
that failure to disclose would constitute a violation of law and, in that case,
the Party required to disclose such information will, to the extent practicable,
provide prior notice of its intent to disclose such information to the other
Party. The Company acknowledges and agrees that the execution, delivery and
performance by Parent and its Affiliates of this Agreement, the Voting
Agreements and the transactions contemplated hereby and thereby shall not be
deemed a breach of Parent's obligations under the Confidentiality Agreement.
(d) No investigation by any of the Parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
Section 7.3 Acquisition Transactions.
(a) Upon execution of this Agreement, the Company shall cease immediately
and cause to be terminated any and all existing discussions or negotiations with
any parties (other than Parent) conducted heretofore with respect to any offer
or other proposal to acquire any of the business, properties or assets of the
Company and its Subsidiaries or any capital stock of the Company or its
Subsidiaries, in each case whether by merger, purchase of assets, tender offer
or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions being referred to herein as an
"Acquisition Transaction") and promptly request that all confidential
information with respect to any proposed Acquisition Transaction furnished by or
on behalf of the Company be returned and the Company shall use its best efforts
to cause any officer, director or employee of the Company, or any attorney,
accountant, investment banker, financial advisor or other agent retained by the
Company or any of its Subsidiaries, not to initiate, solicit, negotiate,
knowingly encourage or provide non-public or confidential information to
facilitate any Acquisition Transaction or any proposal with respect to any
Acquisition Transaction.
(b) After the date hereof and prior to the Effective Time or the earlier
termination of this Agreement pursuant to the terms hereof, the Company shall
not, and shall not permit any of its Subsidiaries to, (i) initiate, solicit,
negotiate, knowingly encourage, provide confidential information to facilitate,
or enter into any agreement with respect to, any bona fide written proposal or
offer (an "Acquisition Proposal") to engage in an Acquisition Transaction; or
(ii) enter into any agreement with respect to any Acquisition Proposal (other
than this Agreement and any confidentiality and "standstill" agreement required
pursuant to subsection (C) of the proviso of this Section 7.3(b)) or enter into
any agreement, arrangement or understanding requiring it to abandon, terminate
or fail to consummate the Merger, this Agreement or the transactions
contemplated hereby; provided, however, that if, at any time prior to the
Effective Time, the Company receives a written Acquisition Proposal that was not
solicited after the date hereof or that did not otherwise result from a breach
of this Section 7.3 and that the Company's Board of Directors or the Special
Committee of the Company's Board of Directors (the "Special Committee")
determine in good faith, after consultation with their legal and financial
advisors, is a Superior Proposal (as defined below), the Company may, in
response to such Acquisition Proposal and subject to the Company's compliance
with this Section 7.3(b), (x) furnish information with respect to the Company to
the person making such Acquisition Proposal, provided that the Company
contemporaneously furnishes a copy of any information supplied to the person
making the Acquisition Proposal to Parent to the extent it has not done so
previously, and (y) participate in discussions and negotiations with respect to
such Acquisition Proposal if,
42
and only to the extent that (A) the Company's Board of Directors and the Special
Committee, after consultation with and taking into consideration the advice of
their legal advisors, determine in good faith that such action is required for
the Company's Board of Directors or the Special Committee to comply with its
fiduciary duties to the Company, (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person, the Company
provides written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person,
and (C) prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, the Company receives from such person an
executed confidentiality and "standstill" agreement on terms substantially
similar to those in the confidentiality and standstill agreement between the
Company and Parent. The term "Superior Proposal" means an Acquisition Proposal
which was not solicited or encouraged, directly or indirectly, after the date
hereof by the Company, any of the Company's representatives or any other
affiliate and which, in the good faith determination of the Company's Board of
Directors or the Special Committee, taking into consideration, to the extent
deemed appropriate by the Company's Board of Directors or the Special Committee,
such interests and factors that may be considered in making such a determination
under the PBCL, and the advice from a financial advisor of nationally recognized
reputation, (A) if accepted, is highly likely to be consummated, (B) if
consummated, would result in a transaction that is more favorable to the Company
than the transactions contemplated by this Agreement and (C) which financing, to
the extent required, is then committed or which if not committed is capable of
being obtained by such Person. The Company shall notify the Parent in writing of
its receipt of any Acquisition Proposal (which notice shall include a copy of
such Acquisition Proposal).
(c) Neither the Company nor the Company's Board of Directors or any
committee thereof (including the Special Committee) shall, or shall authorize or
permit any of its representatives to, (A) withhold, withdraw, modify, change or
fail to make, or propose publicly to withhold, withdraw, modify, change or fail
to make, in a manner adverse to Parent, the recommendation of the Company's
Board of Directors and the Special Committee that the Company Shareholders
approve and adopt this Agreement and the transactions contemplated thereby (the
"Company Board Recommendation"), (B) approve, endorse, or recommend, or propose
publicly to approve, endorse, or recommend, any Acquisition Proposal (other than
the Merger), (C) cause the Company to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal (other than the Merger) or (D) release or permit the
release of any person from, or waive or permit the waiver of any provision of,
any confidentiality, "standstill" or similar agreement under which the Company
or any of the Company Subsidiaries has any rights, or fail to use commercially
reasonable efforts to enforce or cause to be enforced such agreement at the
request of Parent. Nothing in this Agreement shall prohibit the Company or
Parent, as the case may be, from making disclosure (and such disclosure in and
of itself shall not be deemed to be a change in the Recommendations) of the fact
that an Acquisition Proposal has been proposed, the identity of the person
making such proposal or the material terms of such proposal to the extent, and
only to the extent that, based on the advice of the Company's legal advisors,
such disclosure is required by law. Further, notwithstanding anything contained
in this Agreement to the contrary, in the event that an Acquisition Proposal is
made and the Company's Board of Directors or Special Committee determines in
good faith, after consultation with their legal and financial advisors, that
such Acquisition Proposal is a Superior Proposal after the Company has complied
with its obligations pursuant to this Section 7.3, the Company's Board of
Directors or the Special
43
Committee may (if and only to the extent that the Company's Board of Directors
or the Special Committee, after consultation with and taking into consideration
the advice of its legal advisors, determines in good faith that such action is
required for the Company's Board of Directors or the Special Committee to comply
with its fiduciary duties to the Company) take any of the actions specified in
clauses (A), (B) or (D) of this Section 7.3(c), no earlier than five Business
Days following Parent's receipt from the Company of notice pursuant to Section
7.3(b) in connection with an Acquisition Proposal and engages in good faith
negotiations with Parent in accordance with the requirements of Section 7.3(e).
(d) The Company shall promptly provide to Parent any information regarding
the Company or its Subsidiaries provided after the date hereof to any
corporation, partnership, person or other entity or group making an Acquisition
Proposal, unless such information has been previously provided to Parent.
(e) In the event that the Company's Board of Directors or Special Committee
determines that an Acquisition Proposal constitutes a Superior Proposal, the
Company shall give Parent written notice of such determination and provide
Parent with the terms of such Superior Proposal. For a period of not less than
five Business Days after Parent's receipt from the Company of notice described
in the preceding sentence, the Company shall, if requested by Parent, negotiate
in good faith with Parent to revise this Agreement in an effort to make the
Acquisition Proposal that constituted a Superior Proposal no longer constitute a
Superior Proposal.
Section 7.4 Shareholders' Approval. Subject to the other provisions of this
Section 7.4, the Company shall use its best efforts to cause a special meeting
of shareholders of the Company (the "Shareholder Meeting") to be held as soon as
reasonably practicable after the date hereof for the purpose of obtaining the
Company Shareholder Approval (the "Shareholder Proposal"). The Company's Board
of Directors shall use its best efforts to obtain from the shareholders of the
Company the votes required by the PBCL and/or the Company Charter in favor of
the approval of this Agreement and any other matters required thereby to be
approved and shall recommend to the shareholders of the Company that they so
vote at the Shareholder Meeting or any adjournment or postponement thereof;
provided that the Company's Board of Directors shall not be required to use such
best efforts to obtain the vote in favor of the approval of this Agreement and
such other matters or to make or continue to make such recommendation if such
Board of Directors, after having received and considered the advice of, and
after consultation with, its independent, outside legal counsel, has determined
that the making of such reasonable best efforts to obtain the vote in favor of
the approval of this Agreement and such other matters or making or continuing to
make such recommendation would cause the members of the Company's Board of
Directors to breach their fiduciary duties under applicable laws.
Notwithstanding anything to the contrary in this Agreement, unless this
Agreement is earlier terminated in accordance with its terms, the Company shall
be required to submit the Shareholder Proposal for approval by its shareholders
at the Shareholder Meeting, whether with or without the recommendation of the
Company's Board of Directors.
44
Section 7.5 Legal Conditions to the Merger.
(a) Each of Parent and the Company shall, and shall cause their respective
Subsidiaries to, use their reasonable best efforts: (i) to promptly prepare and
file all necessary documentation, to effect all applications, notices, petitions
and filings, to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary or advisable to consummate the transactions contemplated by
this Agreement, and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities; (ii)
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements that may be imposed on such party or
its Subsidiaries with respect to the Merger and, subject to the conditions set
forth in Article VIII, to consummate the transactions contemplated by this
Agreement; and (iii) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party that is required to be obtained by
Parent or the Company or any of their respective Subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement.
(b) Notwithstanding anything to the contrary in paragraph (a) above or any
other provision of this Agreement: (i) the Company shall not, without the prior
written consent of Parent, agree to divest any assets or businesses of the
Company or any of its affiliates or to in any way limit the ownership or
operation of any business of the Company or its affiliates; and (ii) neither
Parent nor the Company shall be required to: (A) divest or encumber any assets
or corporations of Parent or the Company, respectively, or any of their
respective affiliates (provided that in connection with the obtaining of the
approval of any Governmental Entity of the transactions contemplated by this
Agreement, the Company shall, and shall cause its Subsidiaries to, agree to
divest, encumber, and to divest or encumber, any of its or their assets or
corporations at the request of Parent and provided that such divestiture is
conditioned upon consummation of the Merger); or (B) enter into any agreements
that in any way limit the ownership or operation of any business of Parent or
the Company, respectively, or any of their respective affiliates.
(c) Parent and the Company shall have the right to review in advance, and,
to the extent practicable, each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
relating to Parent or the Company, as the case may be, and any of their
respective Subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement, provided that Parent or
the Company can restrict access by the other Party to such documents that
discuss the pricing or dollar value of the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Parties shall act
reasonably and as promptly as practicable. The Parties agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
45
(d) The Parent and the Company shall, upon request, furnish the other
Parties with all information concerning themselves, their Subsidiaries and their
Subsidiaries' affiliates, directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the Proxy
Statement/Prospectus, the Registration Statement or any other statement, filing,
notice or application made by or on behalf of Parent or the Company or any of
their respective Subsidiaries to any Governmental Entity in connection with the
transactions contemplated by this Agreement.
(e) The Company and Parent shall, and Parent shall cause Merger Sub to,
promptly advise the other Parties upon receiving any communication from any
Governmental Entity whose consent or approval is required for consummation of
the transactions contemplated by this Agreement that causes such Party to
believe that there is a reasonable likelihood that any Requisite Regulatory
Approval will not be obtained or that the receipt of any such approval will be
materially delayed.
Section 7.6 Affiliates. The Company shall use its best efforts to cause each
person, listed on Exhibit E hereto to deliver to Parent, as soon as practicable
after the date of this Agreement, and in any event prior to the Effective Time,
a written agreement, in the form of Exhibit E hereto, as applicable, providing
that such person will not sell, pledge, transfer or otherwise dispose of any
shares of Parent Common Stock to be received by such "affiliate" in the Merger,
other than as contemplated in such written agreement. Other than those persons
listed on Exhibit E, there are no "affiliates" (for purposes of Rule 145 under
the Securities Act) of the Company.
Section 7.7 Stock Exchange Quotation or Listing. Parent shall use its reasonable
best efforts to cause the shares of Parent Common Stock to be issued in the
Merger to be authorized for quotation on NASDAQ or such other national exchange
on which the Parent Common Stock may then be quoted or listed prior to the
Effective Time.
Section 7.8 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement and
their respective Subsidiaries shall take all such necessary action as may be
reasonably requested by Parent.
Section 7.9 Advise of Changes. Parent and the Company shall each promptly advise
the other Party of any change or event having a Material Adverse Effect on it,
and Parent and the Company shall each promptly advise the other of any change or
event that it believes is or constitutes or is reasonably likely to be or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
Section 7.10 Directors' and Officers' Indemnification and Insurance.
(a) Parent shall cause to be maintained in effect for a period of not less
than one year and not more than three years from the Effective Time a directors'
and officers' liability insurance policy, with policy limits of not less than
one million dollars ($1,000,000) and not more than three million dollars
($3,000,000), covering the directors and officer of the Company (the "D&O
Insurance Policy"). The D&O Insurance Policy will be underwritten by a reputable
insurance company. The provisions of the immediately preceding sentence shall be
deemed to
46
have been satisfied if, with the prior written consent of the Company, a prepaid
policy has been obtained prior to the Effective Time for purposes of this
Section 7.10(a), which policy provides the Company's directors and officers with
coverage in the amount of not less than one million dollars ($1,000,000) and not
more than three million dollars ($3,000,000) for an aggregate period of three
years with respect to claims arising from facts or events that occurred on or
before the Effective Time, including, without limitation, in respect of the
transactions contemplated by this Agreement. If such policy has been obtained
prior to the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, maintain such policy in full force and effect, and continue to
honor the obligations thereunder. The obligations under this Section 7.10(a)
shall not be terminated or modified in such a manner as to adversely affect any
indemnitee to whom this Section 7.10(a) applies without the consent of such
affected indemnitee (it being expressly agreed that the indemnitees to whom this
Section 7.10(a) applies shall be third party beneficiaries of this Section
7.10(a)).
(b) From and after the Effective Time, the Surviving Corporation will, and
Parent will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of the Company or of any of its
Subsidiaries, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with any
threatened, pending or completed claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters relating to their duties or actions in their
capacity as such (or in such capacity in another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company) and existing
or occurring at or prior to the Effective Time (including those matters relating
to the transactions contemplated by this Agreement), whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent permitted to be
so indemnified by the Surviving Corporation or such Subsidiary, as the case may
be, under applicable law. The Surviving Corporation shall, and Parent shall
cause the Surviving Corporation to, assume all rights of the Indemnified Parties
to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time as provided in the respective
Articles of Incorporation or Bylaws (or comparable organizational documents) of
the Company or any of its Subsidiaries (true and complete copies of which have
been filed as exhibits to the Company's Annual Report on Form 10-K for the year
ended October 26, 2003, in the case of the Company, and otherwise have been made
available to Parent prior to the date hereof) as now in effect, and any
indemnification agreements or arrangements of the Company or any of its
Subsidiaries provided to Parent prior to the date hereof shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and Parent shall cause the Surviving Corporation to comply with its
obligations thereunder. Such rights shall not be amended, or otherwise modified
in any manner that would adversely affect the rights of the Indemnified Parties,
unless such modification is required by law. The right to indemnification
conferred by this Section 7.10 shall include the right to be advanced and paid
by the Surviving Corporation the expenses incurred in defending or otherwise
participating in any proceeding in advance of its final disposition, provided
that such Indemnified Party provides an undertaking reasonably satisfactory in
form and substance to the Surviving Corporation to repay such advanced expenses
to the extent required by law or the terms of the applicable indemnification
provision.
47
(c) From and after the Effective Time until the second anniversary thereof,
Parent shall cause: (i) the Articles of Incorporation and Bylaws of the
Surviving Corporation to contain provisions no less favorable to the Indemnified
Parties with respect to indemnification and to limitation of certain liabilities
of directors and officers than are set forth as of the date of this Agreement in
the Company Charter and Bylaws of the Company; and (ii) the Certificate of
Incorporation and Bylaws (or similar organizational documents) of each
Subsidiary of the Surviving Corporation to contain the current provisions
regarding indemnification of directors and officers which provisions in each
case shall not be amended, repealed or otherwise modified in a manner that would
adversely affect the rights thereunder of the Indemnified Parties.
(d) In the event that Parent or the Surviving Corporation or the respective
successors or assigns of each: (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or entity of such
consolidation or merger; or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, Parent
and the Surviving Corporation shall ensure that proper provision shall be made
so that such successors and assigns of Parent or the Surviving Corporation or
the respective successors or assigns of each, as the use may be, shall assume
all of the obligations thereof set forth in this Section 7.10.
(e) Nothing in this Agreement is intended to, shall be construed to or shall
release, waive or impair any rights to directors' and officers' insurance claims
under any policy that is or has been in existence with respect to the Company or
any of its officers, directors or employees, it being understood and agreed that
the indemnification provided for in this Section 7.10 is not prior to or in
substitution for any such claims under such policies.
(f) The provisions of this Section 7.10 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives; and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise. The obligations of Parent and the Surviving
Corporation under this Section 7.10 shall not be terminated or modified in such
a manner as to adversely affect any Indemnified Party to whom this Section 7.10
applies without the consent of the affected Indemnified Party (it being
expressly agreed that the Indemnified Parties to whom this Section 7.10 applies
shall be third party beneficiaries of this Section 7.10). For the avoidance of
doubt, any failure by the Surviving Corporation to pay any amounts under this
Section 7.10 for any reason whatsoever (including that such entity has ceased to
exist) shall entitle the Indemnified Parties to fulfillment by Parent of such
obligations of the Surviving Corporation.
Section 7.11 Taxable Stock Purchase. Following the Effective Time, neither the
Company, the Surviving Corporation, Parent nor any of their affiliates shall
knowingly take any action, cause any action to be taken, fail to take any
commercially reasonable action or cause any commercially reasonable action to
fail to be taken, which action or failure to act would reasonably be expected to
prevent the Merger from qualifying as a taxable sale of assets and liquidation
of the Company under the Code
Section 7.12 Employee Matters.
(a) Parent will cause the Surviving Corporation to honor the obligations of
the Company or any of its Subsidiaries as of the Effective Time under the
provisions of all
48
employment, bonus, consulting, termination, severance, change in control and
indemnification agreements, all of which are set forth on Schedule 7.12 of the
Company Disclosure Schedule, between and among the Company or any of its
Subsidiaries, on the one hand, and any current or former officer, director,
consultant or employee of the Company or any of its Subsidiaries, on the other
hand, provided that this provision shall not prevent the Surviving Corporation
from amending, suspending or terminating any such agreements to the extent
permitted by the respective terms of such agreement.
(b) Parent and the Surviving Corporation will cause their respective
employee benefit and compensation plans (including, without limitation, pension,
profit-sharing, retirement, savings, 401(k), vacation, paid time-off, employee,
retiree health and other employee financial welfare or other benefit plans)
covering any of the employees of the Company who are employed by the Surviving
Corporation as of the Effective Time (the "Assumed Employees") on or after the
Effective Time to count service that has been recognized by the Company and its
affiliates, without duplication of benefits, for purposes of eligibility to
participate and vesting, but not benefit accrual, to the same extent such
service was recognized under any similar Company Benefit Plans, provided that
the foregoing shall not apply for newly established plans for which prior
service is not taken into account. Parent and the Surviving Corporation will
also cause all (i) waiting periods; and (ii) pre-existing conditions and proof
of insurability provisions, for all conditions that all Assumed Employees and
their covered dependents have as of the Effective Time, under each plan that
would otherwise be applicable to newly hired employees to be waived with respect
to Assumed Employees to the same extent waived to the extent waivable or
satisfied under the Company Benefit Plans for the year in which the Merger
occurs.
(c) Parent and the Surviving Corporation will give Assumed Employees credit,
for purposes of Parent's and the Surviving Corporation's vacation and/ or other
paid leave benefit programs, for such employees' accrued and unpaid vacation
and/or paid leave balance as of the Effective Time; provided, however, that
Assumed Employees will not be provided with duplicative service credit for
vacation or other paid leave programs.
Section 7.13 Registration Statement.
(a) If at any time prior to the date of the Shareholder Meeting, or any
adjournment thereof, any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in an amendment of, or a supplement to the Registration Statement, the
Company shall notify Parent thereof by reference to this Section 7.13(a) and
such event shall be so described. Any such amendment or supplement shall be
filed as promptly as practicable with the SEC and, as and to the extent required
by law, disseminated to the shareholders of the Company, and such amendment or
supplement shall comply in all material respects with all applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
(b) If at any time prior to the date of the Shareholder Meeting, or any
adjournment thereof, any event with respect to Parent, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in an amendment of, or a supplement to the Registration Statement,
Parent shall notify the Company thereof by reference to this Section 7.13(b) and
such event shall be so described. Any such amendment or supplement shall be
filed as promptly as
49
practicable with the SEC and, as and to the extent required by law, disseminated
to the shareholders of the Company, and such amendment or supplement shall
comply in all material respects with all applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations thereunder.
Section 7.14 Company Industrial Revenue Bonds. The Company shall use its best
efforts to assist Parent in making arrangements pursuant to which the Company's
Industrial Revenue Bonds, all of which are set forth on Schedule 7.14 of the
Company Disclosure Schedule (the "Industrial Revenue Bonds") shall remain
outstanding after consummation of the transactions contemplated hereunder. The
Company shall cooperate with Parent, meet with the lenders of the funds provided
by the Industrial Revenue Bonds and allow Parent access to the Company's books
and records for the purpose of enabling Parent to make arrangements to keep the
Industrial Revenue Bonds in place.
Section 7.15 Subordinated Debt Settlement. The Company shall use its best
efforts to reach a settlement with the holders of the Subordinated Debt which
complies with the provisions of Section 8.3(d).
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Parties to effect the Merger shall be subject to
the following conditions:
(a) Shareholder Approval. The Company Shareholder Approval shall have been
obtained.
(b) Stock Exchange Listings. The shares of Parent Common Stock to be issued
in the Merger or upon exercise of the Warrants described in Section 3.1(b)(ii)
shall have been authorized for quotation on NASDAQ or such other national
exchange on which the Parent Common Stock may be quoted or listed as of the
Closing Date.
(c) Other Approvals. All notifications, consents, authorizations and
approvals required to be made with or obtained from any Governmental Entity
prior to the Effective Time (including without limitation, with respect to any
Company Permit (without giving effect to the word "material" in the definition
thereof)): (A) under applicable federal, state, local and foreign laws relating
to the operation of the business of the Company and its Subsidiaries; or (B) the
failure of which to make or obtain would have a Material Adverse Effect on the
Company or Parent, shall have been made or obtained for the transactions
contemplated by this Agreement (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approval"); provided that the foregoing clause shall apply to the obligations of
the Company to consummate the Merger only to the extent that the failure to make
or obtain such notification, consent, authorization or approval would make
consummation of the Merger an illegal act by the Company.
50
(d) Effectiveness of Registration Statement. The Registration Statement
shall have been filed and shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No injunction prohibiting the
consummation of the Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, materially restricts or
makes illegal consummation of the Merger, and no Governmental Entity shall have
instituted any proceeding or be threatening to institute any proceeding seeking
such an order, injunction or decree.
(f) Articles of Merger. The Articles of Merger shall have been filed with
and approved by the Department of State of the Commonwealth of Pennsylvania.
Section 8.2 Conditions to Obligations of the Company. The obligations of the
Company to effect the Merger are also subject to the satisfaction, or waiver by
the Company, at or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties
of the Parent and Merger Sub set forth in Article V of this Agreement that are
qualified as to materiality or Material Adverse Effect shall have been true and
correct as of the date of the Agreement or shall be true and correct on and as
of the Effective Time with the same force and effect as if made as of such date,
or (ii) any representation or warranty of the Parent and Merger Sub set forth in
the Agreement that is not so qualified shall have been true and correct in all
material respects as of the date of the Agreement or shall be true and correct
in all material respects on and as of the Effective Time with the same force and
effect as if made as of such date, except for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct as of such particular date) (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Schedule in accordance with Section 7.9 hereof made or purported to
have been made after the date of the Agreement shall be disregarded). The
Company shall have received certificates signed on behalf of the Parent and the
Merger Sub by a duly authorized officer to such effect.
(b) Performance of Obligations. Parent and Merger Sub shall have performed
in all material respects all obligations required to be performed by each of
them under this Agreement at or prior to the Closing Date, and the Company shall
have received certificates signed on behalf of Parent by an appropriate
executive officer to such effect.
Section 8.3 Conditions to Obligations of Parent. The obligations of Parent to
effect the Merger are also subject to the satisfaction, or waiver by Parent, at
or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties and Covenants. The representations and
warranties of the Company set forth in Article IV of this Agreement that are
qualified as to materiality or Material Adverse Effect shall have been true and
correct as of the date of the
51
Agreement or shall be true and correct on and as of the Effective Time with the
same force and effect as if made as of such date; or (b) any representation or
warranty of the Company set forth in the Agreement that is not so qualified
shall have been true and correct in all material respects as of the date of the
Agreement or shall be true and correct in all material respects on and as of the
Effective Time with the same force and effect as if made as of such date, except
for those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct as of
such particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Company Disclosure Schedule in accordance with Section 7.9 hereof made or
purported to have been made after the date of the Agreement shall be
disregarded), and the Parent and Merger Sub shall have received certificates
signed on behalf of the Company by a duly authorized officer to such effect; and
(ii) the covenants contained in Article VI hereof shall have been performed and
complied with, as the case may be and Parent and Merger Sub shall have received
a certificate to that effect signed on behalf of the Company by a duly
authorized officer.
(b) Performance of Obligations. The Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall have received
certificates signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(c) Restrictions on Transfer. Parent and the individuals set forth on
Exhibit F attached hereto shall have executed and delivered an agreement , in a
form substantially similar to the form set forth on Exhibit F whereby such
individuals agree not to transfer the Parent Common Stock issued in accordance
with the transactions contemplated by this Agreement, subject to customary
transfer exceptions, for the period of time set forth opposite their names on
Exhibit F.
(d) Subordinated Debt Settlement and Repayment. All of the Company's
Subordinated Debt, all of which is set forth on Schedule 4.16 of the Company
Disclosure Schedule shall be paid off at approximately 40% of the total current
principal amount outstanding (a total payment of $1,058,429 to be divided among
all subordinated debt holders as set forth on Schedule 4.16 of the Company
Disclosure Schedule) as full and final payment for all outstanding obligations
owed to them as of the Closing Date and Parent shall have received all
subordinated notes from each party, marked cancelled.
(e) Industrial Revenue Bonds. Parent shall have made arrangements to keep in
place the Industrial Revenue Bonds of the Company or, in the alternative, shall
have paid off the full principal and accrued interest owing thereon at Closing,
without prepayment penalty.
(f) Net Liabilities. The sum of (x) the Net Liabilities, plus (y) (i) the
amount of the principal and interest of the Company's Industrial Revenue Bonds
outstanding on the Closing Date, (ii) the cash paid at Closing to the Preferred
Shareholders and (iii) the amount necessary to payoff in full all amounts owing
in connection with the Senior Debt (as set forth in Section 8.3(h) below), the
Subordinated Debt and the JCIDA Debt, will not exceed eleven million six hundred
thousand dollars ($11,600,000). The "Net Liabilities" means the difference
between (x) the "Liabilities" (as defined below) and (y) the liquidation value
of the assets of the Company
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and its Subsidiaries (other than Stature). For purposes of this Section 8.3(f),
all references to the Company shall mean the Company prior to the merger
identified in the fourth whereas clause of this Agreement, so that neither the
assets, liabilities or obligations of Stature (other than, if any, Stature's
liabilities under the JCIDA Debt, the Subordinated Debt and the Senior Debt)
shall be included as, respectively, assets, liabilities or obligations of the
Company and its Subsidiaries. "Liabilities" means as of the Closing Date: (a)
the sum of (i) all incurred or accrued liabilities and obligations, both
recorded and unrecorded, of the Company and its Subsidiaries (other than
Stature) and shall include any remaining obligations pursuant to any office or
equipment leases and any obligations under any change of control, employee stay
bonus or severance agreements and any other obligations or liabilities that
arise in connection with the Merger transaction, and (ii) all of those incurred
or accrued liabilities and obligations, both recorded and unrecorded, of the
Parent and its Subsidiaries which arise in connection with the Merger
transaction and which would not have been incurred or accrued by Parent and its
Subsidiaries (other than Stature) if Parent had acquired the stock of Stature
instead of participating in the Merger (e.g., costs incurred or accrued in
connection with obtaining the D&O Insurance Policy and costs incurred in
connection with the bonuses awarded by the Company's Compensation Committee on
December 18, 2003), except that no liability or obligation identified under
clause (i) above shall constitute a liability or obligation under this clause
(ii); but (b) shall not include (i) legal fees and legal expenses incurred by
the Company in connection with this Agreement and the consummation of the
transactions contemplated hereby, (ii) any tax liability of the Company relating
to the repayment of the Subordinated Debt or JCIDA Debt as required hereby or
any tax liabilities of the Company, Parent or the Subsidiaries of either the
Company or Parent which are imposed or otherwise payable by reason of the
consummation of either the merger identified in the fourth whereas clause of
this Agreement or the Merger, or both, (iii) the following fees and expenses
incurred by the Parent - professional fees and expenses (including legal and
accounting), bank fees and expenses incurred in connection with the financing of
the Merger transaction, consultants' fees and expenses (including
environmental), and appraisal fees and expenses, and (iv) any liability in
regard of any non-competition agreement with Xxxxxxx Xxxxxx. All determinations
of liabilities and obligations shall be made in accordance with GAAP,
consistently applied.
Five days prior to the date scheduled as the Closing Date, the Company will
deliver to the Parent a statement of Net Liabilities (the "Statement of
Liabilities"). In the event that Parent disputes the inclusion or exclusion of
an item or the proper amount of an item in the Statement of Liabilities, Parent
shall, within five (5) days following delivery of the Statement of Liabilities,
give the Company written notice of the nature of such dispute, which notice
shall set forth in reasonable detail the specific objection ("Liability Notice
of Disagreement"). The Statement of Liabilities shall become final and binding
upon the Parties if the Company does not receive the Liability Notice of
Disagreement from the Parent prior to the expiration of such five (5) day
period. During such five (5) day period the Parent shall be given reasonable
access during normal business hours to relevant records of the Company relating
to, and the procedures carried out by the Company in connection with the
Company's preparation of the Statement of Liability. Parent and the Company
shall use good faith efforts to resolve, in writing, the disputed amounts
identified in the Liability Notice of Disagreement within five (5) days after
the Company's receipt thereof. If such dispute has not been resolved by the
parties within the five (5) day period, the disputed amounts, and the final
amount of the Net Liabilities shall be determined by the Independent Accountant.
For purposes of this Section 8.3(f), the Parties shall bear the costs of the
Independent Accountant equally.
53
(g) Non-Competition Agreement. Xxxxxx Xxxxxxxxxx, Xxxxxxx Xxxxx and Xxxxxx
Felt shall have each executed and delivered a Non-Competition Agreement with
Parent and its affiliates substantially in the form of Exhibit B attached
hereto.
(h) Repayment of Senior Debt. Parent shall have repaid all senior debt of
the Company under credit facilities, all of which are set forth on Schedule
8.3(h) of the Company Disclosure Schedule.
(i) Landlord Consents, Waivers and Estoppel Certificates. The landlord
consents and waivers, if necessary, and landlord estoppel certificates described
in Section 4.15(d) shall have been obtained.
(j) Sale of Texas Property. Prior to the Closing the Company shall have sold
its Texas property located at XX 0000 Xxxx, Xxxxxxx, Xxxxx 00000, on an as-is
basis, for a purchase price of not less than three hundred and eleven thousand
dollars ($311,000).
(k) JCIDA Debt Settlement and Repayment. All of the JCIDA Debt, all of which
is set forth on Schedule 4.16 of the Company Disclosure Schedule, shall be paid
off at approximately 60% of the total current principal amount outstanding as
full and final payment for all outstanding obligations owed to them as of the
Closing Date and Parent shall have received all subordinated notes from each
party, marked cancelled.
(l) Merger of Stature. Prior to the Closing Stature shall have been merged
with and into the Company.
(m) Revision of Executive Salary Continuation Agreement. The Company and
Xxxxxx Xxxxxx Xx. shall have amended the Owosso Corporation Executive Salary
Continuation Agreement, in a manner reasonably satisfactory to Parent, to revise
(i) the dates on which Xx. Xxxxxx is entitled to payments under such agreement
and (ii) the manner in which Xx. Xxxxxx is to receive fringe benefits.
(n) Release. The Company shall cause each of Xxxxxx Felt, Xxxxxx Xxxxxxxxxx,
Xxxxxx Xxxxxx, The Xxxx X. Xxxxxxxx, Xx. Trust, Xxxxxxx Xxxxx, Xxxx Xxxxx and
Xxxxxx Drop Enterprises (each, a "Releasing Person") to execute a release, in a
form reasonably satisfactory to Parent, whereby the Releasing Person irrevocably
releases and forever discharges the Parent and the Company and their respective
affiliates, subsidiaries, successors, assigns, participants, directors,
officers, employees, agents, consultants and attorneys (each, a "Released
Person") of and from all damages, losses, claims, demands, liabilities,
obligations, actions and causes of action whatsoever which such Releasing Person
or any of its affiliates may now have or claim to have against the Parent or the
Company or any other Released Person on account of or in any way related to the
Releasing Person's purchase or ownership of shares of the Company, the Merger
Agreement and the transactions contemplated otherwise evidenced thereby, whether
presently known or unknown and of every nature and extent whatsoever.
54
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual consent of Parent and the Company in a written instrument;
(b) by either Parent or the Company if any Governmental Entity that must
grant a Requisite Regulatory Approval has denied approval of the Merger and such
denial has become final and nonappealable or any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by Parent or the Company if the Effective Time shall not have occurred
on or before July 1, 2004 (the "Termination Date"), unless the failure of the
Effective Time to occur by such date shall be due to the failure of the Party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such Party set forth herein; provided, however, that if on such
date each of the conditions set forth in Article VIII other than those set forth
in Section 8.1(a) (Shareholder Approvals), Section 8.1(c) (Other Approvals) or
Section 8.1(e) (No Injunctions or Restraints; Illegality) has been fulfilled or
is capable of being fulfilled, then such date shall be automatically extended
for thirty (30) days
(d) (i) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if there shall have been a breach by Parent or Merger Sub of any of its
covenants or agreements or any of its representations or warranties set forth in
this Agreement, which breach, either individually or in the aggregate, would
constitute, if occurring or continuing on the Closing Date, the failure of the
conditions set forth in Section 8.2(a) (Representations and Warranties) or
8.2(b) (Performance of Obligations) of this Agreement, and which is not cured as
promptly as practicable and in any case within thirty (30) days following
written notice by the Company to Parent or by its nature or timing cannot be
cured prior to the Closing Date; or (ii) by Parent (provided that neither Parent
nor Merger Sub is then in material breach of any representation, warranty,
covenant or other agreement contained herein) if: (A) there shall have been a
breach by the Company of any of its covenants or agreements or any of its
representations or warranties set forth in this Agreement, which breach, in any
such case, either individually or in the aggregate, would constitute, if
occurring or continuing on the Closing Date, the failure of the conditions set
forth in Section 8.3(a) (Representations and Warranties) or 8.3(b) (Performance
of Obligations) of this Agreement; or (B) there shall have been a material
breach (including any transfer or other disposition of any Company Securities in
violation thereof) by any party to a Voting Agreement (other than Parent) of any
of its respective covenants or agreements or any of its respective
representations or warranties set forth in such Voting Agreement, and which, in
the case of either of clause (A) or (B), is not cured as promptly as practicable
and in any case within thirty (30) days following written notice by Parent to
the Company or by its nature or timing cannot be cured prior to the Closing
Date;
55
(e) by the Company if the Company has proposed to enter into an agreement
with respect to a Superior Proposal or has approved or recommended a Superior
Proposal in accordance with Section 7.3, provided that the Company has complied
with all of the provisions Section 7.3, including the notice provisions therein,
and that simultaneously with terminating this Agreement the Company makes all
payments required to be made to Parent pursuant to Section 9.2(b);
(f) by Parent, if the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn, or modified or amended in any respect
materially adverse to Parent, its approval or recommendation of this Agreement
or shall have resolved to do any of the foregoing, or shall have recommended
another Acquisition Proposal or if the Board of Directors of the Company shall
have resolved to accept a Superior Proposal or shall have failed to publicly
affirm its approval or recommendation of this Agreement within 10 days of
Parent's request made after any Acquisition Proposal shall have been disclosed
to the Company's shareholders generally; or
(g) by Parent or the Company, if the shareholders of the Company fail to
approve this Agreement upon a vote held at a duly held meeting of shareholders
called for such purpose (including any adjournment or postponement thereof), but
subject, in the case of termination by the Company, to its obligation to make
the payment required by Section 9.2(b), if applicable.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement by Parent or the Company
as provided in Section 9.1, this Agreement shall forthwith become void and have
no effect, and none of Parent, Merger Sub or the Company, any of their
respective Subsidiaries or any of the officers or directors of any of them shall
have any liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby, except that: (i) Sections 7.2(c), 10.2, 10.7,
10.8 and this Section 9.2 shall survive any termination of this Agreement; and
(ii) notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved or released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement or out of intentional
misconduct or fraud.
(b) The Company agrees to pay to Parent a fee equal to $500,000, by wire
transfer of immediately available funds, if:
(i) the Company terminates this Agreement pursuant to Section 9.1(e);
(ii) Parent terminates this Agreement pursuant to Section 9.1(f);
(iii) (A) the Company terminates this Agreement pursuant to Section 9.1(c)
at a time when Parent would have been permitted to terminate this Agreement
pursuant to Section 9.1(d)(ii) as a result of a willful or bad faith breach of
any material covenant or agreement contained in this Agreement; and (B) prior to
such termination, an Acquisition Proposal (other than pursuant to this
Agreement) shall have been disclosed publicly or to the Company in excess of the
aggregate Merger Consideration; or
56
(iv) this Agreement is terminated pursuant to Section 9.1(g); provided,
however, that the Company shall not be obligated to make the payment required by
this Section 9.2(b) if the officers of the Parent appointed by those
shareholders of the Company listed in Exhibit A hereto as such shareholders'
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of such shareholder, do not vote (or do not cause to be
voted) such shareholder's shares of Company Common Stock and Company Preferred
Stock at the Shareholders' Meeting in favor of the Merger, in each case as
contemplated by such shareholder's Voting Agreement.
Section 9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the Parties, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented at the Shareholder Meeting by the shareholders of the Company;
provided, however, that after adoption of this Agreement by the Company's
shareholders, no amendment shall be made which by law requires further approval
of the shareholders of the Company without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed by Parent and the Company.
Section 9.4 Extension; Waiver. At any time prior to the Effective Time, the
Parties, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed: (a) extend the time for the performance of
any of the obligations or other acts of the other Parties; (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto; and (c) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by the shareholders
of the Company, there may not be, without further approval of such shareholders,
any extension or waiver of this Agreement or any portion thereof which reduces
the amount or changes the form of the consideration to be delivered to the
holders of Company Securities hereunder, other than as contemplated by this
Agreement. Any agreement on the part of a Party to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Closing except for those covenants and agreements contained
herein which by their terms apply in whole or in part after the Closing.
Section 10.2 Expenses. Except as set forth in Section 9.2, all costs and
expenses (including without limitation professional fees and transfer taxes)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense; provided, however,
that the costs and expenses of printing and mailing the Proxy Statement/
Prospectus, and all filing and other fees paid to the SEC in connection with the
Merger, shall be borne equally by Parent and the Company.
57
Section 10.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given: (a) when received by
facsimile or similar device if subsequently confirmed by a writing sent within
twenty-four (24) hours after the giving of such notice; (b) upon receipt if
delivered personally; or (c) on the date of receipt, if sent by FedEx or other
national overnight delivery service; and in any case, addressed as follows:
(a) if to the Company, to:
Owosso Corporation
0000 Xxxxxxxxxxx Xxxxxxxxx., Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxx, Xx.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
Eighteenth and Arch Streets
Philadelphia, Pennsylvania 19103-2799
Attention: Xxxx X. Xxxxxxxx III, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
and
(b) if to Parent or Merger Sub, to:
Allied Motion Technologies, Inc.
00 Xxxxxxxxx Xxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxxxx Xxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
Xxxxxxx Xxxxxxxxxxx & Mugel, LLP
800 Fleet Bank Building
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
58
Section 10.4 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, table of definitions 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. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.5 Counterparts. This Agreement may be executed by facsimile and in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when 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.
Section 10.6 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) 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.
Section 10.7 Governing Law.
(a) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without regard to any applicable conflicts of law
principles.
(b) Each Party irrevocably submits to the jurisdiction of any state court of
the State of New York, or any federal court sitting in Erie County, New York in
any action arising out of or relating to this Agreement, and hereby irrevocably
agrees that all claims in respect of such action may be heard and determined in
such New York state or federal court. Each Party hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. The Parties further
agree, to the extent permitted by law, that final and unappealable judgment
against any of them in any action or proceeding contemplated above shall be
conclusive and may be enforced in any other jurisdiction within or outside the
United States by suit on the judgment, a certified copy of which shall be
conclusive evidence of the fact and amount of such judgment.
(c) To the extent that any Party has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each Party
hereby irrevocably waives such immunity in respect of its obligations with
respect to this Agreement.
(d) Each Party waives, to the fullest extent permitted by applicable laws,
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each Party certifies
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth above in this Section 10.7.
Section 10.8 Publicity; Announcements. The initial press release concerning the
Merger and the transactions contemplated hereby will be a joint release. Except
as otherwise required by applicable law or the rules of NASDAQ, none of the
Parties hereto shall, or shall permit any of its Subsidiaries to, issue or cause
the publication of any press release or other public
59
announcement with respect to, or otherwise make any public statement concerning,
the transactions contemplated by this Agreement without the consent of the other
Parties, which consent shall not be unreasonably withheld (provided that the
consent of Parent shall be deemed to be the consent of Merger Sub). Prior to the
Effective Time, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior consent of Parent (which shall not be
unreasonably withheld) issue or cause the publication of any press release or
other public announcement with respect to any material developments in the
business strategy of the Company and its Subsidiaries, except for any such press
release or public announcement required by applicable law or the rules of NASDAQ
(in which case the Company shall, to the extent practicable, consult with Parent
prior to making such release or announcement).
Section 10.9 Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations shall be assigned by any of the
Parties (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. Except as otherwise provided in
Section 7.10, this Agreement (including the documents and instruments referred
to herein) is not intended to confer upon any person other than the Parties any
rights or remedies hereunder.
Section 10.10 Specific 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 in
any material respect. 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. A Party
is entitled to seek injunctive relief to prevent any breach and to enforce terms
or provisions if such breach would serve as a basis of terminating this
Agreement by such Party. The rights provided by this section are in addition to
any other remedy to which the Parties are entitled at law or in equity including
an action seeking damages.
Section 10.11 Disclosure of Tax Treatment/Structure. Notwithstanding anything
herein to the contrary, at the earliest of the date of the first public
announcement of the discussions relating to the transactions contemplated
hereby, the date of the public announcement of the transactions contemplated
hereby or the date of the execution of this Agreement, each party to the
transactions (and each employee, representative, agent and advisor of each such
party) may disclose to any and all persons, without limitations of any kind, the
tax treatment and tax structure of the transactions and all materials of any
kind (including opinions and other tax analysis) that are provided to the party
relating to such tax treatment and tax structure; provided, however, that the
tax treatment and tax structure shall be kept confidential to the extent
necessary to comply with any applicable securities laws. In addition, no party
shall be subject to any restriction concerning its consulting with its tax
advisor regarding the tax treatment or tax structure of the transactions at any
time.
(Signature page follows)
729949.1
60
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
ALLIED MOTION TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO
OWOSSO CORPORATION
By: /s/ Xxxxxx Xxxxxx Xx.
--------------------
Name: Xxxxxx Xxxxxx Xx.
Title: President & CEO
AMOT, INC.
By: /s/Xxxxxxx X. Xxxxx
--------------------
Name: Xxxxxxx X. Xxxxx
Title: President
(Signature page to Agreement and Plan of Merger)
EXHIBIT A
The following individuals or entities shall sign Voting Agreements:
Xxxxxx Xxxxxx Xx.
The Xxxx X. Xxxxxxxx, Xx. Trust
Xxxxxx Xxxxxxxxxx
Xxxxxx Felt
Xxxxxxx Xxxxx
Xxxx Xxxxx
See Attached Form of Voting Agreement
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT (this "Agreement"), dated as of February 10, 2004, by and
between Allied Motion Technologies, Inc., a Colorado corporation ("Parent"),
and ___________________________ ("Shareholder").
WHEREAS, concurrently herewith, Parent, AMOT, Inc., a Pennsylvania
corporation and wholly owned subsidiary of Parent ("Merger Sub") and Owosso
Corporation, a Pennsylvania corporation (the "Company"), are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
pursuant to which each share of Company Common Stock and Company Preferred Stock
will cease to be existing and outstanding and shall be automatically converted
into the right to receive the Common Merger Consideration or the Preferred
Merger Consideration, as applicable, and the Merger Sub will be merged with the
Company, with the Merger Sub being the surviving entity. Capitalized terms used
but not defined herein shall have the meanings set forth in the Merger
Agreement.
WHEREAS, as of the date hereof, Shareholder [beneficially] owns [directly]
______ shares of Company Common Stock and _______ shares of Company Preferred
Stock (the "Shares") (for purposes of this Agreement the "Shares" shall also
include any shares of the Company acquired by Shareholder after the date of this
Agreement but prior to the Effective Time, whether upon the exercise of options,
conversion of convertible securities or otherwise); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and the Merger Sub have required that Shareholder agree, and
Shareholder hereby agrees, to take the actions set forth herein;
WHEREAS, the Shareholder has agreed to enter into this Agreement strictly in
his capacity as owner of the Shares and not in any other capacity, including,
without limitation, as a director or officer of the Company.
NOW, THEREFORE, to induce Parent and Merger Sub to enter into the Merger
Agreement, and in consideration of the premises and for other good and valuable
consideration given to each party hereto, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Agreement to Vote.
1.1 Voting. Shareholder hereby agrees that during the period commencing on
the date hereof and continuing until this Agreement terminates pursuant to
Section 2 hereof, at any meeting of the Shareholders, however called,
Shareholder shall: (a) vote the Shares in favor of the Merger; (b) vote the
Shares against any action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement; and (c) vote the Shares against any action
or
agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger, including, but not limited to: (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries; (ii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or a reorganization, recapitalization or liquidation of the Company
and its subsidiaries; (iii) any change in the management or board of directors
of the Company, except as otherwise agreed to in writing by the Parent and the
Merger Sub; (iv) any material change in the present capitalization or dividend
policy of the Company; or (v) any other material change in the Company's
corporate structure or business or (vi) any other action which is intended, or
could be reasonably expected, to impede, interfere with, delay, postpone or
adversely effect the merger and the transactions contemplated by this Agreement
and the Merger Agreement. In the event that any corporate action consistent with
this Agreement is taken by the shareholders of the company by written consent
(including any action to approve the Merger Agreement and the transactions
contemplated thereby), each Shareholder hereby waives any right to receive
notice of the taking of such corporate action without a meeting pursuant to
Section 1766 of the PBCL or otherwise.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) During the period commencing on the date hereof and continuing until
this Agreement terminates pursuant to Section 2 hereof, Shareholder hereby
irrevocably grants to, and appoints, Xxxxxxx Xxxxx and Xxxxxxx Xxxxxxx, or
either of them, in their respective capacities as officers of Parent, and any
individual who shall hereafter succeed to any such office of Parent, and each of
them individually, Shareholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Shareholder, to vote (or
cause to be voted) the Shares at any meeting of the Shareholders, however
called: (a) in favor of the Merger; (b) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement; and (c)
against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing by the Parent
and the Merger Sub; (iv) any material change in the present capitalization or
dividend policy of the Company; or (v) any other material change in the
Company's corporate structure or business or (vi) any other action which is
intended, or could be reasonably expected, to impede, interfere with, delay,
postpone or adversely effect the merger and the transactions contemplated by
this Agreement and the Merger Agreement.
(ii) Shareholder represents that any proxies heretofore given in respect of
the Shares are not irrevocable, and that any such proxies are hereby revoked.
2
(iii) Shareholder hereby affirms that the proxy set forth in this Section
1.2 is coupled with an interest and is irrevocable until such time as this
Agreement terminates in accordance with its terms. Shareholder understands and
acknowledges that Parent is entering into the Merger Agreement in reliance upon
Shareholder's execution and delivery of this Agreement. Shareholder hereby
affirms that the irrevocable proxy set forth in this Section 1.2 is given in
connection with the execution of the Merger Agreement, and that such irrevocable
proxy is given to secure the performance of the duties of Shareholder under this
Agreement. Shareholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Shareholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable.
(iv) The vote of the proxyholder shall control in any conflict between the
vote by the proxyholder of such Shareholder's Shares and a vote by such
Shareholder of such Shareholder's Shares.
1.3 No Inconsistent Arrangements. Shareholder hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, he
shall not: (i) except to Parent or the Merger Sub, transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Shares or any interest therein;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of the Shares or any interest therein;
(iii) grant any proxy, power-of-attorney or other authorization, other than
pursuant to Section 1.2 of this Agreement, in or with respect to the Shares;
(iv) deposit any Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Shares; or (v) take any other action that would
in any way restrict, limit or interfere with the performance of his obligations
hereunder or the transactions contemplated hereby or by the Merger Agreement or
which would make any representation or warranty of Shareholder hereunder untrue
or incorrect. Notwithstanding the foregoing, nothing herein shall prevent or
prohibit: (i) bona fide gifts by the Shareholder; (ii) transfers by the
Shareholder to his or her family members; or (iii) transfers by the Shareholder
to its affiliates (as that term is defined in the Securities Act of 1933, as
amended), provided that in the case of each of (i), (ii) and (iii), the
transferee agrees in writing to the terms of this Agreement.
1.4 No Solicitation. Except as provided below, Shareholder hereby agrees
that he shall not, and shall not permit or authorize any of his affiliates,
representatives or agents to, directly or indirectly, encourage, solicit,
explore, participate in or initiate discussions or negotiations with, or provide
or disclose any information to, any corporation, partnership, person or other
entity or group (other than Parent, the Merger Sub or any of their affiliates or
representatives) concerning any Acquisition Transaction or Acquisition Proposal
or enter into any agreement, arrangement or understanding requiring the Company
to abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement. Shareholder will immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any acquisition transaction with a party other than
Parent or Merger Sub. From and after the execution of this Agreement,
Shareholder shall immediately advise Parent in writing of the receipt, directly
or indirectly, of any inquiries, discussions, negotiations or proposals relating
to an acquisition transaction with a party other than Parent or Merger Sub,
identify the offeror and furnish to Parent a copy of any such proposal or
inquiry, if it is in writing, or a written summary of any oral proposal or
inquiry relating to an acquisition transaction with a party other
3
than Parent or Merger Sub. Shareholder shall promptly advise Parent in writing
of any development relating to such proposal, including the results of any
discussions or negotiations with respect thereto. Any action taken by the
Company or any member of the Board of Directors of the Company including, if
applicable, Shareholder and any representative of Shareholder acting in
accordance with the proviso to Section 7.3(b) of the Merger Agreement shall be
deemed not to violate this Section 1.4.
1.5 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, Shareholder hereby agrees to use all reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Shareholder shall promptly consult with Parent and
provide Parent any necessary information and material with respect to all
filings made by Shareholder with any entity in connection with this Agreement
and the Merger Agreement and the transactions contemplated hereby and thereby.
1.6 Waiver of Appraisal Rights. Shareholder hereby irrevocably waives any
rights of appraisal of the fair value of such Shareholder's Shares, rights to
dissent from the Merger or other similar rights that such Shareholder may have
pursuant to the PBCL or otherwise.
2. Expiration. This Agreement and the parties' obligations hereunder shall
terminate on the earliest of: (i) the Effective Time; or (ii) the 90th
day after the termination of the Merger Agreement, provided, however,
that this Agreement shall be terminated immediately in the event that
the Merger Agreement is terminated pursuant to the clause (i) of
Section 9.1(d) or Section 9.1(e) thereof.
3. Representation and Warranties. Shareholder hereby represents and
warrants to Parent as follows:
(a) Title. Shareholder has good and valid title to the Shares, free and
clear of any lien, pledge, charge, encumbrance or claim of whatever
nature.
(b) Ownership of Shares. The Shares are owned of record and, except as set
forth on Schedule 3(b) attached hereto, beneficially by Shareholder
and, on the date hereof, the Shares constitute all of the Shares owned
of record or beneficially by Shareholder. Shareholder has sole voting
power and sole power of disposition with respect to all of the Shares,
with no restrictions, subject to applicable federal securities laws, on
Shareholder's rights of disposition pertaining thereto.
(c) Power; Binding Agreement. Shareholder has the legal capacity, power and
authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Shareholder will not violate any other agreement to which Shareholder
is a party including, without limitation, any voting agreement,
shareholders agreement or voting trust. This Agreement has been duly
and validly executed and delivered by Shareholder and constitutes a
valid and binding agreement of Shareholder, enforceable against
Shareholder in accordance with its terms, subject to
4
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
(d) No Conflicts. Other than in connection with or in compliance with the
provisions of the Exchange Act, no authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by Shareholder of the transactions contemplated by this Agreement.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not constitute a breach, violation
or default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, encumbrance, pledge, charge or
claim upon any of the Shares of Shareholder under, any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument to which
Shareholder is a party or by which his properties or assets are bound.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Shareholder in his
capacity as a shareholder of the Company.
4. Further Assurances. From time to time, at the Parent's request and
without further consideration, Shareholder shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
5. Miscellaneous.
5.1 Capacity of Shareholder. Each of Parent and Shareholder recognizes and
acknowledges that nothing in this Agreement shall limit or restrict the
Shareholder from acting in such Shareholder's capacity as an officer or director
of the Company, to the extent applicable, it being understood that this
Agreement shall apply to the Shareholder solely in his capacity as a Shareholder
of the Company.
5.2 Survival. The representations and warranties made herein shall terminate
upon Shareholder's sale of the Shares to the Merger Sub pursuant to the Merger
Agreement.
5.3 Entire Agreement; Assignment. This Agreement: (i) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof; and (ii) shall
not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations, and
Shareholder may assign this Agreement in accordance with the last sentence of
Section 1.3 of this Agreement.
5
5.4 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
5.5 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given by hand delivery, telecopier,
any courier guaranteeing overnight delivery or first class registered or
certified mail, return receipt requested, postage pre- paid, addressed as
follows (or at such other address as may hereafter be designated in writing in
accordance with the provisions of this Section):
If to Shareholder:
Facsimile:
Telephone:
If to Parent:
Allied Motion Technologies, Inc.
00 Xxxxxxxxx Xxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
copy to:
Xxxxxxx Xxxxxxxxxxx & Mugel, LLP
800 Fleet Bank Building
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
All such notices and communications (and deliveries) shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
receipt is acknowledged, if telecopied; on the next business day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage pre-paid.
5.6 Governing Law.
(a) This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to any applicable
conflicts of laws principles.
6
(b) Each party to this Agreement irrevocably submits to the jurisdiction of
any Pennsylvania state court or any federal court sitting in Philadelphia,
Pennsylvania and any action arising out of or relating to this Agreement and
hereby irrevocably agrees that all claims in respect of such action may be heard
and determined in such Pennsylvania state or federal court. Each party hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to maintenance of such action or proceeding. The
parties further agree, to the extent permitted by law, that filing an
unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment.
(c) To the extent that any party has or hereafter may apply any immunity
from jurisdiction from any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each party
irrevocably waives such immunity in respect of its obligation with respect to
this Agreement.
(d) Each party waives, to the fullest extent permitted by applicable laws,
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each party certifies
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth above in this Section 5.5.
5.7 Specific Performance. Each of Parent and Shareholder recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other to sustain damages for which it would not
have an adequate remedy at law, and therefore each of Parent and Shareholder
agrees that in the event of any such breach the other shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
5.8 Counterparts. This Agreement may be executed by facsimile and in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
5.9 Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
5.10 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any
7
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(Signature page follows)
8
IN WITNESS WHEREOF, Parent and Shareholder have caused this Agreement to be
duly executed as of the day and year first above written.
ALLIED MOTION TECHNOLOGIES, INC.
________________________________
By:
Name:
Title:
SHAREHOLDER
________________________________
By:
(Signature page to Voting Agreement)
9
EXHIBIT B
The following individuals shall sign Non-Compete Agreements:
Xxxxxx Xxxxxxxxxx
Xxxxxx Felt
Xxxxxxx Xxxxx
See Attached Form of Non-Competition Agreement
NON-COMPETITION AGREEMENT
THIS AGREEMENT dated as of the ______ day of _______________, 2004, is by
and between [each of Xxxxxx Xxxxxxxxxx, Xxxxxxx Xxxxx and Xxxxxx Felt will
execute such Agreements], an individual with a residence located at [insert
address] ("Shareholder") and ALLIED MOTION TECHNOLOGIES, INC., a Colorado
corporation with offices at 00 Xxxxxxxxx Xxx Xxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000, and its affiliates ("Buyer").
RECITALS:
A. Owosso Corporation ("Owosso"), Buyer and AMOT, Inc., a Pennsylvania
corporation ("Merger Sub") have entered into an Agreement and Plan of Merger
dated _________, 2004 pursuant to which Merger Sub will be merged with Owosso
and the Shareholder will receive the consideration set forth in the Merger
Agreement (the "Merger Agreement");
B. Shareholder is the _______________ of Owosso; and
C. Shareholder is receiving a substantial personal benefit from the merger
of the Merger Sub with Owosso (the "Merger") pursuant to the Merger Agreement,
and to realize that benefit and induce Buyer to enter into the Merger Agreement
Shareholder has agreed to execute and deliver this Agreement.
TERMS OF AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and valid
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1 Defined Terms. Any capitalized term used but not defined herein
shall have the meaning given thereto under the Merger Agreement.
Section 2 Non-Competition.
(a) The parties recognize that the value of the business of Owosso and
Stature Electric Inc., Owosso's wholly-owned subsidiary "Stature" and, together
with Owosso, the "Company") is dependent upon the particular method in which the
Company has conducted the business of the Company and the contacts of the
Company with customers of the Company, and that Buyer is entering into the
transactions contemplated under the Merger Agreement with a view toward
realizing that value. Shareholder is specifically familiar with the particular
method in which Stature has conducted its business and the contacts of Stature
with its customers. In consideration of Buyer entering into the Merger
Agreement, Shareholder agrees that, for a period of five years following the
Closing Date, he shall not directly or indirectly engage or have any interest,
financial or otherwise, or accept employment from or serve in any capacity (such
as owner, investor, principal, agent, consultant, partner or otherwise) with any
person or entity which is engaged in a business of a type and nature of the
business in which Stature was engaged on the Closing Date or at any time prior
thereto ("Competition"); and agrees that during that five-year period he shall
not solicit customers who were customers of Stature on the Closing Date or
during the five year period prior thereto; provided, however, that Shareholder
may, without violating this Section 2, own, as a passive investment, shares of
capital stock of a publicly-held corporation that engages in Competition if: (i)
such shares are actively traded on an established national securities market in
the United States; (ii) the number of shares of such corporation's capital stock
that are owned beneficially (directly or indirectly) by Shareholder represent
less than two percent of the total number of shares of such corporation's
capital stock outstanding;
and (iii) Shareholder is not otherwise associated directly or indirectly with
such corporation or with any affiliate of such corporation.
(b) Shareholder acknowledges that his failure to comply with the
provisions of this Section 2 shall cause irreparable harm to Buyer and that
money damages alone would be insufficient to compensate Buyer. Shareholder
therefore agrees that any court having jurisdiction may enter a preliminary or
permanent restraining order or injunction against Shareholder (without the
posting of a bond) in the event of an actual or threatened breach of any of the
provisions of this Section. Any such relief shall not preclude Buyer from
seeking any other relief at law or equity with respect to any such claim.
(c) If any provision of this Section is deemed to be in violation of any
law or public policy, the remainder of this Section shall remain in full force
and effect and shall continue to be binding upon Shareholder. If any term of
this Section is deemed by any court to be unenforceable, the parties agree that
the court shall substitute a reasonable, judicially enforceable limitation in
place of the invalid provision in order to serve the intent of the parties as
expressed herein.
Section 3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telecopier, any courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage pre- paid,
addressed as follows (or at such other address as may hereafter be designated in
writing in accordance with the provisions of this Section):
If to Shareholder:
[insert name]
[insert address]
Telephone: [insert]
Facsimile: [insert]
with a copy to:
[insert name of Shareholder's counsel]
[insert address]
Telephone: [insert]
Facsimile: [insert]
If to Buyer:
Allied Motion Technologies, Inc.
00 Xxxxxxxxx Xxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
ATTENTION: Xxxxxxx Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxxxx Xxxxxxxxxxx & Mugel, LLP
000 Xxxxx Xxxx Xxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
ATTENTION: Xxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
All such notices and communications (and deliveries) shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
receipt is acknowledged, if telecopied; on the next business day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage pre-paid.
Section 4 Binding Effect; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 5 Entire Agreement. This instrument contains the entire agreement
between the parties and supersedes all prior agreements and understandings, oral
or written, with respect to the transactions contemplated herein. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the party to be charged therewith.
Section 6 Governing Law.
(a) This Agreement shall be governed and construed in accordance with
the laws of the State of New York, without regard to any applicable conflicts of
laws principles.
(b) Each party to this Agreement irrevocably submits to the jurisdiction
of any New York state court or any federal court sitting in Buffalo, New York in
any action arising out of or relating to this Agreement and hereby irrevocably
agrees that all claims in respect of such action may be heard and determined in
such New York state or federal court. Each party hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to maintenance of such action or proceeding. The parties further agree, to
the extent permitted by law, that filing an unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment.
(c) To the extend that any party has or hereafter may apply any immunity
from jurisdiction from any court or from any legal process (whether through
service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, each party irrevocably waives
such immunity in respect of its obligation with respect to this Agreement.
(d) Each party waives, to the fullest extent permitted by applicable
laws, any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each party certifies
that such party has been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications set forth above in this Section 6.
Section 7 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. Any waiver
must be in writing and signed by the party entitled to performance.
Section 8 Counterparts. This Agreement may be executed in counterparts
and by facsimile and will be effective when at least one counterpart has been
executed by each party hereto. This Agreement may be executed in duplicate
originals, each of which shall be deemed to be an original instrument. All such
counterparts and duplicate originals together shall constitute but one
agreement.
Section 9 Attorneys' Fees. Buyer shall be entitled to recover from
Shareholder any costs and expenses (including reasonable attorneys' fees)
incurred by Buyer in connection with the enforcement of its rights arising under
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first specified above.
----------------------------------
[insert Shareholder's name]
ALLIED MOTION TECHNOLOGIES, INC.
----------------------------------
By: [insert name] as its [insert title]
EXHIBIT C
See Attached Form of Warrant
THE SECURITIES ISSUABLE ON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS COMMON STOCK PURCHASE WARRANT.
COMMON STOCK PURCHASE WARRANT
No. ____ _______, 2004
Void after 5:00 P.M. Buffalo time on ________, 0000 Xxxxxxx to Purchase ______
Warrant Shares
ALLIED MOTION TECHNOLOGIES, INC., a Colorado corporation (the "Company"), for
value received, hereby certifies that ______________________, or registered
assigns (the "Holder"), is entitled to purchase from the Company _______ duly
authorized, validly issued, fully paid and nonassessable shares (the "Warrant
Shares") of common stock, no par value per share, of the Company (the "Common
Stock"), at a purchase price, subject to adjustment as provided in Section 3.2
herein, of $______ per share (the "Purchase Price"), at any time or from time to
time on or after the First Exercise Date (as defined in Section 3.1 below) prior
to 5:00 P.M., Buffalo, New York time, on ________, 2011 (the "Expiration Date"),
all subject to the terms, conditions and adjustments set forth below in this
Warrant.
This Warrant is originally issued pursuant to the terms of a certain Agreement
and Plan of Merger, dated as of __________, 2004, by and among the Company,
Owosso Corporation and AMOT, Inc. (the "Merger Agreement"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Merger Agreement.
1. Definitions. As used herein, unless the context otherwise requires, the
following terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in the State of Colorado
are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
"Commission" shall mean the United States Securities and Exchange
Commission or any successor agency having jurisdiction to enforce the
Securities Act.
"Common Stock" shall have the meaning assigned to it in the introduction
to this Warrant, such term to include any class or series of capital
stock into which Common Stock shall have been changed or any class or
series of capital stock resulting from any reclassification of Common
Stock.
"Company" shall have the meaning assigned to it in the introduction to
this Warrant, such term to include any corporation or other entity which
shall succeed to or assume the obligations of the Company hereunder in
compliance with Section 4.
"Current Market Price" shall mean, on any date, the average of the daily
closing prices on the principal exchange or quotation system on which
shares of Common Stock are formulated or quoted, as the case may be, for
the five consecutive Trading Days preceding such date specified herein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or
any successor statute.
"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein: (i) in the case
of cash, the dollar amount thereof; (ii) in the case of a security, the
Current Market Price; and (iii) in all other cases, the fair value
thereof (as of a date which is within 20 days of the date as of which
the determination is to be made) determined in good faith jointly by the
Company and the Holder; provided, however, that if such parties are
unable to reach agreement within a reasonable period of time, the Fair
Value shall be determined in good faith, by an independent investment
banking firm selected jointly by the Company and the Holder or, if that
selection cannot be made within ten days, by an independent investment
banking firm selected by the American Arbitration Association in
accordance with its rules, and provided further, that the Company and
the Holder shall each pay one-half of all of the fees and expenses of
any third parties incurred in connection with determining the Fair
Value.
"Holder" shall have the meaning assigned to it in the introduction to
this Warrant.
"Merger Agreement" shall have the meaning assigned to it in the
introduction to this Warrant.
"Net Value" shall mean the excess of the Current Market Value (as
measured on the date of the exercise of the Exercised Shares) over the
Purchase Price.
"Other Securities" shall mean any shares of capital stock (other than
shares of Common Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the Holder at any time shall be
entitled to receive, or shall have received, upon the exercise of this
Warrant, in lieu of or in addition to Warrant Shares, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Warrant Shares or Other Securities pursuant to Section 4
or otherwise.
"Person" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision
thereof, and shall include any successor (by merger or otherwise) of
such entity.
"Restricted Securities" shall mean: (i) any Warrant Shares (or Other
Securities) issued or issuable upon the exercise of this Warrant which
are (or, upon issuance, will be) evidenced by a certificate or
certificates bearing the applicable legend set forth in Section 8; and
(ii) any Warrant Shares (or Other Securities) issued subsequent to the
exercise of this Warrant as a distribution with respect to, or resulting
from a subdivision of the outstanding Warrant Shares
2
(or Other Securities) into a greater number of shares by
reclassification, share splits or otherwise, or in exchange for or in
replacement of the Warrant Shares (or Other Securities) issued upon such
exercise, which are evidenced by a certificate or certificates bearing
the applicable legend set forth in Section 8.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder, or any successor
statute.
"Trading Day" shall mean a day on which shares of Common Stock are
traded on principal exchange or quotation system used to determine the
Current Market Price.
"Warrant" shall mean this Warrant and any Warrants delivered in
substitution or exchange herefor as provided herein.
"Warrant Shares" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any shares of capital
stock into which such Warrant Shares shall have been changed or any
shares of capital stock resulting from any reclassification of such
Warrant Shares.
2. Exercise of Warrant.
2.1 Manner of Exercise; Payment of the Purchase Price,
(a) This Warrant may be exercised by the Holder, in whole or in part, at any
time or from time to time after _________, 2005 [TO BE INSERTED - FIRST
ANNIVERSARY OF THE CLOSING DATE UNDER THE MERGER AGREEMENT] (the first date that
holder shall be entitled to exercise hereunder is referred to as the "First
Exercise Date") but prior to the Expiration Date, by surrendering to the Company
at its principal office this Warrant, with the form of Election to Purchase
Shares attached hereto as Exhibit A (or a reasonable facsimile thereof)
completed and duly executed by the Holder and accompanied by payment of the
Purchase Price for the number of Warrant Shares specified in such form (the
"Exercised Shares").
(b) Payment of the Purchase Price may be made as follows: (i) in United
States currency by cash or delivery of a certified check or bank draft payable
to the order of the Company or by wire transfer to the Company; (ii) by
instructing the Company to reduce the number of Warrant Shares eligible to be
purchased pursuant to this Warrant by that number (rounded up, if a fractional
number, to the nearest whole number) of Warrant Shares having a Net Value equal
to the Purchase Price of the Exercised Shares; (iii) by surrender to the Company
for cancellation certificates representing shares of Common Stock owned by the
Holder (properly endorsed for transfer in blank) having an aggregate Current
Market Price on the date of Warrant exercise equal to the Purchase Price; or
(iv) any combination of the foregoing.
2.2 When Exercise Effective. Each exercise of this Warrant shall be deemed
to have been effected immediately prior to the close of business on the Business
Day on which this Warrant shall have been surrendered to, and the Purchase Price
shall have been received by, the Company as provided in Section 2.1, and at such
time the Person or Persons in whose name or names any certificate or
certificates for Warrant Shares (or Other Securities) shall be issuable upon
such exercise as provided in Section 2.3 shall be deemed to have become the
holder or holders of record thereof for all purposes.
3
2.3 Delivery of Share Certificates, Etc.; Charges, Taxes and Expenses.
(a) As soon as practicable after each exercise of this Warrant, in whole or
in part, and in any event within three Trading Days thereafter, the Company
shall cause to be issued in the name of and delivered to the Holder hereof or,
subject to Section 8, as the Holder may direct,
(i) a certificate or certificates for the number of Warrant Shares (or
Other Securities) to which the Holder shall be entitled upon such exercise plus,
in lieu of issuance of any fractional share to which the Holder would otherwise
be entitled, if any, a check for the amount of cash equal to the same fraction
multiplied by the Current Market Price per share on the date of Warrant
exercise, and
(ii) in case such exercise is for less than all of the Warrant Shares
purchasable under this Warrant, a new Warrant or Warrants of like tenor, for the
balance of the Warrant Shares purchasable hereunder.
(b) An issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the Holder hereof for any issue or
transfer tax or other incidental expense, in respect of the issuance of such
certificates, all of which such taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issue or delivery of
Warrant Shares or Other Securities or property in a name other than that of the
Holder hereof, and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Company the amount of
any such tax or established, to the reasonable satisfaction of the Company, that
such tax has been paid.
3. Adjustment of Warrant Shares Issuable Upon Exercise.
3.1 Adjustment of Number of Shares. Upon each adjustment of the Purchase
Price as a result of the calculations made in this Section 3, this Warrant shall
thereafter evidence the right to receive, at the adjusted Purchase Price, that
number of Warrant Shares (calculated to the nearest one-tenth) obtained by
dividing: (a) the product of the aggregate number of Warrant Shares not issued
hereunder immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (b) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2 Adjustment of Purchase Price. If the Company shall distribute to all
holders of Common Stock any shares of capital stock of the Company (other than
shares of Common Stock), evidence of its indebtedness or assets (excluding
regularly scheduled cash dividends payable out of legally available funds) or
options or convertible securities to subscribe for or purchase any of its
securities (other than Common Stock), then, in each such case, subject to
Section 3.5, the Purchase Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Purchase Price by a fraction:
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(i) the numerator of which shall be the Current Market Price in effect on
such record date or, if the shares of Common Stock trade on an ex- distribution
basis, on the date prior to the commencement of ex-distribution trading, less
the Fair Value of such distribution received by the holder of one share of
Common Stock, and
(ii) the denominator of which shall be such Current Market Price.
As so adjusted or readjusted, the Purchase Price shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 3.
3.3 Treatment of Share Distributions, Share Splits, Etc. If the Company
shall: (a) pay a dividend or make a distribution with respect to its capital
stock in shares of Common Stock; (b) subdivide the outstanding shares of Common
Stock into a greater number of shares; or (c) issue any shares of capital stock
by reclassification of its shares of Common Stock, the Purchase Price in effect
at the opening of business on the day next following the date fixed for the
determination of shareholders entitled to receive such dividend or distribution
or at the opening of business on the day following the day on which such
subdivision, combination or reclassification becomes effective, as the case may
be, shall be adjusted so that the holder of this Warrant shall be entitled to
receive the number of Warrant Shares that such holder would have owned or have
been entitled to receive after the happening of any of the events described
above had any unexercised portion of the Warrant been exercised in full
immediately prior to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this Section 3.3 shall become
effective immediately after the opening of business on the day next following
the record date in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
3.4 Adjustments for Combinations, Etc. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased and the number of Warrant Shares issuable upon
exercise of this Warrant shall be proportionately decreased.
3.5 De Minimis Adjustments. No adjustment to the Purchase Price shall be
required unless such adjustment would require a cumulative increase or decrease
of at least 1% thereof; provided, however, that any adjustments that by reason
of this Section 3.5 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made. All calculations
under this Section 3 shall be made to the nearest cent (with $.005 or more being
rounded upward) or to the nearest one-tenth of a share (with .05 or more of a
share being rounded upward), as the case may be.
3.6 Abandoned Distribution. If the Company shall take a record of the
holders of its Warrant Shares for the purpose of entitling them to receive a
distribution (which results in an adjustment to the Purchase Price under the
terms of this Warrant) and shall, thereafter, and before such distribution is
paid or delivered to shareholders entitled thereto, abandon its plan to pay or
deliver such distribution, then any adjustment made to the Purchase Price and
number of Warrant Shares purchasable upon exercise of this Warrant by reason of
the taking of such record shall be reversed, and any subsequent adjustments,
based thereon, shall be recomputed.
5
4. Consolidation, Merger, Etc.
4.1 Adjustments upon Certain Transactions. If the Company shall be a party
to any transaction (including, without limitation, a merger, consolidation,
statutory share exchange, self tender offer for all or substantially all of the
shares of Common Stock, sale of all or substantially all of the Company's assets
or recapitalization of the Common Stock), in each case as a result of which
shares of Common Stock shall be converted into the right to receive shares,
stock, securities or other property (including cash or any combination thereof)
(each of the foregoing being referred to herein as a "Transaction"), then, and
in the case of each such Transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such Transaction, shall be entitled to receive (at the aggregate
Purchase Price in effect at the time of such consummation for all Warrant Shares
or Other Securities issuable upon such exercise immediately prior to such
consummation), in lieu of the Warrant Shares or Other Securities issuable upon
such exercise prior to such consummation, the kind and amount of shares, stock,
securities and other property (including cash or any combination thereof) to
which such Holder would actually have been entitled as a shareholder upon the
consummation of such Transaction if such Holder had exercised this Warrant in
full immediately prior thereto, assuming such Holder: (a) is not a person with
which the Company consolidated or into which the Company merged or which merged
into the Company or to which such sale or transfer was made, as the case may be
(a "Constituent Person"), or an affiliate of a Constituent Person; and (b)
failed to exercise his or her appraisal rights or rights of election, if any, as
to the kind or amount of shares, stock, securities and other property (including
cash) receivable in such Transaction (provided that if the kind or amount of
stock, securities and other property (including cash) receivable upon such
Transaction is not the same for each shares of Common Stock held immediately
prior to such Transaction by other than a Constituent Person or an affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("Non- electing Share"), then for the purpose of this Section 4.1 the
kind and amount of stock, securities and other property (including cash)
receivable upon such Transaction by each Non-electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
Non-electing Shares). The Company shall not be a party to any Transaction unless
the terms of such Transaction are consistent with the provisions of this Section
4.1, and it shall not consent or agree to the occurrence of any Transaction
until the Company has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the Holder of this Warrant that
will contain provisions enabling such Holder to receive the securities, cash or
other property to which such Holder would actually have been entitled as a
shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 and 4. The provisions of this Section 4.1 shall similarly apply to
successive Transactions.
4.2 Assumption of Obligations. Notwithstanding anything contained in this
Warrant or in the Merger Agreement to the contrary, the Company shall not effect
any Transaction unless, prior to the consummation thereof, each Person (other
than the Company) which may be required to deliver any stock, securities, cash
or property upon the exercise of this Warrant as provided herein shall assume,
by written instrument delivered to, and reasonably satisfactory to,
6
the Holder of this Warrant: (a) the obligations of the Company under this
Warrant (and if the Company shall survive the consummation of such transaction,
such assumption shall be in addition to, and shall not release the Company from,
any continuing obligations of the Company under this Warrant); and (b) the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 4, the
Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to
authorize the Company to enter into any transaction not otherwise permitted by
the Merger Agreement.
5. Company Action. The Company: (a) shall not permit the par value of the
Warrant Shares receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise; (b) shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
exercise of this Warrant, the full number of Warrant Shares deliverable upon the
full exercise of this Warrant; and (c) shall take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of capital stock, free from all taxes,
liens, security interests, encumbrances, preemptive rights and charges on the
exercise of this Warrant from time to time outstanding.
6. Notice of Adjustments. In each case of any adjustment or readjustment in
the Warrant Shares (or Other Securities) issuable upon the exercise of this
Warrant, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a notice
of such adjustment or readjustment setting forth such adjustment or readjustment
and the effective date of such adjustment or readjustment and shall mail such
notice of such adjustment or readjustment to each holder of a Warrant at such
holder's address as it appears in the Warrant Register (as defined below in
Section 10.1).
7. Notices of Company Action. If:
(a) the Company shall declare a distribution on shares of Common Stock
(other than regularly scheduled cash dividends payable out of legally available
funds); or
(b) the Company shall authorize the granting to all holders of Common Stock
of rights or warrants to subscribe for or purchase any shares of any class of
capital stock; or
(c) there shall be any reclassification of the Common Stock or any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or a statutory share exchange,
or self tender offer by the Company for all or substantially all of its
outstanding Common Stock or the sale or transfer of all or substantially all of
the assets of the Company as an entity; or
(d) there shall occur the involuntary or voluntary liquidation, dissolution
or winding up of the Company;
then the Company shall cause to be mailed to the holder of this Warrant, at the
address as it appears in the Warrant Register, as promptly as possible, but at
least 15 Business Days prior to the applicable date hereinafter specified, a
notice stating: (i) the date on which a record is to be taken for the purpose of
such distribution or rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
distribution or rights or warrants are to be determined; or (ii) the date on
which such reclassification,
7
consolidation, merger, statutory share exchange, sale, transfer, liquidation,
dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up. Failure to
give or receive such notice or any defect therein shall not affect the legality
or validity of the proceedings described in this Section 7.
8. Restrictions on Transfer.
8.1 Restrictive Legends.
Except as otherwise permitted by this Section 8, the Warrant and each
certificate for Warrant Shares (or Other Securities) issued upon the exercise of
the Warrant, and each certificate issued upon the transfer of any such Warrant
Shares (or Other Securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES ISSUABLE ON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
8.2 Transfer to Comply With the Securities Act. Restricted Securities may
not be sold, assigned, pledged, hypothecated, encumbered or in any manner
transferred or disposed of, in whole or in part, except in compliance with: (a)
the provisions of the Securities Act and state securities or Blue Sky laws; (b)
the terms and conditions of the Merger Agreement; and (c) the terms and
conditions hereof.
8.3 Termination of Restrictions. The restrictions imposed by this Section 8
on the transferability of Restricted Securities shall cease and terminate as to
any particular Restricted Securities: (a) when a registration statement with
respect to the sale of such securities shall have been declared effective under
the Securities Act and such securities shall have been disposed of in accordance
with such registration statement; (b) when such securities are sold pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act; or
(c) when, in the opinion of both counsel for the Holder and counsel for the
Company, such restrictions are no longer required or necessary in order to
protect the Company against a violation of the Securities Act upon any sale or
other disposition of such securities without registration thereunder. Whenever
such restrictions shall cease and terminate as to any Restricted Securities, the
Holder shall be entitled to receive from the Company, without expense, new
securities of like tenor not bearing the applicable legends required by Section
8.1.
8
9. Reservation of Shares, Etc. The transfer agent for the Warrant Shares,
which may be the Company ("Transfer Agent"), and every subsequent Transfer Agent
for any shares of the Company's equity securities issuable upon the exercise of
any of the purchase rights represented by this Warrant, are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such purpose.
The Company shall keep copies of this Warrant on file with the Transfer Agent
for the Warrant Shares and with every subsequent Transfer Agent for any of the
Company's equity securities issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such Transfer Agent with
duly executed share certificates for such purpose. All Warrant Certificates
surrendered upon the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of capital stock which have been issued upon the exercise of such
Warrants. Subsequent to the Expiration Date, no shares of capital stock need be
reserved in respect of any unexercised Warrant.
10. Registration and Transfer of Warrants, Etc.
10.1 Warrant Register; Ownership of Warrants. Each warrant issued by the
Company shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. Subject to Section 8, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
10.2 Transfer of Warrants. Subject to compliance with Section 8, if
applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of Warrant Shares
with respect to which rights under this Warrant were not so transferred. The
Holder shall be responsible for payment of any transfer tax payable in
connection with any transfer, in whole or in part of this Warrant.
10.3 Replacement of Warrant. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
10.4 Adjustments To Purchase Price and Number of Shares. Notwithstanding
any adjustment in the Purchase Price or in the number or kind of Warrant
Shares purchasable upon
9
exercise of this Warrant, any Warrant theretofore or thereafter issued may
continue to express the same number and kind of Warrant Shares as are stated in
this Warrant as initially issued.
10.5 Fractional Shares. Notwithstanding any adjustment pursuant to Section 3
in the number of Warrant Shares covered by this Warrant or any other provision
of this Warrant, the Company shall not be required to issue fractions of shares
upon exercise of this Warrant or to distribute certificates which evidence
fractional shares. In lieu of fractional shares, the Company shall make payment
to the Holder, at the time of exercise of this Warrant as herein provided, in an
amount in cash equal to such fraction multiplied by the Current Market Price of
a Common Share on the date of Warrant exercise.
11. No Rights or Liabilities as Shareholder. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
12. Notices. All notices and other communications (and deliveries) provided
for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed: (a) if to the Company, to the attention of its President at its
principal office located at 00 Xxxxxxxxx Xxx Xxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000, or such other address as may hereafter be designated in writing
by the Company to the Holder in accordance with the provisions of this Section;
or (b) if to the Holder, at its address as it appears in the Warrant Register.
All such notices and communications (and deliveries) shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
receipt is acknowledged, if telecopied; on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage prepaid; provided, that the exercise of any Warrant
shall be effective in the manner provided in Section 2.
13. Amendments. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
14. Descriptive Headings, Etc. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (a) words of any gender shall be deemed to include each other gender;
(b) words using the singular or plural number shall also include the plural or
singular number, respectively; (c) the words "hereof, "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (d) the word "including" and words of
similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; and (f) provisions apply to successive
events and transactions.
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15. Governing Law.
(a) This Agreement shall be governed and construed in accordance with the
laws of the State of Colorado, without regard to any applicable conflicts of
laws principles.
(b) Each party to this Agreement irrevocably submits to the jurisdiction of
any Colorado state court or any federal court sitting in Denver, Colorado and
any action arising out of or relating to this Agreement and hereby irrevocably
agrees that all claims in respect of such action may be heard and determined in
such Colorado state or federal court. Each party hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to maintenance of such action or proceeding. The parties further agree, to
the extent permitted by law, that filing an unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment.
(c) To the extent that any party has or hereafter may apply any immunity
from jurisdiction from any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, each party
irrevocably waives such immunity in respect of its obligation with respect to
this Agreement.
(d) Each party waives, to the fullest extent permitted by applicable laws,
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each party certifies
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth above in this Section 15.
ALLIED MOTION TECHNOLOGIES, INC.
----------------------------------------
By: [insert name], as its [insert title]
11
EXHIBIT A to
Warrant Shares Purchase Warrant
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____shares of Common Stock, no par value per share ("Warrant
Shares"), of ALLIED MOTION TECHNOLOGIES, INC. and hereby [makes payment
of $________therefor] [or] [makes payment therefor by reduction pursuant
to Section 2.1(b)(ii) of the Warrant of the number of Warrant Shares
otherwise issuable to the Holder upon Warrant exercise by___ shares]
[or] [makes payment therefor by delivery of the following Warrant Shares
Certificates of the Company (properly endorsed for transfer in blank)
for cancellation by the Company pursuant to Section 2.1(b)(iii) of the
Warrant, certificates of which are attached hereto for
cancellation_________________[list certificates by number and amount]].
The undersigned hereby requests that certificates for such shares be
issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrant Shares purchased (and/or reduced) hereby is
less than the number of Warrant Shares covered by the Warrant, the
undersigned requests that a new Warrant representing the number of
Warrant Shares not so purchased (or reduced) be issued and delivered as
follows:
ISSUE TO:_______________________________________________________________________
[insert name of warrant holder]
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:_____________________________________________________________________
[insert address of warrant holder]
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated:____________, [INSERT NAME OF WARRANT HOLDER]
By: [insert name], as its [insert title]
12
EXHIBIT B to
Warrant Shares Purchase Warrant
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto the Assignee named below all of the rights of the undersigned to
purchase shares of Common Stock, no par value per share ("Warrant
Shares") of ALLIED MOTION TECHNOLOGIES, INC. represented by the Warrant,
with respect to the number of Warrant Shares set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of ALLIED MOTION TECHNOLOGIES, INC. maintained for
that purpose, with full power of substitution in the premises.
Dated:_________________ [INSERT NAME OF WARRANT HOLDER]
________________________________________
By: [insert name], as its [insert title]
me], as its [insert title]
13
EXHIBIT D
See Attached Form Subordinated Note and Form Subordination Agreement
SUBORDINATED PROMISSORY NOTE
THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT IN FAVOR OF PNC
BANK, NATIONAL ASSOCIATION FOR ITSELF AND AS AGENT FOR CERTAIN OTHER LENDERS
AND SILICON VALLEY BANK FOR ITSELF AND AS AGENT FOR CERTAIN OTHER LENDERS.
NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN INSTRUMENT, NO
PAYMENT ON ACCOUNT OF ANY OBLIGATION ARISING FROM OR IN CONNECTION WITH THE
WITHIN INSTRUMENT OR ANY RELATED AGREEMENT (WHETHER OF PRINCIPAL, INTEREST OR
OTHERWISE) SHALL BE MADE, PAID, RECEIVED OR ACCEPTED EXCEPT IN ACCORDANCE WITH
THE TERMS OF SAID SUBORDINATION AGREEMENT.
$_________________ Effective as of January 1, 2005
FOR VALUE RECEIVED, ALLIED MOTION TECHNOLOGIES, INC, a corporation organized
under the laws of the State of Colorado ("the Company"), hereby promises to pay
to the order of ______________ (the "Payee"), at
__________________________________, the principal sum of
_______________________________and 00/100 Dollars ($__________.00), with
interest thereon as provided herein, in lawful money of the United States of
America.
This Note shall bear interest on all outstanding principal at a fixed rate
per annum of six and one half percent (6 1/2%). All interest payments required
on this Note shall be computed on the basis of a 360-day year of twelve 30-day
months.
Level payments of principal and interest, each in an amount sufficient to
amortize the unpaid principal balance of this Note at the rate of interest set
forth above over the then remaining portion of a five year term beginning on the
effective date of this Note shall be due and payable on the first day of April
2005 and the first day of each calendar quarter thereafter, and the entire
unpaid principal balance of this Note, together with all accrued and unpaid
interest thereon, shall be due and payable on January 1, 2010. Payments shall be
applied first to accrued and unpaid interest and then to the principal balance
of this Note.
This Note is one of the Subordinated Promissory Notes (collectively, the
"Subordinated Promissory Notes") issued by the Company in the aggregate
principal amount of $__________ pursuant to a certain Agreement and Plan of
Merger dated as of _________, 2004 (the "Merger Agreement") among the Company,
AMOT, Inc. and Owosso Corporation and is subject to the terms of a Subordination
Agreement dated as of _____________, 2004 among PNC Bank, National Association,
Silicon Valley Bank (collectively, the "Banks") the Company and the Payee of the
"Subordination Agreement." In the event that the Company is unable for any
reason (including because of limitations or restrictions set forth in the
Subordination Agreement) to pay in full a payment of principal or interest due
under the terms of the Subordinated Promissory Notes, but is capable of making a
partial payment of such principal or interest, then in such event the Company
shall make such payment to all holders of the Subordinated Promissory Notes on
an equal, prorata basis.
1. Payments and Prepayments.
(a) Payments and prepayments of principal and interest on this Note shall
be made at the address of the Payee heretofore indicated, or at such other place
or places within the United States as may be specified by the holder of this
Note in a written notice to the Company at least ten (10) days before a given
payment date.
(b) Payments and prepayments of principal and interest on this Note shall
be made in lawful money of the United States of America by mailing the Company's
good check in the proper amount to such holder at least three (3) days prior to
the due date of each payment or prepayment or otherwise transferring funds so as
to be received by such holder on or before the due date of each such payment or
prepayment.
(c) If any payment on this Note becomes due and payable on a Sunday or
other day (other than a Saturday) on which commercial banks in New York are
authorized or required by law to close, the maturity thereof shall be extended
to the next succeeding business day, and, with respect to payments of principal,
interest thereon shall be payable during such extension at the then applicable
rate.
(d) The Company, at its option, may at any time prepay this Note in whole
or from time to time in part (but only in integral multiples of $10,000),
together with accrued and unpaid interest thereon to the date of prepayment,
without penalty or premium. Any such optional prepayment shall be applied first
to accrued and unpaid interest on the outstanding principal balance, then to the
principal amount. Upon prepayment of part of the, principal amount of this Note,
the Company may require the holder to present this Note for notation of such
payment and, if this Note is paid in full, require the holder to surrender this
Note.
2. Subordination. By his acceptance hereof, the Payee agrees for himself and
for his successors and assigns that this Note and the obligations represented
thereby, and all other indebtedness, liabilities and obligations of the Company
under this Note to the Payee including, without limitation, such indebtedness,
liabilities and obligations, now existing or hereafter arising, with respect to
interest, expenses, costs and reasonable attorneys' fees and disbursements (all
of the foregoing herein collectively referred to as the "Indebtedness") are
expressly subordinate to the indebtedness of the Company to the Banks and
certain other lenders in accordance with the terms of the Subordination
Agreement.
3. Events of Default. In the event that:
(a) the Company fails to make, within ten (10) days after its due date,
any payment of principal or interest on this Note;
(b) the Company defaults in the performance of any obligation hereunder to
the holder of this Note (other than as set forth in subparagraph (a) above), and
such default is not cured or waived within thirty (30) days after the Company's
receipt of written notice of such default from the holder of this Note; or
(c) the Company, (i) commences any case, proceeding or other legal action
(x) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, winding-up, liquidation,
dissolution or other similar relief with respect to it or its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or shall make a general
assignment for the benefit of its creditors, or (ii) is the debtor named in any
other case, proceeding or other action of a nature referred to in clause (i)
above which (x) results in the entry of an order for relief or any such
2
adjudication or appointment or (y) remains undismissed, undischarged or unbonded
for a period of ninety (90) days, or (iii) shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
then, and in any such event, and at any time thereafter, if such default shall
then be continuing, the Payee may, by written notice to the Company, declare the
entire unpaid principal balance of this Note, together with interest accrued
thereon and with all other sums due or owed by the Company hereunder, due and
payable, in which event such amounts shall be due and payable immediately
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived; provided, however, that the entire unpaid principal
balance of this Note, together with interest accrued thereon and with all other
sums due or owed by the Company hereunder, shall become automatically due and
payable immediately without presentment, demand, protest, or other notice of any
kind, all of which are hereby expressly waived, upon the occurrence of a default
described in clauses (i) or (ii) of subparagraph (c) above; and, provided,
further, that all rights of the Payee hereunder upon the occurrence of a default
shall be expressly subject to the terms of the Subordination Agreement.
4. Notices. All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by facsimile, when receipt thereof is acknowledged at the facsimile
number below, (c) the second day following the day on which the same has been
delivered prepaid to a national air courier service or (d) three Business Days
following deposit in the mail, certified postage prepaid in each case, addressed
as follows: (i) if to the holder of this Note to whom this Note is originally
issued, to his address set forth in the first paragraph hereof, or at such other
address or facsimile number as may have been furnished to the Company by such
holder in writing, or (ii) if to any other holder of this Note, at such address
or facsimile copy number as may have been furnished to the Company in writing by
such holder, or, until such other holder furnishes to the Company an address or
facsimile number, then to, and at the address or facsimile number of, the last
holder of this Note who has so furnished an address to the Company, or (iii) if
to the Company, at 00 Xxxxxxxxx Xxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000.
5. Trial by Jury: Consent to Jurisdiction. THE COMPANY, BY EXECUTING THIS
NOTE, AND THE PAYEE BY ACCEPTING IT, EACH HEREBY WAIVES ITS RIGHT TO A TRIAL BY
JURY IN ANY ACTION, WHETHER ARISING IN CONTRACT OR TORT, BY STATUTE OR
OTHERWISE, IN ANY WAY RELATED TO THIS NOTE. The Company by its execution of this
Note, and the Payee, by his acceptance of this Note, each hereby (a) irrevocably
consents to the jurisdiction and venue of the courts of the State of New York in
connection with any action or proceeding arising out of or relating to this Note
or the transactions contemplated hereby; (b) waives personal service of any
process in connection with any such action or proceeding and (c) agrees that the
service thereof may be made by certified mail directed to the Company or the
Payee, as applicable, at the address of such party in accordance with the
provisions of Section 4 hereof, or at such other address of which such party has
given notice as provided in Section 4 hereof. In the alternative, any party may
effect service upon any other party in any other form or manner permitted by
law.
6. Miscellaneous.
(a) The Payee by his acceptance of this Note agrees for himself and his
successors and assigns in favor of any stockholder, director, incorporator,
member, officer, manager, agent or employee of the Company, that this Note and
the obligations of the Company to the Payee hereunder shall be payable only out
of the assets of the Company, and no recourse shall be had for payment of any
amount due hereunder against any such stockholder, director, incorporator,
member, officer, manager, agent or employee of the Company by virtue of any law
or by enforcement of any assessment or otherwise, all such liability, if any,
being, by the acceptance hereof and as a part of the consideration for the issue
hereof, expressly released.
3
(b) This Note may not be modified orally but only by a writing executed by
the Company and the Payee.
(c) This Note and the rights and obligations of the Company and the Payee
shall be governed by and construed in accordance with the laws of the State of
New York without regard to conflict of law principles thereof.
(d) Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
(e) If any one or more of the provisions of this Note shall be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note, and this
Note shall be construed as if such provision were not contained herein.
(f) All agreements between the Company and the Payee contained in this
Note are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to the Payee for
the use or the forbearance of the indebtedness evidenced hereby exceed the
maximum amount permissible under applicable law. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall involve exceeding the limit of
such validity prescribed by applicable law then the obligation to be fulfilled
shall automatically be reduced to the limits of such validity, and if under or
from circumstances whatsoever the Payee should ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced hereby and not to the payment of interest.
(g) Provided that the Payee is permitted under the terms of the
Subordination Agreement to commence and continue a legal proceeding against the
Company to enforce the Payee's rights under this Note, Payee shall be entitled
to recover from the Company out-of-pocket expenses incurred by Payee in so
enforcing this Note including, without limitation, reasonable fees and
disbursements of legal counsel.
IN WITNESS WHEREOF, the Company has executed this Note as of the day and
year first written above.
ALLIED MOTION TECHNOLOGIES, INC.
By:______________________________
Accepted:
_____________________
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Subordination Agreement
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of the
_____ day of __________, 200_, by and among PNC BANK, NATIONAL ASSOCIATION for
itself and as agent for certain other lenders (in both such capacities "PNC"),
SILICON VALLEY BANK for itself and as agent for certain other lenders (in both
such capacities "SVB," and collectively with PNC the "Banks"), ALLIED MOTION
TECHNOLOGIES, INC., a Colorado corporation (the "Borrower"), and
_____________________________________________ (the "Creditor").
RECITALS
The Banks have established or are establishing certain credit facilities
with the Borrower, as evidenced by certain documents, instruments and agreements
all between the Banks, other Senior Lenders (as such term is defined below) and
the Borrower (collectively, the "Loan Documents").
The Borrower is, or is about to become, indebted to the Creditor as
evidenced by a certain Subordinated Promissory Note dated of even date herewith
in the original principal amount of $_______________ payable by the Borrower to
the order of the Creditor (the "Creditor Documents").
The Banks and the Creditor hereby desire to set forth the respective rights
and obligations each has as against the other with respect to the Borrower.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
"Obligations" means all loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower to the Banks, either of them, any
lender that is part of a syndicate for which a Bank is acting as agent or to any
other direct or indirect subsidiary of The PNC Financial Services Group, Inc.
(each a "Senior Lender" and collectively, the Senior Lenders"), of any kind or
nature, present or future (including any interest accruing thereon after
maturity or after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect (including those acquired by
assignment or participation), absolute or contingent, joint or several, due or
to become due, now existing or hereafter arising, whether or not: (i) evidenced
by any note, guaranty or other instrument, (ii) arising under any agreement,
instrument or document, (iii) for the payment of money, (iv) arising by reason
of an extension of credit, opening of a letter of credit, loan, equipment lease
or guarantee, (v) under any interest or currency swap, future, option or other
interest rate protection or similar agreement, (vi) under or by reason of any
foreign currency transaction, forward, option or other similar transaction
providing for the purchase of one currency in exchange for the sale of another
currency, or in any other manner, or (vii) arising
out of overdrafts on deposit or other accounts or electronic funds transfers
(whether by wire transfer or through automated clearing houses or otherwise) or
out of the return unpaid of, or other failure of a Senior Lender to receive
final payment for, any check, item, instrument, payment order or other deposit
or credit to, deposit or other account, or out of a Senior Lender's non- receipt
of or inability to collect funds or otherwise not being made whole in connection
with depository transfer check or other similar arrangements; and any
amendments, extensions, renewals or increases and all costs and expenses of the
Senior Lenders incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including reasonable attorneys' fees and expenses.
"Collateral" means any collateral now or in the future securing the
Obligations, including but not limited to claims against any guarantors of the
Obligations and any collateral securing such guarantees.
"Subordinated Debt" means any loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Creditor of any
kind or nature, present or future, whether or not for the payment of money,
whether direct or indirect, absolute or contingent, joint or several, due or to
become due, now existing or hereafter arising, whether consisting of principal,
interest, expense payments, management and consulting fees, liquidation costs,
attorneys' fees and costs or otherwise, to the extent arising pursuant to or in
connection with the Creditor Documents.
2. Subordination.
(a) Subject to Section 3 hereof, the Creditor hereby irrevocably
subordinates and postpones the payment and the time of payment of all the
Subordinated Debt and all claims and demands arising therefrom to the
Obligations and directs that the Obligations be paid in full before the
Subordinated Debt.
(b) The Creditor shall: (i) make notations on the books of the Creditor
beside all accounts or on such other statements evidencing or recording any
Subordinated Debt to the effect that such Subordinated Debt is subject to the
provisions of this Agreement, (ii) furnish the Banks, upon request from time to
time, a statement of the account between the Creditor and the Borrower
representing the Subordinated Debt and copies of each of the Creditor Documents,
and (iii) give the Banks, upon request, full and free access to the Creditor's
books pertaining only to such accounts with the right to make copies thereof.
Each and every Creditor Document shall bear a legend as set forth in paragraph
13(c) hereof.
3. Payments to Creditor. Notwithstanding any other provision of this
Agreement, the Borrower shall be entitled to pay and the Creditor shall be
entitled to receive, all scheduled payments of principal and interest (at the
current rate set forth in the Creditor Documents) under the Subordinated Debt,
and only when due, so long as (a) no Event of Default has occurred under the
Loan Documents or would result from such payment, (b) the Borrower has a Fixed
Charge Coverage Ratio (as such term is defined below) of 1.25 to 1 and (c) the
Borrower has Excess Availability (as such term is defined below), after taking
into account the effect of such payment, of at least $1,000,000. For purposes of
this Note, "Fixed Charge Coverage Ratio" means the ratio of (i) the Borrower's
net income plus depreciation, amortization and interest expense for the
3
twelve month period ending on the last day of its most recently ended fiscal
quarter to (ii) payments, required, scheduled or made on account of indebtedness
plus interest expense for such period. For purposes of this Note, "Excess
Availability" means the ability to borrow a sum of money from the Senior Lenders
under existing credit facilities. After the occurrence of an Event of Default
under the Loan Documents and receipt by the Creditor of written notice thereof
from a Bank to the Creditor, the Borrower shall not make, and the Creditor shall
not receive, any direct or indirect payments of principal, interest, fees or
expenses under the Subordinated Debt.
4. Security. The Borrower shall not grant and the Creditor shall not take
any lien on or security interest in any of the Borrower's property, now owned or
hereafter acquired or created, without the prior written consent of the Banks.
5. Standby Limitation. Notwithstanding any breach or default by the Borrower
under the Creditor Documents, the Creditor shall not at any time or in any
manner: (a) foreclose upon, take possession of, or attempt to realize on any
Collateral, or proceed in any way to enforce any claims it has or may have
against the Borrower under the Subordinated Debt or otherwise, or (b) contest,
protest or object to any action taken by a Senior Lender under the Loan
Documents or otherwise, unless and until the Obligations have been fully and
indefeasibly paid and satisfied in full.
6. Bankruptcy/Probate of Borrower. In the event a petition or action for
relief shall be filed by or against the Borrower under any federal bankruptcy
statute in effect from time to time, or under any other law relating to
bankruptcy, insolvency, reorganization, receivership, general assignment for the
benefit of creditors, moratorium, creditor composition, arrangement or other
relief for debtors, the Senior Lenders' claims (secured or unsecured) against
the assets or estate of the Borrower for repayment of the Obligations shall be
indefeasibly paid in full before any payment is made to the Creditor on the
Subordinated Debt, whether such payment is in cash, securities or any other form
of property or rights. The Senior Lenders may, in their discretion, file a proof
of claim for or collect the Creditor's claim first for the benefit of the Senior
Lenders to the extent of the unpaid Obligations and then for the benefit of the
Creditor (but without creating any duty or liability to the Creditor other than
to remit to the Creditor distributions, if any, actually received in such
proceedings after the Obligations have been paid and satisfied in full) directly
from the receiver, trustee, custodian, liquidator or representative of the
Borrower's estate in such proceeding. The Borrower and the Creditor shall
furnish all assignments, powers or other documents requested by a Senior Lender
to facilitate such direct collection by such Senior Lender.
7. Receipt of Payments by Creditor. Should the Creditor directly or
indirectly receive any payment or distribution not permitted by the provisions
of this Agreement or any Collateral or proceeds thereof, prior to the full and
indefeasible payment and satisfaction of the Obligations and the termination of
all financing arrangements between the Banks and the Borrower, the Creditor will
deliver the same to the Banks in the form received (except for the endorsement
or assignment of the Creditor where necessary), for application to the
Obligations in such order and manner as the Banks may elect. Until so delivered,
the Creditor shall hold the same, in trust, for the Senior Lenders as property
of the Senior Lenders, and shall not commingle such property of the Senior
Lenders with any other property held by the Creditor. In the event the Creditor
fails to make any such endorsement or assignment, each Bank, or any of its
officers
4
or employees on behalf of such Bank, is hereby irrevocably authorized in its own
name or in the name of the Creditor to make such endorsement or assignment and
is hereby irrevocably appointed as the Creditor's attorney-in-fact for those
purposes.
8. Senior Lenders' Rights.
(a) The Creditor hereby consents that at any time and from time to time,
without further consent of or notice to the Creditor and without in any manner
affecting, impairing, lessening or releasing any of the provisions of this
Agreement, the Banks and the Senior Lenders may, in their sole discretion: (i)
renew, compromise, extend, expand, postpone, waive, accelerate, terminate,
change the payment terms of, or otherwise modify the Obligations or amend,
renew, replace or terminate the Loan Documents or any and all other agreements
now or hereafter related to the Obligations; (ii) extend credit to the Borrower
in whatever amount on a secured or unsecured basis or take other support for the
Obligations and exchange, enforce, waive, sell, transfer, collect, adjust or
release any such security or other support or any part thereof; (iii) apply any
and all payments or proceeds of such security or other support and in any order
or manner as the Senior Lenders, in their discretion, may determine; and (iv)
release or substitute any party liable on the Obligations, any guarantor of the
Obligations, or any other party providing support for the Obligations.
(b) This Agreement will not be affected, impaired or released by any delay
or failure of a Senior Lender to exercise any of its rights and remedies against
the Borrower or any guarantor or under any of the Obligations or against any
Collateral, by any failure of a Senior Lender to take steps to perfect or
maintain its lien on, or to preserve any rights to, any Collateral by any
irregularity, unenforceability or invalidity of any of the Obligations or any
part thereof or any security or guarantee therefor, or by any other event or
circumstance which otherwise might constitute a defense available to, or a
discharge of, the Borrower or a subordinated creditor. The Creditor hereby
waives demand, presentment for performance, protest, notice of dishonor and of
protest with respect to the Subordinated Debt and the Collateral, notice of
acceptance of this Agreement, notice of the making of any of the Obligations and
notice of default under any of the Obligations.
(c) Nothing in this Agreement will obligate a Senior Lender to grant
credit to, or continue financing arrangements with, the Borrower.
9. Continuing Agreement. This is a continuing agreement and will remain in
full force and effect until all of the Obligations and all of the Creditor's
obligations and undertakings to the Senior Lenders have been fully performed and
indefeasibly satisfied and until all the Loan Documents have been terminated.
This Agreement will continue to be effective or will be automatically
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned by a Senior Lender upon
insolvency, bankruptcy, or reorganization of the Borrower or otherwise, all as
though such payment had not been made.
10. No Challenge to Liens. The Creditor agrees that it will not make any
assertion, claim or argument in any action, suit or proceeding of any nature
whatsoever in any way challenging the priority, validity or effectiveness of the
liens and security interests granted to the Senior Lenders.
4
11. Disposition or Release of Collateral.
(a) If at any time or from time to time the Collateral, or any portion
thereof, is in any manner sold or otherwise transferred, the Creditor's consent
to such disposition shall be automatically and irrevocably given if the Banks,
in their sole discretion and for any reason, consents to such disposition, and
in any event the Creditor shall not be entitled to receive any proceeds (cash or
non-cash) of such disposition unless and until the Obligations have been
indefeasibly paid in full.
(b) If, at any time and for any reason, the Senior Lenders release their
liens on the Collateral, or any portion thereof, the Creditor shall likewise
release its lien on the property so released from the Senior Lenders' liens, if
the Creditor has obtained such a lien.
12. Order of Proceedings. Nothing in this Agreement is intended to compel
the Senior Lenders or the Creditor at any time to declare the Borrower in
default or compel the Senior Lenders to proceed against or refrain from
proceeding against any Collateral in any order or manner. All rights and
remedies of the Senior Lenders with respect to the Collateral, the Borrower, and
any other obligors concerning the Obligations are cumulative and not
alternative.
13. Replacement Financing; Assignment of Subordinated Debt.
(a) The provisions hereof shall inure to the benefit of any financial
institution obtained by the Borrower or the Senior Lenders to provide
replacement working capital or other financing for the Borrower in place of the
Senior Lenders, regardless of whether any such replacement lender provides its
own financing or succeeds to a Senior Lender's financing by assignment. If
requested by such replacement lender, the Creditor shall execute with such
replacement lender a subordination agreement substantially similar to this
Agreement.
(b) The Creditor also agrees that as a prior condition of any assignment
of any of its interests under any of the Creditor Documents, the Creditor shall
require the assignee to acknowledge this Agreement and agree, in writing, to be
bound by the terms and conditions hereof.
(c) Each and every Creditor Document shall bear the following legend, or a
similar legend acceptable to the Banks, in boldface type:
This Note is subject to the terms of a Subordination Agreement in favor of
PNC Bank, National Association for itself and as agent for certain other
lenders and Silicon Valley Bank for itself and as agent for certain other
lenders. Notwithstanding any contrary statement contained in the within
instrument, no payment on account of any obligation arising from or in
connection with the within instrument or any related agreement (whether of
principal, interest or otherwise) shall be made, paid, received or
accepted except in accordance with the terms of said Subordination
Agreement.
5
14. Financing of Fiduciary. In the event of a bankruptcy, reorganization,
other insolvency or court proceeding for the Borrower commences, the Senior
Lenders shall have the option (in its sole and absolute discretion) to continue
to provide financing (on terms acceptable to the Senior Lenders) of the trustee,
other fiduciary, or of the Borrower as a debtor-in-possession, if the Banks deem
such financing to be in the best interests of the Senior Lenders.. The
subordination and lien priority provisions of this Agreement shall continue to
apply to all advances made during the pendency of such court proceedings, so
that the Senior Lenders shall have a prior lien on all Collateral, created
before or during such court proceeding, to secure all Obligations, whether
created before or during such court proceeding. The Creditor hereby waives any
right it may have to object to financing by the Senior Lenders during the
pendency of such court proceeding and the Creditor's consent to such financing
shall not be required regardless of whether the court supervising such
proceeding approves, grants or allows adequate protection to the Creditor.
15. Investigation of Parties. The Creditor has entered into the Creditor
Documents with the Borrower and the Senior Lenders have entered into the Loan
Documents with the Borrower and the Creditor and the Banks have entered into
this Agreement each upon its own independent investigation, and each makes no
warranty or representation as to each other with respect to the financial
condition of the Borrower, or its ability to repay its loans to the Creditor or
the Senior Lenders in the future. Nothing in this Agreement shall be deemed to
constitute this Agreement as a security or create a joint venture or partnership
between the Creditor and the Banks for any purpose.
16. Improper Action by Creditor. If the Creditor, the Borrower or both,
contrary to this Agreement, make, attempt to or threaten to allow the Creditor
to exercise its remedies against the Borrower under the Creditor Documents, or
make any payment or take any action contrary to this Agreement, the Banks may
restrain or enjoin the Creditor and the Borrower from so doing, it being
expressly understood and agreed by the Creditor and the Borrower that: (i) the
Senior Lenders' damages from their actions may at that time be difficult to
ascertain and may be irreparable, and (ii) the Creditor and the Borrower waive
any defense or claim that a Senior Lender or the Borrower cannot demonstrate
damages or can be made whole by the awarding of damages.
17. Indemnification of Senior Lenders. The Creditor agrees to indemnify and
to hold the Senior Lenders, their officers, directors, agents and employees
harmless for any and all losses, damages, liabilities, expenses and obligations,
including attorneys' fees and expenses, as they arise, relating to actions of
the Creditor taken contrary to this Agreement.
18. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address set forth below or to such other address as any party may give to the
other in writing for such purpose in accordance with this section:
To PNC: PNC Bank, National Association
6
____________________________________
____________________________________
Attention:__________________________
Facsimile No._______________________
To SVB Silicon Valley Bank
____________________________________
____________________________________
Attention:__________________________
Facsimile No._______________________
To the Creditor: ____________________________________
____________________________________
____________________________________
____________________________________
Attention:__________________________
Facsimile No._______________________
To the Borrower: Allied Motion Technologies Inc.
____________________________________
____________________________________
____________________________________
Attention:__________________________
Facsimile No._______________________
19. Preservation of Rights. No delay or omission on a Senior Lender's part
to exercise any right or such right or power or be considered a waiver of any
such right or power, nor will the Senior Lender's action or inaction impair any
such right or power. The Senior Lenders' rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which a Senior
Lender may have under other agreements, at law or in equity. Nothing in this
Agreement is intended to modify, alter, reduce or impair any rights which the
Bank or the Creditor may have against the Borrower under the Loan Documents or
the Creditor Documents, respectively, or under any other agreement between them,
or either of them, and the Borrower.
20. Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect the
validity, legality and enforceability of the remaining provisions of this
Agreement.
21. Changes in Writing. No modification, amendment or waiver of, or consent
to any departure by the Borrower or the Creditor from, any provision of this
Agreement, will be effective unless made in a writing and signed by the Banks,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on the Borrower in
any case will entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstance.
7
22. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
23. Counterparts. This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart. Any party so
executing this Agreement by facsimile transmission shall promptly deliver a
manually executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart executed by facsimile transmission.
24. Successors and Assigns. This Agreement will be binding upon and inure to
the benefit of the Borrower, the Creditor and the Senior Lenders and their
respective heirs, executors, administrators, successors and assigns; provided,
however, that neither the Borrower nor the Creditor may assign this Agreement in
whole or in part without the Banks' prior written consent and the Banks at any
time may assign this Agreement in whole or in part. No claims or rights are
intended to be created hereunder for the benefit of the Borrower or any alleged
third party beneficiary hereof.
25. Interpretation. In this Agreement, unless the parties otherwise agree in
writing, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; the word "or" shall be deemed to include
"and/or", the words "including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles, sections (or
subdivisions of sections) or exhibits are to those of this Agreement; and
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such instruments,
but only to the extent such amendments and other modifications are not
prohibited by the terms of this Agreement. Section headings in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose. If this Agreement is executed by more
than one party as Borrower or by more than one party as Creditor, the
obligations of such persons or entities hereunder will be joint and several.
26. Governing Law and Jurisdiction. This Agreement has been delivered to and
accepted by the Banks and will be deemed to be made in the State of Colorado.
THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO,
EXCLUDING ITS CONFLICT OF LAWS RULES. Each of the Borrower and the Creditor
hereby irrevocably consents to the exclusive jurisdiction of any state or
federal court in Denver, Colorado; provided that nothing contained in this
Agreement will prevent the Senior Lenders from bringing any action, enforcing
any award or judgment or exercising any rights against the Borrower or the
Creditor individually, against any security or against any property of the
Borrower within any other county, state or other foreign or domestic
jurisdiction. The parties hereto agree that the venue provided above is the most
convenient forum for each of the parties. Each of the Borrower and the Creditor
waives any objection to venue and any objection based on a more convenient forum
in any action instituted under this Agreement.
8
27. WAIVER OF JURY TRIAL EACH OF THE BORROWER, THE CREDITOR AND THE BANKS
IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER, THE CREDITOR AND THE BANK
ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
WITNESS the due execution hereof as a document under seal, as of the date
first written above.
9
WITNESS/ATTEST: BORROWER:
Allied Motion Technologies, Inc.
____________________________________
____________________________
_____________________________________ By:_________________________________
(SEAL)
Print Name:__________________________ Print Name:_________________________
Title:_______________________________ Title:______________________________
(Include title only if an officer of
entity signing to the right)
10
WITNESS/ATTEST: CREDITOR:
____________________________________
(Corporation, Partnership
or other Entity)
_____________________________________ By:_________________________________
(SEAL)
Print Name:__________________________ Print Name:_________________________
Title:_______________________________ Title:______________________________
(Include title only if an officer of
entity signing to the right)
_____________________________________ ____________________________________
(individual) (SEAL)
Print Name:__________________________ Print Name:_________________________
_____________________________________ ____________________________________
(individual) (SEAL)
Print Name:__________________________ Print Name:_________________________
BANKS:
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________
Print Name:_________________________
Title:______________________________
SILICON VALLEY BANK
By:_________________________________
Print Name:_________________________
Title:______________________________
11
EXHIBIT E
The following shall sign Affiliates Agreements:
Xxxxxx Xxxxxx Xx.
Other entities/individuals to be determined prior to Closing
See Attached Form of Affiliates Agreement
[Form of Affiliates Agreement]
______________, 2004
Allied Motion Technologies, Inc.
00 Xxxxxxxxx Xxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Owosso Corporation, a
Pennsylvania corporation ("Owosso"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant
to the terms of the Agreement and Plan of Merger dated as of ______________,
2004 (the "Agreement"), between Owosso and Allied Motion Technologies, Inc., a
Colorado corporation ("Buyer") and AMOT, Inc., a Pennsylvania corporation
("Merger Sub"), Merger Sub will be merged with Owosso.
As a result of the Merger, the undersigned may receive, among other
consideration, shares of common stock, no par value per share, of Buyer (the
"Buyer Stock").
The undersigned represents, warrants and covenants to Buyer that in the
event the undersigned receives any shares of Buyer Stock as a result of the
Merger:
A. The undersigned shall not make any sale, transfer or other disposition of
Buyer Stock in violation of the Act or the Rules and Regulations.
B. The undersigned has carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable limitations
upon the undersigned's ability to sell, transfer or otherwise dispose of Buyer
Stock.
C. The undersigned has been advised that the issuance of Buyer Stock to the
undersigned pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, the undersigned has
also been advised that, since at the time the Merger was submitted for a vote of
the shareholders of Owosso, the undersigned may be deemed to have been an
affiliate of Owosso and the distribution by the undersigned of the Buyer Stock
has not been registered under the Act, the undersigned may not sell, transfer or
otherwise dispose of the Buyer Stock issued to the undersigned in the Merger
unless: (i) such sale, transfer or other disposition has been registered under
the Act; (ii) such sale, transfer or
Allied Motion Technologies, Inc.
January 27, 2004
Page 2
other disposition is made in conformity with Rule 145 promulgated by the
Commission under the Act; or (iii) in the opinion of counsel reasonably
acceptable to Buyer, or a "no action" letter obtained by the undersigned from
the staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. The undersigned understands that Buyer is under no obligation to register
the sale, transfer or other disposition of the Buyer Stock by the undersigned or
on behalf of the undersigned under the Act or, except as expressly set forth in
the Agreement, to take any other action necessary in order to make compliance
with an exemption from such registration available.
E. The undersigned also understands that stop transfer instructions will be
given to Buyer's transfer agents with respect to the Buyer Stock issued to the
undersigned and that there will be placed on the certificates for such Buyer
Stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT DATED __________, 2004 BETWEEN THE REGISTERED
HOLDER HEREOF AND ALLIED MOTION TECHNOLOGIES, INC., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF ALLIED MOTION TECHNOLOGIES,
INC."
F. The undersigned also understands that unless the transfer by the
undersigned of my Buyer Stock has been registered under the Act or is a sale
made in conformity with the provisions of Rule 145, Buyer reserves the right to
put the following legend on the certificates issued to the undersigned's
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
Allied Motion Technologies, Inc.
January 27, 2004
Page 3
It is understood and agreed that the legend set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if: (i) one year shall have elapsed from the date the
undersigned acquired the Buyer Stock received in the Merger and the provisions
of Rule 145(d)(2) are then available to the undersigned; (ii) two years shall
have elapsed from the date the undersigned acquired the Buyer Stock received in
the Merger and the provisions of Rule 145(d)(3) are then applicable to the
undersigned; or (iii) Buyer has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Buyer, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer apply
to the undersigned.
Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of Owosso as described
in the first paragraph of this letter or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
Accepted this ____ day of ____________, 2004
ALLIED MOTION TECHNOLOGIES, INC.
______________________________________
By [insert name] as its [insert title]
EXHIBIT F
The following shall sign Lock-Up Agreements:
Xxxxxx Xxxxxx Xx.
All family members of Xxxxxx Xxxxxx Xx. who are shareholders of the Company
Xxxx Xxxxx
The Xxxx X. Xxxxxxxx, Xx. Trust
See attached Form of Lock-Up Agreement
______________, 2004
Allied Motion Technologies, Inc.
00 Xxxxxxxxx Xxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
This letter is being delivered to you in connection with the Agreement and
Plan of Merger (the "Merger Agreement") dated ______________, 2004, by and among
Owosso Corporation, a Pennsylvania corporation (the "Company"), AMOT, Inc., a
Pennsylvania corporation (the "Merger Sub") and Allied Motion Technologies,
Inc., a Colorado corporation (the "Buyer").
In order to induce you to enter in the Merger Agreement, the undersigned
will not, without the prior written consent of Buyer directly or indirectly, for
a period (the "Lock-Up Period") of [180 or 365 days depending on signatory] days
after the date of the Merger Agreement: (1) offer, pledge, sell, or contract to
sell any shares of Buyer's stock; (2) sell any option or contract to sell any
shares of Buyer's stock; (3) purchase any option or contract to sell any shares
of Buyer's stock; (4) grant any option, right or warrant to purchase any shares
of Buyer's stock; (5) enter into any swap or other agreement that transfers, in
whole or in part, the economic consequence of ownership of any share of Buyer's
stock whether any such swap or transaction is to be settled by delivery of
shares or other securities in cash or otherwise; (6) take any of the foregoing
actions with respect to any securities convertible into or exchangeable or
exercisable for or repayable with shares of Buyer's stock; or (7) publicly
disclose the intention to take any of the foregoing actions. Notwithstanding the
foregoing, nothing herein shall prevent or prohibit (i) bona fide gifts by the
undersigned; (ii) transfers by the undersigned to his or her family members; or
(iii) transfers by the undersigned to its affiliates (as that term is defined in
the Securities Act of 1933, as amended), provided that in the case of each of
(i), (ii) or (iii), the transferee agrees in writing to the terms of this
letter.
If for any reason the Merger Agreement shall be terminated prior to the
Closing Date (as defined in the Merger Agreement), the agreement set forth above
shall likewise be terminated and the undersigned will be released from his, her
or its obligations hereunder.
Very truly yours,
--------------------------
[signature]
--------------------------
[name and address]
