Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
MEGGITT-USA, INC.,
XXXXX ACQUISITION CORP.
AND
FIREARMS TRAINING SYSTEMS, INC.
DATED AS OF AUGUST 23, 2006
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME............................ 1
1.1 The Merger....................................................... 1
1.2 Closing.......................................................... 2
1.3 Effective Time................................................... 2
1.4 Further Assurances............................................... 2
ARTICLE II CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION................................................... 2
2.1 The Certificate of Incorporation................................. 2
2.2 The Bylaws....................................................... 3
ARTICLE III OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION.......... 3
3.1 Directors........................................................ 3
3.2 Officers......................................................... 3
ARTICLE IV EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES.................................................. 3
4.1 Certain Defined Terms............................................ 3
4.2 Conversion of Securities......................................... 3
4.3 Exchange of Certificates for Common Shares and Series C
Preferred Shares................................................. 5
4.4 Appraisal Rights................................................. 7
ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 8
5.1 Representations and Warranties of the Company.................... 8
5.2 Representations and Warranties of Parent and Merger Sub.......... 25
ARTICLE VI COVENANTS..................................................... 27
6.1 Interim Operations............................................... 27
6.2 Acquisition Proposals............................................ 30
6.3 Information Supplied............................................. 33
6.4 Filings; Other Actions; Notification............................. 34
6.5 Access........................................................... 35
6.6 Publicity........................................................ 36
6.7 Employee Compensation and Benefits............................... 36
TABLE OF CONTENTS
(continued)
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6.8 Expenses......................................................... 37
6.9 Indemnification; Directors' and Officers' Insurance.............. 37
6.10 Parent Vote...................................................... 38
6.11 Notification of Certain Matters; Supplemental Disclosure......... 38
6.12 Certain Litigation............................................... 39
6.13 Certain Tax Matters.............................................. 39
ARTICLE VII CONDITIONS TO THE MERGER..................................... 39
7.1 Conditions to Each Party's Obligation to Effect the Merger....... 39
7.2 Conditions to Obligations of Parent and Merger Sub............... 40
7.3 Conditions to Obligation of the Company.......................... 41
ARTICLE VIII TERMINATION................................................. 41
8.1 Termination by Mutual Consent.................................... 41
8.2 Termination by Either Parent or the Company...................... 41
8.3 Termination by the Company....................................... 42
8.4 Termination by Parent............................................ 42
8.5 Effect of Termination and Abandonment............................ 43
8.6 Extension; Waiver................................................ 44
ARTICLE IX MISCELLANEOUS AND GENERAL..................................... 44
9.1 Survival......................................................... 44
9.2 Modification or Amendment........................................ 44
9.3 Waiver of Conditions............................................. 44
9.4 Counterparts..................................................... 45
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.................... 45
9.6 Notices.......................................................... 45
9.7 Entire Agreement................................................. 47
9.8 No Third Party Beneficiaries..................................... 47
9.9 Obligations of Parent and of the Company......................... 47
9.10 Transfer Taxes................................................... 47
9.11 Severability..................................................... 48
9.12 Interpretation................................................... 48
-ii-
TABLE OF CONTENTS
(continued)
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9.13 Assignment....................................................... 48
9.14 Specific Performance............................................. 48
EXHIBIT A - Certificate of Incorporation of Surviving Corporation
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of August 23, 2006, among FIREARMS TRAINING SYSTEMS, INC., a Delaware
corporation (the "Company"), MEGGITT-USA, INC., a Delaware corporation
("Parent"), and XXXXX ACQUISITION CORP., a Delaware corporation and a direct
wholly-owned subsidiary of Parent ("Merger Sub," the Company and Merger Sub
sometimes being hereinafter collectively referred to as the "Constituent
Corporations").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Sub and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company (the "Merger") upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, the holders of a majority of the
outstanding Series C Preferred Shares and Common Shares (the "Principal
Stockholders") each have agreed pursuant to an agreement (the "Principal
Stockholders' Agreement") to take certain actions in furtherance of the Merger,
including causing the execution and delivery of a written consent immediately
after the execution and delivery of this Agreement (the "Principal Stockholders'
Consent") to the adoption of this Agreement and the approval of the Merger (the
"Stockholder Approval") in accordance with Section 228 of the Delaware General
Corporation Law ("DGCL");
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of the Company to
enter into this Agreement and the Principal Stockholders to enter into the
Principal Stockholders' Agreement, Meggitt PLC, a public limited company
organized under the laws of England and Wales ("Guarantor") has agreed pursuant
to a Guaranty, dated as of the date hereof (the "Guaranty"), to fully and
unconditionally guaranty the payment and performance of Parent and Merger Sub,
each of which being a direct or indirect wholly owned subsidiary of the
Guarantor, under this Agreement and Parent under the Principal Stockholders'
Agreement, as more fully described and set forth in the Guaranty; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with
and into the Company in accordance with Section 251 of the DGCL and the separate
corporate existence of Merger Sub shall thereupon cease. Following the Effective
Time, the Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"), and the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger, except as set
forth in Article II. The Merger shall have the effects specified in Section 259
of the DGCL.
1.2 Closing. Unless otherwise mutually agreed between the Company and
Parent, the closing for the Merger (the "Closing") shall take place at the
offices of O'Melveny & Xxxxx LLP, Times Square Tower, 0 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 at 10:00 A.M. (New York City time) on a date to be specified by
the parties hereto, which shall be no later than the second Business Day
following the day on which the last to be satisfied or waived of the conditions
set forth in Article VII (other than those conditions that by their nature are
to be satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions) shall be satisfied or waived in accordance with this
Agreement. For purposes of this Agreement "Business Day" shall mean any day
other than a Saturday, a Sunday or a day on which banks in the City of New York
are authorized or required to close. The date on which the Closing occurs is
referred to herein as the "Closing Date."
1.3 Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the "Delaware Certificate
of Merger") to be executed, acknowledged and filed with the Secretary of State
of the State of Delaware as provided in Section 251 of the DGCL. The Merger
shall become effective at the time when the Delaware Certificate of Merger has
been duly filed with the Secretary of State of the State of Delaware or at such
later time as may be agreed by the parties and specified in the Delaware
Certificate of Merger (the "Effective Time").
1.4 Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances or any other actions are necessary, desirable or
proper to vest, perfect or confirm of record or otherwise, in the Surviving
Corporation, the title to any property or rights of the Company acquired or to
be acquired by reason of, or as a result of, the Merger, the parties agree that
they and their then serving, duly appointed officers and directors shall and
will execute and deliver all such proper deeds, assignments and assurances and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Surviving Corporation and otherwise to carry
out the purpose of this Agreement, and that such officers and directors of the
Surviving Corporation are fully authorized and directed in the name of the
Company or otherwise to take any and all such actions.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 The Certificate of Incorporation. At the Effective Time, the
certificate of incorporation of the Company shall be amended to read in its
entirety as set forth on Exhibit A hereto, and as so amended, shall be the
certificate of incorporation of the Surviving Corporation
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(the "Charter"), until thereafter duly amended as provided therein or by
applicable Law (as defined in Section 5.1(j)).
2.2 The Bylaws. The bylaws of Merger Sub in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation (the
"Bylaws"), until thereafter amended as provided therein or by applicable Law.
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Charter and the Bylaws.
3.2 Officers. The officers of the Company immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Charter and the Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1 Certain Defined Terms. As used in this Agreement:
(a) "Common Share" means a share of the Company's Class A Common
Stock, par value $0.000006 per share.
(b) "Company Option" means an option to purchase Common Shares issued
under any of the Stock Plans (as defined in Section 5.1(b)(i)).
(c) "Series C Preferred Share" means a share of the Company's Series C
Preferred Stock, par value $0.10 per share.
4.2 Conversion of Securities.
(a) Cancellation of Certain Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders of capital stock
of the Company or capital stock of Merger Sub, each Common Share and Series C
Preferred Share (i) held in the treasury of the Company, (ii) owned by any
Subsidiary of the Company or (iii) owned by Parent or any Subsidiary of Parent,
in each case immediately prior to the Effective Time, shall cease to be
outstanding, shall be cancelled without any conversion thereof and without
payment of any consideration therefor and shall cease to exist.
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(b) Conversion of Series C Preferred Shares.
(i) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders of capital stock of the Company or capital
stock of Merger Sub, each Series C Preferred Share issued and outstanding
immediately prior to the Effective Time (other than Series C Preferred Shares
cancelled pursuant to Section 4.2(a)) shall be converted into the right to
receive, upon surrender of the certificate which immediately prior to the
Effective Time represented such Series C Preferred Share in accordance with
Section 4.3, cash in an amount equal to the sum of (A) the Liquidation
Preference (as defined in the Company's Certificate of Designations of Series C
Preferred Stock filed with the Secretary of State of the State of Delaware on
September 30, 2004 (as amended or modified from time to time, the "Certificate
of Designations")) plus (B) the amount of all accrued and unpaid dividends on
such Series C Preferred Share up to but not including the Effective Time to the
extent not added to the Liquidation Preference pursuant to Section 2(d) of the
Certificate of Designations (whether or not earned or declared) (such sum, the
"Per Series C Preferred Share Consideration"). To the extent requested by Parent
(and to the extent sufficient time prior to the Effective Time exists in order
to enable the Company to give such notice), the Company shall provide at least
thirty (30) days notice of redemption of the Series C Preferred Stock in
connection with the Merger to the holders pursuant to Sections 6(a) and (c) of
the Certificate of Designations.
(ii) Each Series C Preferred Share so converted at the Effective
Time shall be cancelled and shall cease to exist, and each certificate which
theretofore represented Series C Preferred Shares so converted and cancelled
shall thereafter cease to have any rights with respect to such Series C
Preferred Shares, except the right to receive the Per Series C Preferred Share
Consideration multiplied by the number of Series C Preferred Shares formerly
represented by such certificate, without interest thereon and subject to Section
4.3.
(c) Conversion of Common Shares.
(i) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders of capital stock of the Company or capital
stock of Merger Sub, each Common Share issued and outstanding immediately prior
to the Effective Time (other than Common Shares cancelled pursuant to Section
4.2(a) and Common Shares with respect to which the holder thereof exercises
appraisal rights under Section 262 of the DGCL) shall be converted into the
right to receive cash in an amount equal to $1.08 (the "Per Common Share
Consideration"), upon surrender of the certificate which immediately prior to
the Effective Time represented such Common Share in accordance with Section 4.3.
(ii) Each Common Share so converted at the Effective Time shall
be cancelled and shall cease to exist, and each Certificate which theretofore
represented Common Shares so converted and cancelled shall thereafter cease to
have any rights with respect to such Common Shares, except the right to receive
the Per Common Share Consideration multiplied by the number of Common Shares
formerly represented by such Certificate, without interest thereon and subject
to Section 4.3.
(d) Conversion of Company Options. Between the date of this Agreement
and the Effective Time, the Company shall take all reasonable action necessary
(which action
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shall be effective as of or prior to the Effective Time), to terminate the Stock
Plans and provide that, at or prior to the Closing, each outstanding Company
Option shall become fully vested, to the extent provided in the underlying
grant, to the extent not already vested. Each holder of a Company Option that is
outstanding and unexercised as of the Effective Time and has an exercise price
per Common Share that is less than the Per Common Share Consideration shall
(subject to the provisions of this Section 4.2(d)) be paid by the Exchange Agent
(as defined in Section 4.3(a)), in exchange for the cancellation of such Company
Option and completion of an acknowledgement letter, an amount in cash (less any
applicable withholding Taxes (as defined in Section 5.1(m)) equal to the product
of (i) the difference between the Per Common Share Consideration (without
interest) and the applicable exercise price per Common Share of such Company
Option and (ii) the aggregate number of Common Shares for which such Company
Option is exercisable (the "Option Payment"). The Exchange Agent shall make the
Option Payments at or promptly following the Effective Time and Parent shall
provide the Exchange Agent with the requisite amount of funds to make such
Option Payments. Any such payments shall be net of all applicable federal, state
and local Tax withholding. Prior to the Effective Time, the Company shall take
such actions as may be necessary to cause any Company Option that is not
exchanged as provided above to be cancelled as of the Effective Time.
(e) Merger Sub Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof, each share of common
stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
newly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
4.3 Exchange of Certificates for Common Shares and Series C Preferred
Shares.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with an exchange agent in the United States appointed by Parent and approved in
advance by the Company (such approval not to be unreasonably withheld) (the
"Exchange Agent"), to be held in trust for the benefit of the holders of Common
Shares, cash in an amount equal to the product of (A) the Per Common Share
Consideration and (B) the aggregate number of Common Shares issued and
outstanding immediately prior to the Effective Time (such cash, the "Exchange
Fund").
(b) Exchange Procedures.
(i) Common Shares. Appropriate transmittal materials, specifying
that delivery shall be effected, and risk of loss and title to certificates
representing Common Shares (each a "Certificate") shall pass only upon proper
delivery of certificates to the Exchange Agent and to otherwise be reasonably
agreed upon by Parent and the Company, shall be provided by the Exchange Agent
to holders of record of Common Shares as soon as practicable after the Effective
Time advising such holders of the effectiveness of the Merger and the procedure
for surrendering Certificates converted into the right to receive the
consideration payable pursuant to Section 4.2(c) to the Exchange Agent. Upon the
surrender of a Certificate to the Exchange Agent, in accordance with the terms
of such transmittal materials, the holder of such Certificate shall be entitled
to receive in exchange therefor the consideration payable pursuant to Section
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4.2(c) for the Common Shares formerly represented by such Certificate, and such
Certificate shall forthwith be cancelled. No interest will be paid or accrued on
any amount payable upon surrender of the Certificates. In the event of a
transfer of ownership of Common Shares that is not registered in the transfer
records of the Company, the proper amount of cash may be paid in exchange
therefor to a Person other than the Person in whose name a Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the Person requesting such issuance
shall pay any transfer or other taxes required by reason of the transfer of the
Common Shares to, or to payment to, a Person other than the registered holder of
such Certificate or establish to the reasonable satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 4.3(b)(i), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash such holder shall be entitled to receive pursuant
to Section 4.2(c)(i). Notwithstanding anything to the contrary in Section
4.3(b), (x) Parent shall, as promptly as is reasonably practicable after the
date hereof (and in no event later than 10 Business Days prior to the Closing),
deliver to the Principal Stockholders such transmittal materials as would be
required of holders of Certificates pursuant to the first sentence of this
Section 4.3(b)(i) and (y) so long as the Principal Stockholders complete such
transmittal materials and deliver them to Parent at or prior to the Closing (it
being understood and agreed that if Parent shall fail to deliver such
transmittal materials to the Principal Stockholders no later than 10 Business
Days prior to the Closing then in such event such transmittal materials shall
not be required to be completed by the Principal Stockholders), Parent shall
cause the Exchange Agent to pay to the Principal Stockholders immediately after
the Effective Time, the Per Common Share Consideration payable with respect of
the Common Shares held by the Principal Stockholders upon surrender of the
Certificates representing such Common Shares.
(ii) Series C Preferred Shares. Upon the surrender of a
certificate representing Series C Preferred Shares to Parent at or after the
Effective Time, the holder of such certificate shall be entitled to receive from
Parent and Parent shall immediately pay to such holder the Per Series C
Preferred Share Consideration payable pursuant to Section 4.2(b) for the Series
C Preferred Shares formerly represented by such certificate. Until surrendered
as contemplated by this Section 4.3(b)(ii), each certificate shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the amount of cash such holder shall be entitled to receive
pursuant to Section 4.2(b)(i). Parent shall, as promptly as is reasonably
practicable after the date hereof (and in no event later than 10 Business Days
prior to the Closing), deliver to each holder of Series C Preferred Shares such
transmittal materials as would be required of holders of Certificates pursuant
to the first sentence of Section 4.3(b)(i) and so long as such holder of Series
C Preferred Shares completes such transmittal materials and delivers them to
Parent at or prior to the Closing (it being understood and agreed that if Parent
shall fail to deliver such transmittal materials to such holder of Series C
Preferred Shares no later than 10 Business Days prior to the Closing then in
such event such transmittal materials shall not be required to be completed by
such holder of Series C Preferred Shares), Parent shall cause the Exchange Agent
to pay to each holder of Series C Preferred Shares immediately after the
Effective Time, the Per Series C Preferred Share Consideration payable with
respect of the Common Shares held by such holder of Series C Preferred Shares
upon surrender of the Certificates representing such Common Shares.
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(c) Transfers. At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Series C Preferred
Shares and Common Shares that were outstanding immediately prior to the
Effective Time.
(d) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Parent; provided that such
investments shall be in obligations of or guaranteed by the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Xxxxx'x
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1 billion. Any net profit resulting
from, or interest or income produced by, such investments shall be payable to
Parent.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains unclaimed by the holders of Common Shares of the Company for 180
days after the Effective Time shall be delivered to Parent. Any stockholders of
the Company who have not theretofore complied with this Article IV shall
thereafter look only to the Surviving Corporation (in the case of holders of
Common Shares) or the Parent (in the case of holders of Series C Preferred
Shares) for payment of any amounts payable pursuant to Section 4.2 upon due
surrender of their Certificates (or affidavits of loss in lieu thereof), without
any interest thereon. Notwithstanding anything to the contrary herein, none of
Parent, the Surviving Corporation, the Exchange Agent or any other Person shall
be liable to any former holder of Common Shares or Series C Preferred Shares for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar Laws. For the purposes of this Agreement,
the term "Person" shall mean any individual, corporation (including
not-for-profit), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, Governmental Entity (as
defined in Section 5.1(d)(i)) or other entity of any kind or nature.
(f) Lost, Stolen or Destroyed Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such Person of a bond in customary
amount as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent or the Parent, as the case may be, will
deliver in exchange for such lost, stolen or destroyed Certificate the
consideration that would be payable in respect thereof pursuant to this
Agreement had such lost, stolen or destroyed Certificate been surrendered.
(g) Withholding Rights. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Common Shares
pursuant to this Agreement such amounts as are required to be deducted and
withheld with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of Federal, State, local
or foreign tax Law.
4.4 Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, any issued and outstanding Common Shares and Series C Preferred
Shares held by a person who shall not have voted to adopt this Agreement or
consented thereto or waived such rights in writing and who properly demands
appraisal for such shares in accordance with Section
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262 of the DGCL (such person, a "Demanding Stockholder"; such shares, "Appraisal
Shares") shall not be converted as described in Sections 4.2(c) or 4.2(b), as
applicable, but shall be converted into the right to receive such consideration
as may be determined to be due to such Demanding Stockholder pursuant to the
DGCL, unless such holder fails to perfect or withdraws or otherwise loses his
right to appraisal. If, after the Effective Time, such Demanding Stockholder
fails to perfect or withdraws or loses his right to appraisal, such Demanding
Stockholder's Common Shares and Series C Preferred Shares shall no longer be
considered Appraisal Shares for the purposes of this Agreement and shall be
deemed to have been converted, at the Effective Time, into the right to receive
the consideration set forth in Sections 4.2(c) or 4.2(b), as applicable, without
any interest thereon. The Company shall give Parent (i) prompt notice of any
demands received by the Company for appraisal of Common Shares or Series C
Preferred Shares, withdrawals of such demands, and any other instruments or
documents served pursuant to the DGCL and received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to any such
demands. Except with the prior written consent of Parent, the Company shall not
make any payment with respect to, or offer to settle or settle, any such demands
for amounts in excess of the Per Common Share Consideration or the Per Preferred
Share Consideration. Each holder of Appraisal Shares who becomes entitled to
payment for such Appraisal Shares under the provisions of Section 262 of the
DGCL, will receive payment thereof from the Surviving Corporation and, as of the
Effective Time, such Appraisal Shares will no longer be outstanding and will
automatically be canceled and will cease to exist.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. Except as set forth
in the disclosure letter delivered to Parent by the Company on or prior to the
date hereof (the "Company Disclosure Letter"), each section of which qualifies
the correspondingly numbered representation, warranty or covenant to the extent
specified therein and such other representations, warranties or covenants to the
extent the relevance of a matter disclosed in such section of the Company
Disclosure Letter is reasonably apparent to such other representations,
warranties or covenants, and in the Company Reports (as defined herein) filed
prior to the date hereof, the Company hereby represents and warrants to Parent
and Merger Sub that:
(a) Organization, Good Standing and Qualification. (i) Each of the
Company and its Subsidiaries is an entity duly organized, validly existing and
(to the extent the concept of good standing exists in the applicable
jurisdiction) in good standing under the Laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own, lease and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of its
assets and properties or the conduct of its business requires such
qualification, except where the failure to be so organized, qualified or in good
standing or to have such power or authority, when taken together with all other
such failures, would not have a Company Material Adverse Effect (as defined
below). The Company has made available to Parent a complete and correct copy of
the Company's certificate of incorporation and bylaws, each as amended to the
date hereof (the "Company Charter" and "Company Bylaws", respectively) and the
comparable charter and
8
organizational documents of each Subsidiary, in each case as amended through and
in effect as of the date of this Agreement. The Company Charter and the Company
Bylaws so delivered are in full force and effect.
(ii) As used in this Agreement, the term (i) "Subsidiary" means,
with respect to any Person, any other Person, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having by their terms voting power to elect a majority of the board of
directors or other persons performing similar functions is directly or
indirectly owned or controlled by such Person or by one or more of its
respective Subsidiaries, and (ii) "Company Material Adverse Effect" means any
occurrence, change or effect that has or would be reasonably expected to have a
material adverse effect on (A) the business, assets, liabilities, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole, but excluding any such occurrence, change or effect that arises out of
or results from (1) changes in general economic conditions or financial or
securities markets in general or the industries and markets in which the Company
conducts its business (except, in each case, if materially and
disproportionately impacting the business, assets, liabilities, financial
condition, or results of operations of the Company and its Subsidiaries, taken
as a whole), (2) any change in and of itself in the Company's stock price or
trading volume, (3) any change in Law or GAAP after the date hereof, (4) the
execution and performance of or compliance with this Agreement, (5) the
announcement of this Agreement and the transactions contemplated hereby
(including, without limitation, any (x) actions by customers or competitors, (y)
loss of personnel or customers, or (z) the delay or cancellation of orders for
services and products but only to the extent arising from the announcement of
the Merger), (6) any outbreak or escalation of hostilities involving the United
States, the declaration by the United States of a national emergency or war, or
the occurrence of any acts of terrorism, or (7) any actions taken with the prior
written consent of Parent, (B) the ability of the Company to perform its
obligations under this Agreement or (C) the ability of the Company to consummate
the Merger and the transactions contemplated hereby. Notwithstanding the
foregoing, it is understood and agreed that in no event shall any occurrence,
change or effect that arises out of or results from a delay in the placement of
an order or orders (including under any existing Contract) by customers with the
Company and/or its Subsidiaries and/or a delay in acceptance by customers of a
shipment or shipments from the Company and/or its Subsidiaries of the type
described in Section 5.1(a)(ii) of the Company Disclosure Letter be considered,
individually or in the aggregate, in determining whether a "Company Material
Adverse Effect" has occurred or would reasonably be expected to occur.
(b) Capital Structure.
(i) The authorized capital stock of the Company consists of (A)
100,000,000 Common Shares, (B) 6,200,000 shares of Class B Non-Voting Common
Stock, par value $0.000006 per share (the "Class B Common Shares") and (C)
100,000 shares of preferred stock, par value $0.10 per share, of which 38,000
shares have been designated Series A Preferred Stock (the "Series A Preferred
Shares"), 50,000 shares have been designated Series B Preferred Stock (the
"Series B Preferred Shares") and 3,500 shares have been designated Series C
Preferred Shares. As of the close of business on August 22, 2006, (1) 76,059,735
Common Shares were issued and outstanding (and no shares, were held by the
Company in its treasury or by any Subsidiary of the Company), (2) none of the
Class B Common Shares, Series A Preferred Shares and Series B Preferred Shares
were issued or outstanding or were held by the Company in
9
its treasury or by any Subsidiary of the Company and (3) 3,202.780099 Series C
Preferred Shares were issued and outstanding. All of the outstanding Common
Shares and Series C Preferred Shares have been duly authorized and are validly
issued, fully paid and nonassessable. The Company has no Common Shares, Class B
Common Shares, Series A Preferred Shares, Series B Preferred Shares or Series C
Preferred Shares reserved for issuance, except that, as of the close of business
on August 22, 2006, there were (x) 6,223,522 Common Shares reserved for options
granted pursuant to the Firearms Training Systems, Inc. Stock Option Plan and
613,367 Common Shares reserved for future option grants under such plan (none of
which shall be issued) and (y) 189,733 Common Shares reserved for issuance
pursuant to the Firearms Training Systems, Inc. Employee Stock Compensation Plan
(the plans referred to in the foregoing clauses (x) and (y), as amended,
supplemented or otherwise modified through the date hereof, the "Stock Plans").
Except as set forth above, no shares of capital stock or other voting securities
of the Company were, and, immediately prior to the Effective Time no shares of
capital stock or other voting securities of the Company will be, issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights linked to the price of Common Shares and granted under any
Stock Plan or otherwise. None of the outstanding shares of Company capital stock
are, and none of such shares that may be issued prior to the Effective Time will
be when issued, subject to or issued in violation of any purchase option, call
option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the Company Charter, the Company Bylaws or
any Contract (as defined in Section 5.1(d)(ii)) to which the Company is a party
or otherwise bound. All Common Shares issued under the Stock Plans have been
offered, issued and sold pursuant to a registration statement declared effective
by the U.S. Securities and Exchange Commission (the "SEC") and for which no stop
order or investigation is pending. Except as set forth above, there are no
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements, calls, commitments or rights of any kind that obligate the Company
or any of its Subsidiaries to issue or sell any shares of capital stock or other
securities of the Company or any of its Subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of the Company or any
of its Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding.
(ii) Section 5.1(b)(ii) of the Company Disclosure Letter lists
each of the Company's Subsidiaries, its jurisdiction of organization, and the
number of shares outstanding of its capital stock and the number of shares of
its outstanding capital stock owned directly or indirectly by the Company. Each
of the outstanding shares of capital stock or other equity securities of each of
the Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and, except for directors' qualifying shares, owned by the Company
or by a wholly-owned Subsidiary of the Company, free and clear of any
Encumbrance (as defined below), other than Permitted Encumbrances (as defined
below).
(iii) Except for its interests in the Subsidiaries and except for
the ownership interests set forth in Section 5.1(b)(iii) of the Company
Disclosure Letter, the Company does not own, directly or indirectly, any capital
stock, membership interest, partnership interest, joint venture interest or
other equity interest in any Person.
For purposes of this Agreement, (A) "Encumbrance" means any lien,
pledge,
10
security interest, claim or other encumbrance, and (B) "Permitted Encumbrance"
means (1) Encumbrances for Taxes, assessments or governmental charges or claims
the payment of which is not due and payable; (2) statutory Encumbrances of
landlords, Encumbrances of carriers, warehousemen, mechanics and materialmen and
other Encumbrances imposed by Law incurred in the ordinary course of business
for sums not yet due or being contested in good faith; (3) Encumbrances incurred
or deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, (4) the
Encumbrances set forth on Section 5.1(b)(iii) of the Company Disclosure Letter
and (5) other Encumbrances that would not have a Company Material Adverse
Effect.
(c) Corporate Authority; Approval.
(i) The Company has all requisite corporate power and authority
and has taken all corporate action necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the Merger and the
transactions contemplated thereby, subject only to the adoption of this
Agreement by the holders of a majority of the outstanding Common Shares (the
"Company Requisite Vote") immediately after the execution and delivery hereof by
way of execution of the Principal Stockholders' Consents. Each of this Agreement
and the Principal Stockholders' Agreement, is a legally valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general equity principles, regardless of whether
enforceability is considered in a proceeding at Law or in equity (the
"Bankruptcy and Equity Exception").
(ii) The Board of Directors of the Company, at a meeting duly
called and held, has duly and unanimously (x) approved and declared advisable
this Agreement and the Merger and the other transactions contemplated hereby (y)
determined that the terms of the Merger and the transactions contemplated
thereby are fair to and in the best interests of the Company and its
stockholders and (z) recommended that the Company's stockholders approve this
Agreement and the Merger.
(iii) The only vote of holders of any class or series of Company
capital stock necessary to approve and adopt this Agreement and the Merger is
the adoption of this Agreement by a majority of all the votes entitled to be
cast by the holders of outstanding Common Shares, which will be duly and validly
effected by execution and delivery of the Principal Stockholders' Consent. No
approval by the holders of the Series C Preferred Shares is required to approve
and adopt this Agreement and the Merger or consummate the transactions
contemplated hereby.
(d) Governmental Filings; No Violations; Certain Contracts.
(i) Other than Approvals and Permits required to be obtained or
made (A) pursuant to Section 1.3, (B) under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the Securities Act of 1933, as
amended (the "Securities Act"), (C) with the OTC Bulletin Board Coordinator, (D)
under any applicable state and foreign securities, takeover
11
and "blue sky" Laws, (E) under any applicable foreign Laws intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolizing or
restraining trade ("Foreign Antitrust Laws"), (F) under Section 721 of the
Exon-Xxxxxx Amendment to the Defense Production Act of 1950, as amended (the
"Exon-Xxxxxx Amendment"), and the regulations promulgated thereunder and (G)
under 22 U.S.C. Sections 2778-2780 of the Arms Export Control Act and the
International Traffic in Arms Regulations (22 C.F.R. Sections 120-130) ("ITAR"),
no Approvals or Permits are required to be obtained or made by the Company from
or with any supranational, national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency or
commission thereof or other governmental authority ("Governmental Entity") in
connection with the execution and delivery of this Agreement by the Company and
the consummation by the Company of the Merger and the other transactions
contemplated hereby, except those that the failure to obtain or make would not,
individually or in the aggregate, have a Company Material Adverse Effect.
As used in this Agreement, (x) "Permit" means any license, permit,
franchise or certificate of authority, or any extension, modification, amendment
or waiver of the foregoing, required to be issued by any Governmental Entity and
(y) "Approval" means approval, authorization, consent, novation, qualification
or registration, or any extension, modification, amendment or waiver of any of
the foregoing, required to be obtained from, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental
Entity.
(ii) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the Company Charter or Company
Bylaws or the comparable charter or organizational documents of any Subsidiary,
(B) subject to obtaining the Company Requisite Vote and compliance with the
requirements described in Section 5.1(d)(i), a violation of any Law or Order
applicable to the Company or any of its Subsidiaries or (C) a breach or
violation of, a termination (or right of termination) or a default under, the
acceleration of any obligations or the creation of an Encumbrance on the assets
of the Company or any of its Subsidiaries (with or without notice, lapse of time
or both) pursuant to, any agreement, lease, license, contract, note, mortgage,
indenture, arrangement or other obligation ("Contracts") to which the Company or
any Subsidiary is a party or otherwise binding upon the Company or any of its
Subsidiaries or any of the Company's Permits or Approvals except, in the case of
clauses (B) and (C) above, for any breach, violation, termination, default,
acceleration or creation that, individually or in the aggregate, would not have
a Company Material Adverse Effect. Section 5.1(d)(ii) of the Company Disclosure
Letter sets forth, a correct and complete list of material Contracts of the
Company and its Subsidiaries pursuant to which Approvals are or may be required
prior to consummation of the transactions contemplated by this Agreement. No
other Contracts require approvals or consents except those the failure of which
to obtain would not have a Company Material Adverse Effect. The term "knowledge"
when used in this Agreement with respect to the Company shall mean the actual
knowledge of the Company's Chief Executive Officer, Chief Operating Officer, and
Chief Financial Officer after making such inquiry as such officer would
typically reasonably make under the circumstances in the performance of his
duties of the Persons listed on Section 5.1(d)(ii) of the Company Disclosure
Letter to the extent such Person would typically reasonably be consulted by such
officer with respect to the matter in question.
12
(iii) Neither the Company nor any of its Subsidiaries is a party
to or bound by any non-competition Contracts or other Contract that purports to
limit in any material respect either the type of business in which the Company
or its Subsidiaries (or, after giving effect to the Merger, the Parent or its
Subsidiaries) may engage or the manner or locations in which any of them may so
engage in any business.
(e) Company Reports; Financial Statements.
(i) The Company has delivered or made available to the Parent
each registration statement, report, proxy statement or information statement
prepared by it since March 31, 2004, including (i) the Company's Annual Reports
on Form 10-K for the years ended March 31, 2004, March 31, 2005, and Xxxxx 00,
0000, (xx) the Company's Quarterly Reports on Form 10-Q for the periods ended
June 30, 2004, September 30, 2004, December 31, 2004, June 30, 2005, September
30, 2005, December 31, 2005 and June 30, 2006 and (iii) each Current Report on
Form 8-K filed since June 30, 2004, each in the form (including exhibits,
annexes and any amendments thereto) filed with the SEC (collectively, including
any such reports filed subsequent to the date hereof and as amended, the
"Company Reports"). The Company has filed all reports, schedules, forms and
statements required to be filed by the Company with the SEC since June 30, 2004.
As of their respective dates (or, if amended, as of the date of such amendment
prior to the date hereof), the Company Reports complied (and any Company Reports
filed with the SEC subsequent to the date hereof will comply) in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder and
did not, and any Company Reports filed with the SEC subsequent to the date
hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date, and each
of the consolidated statements of income, of cash flow and of changes in
financial position included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents, or will
fairly present, the results of operations, cash flows, retained earnings and
changes in financial position, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments), in each
case in accordance with U.S. generally accepted accounting principles ("GAAP"),
except as may be noted therein, consistently applied during the periods involved
and the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.
(ii) None of the Subsidiaries is, or has at any time been,
subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange
Act.
(iii) Each of the principal executive officer and the principal
financial officer of the Company has made all applicable certifications required
as of the date hereof by Rule 13a-14 or 15d-14 under the Exchange Act or
Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 ("SOX") and the rules and
regulations of the SEC promulgated thereunder with respect to the Company
Reports, and, to the knowledge of the Company, the statements
13
contained in such certifications are true and correct. For purposes of the
preceding sentence, "principal executive officer" and "principal financial
officer" shall have the meanings given to such terms in SOX. Neither the Company
nor any of the Subsidiaries of the Company has outstanding, or has arranged any
outstanding, "extensions of credit" to directors or executive officers within
the meaning of Section 402 of SOX, except as may have been in existence prior to
the application of Section 402 of SOX to the Company.
(iv) Except as set forth in Section 5.1(e)(iv) of the Company
Disclosure Letter, the Company has not received any written notification of a
"material weakness" in the Company's internal controls over financial reporting,
and, to the knowledge of the Company, there is no set of circumstances that
would reasonably be expected to result in a "material weakness" in the internal
controls over financial reporting of the Company. For purposes of this
Agreement, the term "material weakness" shall have the meaning assigned to it in
the Public Company Accounting Oversight Board's Auditing Standard 2, as in
effect on the date hereof.
(v) Neither the Company nor any of the Subsidiaries is a party
to, or has any commitment to become a party to, any "off-balance sheet
arrangements" (as defined in Item 303(a) of Regulation S-K promulgated by the
SEC), where the purpose or effect of such contract or arrangement is to avoid
disclosure of any material transaction involving, or material liabilities of,
the Company or any of the Subsidiaries in the Company's or such Subsidiary's
published financial statements or other Company Reports.
(vi) To the knowledge of the Company, the Company is in material
compliance with the applicable provisions of SOX, the rules and regulations of
the SEC adopted in connection therewith.
(f) Absence of Certain Changes or Events. Except as disclosed in
Section 5.1(f) of the Company Disclosure Letter, since June 30, 2006, the
Company has conducted its business only in the ordinary course consistent with
past practice, and during such period there has not been:
(i) any change, effect, event, occurrence or state of facts that,
individually or in the aggregate, has had a Company Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
Company capital stock or any repurchase for value by the Company of any Company
capital stock (other than the accrual of dividends on Series C Preferred Stock
in accordance with its terms);
(iii) any split, combination or reclassification of any Company
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of, or in substitution for shares of Company
capital stock;
(iv) except as would be permitted after the date hereof pursuant
to Section 6.1, any granting by the Company or any Subsidiary to any director,
officer or employee of the Company or any Subsidiary of any increase in
compensation, except to employees (other than officers) in the ordinary course
of business consistent with prior practice or as was required under employment
agreements in effect as of June 30, 2006, (ii) any granting by the Company or
14
any Subsidiary to any such director, officer or employee of any increase in
severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of June 30, 2006, or (iii) any
entry by the Company or any Subsidiary into, or any amendment of, any
employment, severance or termination agreement with any such director, officer
or employee;
(v) except as would be permitted after the date hereof pursuant
to Section 6.1, any material change in accounting methods, principles or
practices by the Company or any Subsidiary other than as required by a change in
GAAP;
(vi) except as would be permitted after the date hereof pursuant
to Section 6.1, any material elections with respect to Taxes by the Company or
any Company Subsidiary or settlement or compromise by the Company or any Company
Subsidiary of any material Tax liability or refund; or
(vii) any damage, destruction or loss, not covered by insurance,
that, individually or in the aggregate, has had a Company Material Adverse
Effect.
(g) Undisclosed Liabilities. Except as set forth in the Company
Reports (excluding any disclosure set forth in any risk factor section and/or in
any section relating to forward-looking statements, but including all other
information in such Company Reports (including without limitation the financial
statements contained therein)) filed and publicly available prior to the date
hereof or in the Company Disclosure Letter, to the knowledge of the Company,
neither the Company nor any of its Subsidiaries has incurred any liabilities
(whether absolute, accrued, contingent or otherwise) except (i) liabilities
incurred in the ordinary course of business after June 30, 2006, (ii)
liabilities that would not have a Company Material Adverse Effect or (iii)
liabilities and obligations (other than any such liabilities or obligations
arising from the Company's or its Subsidiaries' breach or default prior to the
Effective Time) arising out of Contracts to which the Company or its
Subsidiaries is a party.
(h) Litigation. There are no material actions, suits, claims,
investigations, audits, examinations or proceedings, whether civil or criminal,
at Law or in equity, before any Governmental Entity or arbitrator pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any of the Company's directors or officers in their capacity as
such, that would, individually or in the aggregate, have a Company Material
Adverse Effect (collectively, "Actions"). Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any officer, director or employee
of the Company or any Subsidiaries, has been permanently or temporarily enjoined
by any Order of any Governmental Entity from engaging in or continuing any
conduct or practice in connection with the business, assets or properties of the
Company or such Subsidiary, nor, to the knowledge of the Company, is the
Company, any Subsidiary of the Company or any officer, director or employee of
the Company or any Subsidiaries of the Company under investigation by any
Governmental Entity, except, in each case, (i) as disclosed in the Company
Reports filed prior to the date hereof, or Section 5.1(h) of the Company
Disclosure Letter or (ii) as would not have a Company Material Adverse Effect.
15
(i) Employee Benefits.
(i) Each benefit and compensation plan, contract, policy or
arrangement (generally, a "Compensation and Benefit Plan") covering current or
former employees of the Company or any entity required to be aggregated with the
Company under Section 414(b), (c) (m) or (o) of the Code (an "ERISA Affiliate")
(for purposes of this Section 5.1(i), the "Employees") and current or former
directors of the Company, including "employee benefit plans" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and incentive and bonus, deferred compensation, stock
purchase, restricted stock, stock option, stock appreciation rights or stock
based plan (the "Company Compensation and Benefit Plans"), other than Company
Compensation and Benefit Plans maintained outside of the United States primarily
for the benefit of Employees working outside of the United States (such plans
hereinafter being referred to as "Company Non-U.S. Compensation and Benefit
Plans"), are listed in Section 5.1(i)(i) of the Company Disclosure Letter. True
and complete copies of all Company Compensation and Benefit Plans, including any
trust agreement or insurance contract forming a part of any Company Compensation
and Benefit Plans, all amendments thereto and the financial statements and
summary plan descriptions related thereto have been made available to Parent.
(ii) All Company Compensation and Benefit Plans other than
Company Non-U.S. Compensation and Benefit Plans (collectively, "Company U.S.
Compensation and Benefit Plans") are in substantial compliance with their terms,
ERISA, the Code, and other applicable Laws. Each Company U.S. Compensation and
Benefit Plan that is subject to ERISA (the "ERISA Plans") that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a "Company
Pension Plan") and that is intended to be "qualified" under Section 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service (the "IRS"). As of the date hereof, there is no pending or, to the
knowledge of the Company, material threatened suit, claim or other litigation
relating to the Company U.S. Compensation and Benefit Plans (other than routine
claims for benefits). Neither the Company nor any of its ERISA Affiliates has
engaged in a transaction with respect to any ERISA Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would
reasonably be expected to subject the Company or any of its Subsidiaries to a
tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA.
(iii) No Company Pension Plan is, or has in the five years
preceding this year been, subject to Title IV of ERISA or Section 412 of the
Code. Neither the Company nor any ERISA Affiliate thereof has contributed or
been obligated to contribute to a "multiemployer plan" within the meaning of
Section 3(37) of ERISA (a "Multiemployer Plan").
(iv) All material contributions required to be made under the
terms of any Company Compensation and Benefit Plan as of the date hereof have
been made or have been reflected on the most recent consolidated balance sheet
filed or incorporated by reference in the Company Reports prior to the date
hereof.
(v) Neither the Company nor any ERISA Affiliate thereof has any
obligations to provide health or other non-pension benefits to retirees or other
former employees
16
under any ERISA Plan, except as required by Section 4980 of the Code or Part 6
of Title I of ERISA.
(vi) All Company Non-U.S. Compensation and Benefit Plans comply
in all material respects with applicable local Law. All Company Non-U.S.
Compensation and Benefit Plans are listed on Section 5.1(i)(vi) of the Company
Disclosure Letter. True and complete copies of all Company Non-U.S. Compensation
and Benefit Plans listed on Section 5.1(i)(vi) of the Company Disclosure Letter,
and all amendments thereto, have been made available to Parent. As of the date
hereof, there is no pending or, to the knowledge of the Company, threatened
material litigation relating to the Company Non-U.S. Compensation and Benefit
Plans. None of the Company Non-U.S. Compensation and Benefit Plans is a defined
benefit plan within the meaning of any applicable Law. Each Company Non-U.S.
Compensation and Benefit Plan required to be registered under the Laws of any
jurisdiction has been registered and has been maintained in good standing with
applicable regulatory authorities and has been approved by any applicable Taxing
authority to the extent such Approval is required.
(vii) Except as set forth on Section 5.1(i)(vii) of the Company
Disclosure Letter, no employee of the Company or any Subsidiary of the Company
will be entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefit under any company U.S. Compensation and
Benefit Plan as a result of the transactions contemplated by this Agreement.
(viii) Except as set forth on Section 5.1(i)(viii) of the Company
Disclosure Letter, no filing, application or other matter is pending with the
IRS, the Pension Benefit Guaranty Corporation, the Department of Labor or any
other Governmental Entity.
(j) Compliance with Laws; Permits and Approvals.
(A) Except with respect to employee benefits, the matters specified
in clauses (B) and (C) below, environmental matters and Taxes
(which are the subject of Section 5.1(i), 5.1(j)(B) and (C),
5.1(l) and 5.1(m), respectively), the businesses of each of the
Company and its Subsidiaries are being conducted in compliance
with all Laws currently applicable to it, its personnel,
properties or other assets or its business or operations, except
for violations or possible violations that, individually or in
the aggregate, would not have a Company Material Adverse Effect.
The Company and its Subsidiaries have all Permits and Approvals
that are material to the businesses of the Company and its
Subsidiaries taken as a whole and necessary to conduct such
respective businesses as presently conducted.
As used in this Agreement, (i) "Law" means any constitutional
provision, statute, rule, regulation or ordinance of any Governmental Entity and
any Order and (ii) "Order" means any decree, injunction, judgment, order,
ruling, assessment or writ of any Governmental Entity. Except as set forth in
Section 5.1(j) of the Company Disclosure Letter, neither the Company nor any
Subsidiary has received any written communication, or to the knowledge of the
Company, any overtly threatening oral communication that the Company reasonably
believes is credible
17
based on the Person making the allegation and the circumstances in which the
allegation is made, that alleges that the Company or any Subsidiary is not or
would not be, in compliance with any Law, other than any such allegation that,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(B) The Company and its Subsidiaries are in compliance in all
material respects with all statutory and regulatory requirements
under the Arms Export Control Act (22 U.S.C. 2778), ITAR, the
Export Administration Regulations (15 C.F.R. ss. 730 et seq.) and
associated executive orders, and the Laws implemented by the
Office of Foreign Assets Controls, United States Department of
the Treasury (collectively the "Export Control Laws"). Except as
set forth in Section 5.1(j) of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries has received any
written communication that alleges that the Company or a
Subsidiary is not, or may not be, in material compliance with, or
has, or may have, any material liability under, the Export
Control Laws. All such matters referenced in Section 5.1(j) of
the Company Disclosure Letter have been resolved without any
material penalty to the Company or its Subsidiaries.
(C) The Company and its Subsidiaries are in compliance in all
material respects with all statutory and regulatory requirements
under (i) the anti-bribery provisions of the Foreign Corrupt
Practices Act (15 U.S.C. ss. 78dd-1 and 78dd-2)(the "FCPA"), (ii)
the books and records provisions of the FCPA as they relate to
any payment in violation of the anti-bribery provisions of the
FCPA, (iii) the Organization for Economic Cooperation and
Development Convention Against Bribery of Foreign Public
Officials in International Business Transactions and (iv) to its
knowledge, local anti-corruption and bribery laws in
jurisdictions in which the Company and its Subsidiaries are
operating (collectively, the "Anti-Bribery Laws"). Since June 30,
2001 to the date hereof, neither the Company nor any of its
Subsidiaries has received (i) any written communication from a
Governmental Entity that alleges that the Company, a Subsidiary
of the Company or any agent thereof is in material violation of,
or has any material liability under, the Anti-Bribery Laws or
(ii) to the Company's knowledge, any overtly threatening oral
communication from a Governmental Entity that alleges that the
Company, a Subsidiary of the Company or any agent thereof is in
material violation of, or has any material liability under, any
anti-corruption and bribery laws at the federal or national level
in jurisdictions in which the Company and its Subsidiaries are
operating, and which allegation the Company reasonably believes
to be credible based on the circumstances and the Person (on
behalf of such Governmental Entity) making such oral
communication.
(k) Delaware Takeover Statute. Section 203 of the DGCL is not
applicable to the Company.
18
(l) Environmental Matters. Except as disclosed in the Company Reports
filed prior to the date hereof or as set forth in Section 5.1(l) of the Company
Disclosure Letter or as would not have a Company Material Adverse Effect, each
of the real property and improvements currently owned, leased, used, operated or
occupied by the Company or any of its Subsidiaries (each a "Company Property"):
(i) is in compliance with all applicable Environmental Laws and the requirements
of any Permits issued under such Environmental Laws with respect to any Company
Property; (ii) is not, as of the date hereof, the subject of any pending or, to
the knowledge of the Company, threatened Action alleging the violation of any
applicable Environmental Laws; (iii) is not, as of the date hereof, subject to
any written Order arising under any Environmental Law; (iv) has not been used
for the disposal, generation, treatment, use or storage of Hazardous Substances;
and (v) has not had any emissions or discharges of Hazardous Substances except
as permitted under applicable Environmental Laws. Except as set forth in Section
5.1(l) of the Company Disclosure Letter or as would not have a Company Material
Adverse Effect, there are no facts or circumstances, conditions or occurrences
regarding any Company Property or, to the knowledge of the Company any property
that previously was owned or leased by the Company or any of its Subsidiaries or
to the knowledge of the Company any property that is adjacent to any property
that is currently owned or leased by the Company or any of its Subsidiaries,
that is reasonably likely (A) to form (or has formed) the basis of an Action
against the Company or any of its Subsidiaries or any Company Property with
respect to any Environmental Law or the requirements of any Permits issued under
Environmental Laws with respect to any Company Property or (B) to cause such
Company Property to be subject to any restrictions on its ownership, occupancy,
use or transferability under any Environmental Law.
As used in this Agreement, (i) the term "Environmental Law" means any
applicable Law relating to (A) the protection of the environment (including air,
water, soil and natural resources) or (B) the use, storage, handling, release or
disposal of Hazardous Substances, in each case as in effect on the date of this
Agreement, and (ii) the term "Hazardous Substance" means any substance to the
extent presently listed, defined, designated or classified as hazardous, toxic
or radioactive under any applicable Environmental Law or with respect to which
exposure is prohibited, limited or regulated by any Governmental Entity,
including petroleum, asbestos in any form that is friable, radon gas, urea
formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls and any derivative or by-products thereof.
(m) Taxes.
(i) The Company and each of its Subsidiaries (x) have prepared
and timely filed (taking into account any extension of time within which to
file) with the appropriate Governmental Entity all federal, state, local and
foreign income and franchise Tax Returns (as defined below) and all other
material Tax Returns required to be filed, and all filed Tax Returns are true,
complete and accurate in all material respects; (y) have paid in full all Taxes
(as defined below) that are shown as due on such filed Tax Returns, and all
other material Taxes have been paid in full to the extent due except with
respect to non-material Tax matters being contested in good faith; and (z) have
not waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, and no
Governmental Entity has requested any such waiver or extension. There are not
pending any material Tax audits or examinations of any Tax Returns of the
Company or any of its Subsidiaries. Since
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December 15, 2002, (1) the Company has not received any notification in writing
of any audits, examinations, investigations or other proceedings in respect of
the Tax liability of it or any of its Subsidiaries and (2) no claim has been
made in writing by any Governmental Entity in any jurisdiction the Company or
any of the Subsidiaries did not pay Tax or file Tax Returns that it is or may be
required to pay Taxes or file Tax Returns.
(ii) The Company and each of its Subsidiaries are not, and have
never been a member of any consolidated, combined, unitary, affiliated or
aggregate group for any Tax purpose (other than a group the common parent of
which is the Company). None of the Company or any of its Subsidiaries has any
liability for Taxes of any Person (other than Taxes of the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of any state, local or foreign law), or as a transferee or successor,
except pursuant to customary contractual provisions in financing and commercial
agreements entered into in the ordinary course of business consistent with past
practice.
(iii) Except as may be noted therein the most recent consolidated
balance sheet contained in the Company Reports reflect reserves for all Taxes
payable by the Company and each of its Subsidiaries (in addition to any reserve
for deferred Taxes to reflect timing differences between book and Tax items) for
all Taxable periods and portions thereof through the date of such balance sheet
all in accordance with GAAP, consistently applied during the periods involved
and the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.
(iv) There is no Encumbrance on the assets, income or operation
of the Company or any of its Subsidiaries with respect to any Tax, except for
current Taxes not yet due and payable.
(v) Each of the Company and its Subsidiaries has withheld and
paid all material Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party or Affiliates, except for withholding Taxes
which the Company has reserves on its most recent consolidated balance sheet,
and has complied with all applicable Laws with respect thereto. Neither the
Company or any of its Subsidiaries is or has been a United States real property
holding corporation within the meaning of Code Section 897.
(vi) Neither the Company nor any of its Subsidiaries has
distributed the stock of any corporation in a transaction satisfying, or
intended to satisfy, the requirements of Code Section 355, and neither the stock
of the Company nor the stock of any of its Subsidiaries has been distributed in
a transaction satisfying, or intended to satisfy, the requirements of Code
Section 355.
(vii) Neither the Company nor any of its Subsidiaries has entered
into any transaction identified as a "listed transaction" for purposes of
Treasury Regulation Sections 1.6011-4(b)(2) or 301.6111-2(b)(2), or any other
transaction that required or will require the filing of a Form 8886.
20
(viii) All transactions between any Affiliates of the Company
have complied in all material respects with Section 482 of the Code, or any
similar provision under state, local or foreign Tax Law.
(ix) There is no Tax sharing agreement, Tax allocation agreement,
Tax indemnity or assumption obligation or similar written or unwritten
agreement, arrangement, understanding or practice dealing principally with Taxes
(including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any Governmental Entity) to which the Company or any of
its Subsidiaries is a party, subject, obligated or bound in any manner, other
than agreements solely between the Company and its wholly-owned Subsidiaries.
As used in this Agreement, (x) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") shall mean (i) any and all
taxes duties or assessments of any nature whatsoever (whether federal, state,
local or foreign) including, without limitation, all income, profits, franchise,
gross receipts, environmental, customs duty, capital stock, severances, stamp,
payroll, sales, employment, social security, worker's compensation,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy, ad valorem, transfer, license, windfall, mercantile, net
worth, recapture, alternative or add-on minimum, estimated and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts, and any interest
in respect of such penalties and additions, and (y) the term "Tax Return"
includes all returns, reports, declarations, statements, claim for refund,
forms, or other documents (including elections, disclosures, schedules,
estimates and information returns) required to be supplied to a Tax authority
relating to Taxes.
(n) Labor Matters. None of the Company and its Subsidiaries is a party
to or otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. Since June
30, 2004, none of the Company and its Subsidiaries is the subject of any
material Action asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization. As of the date hereof, there is not
pending or, to the knowledge of the Company, threatened any (i) Action against
the Company or any of its Subsidiaries by any of their employees that is or
would be material to the Company and its Subsidiaries, taken as a whole or (ii)
labor strike, walk-out, work stoppage, slow-down or lockout involving the
Company or any of its Subsidiaries. Since June 30, 2004, there have been no
"plant closings" or "mass layoffs" under the WARN Act. To the knowledge of the
Company, as of the date hereof, there are no material charges or complaints, of
(x) unlawful harassment or discrimination, (y) failure to pay wages or benefits
owed, or (z) any other material labor or employment controversies of any kind,
pending or threatened between the Company or any Subsidiary and any of their
respective employees or their representatives.
(o) Insurance. All fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by the Company and its Subsidiaries ("Insurance Policies")
are in full force and effect, with reputable insurance carriers, provide
coverage for all normal risks incident to the business of the Company and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least
21
equivalent to that carried by Persons engaged in similar businesses and subject
to the same or similar perils or hazards. As of the date hereof, no notice of
cancellation or termination has been received by Company with respect to any
such Insurance Policy other than as is customary in connection with renewals of
existing Insurance Policies.
(p) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns or has the
right to use all (A) trademarks, service marks, trade names, Internet domain
names, trade dress, and all goodwill associated therewith and symbolized
thereby, and registrations and applications therefor, including renewals; (B)
inventions and discoveries, whether patentable or not, and all patents,
registrations, and applications therefor, including divisions, continuations,
continuations-in-part and reissues; (C) published and unpublished works of
authorship, whether copyrightable or not, including computer software programs,
applications, source code and object code, and databases and other compilations
of information, copyrights in and to the foregoing, including extensions,
renewals, and restorations, and registrations and applications therefor; and (D)
confidential and/or proprietary information, trade secrets and know-how,
including processes, schematics, business methods, formulae, drawings,
prototypes, models, designs, customer lists and supplier lists ((A) through (D)
collectively, "IP Rights") that are used in the conduct of the business of the
Company and its Subsidiaries as currently conducted, except for any such
failures to own or have the right to use that, individually or in the aggregate,
would not have a Company Material Adverse Effect. Section 5.1(p) of the Company
Disclosure Letter sets forth a description of all registrable IP Rights that are
material to the conduct of the business of the Company and the Subsidiaries
taken as a whole.
(ii) Except as would not have a Company Material Adverse Effect:
(A) there are no written claims, or to the knowledge of the
Company, oral claims (1) that the conduct of the business of the Company
and its Subsidiaries as currently conducted infringes or otherwise violates
any IP Rights of any Person; (2) against the use by the Company or any of
its Subsidiaries of any IP Right used in the business of the Company or any
of its Subsidiaries as currently conducted; (3) challenging the ownership,
validity or enforceability of any of the IP Rights owned by the Company or
any of its Subsidiaries (collectively, the "Company IP Rights") or any IP
Rights owned or held by third parties (collectively, the "Third-Party IP
Rights") exclusively licensed or otherwise transferred to the Company or
its Subsidiaries; or (4) challenging the right to use of any Third-Party IP
Rights held by the Company or any of its Subsidiaries;
(B) there is no unauthorized use, infringement or other violation
of any of the Company IP Rights, or any Third-Party IP Rights held
exclusively by the Company or its Subsidiaries, by any Person; and
(C) all Company IP Rights and Third-Party IP Rights held
exclusively by the Company or its Subsidiaries are valid and enforceable.
22
(q) Tangible Assets.
(i) Neither the Company nor any of its Subsidiaries owns any real
property. Section 5.1(q) of the Company Disclosure Letter lists (A) all real
property leased by the Company or any of its Subsidiaries from a third Person
and (B) the identity of the lessor and lessee of each such parcel of real
property. The Company has made available to Parent and Merger Sub copies of the
leases set forth in Section 5.1(q) of the Company Disclosure Letter ("Real
Property Lease"). No consent of any lessor under any Real Property Lease is
required to consummate the transactions contemplated hereby. Each Real Property
Lease is in full force and effect and constitutes a valid and binding obligation
of the Company and/or one or more of its Subsidiaries. No material default
exists on the part of any of the Company or any of its Subsidiaries that is
party to any material Real Property Lease or, to the knowledge of the Company,
any lessor that is party to any material Real Property Lease.
(ii) The Company and its Subsidiaries have (A) valid leasehold
interests in (in the case of leasehold interests in personal property) or (B)
good title to (in the case of all other personal property), all of their
respective personal property, free and clear of all Encumbrances other than
Permitted Encumbrances. The assets, and properties owned, leased or licensed by
the Company and such Subsidiaries include all assets, properties and interests
in properties (tangible and intangible) reasonably necessary to enable the
Company and the Subsidiaries to carry on the Company's business as presently
conducted. All of such tangible personal property is in good condition and
repair, ordinary wear and tear excepted, and is usable in the ordinary course of
business of the Company and its Subsidiaries as conducted on the date hereof.
(r) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has retained any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement, except
that the Company has retained Xxxxxxxx Xxxxx Xxxxxx & Xxxxx as its financial
advisor. The Company has delivered to Parent true and complete copies of all
Contracts under which any brokers or finders fees or expenses (in respect of
brokers or finders) are payable, and all indemnification Contracts related to
the engagement of such Persons, in connection with the Merger or the other
transactions contemplated by this Agreement.
(s) Affiliate Transactions. Except as set forth in the Company Reports
filed prior to the date hereof and except for compensation arrangements between
the Company or any of its Subsidiaries, on the one hand, and any director or
officer of the Company or any of its Subsidiaries, on the other hand, entered
into in the ordinary course of business consistent with past practice, Section
5.1(s) of the Company Disclosure Letter sets forth a true and complete list of
all Contracts between, among or involving the Company or any of its
Subsidiaries, on the one hand, and any director or officer or other Affiliate of
the Company or any of its Subsidiaries or any of the Affiliates thereof, on the
other hand that are in effect as of the date hereof and through to and including
the Closing. Except as expressly disclosed in Section 5.1(s) of the Company
Disclosure Letter, none of the Contracts between the Company or any of its
Subsidiaries, on the one hand, and any Principal Stockholder, any beneficial
owner of 5% or more of the outstanding capital stock (or any class thereof) of
the Company, or any of the Affiliates thereof, on the other
23
hand, will continue in effect subsequent to the Closing, and all obligations of
the Company or any of its Subsidiaries thereunder will have been satisfied.
(t) Customers; Suppliers, etc. Section 5.1(t) of the Company
Disclosure Letter contains a list of the top ten suppliers and customers of the
Company and its Subsidiaries (by volume in dollars of purchases) for the fiscal
year ended March 31, 2006 (the "Major Suppliers" and "Major Customers",
respectively). Section 5.1(t) of the Company Disclosure Letter sets forth a
list, as of the date of this Agreement, of each of the material Contracts with
each Major Supplier and Major Customer. As of the date hereof (i) no Major
Supplier or Major Customer of the Company or any of its Subsidiaries has given
written notice canceling or otherwise terminating its relationship with the
Company or any of its Subsidiaries, except for such cancellations and
terminations that, individually or in the aggregate, would not have a Company
Material Adverse Effect, (ii) to the knowledge of the Company, no Major Supplier
or Major Customer of the Company or any of its Subsidiaries has overtly
threatened or provided written notice to the Company or any of its Subsidiaries
of its intent either to terminate its relationship with the Company or any of
its Subsidiaries or to cancel any material agreement with the Company or any of
its Subsidiaries, except for such terminations and cancellations that,
individually or in the aggregate, would not have a Company Material Adverse
Effect, (iii) to the knowledge of the Company, none of the Major Suppliers of
the Company or any of its Subsidiaries is unable to continue to supply the
products or services supplied to the Company or any of its Subsidiaries by such
supplier, except for such inabilities that, individually or in the aggregate,
would not have a Company Material Adverse Effect, and (iv) except as set forth
in Section 5.1(t) of the Company Disclosure Letter, the Company and its
Subsidiaries have no direct or indirect ownership of the capital stock of any
supplier or customer of the Company or any of its Subsidiaries that is material
to the Company and its Subsidiaries taken as a whole. Each of such material
Contracts is in full force and effect and constitutes a valid and binding
obligation of the Company and/or any of its Subsidiaries that are party thereto
and neither the Company, nor any of its Subsidiaries, nor, to the knowledge of
the Company, any Major Supplier or Major Customer is in material breach or
default thereunder. Other than as set forth on Section 5.1(t) of the Company
Disclosure Letter, none of such material Contracts has been amended, modified,
supplemented or superceded, except as and to the extent would not be restricted
after the date hereof by Section 6.1.
(u) Fairness Opinion. The Company's Board of Directors has received
the opinion of Xxxxxxxx Xxxxx, Xxxxxx & Xxxxx, to the effect that, as of the
date of such opinion, the consideration to be received in the Merger by the
holders of Common Shares is fair from a financial point of view to such
stockholders. A complete and correct signed copy of such opinion will be
delivered to Parent by the Company promptly after the execution hereof for
informational purposes. The Company has been authorized by Xxxxxxxx Xxxxx,
Xxxxxx & Xxxxx to permit the inclusion of such fairness opinion (or a reference
thereto) in the Information Statement.
5.2 Representations and Warranties of Parent and Merger Sub. Except as
set forth in the disclosure letter delivered to the Company by Parent on or
prior to the date hereof (the "Parent Disclosure Letter"), each section of which
qualifies the correspondingly numbered representation, warranty or covenant to
the extent specified therein and such other representations, warranties or
covenants to the extent the relevance of a matter disclosed in such
24
section of the Parent Disclosure Letter is reasonably apparent to such other
representations, warranties or covenants, Parent and Merger Sub each hereby
represent and warrant to the Company that:
(a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub is an entity duly organized, validly existing and (to the extent the
concept of good standing exists in the applicable jurisdiction) in good standing
under the Laws of its respective jurisdiction of organization and has all
requisite corporate or similar power and authority to own, lease and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its assets or properties
or the conduct of its business requires such qualification, except where the
failure to be so organized, qualified or in such good standing, or to have such
power or authority when taken together with all other such failures, would not
have a material adverse effect on the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement. Parent has made
available to the Company a complete and correct copy of Parent's and Merger
Sub's certificates of incorporation, bylaws or other organizational documents,
each as amended to and in effect as of the date hereof. Parent's and Merger
Sub's certificates of incorporation and bylaws are in full force and effect.
(b) Corporate Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority and has taken all corporate action
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the Merger and the transactions contemplated thereby, subject
only to adoption of this Agreement by Parent as sole stockholder of Merger Sub,
which adoption shall occur immediately after the execution and delivery of this
Agreement. This Agreement and, with respect to Parent only, the Principal
Stockholders' Agreement, is a legally valid and binding obligation of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, subject to the Bankruptcy and Equity Exception. The respective boards
of directors of each of Parent and Merger Sub have approved and declared
advisable this Agreement and the Merger and the other transactions contemplated
hereby. No approval of Guarantor's shareholders is required in order for Parent
and/or Merger Sub to consummate the Merger or the other transactions
contemplated by this Agreement or the Principal Stockholders' Agreement, or for
Guarantor to perform its obligations under the Guaranty.
(c) Governmental Filings; No Violations.
(i) Other than Approvals and Permits required to be obtained or
made (A) pursuant to Section 1.3, (B) under the HSR Act, the Exchange Act or the
Securities Act, (C) under any applicable Foreign Antitrust Laws, (D) under the
Exon-Xxxxxx Amendment and the regulations promulgated thereunder and (E) under
ITAR, no Approvals or Permits are required to be obtained or made by Parent or
Merger Sub from or with any Governmental Entity in connection with the execution
and delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the Merger and the other transactions contemplated
hereby, except those that the failure to obtain or make would not, individually
or in the aggregate, have a material adverse effect on the ability of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement.
25
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby will not, constitute
or result in (A) a breach or violation of, or a default under, the certificate
of incorporation or bylaws of Parent or Merger Sub, (B) subject to compliance
with the requirements described in Section 5.2(c)(i), a violation of any Law
applicable to Parent or Merger Sub or (C) a breach or violation of, a
termination (or right of termination) or a default under, the acceleration of
any obligations or the creation of an Encumbrance on the assets of Parent or any
of its Subsidiaries (with or without notice, lapse of time or both) pursuant to,
any material Contract binding upon Parent or any of its Subsidiaries except, in
the case of clauses (B) and (C) above, for any breach, violation, termination,
default, acceleration or creation that, individually or in the aggregate, would
not have a material adverse effect on the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement. Section 5.2(c)(ii)
of the Parent Disclosure Letter sets forth, to the knowledge of Parent, a
correct and complete list of material Contracts of Parent and its Subsidiaries
pursuant to which Approvals are or may be required prior to consummation of the
transactions contemplated by this Agreement, except those the failure of which
to obtain would not have a material adverse effect on the ability of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement. The
term "knowledge" when used in this Agreement with respect to Parent shall mean
the actual knowledge of Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxx and Xxxx
Xxxxxxxx.
(d) Litigation and Liabilities. As of the date hereof there are no
Actions pending or, to the knowledge of Parent, threatened against Parent or any
of its Subsidiaries, except for those that would not, individually or in the
aggregate, have a material adverse effect on the ability of Parent or Merger Sub
to consummate the transactions contemplated by this Agreement.
(e) Ownership of Common Shares. Neither Parent nor any of its
Subsidiaries "beneficially owns" or is the "beneficial owner" of (as such terms
are defined in Rule 13d-3 under the Exchange Act) any Common Shares or Series C
Preferred Shares.
(f) Brokers and Finders. Neither Parent nor any of its officers,
directors or employees has retained any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated by this Agreement, other
than Rothschild Inc., the fees and expenses of which will be paid by Parent.
(g) Available Funds. Parent has and will continue to have available to
it through the Closing all funds necessary to satisfy all of its and Merger
Sub's obligations hereunder and in connection with the Merger and the other
transactions contemplated by this Agreement, to repay, in full, all indebtedness
of the Company that will become due and payable as a result of the consummation
of the Merger, and to pay all charges and expenses required to be paid by
Parent, Merger Sub or the Surviving Corporation pursuant to Section 6.8. Section
5.2(g) of the Parent Disclosure Letter sets forth the sources of funds (and the
estimated amounts from each such source) that Parent will use to satisfy the
foregoing obligations.
(h) No Additional Representations. Guarantor, Parent and Merger Sub
have been afforded the opportunity to conduct a thorough review and analysis of
the business, assets,
26
liabilities, results of operations, financial condition, software, technology
and prospects of the Company and its Subsidiaries and acknowledge that
Guarantor, Parent and Merger Sub have been provided adequate access to the
personnel, properties, premises and records of the Company and its Subsidiaries
for such purpose. Except for the representations and warranties contained in
this Agreement and the transaction agreements contemplated hereby, Guarantor,
Parent and Merger Sub acknowledge that neither the Company, any of its
Affiliates nor any other Person makes any express or implied representation or
warranty with respect to the Company and its Subsidiaries prior to or after the
date hereof, their respective businesses or otherwise or with respect to any
other information provided to Guarantor, Parent or Merger Sub, whether on behalf
of the Company or such other Persons. Except in each case as is specifically
provided for pursuant to the terms of this Agreement and the transaction
agreements contemplated hereby, neither the Company nor any other Person will
have or be subject to any liability or obligation to Guarantor, Parent, Merger
Sub or any other Person resulting from the distribution to Guarantor, Parent or
Merger Sub, or Guarantor, Parent's or Merger Sub's use of, any such information,
whether orally or in writing, or in any other form in expectation or furtherance
of the transactions contemplated by this Agreement, nor has Guarantor, Parent or
Merger Sub relied on any such information.
As used in this Agreement, "Affiliate" shall have the meaning assigned
to that term in Rule 12b-2 under the Exchange Act.
ARTICLE VI
COVENANTS
6.1 Interim Operations. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and until the earlier to occur
of the termination of this Agreement pursuant to Article VIII and the Effective
Time (unless Parent shall otherwise approve in writing, which approval in the
case of clauses (c)(ii), (c)(iv), (c)(vi), (e), (f) and (k) below shall not be
unreasonably withheld, delayed or conditioned and except as otherwise permitted
or required by this Agreement or described in Section 6.1 of the Company
Disclosure Letter):
(a) the business of it and its Subsidiaries shall be conducted in the
ordinary course and consistent with past practice;
(b) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend or propose to
amend the Company Charter or the Company Bylaws; (iii) split, combine or
reclassify its outstanding shares of capital stock or any class thereof; (iv)
declare, set aside or pay any dividend payable in cash, stock or property in
respect of any capital stock other than (A) dividends from its direct or
indirect wholly-owned Subsidiaries to the Company, or (B) dividends payable on
the Series C Preferred Shares pursuant to and in accordance with the existing
terms thereof; or (v) repurchase, redeem or otherwise acquire, or permit any of
its Subsidiaries to purchase or otherwise acquire, any shares of its capital
stock or any securities convertible into or exchangeable or exercisable for any
shares of its capital stock;
27
(c) neither it nor any of its Subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, its capital stock of any class (other than Common
Shares issuable pursuant to Company Options outstanding on the date hereof under
the Stock Plans as set forth in Section 5.1(b) of the Company Disclosure
Letter); (ii) transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of, or encumber or suffer to exist any Encumbrance (except for Permitted
Encumbrances) in respect of, any assets in excess of $250,000 in the aggregate
other than (A) sales of inventories (and/or licenses in connection therewith) in
the ordinary course of business consistent with past practice and (B)
dispositions of obsolete or worthless assets; (iii) incur any indebtedness for
borrowed money other than borrowings (including issuance of letters of credit)
and reborrowings under its or any of its Subsidiaries' credit facilities, as
such credit facilities are in existence as of the date hereof without regard to
any subsequent amendment or modification, that would at any given time cause the
net funded amount of indebtedness outstanding under such credit facilities to be
in excess of $4,000,000 in the aggregate (the "Maximum Amount"); provided,
however, that the Company may incur indebtedness under such credit facilities in
excess of the Maximum Amount to the extent that the senior management of the
Company reasonably determines that it is in the best interests of the Company to
borrow such additional amounts in order to fund operations of the business of
the Company and its Subsidiaries in the ordinary course; and provided, further
that prior to taking any actions permitted by the foregoing proviso the Company
shall give Parent three Business Days' prior written notice that it intends to
take such actions; (iv) make or commit for any capital expenditures in the
aggregate in excess of the Company's budget for capital expenditures, in each
case, for the applicable fiscal year; (v) loan, advance funds or make any
investment in or capital contribution to any other Person other than to any
Subsidiary; or (vi) acquire (by merger, consolidation, or acquisition of stock
or assets) any Person;
(d) except as required by Law, neither it nor any of its Subsidiaries
shall terminate, establish, adopt, enter into, amend or otherwise modify any
Company Compensation and Benefit Plans in a manner that would materially
increase benefits thereunder or increase the salary, wage, bonus or other
compensation of any employees except salary increases as a result of employee
promotions occurring in the ordinary course of business consistent with past
practices;
(e) neither it nor any of its Subsidiaries shall (i) settle or
compromise any material claims or litigation in excess of $250,000 in the
aggregate other than (A) settlements and compromises in the ordinary course of
business and (B) settlements and compromises of liabilities not in excess of
$500,000 reflected or reserved against on the financial statements included in
the Company Reports; or (ii) waive, release or assign any material rights or
claims in excess of $250,000 in the aggregate other than in the ordinary course
of business; provided, however, that the Company shall not settle any
Governmental claims or proceedings if such settlement would result in
suspension, debarment or injunctive relief that is material to the businesses of
the Company and its Subsidiaries taken as a whole or that would otherwise
materially affect Parent and its Affiliates;
(f) neither it nor any of its Subsidiaries shall make any material Tax
election, change any annual Tax accounting period, adopt or change any material
method of Tax accounting, extend or waive any applicable statute of limitations
with respect to Taxes, enter into
28
any closing agreement in respect of any material Tax claim, audit or assessment,
surrender any right to claim a material Tax refund, offset or other reduction in
a material Tax liability or settle or compromise any material Tax liability;
(g) use commercially reasonable efforts to (i) preserve intact its
business organization and goodwill, (ii) keep available the services of its
present officers and key employees and (iii) preserve the goodwill and business
relationships with customers, suppliers and others having business relationships
with Company;
(h) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
business in such amounts and against such risks and losses as are consistent
with past practice;
(i) not enter into any plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of Company or any of its Subsidiaries (other than the
transactions contemplated by this Agreement);
(j) not alter, through merger, liquidation, reorganization,
restructuring or any other fashion, the corporate structure or ownership of any
of Company's Subsidiaries;
(k) except as required by GAAP or as recommended in writing by the
Company's independent auditors, (i) not revalue in any material respect any of
its assets, including writing down the value of inventory or writing-off notes
or accounts receivables other than in the ordinary course of business consistent
with past practice, or (ii) change any method of accounting or accounting
principles or practice;
(l) not (i) grant any material severance, retention or termination pay
to, or amend in any material respect any existing severance, retention or
termination arrangement with, any current or former director, officer or
employee of Company or any of its Subsidiaries, (ii) except to the extent
required under Contracts existing as of the date hereof, increase in any
material respect or accelerate in any material respect the payment or vesting
of, any benefits payable under any existing severance, retention or termination
pay policies or employment agreements, (iii) enter into or amend in any material
respect any employment, consulting, deferred compensation or other similar
agreement with any director, officer, consultant or employee of Company or any
of its Subsidiaries or (iv) establish, adopt or amend (except as required by
applicable law) any collective bargaining agreement, bonus, profit-sharing,
thrift, pension, retirement, post-retirement medical or life insurance,
retention, deferred compensation, compensation, stock option, restricted stock
or other benefit plan or arrangement covering any present or former director,
officer or employee, or any beneficiaries thereof, of Company or any of its
Subsidiaries; or
(m) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do any of the foregoing, or commit to any of the foregoing
actions.
6.2 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its Subsidiaries
shall, and that it shall not authorize or permit its or its Subsidiaries'
directors, officers, employees, agents
29
or representatives (including any investment banker, financial advisor,
consultant, attorney or accountant retained by it or any of its
Subsidiaries)(collectively, "Representatives"), directly or indirectly, to
solicit, initiate or knowingly facilitate or encourage the making of any
proposal or offer (including any proposal or offer to the Company's
stockholders) that constitutes or would reasonably be expected to lead to, a
proposal for any tender offer, merger, recapitalization, reorganization, share
exchange, business combination, consolidation, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries and a third
party, or any purchase by a third party of more than 10% of the outstanding
shares of any class of the Company's capital stock (other than upon the exercise
of Company Options that are outstanding on the date hereof in accordance with
their terms) or any business or assets of the Company or any of its Subsidiaries
constituting more than 10% of the assets of the Company and its Subsidiaries,
taken as a whole, other than acquisitions or sales of inventory in the ordinary
course of business (any such proposal or offer, other than in connection with
the Merger, whether in a single transaction or a series of related transactions,
being hereinafter referred to as an "Acquisition Proposal"). The Company further
agrees that neither it nor any of its Subsidiaries shall, and that it shall not
authorize or permit its or its Subsidiaries' Representatives to: (i) engage,
directly or indirectly, in any discussions or negotiations with, or provide any
confidential information or data to, any Person in furtherance of or relating to
an Acquisition Proposal (and the Company, its Subsidiaries and all such Persons
shall immediately cease and cause to be terminated any existing discussions or
negotiations with any third parties conducted heretofore with respect to any
Acquisition Proposal); (ii) except to the extent required to give effect to
Section 6.2(c) in connection with the receipt by the Company of an unsolicited
Acquisition Proposal described in clause (1) or (2) thereof, grant any waiver or
release under any confidentiality agreement, standstill agreement or similar
agreement with respect to Company or any of its Subsidiaries (it being
understood and agreed that receipt by the Company of unsolicited Acquisition
Proposals or Superior Proposals shall not be deemed to be such a waiver or
release); or (iii) execute or enter into any written agreement, letter of
intent, acquisition agreement or similar agreement with respect to any
Acquisition Proposal (an "Acquisition Agreement").
(b) Neither the Company nor its Board of Directors shall approve,
recommend or declare advisable any Acquisition Proposal or Acquisition Agreement
(or publicly propose to approve, recommend or declare advisable, or formally
resolve to approve or authorize, any Acquisition Proposal or Acquisition
Agreement), except in connection with a termination of this Agreement in
accordance with Section 6.2(e) hereof. Nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (i) complying with its
disclosure obligations under applicable Laws or (ii) from taking and disclosing
to its stockholders a position not inconsistent herewith with respect to an
Acquisition Proposal by a third party to the extent required by Rule 14d-9(a) or
Rule 14e-2(a) promulgated under the Exchange Act. It is understood and agreed
that (i) any "stop-look-and-listen" communication by the Board of Directors of
the Company to the stockholders of the Company pursuant to Rule 14d-9(f) of the
Exchange Act, or any substantially similar communication to the stockholders of
the Company in each case in connection with and no later than 10 Business Days
after the commencement of a tender offer or exchange offer, or (ii) any
disclosure of factual information regarding the business, financial condition or
results of operations of the Company or the fact that an Acquisition Proposal
has been made, the identity of the party making such proposal or the terms
30
of such proposal, shall not be deemed to constitute a breach of the first
sentence of this Section 6.2(b).
(c) Notwithstanding the limitations set forth in Section 6.2(a), if no
later than 11:59 p.m., New York City time, on the 25th calendar day after the
date of execution of this Agreement (the "Initial Proposal Deadline"), the
Company receives an unsolicited written Acquisition Proposal (other than as a
result of its breach of Section 6.2(a)) which (1) constitutes a Superior
Proposal (provided the Board of Directors of the Company so determines in good
faith, after consultation with the Company's outside legal and financial
advisors) or (2) which the Board of Directors of the Company determines prior to
the Initial Proposal Deadline, in good faith after consultation with the
Company's outside legal and financial advisors, could reasonably be expected to
result, after the taking of any of the actions referred to in either of clause
(x) or (y) below, in a Superior Proposal (in either of case (1) or (2), an
"Eligible Acquisition Proposal"), the Company may take, or the Company may
direct its Representatives to take, the following actions prior to the later of
the Final Change Deadline (as hereinafter defined), or, if applicable, the
Superior Proposal Termination Date (as hereinafter defined), with respect to
such Acquisition Proposal: (x) furnish nonpublic information to the third party
making such Acquisition Proposal, if, and only if, (i) all such information
provided to such third party and its Representatives has previously been made
available to Parent or is made available to Parent substantially concurrently
(and in any event within 24 hours) with the time such information is provided to
such third party and (ii) prior to so furnishing such information, the Company
receives from the third party an executed confidentiality agreement on terms
substantially similar, with respect to confidentiality, to the terms of the
Confidentiality Agreement and (y) engage in discussions or negotiations with the
third party and its Representatives with respect to the Acquisition Proposal.
"Superior Proposal" shall mean any unsolicited written bona fide proposal to
consummate an Acquisition Proposal made by a third party (which third party
shall have made an Eligible Acquisition Proposal prior to the Initial Proposal
Deadline), which did not result from a knowing or material (whether or not
knowing) breach of Section 6.2(a), on terms which the Board of Directors of the
Company determines in good faith (after consultation with its financial advisors
and outside legal counsel) to be more favorable from a financial point of view
(from the perspective of the Company's stockholders) than the Merger and the
transactions contemplated hereby, taking into account (i) any proposal by Parent
to amend the terms of the transactions contemplated hereby or this Agreement and
(ii) all legal, financial, regulatory and other aspects of such proposal that
the Board of Directors of the Company deems relevant, and is reasonably capable
of being consummated by the proposing third party.
(d) From and after the execution of this Agreement, the Company shall
promptly, and in any event within 48 hours following receipt thereof, advise
Parent in writing of the receipt, directly or indirectly, of any Acquisition
Proposal (including any materially modified proposal) and any determination by
the Board of Directors of the Company under Section 6.2(c) and 6.2(e), which
notification shall identify the offeror and include a copy of any such proposal
(if such proposal is in writing) or shall summarize the material terms thereof
(if such proposal is not in writing). In addition, the Company shall keep Parent
informed on a reasonably prompt basis with respect to any changes in material
terms or conditions of such proposal.
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(e) The Company may terminate this Agreement (and promptly thereafter
(and in any event within 24 hours) enter into an agreement providing for a
Superior Proposal) prior to the Superior Proposal Termination Date if: (i) the
Company has received such Superior Proposal from a third party prior to the
Final Change Deadline (it being understood and agreed that if the Company
receives a revised proposal from such third party after the Response Period but
prior to the Superior Proposal Termination Date, and such revised proposal is
deemed by the Board of Directors of the Company in good faith (after
consultation with its financial advisors and outside legal counsel) at such time
to be a Superior Proposal, then this clause (i) shall be deemed satisfied even
though such revised proposal that is a Superior Proposal was received after the
Final Change Deadline); (ii) the Company shall have provided written notice to
Parent that the Company has determined to accept such Superior Proposal (which,
in the case of the first Superior Proposal Notice hereunder, must be provided
prior to the Final Change Deadline), which notice shall specify all the terms
and conditions of such Superior Proposal (the "Superior Proposal Notice"); (iii)
Parent shall have been given until 11:59 p.m., New York City time, on the fifth
calendar day after the date the Company delivers the Superior Proposal Notice to
Parent (the "Response Period") to submit an amended written proposal or to make
a new written proposal (such amended proposal or new proposal, a "New Proposal")
to the Company; (iv) at the end of the Response Period, and taking into account
any New Proposal, if any, that is made by Parent, the Board of Directors of the
Company determines in good faith (after consultation with its financial
advisors) that such New Proposal is not at least as favorable to the
Stockholders of the Company as such Superior Proposal (such determination, an
"Adverse Determination") (it being understood that any New Proposal shall not be
required to extend the Initial Proposal Deadline, Final Change Deadline or
Superior Proposal Termination Date, or eliminate the "matching rights" set forth
herein); (v) the Company is in compliance in all material respects with Section
6.2; and (vi) the Company has paid or pays concurrently with such termination
the Break-Up Fee. During the Response Period, the Company and its
Representatives shall consider in good faith any adjustments in the terms and
conditions of this Agreement that are proposed by Parent in response to a
Superior Proposal Notice.
(f) As used herein, the term:
(i) "Final Change Deadline" shall mean the later of (x) the
Initial Proposal Deadline and (y) 11:59 p.m., New York City time, on the 15th
calendar day following the last date prior to (which "last date" may be the day
of) the Initial Proposal Deadline on which a third party making an Eligible
Acquisition Proposal (which was made prior to the Initial Proposal Deadline) has
made its first Acquisition Proposal, which is received by the Company following
the execution hereof and prior to the Initial Proposal Deadline; and
(ii) "Superior Proposal Termination Date" shall mean the later of
(a) the Final Change Deadline and (b) 11:59 p.m., New York City time, on the
10th calendar day following the date on which the Company first delivers a
Superior Proposal Notice to Parent in accordance herewith prior to the Final
Change Deadline; provided, however in no event shall the Superior Proposal
Termination Date be later than 11:59 p.m., New York City time, on the 45th
calendar date after the date of this Agreement; and provided, further, that if
the then pending Response Period shall expire at or after the time of the
Superior Proposal Termination Date and during such Response Period (x) Parent
does not make a New Proposal or (y) Parent shall have made a New Proposal but
the Board of Directors of the Company shall have made an Adverse
32
Determination with respect to such New Proposal that related to such Response
Period, then the Superior Proposal Termination Date shall be extended to the
time that is 90 minutes after the end of such Response Period (and, for the
avoidance of doubt, during such 90 minute period the Company shall be permitted
to terminate this Agreement and enter into an agreement providing for such
Superior Proposal promptly (within 3 hours after the end of such 90 minute
period) after such termination).
6.3 Information Supplied.
(a) The Company shall, as soon as reasonably practicable following the
date of this Agreement, prepare and file with the SEC a preliminary information
statement (the "Preliminary Information Statement"). The Company shall use its
commercially reasonable efforts to respond to any comments of the SEC on the
Preliminary Information Statement. The Company shall notify Parent promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Preliminary Information
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the
Preliminary Information Statement. The Company shall use its commercially
reasonable efforts to prepare and file with the SEC the final, definitive
information statement (the "Final Information Statement") and to cause the Final
Information Statement to be mailed to the Company's stockholders of the Company
as promptly as practicable following the date of this Agreement (the date of
such mailing is hereafter referred to as the "Mailing Date"). Notwithstanding
the foregoing, prior to filing or mailing the Preliminary or Final Information
Statement (or any amendment or supplement thereto) or responding to the comments
of the SEC with respect thereto, the Company (i) shall provide Parent a
reasonable opportunity to review and comment on such document or response and
(ii) shall reasonably consider including in such document or response all
reasonable comments proposed by Parent.
(b) Each of Parent and the Company agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it or
its Subsidiaries for inclusion or incorporation by reference in the Final
Information Statement and any amendment or supplement thereto will, as of the
Mailing Date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the effective date of the
Principal Stockholders' Consent, there shall occur any event with respect to
Company, Parent or any of their Subsidiaries, or with respect to any information
provided by Company or Parent for inclusion in the Final Information Statement,
which event is required to be described in an amendment or supplement to the
Information Statement, such amendment or supplement shall be promptly filed with
the SEC, as required by applicable Law, and disseminated to the holders of the
Company's Common Shares, as applicable. Parent and the Company will cause the
Final Information Statement to comply as to form in all material respects with
the applicable provisions of the Exchange Act and the rules and regulations
thereunder.
33
6.4 Filings; Other Actions; Notification.
(a) The Company and Parent shall (and shall cause their respective
Subsidiaries to) cooperate with each other and take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable Laws to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as practicable, including using their best efforts to accomplish the
following: (i) the satisfaction of the conditions set forth in Article VII, (ii)
the obtaining or making of all necessary Permits, Approvals and Orders and (iii)
the defending of any Actions challenging this Agreement or seeking to prevent,
delay or impair the consummation of the transactions contemplated hereby,
including seeking to have any Order vacated or reversed.
(b) Parent shall, upon request by the Company, furnish it with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Information Statement or any other registration,
declaration, filing, notice or report made by or on behalf of the Company or any
of its respective Subsidiaries to any third party, including any Governmental
Entity, in connection with the Merger and the transactions contemplated by this
Agreement.
(c) Subject to applicable Law and the instructions of any Governmental
Entity, the Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any Governmental Entity with respect to such
transactions.
(d) Without limitation of the foregoing, Parent and the Company
undertake and agree to file as soon as practicable (and in any event within ten
(10) Business Days after the date hereof), if required by law, a Notification
and Report Form under the HSR Act with the Federal Trade Commission ("FTC") and
the Antitrust Division of the Department of Justice ("DOJ"). If Parent or the
Company reasonably determine that it is so required, Parent and Company shall,
promptly after the date of this Agreement, prepare and file notifications
required under any applicable Foreign Antitrust Laws or regulations thereunder
in connection with the Merger.
(e) Without limitation of the above, Parent and the Company undertake
and agree to file as soon as practicable (and in any event within fifteen (15)
Business Days after the date hereof) with the Committee on Foreign Investment in
the United States ("CFIUS") a joint voluntary notice under the Exon-Xxxxxx
Amendment, with respect to the transaction contemplated by this Agreement. The
parties agree to provide CFIUS with any additional or supplemental information
requested by CFIUS or its member agencies during the Exon-Xxxxxx Amendment
review process. The parties, in cooperation with each other, shall take all
commercially reasonable steps advisable, necessary or desirable to finally and
successfully complete the Exon-Xxxxxx Amendment review process as promptly as
practicable.
34
(f) Without limitation of the above, Parent and the Company undertake
and agree to file (i) as soon as practicable (and in any event within fifteen
(15) Business Days after the date hereof) with the United States Department of
State Directorate of Defense Trade Controls ("DDTC") the requisite notifications
under ITAR and (ii) within five (5) Business Days after the date hereof with the
Bureau of Alcohol, Tobacco, Firearms and Explosives (the "ATF") a notice in
connection with the Company's application to renew its license to be a
manufacturer of destructive devices and certain other materials, which expires
on September 1, 2006, referencing this Agreement pursuant to which Parent will
acquire the Company, and cooperate with any requests or directions of ATF
regarding the filing of related or supplemental materials.
(g) Without limiting the generality of the undertakings pursuant to
this Section 6.4 (but subject to the limitations provided in clause (ii) below
with respect to Specified Efforts), each of the Company and Parent agrees to
take or cause to be taken the following actions: (i) cooperate in all respects
with each other in connection with any request by any Governmental Entity with
jurisdiction over enforcement of any antitrust or competition Laws applicable to
the Company or Parent ("Government Antitrust Entity") for additional
non-privileged information and documents requested by such Government Antitrust
Entity or that are necessary, proper or advisable to permit consummation of the
transactions contemplated by this Agreement and (ii) the prompt use of its
Specified Efforts to avoid the entry of any Order that would delay, restrain,
prevent, enjoin or otherwise prohibit consummation of the transactions
contemplated by this Agreement. For purposes of this Section 6.4(g), "Specified
Efforts" shall mean all efforts that an acquiring or selling entity (as the case
may be) in an acquisition such as the one contemplated herein would make if
using best efforts to avoid the entry of such an Order, including the devotion
of all required management time and the engagement and payment of its
Representatives to assist in such efforts but otherwise excluding the payment of
any sum material to Parent's acquisition of the Company to avoid the entry of
such Order.
(h) Notwithstanding anything in this Agreement to the contrary,
neither Parent nor any of its Affiliates shall be under any obligation to make
proposals, execute or carry out agreements or submit to orders (i) providing for
the sale or other disposition or holding separate (through the establishment of
a trust or otherwise) of any assets or categories of assets of Parent or any of
its Affiliates, or seeking to impose any material limitation on the ability of
Parent or any of its Affiliates to conduct their business or own such assets or
(ii) providing for the sale or other disposition or holding separate (through
the establishment of a trust or otherwise) of any assets or categories of assets
of the Company or its Subsidiaries, or seeking to impose any material limitation
on the ability of Parent or any of its Affiliates to conduct the business or own
such assets of the Company or its Subsidiaries, except in the case of this
clause (ii) for any such sale or disposition of assets of the Company or its
Subsidiaries or any such material limitation as would not have a Company
Material Adverse Effect. For the avoidance of doubt, the term "Affiliates" in
this paragraph refers to Affiliates of Parent prior to the Effective Time.
6.5 Access. Except as may otherwise be required by applicable Law,
upon reasonable notice, the Company shall (and shall cause its Subsidiaries to)
afford Parent's directors, officers, employees, counsel, agents, accountants and
other authorized representatives ("Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to its
properties, books, contracts and records and, during such period, the Company
shall (and shall cause its Subsidiaries to) furnish promptly to Parent all
information
35
concerning its business, properties and personnel as may reasonably be
requested; provided, that no investigation pursuant to this Section 6.5 shall
amend or modify any representations or warranties made herein or the conditions
to the obligations of the respective parties to consummate the Merger; and
provided, further that the foregoing shall not require the Company to permit any
inspection, or to disclose any information, that in the good faith judgment of
the Company would result in the disclosure of any trade secrets of third Persons
or violate any of its or its Subsidiaries' obligations with respect to
confidentiality if the Company shall have used its commercially reasonable
efforts to obtain the consent of such third Persons to such inspection or
disclosure. All requests for information made pursuant to this Section 6.5 shall
be directed to an executive officer of the Company or such Person as may be
designated in writing by an executive officer of the Company. All such
information shall be governed by the terms of the Confidentiality Agreement.
6.6 Publicity. Parent and the Company agree that no public release or
announcement shall be made without the prior written consent of the other party
or parties (which consent shall not be unreasonably withheld or delayed), with
respect to the Merger and the other transactions contemplated by this Agreement,
except as may be required by Law or by obligations pursuant to any listing
agreement with or rules of any applicable U.S. or non-U.S. securities exchange
or interdealer quotation service, in which case the party required to make the
release or announcement shall use reasonable efforts to allow the other parties
reasonable time to comment on such release or announcement in advance of such
issuance.
6.7 Employee Compensation and Benefits.
(a) During the period commencing at the Effective Time and ending on
the first anniversary thereof (the "Benefits Continuation Period"), Parent
shall, and shall cause the Surviving Corporation to, provide each person who, as
of the Effective Time, is an employee of the Company or any Subsidiary of the
Company for so long as such employee continues to be employed by the Company (a
"Company Employee") with compensation (including bonus opportunities) and
employee benefits that, in Parent's judgment, are substantially comparable in
the aggregate to those provided to such Company Employees immediately prior to
the Effective Time, other than the granting of Company Options and any "change
in control" benefits. Parent shall, and shall cause the Surviving Corporation
to, honor all employee benefit obligations to Company Employees under the
employee severance plans or policies in existence on the date hereof and
disclosed on Section 6.7(a) of the Company Disclosure Letter and all employment
or severance agreements entered into by the Company or adopted by the Company's
Board of Directors prior to the date hereof and disclosed on Section 6.7(a) of
the Company Disclosure Letter. However, payment of any "deferred compensation"
to a "specified employee" (in each case, within the meaning of Section 409A of
the Code and the published guidance thereunder) may be postponed until six
months after the Effective Time solely to the extent necessary to avoid the
imposition of tax under Section 409A of the Code. Nothing contained herein shall
be interpreted to obligate Parent or the Surviving Corporation to continue to
employ any current employee.
(b) Following the Effective Time and with respect to any benefit plans
or programs provided to the Company Employees, (i) service accrued by Company
Employees during employment with the Company and its Subsidiaries prior to the
Effective Time shall be
36
recognized for purposes of eligibility, vesting and benefit accrual (provided
that no duplication of benefits or benefit accruals would result from such
crediting), (ii) in the case of Employee Welfare Benefit Plans (as defined in
Section 3(1) of ERISA) any and all pre-existing condition limitations (to the
extent such limitations did not apply to a pre-existing condition under the
applicable Compensation and Benefit Plan immediately prior to the Effective
Time) and eligibility waiting periods under any group health plan shall be
waived with respect to such Company Employees and their eligible dependents and
(iii) in the case of Employee Welfare Benefit Plans (as defined in Section 3(1)
of ERISA) the Company Employees shall be given credit for amounts paid under a
Compensation and Benefit Plan prior to the Effective Time for purposes of
applying deductibles, co-payments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the
employee welfare plans maintained by Parent or the applicable Subsidiary of
Parent.
6.8 Expenses. Subject to Section 8.5, from and after the Effective
Time the Surviving Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the transactions contemplated in
Article IV (it being understood and agreed that the foregoing reference to
Article IV shall not obligate the Surviving Corporation to pay any amounts in
respect of Appraisal Shares, if any, unless and until the Surviving Corporation
is obligated to pay any such amounts pursuant to Section 262 of the DGCL) and
all fees, charges and expenses of any investment bankers and attorneys incurred
in connection with the transactions contemplated by this Agreement. Subject to
Section 8.5, prior to the Effective Time whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the Merger and the other transactions contemplated by this Agreement shall
be paid by the party incurring such expense, except that Parent shall pay all
HSR Act filing fees, Foreign Antitrust Law filing fees, and all filing fees
associates with the filings or notifications with CFIUS under the Exon-Xxxxxx
Amendment and the DDTC under ITAR.
6.9 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent and the Surviving
Corporation shall, jointly and severally, honor all the Company's obligations to
indemnify and hold harmless, each present and former director and officer of the
Company and its Subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any Action arising out of or pertaining to matters existing or
occurring at or prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time (and the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted under applicable
Law; provided the person to whom expenses are advanced provides an undertaking,
to the extent required by the DGCL, to repay such advances if it is ultimately
determined that such person is not entitled to indemnification).
(b) From and after the Effective Time, the Charter and Bylaws of the
Surviving Corporation shall contain provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of present and former
directors, officers, employees and agents of the Company and its subsidiaries
than are presently set forth in the Company Charter and Company Bylaws.
37
(c) Parent and the Surviving Corporation shall be obligated, jointly
and severally, to purchase on or prior to Closing a "tail" policy (which would
be purchased not later than the Effective Time and effective as of the Effective
Time) providing for directors' and officers' liability insurance ("D&O
Insurance") that has at least as much coverage in the aggregate as the D&O
Insurance maintained by the Company prior to the Effective Time, for the
Indemnified Parties, covering insurable events with respect to matters arising
before the Effective Time, for a period of six years after the Effective Time.
The cost of such policy for the entire six-year period shall not exceed the
amount set forth in Section 6.9(c) of the Company Disclosure Letter or, if it
does, the Parent and the Surviving Corporation shall be obligated, jointly and
severally, to purchase a policy providing for as much coverage in the aggregate
as it is possible to obtain for such amount.
(d) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or (ii)
shall transfer all or substantially all of its properties and assets to any
other Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume all of its obligations set forth in this Section 6.9.
(e) The provisions of this Section 6.9 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.10 Parent Vote. Parent shall consent (or cause a consent to be given
with respect to) all shares of common stock of Merger Sub beneficially owned by
it or any of its Affiliates, or with respect to which it or any of its
Affiliates has the power (by agreement, proxy or otherwise) to cause to be voted
(or to provide a consent), in favor of the adoption and approval of (i) this
Agreement immediately after the execution and delivery of this Agreement and
(ii) any Accepted New Proposal Amendment (as defined in the Principal
Stockholders' Agreement) immediately after the execution and delivery of any
such Accepted New Proposal Amendment.
6.11 Notification of Certain Matters; Supplemental Disclosure.
(a) Each of Company, Parent and Merger Sub agrees to give prompt
notice to each other of, and to use their respective commercially reasonable
efforts to prevent or promptly remedy, the occurrence or failure to occur of any
event that would reasonably be expected to cause any condition to the Merger set
forth in Article VII to not be satisfied by it prior to the Termination Date;
provided, however, that the delivery of any notice pursuant to this Section 6.11
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice, except as provided in Section 6.11(b) below.
(b) The Company shall have the right to update the sections of the
Company Disclosure Letter that relate to the representations and warranties of
the Company in Section 5.1 hereof with respect to any matter which arises or is
discovered after the date hereof (and which the Company did not knowingly fail
to disclose as of the date hereof) which, if in existence on the date hereof and
known at the date of this Agreement, would have been required to be set forth in
the Company Disclosure Letter (any such matter or matters, "Supplementary
Disclosed Matters"). The parties agree that any Supplementary Disclosed Matters
or the previous absence
38
of the disclosure in the Company Disclosure Letter of any Supplementary
Disclosed Matters (i) shall only be considered for purposes of the condition in
Section 7.2(d) and (ii) shall not be considered (and shall be disregarded) for
purposes of determining whether the condition in Section 7.2(a) is satisfied or
whether Parent is entitled to terminate this Agreement pursuant to Section
8.4(a) or Section 8.4(f) and shall not be considered a breach of this Agreement.
6.12 Certain Litigation. Company shall keep Parent informed of, and
cooperate with Parent in the event of any litigation or claim against Company
and/or its directors or officers relating to the Merger or the other
transactions contemplated by this Agreement; provided, however, that no
settlement in connection with such litigation that is material to the Company
and its Subsidiaries taken as a whole shall be agreed to without Parent's prior
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed; and provided, further, that all obligations in this Section 6.12
shall be subject to the obligations of Company under applicable laws relating to
attorney-client communication and privilege.
6.13 Certain Tax Matters. Prior to the Closing, the Company shall
provide certifications of non-foreign status as defined in Treasury Regulations
Section 1.1445-2(b)(2), duly executed by each of the Company's stockholders who
or that owns more than 5% of the total fair market value of the Company's Common
Shares within the meaning of Code Section 897(c)(3), that is reasonably
satisfactory to Parent for purposes of permitting Parent to determine that there
are no withholding obligations under Treasury Regulations Section 1.1445-2. Any
failure to provide such certificates within 30 days prior to the Closing shall
result in withholding tax under Section 1445 of the Code.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Regulatory Consents. (i) The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, (ii) all Approvals and Permits required to be obtained or made prior
to the Effective Time by the Company, Parent, Merger Sub or any of their
respective Subsidiaries under Foreign Antitrust Laws in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby shall have been obtained or made,
except those that the failure to obtain or make would not, individually or in
the aggregate, have a Company Material Adverse Effect or a material adverse
effect on the ability of Parent or Merger Sub to consummate the transactions
contemplated by this Agreement and (iii) the period of time for any applicable
review process by CFIUS under the Exon-Xxxxxx Amendment shall have expired, and
the President of the United States shall not have taken action to block or
prevent the consummation of the Merger or other transactions contemplated by
this Agreement on the basis that they threaten to impair the national security
of the United States.
(b) No Violation of Law. No Governmental Entity of competent
jurisdiction in a country where the Company and its Subsidiaries or Guarantor
and its
39
Subsidiaries have any operations or derive any revenues shall have enacted,
issued, promulgated, enforced or entered any Law that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement and no temporary restraining
order, preliminary or permanent injunction or other Order issued by any court of
competent jurisdiction shall be in effect; provided, however, that prior to
asserting this condition, subject to Section 6.4, the asserting party shall have
used its Specified Efforts in a manner consistent with this Agreement, to
prevent the entry of such injunction or other Order.
(c) No Litigation. There shall not be pending any Action by any
Governmental Entity of competent jurisdiction in a country where the Company and
its Subsidiaries or Guarantor and its Subsidiaries have any operations or derive
any revenues that has arisen after the date of this Agreement, which is more
likely than not to succeed on the merits, seeking to restrain, enjoin or
prohibit the consummation of the Merger, and which provides a reasonable basis
to conclude that if the Merger is consummated, the Company or Parent (including
their respective officers or directors or Affiliates), as the case may be, would
be subject to the risk of criminal liability or material civil penalties).
7.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub 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. (i) The representations and
warranties of the Company contained herein shall be true and correct on the
Closing Date, as though made on the Closing Date, except to the extent such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true and correct as of such earlier date, except in
each case to the extent that the failure of such representations and warranties
to be true and correct would not, individually or in the aggregate, have a
Company Material Adverse Effect; provided that the representations and
warranties of the Company in Section 5.1(b)(i) (with respect to the Company only
and not the Company's Subsidiaries) and Section 5.1(c) shall be true and correct
in all material respects and (ii) Parent shall have received at the Closing an
executive officer's certificate signed on behalf of the Company to the effect
that the condition set forth in this Section 7.2(a) has been satisfied.
(b) Performance of Obligations of the Company. (i) 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 (ii) Parent
shall have received at the Closing an executive officer's certificate signed on
behalf of the Company to such effect.
(c) Appraisal Shares. The amount of Appraisal Shares shall not
constitute more than 10% of the aggregate number of Common Shares outstanding as
of the date hereof.
(d) Supplementary Disclosed Matters. The Supplementary Disclosed
Matters, taken together with any failures of the representations and warranties
of the Company contained herein to be true and correct on the Closing Date, as
though made on the Closing Date (other than to the extent such representations
and warranties by their terms speak as of an earlier
40
date, in which case only taking into account any failures to be true and correct
as of such earlier date), would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(e) Closing Date. The Closing Date shall not occur on or prior to
September 30, 2006, unless the lenders under the Company's revolving credit and
term loan facility shall have waived any termination fee payable in connection
with the Merger and the transactions contemplated hereby.
(f) No Litigation. There shall not be pending any Action by any
Governmental Entity of any competent jurisdiction in the United States, the
United Kingdom or any other jurisdiction in which Guarantor or the Company has
substantial business or operations that has arisen after the date of this
Agreement and has a reasonable likelihood of success, seeking (i) to restrain,
enjoin or otherwise prohibit consummation of the Merger or (ii) to prohibit
Parent or any of its affiliates from effectively acquiring, owning and
controlling the business or operations of the Company, except in clause (ii) as
would not have a Company Material Adverse Effect.
7.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is 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 Parent and Merger Sub contained herein shall be true and correct
on the Closing Date, as though made on the Closing Date, except to the extent
such representations and warranties by their terms speak as of an earlier date,
in which case they shall be true and correct as of such earlier date, except in
each case to the extent that the failure of such representations and warranties
to be true and correct would not, individually or in the aggregate, have a
material adverse effect on the ability of Parent or Merger Sub to consummate the
transactions contemplated by this Agreement; provided that the representations
and warranties of Parent and Merger Sub in Section 5.2(b) and Section 5.2(g)
(which shall be deemed conclusively satisfied by the payment in full of all
amounts required to be paid by Parent on the Closing Date) shall be true and
correct in all material respects and (ii) the Company shall have received at the
Closing an executive officer's certificate signed on behalf of each of Parent
and Merger Sub to the effect that the condition set forth in this Section 7.3(a)
has been satisfied.
(b) Performance of Obligations of Parent and Merger Sub. (i) Each of
Parent and Merger Sub 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 (ii) the Company shall have received at the Closing an
executive officer's certificate signed on behalf of each of Parent and Merger
Sub to such effect.
(c) Final Change Deadline. The applicable time of the later of (i) the
Final Change Deadline and (ii) if applicable, the Superior Proposal Termination
Date, shall have occurred.
41
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after adoption of this Agreement by stockholders of the Company or
Merger Sub, by mutual written consent of the Company and Parent by action of
their respective Boards of Directors.
8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after adoption of this Agreement by the stockholders of
the Company or Merger Sub, by action of the Board of Directors of either Parent
or the Company if:
(a) the Merger shall not have been consummated by the date that is 120
days after the date hereof (the "Termination Date"); provided, however, that if
at such time the conditions set forth in Section 7.1(a) are not at that time
satisfied, then the Termination Date shall mean the date that is 270 days after
the date hereof; and provided, further that that the right to terminate this
Agreement pursuant to this clause (a) shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Merger to be consummated; or
(b) any Order issued by a Governmental Entity of competent
jurisdiction in a country where the Company and its Subsidiaries or Guarantor
and its Subsidiaries have any operations or derive any revenues permanently
restraining, enjoining or otherwise prohibiting consummation of the Merger shall
become final and non-appealable.
8.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after adoption of this Agreement by the stockholders of the Company or
Merger Sub, by action of the Board of Directors of the Company:
(a) if there has been a breach of any representation, warranty,
covenant or agreement made by Parent or Merger Sub in this Agreement, or any
such representation and warranty shall have become untrue after the date of this
Agreement, such that Section 7.3(a) or 7.3(b) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within 30 days
after written notice thereof is given by the Company to Parent (provided that
the Company is not then in material breach of any representation, warranty or
covenant in this Agreement); or
(b) in accordance with Section 6.2(e).
8.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after adoption of this Agreement by the stockholders of the Company or Merger
Sub, by action of the Board of Directors of Parent:
42
(a) if there has been a breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 7.2(a) or 7.2(b) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within 30 days
after written notice thereof is given by Parent to the Company (provided that
Parent is not then in material breach of any representation, warranty or
covenant in this Agreement);
(b) if the Company delivers a Superior Proposal Notice to Parent;
(c) if the Company or the Board of Directors of the Company has
entered into any Acquisition Agreement (other than a confidentiality agreement
as permitted pursuant to Section 6.2);
(d) (i) if the Company publicly approves or recommends, or proposes
publicly to approve or recommend, an Acquisition Proposal, (ii) if the Principal
Stockholders fail to execute and deliver (x) the Principal Stockholders' Consent
within three hours after the execution and delivery by the Company, Parent and
Merger Sub of this Agreement or (y) an Accepted New Proposal Consent (as defined
in the Principal Stockholders' Agreement), under circumstances that require the
Principal Stockholders to execute and deliver an Accepted New Proposal Consent
pursuant to the Principal Stockholders' Agreement, within three hours of the
execution and delivery by the Company, Parent and Merger Sub of an Accepted New
Proposal Amendment (as defined in the Principal Stockholders' Agreement) or
(iii) if the Company publicly announces a neutral position in a Schedule 14D-9
filed by the Company with the SEC in response to an Acquisition Proposal;
(e) if the Company materially violates Section 6.2, and such violation
has a material and adverse effect on Parent; or
(f) upon a failure of the condition set forth in Section 7.2(d).
8.5 Effect of Termination and Abandonment. (a) Subject to the
following subsections (b) and (c), in the event of termination of this Agreement
and the abandonment of the Merger pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.1 and this Section 8.5) shall become void
and of no effect without any liability other than Section 6.6, Section 6.8, this
Section 8.5 and Article IX, which shall survive such termination; provided,
however, no such termination shall relieve any party hereto of any liability for
any willful or intentional breach of this Agreement.
(b) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 8.3(b), (ii) by Parent pursuant to Section 8.4(d)(i),
Section 8.4(d)(ii), Section 8.4(b) or Section 8.4(c), or (iii) by Parent
pursuant to Section 8.4(e) or Section 8.4(d)(iii) and, in the case of this
clause (iii) of this Section 8.5(b) only, at the time of such termination a
person shall have made an Acquisition Proposal that was publicly disclosed and
not withdrawn and within nine (9) months following such termination the Company
shall have entered into a definitive agreement providing for, or consummated,
any Acquisition Proposal, then, the Company shall pay to Parent an amount equal
to $4,250,000 (the "Break-Up Fee") in cash by wire transfer of immediately
43
available funds to an account designated by Parent, no later than the same day
as the date of termination of this Agreement or, with respect to a termination
pursuant to clause (iii) above of this Section 8.5(b), the date entering into
such definitive agreement or, if earlier, consummation of such transaction;
provided that, in the case of a termination pursuant to clause (iii) above of
this Section 8.5(b), the applicable Acquisition Proposal relates to a
transaction or series of transactions involving, directly or indirectly, the
sale of fifty percent (50%) or more of the outstanding shares of voting stock,
capital stock or consolidated assets of the Company. It is acknowledged and
agreed that (x) in no event shall the Company be obligated to pay the Break-Up
Fee on more than one occasion and (y) payment by the Company of the Break-Up Fee
(under circumstances where the Company is obligated to pay the Break-Up Fee)
shall constitute conclusive evidence that this Agreement has been properly
terminated and shall, notwithstanding anything to the contrary herein, relieve
the Company of any further liability pursuant to this Agreement.
(c) In the event that a court of competent jurisdiction makes a final
and non-appealable determination that (i) the Break-Up Fee payments contemplated
by this Section 8.5 were not paid by the Company when due, in addition to being
obligated to pay such amounts, the Company shall pay or reimburse Parent's costs
and expenses (including but not limited to reasonable and documented legal fees
and expenses (other than allocated costs of internal legal counsel)) solely to
the extent incurred in connection with any Action by Parent or its Affiliates to
collect payment of the Break-Up Fee or (ii) the Company was not obligated to pay
the Break-Up Fee under the circumstances of the termination of this Agreement,
then Parent shall pay or reimburse the Company's costs and expenses (including
but not limited to reasonable and documented legal fees and expenses (other than
allocated costs of internal legal counsel)) solely to the extent incurred in
connection with the defense by the Company against any Action by Parent or its
Affiliates to attempt to collect payment of the Break-Up Fee.
8.6 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c), waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Survival. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Sections 6.7 (Employee Compensation and
Benefits), 6.8 (Expenses) and 6.9 (Indemnification; Directors' and Officers'
Insurance) shall survive the consummation of the Merger. This Article IX, the
agreements of the Company, Parent and Merger Sub contained in Section 6.6
(Publicity), Section 6.8 (Expenses), Section 8.5 (Effect of Termination and
Abandonment) and the Confidentiality Agreement shall survive the termination of
this Agreement. All other representations, warranties, covenants and agreements
in this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement. This
44
Section 9.1 shall not limit any other covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
9.2 Modification or Amendment. At any time prior to the Effective
Time, whether before or after adoption of this Agreement by the stockholders of
the Company or Merger Sub, this Agreement may be amended, modified or
supplemented in writing by the parties hereto, by action of the Board of
Directors of the respective parties; provided, however, no amendment shall be
made after the adoption of this Agreement by the stockholders of the Company
which by Law requires the further approval of such stockholders without such
further approval. At the request of Parent, the parties shall amend this
Agreement to effect the assignment by Merger Sub of any or all its rights,
interests and obligations under this Agreement to any direct or indirect wholly
owned subsidiary of Parent, provided that such assignment does not in any way
result in a breach of any provision of this Agreement or otherwise delay the
Closing or the consummation of the Merger and the other transactions
contemplated hereunder; and provided, further, than any such assignment shall
not relieve Merger Sub of its obligations under this Agreement. For the
avoidance of doubt, Parent shall not be permitted to assign any of its rights
under this Agreement without the prior written consent of the Company.
9.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of
Delaware and the Federal courts of the United States of America located in the
State of Delaware solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive and
agree not to assert, as a defense in any Action for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such Action may not be brought or is not maintainable in said courts or
that the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such Action shall be heard and
determined in such a Delaware or Federal court. The parties hereby consent to
and grant any such court jurisdiction over the person of such parties and, to
the extent permitted by Law, over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such Action in
the manner provided in Section 9.6 or in such other manner as may be permitted
by Law shall be valid and sufficient service thereof. The parties hereby agree
that in no event shall the other parties' respective stockholders, directors or
officers be liable for any claims or damages with
45
respect to the subject matter of this Agreement, and the parties agree not to
assert any such claims or damages against the other parties' respective
stockholders, directors or officers.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5(b).
9.6 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Sub:
Meggitt-USA, Inc.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Vice President, Secretary and General Counsel
Fax: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
if to the Company:
Firearms Training Systems, Inc.
0000 XxXxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Fax: 000-000-0000
46
with a copy to (which shall not constitute notice):
O'Melveny & Xxxxx LLP
Times Square Tower
0 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxxx, Esq.
Fax: 000-000-0000
with a copy to (which shall not constitute notice):
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxx-Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Esq.
Fax: 000-000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7 Entire Agreement. This Agreement (including any exhibits hereto),
the Company Disclosure Letter, the Parent Disclosure Letter, the Principal
Stockholders' Agreement, the Guaranty and the Confidentiality Agreement, dated
May 10, 2006, between Parent and the Company (the "Confidentiality Agreement")
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof.
9.8 No Third Party Beneficiaries. Except as provided in (i) Article IV
(Effect of the Merger on Capital Stock; Exchange of Certificates), which shall
be enforceable by the holders of the Common Shares and the holders of the Series
C Preferred Shares after the Effective Time, (ii) Section 6.9 (Indemnification;
Directors' and Officers' Insurance), which shall be enforceable by the
Indemnified Parties after the Effective Time, (iii) the last sentence of Section
4.3(b)(i), which shall be enforceable by the Principal Stockholders, and (iv)
the last sentence of Section 4.3(b)(ii), which shall be enforceable by the
holders of the Series C Preferred Shares, this Agreement is not intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
9.9 Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
47
9.10 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including penalties and interest)
incurred in connection with the Merger shall be paid by Parent and Merger Sub
when due, and Parent and Merger Sub will indemnify the Company against liability
for any such Taxes.
9.11 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.12 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Unless otherwise indicated, whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." All references herein to dollars and "$" are
references to lawful money of the United States.
9.13 Assignment. Subject to Section 9.2, no rights or obligations
under this Agreement may be assigned or delegated by operation of Law or
otherwise. Any purported assignment or delegation in violation of this Agreement
is void.
9.14 Specific Performance. The parties agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties are entitled
to specific performance of the terms hereof in addition to any other remedies at
law or in equity.
48
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chairman & CEO
MEGGITT-USA, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President, Secretary &
General Counsel
XXXXX ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President & Secretary
