AGREEMENT AND PLAN OF MERGER
AMONG
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA,
FLOSS ACQUISITION CORP.
AND
FIRST COMMONWEALTH, INC.
Dated as of May 19, 1999
TABLE OF CONTENTS
Page
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ARTICLE I THE OFFER
Section 1.1 The Offer........................................................2
Section 1.2 Company Actions..................................................4
ARTICLE II THE MERGER
Section 2.1 The Merger.......................................................6
Section 2.2 Effective Time...................................................6
Section 2.3 Effects of the Merger............................................6
Section 2.4 Certificate of Incorporation and Bylaws; Directors and
Officers........................................................6
Section 2.5 Conversion of Securities.........................................6
Section 2.6 Exchange of Certificates.........................................7
Section 2.7 Dissenting Shares................................................9
Section 2.8 Merger Without Meeting of Stockholders...........................9
Section 2.9 No Further Ownership Rights in Shares; Closing of Company
Transfer Books..................................................9
Section 2.10 Further Assurances..............................................10
Section 2.11 Closing.........................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 3.1 Organization, Standing and Power; Capitalization and
Ownership of Sub...............................................10
Section 3.2 Authority; Non-Contravention....................................11
Section 3.3 Offer Documents and Proxy Statement.............................13
Section 3.4 Financing.......................................................13
Section 3.5 Brokers.........................................................13
Section 3.6 Business of Sub.................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization, Standing and Power................................14
Section 4.2 Capital Structure...............................................14
Section 4.3 Subsidiaries. ..................................................15
Section 4.4 Other Interests. ...............................................15
Section 4.5 Authority; Non-Contravention....................................16
Section 4.6 SEC Documents and Financial Statements..........................17
Section 4.7 Offer Documents and Proxy Statement.............................18
Section 4.8 Absence of Certain Events.......................................18
Section 4.9 Litigation......................................................19
Section 4.10 Compliance with Applicable Law..................................20
Section 4.11 Employee Plans. ................................................20
Section 4.12 Employment Relations and Agreement. ............................22
Section 4.13 Contracts.......................................................23
Section 4.14 Rights Agreement................................................23
Section 4.15 State Takeover Statutes; Certain Charter Provisions.............23
Section 4.16 Taxes...........................................................24
Section 4.17 Intellectual Properties.........................................26
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Section 4.18 Voting Requirements.............................................27
Section 4.19 Year 2000.......................................................27
Section 4.20 Brokers.........................................................27
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger...........28
Section 5.2 No Solicitation.................................................31
Section 5.3 Third Party Standstill Agreements...............................33
ARTICLE VI ADDITIONAL AGREEMENTS
Section 6.1 Company Stockholder Approval; Proxy Statement...................34
Section 6.2 Access to Information...........................................35
Section 6.3 Fees and Expenses...............................................36
Section 6.4 Stock Options...................................................37
Section 6.5 Reasonable Best Efforts.........................................38
Section 6.6 Public Announcements............................................38
Section 6.7 Indemnification; Directors and Officers Insurance...............38
Section 6.8 Employee Benefits...............................................39
Section 6.9 Employee Agreements, Stay Bonuses, Etc..........................40
Section 6.10 Board Representations...........................................40
Section 6.11 State Takeover Laws.............................................41
Section 6.12 Rights Agreement................................................41
ARTICLE VII CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger......42
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.....................................................43
Section 8.2 Effect of Termination...........................................45
Section 8.3 Amendment.......................................................45
Section 8.4 Waiver..........................................................46
ARTICLE IX GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties..................46
Section 9.2 Notices.........................................................46
Section 9.3 Interpretation..................................................47
Section 9.4 Counterparts....................................................47
Section 9.5 Entire Agreement; No Third-Party Beneficiaries..................47
Section 9.6 Governing Law...................................................48
Section 9.7 Assignment......................................................48
Section 9.8 Severability....................................................48
Section 9.9 Enforcement of this Agreement...................................48
Section 9.10 Incorporation of Exhibits.......................................48
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EXHIBIT A -- Conditions of the Offer
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 19, 1999 (this
"Agreement"), among The Guardian Life Insurance Company of America, a New York
corporation ("Parent"), Floss Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and First Commonwealth, Inc., a
Delaware corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent pursuant to a
tender offer (the "Offer") by Sub for all of the outstanding shares of Common
Stock, par value $.001 per share (the "Common Stock"), together with associated
Rights (as defined below) (the shares of Common Stock and associated Rights are
referred to herein as "Shares"), of the Company at a price of $25.00 per share,
net to the seller in cash, followed by a merger (the "Merger") of Sub with and
into the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has unanimously
adopted resolutions determining that the Offer and the Merger are fair to and in
the best interests of the holders of Shares and declaring the advisability of
the Offer and the Merger and recommending that the Company's stockholders accept
the Offer and approve and adopt this Agreement and approve the Merger and the
other transactions contemplated hereby;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent is entering into a Stockholder Agreement (the "Stockholder
Agreement") with each of Xxxxxxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx
(collectively, "Stockholders") pursuant to which Stockholders have agreed, among
other things, (i) to tender all of the Shares that Stockholders now own or
hereafter acquire (the "Stockholder Shares"), and (ii) with respect to certain
questions put to stockholders of the Company for a vote, to vote the Stockholder
Shares, in each case, in accordance with the terms and conditions of the
Stockholder Agreement; and
WHEREAS, pursuant to the Merger, each issued and outstanding Share
not owned directly or indirectly by Parent or the Company will be converted into
the right to receive the per share consideration paid pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than May 25, 1999,
Sub shall, and Parent shall cause Sub to, commence, within the meaning of Rule
14d-2 under the Exchange Act (as hereinafter defined), the Offer. The initial
expiration date of the Offer shall be June 23, 1999. The obligation of Sub to,
and of Parent to cause Sub to, commence the Offer and accept for payment, and
pay for, any Shares tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A, any of which may be waived by Parent or Sub
in their sole discretion; provided that, without the prior written consent of
the Company, Sub shall not (i) waive the Minimum Condition (as defined in
Exhibit A), (ii) reduce the number of Shares of Common Stock subject to the
Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv)
extend the Offer if all of the Offer conditions are satisfied or waived, (v)
change the form of consideration payable in the Offer, or (vi) amend, add or
waive any term or condition of the Offer (including the conditions set forth on
Exhibit A) in any manner that would adversely affect the Company or its
stockholders in any material respect. Notwithstanding the foregoing, Sub may,
without the consent of the Company, extend the Offer (i) if at the then
scheduled expiration date of the Offer any of the conditions to Sub's obligation
to accept for payment and pay for shares of Common Stock shall not have been
satisfied or waived, until the fifth business day after the date Sub reasonably
believes to be the earliest date on which such conditions will be satisfied;
(ii) for any period required by any rule, regulation, interpretation or position
of the SEC (as hereinafter defined) or its staff applicable to the Offer; or
(iii) for an aggregate period of not more than ten business days (for all such
extensions) notwithstanding the satisfaction of all conditions to the Offer.
Parent and Sub agree that if at any scheduled expiration date of the Offer, the
Minimum Condition or the Regulatory Condition (as defined in Exhibit A) shall
not have been satisfied, but at such scheduled expiration date each of the other
conditions set forth in Exhibit A shall then be satisfied, at the request of the
Company, Sub shall extend the Offer from time to time, subject to the right of
Parent, Sub or the Company to terminate this Agreement pursuant to the terms
hereof. Parent and Sub further agree that in the event Sub wishes to terminate
the Offer solely by reason of the condition described in clause
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(i) of Exhibit A, Sub shall first extend the Offer for a minimum period of ten
days, it being understood that, if at the end of such ten day period, a banking
moratorium or suspension of payments in respect of banks in the United States
shall be in effect, Sub shall then be entitled to terminate the Offer under the
provisions of clause (i) of Exhibit A, provided, that Sub shall not be required
to extend the Offer more than once pursuant to this sentence. Notwithstanding
anything to the contrary contained herein, the parties further agree that, in
the event that upon any scheduled expiration date of the Offer (or any extension
thereof), (x) all conditions to the Offer set forth in Exhibit A to this
Agreement have been satisfied and (y) for a period of five consecutive trading
days prior to the expiration of the Offer (or any extension thereof), the
average of the daily closing values of the Standard & Poor's Index of 500
Industrial Companies (the "S&P Index") for such five trading days shall reflect
a decline in excess of 25% as compared to the closing value of the S&P Index on
the close of business on the trading day next preceding the date of the Merger
Agreement, then Sub shall be entitled to extend the Offer for a period not to
exceed eight trading days. Subject to the terms and conditions of the Offer set
forth in Exhibit A, Sub shall, and Parent shall cause Sub to, pay for all Shares
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer, which shall contain
(included as an Exhibit) or incorporate by reference an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents therein pursuant to which the Offer will be made, together with
any supplements or amendments thereto, the "Offer Documents"). The Company and
its counsel shall be given an opportunity to review and comment upon the Offer
Documents prior to the filing thereof with the SEC. The Offer Documents shall
comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), and on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
the Offer Documents shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or Sub with respect to information supplied by the Company in writing, expressly
for inclusion in the Offer Documents. Each of Parent, Sub and the Company agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have
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become false or misleading in any material respect, and each of Parent and Sub
further agrees to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of shares
of Common Stock, in each case as and to the extent required by applicable
federal securities laws. Parent and Sub agree to provide the Company and its
counsel in writing with copies of any written comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents.
(c) Prior to or concurrently with the expiration of the Offer,
Parent shall provide or cause to be provided to Sub all of the funds necessary
to purchase any Shares that Sub becomes obligated to purchase pursuant to the
Offer.
Section 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
by unanimous vote, has (i) duly adopted resolutions approving this Agreement,
the Offer and the Merger, determining that the Merger is advisable and that the
terms of the Offer and Merger are fair to, and in the best interests of, the
Company's stockholders and unanimously recommending that the Company's
stockholders accept the Offer and approve the Merger and approve and adopt this
Agreement and (ii) taken all other applicable action necessary to render (x)
Section 203 of the General Corporation Law of the State of Delaware and other
state takeover statutes and (y) the Stockholders Rights Agreement dated as of
November 1, 1995 between the Company and First Chicago Trust Company of New
York, as amended as of December 15, 1998 (as further amended to date, the
"Rights Agreement") inapplicable to the Offer and the Merger. The Company
represents that its Board of Directors has received the written opinion of
Xxxxxxx Xxxxx & Company, L.L.C. that the proposed consideration to be received
by the holders of Shares pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. The Company has been advised that each
of its directors and executive officers intends to tender pursuant to the Offer
all Shares owned of record and beneficially by him or her except to the extent
such tender would violate applicable securities laws.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9"), and shall mail the Schedule 14D-9 to the
stockholders of the Company. Subject to the terms of this Agreement, the
Schedule 14D-9 shall contain the recommendation described in paragraph (a) of
this Section 1.2. To the extent practicable, the Company shall cooperate with
Parent and Sub in mailing or otherwise disseminating the Schedule 14D-9 with the
appropriate Offer Documents to the Company's stockholders.
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Parent and Sub and their counsel shall be given an opportunity to review and
comment upon the Schedule 14D-9 prior to the filing thereof with the SEC. The
Schedule 14D-9 shall comply as to form in all material respects with the
requirements of the Exchange Act and, on the date filed with the SEC and on the
date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circum stances under which they were made, not
misleading, except that no representation is made by the Company with respect to
infor mation supplied by Parent or Sub in writing expressly for inclusion in the
Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to provide
copies thereof to Parent and Sub so that they may be disseminated to the holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Company agrees to provide Parent and Sub and their counsel
in writing with any comments the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Parent and Sub with mailing labels containing the
names and addresses of the record holders of Shares as of a recent date and of
those persons or entities becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security position listings
and computer files and all other information in the Company's possession or
control regarding the beneficial owners of Shares, and shall furnish to Parent
and Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent and Sub
may reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent and Sub and each of their affiliates and
associates shall hold in confidence the information contained in any of such
labels, lists and files, will use such information only in connection with the
Offer and the Merger, and, if this Agreement is terminated, will promptly
deliver to the Company all copies of such information then in their possession.
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ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Sub shall be merged with and into the Company
at the Effective Time (as hereinafter defined). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the DGCL.
Section 2.2 Effective Time. The Merger shall become effective when
the Certificate of Merger or, if applicable, the Certificate of Ownership and
Merger (each, the "Certificate of Merger"), executed in accordance with the
relevant provisions of the DGCL, are accepted for record by the Secretary of
State of the State of Delaware. When used in this Agreement, the term "Effective
Time" shall mean the later of the date and time at which the Certificate of
Merger is accepted for record or such later time established by the Certificate
of Merger. The filing of the Certificate of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger set
forth herein.
Section 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL.
Section 2.4 Certificate of Incorporation and Bylaws; Directors and
Officers. (a) The Certificate of Incorporation, as in effect immediately prior
to the Effective Time, of Sub shall be amended to change the name of Sub to
"First Commonwealth, Inc." and, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or applicable law. The Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or the
Certificate of Incorporation and applicable law.
(b) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation as of the Effective Time.
Section 2.5 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of any stockholder of
the Company:
(a) All Shares that are held in the treasury of the Company or by
any wholly owned Subsidiary (as hereinafter defined) of the Company and
any Shares
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owned by Parent, Sub or any other wholly owned Subsidiary of Parent shall
be cancelled and no consideration shall be delivered in exchange therefor.
(b) Each Share issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with
Section 2.5(a) and other than Dissenting Shares (as defined in Section
2.7)) shall be converted as of the Effective Time into the right to
receive from the Surviving Corporation in cash, without interest, the per
Share consideration in the Offer (the "Merger Consideration"). All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and each holder of a certificate or
certificates (the "Certificates") representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration.
(c) Each issued and outstanding share of the capital stock of Sub
shall be converted into and become as of the Effective Time one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.6 Exchange of Certificates. (a) Paying Agent. Parent and
the Company shall authorize a commercial bank or trust company having net
capital of not less than $100 million (or one or more other persons or entities
as shall be reasonably acceptable to Parent and the Company) to act as paying
agent hereunder (the "Paying Agent") for the payment of the Merger Con
sideration upon surrender of Certificates. All of the fees and expenses of the
Paying Agent shall be borne by Parent.
(b) Parent and Sub to Provide Funds. Parent shall take all steps
necessary to enable and cause the Sub to deposit in trust with the Paying Agent
concurrently with or prior to the Effective Time cash in an amount necessary to
pay for all of the Shares pursuant to Section 2.5 and the amount required in
connection with the Stock Options pursuant to Section 6.4. Such amount shall
hereinafter be referred to as the "Exchange Fund."
The Exchange Fund shall be invested by the Paying Agent as directed
by Parent in direct obligations of the United States, obligations for which the
full faith and credit of the United States is pledged to provide for the payment
of principal and interest, commercial paper rated of the highest quality by
Xxxxx'x Investors Services, Inc. or Standard & Poor's Ratings Group or
certificates of deposit, bank repurchase agreements or bankers' acceptances of a
commercial bank having at least $100,000,000 in assets (collectively "Permitted
Investments") or
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in money market funds which are invested in Permitted Investments, and any net
earnings with respect thereto shall be paid to Parent as and when requested by
Parent. The Paying Agent shall, pursuant to irrevocable instructions, make the
payments referred to in Section 2.5 hereof out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose except as otherwise agreed
to by Parent.
If the amount of cash in the Exchange Fund is insufficient to pay
all of the amounts required to be paid pursuant to Sections 2.5 or 6.4, Parent
from time to time after the Effective Time shall take all steps necessary to
enable and cause the Surviving Corporation to deposit in trust additional cash
with the Paying Agent sufficient to make all such payments.
(c) Exchange Procedures. As soon as practicable after the Effective
Time, the Paying Agent shall mail to each holder of record of a Certificate,
other than Parent, the Company and any Subsidiary of Parent or the Company, (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon actual
delivery of the Certificates to the Paying Agent and shall be in a form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.5, and the Certificates so
surrendered shall forthwith be cancelled. No interest will be paid or will
accrue on the cash payable upon the surrender of any Certificate. If payment is
to be made to a person or entity other than the person or entity in whose name
the Certificate so surrendered is registered, it shall be a condition of payment
that such Certificate shall be properly endorsed or otherwise in proper form for
transfer and that the person or entity requesting such payment shall pay any
transfer or other taxes required by reason of such Certificate or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.6, each
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing any Shares owned by Parent or any Subsidiary of
Parent) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the Shares theretofore represented by such Certificate shall have
been converted pursuant to Section 2.5. Notwithstanding the foregoing, none of
the Paying Agent, the Surviving Corporation or
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any party hereto shall be liable to a former stockholder of the Company for any
cash or interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for six months after the Effective
Time shall be repaid to the Surviving Corporation (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all such funds). Thereafter, persons or entities who prior to the
Merger held Shares shall look only to the Surviving Corporation (subject to the
terms of this Agreement, abandoned property, escheat and other similar laws) as
general creditors thereof with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them, without interest.
Section 2.7 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such Shares who have
properly exercised appraisal rights with respect thereto in accordance with
Delaware law (the "Dissenting Shares") will not be exchangeable for the right to
receive the Merger Consideration, and holders of such Shares will be entitled to
receive payment of the appraised value of such Shares in accordance with the
provisions of Delaware law unless and until such holders fail to perfect or
effectively withdraw or lose their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such Shares will thereupon be treated
as if they had been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon. The Company will give Parent and Sub prompt notice of any
demands received by the Company for appraisals of Shares. The Company shall give
Parent and Sub (A) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related instruments received
by the Company, and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal. The Company will not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal or settle or offer to settle any such
demand.
Section 2.8 Merger Without Meeting of Stockholders. Notwithstanding
the foregoing, in the event that Sub, or any other direct or indirect subsidiary
of Parent, shall acquire at least 90 percent of the outstanding Shares, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of the
Offer without a meeting of stockholders of the Company, in accordance with
Section 253 of the DGCL.
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Section 2.9 No Further Ownership Rights in Shares; Closing of
Company Transfer Books. At and after the Effective Time, each holder of a
Certificate shall cease to have any rights as a stockholder of the Company,
except for, in the case of a holder of a Certificate (other than shares to be
cancelled pursuant to Section 2.5 hereof and other than Dissenting Shares), the
right to surrender his or her Certificate in exchange for payment of the Merger
Consideration or, in the case of a holder of Dissenting Shares, to perfect his
or her right to receive payment for his or her shares pursuant to Delaware law
if such holder has validly perfected and not withdrawn his or her right to
receive payment for his or her shares, and no transfer of Shares shall be made
on the stock transfer books of the Surviving Corporation. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.10 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such Constituent Corporations, all such other acts and things
necessary, desirable or proper, consistent with the terms of this Agreement (as
in effect immediately prior to the acceptance of Shares in the Offer, or as
thereafter amended in accordance with Section 8.3), to vest, perfect or confirm
its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of such Constituent Corporation and
otherwise to carry out the purposes of this Agreement.
Section 2.11 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of White &
Case LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m.,
local time, on the second business day after the day on which the last of the
conditions set forth in Article VII hereof shall have been fulfilled or waived
or at such other time and place as Parent and the Company shall agree.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 3.1 Organization, Standing and Power; Capitalization and
Ownership of Sub. Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now being conducted. The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are validly issued and outstanding, fully paid and nonassessable and are owned
by Parent free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, charges or other encumbrances of
any nature or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided under applicable
Federal or State securities laws) ("Liens").
Section 3.2 Authority; Non-Contravention. Each of Parent and Sub has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by the Company) constitutes a valid and
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally and by general equitable principles.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Parent or Sub under, any provision of (i) the Certificate of
Incorporation or Bylaws of Parent or Sub, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or Sub or
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(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of their respective properties or assets,
other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, or Liens that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Parent or
Sub or prevent the consummation of any of the transactions contemplated hereby.
No filing or registration with, or authorization, consent or approval of, any
domestic (federal, state or local), foreign or supranational court, commission,
governmental body, regulatory or administrative agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent and Sub
or is necessary for the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the Exchange Act, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iii) the filing of a Form A Statement Regarding the Acquisition
of Control of a Domestic Insurer and/or other documents as may be required with
the Arizona, Illinois, Indiana, Wisconsin, Missouri and Michigan Departments of
Insurance and the approval thereof by the Directors of Insurance of such
Departments of Insurance ("DOI"), and any other required filings with or
approvals by state agencies regulating corporations or insurance companies
applicable to the transactions contemplated hereby (collectively, such filings
and approvals are referred to as the "Insurance Approvals"), (iv) such filings
and approvals as may be required under the Xxxx-Xxxxx-Xxxxxx Improvements Act of
1976, as amended (the "HSR Act"), (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states or the Nasdaq
National Market, and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent or Sub or prevent the consummation of any of
the transactions contemplated hereby. Except as disclosed by Parent to the
Company in writing prior to the date of this Agreement, to the knowledge of the
Parent, there are no controversies, examinations, actions, suits, proceedings,
investigations, claims, or issues raised by the DOI in the States of Arizona,
Illinois, Indiana, Wisconsin, Missouri or Michigan involving Parent or any of
its Subsidiaries which would reasonably be expected to, directly or indirectly,
prevent the Offer or the Merger or delay the Effective Time beyond 180 days
after the date of this Agreement. For purposes of this Agreement (a) "Material
Adverse Change" or "Material Adverse Effect" means, (i) when used with respect
to the Company, any change or effect,
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either individually or in the aggregate, that is or may be materially adverse to
the business, assets, liabilities, properties, condition (financial or
otherwise), or results of operations of all or any material part of the Company
and its Subsidiaries taken as a whole or (ii) when used with respect to Parent,
Sub or the Company, as the case may be, any change or effect, either
individually or in the aggregate, which would reasonably be expected to
materially impair the ability of Parent, Sub or the Company, as the case may be,
to perform their respective obligations hereunder, and (b) "Subsidiary" means
any corporation, partnership, joint venture or other legal entity of which (i)
Parent or the Company or any of their respective Subsidiaries, as the case may
be, is a general partner or (ii) Parent or the Company, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
Section 3.3 Offer Documents and Proxy Statement. The Offer Documents
will comply in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. The written information
supplied or to be supplied by Parent and Sub expressly for inclusion in the
Proxy Statement, the Schedule 14D-9 and the information statement filed by the
Company in connection with the offer pursuant to Rule 14f-1 promulgated under
the Exchange Act (the "Information Statement"), together with any amendments or
supplements to any of the foregoing will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made, in light of the circumstances
under which they are made, not misleading. Notwithstanding the foregoing, no
representation or warranty is made with respect to any information with respect
to the Company or its officers, directors and affiliates provided to Parent or
Sub by the Company in writing for inclusion in the Offer Documents or amendments
or supplements thereto. If at any time prior to the purchase of Shares pursuant
to the Offer there shall occur any event with respect to Parent, its officers
and directors or any of its Subsidiaries which is required to be described in
the Offer Documents, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of the Company.
Section 3.4 Financing. Parent has all of the funds necessary to
consummate the Offer and the Merger and the transactions contemplated hereby on
a timely basis and to pay any and all of its related fees and expenses.
Section 3.5 Brokers. No broker, investment banker or
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other person or entity, other than Xxxxxxx Xxxxx Barney, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub.
Section 3.6 Business of Sub. Sub was organized solely for the
purpose of acquiring the Company and engaging in the transactions contemplated
by this Agreement and has not engaged in any business since it was incorporated
which is not in connection with the acquisition of the Company and this
Agreement. During the period from the date of this Agreement through the date on
which Shares are purchased in accordance with the Offer, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization, Standing and Power. The Company and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company has made available to Parent and Sub complete and
correct copies of the Second Restated Certificate of Incorporation and By-Laws
of the Company and the comparable governing documents of each of its
Subsidiaries, in each case as amended to the date of this Agreement. Other than
as set forth in Section 4.1 of the Company's disclosure letter (the "Company
Disclosure Letter") delivered concurrently with the delivery of this Agreement,
the respective certificates of incorporation and by-laws or other organizational
documents of the Subsidiaries of the Company do not contain any provision
limiting or otherwise restricting the ability of the Company to control such
Subsidiaries in any material respect.
Section 4.2 Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of fifteen
- 14 -
million (15,000,000) shares of Common Stock and one million (1,000,000) shares
of preferred stock, par value $.001 per share ("Preferred Stock"). At the close
of business on May 18, 1999, (i) 3,730,135 shares of Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable
and free of preemptive rights, (ii) 740 shares of Common Stock were held in the
treasury of the Company or by Subsidiaries of the Company and (iii) 413,389
shares of Common Stock were reserved for future issuance pursuant to the
Company's 1995 Long-Term Incentive Plan and 1987 Statutory-Nonstatutory Stock
Option Plan (collectively, the "Stock Option Plans"). No shares of Preferred
Stock are outstanding. A total of 150,000 shares of Preferred Stock have been
designated as Series A Junior Participating Preferred Stock ("Series A Preferred
Stock"), in connection with the Rights Agreement. As of the date of this
Agreement, except (i) as set forth above, (ii) for the rights to purchase Series
A Preferred Stock ("Rights") pursuant to the Rights Agreement and (iii) as set
forth in the Company SEC Documents (as hereinafter defined), no shares of
capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. The Company does not have any outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter ("Voting
Debt"). As of the date of this Agreement, except for stock options covering not
in excess of 305,240 shares of Common Stock issued under the Stock Option Plans,
there are no outstanding or authorized options, warrants, calls, rights or
subscriptions, claims of any character, obligations, convertible or exchangeable
securities or other commitments, contingent or otherwise, to which the Company
is a party or by which it is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement (each an
"Issuance Obligation").
Section 4.3 Subsidiaries. Exhibit 21 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, as filed with the SEC, is a
true, accurate and correct list of all of the Subsidiaries of the Company. All
of the outstanding capital stock of, or ownership interests in, each Subsidiary
of the Company is owned by the Company, directly or indirectly. All of the
shares of capital stock of each Subsidiary are validly existing, fully paid and
non-assessable. Except as set forth in the Company SEC Documents or Section 4.3
of the Company Disclosure Letter, no Subsidiary of the Company has outstanding
Voting Debt and no Subsidiary of the Company is bound by, obligated under, or
party to an Issuance Obligation with respect to any security of the Company or
any Subsidiary of the Company.
- 15 -
Except as set forth in the Company SEC Documents or Section 4.3 of the Company
Disclosure Letter, all of such capital stock or ownership interest is owned by
the Company, directly or indirectly, free and clear of all Liens.
Section 4.4 Other Interests. Except for the Company's interest in
its Subsidiaries, investments in ordinary course consistent with past practice,
and as set forth in the Company SEC Documents or Section 4.4 of the Company
Disclosure Letter, neither the Company nor its Subsidiaries owns directly or
indirectly any interest or investment (whether equity or debt) in, nor is the
Company or any of its Subsidiaries subject to any obligation or requirement to
provide for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in, any corporation, partnership, joint
venture, business, trust or entity.
Section 4.5 Authority; Non-Contravention. The Board of Directors of
the Company has unanimously approved the Merger Agreement and the transactions
contemplated thereby (including, but not limited to the Offer and the Merger),
declared the Merger advisable and fair to and in the best interests of the
holders of Shares and the Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of the Merger by
the stockholders of the Company (if required), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the approval of the Merger by the stockholders of the
Company (if required). This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub) constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights,
generally, and by general equitable principles. Except as set forth in the
Company SEC Documents or Section 4.5 of the Company Disclosure Letter, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries under, any provision of (i)
the Certificate of Incorporation or Bylaws of the Company (true and complete
copies of which as of the date hereof have been delivered to Parent) or any
provision of the comparable
- 16 -
charter or organization documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such conflicts, violations, defaults, rights,
or Liens that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company, or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for (i) in connection or in compliance with the provisions of the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) the Insurance Approvals, (iv) such filings and approvals as may be
required under the HSR Act, (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states or the Nasdaq
National Market, and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company or prevent the consummation of any of
the transactions contemplated hereby. Except as disclosed in Section 4.5 of the
Company Disclosure Letter, to the knowledge of the Company, there are no
controversies, examinations, actions, suits, proceedings, investigations,
claims, or issues raised by the DOI in the States of Arizona, Illinois, Indiana,
Wisconsin, Missouri or Michigan involving the Company or any of its Subsidiaries
which would reasonably be expected to, directly or indirectly, prevent the Offer
or the Merger or delay the Effective Time beyond 180 days after the date of this
Agreement.
Section 4.6 SEC Documents and Financial Statements. (a) Since
November 16, 1995, the Company has filed with the SEC all documents required to
be filed under the Securities Act of 1933, as amended (including the rules and
regulations promulgated thereunder) (the "Securities Act"), and the Exchange Act
(such documents, together with any exhibits, schedules, amendments or
supplements thereto, and any information incorporated by reference therein, the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or
- 17 -
the Exchange Act, as the case may be, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by the
rules applicable to Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein).
(b) Except as set forth in the Company SEC Documents or Section 4.6
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1998 which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
Section 4.7 Offer Documents and Proxy Statement. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents or the Schedule 14D-9, the
Information Statement, if any, the Proxy Statement, if any, or any amendment or
supplement thereto, will (i) in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times such documents are
filed with the SEC or first published, sent or given to the Company's
stockholders, or (ii) in the case of the Proxy Statement, at the time of the
mailing of the Proxy Statement and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur which is required
to be described in an amendment of, or a supplement to, the Proxy Statement, the
Information Statement, the Schedule 14D-9 or the Offer Documents,
- 18 -
such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. Prior to the filing of such amendment or supplement
with the SEC, a copy thereof shall be delivered to Parent and its counsel, who
shall have the opportunity to comment on such amendment or supplement. The Proxy
Statement and the Schedule 14D-9 will comply as to form in all material respects
with the requirements of the Exchange Act.
Section 4.8 Absence of Certain Events. Since December 31, 1998, the
Company and its Subsidiaries have operated their respective businesses only in
the ordinary course consistent with historical practices and, except as
disclosed in the Company SEC Documents or Section 4.8 of the Company Disclosure
Letter, there has not occurred (i) any event, occurrence or conditions which,
individually or in the aggregate, would be reasonably likely to have, a Material
Adverse Effect on the Company; (ii) any entry into or any commitment or
transaction that, individually or in the aggregate, would be reasonably likely
to have, a Material Adverse Effect on the Company; (iii) any change by the
Company or any of its Subsidiaries in its accounting methods, principles or
practices; (iv) any amendments or changes in the Certificate of Incorporation or
Bylaws of the Company; (v) any revaluation by the Company or any of its
Subsidiaries of any of their respective assets, including, without limitation,
write-offs of accounts receivable, other than in the ordinary course of the
Company's and its Subsidiaries' businesses consistent with past practices; (vi)
any damage, destruction or loss which resulted in or is reasonably likely to
result in a Material Adverse Effect on the Company; (vii) any event pursuant to
which the Company or any of its Subsidiaries has incurred any material
liabilities (direct, contingent or otherwise) or engaged in any material
transaction or entered into any material agreement outside the ordinary course
of business; (viii) any increase in the compensation of any officer of the
Company or any of its Subsidiaries or any general salary or benefits increase to
the employees of the Company or any of its Subsidiaries other than in the
ordinary course of business; or (ix) any declaration, setting aside or payment
of any dividend or other distribution with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company. Except as set
forth in the Company SEC Documents or Section 4.8 of the Company Disclosure
Letter, since December 31, 1998, neither the Company nor any of its Subsidiaries
has taken any action specified in Section 5.1 of this Agreement.
Section 4.9 Litigation. Except as disclosed in Section 4.9 of the
Company Disclosure Letter, there are no investigations, actions, suits or
proceedings pending against
- 19 -
the Company or its Subsidiaries or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries (or any of their respective properties,
rights or franchises), at law or in equity, or before or by any federal or state
commission, board, bureau, agency, regulatory or administrative instrumentality
or other Governmental Entity or any arbitrator or arbitration tribunal, that
would be reasonably likely to have a Material Adverse Effect on the Company,
and, to the knowledge of the Company, no development has occurred with respect
to any pending or threatened action, suit or proceeding that would be reasonably
likely to result in a Material Adverse Effect on the Company or would prevent or
delay the consummation of the transactions contemplated hereby. Neither the
Company nor any of its Subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding which would reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.10 Compliance with Applicable Law. (a) The Company and its
Subsidiaries hold, and at all required times have held, all permits, licenses,
variances, exceptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company and its Subsidiaries are, and at all times have been, in compliance with
the terms of the Company Permits, except where the failure so to comply would
not have a Material Adverse Effect on the Company. The businesses of the Company
and its Subsidiaries are not being, and have not been, conducted in violation of
any law, ordinance or regulation of any Governmental Entity except for
violations or possible violations which individually or in the aggregate do not
and would not reasonably be expected to have a Material Adverse Effect on the
Company. Except as set forth in Section 4.10 of the Company Disclosure Letter,
no investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company, threatened, nor, to the knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which would not reasonably be expected to have a Material Adverse Effect
on the Company.
(b) The Company has made all required filings under applicable
insurance holding company statutes in each jurisdiction where such filings are
required, except for such jurisdictions in which the failure to make such
filings would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 4.11 Employee Plans. (a) Each Company Benefit Plan (as
defined below) (and each related trust agreement or
- 20 -
insurance contract) is in compliance with its terms and with all contractual
obligations and all obligations under applicable federal, state and local laws,
rules and regulations (domestic and foreign), other than where the failure to so
comply or perform would not be reasonably likely to have, a Material Adverse
Effect on the Company. All contributions and other payments required to be made
by the Company and its Subsidiaries to any Company Benefit Plan or Multiemployer
Plans (as defined below), prior to the date hereof have been made, other than
where the failure to so contribute or make payments would not be reasonably
likely to have, a Material Adverse Effect on the Company, and all accruals or
contributions required to be made under any Company Benefit Plan or
Multiemployer Plan have been made. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or proceeding
pending, threatened or anticipated (other than routine claims for benefits)
against or relating to any Company Benefit Plan or against the assets of any
Company Benefit Plan, which would be reasonably likely to have, a Material
Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
has communicated generally to employees or specifically to any employee
regarding any future increase of benefit levels (or future creations of new
benefits) with respect to any Company Benefit Plan beyond those reflected in the
Company Benefit Plans, which benefit increases or creations, either individually
or in the aggregate, would be reasonably likely to have, a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries presently
sponsors, maintains, contributes to, nor is the Company or its Subsidiaries
required to contribute to, nor has the Company or any of its Subsidiaries ever
sponsored, maintained, contributed to, or been required to contribute to, any
employee pension benefit plan within the meaning of section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
multiemployer plan within the meaning of section 3(37) or 4001(a)(3) of ERISA a
("Multiemployer Plan"), other than the Company's 401(k) plan which is qualified
under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code").
No Company Benefit Plan provides for post-employment or retiree welfare
benefits, except to the extent required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code. Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any other "disqualified person"
or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively) has engaged in any transactions in connection with
any Company Benefit Plan that would reasonably be expected to result in the
imposition of a penalty pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA, or a tax pursuant to Section 4975 of the Code, except
where the imposition of such penalties, damages or taxes would not reasonably be
expected to result in a Material Adverse Effect on the Company.
- 21 -
(b) Neither the Company nor any of its Subsidiaries has incurred,
nor has any event occurred which has imposed or is reasonably likely to impose
upon the Company or any of its Subsidiaries, any withdrawal liability (partial
or complete) in respect of any Multiemployer Plan, which withdrawal liability
has not been satisfied or discharged in full or which, either individually or in
the aggregate, would be reasonably likely to cause, a Material Adverse Effect on
the Company.
(c) The execution, delivery and performance of this Agreement and
the transactions contemplated hereby will not result in the imposition of any
federal excise tax with respect to any Company Benefit Plan.
(d) Except as set forth in Section 4.11 of the Company Disclosure
Letter, no payment or benefit which will or may be made by the Company or any of
its Subsidiaries with respect to any of their employees under any Company
Benefit Plan in effect on the date hereof will be characterized as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code.
(e) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workers' compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, including, but not limited to, any "employee benefit
plan" within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan" means any employee pension benefit plan and any Plan, other than a
Multiemployer Plan, established by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributes or has contributed
(including any such Plans not now maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries does not now
contribute, but with respect to which the Company or any of its Subsidiaries has
or may have any liability).
Section 4.12 Employment Relations and Agreement. (a) Except as would
not reasonably be expected to have a Material Adverse Effect on the Company or
as disclosed in Section 4.12(a) of the Company Disclosure Letter, (i) each of
the Company and its Subsidiaries is, and at all times has been, in compliance in
all material respects with all federal, state or other applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice; (ii) no unfair labor practice complaint against the Company or
any of its Subsidiaries is pending before the National Labor Relations Board;
(iii) there is no labor strike, dispute, slowdown or stoppage actually
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pending or threatened against or involving the Company or any of its
Subsidiaries, (iv) no representation question exists respecting the employees of
the Company or any of its Subsidiaries; (v) no grievance exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (vi) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries; and (vii) the Company and its Subsidiaries taken as a whole have
not experienced any material labor difficulty during the last three years.
(b) Except for Employment Agreements and similar agreements,
executed copies of which, as amended, have been delivered to Parent, and as set
forth in the Company SEC Documents or Section 4.12(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has any written, or, to
the knowledge of the Company, any oral, employment or severance agreement with
any other person. The executed copies of the Employment Agreements and similar
agreements previously delivered to Parent are true and correct and such
agreements have not since been amended, modified or rescinded except to the
extent disclosed to Parent.
Section 4.13 Contracts. Except as filed as Exhibits to Company SEC
Documents or as set forth in Section 4.13 of the Company Disclosure Letter,
neither the Company nor its Subsidiaries is a party to, or has any obligation
under, any contract or agreement which contains any covenant currently or
prospectively limiting the freedom of the Company, any of its Subsidiaries or
any of their respective affiliates to engage in any line of business or to
compete with any entity. Subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity, all contracts and agreements to which the Company or any
of its Subsidiaries is a party or by which any of their respective assets is
bound are valid and binding, in full force and effect and enforceable against
the parties thereto in accordance with their respective terms, other than such
failures to be so valid and binding, in full force and effect or enforceable
which, would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company. There is not under any such
contract or agreement any existing default, or event which, after notice or
lapse of time, or both, would constitute a default, by the Company or any of its
Subsidiaries, or to the Company's knowledge, any other party, except to the
extent such default would not reasonably be expected to have a Material Adverse
Effect on the Company.
Section 4.14 Rights Agreement. The Company and the Board of
Directors of the Company have taken all necessary action to amend the Rights
Agreement (subject only to the execution of
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such amendment by the Rights Agent, which execution the Company shall cause to
take place prior to the commencement of the Offer) to (a) render the Rights
Agreement inapplicable with respect to the Offer, the Merger and the other
transactions contemplated by this Agreement and (b) ensure that (x) neither
Parent nor Sub nor any of their Affiliates (as defined in the Rights Agreement)
or Associates (as defined in the Rights Agreement) is considered to be an
Acquiring Person (as defined in the Rights Agreement) and (y) the provisions of
the Rights Agreement, including the occurrence of a Distribution Date (as
defined in the Rights Agreement), are not and shall not be triggered by reason
of the announcement or consummation of the Offer, the Merger or the consummation
of any of the other transactions contemplated by this Agreement. The Company has
delivered to Parent a complete and correct copy of the Rights Agreement as
amended and supplemented to the date of this Agreement.
Section 4.15 State Takeover Statutes; Certain Charter Provisions.
The Board of Directors of the Company has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of the Company) necessary to exempt Parent, its Subsidiaries, their
affiliates, the Merger, this Agreement, the Stockholder Agreements and the
transactions contemplated hereby and thereby from Section 203 of the DGCL. No
other state takeover statutes and no charter or bylaw provisions are applicable
to the Merger, this Agreement, the Stockholder Agreements and the transactions
contemplated hereby and thereby.
Section 4.16 Taxes. (a) The Company and each Subsidiary (i) has
timely filed or will timely file all material Tax Returns required to be filed
on or before the Effective Time, which returns are or will be true and complete
in all material respects; (ii) the Company and each Subsidiary has timely paid
or will timely pay, or has adequately disclosed or will adequately disclose, and
has fully provided or will fully provide for as a liability on the financial
statements of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, all material Taxes which
are due and payable with respect to all taxable years or periods that end on or
before the Effective Time and, with respect to any taxable year or period
beginning before and ending after the Effective Time, the portion of such
taxable year or period ending on and including the Effective Time
("Pre-Effective Periods"), and the Company and each Subsidiary has withheld or
collected all material Taxes they were required to withhold and collect, and
have timely paid to the proper authorities such Taxes withheld or collected to
the extent due and payable.
(b) Except as set forth in the Company Disclosure Letter, (i)
neither the Company nor any Subsidiary has waived any statute of limitations in
respect of material Taxes of the
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Company or any Subsidiary; (ii) the Tax Returns referred to in clause (i) of
Section 4.16(a) have been reviewed by the Internal Revenue Service or any other
appropriate taxing authority; and (iii) no issues have been raised by the
relevant taxing authority in connection with such review of the Tax Returns
through a notice or any other correspondence from any taxing authority, and
neither the Company nor any of its Subsidiaries is subject to an audit,
examination, action, suit, proceeding, investigation or claim regarding Taxes
("Tax Controversy") by the appropriate taxing authorities of any nation, state,
province or locality that is currently pending (or scheduled as of the Effective
Time to be conducted) or that has been threatened by any such authority
regarding Taxes; and (iv) all deficiencies asserted or assessments made as a
result of any such Tax Controversy concerning the Tax Returns referred to in
Section 4.16(a) by a taxing authority have been paid in full; and (vii) no liens
or security interests arising in connection with a failure (or alleged failure)
to pay any Taxes have attached to any of the Company's or any of its
Subsidiaries' assets. The Company has delivered to Parent correct and complete
copies of all United States federal, state and all foreign income Tax Returns
(to the extent filed as of the date hereof or, if not filed, correct and
complete copies of extensions thereof), examination reports, statements of
deficiencies assessed against or agreed to by the Company and any of its
Subsidiaries, or any other similar correspondence from a taxing authority,
relating to taxable years 1996, 1997 and 1998.
(c) For purposes of this Agreement (i) "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any federal, state, local, foreign or
other income, gross receipts, profits, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer, stamp, severance, capital gains, capital stock or
excise tax, or any other tax, levy custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority and shall include any liability
for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity with respect to Taxes, and (ii) "Tax
Return" means any return, form, report or similar statement required to be filed
with respect to any Tax (including any schedules, related or supporting
information), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(d) Except as set forth in the Company Disclosure Letter, none of
the Company or any of its Subsidiaries has agreed to any extension of time with
respect to Tax assessment or deficiency.
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(e) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has been included in any "consolidated,"
"unitary" or "combined" Tax Return provided for under the law of the United
States, any foreign jurisdiction or any state, province or locality with respect
to Taxes for any taxable period for which the statute of limitations has not
expired.
(f) Except as set forth in the Company Disclosure Letter, there are
no tax sharing, allocation, indemnification or similar agreements in effect as
between the Company or its Subsidiaries or any predecessor or affiliate thereof
and any other party under which Parent or Sub, the Company or its Subsidiaries
could be liable for Taxes or other claims of any party.
(g) No election under Section 341(f) of the Code has been made or
shall be made prior to the Effective Time to treat the Company or its
Subsidiaries as a consenting corporation, as defined in Section 341 of the Code.
(h) Neither the Company nor any of its Subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(i) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustments pursuant to section 481 of the
Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the Internal Revenue Service has not
initiated or proposed any such adjustment or change in accounting period.
Section 4.17 Intellectual Properties. (a) The Company exclusively
owns, without restrictions, or is licensed to use, the worldwide rights to all
material patents, trademarks, trade names, service marks, copyrights together
with any registrations and applications therefor, Internet domain names, net
lists, schematics, inventories, technology, trade secrets, proprietary
information, know-how, computer software programs or applications including,
without limitation, all object and source codes and tangible or intangible
proprietary information or material that in any material respect are used in the
business of the Company and any of its Subsidiaries as currently conducted (the
"Company Intellectual Property"). Section 4.17 of the Company Disclosure Letter
sets forth: (i) all material patents, trademarks, trade names, service marks,
registered copyrights, and any applications therefor in any nation included in
the Company Intellectual Property; and (ii) all material licenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any Company Intellectual Property and includes the identities of the parties
thereto, a description of the
- 26 -
nature and subject matter thereof, the applicable royalty and the term thereof.
Neither the Company nor any of its Subsidiaries is, or as a result of the
execution, delivery or performance of the Company's obligations hereunder will
be, in violation of, or lose any rights pursuant to, any license or agreement
set forth in Section 4.17 of the Company Disclosure Letter, except as would not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) No claims have been asserted or, to the knowledge of the
Company, are threatened by any person or entity nor does the Company or any of
its Subsidiaries know of any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, use, offer for sale, reproduction,
distribution or modification, of any product or process by the Company or any of
its Subsidiaries infringes or within the six (6) year period immediately prior
to the date hereof has infringed any copyright, trade secret, trademark, patent
or other intellectual property right of any person or entity, (ii) that, if
sustained, might preclude the use by the Company or any of its Subsidiaries of
any Company Intellectual Property, or (iii) challenging the ownership, validity
or enforceability of any of the Company Intellectual Property, except as would
not reasonably be expected to have a Material Adverse Effect on the Company. All
granted and issued patents and all registered trademarks and service marks set
forth in Section 4.17 of the Company Disclosure Letter and all copyrights held
by the Company or any of its Subsidiaries are valid, enforceable and subsisting,
except as would not reasonably be expected to have a Material Adverse Effect on
the Company. To the Company's best knowledge, there has not been and there is
not any unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any person or entity, including, without limitation,
any employee or former employee.
Section 4.18 Voting Requirements. The affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock (voting
as one class, with each share of Common Stock having one (1) vote) entitled to
be cast approving this Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement.
Section 4.19 Year 2000. Section 4.19 of the Company Disclosure
Letter sets forth a summary of the status of the Company's Year 2000 readiness
plan (the "Y2K Readiness Plan"). Upon completion of the Y2K Readiness Plan,
except as set forth in Section 4.19 of the Company Disclosure Letter, to the
knowledge of the Company, all software material to the business, finances or
operations of the Company ("Software"):
(i) shall accurately and completely process
- 27 -
(including but not limited to calculation, comparison and sequencing, and
including without limitation leap year calculations) date-related data for
dates prior to the year 2000, date-related data for dates after the year
1999, and date-related data for dates both before the year 2000 and after
the year 1999; and
(ii) shall not, as a consequence of the change of centuries or
of the fact that date from more than one century is being processed, cause
an abnormal termination of execution, an endless loop, incorrect values or
invalid results, or otherwise fail to perform accurately and completely
those functions set forth in the associated user documentation.
Section 4.20 Brokers. No broker, investment banker or other person
or entity, other than Xxxxxxx Xxxxx & Company, L.L.C., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contem
plated by this Agreement based upon arrangements made by or on behalf of the
Company. A true and correct copy of the engagement letter of Xxxxxxx Xxxxx &
Company, L.L.C., as in effect on the date hereof has been delivered to Parent.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger.
Except as otherwise expressly contemplated by this Agreement or as described in
the Company Disclosure Letter, during the period from the date of this Agreement
through the Effective Time, the Company shall, and shall cause its Subsidiaries
to, in all material respects carry on their respective businesses in, and not
enter into any material transaction other than in accordance with, the regular
and ordinary course and, to the extent consistent therewith, use its reasonable
best efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them. Without limiting the generality of the foregoing, and,
except as otherwise expressly contemplated by this Agreement or as described in
the Company Disclosure Letter, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Parent:
(a) (x) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make
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any payments to stockholders of the Company in their capacity as such,
other than dividends payable to the Company declared by any of the
Company's Subsidiaries, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock or (z) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into or exchangeable or
exercisable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or equity equivalent
(other than, in the case of the Company, the issuance of Shares during the
period from the date of this Agreement through the Effective Time upon the
exercise of Stock Options outstanding (as set forth in Section 4.2) on the
date of this Agreement in accordance with their current terms or enter
into any agreement or contract with respect to the sale or issuance of any
of its securities;
(c) amend its charter or bylaws or the Rights Agreement;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (other than in the ordinary course of business consistent with
past practice);
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets that are material, individually or
in the aggregate, to the Company and its Subsidiaries taken as a whole;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except for borrowings or guarantees incurred in the
ordinary course of business consistent with past practice for working
capital purposes, or make any loans, advances or capital contributions to,
or investments in, any other person or entity, other than to the Company
or any wholly owned Subsidiary of the Company and other than in the
ordinary course of business consistent with past practice;
- 29 -
(g) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
Subsidiary of the Company or adopt any plan with respect to any of the
foregoing;
(h) grant any severance or termination pay not currently required to
be paid under existing severance plans or enter into or adopt, or amend
any existing, severance plan, agreement or arrangement or, other than in
the ordinary course of business, enter into or amend any employee benefit
plan (including without limitation, the Stock Option Plans), or enter into
or amend employment or consulting agreement;
(i) enter into any contract or commitment with respect to capital
expenditures with a value in excess of, or requiring expenditures by the
Company and its Subsidiaries in excess of, $100,000, individually, or
enter into contracts or commitments with respect to capital expenditures
with a value in excess of, or requiring expenditures by the Company and
its Subsidiaries in excess of, $500,000, in the aggregate;
(j) except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement, increase the compensation or fringe benefits of
any of its directors, officers or employees provided that, with respect to
employees that are not executive officers or directors, the Company may
increase compensation associated with promotions and regular reviews in
the ordinary course of business consistent with past practice;
(k) agree to the settlement of any material claim or litigation;
(l) make or rescind any material tax election or settle or
compromise any material tax liability;
(m) except as required by applicable law or GAAP, make any material
change in its method of accounting;
(n) except as required under the Stock Option Plans and as otherwise
provided in this Agreement, accelerate the payment, right to payment or
vesting of any bonus, severance, profit sharing, retirement, deferred
compensation, stock option, insurance or other compensation or benefits;
(o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted,
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contingent or otherwise), other than the payment, discharge or
satisfaction (A) of any such claims, liabilities or obligations in the
ordinary course of business and consistent with past practice or (B) of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) contained in the Company SEC Documents;
(p) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's or any of its Subsidiaries'
ability to compete with or conduct any business or line of business,
including, but not limited to, geographic limitations on the Company's or
any of its Subsidiaries' activities;
(q) materially modify, amend or terminate any material contract to
which it is a party or waive any of its material rights or claims except
in the ordinary course of business consistent with past practice; or
(r) agree, in writing or otherwise, to take any of the foregoing
actions, provided, however, that nothing in this Section 5.1 shall be
deemed as prohibiting the Company from making such expenditure as it deems
reasonably necessary to complete its Y2K Readiness Plan as set forth in
Schedule 4.19 of the Company Disclosure Schedule.
Section 5.2 No Solicitation. (a) The Company and its affiliates (as
such term is defined under Rule 12b-2 under the Exchange Act) and each of their
respective officers, directors, employees, financial advisors, attorneys and
other advisors, representatives and agents shall immediately cease any
discussions or negotiations which may be ongoing with third parties with respect
to any Takeover Proposal (as defined below). The Company shall not, nor shall it
permit any of its affiliates (as defined under Rule 12b-2 under the Exchange
Act) to, nor shall it authorize or permit any officer, director or employee of
or any financial advisor, attorney or other advisor, representative or agent of,
the Company or any of its affiliates to, (i) solicit, facilitate, initiate or
encourage the submission of, any Takeover Proposal (as hereafter defined)
(including, without limitation, the taking of any action which would make the
Rights Agreement or Section 203 of the Delaware General Corporation inapplicable
to a Takeover Proposal), (ii) enter into any agreement with respect to any
Takeover Proposal or enter into any arrangement, understanding or agreement
requiring it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement or (iii) participate in any way in
any discussions or negotiations regarding, or furnish to any person or legal
entity (other than Parent or Sub) any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
- 31 -
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that prior to acceptance for payment of Shares pursuant to
the Offer, in response to an unsolicited Takeover Proposal and in compliance
with its obligations under Section 5.2(d) hereof, the Company may participate in
discussions or negotiations with or furnish information (pursuant to a
confidentiality agreement with terms not more favorable to such third party than
the terms of the Confidentiality Agreement) to any third party which makes a
Superior Proposal (as defined below) if the Board of Directors believes (based
on the written advice of independent, outside, nationally-recognized, legal
counsel) that failing to take such action would constitute a breach of its
fiduciary duties. For purposes of this Agreement, "Takeover Proposal" means (i)
any inquiry, proposal or offer from any person or entity relating to any direct
or indirect acquisition or purchase of a substantial amount of assets of the
Company or any of its Subsidiaries or of over 15% of any class of equity
securities of the Company or any of its Subsidiaries, (ii) any tender offer or
exchange offer that, if consummated, would result in any person or entity
beneficially owning 15% or more of any class of equity securities of the Company
or any of its Subsidiaries or (iii) any merger, consolidation, business
combination, sale of all, or substantially all, of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries; and "Superior Proposal" means a bona fide proposal made by a
third party to acquire all outstanding Shares pursuant to a tender offer or a
merger or purchase of all of the assets of the Company (w) on terms which a
majority of the disinterested members of the Board of Directors of the Company
determines in its good faith reasonable judgment (based on the written advice of
Xxxxxxx Xxxxx & Company L.L.C. and independent, outside, nationally-recognized,
legal advisors) to be more favorable to the Company and its stockholders than
the transactions contemplated hereby, (x) for which financing is then available
(it being understood that financing evidenced by highly confident letters and
similar letters shall not be considered "available" for purposes of this
Section), (y) which is not subject to any financing or due diligence condition
and (z) which, in the written opinion of Xxxxxxx Xxxxx & Company L.L.C., is more
favorable to the Company's stockholders from a financial point of view than the
transactions contemplated hereby, as proposed to be modified by Parent in
accordance with Section 8.1(d)(iii).
(b) Except as set forth in Section 5.2(c), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by such Board of Directors or such committee of the
Offer, the Merger or this Agreement, or (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or
- 32 -
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal.
(c) Notwithstanding anything to the contrary herein, prior to the
acceptance for payment of Shares pursuant to the Offer, the Company may
recommend to its stockholders a Takeover Proposal and in connection therewith
withdraw or modify its approval or recommendation of the Offer or the Merger if
(1) a third party makes a Superior Proposal, (2) all the conditions to the
Company's right to terminate this Agreement in accordance with Section
8.1(d)(iii) hereof have been satisfied (including the expiration of the five (5)
business-day period described therein and the payment of all amounts required
pursuant to Section 6.3 hereof) and (3) simultaneously with such withdrawal,
modification or recommendation, this Agreement is terminated in accordance with
Section 8.1(d)(iii) hereof.
(d) In addition to the obligations of the Company set forth in
paragraphs (a), (b) and (c) of this Section 5.2, on the date of receipt thereof,
if possible, but no later than twelve (12) hours after receipt thereof, the
Company shall advise Parent in writing of any request for information or any
Takeover Proposal, or any inquiry, proposal, discussions or negotiation with
respect to any Takeover Proposal, the terms and conditions of such request,
Takeover Proposal, inquiry, proposal, discussion or negotiation and the Company
shall promptly provide to Parent copies of any written materials received by the
Company in connection with any of the foregoing, and the identity of the person
or entity making any such Takeover Proposal or such request, inquiry or proposal
or with whom any discussion or negotiations are taking place. The Company shall
keep Parent fully informed of the status and details (including amendments or
proposed amendments) of any such request or Takeover Proposal and keep Parent
fully informed as to the details of any information requested of or provided by
the Company and as to the details of all discussions or negotiations with
respect to any such request, takeover proposal or inquiry. The Company shall
promptly provide to Parent any non-public information concerning the Company
provided to any other person or entity in connection with any Takeover Proposal
which was not previously provided to Parent.
(e) Nothing contained in this Section 5.2 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by the
Exchange Act or from making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors of the Company (based upon
written advice of independent, outside, nationally-recognized, legal advisors),
such disclosure is required by applicable state or Federal securities laws or is
necessary in order to comply with its fiduciary duties to the
- 33 -
Company's stockholders under applicable law.
(f) Immediately following the execution of this Agreement, the
Company shall request each person or entity which has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring the
Company or any portion thereof to return all confidential information heretofore
furnished to such person or entity by or on behalf of the Company.
Section 5.3 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, (i) the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Parent), and (ii) the Company shall enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Company Stockholder Approval; Proxy Statement. (a)
Promptly following the purchase of Shares pursuant to the Offer if approval of
the Merger by the stockholders of the Company is required by applicable law, the
Company shall call a meeting of its stockholders (the "Stockholder Meeting") for
the purpose of voting upon the Merger and shall take all action necessary or
advisable to obtain stock holder approval of the Merger. The Stockholder Meeting
shall be held as soon as practicable following the purchase of Shares pursuant
to the Offer and the Company will, through its Board of Directors, subject to
this Agreement, recommend to its stockholders the approval of the Merger. The
record date for the Stockholder Meeting shall be a date subsequent to the date
Parent or Sub becomes a record holder of Shares purchased pursuant to the Offer.
(b) If stockholder approval of the Merger is required by applicable
law, the Company will, as soon as practicable following the expiration of the
Offer, prepare and file a preliminary Proxy Statement with the SEC and will use
its reasonable best efforts to respond to any comments of the SEC or its staff
and to cause the Proxy Statement to be cleared by the SEC. The Company will
notify Parent of the receipt of any comments from the SEC or its staff and of
any request by the SEC
- 34 -
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will 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 Proxy Statement or the
Merger. The Company shall give Parent and its counsel the opportunity to review
the Proxy Statement prior to its being filed with the SEC and shall give Parent
and its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company and Parent agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC. As promptly as practicable after the Proxy
Statement has been cleared by the SEC, the Company shall mail the Proxy
Statement to the stockholders of the Company. If at any time prior to the
approval of this Agreement by the Company's stockholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will prepare and mail to its stockholders such an
amendment or supplement.
(c) The Company shall take all such action as may be necessary or
advisable to obtain the necessary approvals by its stockholders of the Merger,
this Agreement and the transactions contemplated hereby.
(d) Parent agrees to cause all Shares purchased pursuant to the
Offer and all other Shares owned by Parent, Sub or any other Subsidiary of
Parent to be voted in favor of the approval of the Merger.
Section 6.2 Access to Information. (a) The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably request
during normal business hours during the period from the date of this Agreement
through the Effective Time to all their respective properties, information
systems, books, contracts, commitments and records and, during such period, the
Company shall, and shall cause each of its Subsidiaries to, furnish promptly to
Parent (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state laws and (ii) all other information concerning its business, properties
and personnel as Parent may reasonably request. In no event shall the Company
prior to the purchase of Shares in the Offer, be requested to supply to Parent,
or to Parent's accountants, counsel, financial advisors or other
representatives, any information relating to indications of interest from, or
discussions with, any other
- 35 -
potential acquirors of the Company which were received or conducted prior to the
date hereof, except to the extent necessary for use in the Offer Documents, the
Schedule 14D-9 and the Proxy Statement. Except as required by law, prior to the
Effective Time Parent will hold, and will cause its affiliates, associates and
representatives to hold, any nonpublic information in confidence in accordance
with the terms of the Confidentiality Agreement dated March 24, 1999. In the
event of termination of this Agreement for any reason, Parent shall promptly
destroy all non-public documents so obtained from the Company or any of its
Subsidiaries and any copies made of such documents for Parent.
(b) The Company agrees that between the date hereof and the
Effective Time, Parent and its representatives shall have the right, during
normal business hours, and at other reasonable times upon request, to have full
and complete access to the Company's hardware, information systems and Software
including without limitation, those identified on Schedule 4.19 for the purpose
of assisting the Company in assessing, developing, executing and testing the
Company's Y2K Readiness Plan. In connection therewith, the Company shall cause
its officers, employees and agents to fully cooperate with the representatives
of Parent and to provide them with all information, data, records, documents and
any other material which they may request relating to the Company's hardware,
Software and information systems. The Company shall seriously consider any and
all recommendations made by Parent or its representatives relating to the
Company's Y2K Readiness Plan and shall take full advantage of the Parent's
resources and expertise in connection therewith. In addition, if the Parent
reasonably determines that there exists any material deficiency in the Company's
Y2K Readiness Plan, the Company shall take such action as the Parent reasonably
requests is necessary to cure such deficiency. As part of this process, the
Company and Parent shall establish a joint Y2K Readiness steering committee
which shall consider and make recommendations relating to the Company's Y2K
Readiness Plan (the "Committee"), which shall consist of three representatives
from the Company and up to three representatives designated by Parent. The
Committee shall meet physically or telephonically as often as may be necessary
for the purpose of ensuring that the Company is assessing, developing, executing
and testing the Company's Y2K Readiness Plan in a timely and effective manner.
If the members of the Committee do not by majority vote agree on or prior to
July 13, 1999 that the Company's Y2K Readiness Plan is or will be implemented on
a timely and effective manner in all material respects, the Company and the
Parent shall designate a third party consultant which is mutually acceptable to
both the Company and Parent to assess and make recommendations with respect to
the Company's Y2K Readiness Plan (the "Consultant"). If the Consultant
identifies any material deficiency in the Company's Y2K Readiness Plan, the
Company agrees to follow the recommendations of Consultant which are reasonably
requested by
- 36 -
the Parent.
Section 6.3 Fees and Expenses. (a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, except as expressly set forth in this Agreement.
(b) If this Agreement is terminated (i) by Parent in accordance with
Section 8.1(b)(ii) hereof because of the occurrence of any of the events set
forth in clauses (d), (e) or (f) of Exhibit A; (ii) Parent or the Company, as
the case may be, in accordance with Sections 8.1(b)(i) or 8.1(d)(iii) hereof; or
(iii) by Parent, pursuant to any provision herein other than those described in
the preceding clauses (i) and (ii) of this paragraph (b), or, except to the
extent the that the termination of this Agreement is the result of a breach by
Parent or Sub in any material respect its representations, warranties or
covenants in this Agreement, by the Company pursuant to Section 8.1(d)(i) or
8.1(d)(ii) if, in any such case described in this clause (iii) of this paragraph
(b), (x) a Takeover Proposal has been made after the date of this Agreement and
(y) within twelve (12) months of the date of such termination, the Company shall
enter into an Acquisition Agreement with any person or entity other than Parent
or any of its affiliates, then the Company shall (except as required to be paid
earlier in accordance with Section 8.1(d)(iii) hereof) on the business day next
succeeding the date of termination (or in the case of a termination pursuant to
clause (iii) of this paragraph (b), the business day next succeeding the
execution of such agreement), (A) reimburse Parent in immediately available
funds for the Expenses of Parent and Sub, not to exceed $1,500,000, and (B) pay
to Parent in immediately available funds an amount equal to $3.9 million.
"Expenses" shall mean documented and reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent or Sub in connection with the Offer,
the Merger or the consummation of any of the transactions contemplated by this
Agreement, including, but not limited to, all filing fees, printing fees and
reasonable fees and expenses of law firms, commercial banks, investment banking
firms, accountants, experts and consultants to Parent.
Section 6.4 Stock Options. (a) The Company shall (i) terminate the
Stock Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries (collectively "Stock Incentive Plans"),
immediately prior to the Effective Time without prejudice to the holders of
Stock Options (as hereinafter defined), (ii) grant no additional Stock Options
(as hereinafter defined), and (iii) amend, immediately prior to the Effective
Time, the provisions of
- 37 -
any other Company Benefit Plan providing for the issuance, transfer or grant of
any Shares, or any interest in respect of any Shares, to provide no continuing
rights to acquire, hold, transfer, or grant any Shares or any interest in any
Shares.
(b) Immediately upon the consummation of the Offer, provided that a
"Change of Control" has occurred under the terms of the Stock Incentive Plans,
all outstanding employee stock options, whether or not then fully exercisable or
vested, to purchase Shares (a "Stock Option") heretofore granted under the Stock
Incentive Plans shall become fully exercisable and vested, and the Stock Options
shall be cancelled by the Company, and the holders thereof shall receive a cash
payment (the "Cash Payment") from the Company in an amount (if any) equal to the
number of Shares subject to such option multiplied by the difference (if
positive) between the exercise price per Share covered by the option and the
highest per share price offered to stockholders of the Company in the Offer. The
Company shall request such holders to acknowledge the cancellation of all Stock
Options held by such holders, including any Stock Options as to which the
exercise price equals or exceeds such price per share. The Company shall deliver
to Parent within five business days of the date hereof a true and complete list
of Stock Options which are outstanding as of the date hereof, together with
detailed calculations of the Cash Payments relating to such Stock Options had
the Effective Time occurred on the date of delivery thereof. The Company shall
update such list and such calculations as of, and deliver such update to Parent
on, the date that is two business days prior to the Effective Time, such updated
list and calculations made as if the Effective Time would occur on such date.
Except as otherwise contemplated herein, any then-outstanding stock appreciation
rights or limited stock appreciation rights issued by the Company or any
Subsidiary of the Company shall be cancelled immediately prior to the Effective
Time without any payment therefor. The Company shall ensure that neither it nor
any of its Subsidiaries is or will be bound by any Stock Options, other options,
warrants rights or agreements which would entitle any person or entity, other
than Parent or it Subsidiaries, to own any Shares or to receive any payment in
respect thereof.
Section 6.5 Reasonable Best Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger, and the other
transactions contemplated by this Agreement, including (a) obtaining all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, including
- 38 -
without limitation, all filings under the HSR Act, and the Insurance Approvals)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from or to avoid an action or proceeding by any Governmental Entity,
(b) obtaining all necessary consents, approvals or waivers from third parties,
(c) defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (d) executing and delivering any additional instruments
necessary to consummate the transactions contemplated by this Agreement.
Section 6.6 Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or regulation or by obligations pursuant to
any listing agreement with any national securities exchange or the Nasdaq
National Market.
Section 6.7 Indemnification; Directors and Officers Insurance. (a)
From and after the Effective Time, Parent agrees to, and to cause the Surviving
Corporation to, indemnify and hold harmless all past and present officers,
directors, employees and agents of the Company and of its Subsidiaries to the
full extent such persons may be indemnified by the Company pursuant to the
Company's Certificate of Incorporation and Bylaws as in effect as of the date
hereof for acts and omissions occurring at or prior to the Effective Time and
shall advance reasonable expenses incurred by such persons in connection with
defending any action arising out of such acts or omissions, provided that the
Company receives reasonable affirmations and undertakings from such persons to
repay all amounts advanced if it should be ultimately determined that such
person was not entitled to indemnification.
(b) Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, for
the benefit of the Company's current directors and officers, an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; provided, however, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the such insurance in excess of 1.25
times the last annual premium paid prior to the date hereof, but in such case
shall purchase as much such coverage as possible for
- 39 -
such amount.
Section 6.8 Employee Benefits. (a) Until at least December 31, 1999,
Parent shall maintain employee benefits and programs for retirees, officers and
employees of the Company and its Subsidiaries that are no less favorable in the
aggregate than those being provided to such retirees, officers and employees on
the date hereof (it being understood that Parent will not be obligated to
continue any one or more employee benefits or programs); provided that the
Company shall not be obligated to continue any Stock Incentive Plan or provide
any other incentive plan or benefits in lieu thereof. For purposes of
eligibility to participate in and vesting in all benefits provided to retirees,
officers and employees, retirees, officers and employees of the Company and its
Subsidiaries will be credited with years of service with the Company and its
Subsidiaries and years of service with prior employers to the extent service
with prior employers is taken into account under plans of the Company. Amounts
paid before the Effective Time by retirees, officers and employees of the
Company under any medical plans of the Company shall after the Effective Time be
taken into account in calculating balances for deductibles and maximum
out-of-pocket limits applicable under the medical plan of Parent for the plan
year during which the Effective Time occurs as if such amounts had been paid
under such medical plan of Parent.
(b) After the Effective Time, Parent shall cause the Company to
maintain for 1999, without modification or amendment, its Management Bonus Plan
for all covered employees. Parent agrees that the following principles shall
apply for purposes of determining bonuses for 1999 under the Company's
Management Incentive Plan: (1) only persons who are employees of the Company or
any of its Subsidiaries at December 31, 1999 and who, at such time, are covered
by such plan shall be eligible to receive such bonuses (which shall be paid no
later than March 1, 2000), except that a covered employee whose employment is
terminated prior to December 31, 1999 and meets any of the following conditions
shall be eligible to receive a pro rata portion of the 1999 bonus: (x) those
individuals who are entitled to a severance payment (other than a bonus payment)
under an employment agreement with the Company as a result of such termination;
(y) those individuals who, are entitled to a severance payment under the
Company's severance policy as of May 1, 1999 as a result of such termination;
and (z) those individuals who are entitled to a pro rata portion of the bonus
pursuant to the terms of an employment agreement with the Company, to the extent
provided in such employment agreement; (2) whether any bonuses are payable under
such plan and, if so, the amounts thereof shall be determined as if the
transactions contemplated hereby had not occurred and the Company had remained
an independent, publicly-owned company through December 31, 1999; and (3) the
timing of payment of any bonuses payable pursuant to
- 40 -
clause (2) above shall be consistent with past practices. Except as otherwise
set forth in an employment agreement, the pro rata portion of an employee's
bonus shall be the amount determined pursuant to the preceding sentence
multiplied by a fraction, the numerator of which shall be the number of days
during 1999 for which such employee was employed by the Company or any of its
Subsidiaries and the denominator of which shall be 365.
Section 6.9 Employee Agreements, Stay Bonuses, Etc. (a) Parent shall
maintain the Company's standard severance policy as in effect on the date hereof
for a period of at least two years from the Effective Time. A true and correct
copy of the Company's severance policy has been provided to the Parent.
(b) Parent shall honor or cause to be honored all employment,
severance and similar agreements with the Company's officers and employees to
the extent that executed copies of such agreements have been delivered to Parent
or are disclosed in the Company SEC Documents or the Company Disclosure Letter.
(c) Parent and its Subsidiaries shall provide reasonable and
customary outplacement services to officers of the Company and its Subsidiaries
who are terminated by the Company as a result of, or within two years following,
the Merger, which outplacement services provided to such officer shall include
one-on-one counseling and assistance.
Section 6.10 Board Representations. Promptly upon Sub having
acquired a majority of the Shares on a fully diluted basis, Sub shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, a percentage of all directors rounded up to the nearest whole
number equal to the percentage of the outstanding Shares then owned by Sub, and
the Company shall, at such time, cause Sub's designees to be so elected by its
existing Board of Directors; provided, however, that in the event that Sub's
designees are so elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least three directors who
are directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further that, in such event,
if the number of Independent Directors shall be reduced below three for any
reason whatsoever, the remaining Independent Directors or Director shall
designate a person or persons to fill such vacancy or vacancies, each of whom
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate
three persons to fill such vacancies who shall not be officers or affiliates of
the Company or any of its subsidiaries, or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for
- 41 -
purposes of this Agreement. Subject to applicable law, the Company shall take
all action requested by Parent that is reasonably necessary to effect any such
election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, increase the size of the Company's Board
of Directors, or remove or cause the resignation of sufficient directors to
enable Sub's designees to be elected or appointed to, and to constitute a
majority of the directors on, the Company's Board of Directors as provided
above.
Section 6.11 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall take all
such action as may be necessary or advisable to obtain such approvals and take
such actions as are necessary or advisable so that the transactions contemplated
hereby and by the Stockholder Agreements may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby and thereby.
Section 6.12 Rights Agreement. The Company shall not, unless
required to do so by a court of competent jurisdiction, (i) redeem the Rights
(ii) amend (other than to delay the Distribution Date (as defined therein) or to
render the Rights inapplicable to the Offer and the Merger) or terminate the
Rights Agreement prior to the Effective Time without the consent of Parent, or
(iii) take any action which would allow any Person (as such term is defined in
the Rights Agreement) other than Parent or Sub to be the Beneficial Owner (as
such term is defined in the Rights Agreement) of 15% or more of the Common Stock
without causing a Distribution Date (as such term is defined in the Rights
Agreement) or a Triggering Event (as such term is defined in the Rights
Agreement) to occur.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
- 42 -
(a) Stockholder Approval. If approval of the Merger by the holders
of the Common Stock is required by applicable law, the Merger shall have
been approved by the requisite vote of such holders.
(b) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree or injunction which
prohibits or has the effect of prohibiting the consummation of the Merger;
provided, however, that the Company, Parent and Sub shall use their
reasonable best efforts to have any such order, decree or injunction
vacated.
(c) Purchase of Shares. Sub shall have accepted for payment and paid
for the Shares properly tendered pursuant to the Offer in an amount
sufficient to satisfy the Minimum Condition; provided, however, that this
condition will be deemed waived with respect to the obligations of Parent
and Sub if Sub fails to accept for payment and pay for any Shares pursuant
to the Offer in violation of the terms of this Agreement or the Offer.
(d) HSR Act Waiting Period. The applicable waiting period (and any
extension thereof) under the HSR Act shall have expired or been
terminated.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after any approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by the Parent or Sub:
(i) if, prior to the purchase of Shares pursuant to the Offer,
the Company has breached in any material respect any representation,
warranty, covenant or other agreement contained in this Agreement
which (i) would give rise to the failure of a condition set forth in
clause (d) or (e) of Exhibit A, (ii) cannot or has not been cured
prior to fifteen (15) days after the giving of written notice of
such breach to the Company and (iii) has not been waived by Parent
pursuant to the provisions hereof; or
- 43 -
(ii) if the Offer is terminated or expires in accordance with
its terms without Sub having purchased any Shares thereunder due to
an occurrence which results in a failure to satisfy any one or more
of the conditions set forth on Exhibit A hereto, unless any such
failure shall have been caused by or resulted from the breach by
Parent or Sub in any material respect of their respective
representations and warranties in this Agreement or the failure of
Parent or Sub to perform in any material respect any covenant or
agreement of either of them contained in this Agreement; or
(iii) it shall have been publicly disclosed, or the Parent
shall have otherwise learned, that beneficial ownership (determined
for the purposes of this paragraph (b)(iii) as set forth in Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding Shares has been acquired by any person, entity or group
(as defined in Section 13(d)(3) under the Exchange Act).
(c) by the Company:
(i) if Parent or Sub shall have (i) terminated the Offer or
(ii) failed to pay for any Shares pursuant to the Offer on or prior to the
Termination Date, unless, in the case of (i) or (ii), such termination or
failure shall have been caused by the failure of the Company to satisfy
the conditions set forth in clauses (d) or (e) of Exhibit A;
(ii) if the Offer has not been timely commenced in accordance
with Section 1.1(a); or
(iii) if, prior to the purchase of Shares pursuant to the
Offer, Parent or Sub has breached in any material respect any
representation, warranty, covenant or other agreement contained in this
Agreement which cannot be or has not been cured within fifteen (15) days
after the giving of written notice to Parent or Sub (other than any
matters that, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect with respect to Parent or Sub); or
(d) by either Parent or the Company:
(i) if the Effective Time has not occurred on or prior to the
close of business on the date which is 120 days after the date of this
Agreement (the "Termination Date"); provided, however, that the
Termination Date shall be the date which is 180 days after the date of
this Agreement if the Regulatory Condition has not been satisfied but all
- 44 -
other conditions set forth in Exhibit A have been satisfied on the date
which is 120 days after the date of this Agreement; provided, further,
that the right to terminate this Agreement pursuant to this clause shall
not be available (y) to Parent if Sub or any affiliate of Sub acquires
Shares pursuant to the Offer, or (z) to any party whose failure to fulfill
any material obligation of this Agreement or other material breach of this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to have occurred on or prior to the aforesaid date;
(ii) if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall
have issued an order, decree or ruling or taken any other action
permanently restricting, enjoining, restraining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable;
(iii) if a Superior Proposal is received by the Company and
the Board of Directors of the Company believes (based on the written
advice of independent outside nationally recognized legal counsel) that a
failure to terminate this Agreement and enter into an agreement to effect
the Superior Proposal would constitute a breach of its fiduciary duties;
provided, however that the Company may not terminate this Agreement
pursuant to this Section 8.1(d)(iii) unless and until (i) five (5)
business days have elapsed following delivery to Parent of a written
notice of such determination by the Board of Directors and during such
five (5) business day period the Company has fully cooperated with Parent
including, without limitation, informing Parent of the terms and
conditions of such Superior Proposal, and the identity of the person or
entity making such Superior Proposal, with the intent of enabling both
parties to agree to a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be effected;
(ii) at the end of such five (5) business day period the Takeover Proposal
continues to constitute a Superior Proposal and the Board of Directors of
the Company continues to believe (and has again been advised in writing by
independent outside nationally recognized legal counsel) that a failure to
terminate this Agreement and enter into an agreement to effect the
Superior Proposal would constitute a breach of its fiduciary duties; and
(iii) (x) prior to such termination, Parent has received all fees set
forth in Section 6.3 hereof by wire transfer in same day funds and (y)
simultaneously with such termination the Company enters into a definitive
acquisition, merger or similar agreement to effect the Superior Proposal.
- 45 -
Section 8.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent or Sub or their respective officers or
directors (except as set forth in the last sentence of Section 1.02(c), Section
3.5, Section 4.20, the last two sentences of Section 6.2 and Section 6.3, which
shall survive the termination); provided, however, that nothing contained in
this Section 8.2 shall relieve any party hereto from any liability for any
breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after any approval of the Merger by the stockholders of
the Company but, after the purchase of Shares pursuant to the Offer, no
amendment shall be made which decreases the Merger Consideration or which in any
way materially adversely affects the rights of such stockholders, without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Following the election or appointment of the Sub's designees pursuant to Section
6.10 and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement, (iii) extend the time for
performance of Parent and Sub's respective obligations under this Agreement or
(iv) take any action to amend or otherwise modify the Company's Certificate of
Incorporation or By-Laws.
Section 8.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. None of
the representations and warranties in this
- 46 -
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time; provided however, the Section 9.1 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier (other than United Parcel Service)) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent, to
c/o The Guardian Life Insurance Company of
America
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
with copies to:
The Guardian Life Insurance Company of
America
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
with further copies to:
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to
First Commonwealth, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxxxxxxx X. Xxxxxxxx and
Xx. Xxxxx X. Xxxxxxxx
Facsimile No.: 000-000-0000
with a copy to:
- 47 -
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq. and
Xxxxxx X. Sacha, Esq.
Facsimile No.: (000) 000-0000
Section 9.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." When the phrase "knowledge of the
Company" is used herein, it shall refer to the actual knowledge of the
individuals set forth in Section 9.3 of the Company Disclosure Schedule. As used
in this Agreement, "business day" shall have the meaning ascribed thereto in
Rule 14d-1(c)(6) under the Exchange Act.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, together
with the Confidentiality Agreement dated March 24, 1999, (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) except for the provisions of Sections 2.5, 6.4, 6.7, 6.8, and 6.9 of
this Agreement, is not intended to confer upon any person or entity other than
the parties any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall
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relieve Parent or Sub of any of its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible.
Section 9.9 Enforcement of this Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 9.10 Incorporation of Exhibits. The Company Disclosure
Letter and all Exhibits and annexes attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Xxxxxxxx Xxxxx
------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President,
Group Health Care
FLOSS ACQUISITION CORP.
By: /s/ Xxxxxxxx Xxxxx
------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President,
Dental Plans
FIRST COMMONWEALTH, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Chairman
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EXHIBIT A
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or pay for, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) of the
Exchange Act, any Shares not theretofore accepted for payment or paid for and
may terminate or amend the Offer as to such Shares unless (i) there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
that number of Shares which would represent at least a majority of the
outstanding Shares on a fully diluted basis (the "Minimum Condition"), (ii) any
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer shall have expired or been terminated (the "HSR Condition") and
(iii) all necessary filings with each DOI shall have been completed and, to the
extent required, each of the DOI shall have issued a final order (which order
shall not have been stayed or enjoined) approving, exempting or otherwise
authorizing consummation of the Offer and the Merger and all other transactions
contemplated by this Agreement (the "Insurance Condition") (the HSR Condition
and the Insurance Condition are collectively referred to as the "Regulatory
Condition"). Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to commence the Offer or accept for payment
or to pay for any Shares not theretofore accepted for payment or paid for, and
may terminate or amend the Offer if at any time on or after the date of this
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exist or shall occur and remain in
effect:
(a) there shall be threatened, instituted or pending any action or
proceeding by any Governmental Entity, domestic or foreign, or by any other
person or entity, domestic or foreign, before any court of competent
jurisdiction or Governmental Entity, domestic or foreign, (i) challenging or
seeking to, or which could reasonably be expected to make, illegal, impede or
otherwise directly or indirectly restrain, prohibit the Offer or the Merger or
seeking to obtain material damages in connection therewith, (ii) seeking to
prohibit or materially limit the ownership or operation by Parent or Sub of all
or any material portion of the business or assets of the Company and its
Subsidiaries taken as a whole or to compel Parent or Sub to dispose of or hold
separately all or any material portion of the business or assets of Parent and
its subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole, or seeking to impose any limitation on the ability of Parent or Sub to
conduct its business or own such assets, (iii) seeking to impose limitations on
the ability of Parent or Sub effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares acquired
or owned by Parent or Sub on all matters properly presented to the
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Company's stockholders, (iv) seeking to require divestiture by Parent or Sub of
any Shares or (v) otherwise directly or indirectly relating to the Offer or the
Merger and which would reasonably be expected to have a Material Adverse Effect
on the Company or Parent or the value of the Shares;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended or issued and applicable to (i) Parent,
Sub, the Company or any Subsidiary of any of them or (ii) the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign, other
than the routine application of the waiting period provisions of the HSR Act to
the Offer or to the Merger, which would reasonably be expected to directly or
indirectly, result in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
(c) any change shall have occurred that would reasonably be expected
to have a Material Adverse Effect on the Company;
(d) any of the representations or warranties made by the Company in
the Merger Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any such representations and warranties that are not
so qualified shall be untrue or incorrect in any material respect, in each case
as of the date of the Merger Agreement and the scheduled expiration date of the
Offer, except (i) for changes specifically permitted by the Merger Agreement and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(f) the Company's Board of Directors or any committee thereof shall
have withdrawn, or shall have modified or amended in a manner adverse to Parent
or Sub, the approval, adoption or recommendation, as the case may be, of the
Offer, the Merger or the Merger Agreement, or approved or recommended, or
announced a neutral position with respect to, any merger, consolidation, other
business combination, sale of material assets, takeover proposal or other
acquisition of Shares other than the Offer and the Merger or upon request by
Parent, shall fail to reaffirm its approval and recommendation of the Offer, the
Merger or the Merger Agreement;
(g) it shall have been publicly disclosed, or Sub
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shall have otherwise learned, that beneficial ownership (determined for the
purposes of this paragraph (g) as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the Shares has been acquired by any person or
entity or group (as defined in Section 13(d)(3) under the Exchange Act);
(h) the average of the closing values of the S&P Index for the
twelve consecutive trading days immediately preceding the scheduled expiration
of the Offer (or any extension thereof) shall reflect a decline in excess of 25%
from the closing value of the S&P 500 Index on the close of business on the
trading day next preceding the date of the Merger Agreement;
(i) there shall have occurred a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States; or
(j) the Merger Agreement shall have been terminated in accordance
with its terms;
which, in the reasonable judgment of Sub, makes it inadvisable to proceed with
the Offer or with such acceptance for payment or payment.
The foregoing conditions may be waived by Sub, in whole or part, at
any time and from time to time, in the sole discretion of Sub. The failure by
Sub at any time to exercise any of the foregoing rights will not be deemed a
waiver of any right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
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