1
Exhibit (2)(b)
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 26, 1999
AMONG
HILITE INDUSTRIES, INC.
HILITE HOLDINGS, LLC
AND
HILITE MERGECO, INC.
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TABLE OF CONTENTS(1)
ARTICLE I
THE OFFER
SECTION 1.01. The Offer.....................................................2
SECTION 1.02. Company Action................................................3
SECTION 1.03. Directors.....................................................4
ARTICLE II
STOCK PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of Shares...................................5
SECTION 2.02. Purchase Price................................................5
SECTION 2.03. Closing.......................................................5
SECTION 2.04. Closing Deliveries by the Company.............................5
SECTION 2.05. Closing Deliveries by Buyer...................................6
ARTICLE III
THE MERGER
SECTION 3.01. The Merger....................................................6
SECTION 3.02. Conversion of Shares..........................................7
SECTION 3.03. Surrender and Payment.........................................7
SECTION 3.04. Dissenting Shares.............................................9
SECTION 3.05. Stock Options.................................................9
SECTION 3.06. Merger Without Meeting of Stockholders.......................10
SECTION 3.07. Closing......................................................10
SECTION 3.08. Certificate of Incorporation.................................10
SECTION 3.09. By-Laws......................................................10
SECTION 3.10. Directors and Officers.......................................10
SECTION 3.11. Effects of the Merger........................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 4.01. Corporate Existence and Power................................11
SECTION 4.02. Corporate Authorization......................................11
SECTION 4.03. Governmental Authorization...................................12
SECTION 4.04. Non-Contravention............................................12
SECTION 4.05. Capitalization...............................................12
SECTION 4.06. Subsidiaries.................................................13
SECTION 4.07. Investments..................................................14
SECTION 4.08. SEC Filings..................................................14
SECTION 4.09. Financial Statements.........................................14
SECTION 4.10. Disclosure Documents.........................................15
SECTION 4.11. Absence of Certain Changes...................................15
SECTION 4.12. No Undisclosed Material Liabilities..........................17
SECTION 4.13. Litigation; Permits..........................................17
SECTION 4.14. Taxes........................................................18
SECTION 4.15. Employee Matters.............................................19
SECTION 4.16. Labor Matters................................................22
SECTION 4.17. Compliance with Laws.........................................22
SECTION 4.18. Finders' Fees................................................22
SECTION 4.19. Environmental Matters........................................23
SECTION 4.20. Property.....................................................24
SECTION 4.21. Insurance....................................................25
SECTION 4.22. Patents and Trademarks.......................................25
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(1) The Table of Contents is not a part of this Agreement.
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TABLE OF CONTENTS
SECTION 4.23. Material Contracts...........................................26
SECTION 4.24. Shareholder Rights Agreement.................................26
SECTION 4.25. Voting Requirements..........................................26
SECTION 4.26. Opinion of Financial Advisor.................................26
SECTION 4.27. Year 2000 Issues.............................................27
SECTION 4.28. Transaction Fees.............................................27
SECTION 4.29. Insider Interests............................................27
SECTION 4.30. Full Disclosure..............................................27
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
SECTION 5.01. Corporate Existence and Power................................28
SECTION 5.02. Corporate Authorization......................................28
SECTION 5.03. Governmental Authorization...................................28
SECTION 5.04. Non-Contravention............................................28
SECTION 5.05. Disclosure Documents.........................................28
SECTION 5.06. Finders' Fees................................................29
SECTION 5.07. Financing....................................................29
SECTION 5.08. Share Ownership..............................................29
SECTION 5.09. Merger Subsidiary's Operations...............................29
SECTION 5.10. Due Diligence................................................29
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company.......................................30
SECTION 6.02. Stockholder Meeting; Proxy Material..........................30
SECTION 6.03. Access to Information........................................31
SECTION 6.04. Other Offers.................................................31
SECTION 6.05. Notices of Certain Events....................................33
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.01. Obligations of Merger Subsidiary.............................34
SECTION 7.02. Voting of Shares.............................................34
SECTION 7.03. Director and Officer Liability...............................34
SECTION 7.04. Merger Subsidiary Subscription Agreements....................36
ARTICLE VIII
COVENANTS OF BUYER
AND THE COMPANY
SECTION 8.01. Best Efforts.................................................36
SECTION 8.02. Certain Filings..............................................37
SECTION 8.03. Public Announcements.........................................37
SECTION 8.04. Conveyance Taxes.............................................37
SECTION 8.05. Further Assurances...........................................37
SECTION 8.06. Employee Matters.............................................38
SECTION 8.07. Certain Litigation...........................................38
SECTION 8.08. Recapitalization.............................................39
SECTION 8.09. Stop Transfer Order..........................................39
ARTICLE IX
CONDITIONS TO THE STOCK PURCHASE AND THE MERGER
SECTION 9.01. Conditions to the Stock Purchase............................39
SECTION 9.02. Conditions to the Merger.....................................40
ARTICLE X
TERMINATION
SECTION 10.01. Termination.................................................41
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TABLE OF CONTENTS
SECTION 10.02. Effect of Termination.......................................43
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices.....................................................43
SECTION 11.02. Survival of Representations and Warranties..................44
SECTION 11.03. Amendments; No Waivers......................................44
SECTION 11.04. Expenses....................................................45
SECTION 11.05. Successors and Assigns......................................47
SECTION 11.06. Governing Law...............................................48
SECTION 11.07. Severability................................................48
SECTION 11.08. Third Party Beneficiaries...................................48
SECTION 11.09. Entire Agreement............................................48
SECTION 11.10. Counterparts; Effectiveness.................................48
SECTION 11.11. Jurisdiction................................................48
SECTION 11.12. Knowledge...................................................49
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TABLE OF CONTENTS
Company Disclosure Letter
Section 4.01: Licenses
Section 4.03: Governmental Authorization
Section 4.04: Non-Contravention
Section 4.05: Stock Options
Section 4.06: Subsidiaries
Section 4.07: Investments
Section 4.11: Absence of Certain Changes
Section 4.12: Material Liabilities
Section 4.13: Litigation, Permits
Section 4.15: Employee Matters
Section 4.16: Labor Matters
Section 4.17: Compliance with Laws
Section 4.19: Environmental Matters
Section 4.20: Property
Section 4.21: Insurance
Section 4.22: Patents and Trademarks
Section 4.23: Material Contracts
Section 4.28: Transaction Fees
Section 4.29: Insider Interests
Section 5.10: Data Room Index
Section 7.03: Director and Officer Liability
Section 8.06: Employee Bonuses
Exhibit A -- Confidentiality Agreement
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DEFINITIONS
The following terms which may appear in more than one Section of this
Agreement are defined in the following Sections:
TERMS SECTION OR OTHER LOCATION
----- -------------------------
Advisor Section 1.02 (a)
Agreement Preamble
Balance Sheet Section 4.09
Balance Sheet Date Section 4.09
Benefit Arrangement Section 4.15 (A)
Business Day Section 1.01
Buyer Preamble
Buyer Shares Section 2.01 (a)
By-Laws Section 1.02 (a)
CBA Section 4.16
Certificate of Incorporation Section 1.02 (a)
Code Section 4.14 (a)
Company Preamble
Company 10-K Section 4.06 (a)
Company 10-Qs Section 4.08 (a)
Company Acquisition Agreement Section 6.04
Company Designees Section 1.03 (a)
Company Disclosure Documents Section 4.10 (a)
Company Disclosure Letter Section 4.01
Company Notice Section 6.04
Company Permits Section 4.13
Company Proxy Statement Section 6.02
Company Securities Section 4.05
Company SEC Documents Section 4.08 (a)
Company Stockholder Meeting Section 6.02
Competing Proposal Section 11.04(b)(i)(B)(3)
Competing Proposal Agreement Section 11.04(b)(i)(B)(4)
Confidentiality Agreement Section 6.03
DGCL Preamble
Depositary Section 3.03 (a)
Effective Time Section 3.01 (b)
Employee Agreement Section 4.15 (B)
Employee Plan Section 4.15 (C)
Environmental Law Section 4.19 (b)
Environmental Permits Section 4.19 (b)
ERISA Section 4.15 (D)
ERISA Affiliate Section 4.15 (E)
Exchange Act Section 1.01
Expenses Section 11.04(b)(ii)
Expiration Date Section 1.01
Fiduciary Duties Section 1.02 (c)
Financing Section 5.07
GAAP Section 4.09
Governmental Entity Section 4.03
HSR Act Section 4.03
HSR Authority Section 8.01
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Indemnified Parties Section 7.03
Leases Section 4.20 (c)
Licenses Section 4.01
Lien Section 4.04
Loan Agreement Section 4.06 (b)
Material Adverse Effect Section 4.01
Material Contracts Section 4.23 (a)
Material Patents and Trademarks Section 4.22 (a)
Merger Section 3.01 (a)
Merger Closing Section 2.07
Merger Closing Date Section 2.07
Merger Consideration Section 3.02 (a)
Merger Subsidiary Preamble
Minimum Condition Section 1.01 (a)
Multiemployer Plan Section 4.15 (F)
Offer Preamble
Offer Completion Date Section 6.04
Offer Documents Section 1.01 (b)
Offer Price Section 1.01 (a)
Offer to Purchase Section 1.01 (b)
Option Section 2.05 (a)
Option Consideration Section 2.05 (a)
Outside Termination Date Section 10.01 (ii)
PBGC Section 4.15 (d)
Person Section 2.03 (c)
Pre-Closing Tax Period Section 4.14 (b)
Purchase Price Section 2.02
Real Property Section 4.20 (b)
Retained Employees Section 8.06 (a)
Returns Section 4.14 (a)
Schedule 13E-3 Section 1.01 (b)
Schedule 13E-4 Section 1.01 (b)
SEC Section 1.01 (b)
Secretary Section 3.01 (b)
Share(s) Preamble
Stockholder Agreement Preamble
Stock Purchase Closing Section 2.03
Stock Purchase Closing Date Section 2.03
Subsidiary Section 4.06 (a)
Subsidiary Agreement Section 4.06 (b)
Subsidiary Securities Section 4.06 (b)
Superior Proposal Section 6.04
Surviving Corporation Section 3.01 (a)
Takeover Proposal Section 6.04
Takeover Proposal Event Section 11.04(b)(i)(C)(3)
Tax Asset Section 4.14 (a)
Taxes Section 4.14 (b)
Termination Fee Section 11.04
Title IV Plan Section 4.15 (G)
Transactions Section 1.01 (b)
Transaction Fees Section 4.28
Trigger Event Section 11.04 (b)
UST's Section 4.19 (a) (iii)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 26, 1999 (this
"AGREEMENT") among HILITE INDUSTRIES, INC., a Delaware corporation (the
"COMPANY"), HILITE HOLDINGS, LLC, a Delaware limited liability company
("BUYER"), and HILITE MERGECO, INC., a Delaware corporation and a wholly owned
subsidiary of Buyer ("MERGER SUBSIDIARY").
WHEREAS, the Boards of Managers or Directors, as the case may
be, of Buyer, Merger Subsidiary and the Company have each determined that it is
in the best interests of their respective members or stockholders for Buyer to
acquire the Company upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such acquisition, it is proposed
that the Company shall make a cash tender offer (the "OFFER") to acquire all of
the issued and outstanding shares of Common Stock, par value $.01 per share, of
the Company (referred to collectively as the "SHARES" and individually as a
"SHARE"), for $14.25 per Share net to the seller in cash, upon the terms and
subject to the conditions of this Agreement and the Offer; and
WHEREAS, in furtherance of such acquisition, Buyer, Merger
Subsidiary and certain significant stockholders of the Company have entered into
a Stockholders Agreement (the "STOCKHOLDERS AGREEMENT") pursuant to which such
Stockholders agree, among other things, to tender pursuant to the Offer all of
their Shares, except for certain Shares to be retained by such stockholders in
accordance with the Stockholders Agreement; and
WHEREAS, the Board of Directors of the Company has unanimously
approved the making of the Offer and resolved and agreed to recommend that
holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the
respective Boards of Managers or Directors, as the case may be, of Buyer and the
Company has each approved the purchase by Buyer and the sale by the Company (the
"Stock Purchase") of 1,681,414 Shares for the Offer Price immediately prior to
the consummation of the Offer; and
WHEREAS, the parties hereto intend that the acquisition be
treated as a recapitalization for financial accounting purposes; and
WHEREAS, also in furtherance of such acquisition, the Boards
of Managers or Directors, as the case may be, of Buyer, Merger Subsidiary and
the Company have each approved the merger of Merger Subsidiary with and into the
Company in accordance with the General Corporation Law of the State of Delaware
(the "DGCL") following the consummation of the Offer and upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Buyer, Merger Subsidiary and the Company hereby agree as follows:
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ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER.
(a) Provided that nothing shall have occurred that would
result in a failure to satisfy any of the conditions set forth in Annex I
hereto, the Company shall commence, within the meaning of Rule 13e-4(a)(4) under
the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), as promptly as
practicable after the date hereof, but in no event later than five business days
(as such term is defined in Rule 14d-1 under the Exchange Act, a "BUSINESS DAY")
following the public announcement of the terms of this Agreement, the Offer to
purchase all of the outstanding Shares at a price of $14.25 per Share (the
"OFFER PRICE"), net to the sellers in cash, subject to any amounts required to
be withheld under applicable federal, state, local or foreign income tax
regulations. Subject to the extension of the Offer as provided below, the
obligation of the Company to commence the Offer, to consummate the Offer and to
accept for payment and to pay for any Shares validly tendered and not withdrawn
shall be subject only to: (i) the condition that there shall be validly tendered
in accordance with the terms of the Offer prior to the expiration date of the
Offer and not withdrawn a number of Shares which represents at least a majority
of the Shares outstanding on a fully diluted basis (the "MINIMUM CONDITION"),
and (ii) the satisfaction or waiver of the other conditions set forth in Annex I
hereto. At Buyer's request, the Company shall increase the price per Share
payable in the Offer and make such other changes to the Offer as Buyer may
request, provided, however, that the Company will not be required to make any
changes which decrease the price per Share payable in the Offer, which change
the form of consideration to be paid in the Offer, which reduce the maximum
number of Shares to be purchased in the Offer, which impose conditions to the
Offer in addition to those set forth in Annex I hereto or which broaden the
scope of such conditions. The Company shall make no other changes to the Offer
or waive any conditions to the Offer or take any other action, including,
without limitation, notice of acceptance of tendered Shares to the Depositary,
with respect to the Offer without Buyer's prior written consent. The Offer will
remain open (unless the Company, at the written request of Buyer, terminates the
Offer upon the occurrence of an event in Annex I) for a period of twenty
Business Days from the commencement of the Offer in accordance with applicable
law (the "EXPIRATION DATE") unless the Company, at the request of Buyer, extends
the period of time for which the Offer is open as may be permitted or required
by this Agreement, or applicable laws in which case the term "Expiration Date"
will mean the latest time and date at which the Offer as so extended by the
Company expires. Notwithstanding the foregoing, the Company shall extend the
Offer at any time up to the Outside Termination Date (as defined in Section
10.01) for one or more periods of not more than an aggregate of 10 Business
Days, if at the initial expiration date of the Offer, or any extension thereof,
the condition to the Offer requiring the expiration or termination of any
applicable waiting periods under the HSR Act (as defined in Section
4.03) is not satisfied or required. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case only at the request of Buyer. The
Company shall, at Buyer's request, extend the Offer beyond the initial
Expiration Date for a period of up to 10 Business Days, if, on the date of such
extension, more than 85% but less than 90% of the outstanding Shares on a fully
diluted basis have been tendered. Subject to the terms and conditions of the
Offer and subject to the closing of the Stock Purchase as set forth in Article
II herein, the Company shall pay, as promptly as practicable after expiration of
the Offer, for all Shares validly tendered and not withdrawn. Notwithstanding
the foregoing, the Company shall not be required to consummate the Offer or pay
the Offer Price for the Shares tendered unless it shall have received the
proceeds from the sale of the Buyer Shares and the Financing or other funds
arranged for by Buyer in an amount which shall be equal to or greater than the
Offer Price multiplied by the number of Shares tendered.
(b) As soon as practicable on the date of commencement of the
Offer, the Company shall file with the Securities and Exchange Commission (the
"SEC"), an Issuer Tender Offer Statement on Schedule 13E-4 with respect to the
Offer which will contain the offer to purchase and form of the related letter of
transmittal (together with any supplements or amendments thereto, the "SCHEDULE
13E-4"), and the Company,
10
Buyer and Merger Subsidiary shall file with the SEC a Rule 13E-3 Transaction
Statement on Schedule 13E-3 (together with all amendments and supplements
thereto, the "SCHEDULE 13E-3") with respect to the Offer, the Stock Purchase,
the Merger and the other transactions contemplated by this Agreement
(collectively, the "TRANSACTIONS"). The Schedule 13E-4 and Schedule 13E-3 shall
contain or shall incorporate by reference an offer to purchase (the "OFFER TO
PURCHASE") and forms of the related letter of transmittal and any other
documents related to the Offer (the Schedule 13E-4, together with the Schedule
13E-3, the Offer to Purchase and such other documents, together with any
supplements or amendments thereto, are collectively referred to herein as the
"OFFER DOCUMENTS"). Buyer and the Company each agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect. Buyer and
the Company agree 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,
in each case as and to the extent required by applicable federal securities
laws. Buyer and its counsel shall be given a reasonable opportunity to review
and comment on the Offer Documents prior to their being filed with the
applicable authorities.
SECTION 1.02. COMPANY ACTION.
(a) The Company hereby approves and agrees to undertake the
Offer and represents that its Board of Directors, at a meeting duly called and
held on April 26, 1999, has (i) unanimously determined that this Agreement and
the Transactions are fair to and in the best interest of the Company's
stockholders, (ii) unanimously approved this Agreement, the Stockholders
Agreement and the Transactions, which approval satisfies in full the
requirements of the DGCL including Section 203 of the DGCL, and the Amended and
Restated Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION") and
the Amended and Restated By Laws (the "BY-LAWS") of the Company and (iii)
subject to Section 6.04 (b), unanimously resolved to recommend acceptance of the
Offer and approval and adoption of this Agreement and the Merger by its
stockholders. The Company shall include a statement of such recommendation and
approval in the Offer Documents.
The Company represents that Xxxxx Xxxxxxxxx Xxxxxx & Co. (the
"ADVISOR") as financial advisors to the Company, has delivered to the Company's
Board of Directors its written opinion that the cash consideration to be
received in the Offer and the Merger by the holders of Shares (other than any
holders of Shares who will retain Shares following consummation of the Offer and
the Merger) is fair from a financial point of view to such holders. The Company
has been advised that all of its directors and executive officers intend to
tender their Shares pursuant to the Offer (except to the extent provided in the
Stockholders Agreement). The Company agrees to, and has been authorized by the
financial advisor to permit, subject to prior review and consent of the
financial advisor (such consent not to be unreasonably withheld), the inclusion
of the fairness opinion (or a reference thereto) in the Offer Documents.
(b) The Company shall take all action as may be necessary to
effect the Offer as contemplated by this Agreement, including, without
limitation, promptly mailing the Offer Documents to the record holders and
beneficial owners of the Shares.
(c) References herein to the "FIDUCIARY DUTIES" of the members
of the Board of Directors of the Company mean the fiduciary duties of such
members to the holders of Shares.
SECTION 1.03. DIRECTORS.
(a) Promptly upon the consummation of the Stock Purchase and
the acceptance for payment by the Company of any Shares, Buyer shall be entitled
11
to designate the number of directors, rounded up to the next whole number, on
the Company's Board of Directors that equals the product of (i) the total number
of directors on the Company's Board of Directors (giving effect to the election
of any additional directors pursuant to this Section) and (ii) the percentage
that the number of Shares owned by Buyer bears to the total number of Shares
outstanding, and the Company shall take all action necessary to cause Buyer's
designees to be elected or appointed to the Company's Board of Directors,
including, without limitation, increasing the number of directors and seeking
and accepting resignations of incumbent directors. At such times, the Company
will use its best efforts to cause individuals designated by Buyer to constitute
the same percentage as such individuals represent on the Company's Board of
Directors of (x) each committee of such Board (other than any committee of such
Board established to take action under this Agreement), (y) each board of
directors of each Subsidiary (as defined in Section 4.06) and (z) each committee
of each such board. Notwithstanding the foregoing, until the Effective Time (as
defined in Section 2.01(b)), the Company shall retain as members of its Board of
Directors at least two directors who are directors of the Company on the date
hereof (the "COMPANY DESIGNEES").
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act (as
defined in Section 4.03) and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to Section 14(f) and Rule
14f-i in order to fulfill its obligation under this Section 1.03 and shall
include in the Schedule 13E-4 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill its obligations under this Section 1.03. Buyer will supply to the
Company in writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
(c) From and after the time, if any, that Buyer's designees
constitute a majority of the Company's Board of Directors until the Effective
Time, any amendment of this Agreement, any termination of this Agreement by the
Company, any extension of time for performance of any of the obligations of
Buyer or Merger Subsidiary hereunder, any waiver of any condition to the
obligations of the Company or any of the Company's rights hereunder or other
action by the Company hereunder may be effected only by the action of a majority
of the directors of the Company then in office who were directors of the Company
on the date hereof, which action shall be deemed to constitute the action of the
full Board of Directors; PROVIDED that if there shall be no such directors, such
actions may be effected by majority vote of the entire Board of Directors of the
Company.
ARTICLE II
STOCK PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of Shares.
(a) Upon the terms and subject to the conditions of this
Agreement, at the Stock Purchase Closing (as defined herein), the Company shall
sell to Buyer and Buyer shall purchase from the Company, 1,681,414 Shares (the
"BUYER SHARES").
(b) The Buyer Shares will be validly issued, fully paid and
nonassessable, and will be issued free of preemptive rights or any Liens.
SECTION 2.02. PURCHASE PRICE. The aggregate purchase price for
the Buyer Shares shall be the number of Buyer Shares multiplied by the Offer
Price or such increased price per share payable in the Offer in accordance with
Section 1.01(a) (the "PURCHASE PRICE").
12
SECTION 2.03. CLOSING. Upon the terms and subject to the
conditions of this Agreement, the sale and purchase of the Buyer Shares
contemplated by this Agreement shall take place at a closing (the "STOCK
PURCHASE CLOSING") to be held at the offices of Xxxxx, Day, Xxxxxx & Xxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m., on the day after the Offer
is scheduled to expire, or at such other place or at such other time or on such
other date as the Company and Buyer may mutually agree upon in writing (the day
on which the Closing takes place being the "STOCK PURCHASE CLOSING DATE").
SECTION 2.04. CLOSING DELIVERIES BY THE COMPANY. At the Stock
Purchase Closing, the Company shall deliver or cause to be delivered to Buyer:
(a) stock certificates evidencing the Buyer Shares;
(b) a receipt for the Purchase Price; and
(c) the certificates and other documents required to be
delivered pursuant to Section 9.01(b)(iii).
SECTION 2.05. CLOSING DELIVERIES BY BUYER. At the Stock
Purchase Closing, Buyer shall deliver to the Company:
(a) the Purchase Price by wire transfer of immediately
available funds to an account at a United States bank designated in writing by
the Company, which designation shall be received by Buyer at least three
Business Days prior to the Stock Purchase Closing;
(b) the certificates and other documents required to be
delivered pursuant to Section 9.01(c)(iii); and
(c) Buyer shall arrange for the Company to receive
financing which, together with the Purchase Price, shall be equal to or greater
than the Offer Price multiplied by the number of Shares tendered.
ARTICLE III
THE MERGER
SECTION 3.01. THE MERGER.
(a) At the Effective Time (as defined in Section 3.01(b)),
Merger Subsidiary shall be merged (the "MERGER") with and into the Company in
accordance with the DGCL, whereupon the separate existence of Merger Subsidiary
shall cease, and the Company shall be the surviving corporation (the "SURVIVING
CORPORATION").
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Subsidiary will file a certificate of merger with the Secretary of
State of the State of Delaware (the "SECRETARY") and make all other filings or
recordings required by the DGCL in connection with the Merger. The Merger shall
become effective on such date as the certificate of merger is duly filed with
the Secretary or at such later date as is specified in the certificate of merger
(the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities, liabilities and duties of
the Company and Merger Subsidiary, all
13
as provided under the DGCL.
(d) Buyer may, with the consent of the Company, modify the
structure of the Merger if Buyer determines it advisable to do so because of tax
or other considerations, and the parties hereto shall promptly enter into any
amendment to this Agreement necessary or desirable to accomplish such structure
modification, provided that no such amendment shall reduce the Merger
Consideration or delay the Stock Purchase Closing or the Effective Time.
SECTION 3.02. CONVERSION OF SHARES. At the Effective Time by
virtue of the Merger and without any action on the part of any stockholder:
(a) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section, 3.02(b) or 3.02(d) or as
provided in Section 3.04 with respect to Shares as to which properly exercised
dissenters rights are available under the DGCL, be canceled and converted into
the right to receive the Offer Price in cash or any higher price paid for each
Share in the Offer, without interest (the "MERGER CONSIDERATION") upon surrender
and exchange of the certificates representing such Shares in accordance with
Section 3.03. Any payment made pursuant to this Section 3.02(a) will be made net
of applicable withholding taxes to the extent such withholding is required by
law.
(b) each Share held by the Company as treasury stock or owned
by Merger Subsidiary or any other subsidiary of Buyer or the Company immediately
prior to the Effective Time shall be canceled, and no payment shall be made with
respect thereto;
(c) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation; and
(d) the aggregate number of Shares owned by certain
stockholders and by existing management which shall be retained by such persons
pursuant to the Stockholders Agreement and the Buyer Shares, shall not be
canceled as provided above, but shall remain outstanding.
SECTION 3.03. SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Buyer shall appoint a
depositary (the "DEPOSITARY") for the purpose of exchanging certificates
representing Shares for the Merger Consideration. The Depositary shall at all
times be a commercial bank having a combined capital and surplus of at least
$100,000,000. Buyer will arrange for financing for the Company in an amount
sufficient for the Company to pay to the Depositary immediately available funds
in amounts necessary to make payments pursuant to Section 3.02 and this Section
3.03 to holders of Shares entitled thereto. Promptly after the Effective Time,
the Company will send, or will cause the Depositary to send, but in no event
later than three Business Days after the Effective Time, to each holder of
Shares at the Effective Time a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the certificates representing
Shares to the Depositary).
(b) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Depositary of a
certificate or certificates properly representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be entitled
to receive the Merger Consideration payable in respect of such Shares. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes, only the right to receive such
14
Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Depositary any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such Shares or establish to the satisfaction of the
Depositary that such tax has been paid or is not payable. For purposes of this
Agreement, "PERSON" means an individual, a corporation, limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article III.
(e) Any portion of the Merger Consideration paid to the
Depositary pursuant to Section 3.03(a) that remains unclaimed by the holders of
Shares one year after the Effective Time shall be returned to the Surviving
Corporation, upon demand, and any such holder who has not exchanged his Shares
for the Merger Consideration in accordance with this Section prior to that time
shall thereafter look only to Surviving Corporation for payment of the Merger
Consideration in respect of his Shares. Notwithstanding the foregoing, Buyer,
Merger Subsidiary and the Surviving Corporation shall not be liable to any
holder of Shares for any amount paid to a public official pursuant to applicable
abandoned property laws.
(f) Any portion of the Merger Consideration paid to the
Depositary pursuant to Section 3.03(a) to pay for Shares for which dissenter's
rights have been exercised shall be returned to Surviving Corporation upon
demand.
(g) If any Certificate has been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Depositary shall issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
due to such person pursuant to this Agreement.
SECTION 3.04. DISSENTING SHARES. Notwithstanding Section 3.02,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with the DGCL shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect or withdraws or otherwise loses his right to appraisal. If
after the Effective Time such holder fails to perfect or withdraws or loses his
right to appraisal, such Shares shall be treated as if they had been converted
as of the Effective Time into a right to receive the Merger Consideration. The
Company shall give Buyer prompt notice of any demands received by the Company
for appraisal of Shares, and Buyer shall have the right to direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Buyer, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 3.05. STOCK OPTIONS.
15
(a) Immediately prior to the Effective Time, each outstanding
employee stock option (an "OPTION") to purchase Shares granted under any
employee stock option or compensation plan or arrangement of the Company shall
be canceled, and each holder of any such Option, whether or not then vested or
exercisable, shall be paid by the Company at the Effective Time for each such
Option an amount determined by multiplying (i) the excess, if any, of the Merger
Consideration per Share over the applicable exercise price of such Option by
(ii) the number of Shares such holder could have purchased (assuming full
vesting of all Options) had such holder exercised such option in full
immediately prior to the Effective Time (the "OPTION CONSIDERATION").
(b) The consideration due under this Section 3.05 shall be
payable without interest after (a) verification by the Depositary of the
ownership and terms of the particular Option by reference to the Company's
records and (b) delivery in the manner provided in Section 3.03 of a written
instrument duly executed by the owner of the Option, in a form to be provided by
the Depositary promptly after the Effective Time, setting forth (i) the
aggregate number of Shares of Common Stock acquirable by such Option holder upon
exercise of all Options held by such holder whether or not such Options are
immediately exercisable, the respective issue dates of each Option and the
exercise price of each Option; (ii) a representation by the person that he or
she is the owner of all Options described pursuant to clause (a), and that none
of those Options has expired or ceased to be exercisable; and (iii) a consent to
the treatment of such Options pursuant to this Section 3.05 in full satisfaction
of all rights relating to such Options.
(c) Prior to the Effective Time, the Company shall (i) use its
best efforts to obtain any consents from holders of Options and (ii) make any
amendments to the terms of such stock option or compensation plans or
arrangements, to the extent such consents or amendments are necessary to give
effect to the transactions contemplated by Section 3.05(a). Notwithstanding any
other provision of this Section, payment may be withheld in respect of any
Option until necessary consents are obtained.
(d) Except as otherwise agreed to in writing by the parties,
(i) the Options and other equity plans will terminate as of the Effective Time
and the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary thereof will be canceled as of the Effective Time, and
(ii) the Company shall use its reasonable efforts to assure that following the
Effective Time no participant in any of such plans, or other plans, programs or
arrangements, will have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any subsidiary thereof.
SECTION 3.06. MERGER WITHOUT MEETING OF STOCKHOLDERS.
Notwithstanding Section 6.02 hereof, in the event that Buyer, Merger Subsidiary
or any other subsidiary of Buyer shall acquire at least 90% of the outstanding
shares of capital stock of the Company, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after such acquisition, without a meeting of stockholders of the
Company, in accordance with the DGCL.
SECTION 3.07. CLOSING. The closing of the Merger (the "MERGER
CLOSING") will take place at a time and on a date to be specified by the
parties, which is to be no later than the second Business day after satisfaction
or waiver (subject to applicable law) of the conditions (excluding conditions
that, by their terms, cannot be satisfied until the Merger Closing Date) set
forth in Article IX, unless another time or date is agreed to by parties to this
Agreement. The Merger Closing will be held at the offices of Xxxxx, Day, Xxxxxx
& Xxxxx, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxx, or such other location as the
parties to this Agreement agree to in writing. The date on which the Merger
Closing occurs is hereinafter referred to as the "MERGER CLOSING DATE."
16
SECTION 3.08. CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Surviving Corporation in effect at the Effective Time shall be
the certificate of incorporation of the Company until amended in accordance with
applicable law.
SECTION 3.09. BY-LAWS. The By-Laws of Surviving Corporation in
effect at the Effective Time shall be the by-laws of the Company.
SECTION 3.10. DIRECTORS AND OFFICERS. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, the directors of the Company at the Effective
Time shall be the initial directors of the Surviving Corporation and the
officers of the Company at the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected and appointed or qualified.
SECTION 3.11. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer and Merger
Subsidiary that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and except as set forth on Section 4.01 of the
letter delivered to the Company simultaneously herewith (the "COMPANY DISCLOSURE
LETTER"), has all corporate powers and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and has all
governmental licenses, authorizations, consents, permits and approvals
(collectively, "LICENSES") required to carry on its business as now conducted
except where the failure to have any such License would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below). The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect. As used herein, the term
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Company and the Subsidiaries, taken as a whole, that is not a result of general
changes in the economy or the industries in which the Company and its
Subsidiaries operate or which prevents or materially delays the Company's
ability to consummate the transactions contemplated hereby. The Company has
heretofore delivered to Buyer true and complete copies of the Company's
Certificate of Incorporation and By-Laws as currently in effect.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and authority and, except for any required approval by the
Company's stockholders in connection with the consummation of the Merger, have
been duly authorized by all necessary corporate action. This Agreement, assuming
due and valid authorization, execution and delivery by the Buyer and Merger
Subsidiary, has been duly executed and delivered by the Company and, constitutes
a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its
17
terms, except that (i) enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The Company has taken all actions necessary
to render the prohibitions of Section 203 of the DGCL to be inapplicable to the
execution and delivery of this Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby, including the acquisition of the
Shares pursuant to the Offer and the Merger. No other "fair price," "merger
moratorium," "control share acquisition" or other anti-takeover statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement, the Stockholders Agreement or any of the transactions contemplated
hereby.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. Except as set forth
in Section 4.03 of the Company Disclosure Letter, the execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority (each, a
"GOVERNMENTAL ENTITY") other than: (i) the filing of a certificate of merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX XXX") and
(iii) compliance with any applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT").
SECTION 4.04. NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) contravene or
conflict with the Certificate of Incorporation or By-Laws of the Company or
comparable organizational documents of its Subsidiaries, (ii) except as set
forth in Section 4.04 of the Company Disclosure Letter and assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any
Subsidiary, (iii) except as set forth in Section 4.04 of the Company Disclosure
Letter, with or without the giving of notice or passage of time or both,
constitute a default under or give rise to a right of termination, cancellation
or acceleration of any right or obligation of the Company or any Subsidiary or
to a loss of any benefit to which the Company or any Subsidiary is entitled
under any provision of any agreement, contract or other instrument binding upon
the Company or any Subsidiary or any license, franchise, permit or other similar
authorization held by the Company or any Subsidiary, or (iv) result in or
require the creation or imposition of any Lien on any asset of the Company or
any Subsidiary excluding from the foregoing clauses (ii), (iii) or (iv) such
violations, breaches, defaults or Liens which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole, and which will not materially impair the ability of the
Company to consummate the transactions contemplated hereby. For purposes of this
Agreement, "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
SECTION 4.05. CAPITALIZATION. The authorized capital stock of
the Company consists of 15,000,000 shares of common stock, par value $0.01 per
Share, and 5,000,000 shares of preferred stock. As of January 31, 1999, there
were outstanding 4,900,000 shares of common stock, no shares of preferred stock
and Options to purchase an aggregate of 120,200 Shares, both vested and
unvested. Section 4.05 of the Company Disclosure Letter accurately sets forth
information regarding the exercise prices of the Options. All outstanding shares
of capital stock of the Company have been duly authorized and validly issued and
are fully paid and
18
nonassessable. Except as set forth in this Section, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or of any Subsidiary convertible into or exchangeable
for shares of capital stock or voting securities of the Company, (iii) no
options, warrants, calls or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or its Subsidiaries, and (iv) no outstanding
obligations of the Company or any of its Subsidiaries to issue, sell or deliver,
or cause to be issued, sold or delivered any securities issuable by the Company
or the Subsidiaries (the items in clauses (i), (ii), (iii) and (iv) being
referred to collectively as the "COMPANY SECURITIES"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any Company Securities. Neither the Company nor any Subsidiary is
subject to any voting agreement with respect to the voting of the Company
Securities.
SECTION 4.06. SUBSIDIARIES.
(a) Each Subsidiary that is actively engaged in any business
or owns any material assets (an "ACTIVE SUBSIDIARY") (i) is a limited
partnership or a corporation duly formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation, (ii) except as set forth in
Section 4.06 of the Company Disclosure Letter, has all corporate or partnership
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and (iii) is duly
qualified to do business as a foreign corporation or limited partnership and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except in each case to the extent that the failure of this
representation and warranty to be true would not have a Material Adverse Effect.
For purposes of this Agreement, "SUBSIDIARY" means any corporation, limited
partnership or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
the Company. All Active Subsidiaries and their respective jurisdictions of
organization are either identified in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998 (the "COMPANY 10-K") or in Section 4.06
of the Company Disclosure Letter.
(b) Except that the stock of the Active Subsidiaries is
pledged under the Loan Agreement set forth in Section 4.04 of the Company
Disclosure Letter (the "LOAN AGREEMENT") which Loan Agreement restricts the
sale, transfer, disposition, pledge or hypothecation of such stock, all of the
outstanding capital stock of, or other ownership interests in, each Active
Subsidiary, is owned by the Company, directly or indirectly, free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests); there are no outstanding (i) securities of
the Company or any Subsidiary convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary, or (ii) options or other rights to acquire from the Company or any
Subsidiary, and no other obligation of the Company or any Subsidiary to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary (the items in clauses (i)
and (ii) being referred to collectively as the "SUBSIDIARY SECURITIES"); and,
there are no outstanding obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
All outstanding capital stock or other equity interests of each of the
Subsidiaries has been validly issued and is fully paid and nonassessable.
SECTION 4.07. INVESTMENTS. Except as disclosed in Section 4.07
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries, directly or
19
indirectly, owns any shares or has any ownership interest in any other Person
other than the Subsidiaries.
SECTION 4.08. SEC FILINGS.
(a) The Company has delivered to Buyer (i) its Annual Reports
on Form 10-K for its fiscal years ended June 30, 1998, 1997 and 1996, (ii) its
Quarterly Reports on Form 10-Q for its fiscal quarters ended September 30, 1998
and December 31, 1998 (such reports are hereinafter referred to as the "COMPANY
10-QS"), (iii) its proxy or information statements relating to its annual
meeting held on November 18, 1998 and all meetings of, or actions taken without
a meeting by, the stockholders of the Company held since June 30, 1998, and (iv)
all of its other reports, statements, schedules and registration statements
filed by the Company with the SEC since June 30, 1996 (collectively the "COMPANY
SEC DOCUMENTS").
(b) As of its respective filing date or as later modified by
an amendment thereto or by subsequent Company SEC Documents, each of the
Company's SEC Documents (i) did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, and (ii) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated thereunder applicable to such SEC
Documents.
SECTION 4.09. FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in the Company SEC Documents fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto and, in the case of the interim
financial statements included in the Company SEC Documents, except for the
absence of certain footnotes that would be required under Generally Accepted
Accounting Principles herein referred to as "GAAP"), the consolidated financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements). The financial statements of the Company
included in the Company SEC Documents comply as to form, as of their respective
date of filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. For purposes of this Agreement, "BALANCE SHEET" means the consolidated
balance sheet of the Company as of December 31, 1998 set forth in the Company
10-Qs and "BALANCE SHEET DATE" means December 31, 1998.
SECTION 4.10. DISCLOSURE DOCUMENTS. Each document required to
be filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, the Schedule 13E-4, Schedule 13E-3 and the Company Proxy
Statement, if any, will, when filed, (i) comply as to form in all material
respects with the applicable requirements of all applicable law, including
without limitation, the Exchange Act and (ii) 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 therein, in light of
the circumstances under which they are made, not misleading (in the case of the
Company Proxy Statement at the time it or any amendment or supplement thereto is
first mailed to stockholders of the Company) at the time the stockholders vote
on adoption of this Agreement and at the Effective Time and in the case of any
other Company SEC Documents, at the time of filing thereof and at the time of
distribution thereof. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to the statements made in any of the
foregoing documents based on written information supplied by or on behalf of
either Buyer, Merger Subsidiary or
20
any of their respective affiliates specifically for inclusion therein.
SECTION 4.11. ABSENCE OF CERTAIN CHANGES. Since the Balance
Sheet Date, and except as set forth in Section 4.11 of the Company Disclosure
Letter or as contemplated by this Agreement, the Company and Subsidiaries have
conducted their business in the ordinary course consistent with past practice,
there has not been a Material Adverse Effect, the Company and its Subsidiaries
have not taken any action that if taken after the date of this Agreement would
constitute a violation of Section 6.01, neither the Company nor any of its
Subsidiaries has incurred nor shall there have arisen any liabilities (direct,
contingent or otherwise) which would have a Material Adverse Effect and there
has not been:
(a) 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 Subsidiary of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or
any Subsidiary other than the quarterly dividends paid on the shares or
split, combination or reclassification of any of its capital stock or
issuance or authorization of the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock;
(b) any incurrence, assumption or guarantee by the Company or
any Subsidiary of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with
past practices;
(c) any making of any loan, advance or capital contribution to
or investment in any Person other than advances to employees in the
ordinary course of business consistent with past practice and loans,
advances or capital contributions to or investments in wholly-owned
Subsidiaries made in the ordinary course of business consistent with
past practices;
(d) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the
Company or any Subsidiary which, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect;
(e) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any Subsidiary, (iii)
increase in benefits payable under any existing severance or
termination pay policies or employment agreements, (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary, other than compensation,
bonus or other benefits payable to employees at the Company in the
ordinary course of business consistent with past practices or (v) enter
into any collective bargaining agreements;
(f) any issuance, delivery, sale, pledge or other encumbrance
or subjecting to any Lien any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities;
(g) any entering into of commitments for capital expenditures
involving more than $100,000 in the aggregate except (i) as may be
necessary for the maintenance of existing facilities, machinery and
equipment in good operating condition and repair in the ordinary course
of business, (ii) as reflected in the capital plan of the Company
previously provided to Buyer, or (iii) tooling costs
21
which are reimbursable by customer;
(h) any change in the accounting principles used by it unless
required by GAAP;
(i) any making or rescinding of any express or deemed election
or settlement or compromise of any claim or action relating to U. S.
Federal, state or local taxes, or change of any of its methods of
accounting or of reporting income or deductions for U.S. federal income
tax purposes;
(j) any satisfaction of any claims or liabilities, other than
the satisfaction, in the ordinary course of business consistent with
past practice, in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company included in the
Company 10-K or Company 10-Qs or incurred in the ordinary course of
business consistent with past practice;
(k) other than in the ordinary course of business consistent
with past practice, any (A) modification, amendment or termination of
any material contract, (B) waiver, release, relinquishment or
assignment of any material contract (or any of the Company's rights
thereunder), right or claim or (C) canceling or forgiveness of any
material indebtedness owed to the Company or the Subsidiaries;
provided, however, that the Company may not under any circumstance
waive or release any of its rights under any standstill or
confidentiality agreement to which it is party; or
(l) any authorization of, or commitment or agreement to take,
any of the foregoing actions.
SECTION 4.12. NO UNDISCLOSED MATERIAL LIABILITIES. Except as
set forth in Section 4.12 of the Company Disclosure Letter, there are no
liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise other than:
(a) liabilities disclosed or provided for in the Balance Sheet
and in the Company's SEC Documents;
(b) other liabilities the presence of which, individually or
in the aggregate, do not have and could not reasonably be expected to have a
Material Adverse Effect;
(c) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date; and
(d) liabilities under this Agreement or in connection with
this Agreement or disclosed hereunder.
SECTION 4.13. LITIGATION; PERMITS. Except as set forth in the
Company SEC Documents or in Section 4.13 of the Company Disclosure Letter, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of the Company threatened against or affecting, the Company or any
Subsidiary or any of their respective properties before any court or arbitrator
or any governmental body, agency or official which, if determined or resolved
adversely to the Company or any Subsidiary could reasonably be expected to have
a Material Adverse Effect. Except as set forth in Section 4.13 of the Company
Disclosure Letter, the Company, its subsidiaries and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the businesses of
Company and its Subsidiaries (collectively the
22
"COMPANY PERMITS"), except where the failure to have any such Company Permits
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect. The Company and its Subsidiaries are in compliance with
the terms of the Company Permits and all applicable statutes, laws, ordinances,
rules and regulations, except where failure so to comply individually or in the
aggregate has not had a Material Adverse Effect.
SECTION 4.14. TAXES.
(a) (i) All income and other material Tax returns, statements,
reports and forms (including estimated Tax returns and reports and information
returns and reports) required to be filed with any taxing authority with respect
to any Pre-Closing Tax Period (as defined herein) by or on behalf of the Company
or any Subsidiary (collectively, the "RETURNS") have been filed; (ii) to the
Company's knowledge as of the time of filing such Returns correctly reflected in
all material respects the facts regarding the income, business, assets,
operations, activities and status of the Company, the Subsidiaries and any other
information required to be shown therein; (iii) the Company and the Subsidiaries
have timely paid, or withheld and remitted to the appropriate taxing authority,
all Taxes shown as due and payable on the Returns that have been filed; (iv) the
charges, accruals and reserves for Taxes with respect to the Company and any
Subsidiary for any Pre-Closing Tax Period (including any Pre-Closing Tax Period
for which no Return has yet been filed) reflected on the books of the Company
and the Subsidiaries (excluding any provision for deferred income taxes) are
adequate (in accordance with GAAP) to cover such Taxes; (v) neither the Company
nor any Subsidiary of the Company has been a member of an affiliated group (as
defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the
"CODE")) other than one of which the Company was the common parent, or filed or
been included in a combined, consolidated or unitary Return other than one filed
by the Company; (vi) the Company is not and has not been within five years of
the date hereof a "United States real property holding corporation" as defined
in Section 897 of the Code; (vii) there is no claim, action, suit or proceeding
now pending or threatened in writing against or in respect of any Tax or "tax
asset" of the Company or any Subsidiary the resolution of which would as
proposed, or audit or investigation now pending or threatened in writing against
or in respect of any Tax or "tax asset" of the Company or any Subsidiary the
resolution of which the Company believes would (taking into account any changes,
accruals and reserves referred to in clause (iv) above), individually or in the
aggregate, have a Material Adverse Effect. (The term "TAX ASSET" means any net
operating loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other credit or tax attribute which could reduce
Taxes); and (viii) the only states in which the Company or any Subsidiary files
income Tax returns are Georgia, Illinois (on a non-unitary basis), Michigan and
Texas.
(b) As used in this Section 4.14, "TAXES" mean all (i)
Federal, state, local and foreign income, franchise, alternative or add-on
minimum tax, gross receipts, transfer, withholding on amounts paid to or by the
Company or any of its Subsidiaries, payroll, employment, license, property,
sales, use, excise and other taxes, tariffs or governmental charges of any
nature whatsoever, together with any interest, penalty or additional tax
attributable to such taxes; (ii) liability of the Company or any Subsidiary for
the payment of any amounts of the type described in clause (i) of this paragraph
as a result of being a member of an affiliated, consolidated, combined or
unitary group, or being a party to any agreement or arrangement whereby
liability of the Company or any Subsidiary for payments of amounts was
determined or taken into account with reference to the liability of any other
person; and (iii) liability of the Company or any Subsidiary for the payment of
any amounts as a result of being party to any tax sharing agreement or with
respect to the payment of any amounts of the type described in clauses (i) or
(ii) of this paragraph as a result of any express or implied obligation to
indemnify any other person.
23
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the close of business on the Effective Time.
SECTION 4.15. EMPLOYEE MATTERS.
(a) For purposes of this Section, the following terms shall
have the meanings set forth below:
(A) "BENEFIT ARRANGEMENT" means any material contract
(other than the Employee Agreements), arrangement or policy, or any
plan or arrangement (whether or not written) providing for severance
benefits, insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that (i) is not an
Employee Plan, (ii) is entered into or maintained, as the case may be,
by the Company or any of its Subsidiaries and (iii) covers any employee
or former employee of the Company or any of its Subsidiaries.
(B) "EMPLOYEE AGREEMENT" means all written employment
agreements and severance agreements with employees of the Company or
any of its Subsidiaries
(C) "EMPLOYEE PLAN" means any "employee benefit
plan", as defined in Section 3(3) of ERISA, that (i) is maintained,
administered or contributed to by the Company, any Subsidiary or any of
their ERISA Affiliates for employees or former employees of the Company
or any of its Subsidiaries and (ii) covers any employee or former
employee of the Company or any of its Subsidiaries.
(D) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute thereto,
and the rules and regulations promulgated thereunder.
(E) "ERISA AFFILIATE" of any entity means any other
entity which, together with such entity, would be treated as a single
employer under Section 4001(b)(1) of ERISA or Section 414 (b), (c), (m)
or (o) of the Code.
(F) "MULTIEMPLOYER PLAN" means each Employee Plan
that is a multiemployer plan, as defined in Section 3(37) of ERISA.
(G) "TITLE IV PLAN" means an Employee Plan, other
than any Multiemployer Plan, subject to Title IV of ERISA.
(b) Section 4.15 of the Company Disclosure Letter identifies
each Employee Plan. The Company has furnished or made available to Buyer copies
of the Employee Plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof together with (i) the two
most recent annual reports prepared in connection with any material Employee
Plan (Form 5500 including, if applicable, Schedule B thereto), (ii) the most
recent actuarial valuation report prepared in connection with any Employee Plan
and (iii) such other related information as is reasonably requested by Buyer.
(c) With respect to each Employee Plan: (i) no "prohibited
transaction", as defined in Section 406 of ERISA or Section 4975 of the Code or
any breach of fiduciary duty, has, to the knowledge of the Company, occurred
with respect to any Employee Plan; (ii) neither (A) disputes in the ordinary
course of the operation of
24
an Employee Plan that might reasonably be expected to have a Material Adverse
Effect nor (B) disputes outside the ordinary course of the operation of an
Employee Plan, are pending, or to the knowledge of the Company, threatened;
(iii) all contributions required to be made to each Employee Plan as of the date
hereof (taking into account any extensions permitted by the Code or the IRS)
have been made in full.
(d) Except as set forth in Section 4.15 of the Company
Disclosure Letter, no liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate that has not been satisfied in full and to the
knowledge of the Company, no condition exists that presents a material risk to
the Company or its ERISA Affiliates of incurring any material liability to the
Pension Benefit Guaranty Corporation (the "PBGC"), Department of Labor or the
plan participants (other than routine claims for benefits). No Employee Plan has
incurred an accumulated funding deficiency, as defined in Section 302 of ERISA
or Section 312 of the Code, whether or not waived.
(e) If a "complete withdrawal" by the Company, all its
Subsidiaries and all of their ERISA Affiliates were to occur as of the Effective
Time with respect to all Multiemployer Plans, none of the Company, any of its
Subsidiaries or any of their ERISA Affiliates would incur any material
withdrawal liability under Title IV of ERISA.
(f) Except as set forth in Section 4.15 of the Company
Disclosure Letter, each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is and has been determined by the Internal Revenue
Service to be so qualified and no event has occurred since the date of such
determination that, to the knowledge of the Company, would adversely affect such
qualification, and each trust created under any such Employee Plan has been
determined by the Internal Revenue Service to be exempt from Tax under Section
501(a) of the Code and no event has occurred since the date of such
determination that, to the knowledge of the Company, would adversely affect such
exemption. The Company has provided or made available to Buyer the most recent
determination letter of the Internal Revenue Service relating to each such
Employee Plan. Except as set forth in Section 4.15 of the Company Disclosure
Letter, each Employee Plan has been maintained in substantial compliance (to
include timely, complete and substantially correct filing of Form 5500 and any
attachments) with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Code. No Employee Plan is or has been audited or is or has been
under investigation by the Department of Labor or the Internal Revenue Service.
(g) All contributions to each Employee Plan have been or will
be deductible in accordance with the applicable provisions of the Code.
(h) With respect to any insurance policy providing funding for
benefits under any Employee Plan, there is no liability of the Company or any of
its Subsidiaries, in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other actual or contingent liability, nor would there be any
such liability if such insurance policy was terminated on the date hereof, and
no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the knowledge of the
Company, no such proceedings with respect to any such insurer are imminent.
(i) Neither the Company nor any of its Subsidiaries or ERISA
Affiliates has any liability with respect to any "employee benefit plans"
(within the meaning of Section 3(3) of ERISA) previously maintained or
contributed to by the Company, its Subsidiaries or ERISA Affiliates or to which
any such entity previously had an obligation to contribute.
(j) Except as set forth on Section 4.15 of the Company
Disclosure Letter, the execution and performance of this Agreement will not (i)
constitute a stated triggering event under any Employee Plan, Benefit
Arrangement or Employee
25
Agreement that will result in any payment (whether of severance pay or
otherwise) becoming due from any director, officer, employee, or former employee
(or dependents of such employee), or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any employee, officer or
director of the Company or the Subsidiaries.
(k) Section 4.15 of the Company Disclosure Letter identifies
each material Benefit Arrangement. The Company has furnished or made available
to Buyer copies or descriptions of each material Benefit Arrangement. Each such
Benefit Arrangement has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations.
(l) Section 4.15 of the Company Disclosure Letter identifies
by name all Employee Agreements in effect or committed to be put in effect as of
the date hereof.
(m) Neither the Company nor any of its ERISA Affiliates has
any material current or projected liability in respect of post-employment or
post-retirement health or medical or life insurance benefits for retired or
former employees of the Company.
(n) There has been no amendment or announcement by the Company
or any of its ERISA Affiliates relating to, or change in benefits, employee
participation or coverage under, any Employee Plan or Benefit Arrangement, that
would increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended June 30, 1998.
(o) Except as set forth in Section 4.15 of the Company
Disclosure Letter, the Company is not aware of any Employee Agreement or other
contract, agreement, plan or arrangement covering any employee or former
employee of the Company that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
(p) No excise Tax under Section 4980B or other provision of
the Code has been incurred by the Company or an ERISA Affiliate in respect of
any Employee Plan.
(q) Section 4.15 of the Company Disclosure Letter lists by
policy number and issuer all corporate owned life insurance policies owned by
the Company or an ERISA Affiliate and with respect to each such policy lists the
(1) current cash surrender value, net of any loan, (2) name of insured and (3)
the face amount. Each policy so identified is a life insurance contract within
the meaning of Section 7702 of the Code.
SECTION 4.16. LABOR MATTERS. Except as set forth in Section
4.16 of the Company Disclosure Letter, (i) there are no controversies pending
or, to the best knowledge of the Company, threatened between the Company or any
Subsidiary and any of their respective employees which individually or in the
aggregate would have a Material Adverse Effect; and (ii) neither the Company nor
any Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary
(any such agreement or contract a "CBA"), nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees. The Company has furnished or made available, to Buyer true and
complete copies of all CBAs. Except as set forth in Section 4.16 of the Company
Disclosure Letter, at no time since December 31, 1995 has the Company or the
Subsidiaries experienced any strikes or work stoppages by any
26
union or labor organization or any other group of employees, or been involved in
or the subject of any grievance, dispute or controversy by or with any union or
labor organization or any other group of employees or any pending or threatened
legal proceeding based on or related to any employment grievance, dispute or
controversy or received any notice of any of the foregoing which individually or
in the aggregate have had a Material Adverse Effect.
SECTION 4.17. COMPLIANCE WITH LAWS. Except as set forth in
Section 4.17 of the Company Disclosure Letter, neither the Company nor any
Subsidiary is in violation of any provisions of any laws, statutes, ordinances
orders, judgements, decrees, rules or regulations except where such violations,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 4.18. FINDERS' FEES. Except for the Advisor, a copy of
whose engagement agreement has been provided to Buyer, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company or any Subsidiary who would be
entitled to any fee or commission from the Company, any Subsidiary, Buyer or any
of its affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 4.19. ENVIRONMENTAL MATTERS.
(a) To the Company's knowledge, except as set forth in the
Company SEC Documents or in Section 4.19 of the Company Disclosure Letter:
(i) the Company and its Subsidiaries has not received any (A)
written communication from any person or entity (including any Governmental
Entity) stating that (x) it or its Subsidiaries may be a potentially responsible
party under Environmental Law (as defined in (c) below) with respect to any
actual or alleged environmental contamination or (y) any Governmental Entity is
conducting or has conducted any environmental remediation or environmental
investigation which could reasonably be expected to result in liability for the
Company or its Subsidiaries under Environmental Law; or (B) request for
information under Environmental Law from any Governmental Entity with respect to
any actual or alleged environmental contamination, except, in each case, for
communications, environmental remediation and investigations and requests for
information which would not, individually or in the aggregate, have a Material
Adverse Effect;
(ii) the Company and its Subsidiaries have not received any
written communication from any person or entity (including any Governmental
Entity) stating or alleging that the Company or its Subsidiaries may have
violated any Environmental Law, or that the Company or its Subsidiaries has
caused or contributed to any environmental contamination that has caused any
property damage or personal injury under Environmental Law, except, in each
case, for statements and allegations of violations and statements and
allegations of responsibility for property damage and personal injury which
would not, individually or in the aggregate, have a Material Adverse Effect;
(iii) all underground storage tanks ("UST'S") on property
currently owned or leased by the Company currently comply with and for the past
three years have compiled with applicable Environmental Law, except for failures
to comply which would not, individually or in the aggregate, have a Material
Adverse Effect.
(iv) with respect to UST's other than those covered by Section
4.19(a)(iii), to the Company's knowledge, all obligations for which the Company
and its Subsidiaries have retained liability either contractually or by
operation of law would not have a Material Adverse Effect; and
27
(v) the Company and its Subsidiaries have no liabilities under
any Environmental Laws which individually or in the aggregate would reasonably
be expected to result in a Material Adverse Effect.
(vi) the Company and its Subsidiaries are and for the past
three years have been in material compliance with all applicable Environmental
Laws;
(vii) the Company has made available to Buyer all information
including such studies, analyses and test results, in the possession, custody or
control of or otherwise known and available to the Company or its Subsidiaries
relating to the environmental conditions on, under or about any of the
properties or assets owned, leased or operated by the Company or its
Subsidiaries at any time or any other property for which the Company or its
Subsidiaries may bear some liability for under applicable Environmental Laws;
and
(viii) the Company and its Subsidiaries hold all permits,
licenses or authorizations required under applicable Environmental Laws
("ENVIRONMENTAL PERMITS") and have submitted on a timely basis complete
applications for the renewal of any Environmental Permit which has expired but
has not yet been renewed or which will expire within the period of time after
the Closing Date, the length of which is the number of days prior to expiration
that a renewal application for any such Environmental Permit is required to be
submitted.
(b) For purposes of this Section 4.19, "ENVIRONMENTAL LAW"
means all applicable state, federal and local laws, regulations and rules,
including common law, judgments, decrees and orders relating to pollution, the
preservation of the environment and the release of material into the
environment.
SECTION 4.20. PROPERTY.
(a) The Company and the Subsidiaries have good title to all
assets other than the Real Property (as defined herein) necessary to conduct the
business of the Company as currently conducted except to the extent the failure
of this representation and warranty to be true would not have a Material Adverse
Effect.
(b) Section 4.20 of the Company Disclosure Letter contains a
complete and accurate legal description of each parcel of real property owned,
leased or used in any manner by the Company and the Subsidiaries (collectively,
the "REAL PROPERTY"), indicating, in each case, whether such property is owned
or leased. The Real Property constitutes all of the Real Property necessary to
the conduct of the Business as currently conducted. The Company and its
Subsidiaries have good and marketable title to the Real Property which it owns
and to all plants, buildings and improvements thereon, free and clear of any
Liens, claims, charges, imperfections of title, encroachments, easements,
rights-of-way, squatters' rights, encumbrances, covenants, conditions or
restrictions of any kind or nature whatsoever, other than those described in
Section 4.20 of the Company Disclosure Letter.
(c) The Company and the Subsidiaries have a valid and
enforceable leasehold interest, free and clear of all Liens, in each parcel or
tract of leased Real Property attributable to it pursuant to a lease (the
"LEASES"). The Company or the Subsidiaries, as applicable, has performed all of
the obligations required to be performed by the tenant under the Leases,
possesses and quietly enjoys the Real Property demised under each of the Leases
and has not released any of its rights under the Leases.
(d) Neither of the Company or the Subsidiaries is a foreign
person within the meaning of Section 1445 of the Code.
28
(e) There are not currently any pending or, to the knowledge
of the Company, threatened (i) condemnation, eminent domain or similar
proceedings that would affect any parcel of Real Property, or (ii) any future
improvements by any Governmental Entities, any part of the cost of which would
be assessed against the Real Property. Since the Balance Sheet Date, all Real
Property has been maintained, repaired and replaced consistent with past
practice in a manner that is appropriate for the continued operation of the
business of the Company. To the knowledge of the Company, the ownership,
occupancy, operation or use by the Company of each parcel of Real Property
including, without limitation, all buildings, structures and improvements
located on such property (i) complies with and does not violate any restriction
imposed by any declaration, covenant running with the land, lease, permit, deed
of restriction or other contract affecting such Real Property; (ii) complies
with and does not violate any Law, including, without limitation, fire and
zoning Laws; and (iii) there are no pending changes in Laws affecting any of the
Real Property (including zoning) that will render any part of the business of
the Company as presently conducted illegal or uneconomical. To the knowledge of
the Company, there is no plan, study or effort with respect to any of the Real
Property by any Governmental Authorities or of any other Person that could
adversely affect any of the business of the Company.
SECTION 4.21. INSURANCE. Section 4.21 of the Company
Disclosure Letter contains an accurate and complete list and a brief description
(including the insurer, policy number, type of insurance, coverage limits,
deductibles, current premium, expiration dates and any special cancellation
conditions) of all material policies of fire, liability (including but not
limited to product liability), workers' compensation and other forms of
insurance owned or held by either the Company or the Subsidiaries or pursuant to
which any of their assets are insured. Such policies (i) are carried by insurers
of recognized responsibility; (ii) are in full force and effect; and (iii) to
the Company's knowledge, are sufficient for compliance with all requirements of
law and insure the assets, business and operations of the Company or the
Subsidiaries against all liabilities, claims, hazards and risks against which
businesses in industries similar to the Company or the Subsidiaries customarily
insure. All such insurance shall be in effect through the Effective Time. No
insurance coverage of either the Company or the Subsidiaries is maintained
through self-insurance except as set forth in Section 4.21 of the Company
Disclosure Letter.
SECTION 4.22. PATENTS AND TRADEMARKS.
(a) The Company and the Subsidiaries own all right, title and
interest to, or possess valid and enforceable licenses or other rights to use
all patents, trademarks, trademark rights, trade names and trade name rights
(including any applications for any of the foregoing) material to the Company's
business and operations (collectively, "MATERIAL PATENTS AND TRADEMARKS") used
or held for use in connection with the business of the Company and the
Subsidiaries as currently conducted free and clear of all Liens, licenses and
other restrictions. All Material Patents and Trademarks owned by the Company or
its Subsidiaries are validly registered or registrations have been applied for.
(b) Except as set forth in Section 4.22 of the Company
Disclosure Letter, the Company is unaware of any assertion or claim challenging
the validity of any Material Patent and Trademark. Except as set forth in
Section 4.22 of the Company Disclosure Letter, the conduct of the business of
the Company and the Subsidiaries as currently conducted does not conflict with
any patent, patent application, trademark or trademark application of any third
party in a manner that could reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Company, there are no material infringements of
any Material Patents and Trademarks.
(c) Each of the Company's employees set forth in Section
4.22(c) of
29
the Company Disclosure Letter has entered into an agreement with the Company
regarding intellectual property matters in the form provided to Buyer.
SECTION 4.23. MATERIAL CONTRACTS.
(a) Except as set forth in Section 4.23 of the Company
Disclosure Letter, the Company SEC Documents list each material contract or
agreement (including, but not limited to, all material leases, licensing
agreements, manufacturing, production or distribution contracts and any material
contracts or agreements pursuant to which the Company or any Subsidiary has
licensed intellectual property to a third party) (collectively, the "MATERIAL
CONTRACTS") to which the Company or any of its Subsidiaries is a party, other
than purchase orders with customers entered into in the ordinary course of
business.
(b) To the knowledge of the Company, each Material Contract is
in full force and effect and is enforceable in all material respects against the
parties thereto (other than the Company and the Subsidiaries) in accordance with
its terms and no condition or state of facts exists that, with notice or the
passage or time, or both, would constitute a material default by the Company or
any Subsidiary or, to the knowledge of the Company, any third party under any
Material Contract.
SECTION 4.24. SHAREHOLDER RIGHTS AGREEMENT. The Company
currently is not, and no resolution or other action has been taken providing for
the Company to become at a later date, a party to a shareholder rights
agreement, "poison pill" or any other agreement of like nature.
SECTION 4.25. VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of the Shares at the Company Stockholder Meeting to adopt
this Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to adopt and approve this Agreement, and the
Merger and the transactions contemplated hereby and thereby.
SECTION 4.26. OPINION OF FINANCIAL ADVISOR. The Company has
received the opinion of Xxxxxx Xxxxxxxxx Xxxxxx, dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration and the
Offer Price are fair from a financial point of view to holders of shares of
Common Stock, a signed copy of which opinion will be made available to Buyer
promptly after the date hereof.
SECTION 4.27. YEAR 2000 ISSUES. The Company has adopted and
implemented commercially reasonable measures to investigate and correct any
"year 2000 problems" associated with (i) the operation of the Company's
business, and (ii) the products manufactured and distributed by the Company. The
Company has provided to Buyer a written explanation of the costs that the
Company and Company Subsidiaries have incurred in each of the past two fiscal
years to investigate and correct the "year 2000 problem," as well as a written
report of its estimates of the costs to be incurred in the future to investigate
and correct the "year 2000 problem."
SECTION 4.28. TRANSACTION FEES. Section 4.28 of the Company
Disclosure Letter sets forth all fees and expenses paid by the Company, and the
Company's estimate of any additional fees and expenses which it expects to
incur, as a result of or in connection with the Offer and the transactions
contemplated by this Agreement, including legal, accounting and investment
banking fees and expenses as well as any and all payments made or to be made
pursuant to any change in control, severance or other agreements to which the
Company is a party (collectively, the "TRANSACTION FEES"). As of the Offer
Completion Date and the Closing Date, the Transaction Fees shall not exceed
$5,900,000, unless the Company shall incur additional expenses in defending
lawsuits brought by stockholders of the Company that arise as a result of the
transactions contemplated by this Agreement in which case the
30
amount of the Transaction Fees may exceed $5,900,000 by the amount such
litigation expenses, together with the legal expenses otherwise incurred by the
Company in connection with the transactions contemplated by this Agreement,
exceed $250,000.
SECTION 4.29. INSIDER INTERESTS. Except as set forth in
Section 4.29 to the Company Disclosure Letter or the Company SEC Documents, no
officers, directors, employees or stockholders of the Company or its
Subsidiaries and no entity controlled by such persons has a relationship with
the Company that would be required to be disclosed under Item 404 of Regulation
S-K promulgated under the Securities Act of 1933, as amended, if such Item 404
applied to all of such persons.
SECTION 4.30. FULL DISCLOSURE. To the Company's knowledge, no
representation or warranty made by the Company in this Agreement or in any
schedule hereto contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company that:
SECTION 5.01. CORPORATE EXISTENCE AND POWER. Each of Buyer and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation.
SECTION 5.02. CORPORATE AUTHORIZATION. The execution, delivery
and performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers and authority of Buyer and Merger
Subsidiary and have been duly authorized by all necessary corporate action. This
Agreement, assuming due and valid authorization, execution and delivery by the
Company, constitutes a legally valid and binding agreement of each of Buyer and
Merger Subsidiary enforceable against the Buyer and Merger Subsidiary in
accordance with its terms, except that (i) enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 5.03. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and performance by Buyer and Merger Subsidiary of this Agreement and
the consummation by Buyer and Merger Subsidiary of the transactions contemplated
by this Agreement require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of a certificate of merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the HSR Act and (iii) compliance with any applicable requirements of the
Exchange Act.
SECTION 5.04. NON-CONTRAVENTION. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the certificate of
incorporation or by-laws of Merger Subsidiary or Buyer, (ii) assuming compliance
with the matters referred to in Section 5.03, contravene or conflict with any
provision of law, regulation, judgment, order or decree binding upon Buyer or
Merger subsidiary, or (iii) constitute a default under or give rise to any right
of termination, cancellation or acceleration of any right or obligation of Buyer
or Merger Subsidiary or to a loss of any benefit to which Buyer or
31
Merger Subsidiary is entitled under any agreement, contract or other instrument
binding upon Buyer or Merger Subsidiary, except in the case of clauses (ii) and
(iii) as would not materially impair the consummation of the Offer or the
Merger.
SECTION 5.05. DISCLOSURE DOCUMENTS. The information with
respect to Buyer and its subsidiaries and Merger Subsidiary that Buyer and
Merger Subsidiary furnish to the Company in writing specifically for use in any
Offer Document will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading (i) in the case of the Company Proxy Statement (as defined in Section
6.02 herein) at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, at the time
the stockholders vote on adoption of this Agreement and at the Effective Time,
and (ii) in the case of any Offer Document other than the Company Proxy
Statement, at the time of the filing thereof and at the time of any distribution
thereof. The Schedule 13E-3, when filed, will comply as to form in all material
respects with the applicable requirements of the Exchange Act. The Schedule
13E-3 will not at the time of the filing thereof, at the time of any
distribution thereof or at the time of consummation of the Offer, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED that this representation and
warranty will not apply to statements or omissions in the Offer Documents based
upon information furnished to Buyer or Merger Subsidiary in writing by the
Company specifically for use therein.
SECTION 5.06. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary who might be entitled to any fee or
commission from the Company or any of its affiliates upon consummation of the
transactions contemplated by this Agreement.
SECTION 5.07. FINANCING. Buyer has received commitments from
financing sources to provide debt and equity financing to Buyer and/or the
Company sufficient to finance the Transactions, including the Buyer Shares, the
Option Consideration and the Transaction Fees, and to perform the obligations of
Buyer and Merger Subsidiary hereunder (the "FINANCING").
SECTION 5.08. SHARE OWNERSHIP. As of the date hereof and
except pursuant to the Stockholders Agreement, Buyer and Merger Subsidiary do
not beneficially own any Shares.
SECTION 5.09. MERGER SUBSIDIARY'S OPERATIONS. Merger
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated hereby and has not engaged in any business activities, conducted
any operations or incurred any obligations other than in connection with the
transactions contemplated hereby.
SECTION 5.10. DUE DILIGENCE. Buyer and its representatives
have received a copy of such documents relating to the Company as requested by
Buyer (including without limitation the Data Room Index attached hereto as
Section 5.10 of the Company Disclosure Letter and all documents referred to
therein), has had the opportunity to obtain any additional information necessary
to verify the accuracy of the information contained in such documents and has
been given the opportunity to meet with representatives of the Company and to
have them answer any questions and provide any additional information requested,
and all such questions have been answered and requested information provided to
Buyer's full satisfaction.
ARTICLE VI
COVENANTS OF THE COMPANY
32
The Company agrees that:
SECTION 6.01. CONDUCT OF THE COMPANY. From the date hereof
until the Effective Time, the Company and the Subsidiaries shall conduct their
business in the ordinary course consistent with past practice and in compliance
with all applicable laws and regulations and shall use their best efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its
certificate of incorporation or by-laws;
(b) except for the Merger, the Company will not, and will not
permit any Subsidiary to, merge or consolidate with any other Person or
acquire a material amount of assets of any other Person;
(c) the Company will not, and will not permit any Subsidiary
to, sell, lease, license or otherwise dispose of any material assets or
property except (i) pursuant to existing contracts or commitments and
(ii) inventory in the ordinary course consistent with past practice;
(d) the Company will not, and will not permit any Subsidiary
to, take any action other than the Offer and the Stock Purchase that
would constitute a violation of Section 4.11 (in the case of Section
4.11(e)(iv), without giving effect to the ordinary course of business
qualifier);
(e) the Company will not, and will not permit any Subsidiary
to (i) take or agree or commit to take any action that would make any
representation and warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or
(ii) omit, or agree or commit to omit, to take any action necessary to
prevent any such representation or warranty from being inaccurate in
any material respect at any such time; and
(f) the Company will not, and will not permit any Subsidiary
to, agree or commit to do any of the foregoing.
SECTION 6.02. STOCKHOLDER MEETING; PROXY MATERIAL. The Company
shall cause a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to
be duly called and held as soon as reasonably practicable after the Offer
Completion Date for the purpose of voting on the approval and adoption of this
Agreement and the Merger unless a vote of stockholders of the Company is not
required by the DGCL. The directors of the Company shall, subject to Section
6.04(b) recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with such meeting, the Company (i) will
promptly, after the consummation of the Offer, prepare and file with the SEC,
will use its best efforts to have cleared by the SEC and will thereafter mail to
its stockholders as promptly as practicable the proxy or information statement
and all other proxy materials for such meeting (the "COMPANY PROXY STATEMENT"),
(ii) will use its best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply with all legal requirements applicable to such
meeting. Without limiting the generality of the foregoing but subject to its
rights pursuant to Section 6.04, the Company agrees that its obligations
pursuant to the first sentence of this Section 6.02 shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
or any Takeover Proposal.
SECTION 6.03. ACCESS TO INFORMATION. From the date hereof
until the
33
Effective Time, the Company will give Buyer, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of the
Company and the Subsidiaries, will furnish to Buyer, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request and
will instruct the Company's employees, counsel and financial advisors to
cooperate with Buyer in its investigation of the business of the Company and the
Subsidiaries; PROVIDED that all requests for information, to visit plants or
facilities or to interview the Company's employees or agents should be directed
to and coordinated with an executive officer of the Company and PROVIDED further
that no investigation pursuant to this Section shall affect any representation
or warranty given by the Company to Buyer hereunder and any information received
by Buyer or its representatives shall remain subject to the Confidentiality
Agreement between Buyer and the Company (the "CONFIDENTIALITY AGREEMENT") which
is attached hereto as Exhibit A. The Company agrees to provide, and will cause
its Subsidiaries and its and their respective officers, employees and advisors
to provide, all cooperation reasonably necessary in connection with the
arrangement of the Financing, including, without limitation, participation in
meetings, due diligence sessions and assisting Buyer or its lenders in obtaining
landlord consents or estoppel certificates or any other financing related
agreement or document.
SECTION 6.04. OTHER OFFERS. (a) The Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal which constitutes or reasonably may give rise to any
Takeover Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal. Notwithstanding the foregoing, if,
at any time prior to the date the Company purchases Shares in the Offer (the
"OFFER COMPLETION DATE"), the Board of Directors of the Company determines in
good faith, after consultation with outside counsel that failure to do
so would result in a breach of its fiduciary duties to the Company's
stockholders under applicable law, the Company may, in response to a Superior
Proposal (as defined in Section 6.04(b)) which was not solicited by it or which
did not otherwise result from a breach of this Section 6.04 and subject to
providing prior written notice of its decision to take such action to Buyer (the
"COMPANY NOTICE") and compliance with Section 6.04(c), (x) furnish information
with respect to the Company and its Subsidiaries to any person making a Superior
Proposal pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with its outside counsel) that is no less restrictive
than the Confidentiality Agreement and (y) participate in discussions or
negotiations regarding such Superior Proposal. The Company, its affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to any Takeover Proposal and
request the return of all confidential information regarding the Company
provided to any such parties prior to the date hereof pursuant to the terms of
any confidentiality agreements or otherwise. For purposes of this Agreement,
"TAKEOVER PROPOSAL" means any inquiry, proposal or offer from any person other
than the Buyer and Merger Subsidiary relating to any (v) direct or indirect
acquisition or purchase of a business that constitutes 15% or more of the net
revenues, net income or the assets of the Company and its Subsidiaries, taken as
a whole, (w) direct or indirect acquisition or purchase of 15% or more of any
class of equity securities of the Company or any of its Subsidiaries whose
business constitutes 15% or more of the net revenues, net income or assets of
the Company and its Subsidiaries, taken as a whole, (x) tender offer or exchange
offer for Shares of any class of equity securities of the Company or any of its
Subsidiaries, or (y) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
34
involving the Company or any of its Subsidiaries other than the transactions
contemplated by this Agreement.
(b) Except as expressly permitted by this Section 6.04(b),
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify or propose publicly to withdraw or modify, in a manner
adverse to Buyer, the approval or recommendation by such Board of Directors or
such committee of the Offer, the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal or
(iii) cause or authorize the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each a
"COMPANY ACQUISITION AGREEMENT") related to any Takeover Proposal.
Notwithstanding the foregoing, if prior to the Offer Completion Date, the Board
of Directors of the Company determines in good faith, after the Company has
received a Superior Proposal and after consultation with outside counsel, that
failure to do so would result in a breach of its fiduciary duties to the
Company's stockholders under applicable law, the Board of Directors of the
Company may (subject to this and the following sentences and Section 11.04)
terminate this Agreement in order to concurrently enter into such Company
Acquisition Agreement with respect to a Superior Proposal, PROVIDED, HOWEVER,
that the Company may not terminate this Agreement pursuant to this Section
6.04(b) unless and until (i) five Business Days have elapsed following the
delivery to Buyer of the Company Notice and (x) the Company has delivered to
Buyer the written notice required by Section 6.04(c) below, and (y) during such
five Business Day period, the Company otherwise cooperates with Buyer with
respect to the Takeover Proposal that constitutes a Superior Proposal with the
intent of enabling Buyer to engage in good faith negotiations so that the
transactions contemplated hereby may be effected, and (ii) at the end of such
five Business day period the Board of Directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Common Stock of the Company then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Board of Directors of the Company determines in its good
faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Offer and the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of Directors of
the Company, is reasonably capable of being obtained by such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.04, the Company shall immediately
advise Buyer orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or Takeover
Proposal, and the identity of the person making such request or Takeover
Proposal and promptly furnish to Buyer a copy of any such written proposal in
addition to any information provided to or by any third-party relating thereto.
The Company shall keep Buyer reasonably informed of the status and details
(including amendments and proposed amendments) of any such request or Takeover
Proposal.
(d) Nothing contained in this Section 6.04 prohibits the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or making any disclosure to
the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so to
disclose would result in breach of its fiduciary duties to the Company's
stockholders under applicable law; provided, however that except as expressly
permitted by paragraph (b) of this Section 6.04 in connection with a Superior
Proposal, neither the Company nor its Board of Directors
35
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to the Offer, this Agreement or
the Merger or approve or recommend, or propose publicly to approve or recommend,
a Takeover Proposal.
SECTION 6.05. NOTICES OF CERTAIN EVENTS. The Company shall
promptly notify Buyer of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this
Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge,
threatened against, relating to or involving or otherwise
affecting the Company or any Subsidiary which, if pending on
the date of this Agreement, would have been required to have
been disclosed pursuant to Section 4.13 or which relate to the
consummation of the transactions contemplated by this
Agreement;
(iv) the occurrence or non-occurrence of any event
whose occurrence or non-occurrence would be likely to cause
either (A) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time or (B)
any condition set forth in Annex I to be unsatisfied in any
material respect at any time from the date hereof to the date
Buyer purchases Shares pursuant to the Offer; and
(v) any material failure of the Company, or any
officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.05 shall not
limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.01. OBLIGATIONS OF MERGER SUBSIDIARY. Buyer will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
SECTION 7.02. VOTING OF SHARES. Buyer agrees to vote all
Shares beneficially owned by it or by its Subsidiaries in favor of adoption of
this Agreement at the Company Stockholder Meeting.
SECTION 7.03. DIRECTOR AND OFFICER LIABILITY. From the
Effective Time through the sixth anniversary of the date on which the Effective
Time occurs, Buyer shall cause the Surviving Corporation to indemnify and hold
harmless each present and former officer, director, employee or agent of the
Company, including, without limitation, each Person controlling any of the
foregoing Persons (the "INDEMNIFIED PARTIES"), against all claims, losses,
liabilities, damages, judgments, fines, fees, costs or
36
expenses, including, without limitation, attorneys' fees and disbursements
(collectively, "Costs"), incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time (including, without limitation, this Agreement,
the Offer Documents, the Transactions and actions contemplated hereby and
thereby and giving effect to the consummation of such transactions and actions),
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under the Articles of Incorporation or By-Laws of the
Company or indemnification agreements in effect on the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
claim, action, suit, proceeding or investigation. Without limiting the
foregoing, in the event that any claim, action, suit, proceeding or
investigation is brought against an Indemnified Party (whether arising before or
after the Effective Time), the Indemnified Party may retain counsel satisfactory
to such Indemnified Party and Buyer shall, or shall cause the Surviving
Corporation to, advance the fees and expenses of such counsel for the
Indemnified Party in accordance with the Articles of Incorporation or By-Laws of
the Company in effect on the date of this Agreement. Buyer and the Company agree
that all rights to indemnification and all limitations on liability existing in
favor of any such officer, director, employee or agent as provided in the
Company's Certificate of Incorporation and By-laws as in effect as of the date
hereof shall survive the Merger and shall continue in full force and effect
unless required to be amended under applicable law and except to make changes
permitted by law that would enlarge the Indemnified Parties' right to
indemnification. Any determination required to be made with respect to whether
any of the foregoing Persons is entitled to indemnification as set forth above
shall be made by independent legal counsel selected mutually by such Person and
reasonably satisfactory to Buyer; PROVIDED, HOWEVER, that Buyer will not be
liable for any settlement effected without its written consent. On or prior to
the Effective Time, Buyer will cause the Surviving Corporation to pre-pay, at no
expense to the beneficiaries, officers' and directors' liability insurance,
which will be in effect for no less than six years after the Effective Time, in
respect of acts or omissions occurring prior to the Effective Time covering each
such Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date hereof; PROVIDED,
HOWEVER, that in no event will Buyer be required to pay aggregate premiums for
such insurance during such six-year period under this Section 7.03 in excess of
nine times the annual premium paid by the Company in 1998 for such purpose;
PROVIDED, FURTHER, that if the aggregate premiums of such insurance coverage
exceed such amount, Buyer will be obligated to obtain a policy with the best
coverage available, in the reasonable judgment of the Board of Directors of
Buyer, for a cost up to but not exceeding such amount. Buyer will on the
Effective Time cause the policy referred to in the preceding sentence to be in
full force and effect with the premiums therefore prepaid in full, which policy
shall by its terms be noncancelable. Buyer shall cause the Surviving Corporation
to continue to indemnify in accordance with the Company's past practices each of
the employees listed in Section 7.03 of the Company Disclosure Letter in respect
of the lawsuit set forth opposite such employee's name in Section 7.03 of the
Company Disclosure Letter.
In the event any claim is made against present or former
directors, officers or employees of the Company that is covered or potentially
covered by insurance, neither the Surviving Corporation nor Buyer shall do
anything that would forfeit, jeopardize, restrict or limit the insurance
coverage available for that claim until the final disposition thereof.
Notwithstanding anything herein to the contrary, if any claim,
action, suit proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any Indemnified Party, on or prior to the
sixth anniversary of the Effective Time, the provisions of this Section 7.03
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
37
In the event that the Surviving Corporation or Buyer or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
7.03, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Buyer shall succeed to the obligations set forth in
this Section 7.03 and none of the actions described herein shall be taken until
such provision is made.
SECTION 7.04. MERGER SUBSIDIARY SUBSCRIPTION AGREEMENTS.
Certain stockholders of Merger Subsidiary shall enter into agreements to
subscribe for shares of capital stock of Merger Subsidiary in form and substance
satisfactory to the Company.
ARTICLE VIII
COVENANTS OF BUYER
AND THE COMPANY
The parties hereto agree that:
SECTION 8.01 BEST EFFORTS. (a) Subject to the terms and
conditions of this Agreement, the Company, Buyer and Merger Subsidiary shall,
and the Company shall cause each of its subsidiaries to, cooperate and each
party will use its best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement; provided that Buyer and its affiliates shall not be required to
agree to any consent decree or order in connection with any objections of the
Department of Justice or Federal Trade Commission (each an "HSR AUTHORITY") to
the transactions contemplated by this Agreement.
(b) The Company and Buyer shall coordinate in advance of
sending any communications to or scheduling any meetings with any Governmental
Entity relating to this Agreement, the Offer or the Merger and shall promptly
share all correspondence or other communication received from any Governmental
Entity relating to this Agreement, the Offer or the Merger.
(c) The Company shall, upon the request of Buyer, take all
reasonable steps to assist in any challenge by Buyer to the validity or
applicability to the transactions contemplated by this Agreement, including the
Merger, of any state takeover law.
SECTION 8.02 CERTAIN FILINGS. The Company and Buyer shall
cooperate with one another (a) in connection with the preparation of the Company
Disclosure Documents and the Offer Documents, (b) in determining whether any
action by or in respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts
(including, without limitation, lessors under material leases), in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, the consummation of the Financing in accordance
with the terms thereof) and (c) in seeking any such actions, consents, approvals
or waivers or making any such filings, furnishing information required in
connection therewith or with the Company Disclosure Documents or the Offer
Documents and seeking timely to obtain any such actions, consents, approvals or
waivers.
38
SECTION 8.03. PUBLIC ANNOUNCEMENTS. Buyer and the Company will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with, any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law, court process or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 8.04. CONVEYANCE TAXES. Buyer and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
Taxes which become payable in connection with the transactions contemplated
hereunder that are required or permitted to be filed on or before the Effective
Time.
SECTION 8.05. FURTHER ASSURANCES. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger. The
Company shall use its best efforts to obtain a release from each Person owed any
Transaction Fees.
SECTION 8.06. EMPLOYEE MATTERS.
(a) Buyer and Merger Subsidiary agree that, effective as of
the Effective Time and for the six-month period following the Effective Time,
the Surviving Corporation and its Subsidiaries and successors shall continue for
those persons who, immediately prior to the Effective Time, were employees of
the Company or its Subsidiaries ("RETAINED EMPLOYEES") the Employee Plans and
material Benefit Arrangements or provide benefits that are not less favorable in
the aggregate to such Employee Plans and Benefit Arrangements. Service accrued
by such Retained Employees during employment with the Company and its
Subsidiaries prior to the Effective Time shall be recognized to the extent and
for the purposes such service was recognized prior to the Effective Time by the
applicable Employee Plan or Benefit Arrangements or benefits plans established
after the Effective Time. Except as provided in the Employee Agreements, nothing
contained in the foregoing is intended to preclude the Surviving Corporation
from terminating the employment of any Retained Employee after the Effective
Time.
(b) Buyer and Merger Subsidiary agree to honor, and cause the
Surviving Corporation to honor, without modification, the Employee Agreements on
the same terms as disclosed in Section 4.15 of the Company Disclosure Letter
hereof (whether or not executed as of the date hereof) which Employee Agreements
are listed on Section 4.15 of the Company Disclosure Letter hereto. Buyer and
Merger Subsidiary acknowledge that the consummation of the Offer shall
constitute a change in control for purposes of the Employee Agreements.
(c) Buyer and Merger Subsidiaries agree to honor, and cause
the Surviving Company to pay, without modification, no later than the earlier of
July 31, 1999 or such employee's last day of work for the Company to each
employee listed in Section 8.06(c) of the Company Disclosure Letter, the bonus
amounts set forth opposite such employee's names listed in Section 8.06 of the
Company Disclosure
39
Letter.
(d) In the event Buyer or Merger Subsidiary or the Surviving
Corporation or any of their successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary to effectuate the purposes
of this Section 8.06, proper provision shall be made so that the successors and
assigns of Buyer, Merger Subsidiary or the Surviving Corporation, as the case
may be, assume the obligations set forth in this Section 8.06 and none of the
actions described in clauses (i) and (ii) shall be taken until such provision is
made.
SECTION 8.07 CERTAIN LITIGATION. Buyer and Merger Subsidiary
have the right to participate in the defense of any stockholder litigation
against the Company and its officers, directors, employees, representatives and
agents relating to the transactions contemplated by this Agreement. The Company
agrees that it shall not settle any such litigation without the prior written
consent of Buyer, which consent shall not be unreasonably withheld.
SECTION 8.08. RECAPITALIZATION. Each of the Company, Buyer and
Merger Subsidiary agrees to use its best efforts to cause the transactions
contemplated by this Agreement, including the Merger, to be accounted for as a
recapitalization and such accounting treatment to be accepted by their
respective accountants and the SEC, and each of the Company, Buyer and Merger
Subsidiary agrees that it shall take no action that would cause such accounting
treatment not to be obtained in the event the Merger is consummated.
SECTION 8.09. STOP TRANSFER ORDER. The Company shall instruct
the Company's transfer agent that, except as provided in the Stockholders
Agreement, there is a stop transfer order with respect to all of the Shares (as
defined in the Stockholders Agreement) and that the Stockholders Agreement
places limits on the transfer of such Shares.
ARTICLE IX
CONDITIONS TO THE STOCK PURCHASE AND THE MERGER
SECTION 9.01. CONDITIONS TO THE STOCK PURCHASE (a) The
respective obligations of the Company and Buyer to consummate the Stock Purchase
are subject to the satisfaction (or waiver) at or prior to the Stock Purchase
Closing Date of the following conditions:
(i) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Stock Purchase (each party agreeing to use its best efforts to
have any such order reversed or injunction lifted); and
(ii) the conditions to the Offer set forth in Annex I shall
have been satisfied and the Company shall simultaneously with the Stock
Purchase Closing purchase all Shares validly tendered and not withdrawn
pursuant to the Offer.
(b) The obligation of Buyer to consummate the Stock Purchase
are subject to the satisfaction (or waiver) at or prior to the Stock Purchase
Closing Date to each of the following additional conditions:
40
(i) (A) the representations and warranties of the Company set
forth in the first sentence of Section 4.01 and in Sections 4.02, 4.05
and 4.10 of this Agreement shall be true and correct as of the Stock
Purchase Closing Date as though made on such date, (B) the
representations and warranties set forth in this Agreement other than
those contained in the first sentence of Section 4.01 and in Sections
4.02, 4.05 and 4.10 shall be true and correct (without giving effect to
the materiality or material adverse effect limitations contained
therein) except for any breach or breaches which individually or in the
aggregate, do not have, and could not reasonably expected to have, a
Material Adverse Effect; and (C) clauses A and B of this paragraph
shall be limited to the extent that representations and warranties set
forth in this Agreement that address matters only as of a particular
date shall be true and correct in all material respects only as of such
specified date;
(ii) the Company shall have performed or complied in all
material respects with all obligations and agreements, and complied in
all materials respects with covenants, contained in this Agreement to
be performed or complied with by it prior to or on the Stock Purchase
Closing Date;
(iii) the Company shall have delivered a certificate of the
Company, dated as of the Stock Purchase Closing Date, signed by an
executive officer of the Company to evidence satisfaction of the
conditions set forth in Sections 9.01(b)(i) and (ii); and
(iv) all Directors of the Company, to the extent requested by
Buyer, shall have tendered their resignations effective as of the Stock
Purchase Closing and shall have been replaced by nominees acceptable to
Buyer.
(c) The obligation of the Company to effect the Stock Purchase
is also subject to the satisfaction (or waiver) at or prior to the Stock
Purchase Closing Date of each of the following additional conditions:
(i) the representations and warranties of Buyer set forth in
this Agreement shall be true and correct in all material respects on
the Stock Purchase Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of
the Stock Purchase Closing Date, except for representations and
warranties that are made as of a specified date or time which shall be
true and correct in all material respects only as of such specific date
or time;
(ii) Buyer shall have performed in all material respect all
obligations and agreements, and complied in all material respects with
the covenants, contained in this Agreement to be performed or complied
with by it prior to or on the Stock Purchase Closing Date; and
(iii) the Company shall have received certificates of Buyer,
dated as of the Stock Purchase Closing Date, signed by an executive
officer of Buyer to evidence satisfaction of the conditions set forth
in Section 9.01(c)(i) and (ii).
SECTION 9.02 CONDITIONS TO THE MERGER. The respective
obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger
are subject to the satisfaction at or prior to the Merger Closing Date of the
following conditions:
(i) if required by the DGCL and the Certificate of
Incorporation,
41
this Agreement and the transactions contemplated hereby shall
have been adopted by the stockholders of the Company in
accordance therewith;
(ii) any applicable waiting period under the HSR Act relating
to the Merger shall have expired;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Merger (each party agreeing to use its best efforts to have any
such order reversed or injunction lifted);
(iv) the Company shall have accepted for payment Shares
tendered pursuant to the Offer;
(v) Buyer shall have received or be reasonably satisfied that
it will receive all material consents and approvals contemplated by
Section 4.04 in connection with the consummation of the Merger or to
enable the Surviving Corporation to continue to carry on the business
of the Company and the Subsidiaries as presently conducted in all
material respects; and
(vi) Buyer shall have purchased the Buyer Shares.
ARTICLE X
TERMINATION
SECTION 10.01. TERMINATION . This Agreement may be terminated
and the Transactions may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(i) by mutual written consent of the Board of Directors of
each of Company and Buyer;
(ii) by either the Company or Buyer if the Offer Completion
Date shall not have occurred by June 30, 1999 (the "OUTSIDE TERMINATION
DATE"); PROVIDED, HOWEVER, that the right to terminate this Agreement
under this paragraph shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure to meet the date requirements of this
paragraph;
(iii) by either the Company or Buyer, if any judgment,
injunction, order or decree enjoining Buyer or the Company from
consummating the Merger or accepting for payment or paying for Shares
in the Offer is entered by any Governmental Entity and such judgment,
injunction, order or decree shall become final and nonappealable;
(iv) by either the Company or Buyer if the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being
purchased thereunder by the Company as a result of a failure of any of
the conditions to the Offer set forth in ANNEX I to be satisfied or
waived prior to the Expiration Date or any extension thereof;
(v) by the Company at any time prior to the Offer Completion
Date, if Buyer or Merger Subsidiary materially breaches or fails in any
material respect to perform or comply with any of its covenants and
42
agreements contained herein or breaches its representations and
warranties in any material respect which materially adversely affects
(or materially delays) the consummation of the Offer or the other
Transactions, which breach or failure to perform cannot be or has not
been cured within ten days of the receipt of written notice of such
breach by Buyer or Merger Subsidiary from the Company; or
(vi) by Buyer at any time prior to the Offer Completion Date,
if the Company materially breaches or fails in any material respect to
perform or comply with any of its covenants and agreements contained
herein or breaches its representations and warranties in any material
respect, which breach or failure to perform cannot be or has not been
cured within ten days of the receipt of written notice of such breach
by the Company from Buyer;
(vii) by the Company at any time prior to the Offer Completion
Date, pursuant to the second sentence of Section 6.04(b), PROVIDED that
such termination under this clause (vii) shall not be effective until
payment of the fee required by Section 11.04 hereof and PROVIDED,
FURTHER, that this Agreement may not be terminated pursuant to this
clause (vii) until the Expiration Date of the Offer; or
(viii) by Buyer or Merger Subsidiary at any time prior to the
Offer Completion Date, if, (A) the Board of Directors of the Company
shall have (i) withdrawn or modified or changed in a manner adverse to
Buyer its approval or recommendation of this Agreement, the Offer, the
Merger or the other Transactions, (ii) approved or recommended, or
proposed publicly to approve or recommend, a Takeover Proposal, (iii)
caused or authorized the Company or any of its subsidiaries to enter
into a Company Acquisition Agreement, (iv) approved the breach of the
Company's obligations in Section 6.04(b), or (v) resolved or publicly
disclosed any intention to take any of the foregoing actions or (B) the
Advisor shall have withdrawn or modified or changed in a manner adverse
to Buyer its opinion relating to the Merger Consideration.
The party desiring to terminate this Agreement pursuant to clauses (ii), (iii),
(iv), (v), (vi), (vii) or (viii) shall give written notice of such termination
to the other party.
SECTION 10.02. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except that the
agreements contained in Section 11.04 and the Confidentiality Agreement shall
survive the termination hereof and nothing herein shall relieve any party from
liability for any breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given,
if to Buyer or Merger Subsidiary, to:
Carreras, Xxxxxxx & Co., LLC
Terminal Tower
00 Xxxxxx Xxxxxx, 00xx Xxxxx
00
Xxxxxxxxx, Xxxx 00000
Telecopy: 000-000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Telecopy: 216-579-0212
Attention: Xxxxxxx X. Xxxxx, Esq.
if to the Company, to:
Hilite Industries, Inc.
0000 X. Xxxxxxxx
Xxxxxxxxxx, Xxxxx 00000
Telecopy: 000-000-0000
Attention: Xxxxxx X. Xxxxx, President and
Chief Operating Officer
with a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (ii) if given by any other
means, when delivered at the address specified in this Section.
SECTION 11.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement. All covenants and agreements contained herein
which by their terms are to be performed in whole or in part subsequent to the
Effective Time shall survive the Merger in accordance with their terms and shall
be enforceable by the party entitled to the benefit thereof. Nothing contained
in this Section 11.02 shall relieve any party from liability for any breach of
this Agreement.
SECTION 11.03 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Buyer and
Merger Subsidiary or in the case of a waiver, by the party against whom the
waiver is to be effective; PROVIDED that after the adoption of this Agreement by
the stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company or (ii) any of the terms or conditions of this Agreement if such
alteration or change could adversely affect the holders of any shares of capital
stock of the Company.
44
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 11.04. EXPENSES.
(a) Except as otherwise provided in this Section, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense. All costs and expenses related to the
preparation, printing, filing and mailing (as applicable) of the Offer Documents
and all SEC filing fees shall be considered to be costs and expenses of Buyer.
(b) (i) The Company will pay to Buyer an amount equal to
$3,000,000 (the "TERMINATION FEE") in any of the following circumstances:
(A) This Agreement is terminated at such time that
this Agreement is terminable pursuant to Sections 10.01(vii)
or 10.01(viii);
(B) This Agreement is terminated by either Buyer or
the Company pursuant to Section 10.01(ii), and each of the
following items occurs:
(1) at the time of such termination the
Minimum Condition shall not have been satisfied,
(2) at the time of such termination the
Company shall not have the right to terminate this
Agreement pursuant to Section 10.01(v),
(3) prior to such termination, a Takeover
Proposal involving at least 50% of the assets of the
Company and its subsidiaries, taken as a whole, or
50% of any class of equity securities of the Company
(any such Takeover Proposal, a "COMPETING PROPOSAL"),
is (x) publicly disclosed or has been made directly
to stockholders of the Company generally or (y) any
Person (including without limitation the Company or
any of its Subsidiaries) publicly announces an
intention (whether or not conditional) to make such a
Competing Proposal, and
(4) prior to the termination of this
Agreement or within 12 months after the termination
of this Agreement, the Company or a Subsidiary enters
into a Company Acquisition Agreement providing for a
Competing Proposal (any such agreement, a "COMPETING
PROPOSAL AGREEMENT") or the transactions contemplated
by a Competing Proposal are consummated;
(C) This Agreement is terminated by either Buyer or
the Company pursuant to Section 10.01(iv), and each of the
following items occurs:
(1) at the time of such termination the
Minimum Condition shall not have been satisfied,
(2) at the time of such termination the
Company shall not have the right to terminate this
Agreement pursuant to Section 10.01(v),
(3) prior to such termination an event
referred to in Section 11.04(b)(i)(B)(3) (a "TAKEOVER
PROPOSAL EVENT") shall have occurred, and
45
(4) prior to the termination of this
Agreement or within 12 months after the termination
of this Agreement, the Company or a Subsidiary
thereof enters into a Competing Proposal Agreement or
the transactions contemplated by a Competing Proposal
are consummated; or
(D) This Agreement is terminated by Buyer pursuant to Section
10.01(vi), and each of the following shall have occurred:
(1) prior to such termination a Takeover Proposal
Event shall have occurred, and
(2) prior to the termination of this Agreement or
within 12 months after the termination of this Agreement, the
Company or a subsidiary thereof enters into a Competing
Proposal Agreement or the transactions contemplated by a
Competing Proposal are consummated unless, in either case, the
purchaser pursuant to such Competing Proposal Agreement or
otherwise waives the breach (or failure) of the
representation, warranty, covenant or agreement that
constituted the basis for Buyer's termination pursuant to
Section 10.01(vi), so long as the Company's breach or failure
was not intentional.
(ii) If this Agreement is terminated in circumstances
where a Termination Fee is then payable, then in any such case
the Company will promptly, but in no event later than two
Business Days after submission of a request therefor, pay
Buyer up to $1,000,000 of Buyer's documented Expenses.
(iii) If a Termination Fee is payable pursuant to
Section 10.01(b)(i)(B), 10.01(b)(i)(C) or 10.01(b)(i)(D), then
the Company will pay the Termination Fee to Buyer upon the
signing of a Competing Proposal Agreement or, if no Competing
Proposal Agreement is signed, then at the closing (and as a
condition to the closing) of a Competing Proposal.
Notwithstanding any other provision hereof, (A) in no event
may the Company enter into a Competing Proposal Agreement
unless, prior thereto, the Company has paid any amount due
under Section 10.01(b) or which will become due under Section
10.01(b), (B) the Company may not terminate this Agreement
under Sections 6.04(b) or 10.01(vii) unless prior thereto it
has paid all amounts due under Section 10.01(b) to Buyer, (C)
all amounts due in the event that this Agreement is terminated
under Section 10.01(vii) or 10.01(viii) and in circumstances
in which the Company has not entered into a Competing Proposal
Agreement will be payable promptly, but in no event more than
two Business Days after request therefor is made, and (d) all
amounts due under this Section 10.01(b) will be paid on the
date due in immediately available funds wire transferred to
the account designated by the Person entitled to such payment.
(iv) This Section 11.04 will survive any termination
of this Agreement. For purposes of this Agreement, the term
"EXPENSES" means all actual out-of-pocket fees, costs and
other expenses incurred or assumed by Buyer or Merger
Subsidiary or incurred on their behalf in connection with this
Agreement or any of the transactions contemplated hereby,
including, without limitation, in connection with the
negotiation, preparation, execution and performance of this
Agreement, the structuring and financing of the Merger and the
other transactions contemplated hereby, or any commitments or
agreements relating to such financing,
46
including without limitation, fees and expenses payable to all
banks, investment banking firms, other financial institutions
and other Persons and their respective agents and counsel for
arranging, committing to provide or providing any financing
for the Merger and any other transactions contemplated hereby
or structuring, negotiating or advising with respect to such
transactions or financing, and all fees and expenses of
counsel, accountants, experts and computer, environmental,
actuarial, insurance and other consultants to Buyer or Merger
Subsidiary.
(v) The Company acknowledges that the agreements
contained in this Section 11.04 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, Buyer and Merger Subsidiary would not enter
into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 11.04,
and, in order to obtain such payment, Buyer or Merger
Subsidiary commences a suit which results in a judgment
against the Company for a fee set forth in this Section 11.04,
the Company will pay to Buyer and Merger Subsidiary their
documented Expenses (including attorneys' fees and expenses)
in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in effect
on the date such payment was required to be made.
SECTION 11.05. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, PROVIDED that except as provided
in Section 11.02, no party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the consent of the other
parties hereto except that Buyer may transfer or assign, in whole or from time
to time in part, (i) to one or more of its direct or indirect wholly owned
subsidiaries, the right to purchase Shares pursuant to the Offer, but such
transfer or assignment will not relieve Buyer of its obligations under the
Offer or prejudice the rights of tendering stockholders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer or (ii)
its rights under this Agreement as collateral to the Lender, its successors and
assigns, providing the Financing.
SECTION 11.06. GOVERNING LAW. This Agreement shall be
construed in accordance with and governed by the law of the State of Delaware
without regard to conflicts of laws.
SECTION 11.07. 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 herein is not affected in any
manner materially adverse to any party hereto. Upon such determination that any
term or other provisions is invalid, illegal or incapable of being enforced, the
parties hereto 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.
SECTION 11.08 THIRD PARTY BENEFICIARIES. No provision of this
Agreement other than Sections 7.03 and 8.06 and the second sentence of Section
11.02 is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
SECTION 11.09. ENTIRE AGREEMENT. This Agreement (including any
exhibits or schedules hereto), Annex A, the Stockholders Agreement and the
Confidentiality Agreement, which will survive the execution and delivery of this
Agreement, constitute the entire agreement among the parties with respect to the
47
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto, both written and oral. No addition to or
modification of any provision of this Agreement will be binding upon any party
hereto unless made in writing and signed by all parties hereto.
SECTION 11.10. COUNTERPARTS; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 11.11. JURISDICTION. Any legal action or proceeding
with respect to this Agreement or any matters arising out of or in connection
with this Agreement, and any Action for enforcement of any judgment in respect
thereof shall be brought exclusively in the courts of the State of New York or
of the United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Company, Buyer and Merger
Subsidiary each hereby accepts for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts and appellate courts thereof. The Company, Buyer and Merger Subsidiary
irrevocably consent to service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, or by recognized international
express carrier or delivery service, to the Company, Buyer or Merger Subsidiary
at their respective addresses referred to in Section 11.01 hereof. The Company,
Buyer and Merger Subsidiary each hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
otherwise brought in the courts referred to above and hereby further irrevocably
waives and agrees, to the extent permitted by applicable law, not to plead or
claim in any such court that any such action or proceedings brought in any such
court has been brought in an inconvenient forum. Nothing herein shall affect the
right of any party hereto to serve process in any other manner permitted by law.
SECTION 11.12. KNOWLEDGE. The phrase "to the Company's
knowledge" when used throughout this Agreement shall mean the actual knowledge
of the officers of the Company preparing the Company Disclosure Letter after
reasonable inquiry, including, without limitation, the following officers:
Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxx Xxxxxxxx and Xxxxx Xxxxx.
48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
HILITE INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Operating Officer
HILITE HOLDINGS, LLC
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
HILITE MERGECO, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
49
ANNEX I
CONDITIONS TO THE OFFER
-----------------------
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) the Company's rights to extend and amend
the Offer pursuant to the provisions of the Merger Agreement, the Company shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to the Company's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), to pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate the Offer if (i) any
applicable waiting period under the HSR Act has not expired or terminated prior
to the expiration of the Offer, (ii) the Minimum Condition has not been
satisfied, (iii) the Stock Purchase Closing shall not have occurred other than
due to any breach of this Agreement by Buyer or Merger Subsidiary, (iv) the
Company shall not have received the proceeds of the debt portion of the
Financing or otherwise obtained funds sufficient to finance the Transactions
except that the foregoing condition shall not apply in the event such proceeds
are not received due to (x) the failure of the lenders in the Financing and
Buyer to agree on definitive documentation for the Financing or (y) the failure
of Buyer and/or Merger Subsidiary to receive the equity portion of the
Financing, or (v) at any time on or after the date of the Merger Agreement, and
on or before the Expiration Date (whether or not any Shares have heretofore been
accepted for payment or paid for pursuant to the Offer), any of the following
conditions shall exist (each of paragraphs (a) through (g) providing for a
separate and independent condition to the Company's obligations pursuant to the
Offer):
(a) there shall be instituted and pending by any Governmental
Entity (or the staff of any HSR Authority shall have recommended the
commencement of) any action or proceeding which (1) seeks to prohibit, or impose
any material limitations on, Buyer's or Merger Subsidiary's ownership or
operation of all or a material portion of the businesses or assets of the
Company and its Subsidiaries, taken as a whole, or to compel Buyer or any of its
subsidiaries or affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company and its Subsidiaries, taken as
a whole, or of Buyer or its subsidiaries, (2) seeks to impose limitations on the
ability of Buyer or render Buyer unable to accept for payment, payment for or
purchase some or all of the Shares pursuant to the Offer and the Merger or the
consummation of the Offer or the Merger, (3) challenges or seeks to make
illegal, to delay materially or to restrain or prohibit, the making of the
Offer, the consummation of the Merger or the other Transactions, or seeks to
restrain or limit the ability of the Company, or renders the Company unable, to
accept for payment, pay for or purchase some or all of the Shares, to consummate
the Merger or the other Transactions, or seeks material damages relating to the
transactions contemplated by the Offer, the Merger or the other Transactions or
(4) imposes limitations on the ability of Merger Subsidiary or Buyer or its
Affiliates effectively to exercise full rights of ownership of the Shares,
including without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's stockholders;
(b) any action taken, or any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted, issued or
applicable to the Offer, the Merger or the other Transactions by any
Governmental Entity shall be in effect that results in any of the consequences
referred to in clauses (1) through (4) of paragraph (a) above;
(c) the Merger Agreement shall have been terminated in
accordance with its
50
terms;
(d) the commitment for the Financing shall be no longer in
effect due to (i) any general suspension of, or limitation on prices for,
trading in securities on any national securities exchange or the
over-the-counter market for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or interference
with such exchanges not related to market conditions), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (iii) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, (iv) any limitation (whether or not mandatory) by
any United States Governmental Entity on the extension of credit generally by
banks or other financial institutions, (v) a change in general financial, bank
or capital market conditions which materially and adversely affects the ability
of financial institutions in the United States to extend credit or syndicate
loans, (vi) a decline of at least 20% in either the Dow Xxxxx Average of
Industrial Stocks or the Standard & Poor's 500 Index from the close of business
on the date of the Merger Agreement, or (vii) in the case of any of the
foregoing existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof;
(e) since the Balance Sheet Date there shall have occurred any
material adverse change or any event or development that has resulted in or is
reasonably likely to result in, a material adverse change in the business,
properties, assets, condition (financial), results of operations, liabilities or
operations of the Company and its Subsidiaries, taken as a whole;
(f) the Company's Board of Directors (or any committee
thereof) shall have (i) withdrawn, or modified or changed in a manner adverse to
Buyer or Merger Subsidiary (including by amendment of the Schedule 13E-4) its
recommendation of the Offer, the Merger Agreement; the Merger or the other
Transactions; (ii) taken a position inconsistent with its recommendation of the
Offer, the Merger Agreement or the Merger, (iii) approved or recommended any
Takeover Proposal; (iv) taken any action referred to in Section 6.04(b) of the
Merger Agreement that is prohibited thereby, or (v) shall have resolved or
publicly disclosed an intention to do any of the foregoing;
(g) Buyer and the Company shall have agreed that the Company
shall terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder
which in the sole judgment of Buyer or Merger Subsidiary, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments.
If any condition to the Financing shall also be a condition to
the Offer in this Annex I, Buyer shall use the failure to satisfy the condition
set forth in this Annex I as the basis for terminating the Merger Agreement
instead of clause (iii) of the first paragraph of this Annex I.
The parties acknowledge that the foregoing conditions are for
the sole benefit of the Buyer and Merger Subsidiary and that the Company shall
not assert failure of, or waive, any such condition without the prior written
consent of Buyer and that if Buyer elects to waive any such condition to the
Offer, the Company shall cooperate and comply with such election.
51
Exhibit A
CONFIDENTIALITY AGREEMENT
Xxxxxx Xxxxxxxxx Xxxxxx & Co.
First Union Capital Markets Group
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Ladies and Gentlemen:
You have advised us that you are acting on behalf of Hilite Industries,
Inc., a certain publicly traded company ("Neon" or the "Company") in its
consideration of a possible sale of Neon, and you have agreed to discuss with us
the possible purchase of Neon. As a condition to such discussions, you have
required that we agree to keep strictly confidential all information conveyed to
us regarding this matter.
This letter will confirm our agreement with you and Neon to retain in
strict confidence all information (whether oral or written) conveyed to us by
Neon, its agents, or you regarding the Company, unless such information is
publicly available, we can clearly establish was known to us, without any direct
or indirect obligation of confidentiality, prior to your disclosure, or is or
becomes available to us on a nonconfidential basis from a source other than you,
Neon, or its agents, provided that such other source is not bound by a
confidentiality agreement with you or Neon. We will use such information only in
connection with our consideration of whether to purchase Neon and will not
otherwise us it in our business or disclose it to others, except that we shall
have the right to communicate the information to such of our directors,
officers, advisors, and employees (if any) who are required by their duties to
have knowledge thereof, provided that each such person is informed that such
information is strictly confidential and subject to this agreement and agrees
not to disclose or use such information except as provided herein. We hereby
agree to be jointly and severally responsible for any breach of this agreement
by our officers, directors, advisors, and/or employees or any of our
representatives. In the event that we become legally compelled by deposition,
subpoena, or other court or governmental action to disclose any of the
confidential information covered by this agreement, we shall provide Neon with
prompt prior written notice to that effect, and we will cooperate with Neon if
it seeks to obtain a protective order concerning such confidential information.
We agree not to initiate contact, or engage in discussions, with any
employee, customer, or supplier of Neon without the express prior consent of you
or the Company. Unless we purchase Neon, we agree not to hire or solicit for
employment any employees of Neon, without the written consent of the Company,
for a period of two years from the date of this letter.
Until the expiration of two years from the date of this letter, we will not
and will insure that our officers, directors, advisors, and employees will not,
without the prior written approval of the Board of Directors of the Company, (i)
acquire or agree to acquire or make any proposal to acquire directly or
indirectly any securities or property of the Company, or (ii) otherwise act
alone, or in concert with others to seek to control or influence the management,
Board of Directors, or policies of the Company.
We acknowledge that neither Neon nor any of its directors, officers,
employees, stockholders, or agents make any representation as to the accuracy or
completeness of such information and that neither Neon nor any of its directors,
officers, employees, stockholders, or agents shall have any liability to us as a
result of our use of such information.
We also agree that without prior consent of Neon, we and our officers,
directors, advisors, and employees will not disclose to any other person that we
have received such information, that we are in discussions or negotiations with
you and Neon as to a possible purchase of Neon, or that the Board of Directors
of the Company is contemplating a possible sale of Neon.
52
CONFIDENTIALITY AGREEMENT
Page 2
We will advise all of our directors, officers, employees, and other
representatives who are informed of the matters which are the subject of this
letter that U.S. securities laws prohibit any person who has material, nonpublic
information concerning an issuer of publicly held securities from purchasing or
selling such securities.
We acknowledge that Neon reserves the right to reject any or all offers to
acquire the Company. We further acknowledge that the Company reserves the right
to discontinue discussions at any time and to conduct the process for the sale
of the Company as in its sole discretion it shall determine (including without
limitation, negotiating with any prospective purchasers, and entering into a
definitive agreement without prior notice to us or any other person or to change
any procedures relating to such sale without notice to us or any other person).
We shall have no claim against the Company or any of its directors, officers,
representatives, affiliates, or agents arising out of or relating to the sale of
the Company other than as against them as named parties to a definitive
agreement and only in accordance with the express terms and conditions thereof.
We further acknowledge that we acquire no intellectual property rights based on
any information provided to us hereunder and no right under any invention,
patent or patent application based on any information conveyed to us in
accordance with this agreement.
In the event that we do not purchase Neon, we agree to return to you all
financial and other written information provided to us relating to Neon,
including any memoranda, notes, or other writings prepared by us or our
representatives based on such information, together with all copies of such
information in our possession or under our control to which we have access. We
agree that neither Neon nor Xxxxxx Xxxxxxxxx Xxxxxx & Co. shall be obligated to
pay any fees on our behalf to any brokers, finders, or other parties claiming to
represent us in this transaction. Without limiting the generality of the
nondisclosure agreements contained herein above, it is further understood that
we are strictly prohibited by this agreement from acting as a broker or an agent
using any of the confidential information provided to us.
We acknowledge that unauthorized disclosure of such information would cause
substantial and irreparable damage to the business and competitive position of
the Company, and we agree that the Company shall be entitled to injunctive
relief in the event of any breach or threatened breach of the terms of this
letter agreement in addition to such other remedies as may be available at law
or equity. The parties hereto acknowledge that any action or proceeding arising
out of or relating to this letter agreement shall be determined by the United
States District Court for the Northern District of Texas and this agreement
shall be interpreted and construed in its entirety in accordance with the laws
of the State of Delaware.
Name: Xxxxxxx X. Xxxxxxx
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Title: Chief Financial Officer
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Company: Carreras, Xxxxxxx & Co., LLC
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Date: 1/22/99
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