1
Exhibit 1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXX INTERNATIONAL, INC.
HI HOLDINGS INC.
AND
HI MERGER SUBSIDIARY INC.
DATED AS OF MARCH 15, 1999
================================================================================
2
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER 1
Section 1.1. The Offer 1
Section 1.2. Company Action 3
Section 1.3. Board of Directors and Committees;
Section 14(f) 5
ARTICLE 2 THE MERGER 6
Section 2.1. The Merger 6
Section 2.2. Effective Time 6
Section 2.3. Closing of the Merger 6
Section 2.4. Effects of the Merger 6
Section 2.5. Articles of Incorporation and Bylaws 6
Section 2.6. Directors 6
Section 2.7. Officers 7
Section 2.8. Conversion of Shares 7
Section 2.9. Shares of Dissenting Holders 7
Section 2.10. Exchange of Certificates 8
Section 2.11. Company Stock Options; Warrants 9
Section 2.12. Officers 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
Section 3.1. Organization and Qualification; Subsidiaries 11
Section 3.2. Capitalization of the Company and its
Subsidiaries 12
Section 3.3. Authority Relative to this Agreement;
Consents and Approvals 13
Section 3.4. SEC Reports; Financial Statements 13
Section 3.5. Information Supplied 14
Section 3.6. Consents and Approvals; No Violations 14
Section 3.7. No Default 15
Section 3.8. No Undisclosed Liabilities; Absence of Changes 15
Section 3.9. Litigation 16
Section 3.10. Compliance with Applicable Law 16
Section 3.11. Employee Plans 17
Section 3.12. Environmental Laws and Regulations 17
Section 3.13. Intellectual Property; Software 18
Section 3.14. Certain Business Practices 19
Section 3.15. Vote Required 19
Section 3.16. Labor Matters 19
Section 3.17. Insurance 19
Section 3.18. Suppliers and Customers 20
2
3
Section 3.19. Tax Matters 20
Section 3.20. Brokers 21
Section 3.21. Related Party Transactions 21
Section 3.22. Restrictions on Business Activities 21
Section 3.23. Year 2000 Compliance 21
Section 3.24. Real Estate 22
Section 3.25. Conduct of Business 23
Section 3.26. Expenses 23
Section 3.27. Dividends 23
Section 3.28. No Other Representations or Warranties 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION 23
Section 4.1. Organization 24
Section 4.2. Authority Relative to this Agreement 24
Section 4.3. Information Supplied 24
Section 4.4. Consents and Approvals; No Violations 25
Section 4.5. No Default 25
Section 4.6. Availability of Financing; Parent Guarantee 26
Section 4.7. No Prior Activities 26
Section 4.8. Brokers 26
Section 4.9. No Other Representations or Warranties 26
ARTICLE 5 COVENANTS 26
Section 5.1. Conduct of Business of the Company 26
Section 5.2. Other Potential Acquirers 29
Section 5.3. Access to Information 31
Section 5.4. Shareholders Meeting 31
Section 5.5. Additional Agreements; Reasonable Best Efforts 32
Section 5.6. Consents 32
Section 5.7. Public Announcements 32
Section 5.8. Indemnification; Directors' and Officers'
Insurance 32
Section 5.9. Notification of Certain Matters 33
Section 5.10. Employee Matters 33
Section 5.11. SEC Filings 34
Section 5.12. Guarantee of Performance 34
Section 5.13. Notice of Certain Events 34
Section 5.14. Takeover Statutes 34
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER 35
Section 6.1. Conditions to Each Party's Obligations to
Effect the Merger 35
Section 6.2. Conditions to Obligations of Parent and
Acquisition 35
3
4
Section 6.3. Conditions to Obligations of the Company 36
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER 36
Section 7.1. Termination 36
Section 7.2. Effect of Termination 37
Section 7.3. Fees and Expenses 38
Section 7.4. Amendment 39
Section 7.5. Extension; Waiver 39
ARTICLE 8 MISCELLANEOUS 39
Section 8.1. Nonsurvival of Representations and Warranties 39
Section 8.2. Entire Agreement; Assignment 39
Section 8.3. Validity 39
Section 8.4. Notices 40
Section 8.5. Governing Law 40
Section 8.6. Construction; Interpretation 40
Section 8.7. Parties in Interest 41
Section 8.8. Severability 41
Section 8.9. Specific Performance 41
Section 8.10. Counterparts 41
4
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of the 15th day of March, 1999
(this "Agreement"), is made by and among Xxxxxx International, Inc., a
California corporation (the "Company"), HI Holdings Inc., a Delaware corporation
("Parent") and HI Merger Subsidiary Inc., a California corporation and a wholly
owned subsidiary of Parent ("Acquisition").
R E C I T A L S
WHEREAS, the Board of Directors of the Company (the "Company Board") has,
in light of and subject to the terms and conditions set forth herein, (i)
determined that each of the Offer (as defined in the recitals) and the Merger
(as defined in Section 2.1) is fair to, and in the best interests of, its
shareholders and (ii) approved and adopted this Agreement and the transactions
contemplated hereby and resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement by the shareholders of the Company; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition shall
commence a tender offer (the "Offer") to acquire all of the outstanding shares
of common stock of the Company (the "Company Common Stock") at a price equal to
$12.90 per share (such amount, or any greater amount per share paid pursuant to
the Offer, being hereinafter referred to as the "Per Share Amount"), net to the
seller in cash, subject to reduction for any applicable federal back-up
withholding or stock transfer taxes payable by such seller, in accordance with
the terms and subject to the conditions provided herein;
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, Parent and
Acquisition hereby agree as follows:
ARTICLE 1
THE OFFER
Section 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events or conditions set forth in
Annex A shall have occurred and be existing, as promptly as practicable after,
but in no event later than five (5) Business Days after, the public announcement
of the execution of this Agreement by the parties hereto, Acquisition shall
commence (within the meaning of the Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) the Offer for all the outstanding
shares of Company Common Stock at the Per Share Amount. Acquisition shall use
all commercially reasonable efforts to consummate the Offer. Acquisition shall
accept for payment all outstanding shares of Company Common Stock which have
been validly tendered and not withdrawn
5
6
pursuant to the Offer at the earliest time following the expiration of the Offer
that all conditions to the Offer shall have been satisfied or waived by
Acquisition. The obligation of Acquisition to accept for payment, purchase and
pay for shares of Company Common Stock tendered pursuant to the Offer shall be
subject only to the conditions set forth in Annex A and to the further condition
that a number of shares of Company Common Stock which, together with shares of
Company Common Stock then owned directly or indirectly by Acquisition, would
equal at least ninety percent (90%) of the shares of Company Common Stock then
outstanding shall have been validly tendered and not withdrawn prior to the
expiration date of the Offer (the "Minimum Condition"). Acquisition expressly
reserves the right to increase the price per share of Company Common Stock
payable in the Offer or to make any other changes in the terms and conditions of
the Offer (provided that, unless previously approved by the Company in writing,
no change may be made that (i) decreases the Per Share Amount payable in the
Offer, (ii) changes the form of consideration to be paid in the Offer, (iii)
reduces the maximum number of shares of Company Common Stock to be purchased in
the Offer, (iv) imposes conditions to the Offer in addition to those set forth
in Annex A or that broaden the scope of such conditions, (v) amends any other
term of the Offer in a manner adverse to the holders of the Company Common
Stock, (vi) extends the Offer except as provided in Section 1.1(b), or (vii)
amends the Minimum Condition). It is agreed that the conditions set forth in
Annex A are for the sole benefit of Acquisition and may be asserted by
Acquisition regardless of the circumstances giving rise to any such condition
(including any action or inaction by Acquisition) or may be waived by
Acquisition (other than the Minimum Condition) in whole or in part at any time
and from time to time, in its sole discretion, other than the Minimum Condition,
as to which prior written Company approval is required. The failure by
Acquisition at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
(which shall be made in good faith) by Acquisition with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) shall be final and binding on the parties. The Company agrees that
no shares of Company Common Stock held by the Company or any of its Subsidiaries
(as defined in Section 3.1(b)) will be tendered in the Offer. "Business Day"
means any day other than Saturday, Sunday or a federal holiday.
(b) Subject to the terms and conditions hereof, the Offer shall
expire at midnight, New York City time, on the date that is twenty (20) Business
Days after the Offer is commenced; provided, however, that without the consent
of the Company or the Company Board, Acquisition may (i) extend the Offer, if at
the scheduled expiration date of the Offer any of the conditions to the Offer
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required for any rule,
regulation, interpretation or position of the Securities and Exchange Commission
("SEC") or the staff thereof applicable to the Offer or (iii) extend the Offer
for any reason on one or more occasions for an aggregate period of not more than
ten (10) Business Days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence if on such expiration date
there shall not have been tendered that number of shares of Company Common Stock
which, together with shares of Company Common Stock then owned directly or
indirectly by Acquisition, would equal at least ninety percent (90%) of the
shares of Company
6
7
Common Stock. Acquisition agrees that if all of the conditions to the Offer set
forth in Annex A are not satisfied on any scheduled expiration date of the Offer
then, provided that all such conditions are reasonably capable of being
satisfied prior to May 28, 1999, Acquisition shall extend the Offer from time to
time until such conditions are satisfied or waived, provided that Acquisition
shall not be required to extend the Offer beyond June 11, 1999. Subject to the
terms and conditions of the Offer and this Agreement, Acquisition shall accept
for payment, and pay for, all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer that Acquisition becomes obligated to
accept for payment and pay for pursuant to the Offer as promptly as practicable
after the expiration of the Offer.
(c) As soon as practicable after commencement of the Offer,
Acquisition shall file with the SEC a Tender Offer Statement on Schedule 14D-l
with respect to the Offer which will reflect the existence of this Agreement
(together with any supplements or amendments thereto and any other related
documents, including, if required, a Schedule 13E-3, collectively the "Offer
Documents"). The Offer Documents will comply in all material respects with the
provisions of applicable federal securities laws. The information provided and
to be provided by the Company, Parent and Acquisition for use in the Offer
Documents shall not, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Acquisition and the Company each agrees to correct promptly
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,
and Acquisition further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of shares of Company Common Stock, in each case as and to the extent
required by applicable federal securities laws.
Section 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Company Board, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, in all respects and
that such approval constitutes approval of the Offer, this Agreement and the
Merger for purposes of Section 1101 of the California General Corporation Law
(the "CGCL"), and similar provisions of any other similar state statutes that
might be deemed applicable to the transactions contemplated hereby, and (iii)
resolved to recommend that the shareholders of the Company accept the Offer,
tender their shares of Company Common Stock thereunder to Acquisition and
approve and adopt this Agreement and the Merger; provided, however, that such
recommendation may be withdrawn, modified or amended in accordance with the
provisions of Section 5.2 of this Agreement. The Company consents to the
inclusion of such recommendation and approval in the Offer Documents. The
Company further represents and warrants that Xxxxxxxx & Co. Inc. (the "Financial
Advisor") has delivered to the Company Board its written opinion, dated as of
the date
7
8
hereof, that the cash consideration to be received by the shareholders of the
Company pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view. The Company has been authorized by the Financial
Adviser to permit, subject to the prior review and consent by the Financial
Adviser (such consent not to be unreasonably withheld), the inclusion of the
fairness opinion (or a reference thereto) in the Schedule 14D-9 and, if
required, the Schedule 13E-3 (each, as defined in Section 1.2(b)).
(b) Contemporaneously with the commencement of the Offer as provided
in Section 1.1, the Company hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and to promptly mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or Acquisition in writing for inclusion in the Schedule
14D-9. The Company, Parent and Acquisition each agrees to correct promptly any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to the holders of
shares of Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Acquisition and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 before it is
filed with the SEC, and the Company shall consider such comments in good faith.
Notwithstanding anything to the contrary in this Agreement, if the Company Board
withdraws, modifies or amends its recommendation in accordance with the
provisions of Section 5.2 of this Agreement, such withdrawal, modification or
amendment shall not constitute a breach of this Agreement.
(c) In connection with the Offer, the Company will cause its
transfer agent to promptly furnish to Parent and Acquisition mailing labels,
security position listings and any available listing or computer files
containing the names and addresses of the record holders of shares of Company
Common Stock as of a recent date and shall furnish Acquisition with such
additional information and assistance (including, without limitation, updated
lists of shareholders, mailing labels and lists of securities positions) as
Acquisition or its agents may reasonably request in communicating the Offer to
the record and beneficial holders of shares of Company Common Stock. Subject to
the requirements of applicable law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent, Acquisition and their affiliates, associates,
agents and advisors shall hold in confidence the information contained in any
such labels, listings and files and use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information then in their possession.
8
9
Section 1.3. Board of Directors and Committees; Section 14(f).
(a) Promptly upon the purchase by Acquisition of shares of Company
Common Stock pursuant to the Offer and from time to time thereafter, Acquisition
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Company Board as will give Acquisition representation
on the Company Board equal to the product of the number of directors on the
Board (giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of shares of Company Common
Stock so purchased bears to the total number of outstanding shares of Company
Common Stock on a fully diluted basis, and the Company shall use its reasonable
best efforts to, upon request by Acquisition, promptly, at the Company's
election, either increase the size of the Board or secure the resignation of
such number of directors as is necessary to enable Acquisition's designees to be
elected to the Company Board and to cause Acquisition's designees to be so
elected. At such times, the Company will use its reasonable best efforts to
cause persons designated by Acquisition to constitute the same percentage as is
on the Company Board of (i) each committee of the Company Board (other than any
committee of the Company Board established to take action under this Agreement),
(ii) each board of directors of each subsidiary of the Company and (iii) each
committee of each such board.
(b) The Company's obligation to appoint designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.3.
Acquisition will furnish 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 such Section and Rule.
(c) Following the election or appointment of Acquisition's designees
pursuant to this Section 1.3 and prior to the Effective Time, if there shall be
any directors of the Company who were directors as of the date hereof, any
amendment of this Agreement, any termination of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Acquisition or Parent or waiver of any of the
Company's rights hereunder will require the concurrence of a majority of such
directors.
ARTICLE 2
THE MERGER
Section 2.1. The Merger. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance with
the CGCL, Acquisition shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"), and the separate corporate existence
of Acquisition shall cease.
Section 2.2. Effective Time. Subject to the terms and conditions set forth
in this
9
10
Agreement, on the Closing Date (as defined in Section 2.3) or as soon thereafter
as is practicable, the Surviving Corporation shall file a copy of this Agreement
and an officers' certificate of each constituent corporation with the Secretary
of State of the State of California for filing pursuant to the CGCL, at which
time the Merger shall become effective (the time the Merger becomes effective
being referred to herein as the "Effective Time").
Section 2.3. Closing of the Merger. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 6 (the "Closing Date"), at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP,
000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, unless another time, date
or place is agreed to in writing by the parties.
Section 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the CGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.5. Articles of Incorporation and Bylaws. The Articles of
Incorporation of Acquisition in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Acquisition in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
Section 2.7. Officers. The officers of Acquisition at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
Section 2.8. Conversion of Shares.
(a) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (individually a "Share"
and, collectively, the "Shares") (other than (i) Shares held by the Company or
any subsidiary of the Company, (ii) Shares held by Parent, Acquisition or any
other subsidiary of Parent and (iii) Company Dissenting Shares (as defined in
Section 2.9(a), collectively the "Excluded Shares")) shall, by virtue of the
Merger and without any action on the part of Parent, Acquisition, the Company or
the holder thereof, be canceled and extinguished and be converted into and shall
become the right to receive a cash payment per Share, without interest, equal to
the Per Share Amount (the
10
11
"Merger Consideration") upon the surrender of the certificate representing such
Share. From and after the Effective Time, the holders of certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided for herein or by applicable law.
(b) At the Effective Time, each issued and outstanding share of the
common stock, par value $0.01 per share, of Acquisition shall be converted into
one share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(c) At the Effective Time, each Share held by the Company as
treasury stock or held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, Acquisition,
the Company or the holder thereof, be canceled, retired and cease to exist, and
no consideration shall be delivered with respect thereto.
Section 2.9. Shares of Dissenting Holders.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which dissenters' rights, if
any, are granted by reason of the Merger under the CGCL and who does not vote in
favor of the Merger and who otherwise complies with the CGCL ("Company
Dissenting Shares") shall not be entitled to receive any Merger Consideration
pursuant to Section 2.8(a), unless such holder fails to perfect, effectively
withdraws or loses his or her right to dissent from the Merger under the CGCL.
If any such holder so fails to perfect, effectively withdraws or loses his or
her dissenters' rights under the CGCL, each Company Dissenting Share of such
holder shall thereupon be deemed to have been converted, as of the Effective
Time, into the right to receive the Per Share Amount pursuant to Section 2.8(a).
(b) Any payments relating to Company Dissenting Shares shall be made
solely by the Surviving Corporation, and no funds or other property have been or
will be provided by Acquisition, Parent or any of Parent's other direct or
indirect subsidiaries for such payment, nor shall the Company make any payment
with respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Acquisition prompt notice of any demands
received by the Company for the payment of fair value for shares, and
Acquisition shall have the right to direct all negotiations and proceedings with
respect to such demands.
Section 2.10. Exchange of Certificates.
(a) American Stock Transfer or another bank or trust company
designated by Parent and reasonably acceptable to the Company shall act as the
exchange agent (in such capacity, the "Exchange Agent") for the benefit of the
holders of Shares for the exchange of a certificate or certificates which
immediately prior to the Effective Time represented Shares (the "Certificates")
that were converted into the right to receive the Per Share Amount pursuant to
Section 2.8(a), all in accordance with this Article 2. At the Effective Time,
Parent shall deposit,
11
12
or shall cause to be deposited, with the Exchange Agent, for the benefit of the
holders of Shares, cash in U.S. dollars in an amount equal to the Merger
Consideration multiplied by the aggregate outstanding Shares (other than the
Excluded Shares) to be paid pursuant to Section 2.8(a).
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Certificates: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for a cash payment of the proper Merger Consideration pursuant to Section
2.8(a). Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent and Acquisition,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor by check an amount
equal to (A) the Per Share Amount, multiplied by (B) the number of Shares
represented by such Certificate, which such holder has the right to receive
pursuant to the provisions of this Article 2, and the Certificate so surrendered
shall forthwith be canceled. No interest shall be paid or accrued on any Merger
Consideration upon the surrender of any Certificates. In the event of a transfer
of ownership of Shares which is not registered in the transfer records of the
Company, payment of the proper Merger Consideration may be paid to a transferee
if the Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer or other taxes required as a
result of such payment to a Person other than the registered holder of such
shares have been paid. Until surrendered and exchanged as contemplated by this
Section 2.10, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender an amount equal
to (A) the Per Share Amount, multiplied by (B) the number of Shares represented
by such Certificate, as contemplated by this Section 2.10.
(c) In the event that any Certificate shall have been lost, stolen
or destroyed, the Exchange Agent shall pay, upon the making of an affidavit of
that fact by the holder thereof in form and substance reasonably acceptable to
Parent, the proper Merger Consideration as may be required pursuant to this
Section 2.10; provided, however, that Parent may, in its discretion, require the
delivery of a suitable bond and/or indemnity.
(d) The Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares; subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
this Agreement, or prior to the date hereof, and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.
12
13
(e) Any portion of the Merger Consideration which remains
undistributed to the shareholders of the Company for six months after the
Effective Time shall be delivered to Parent, upon demand, and any shareholders
of the Company who have not theretofore complied with this Article 2 shall
thereafter look only to Parent for payment of their claim for any Merger
Consideration.
(f) Notwithstanding Section 2.11(e), neither Parent nor the Company
shall be liable to any holder of Shares for any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Any amounts remaining unclaimed by holders of Shares one year
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
Parent free and clear of any claim or interest of any Person previously entitled
thereto.
(h) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.10(a) to pay for shares for which
dissenters' rights have been perfected shall be returned to the Parent upon
demand.
Section 2.11. Company Stock Options; Warrants.
(a) At the Effective Time, each outstanding, vested and exercisable
option to purchase shares of Company Common Stock (including those options that
will become exercisable upon a change in control of the Company) (a "Company
Stock Option" or collectively "Company Stock Options") issued pursuant to the
1989 Incentive Stock Option Plan, the 1995 Incentive Stock Option Plan, the 1995
Formula Stock Option Plan, the 1998 Long-Term Performance Incentive Plan or the
Non-Qualified Stock Option Plan of the Company (collectively the "Company
Plans") or issued outside the Company Plans via special grants by the Company's
Stock Option Committee to certain employees shall be converted into and shall
become the right to receive a cash payment per Company Stock Option, without
interest, determined by multiplying (i) the excess, if any, of the Per Share
Amount over the applicable per share exercise price of such Company Stock Option
by (ii) the number of shares of Company Common Stock underlying the Company
Stock Options immediately prior to the Effective Time; provided that Parent and
Acquisition may, with the consent of the option holder, treat such options
differently. At the Effective Time, all outstanding options to purchase shares
of Company Common Stock (including those options that are not exercisable at the
time of the Merger) shall be canceled and be of no further force or effect
except for the right to receive cash to the extent provided in this Section
2.11. Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of any Company Plan) that are
necessary to give effect to the transactions contemplated by this Section 2.11.
(b) At the Effective Time, each outstanding and exercisable warrant
that entitles the holder to purchase shares of Company Common Stock, (a
"Warrant" or collectively "Warrants") sold pursuant to Company's initial public
offering of its common stock shall be converted into and shall become the right
to receive a cash payment per Warrant, without
13
14
interest, determined by multiplying (i) the excess, if any, of the Per Share
Amount over the applicable per share exercise price of such Warrant by (ii) the
number of shares of Company Common Stock underlying the Warrants immediately
prior to the Effective Time. At the Effective Time, all outstanding Warrants
shall be canceled and be of no further force or effect except for the right to
receive cash to the extent provided in this Section 2.11. Prior to the Effective
Time, the Company shall take all actions that are necessary to give effect to
the transactions contemplated by this Section 2.11.
(c) As soon as practicable after the Effective Time (but no later
than thirty (30) days following the Effective Time), Parent shall establish a
procedure to effect the surrender of Company Stock Options and Warrants, as the
case may be, in exchange for the cash payment to which the holder of a Company
Stock Option or Warrant shall be entitled under Section 2.11(a) or (b), and,
upon surrender of such Company Stock Option or Warrant, Parent shall pay to the
holder thereof in cash the amount, if any, to which such holder shall be
entitled thereunder.
Section 2.12. Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Acquisition or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Acquisition
shall be authorized to execute and deliver, in the name and on behalf of
Acquisition or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Acquisition or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition as
follows:
Section 3.1. Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as presently conducted.
(b) Except as set forth on Section 3.1(b) of the Disclosure Schedule
or as disclosed in filings with the SEC made prior to the date hereof and since
the filing of the Company's most recent Annual Report on Form 10-K (the "Recent
SEC Reports"), the Company has no equity interests in any corporations,
partnerships, limited liability companies, trusts or
14
15
similar business entities. Each of the subsidiaries listed on Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1998
(each a "Subsidiary" and collectively "Subsidiaries") is a corporation or a
limited partnership, as the case may be, duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of its incorporation
or organization and has all requisite corporate or other power and authority to
own, lease and operate its respective properties and to carry on its respective
businesses as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority, both
individually and in the aggregate, would not have a Company Material Adverse
Effect (as defined below). When used in connection with the Company or its
Subsidiaries, the term "Company Material Adverse Effect" means a material
adverse effect on the financial condition, properties, business or results of
operations of the Company and its Subsidiaries taken as a whole, it being
understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Company Material
Adverse Effect (i) a change in the market price or trading volume of the Company
Common Stock, (ii) a failure by the Company to meet the revenue or earnings
predictions of equity analysts for any period ending (or for which earnings are
released) on or after the date of this Agreement and prior to the Effective
Date, (iii) conditions affecting the U.S. economy as whole, or (iv) conditions
affecting the worldwide industrial equipment market.
(c) Each of the Company and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have, individually or in the aggregate, a Company Material
Adverse Effect.
(d) The Company has heretofore delivered to Acquisition or Parent
accurate and complete copies of the Articles of Incorporation and Bylaws, each
as amended to date and currently in effect, of the Company.
Section 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Class A common stock, of which, as of March 10, 1999,
4,772,205 shares were issued and outstanding, 40,000 shares of Class B common
stock, all of which, as of March 10, 1999, were issued and outstanding and
2,000,000 shares of preferred stock, no shares of which are issued or
outstanding (collectively the "Company Common Stock"). All of the shares of
Company Common Stock have been validly issued, and are fully paid, nonassessable
and free of preemptive rights. As of March 10, 1999, 834,640 shares of Company
Common Stock were reserved for issuance and issuable upon, or otherwise
deliverable in connection with, the exercise of outstanding Company Stock
Options. Since March 10, 1999, no shares of the Company's capital stock have
been issued other than pursuant to Company Stock Options already in existence on
such date, and, since March 10, 1999, no stock options have been granted. As of
March 10, 1999, 75,000 shares of Company Common Stock were reserved for issuance
and issuable upon, or otherwise deliverable in connection with, the exercise of
outstanding Warrants.
15
16
Since March 10, 1999, no shares of the Company's capital stock have been issued
other than pursuant to Warrants already in existence on such date, and, since
March 10, 1999, no warrants have been issued. Section 3.2(a) of the Disclosure
Schedule sets forth the outstanding Company Stock Options and Warrants. Except
as set forth above, there are outstanding (i) no shares of capital stock or
other voting securities of the Company, (ii) no securities of the Company or its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options or other rights to acquire
from the Company or its Subsidiaries, and no obligations of the Company or its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or its Subsidiaries or other similar rights (collectively
"Company Securities"). There are no outstanding obligations of the Company or
its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
(b) Except as set forth on Schedule 3.2(b) of the disclosure
schedule delivered by the Company to Parent concurrently herewith (the
"Disclosure Schedule"), or as publicly disclosed by the Company, all of the
issued and outstanding shares of capital stock of each Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable, and are
owned by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its Subsidiaries
issued and outstanding that are convertible into or exchangeable for, no options
or other rights to acquire from the Company or its Subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any capital stock
or other ownership interests in, or any other securities of, any Subsidiary.
There are no outstanding contractual obligations of the Company or its
Subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any Subsidiary. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, claim, security
interest or encumbrance of any kind in respect of such asset.
Section 3.3. Authority Relative to this Agreement; Consents and Approvals.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board, and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Company Common Stock). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) The Company Board has duly and validly approved, and taken all
16
17
corporate actions required to be taken by the Company Board for the consummation
of, the transactions, including the Offer and the Merger, contemplated hereby
and resolved to recommend that the shareholders of the Company approve and adopt
this Agreement; provided, however, that such approval and recommendation may be
withdrawn, modified or amended in accordance with the provisions of Section 5.2
of this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents
with the SEC since May 30, 1996 (the "SEC Reports"), each of which has complied
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. The Company
has delivered to Acquisition or Parent, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Reports on Form 10-K for each
of the fiscal years ended May 30, 1997 and 1998, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether annual or
special) held since May 30, 1997, (iii) its Quarterly Reports on Form 10-Q for
the quarters ended August 28, 1998 and November 30, 1998 and (iv) all other
reports or registration statements filed by the Company with the SEC since May
30, 1997. None of such forms, reports, registration statements or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and its
Subsidiaries included in the Annual Reports on Form 10-K referred to in the
second sentence of this Section 3.4(a) and the unaudited consolidated interim
financial statements of the Company and its Subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 (A)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (B) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, except as may be indicated in the notes thereto,
and (C) fairly present the consolidated financial position of the Company and
its Subsidiaries as of the dates thereof and their consolidated results of
operations, financial condition, cash flow and changes in financial position for
the periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments).
(b) The Company has heretofore made available to Acquisition or
Parent a complete and correct copy of any amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Schedule 13E-3 or the Proxy Statement or provided by the
Company in the Schedule 14D-9 will,
17
18
at the respective times that the Offer Documents, the Proxy Statement, the
Schedule 13E-3 and the Schedule 14D-9 or any amendments or supplements thereto
are filed with the SEC and are first published or sent or given to holders of
Shares, 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.
Section 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Xxxx Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the filing and recordation of this
Agreement and officers' certificates of each constituent corporation with the
Secretary of State of the State of California as required by the CGCL, no filing
with or notice to, and no permit, authorization, consent or approval of, or
order of, any court or tribunal or administrative, governmental or regulatory
body, agency or authority (a "Governmental Entity") is necessary for the
execution and delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Company Material Adverse Effect.
Neither the execution, delivery and performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws (or similar governing documents) of the Company or any
of its Subsidiaries, (b) except as set forth on Schedule 3.6 of the Disclosure
Schedule, result in a violation or breach of, or cause acceleration, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound, or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation of
any court, or any governmental agency or body having jurisdiction over the
Company or any of its Subsidiaries or any of their respective properties or
assets, except in the case of (b) or (c) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 3.7. No Default. Except as set forth on Schedule 3.7 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, none of the
Company or its Subsidiaries is in default, in conflict with or violation (and no
event has occurred which, with notice or the lapse of time or both, would
constitute a default or violation) of any term, condition or provision of (a)
its Articles of Incorporation or Bylaws (or similar governing documents), (b)
any note, bond, mortgage, indenture, lease, license, permit, franchise,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or affected or (c) any order, writ,
injunction, decree, law, judgment, statute, rule or regulation applicable to the
Company, its Subsidiaries or any of their respective properties or assets,
except in the case of (b) or (c) for violations, breaches or defaults that would
not have, individually or in the aggregate, a Company Material Adverse Effect.
18
19
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as set
forth on Schedule 3.8 of the Disclosure Schedule or as disclosed in the Recent
SEC Reports, as of November 30, 1998, none of the Company or its Subsidiaries
has any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) or which would have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth on Schedule 3.8 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, since November 30, 1998,
none of the Company or its Subsidiaries has incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, which would have, and
there have been no events, changes or effects with respect to the Company or its
Subsidiaries having, individually or in the aggregate, a Company Material
Adverse Effect. Except as set forth on Schedule 3.8 and Schedule 5.1 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, since November
30, 1998, the Company and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice; there has not been any event,
occurrence or development or state of circumstances or facts as described in
Sections 5.1(a) through 5.1(m) and, as of the date hereof and at the Closing
Date, there has not been any event or occurrence of any condition that has had
or would reasonably be likely to result in a Company Material Adverse Effect.
The consummation of the transactions contemplated hereby will not give rise to
any liability of any nature, whether or not accrued, contingent or otherwise,
except as set forth herein.
Section 3.9. Litigation. Except as disclosed in the Recent SEC Reports,
there is no suit, litigation, arbitration, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of their respective properties,
assets or business before any Governmental Entity which could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or would prevent or substantially delay the consummation of the
transactions contemplated by this Agreement. Except as disclosed in the Recent
SEC Reports, none of the Company or its Subsidiaries is subject to any
outstanding order, writ, injunction or decree that would have, individually or
in the aggregate, a Company Material Adverse Effect or would prevent or delay
the consummation of the transactions contemplated hereby. There are no actions,
suits or proceedings related to discrimination on the basis of age, sex,
religion, race or physical or mental disability, and no labor disturbance by the
employees of the Company or any Subsidiary exists or, to the knowledge of the
Company or any Subsidiary, is imminent which, in each case could reasonably be
expected to have a Company Material Adverse Effect.
Section 3.10. Compliance with Applicable Law. Except as disclosed in the
Recent SEC Reports, the Company and its Subsidiaries hold all permits, licenses,
consents, authorizations, certificates, variances, exemptions, orders and
approvals of and from all, and has made all declarations and filings with
Governmental Entities necessary for the lawful conduct of their respective
businesses and to own, lease, license and use its respective properties and
assets (the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of the Company Permits,
except where the failure so to comply would not have a
19
20
Company Material Adverse Effect. Except as disclosed in the Recent SEC Reports,
the activities or businesses of the Company and its Subsidiaries are not being
conducted in violation of or in conflict with any law, rule, order, judgment,
decree, ordinance or regulation of the United States, any foreign country, any
state, county or locality, or of any Governmental Entity of the United States,
any country, any state, county or locality or of any foreign jurisdiction,
except that no representation or warranty is made in this Section 3.10 with
respect to Environmental Laws (as defined in Section 3.12) and except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not have, individually or in the aggregate, a
Company Material Adverse Effect. Except as disclosed in the Recent SEC Reports,
no investigation or review by any Governmental Entity of the United States, any
country, any state, county or locality or of any foreign jurisdiction with
respect to the Company or its Subsidiaries is pending or, after reasonably
inquiry, to the knowledge of the Company and any Subsidiary, threatened, nor,
after reasonable inquiry, to the knowledge of the Company and any Subsidiary,
has any Governmental Entity of the United States, any country, any state, county
or locality or of any foreign jurisdiction indicated an intention to conduct the
same, other than, in each case, those which the Company reasonably believes will
not have a Company Material Adverse Effect.
Section 3.11. Employee Plans. Except as set forth on Schedule 3.11 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, there are no
employee benefit plans (including without limitation, retirement, savings,
thrift, deferred compensation, severance, stock ownership, stock purchase, stock
option, performance, bonus, incentive, vacation or holiday pay, travel, fringe
benefit, hospitalization or other medical, disability, life or other insurance,
and any other employee benefit policy, trust, understanding or arrangement of
any kind) maintained or contributed to by the Company or its Subsidiaries or
with respect to which the Company or its Subsidiaries has any actual or
potential liability (the "Employee Plans") except for liability that would not
have, individually or in the aggregate, a Company Material Adverse Effect. The
Employee Plans are in compliance with applicable law, including without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, except for instances of non-compliance that would not
have, individually or in the aggregate, a Company Material Adverse Effect. None
of the Employee Plans are subject to Title IV of ERISA nor provide for medical
or life insurance benefits to retired or former employees of the Company or any
Subsidiary (other than as required under Code Section 4980B, or similar state
law). None of the Employee Plans have any material unfunded liabilities. Except
as set forth on Schedule 3.11 of the Disclosure Schedule or as disclosed in the
Recent SEC Reports, none of the Employee Plans obligates the Company to pay any
separation, severance, termination, bonus or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership. There are no pending or, to the knowledge of the
Company, threatened actions, suits, investigations or claims with respect to any
Employee Plan, and the Company has no knowledge of any facts that could result
in any actions, suits, investigations or claims that could reasonably be
expected to result in a Company Material Effect.
Section 3.12. Environmental Laws and Regulations.
(a) Except as set forth on Schedule 3.12 of the Disclosure Schedule
or as
20
21
disclosed in the Recent SEC Reports, (i) each of the Company and its
Subsidiaries is in compliance with all applicable federal, state and local laws
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively "Environmental Laws"),
except for non-compliance that would not have a Company Material Adverse Effect,
which compliance includes, but is not limited to, the possession by the Company
and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof, (ii) since November 30, 1998, none of the
Company or its Subsidiaries has received written notice of, or, to the best
knowledge of the Company, is the subject of, any material action, cause of
action, claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim"), and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance, or give rise to material Environmental Claims, in the
future.
(b) Except as disclosed in the Recent SEC Reports, there are no
Environmental Claims which would have a Company Material Adverse Effect that are
pending or, to the best knowledge of the Company, threatened against the Company
or its Subsidiaries or, to the best knowledge of the Company, against any person
or entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
Section 3.13. Intellectual Property; Software.
(a) Each of the Company and its Subsidiaries owns, or possesses
valid and enforceable licenses to use, all existing United States and foreign
patents, trademarks, trade names, service marks, trade dress, Internet domain
names, together with all the goodwill associated therewith, copyrights, computer
software, data, databases and documentation thereof, trade secrets, know-how and
other confidential information, including any applications and registrations of
any of the foregoing necessary for the operation of the business of the Company
and its Subsidiaries as now conducted and as currently proposed to be conducted
(the "Company Intellectual Property Rights"), except where the failure to own or
possess valid rights to use such Company Intellectual Property Rights would not
have a Company Material Adverse Effect. The Company patents are set forth on
Section 3.13(a) of the Company Disclosure Schedule.
(b) Except for any of the following which would not reasonably be
expected to have a Company Material Adverse Effect,
(i) except as set forth on Schedule 3.13(b) of the Disclosure
Schedule, the validity, enforceability and use of the Company Intellectual
Property Rights and the title thereto of the Company or any Subsidiary as the
case may be is not being questioned in any litigation or other proceeding to
which the Company or any Subsidiary is a party, nor has any claim of
infringement or misappropriation (including, without limitation, any demand or
request that the Company or any Subsidiary license any intellectual property
rights from a third party)
21
22
been alleged against the Company or any Subsidiary by any third party in
connection with such third party's intellectual property rights,
(ii) except as set forth on Schedule 3.13(b) of the Disclosure
Schedule, to the knowledge of the Company and its Subsidiaries, no third party
is infringing or misappropriating the Company Intellectual Property Rights, and
(iii) except as set forth on Schedule 3.13(b) of the
Disclosure Schedule, the conduct of the business of the Company and its
Subsidiaries as now conducted does not, to the knowledge of the Company,
infringe, misappropriate or otherwise conflict with any valid patents,
trademarks, trade names, service marks, copyrights or other intellectual
property rights of others. The consummation of the transactions completed hereby
will not result in the loss or impairment of any Company Intellectual Property
Rights.
Section 3.14. Certain Business Practices. To the knowledge of the Company
after due inquiry, none of the Company, any of its Subsidiaries or any
directors, officers, agents or employees of the Company or any of its
Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 3.15. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Class A common stock and a majority of the
holders of the outstanding shares of Class B common stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the merger contemplated by this Agreement.
Section 3.16. Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its Subsidiaries the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor union or labor organization, nor is there pending or, to the knowledge of
the Company, threatened any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its Subsidiaries.
Section 3.17. Insurance. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have complied
in all material respects with provisions of each Insurance Policy under which it
is the insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to the Company's
knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the
22
23
Insurance Policies have been filed in a timely fashion.
Section 3.18. Suppliers and Customers. The documents and information
supplied by the Company to Parent and Acquisition in connection with this
Agreement with respect to the relationships and volumes of business done with
significant suppliers and customers and with respect to inventory aging and
reserves with respect thereto was accurate in all material respects. The Company
is not aware of any circumstances that would indicate that any significant
supplier or customer intends to materially alter its relationship with the
Company as a result of the Company's entering into this Agreement.
Section 3.19. Tax Matters.
(a) The Company and its Subsidiaries have accurately prepared and duly
filed with the appropriate federal, state, local and foreign taxing authorities
all tax returns, information returns and reports required to be filed with
respect to the Company and its Subsidiaries and have paid in full or made
adequate provision for the payment of all Taxes (as defined below). Neither the
Company nor any of its Subsidiaries is delinquent in the payment of any Taxes.
As used herein, the term "Taxes" means all federal, state, local and foreign
taxes, including, without limitation, income, profits, franchise, employment,
transfer, withholding, property, excise, sales and use taxes (including interest
and penalties thereon and additions thereto).
(b) Except as set forth on Section 3.19(b) of the Disclosure Schedule, no
claim has ever been made by an authority in a jurisdiction where the Company or
any Subsidiary does not file tax returns that the Company so not filing is or
may be subject to taxation by that jurisdiction.
(c) There are no security interests on any of the assets of the Company or
any Subsidiary that arose in connection with any failure (or alleged failure) to
pay any Tax.
(d) There is no dispute or claim concerning any Tax liability of the
Company or any Subsidiary either (i) claimed or raised by any authority in
writing or (ii) as to which any of the employees responsible for Tax matters of
the Company or any Subsidiary has knowledge based upon personal contact with any
agent of such authority. Schedule 3.19(d) sets forth those tax returns that
currently are the subject of audit.
(e) None of the Company or any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(f) None of the Company nor any Subsidiary has filed a consent under Code
ss.341(f) concerning collapsible corporations. Except as set forth on Section
3.19(f) of the Disclosure Schedule, none of the Company nor any Subsidiary has
made any payments, is obligated to make payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code ss.280G or Code ss.162(m). None of the Company
nor any Subsidiary has been a United States real property holding corporation
within the meaning of Code ss.897(c)(2) during the applicable period specified
in Code
23
24
ss.897(c)(1)(A)(ii).
(g) None of the Company nor any Subsidiary has any liability for the Taxes
of any Person other than the Company or any Subsidiary (i) under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law), or (ii)
by contract.
(h) None of the Company nor any Subsidiary owns an interest in an entity
either treated as a partnership or whose separate existence is ignored for
federal income tax purposes.
Section 3.20. Brokers. No broker, finder or investment banker (other than
the Financial Advisor pursuant to an arrangement (that may not be amended or
modified without the prior written consent of Parent) that has been disclosed to
Parent and Acquisition prior to the date hereof) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any Subsidiary.
Section 3.21. Related Party Transactions. Since May 30, 1998, neither the
Company nor any officer or director of the Company has engaged in any
transactions required to be disclosed by the Company in its SEC Reports pursuant
to Item 404 of Regulation S-K promulgated under the Exchange Act, except as have
been publicly disclosed by the Company or disclosed herein.
Section 3.22. Restrictions on Business Activities. There is no judgment,
injunction, order or decree binding upon the Company or any of its Subsidiaries,
or, to the Company's knowledge, threatened, which has, or could reasonably be
expected to have, the effect of prohibiting or materially impairing any business
practice of the Company or any of its Subsidiaries, any acquisition of property
by the Company or any of its Subsidiaries or the conduct of business by the
Company or any of its Subsidiaries as currently conducted.
Section 3.23. Year 2000 Compliance. The Company and each of its
Subsidiaries are conducting a thorough inventory and assessment of the software,
hardware, databases and embedded control systems (microprocessor controlled,
robotic or other device) (collectively "Systems") used by the Company and its
Subsidiaries in connection with their business or in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company or its Subsidiaries, in order to determine which parts
of the Systems are not Year 2000 Compliant (as defined below) and to estimate
the cost of rendering such Systems Year 2000 Compliant prior to December 31,
1999 or such earlier date on which the Computer Systems may shut down or may
produce incorrect calculations or otherwise malfunction without becoming totally
inoperable. Based on the above inventory and assessment, the estimated total
cost of rendering the Systems Year 2000 Compliant is $200,000, which expenditure
has been included in the budget adopted by the Company. Year 2000 Compliant
means that the Systems will operate to accurately process date data (including
but not limited to calculating, comparing and sequencing) from, into and between
year 1999 and 2000, including leap-year calculations. To the knowledge of the
Company, after due inquiry, neither the Company nor any of its Subsidiaries will
incur material expenses arising from or relating to the failure of any of its
Systems as a result of the advent of the year 2000, the advent of the
twenty-
24
25
first century or the transition from the twentieth century through the year
2000. Neither the Company nor any of its Subsidiaries has made any other
representations or warranties regarding the ability of any product or service
sold, licensed, rendered, or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses to operate without
malfunction, to operate without ceasing to function, to generate correct data or
to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
Section 3.24. Real Estate.
(a) Attached as Schedule 3.24(a) is the address and legal description of
each parcel of real property owned by the Company or any Subsidiary (the "Owned
Real Property"). The Company or its applicable Subsidiary has good and
marketable title in and to all of the Owned Real Property subject to no liens,
encroachments, encumbrances or other defects in title (collectively, "Liens"),
except as described on such Schedule.
(b) Attached as Schedule 3.24(b) is a list of all leases, subleases and
other occupancy agreements, including all amendments, extensions and other
modifications (the "Leases") for real property (the "Leased Real Property"; the
"Owned Real Property" and the "Leased Real Property" collectively the "Real
Property") to which the Company or any Subsidiary is a party. The Company or its
applicable Subsidiary has a good and valid leasehold interest in and to all of
the Leased Real Property, subject to no Liens except as described in such
Schedule. Each Lease is in full force and effect and is enforceable in
accordance with its terms. Except as disclosed on Schedule 3.24(b), there exists
no default or condition which, with the giving of notice, the passage of time or
both, could become a default under any Lease. The Company has previously
delivered to Parent true, complete, and correct copies of all the Leases.
(c) The Real Property constitutes all of the real property owned, leased,
occupied or otherwise used in connection with the business of the Company and
its Subsidiaries. Except as disclosed on Schedule 3.24(c), other than the
Company and the Subsidiaries, there are no parties in possession or parties
having any current or future right to occupy any of the Real Property. The Real
Property is in good condition and repair and is sufficient and appropriate for
the conduct of the business of the Company and the Subsidiaries. The Real
Property and all plants, buildings and improvements located thereon conform to
all applicable building, zoning and other laws, ordinances, rules and
regulations. All permits, licenses and other approvals necessary to the current
occupancy and use of the Real Property have been obtained, are in full force and
effect and have not been violated, except for violations that, individually or
in the aggregate, would not have a Company Material Adverse Effect. There exists
no violation of any covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Property (except for violations that,
individually or in the aggregate, would not have a Company Material Adverse
Effect). All improvements located on the Real Property have direct access to a
public road adjoining such Real Property. No such improvements or accessways
encroach on land not included in the Real Property and no such improvement is
dependent for its access, operation or utility on any land, building or other
improvement not included in the Real Property. There is no
25
26
pending or, to the knowledge of the Company and its Subsidiaries, any threatened
condemnations proceeding affecting any portion of the Real Property. Except as
disclosed on Schedule 3.24(c), there are no outstanding options or rights of
first refusal with respect to the purchase or use of any of the Real Property,
any portion thereof or interest therein. Except as disclosed on Schedule
3.24(c), neither the Company nor any Subsidiary is obligated to purchase or
lease any real property.
Section 3.25. Conduct of Business. Since November 30, 1998, the Company
has conducted its operations in the ordinary course of business.
Section 3.26. Expenses. Section 3.26 of the Company Disclosure Schedule
sets forth the Company's estimated expenses incurred in connection with this
Agreement and the transaction contemplated hereby. Except as set forth in
Section 3.26 of the Disclosure Schedule, the Company has not incurred any
expenses or liabilities in connection with the transactions contemplated by this
Agreement or outside the ordinary course of business.
Section 3.27. Dividends. On December 16, 1998, the Company declared a
dividend of $0.07 per share, payable on January 15, 1999 to shareholders of
record as of January 4, 1999. The Company has not declared any dividends since
December 16, 1998.
Section 3.28. No Other Representations or Warranties. No representations
or warranties have been made by or on behalf of the Company or any of its
Subsidiaries in connection with the Merger and the transactions contemplated by
this Agreement other than those expressly set forth in this Article 3. Without
limiting the generality of the foregoing, no representations or warranties are
being made with respect to financial projections or the future financial
performance or prospects of the Company, its Subsidiaries or their respective
businesses.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
Section 4.1. Organization.
(a) Each of Parent and Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not have a Parent Material Adverse Effect (as defined below). The term
"Parent Material Adverse Effect" means a material adverse effect on the
financial condition, properties, business or results of operations of the Parent
and its subsidiaries taken as a whole. It being understood that conditions
affecting the U.S. economy as whole shall not be deemed to constitute a Parent
Material Adverse Effect.
26
27
(b) Parent has heretofore delivered to the Company accurate and
complete copies of the Articles of Incorporation and Bylaws, as currently in
effect, of Parent and Acquisition. Each of Parent and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Parent Material Adverse Effect.
Section 4.2. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition and by Parent as the sole
shareholder of Acquisition, and no other corporate proceedings on the part of
Parent or Acquisition are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition in accordance with its terms,
except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding thereof may be brought.
Section 4.3. Information Supplied. None of the information supplied or to
be supplied by Parent or Acquisition for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9, the Schedule 13E-3 or the Proxy
Statement (as defined in Section 5.4(a)) will, at the respective times that the
Offer Documents, the Schedule 14D-9, the Schedule 13E-3, the Proxy Statement or
any amendments or supplements thereto are filed with the SEC and are first
published or sent or given to holders of shares of Company Common Stock, 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.
Section 4.4. Consents and Approvals; No Violations. Assuming the truth and
accuracy of the Company's representations and warranties contained in Section
3.6, except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the HSR Act and the filing and
recordation of this Agreement and officers' certificates of each constituent
corporation with the Secretary of State of the State of California as required
by the CGCL, no filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution and
delivery by Parent or Acquisition of this Agreement or the consummation by
Parent or Acquisition of the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice would not have a Parent Material Adverse Effect
or have a material adverse affect on the ability of Parent or Acquisition to
consummate the Offer or the
27
28
Merger. Neither the execution, delivery and performance of this Agreement by
Parent or Acquisition nor the consummation by Parent or Acquisition of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the respective certificate or articles of incorporation or
Bylaws (or similar governing documents) of Parent or Acquisition, (b) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or Acquisition is a party or by
which any of them or any of their respective properties or assets may be bound
or (c) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of Parent's subsidiaries
or any of their respective properties or assets, except in the case of (b) or
(c) for violations, breaches or defaults which would not have a Parent Material
Adverse Effect or have a material adverse effect on the ability of Parent or
Acquisition to consummate the Offer or the Merger.
Section 4.5. No Default. None of Parent or any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (a) its certificate or articles of incorporation or Bylaws (or
similar governing documents), (b) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (c) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, its
subsidiaries or any of their respective properties or assets, except in the case
of (b) or (c) for violations, breaches or defaults that would not have a Parent
Material Adverse Effect or have a material adverse effect on the ability of
Parent or Acquisition to consummate the Offer or the Merger.
Section 4.6. Availability of Financing; Parent Guarantee. Parent has
caused the attached guarantee to be executed by Tinicum Capital Partners, L.P.
and Xxxxxxxxx International, Inc.
Section 4.7. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization, the making of the Offer or
the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Acquisition has neither incurred any obligation or
liability or engaged in any business or activity of any type or kind whatsoever
or entered into any agreement or arrangement with any person or entity.
Section 4.8. Brokers. Except for Merchants Group International Ltd., Inc.,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent or
Acquisition.
Section 4.9. No Other Representations or Warranties. No representations or
warranties are made by or on behalf of Parent or Acquisition in connection with
the transactions contemplated by this Agreement other than those expressly set
forth in this Article 4. Without
28
29
limiting the generality of the foregoing, no representations or warranties are
being made with respect to financial projections or the future financial
performance or prospects of Parent, Acquisition or their businesses.
ARTICLE 5
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
the Company Board will not permit the Company or its any of its Subsidiaries to
conduct their operations otherwise than in the ordinary course of business
consistent with past practice, and the Company shall, and shall cause its
Subsidiaries to, use its or their reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of its present officers and employees and to preserve the present commercial
relationships of the Company and its Subsidiaries with persons with whom the
Company or its Subsidiaries do business. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Effective Time, the Company will not, without the prior written consent
of Parent or Acquisition, and will not permit any of its Subsidiaries to:
(a) amend its Articles of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as required hereby) the terms of the
Company Plans or authorize for issuance, issue, sell, deliver or agree or commit
to issue (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
issuance or sale of shares of Company Common Stock pursuant to the exercise of
Company Stock Options;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any Company Securities or any securities of its
Subsidiaries;
(d) except in connection with the exercise of purchase options under
existing leases, (i) incur or assume any long-term or short-term debt or other
liability (whether directly, contingently or otherwise) or issue any debt
securities, except for borrowings under existing lines of credit in the ordinary
course of business and in amounts not material to the Company and its
Subsidiaries taken as a whole and except for indebtedness not exceeding $100,000
in the aggregate, (ii) except as described in Schedule 5.1(d) of the Disclosure
Schedule, assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business consistent with past practice
and in amounts not material to the Company and its Subsidiaries taken as a whole
and except for obligations of its Subsidiaries, (iii) except for investments not
exceeding $100,000 in the aggregate, make any loans, advances or capital
contributions to, or
29
30
investments in, any other person (other than to Subsidiaries of the Company or
customary loans or advances to employees in the ordinary course of business
consistent with past practice and in amounts not material to the maker of such
loan or advance), (iv) except as described in Schedule 5.1(d) of the Disclosure
Schedule, pledge or otherwise encumber shares of capital stock of the Company or
its Subsidiaries, or (v) except as described in Schedule 5.1(d) of the
Disclosure Schedule, mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon except for
Liens securing indebtedness not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by this
Agreement and except in connection with the hiring of officers (to replace at
compensation levels not to exceed those of the officers being replaced any
officer who retires or is terminated for any reason) or employees in the
ordinary course of business, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, provided that the Company may not, under any circumstance, issue any
stock option or stock option equivalents thereof to any person, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, except as required under
existing agreements and except for the payment of bonuses and severance payments
in the ordinary course of business generally consistent with past practice)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or agent or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units) or create, issue
or increase any severance agreement or stay bonus with any officer, director or
employee;
(f) except as described in Schedule 5.1(f) of the Disclosure
Schedule or with the consent of Parent or Acquisition, which consent will not be
unreasonably withheld, acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which have a value in the aggregate in
excess of $250,000;
(g) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(h) except in connection with the exercise of purchase options under
existing leases which must be exercised for the Company to retain possession of
the subject property, (i) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein (except for transactions having
an aggregate value not exceeding $100,000), (ii) authorize or make any new
capital expenditure or expenditures which, individually, is in excess of
$100,000 or, in the aggregate, are in excess of $500,000 or (iii) enter into or
amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
30
31
(i) make any tax election or settle or compromise any income tax
liability material to the Company and its Subsidiaries taken as a whole;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against, in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
Subsidiaries in the Recent SEC Reports or incurred in the ordinary course of
business consistent with past practice;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any Subsidiary
or the Company;
(l) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(m) incur any expenses in connection with the transactions
contemplated hereby in excess of the amount set forth on Schedule 3.26 without
the prior written consent of Parent or Acquisition;
(n) make any intercompany transfers of cash in excess of $500,000;
or
(o) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through 5.1(n) or any action which would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made.
Section 5.2. Other Potential Acquirers.
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties (other than the parties to
this Agreement) conducted heretofore with respect to any offer or proposal for a
merger or other business combination involving the Company or any of its
Subsidiaries or the acquisition of all or any material portion of the assets of,
or any equity interest in, the Company or its Subsidiaries or any business
combination with the Company or its Subsidiaries (each an "Acquisition
Proposal"). The Company may, directly or indirectly, furnish information and
access, in each case only in response to unsolicited requests therefor, to any
corporation, partnership, limited liability company or other entity or group
pursuant to confidentiality agreements on terms no less favorable to the Company
than the confidentiality agreement that has been entered into by and between the
Company and Parent, and may participate in discussions and negotiate with such
entity or group concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction involving the Company or any Subsidiary or division
thereof, if such entity or group has submitted a bona fide written proposal to
the Company Board relating to any such transaction that is a Superior Proposal.
31
32
For purposes of this Agreement, a "Superior Proposal" means any proposal
made by a third party to acquire, directly or indirectly, all of the equity
securities of the Company entitled to vote generally in the election of
directors or all or substantially all of the assets of the Company for cash and
on terms which the Company Board reasonably believes (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable from
a financial point of view to its shareholders than the Offer and the Merger,
taking into account at the time of determination all factors relating to such
proposed transaction deemed relevant by the Company Board, including, without
limitation, the financing thereof, the proposed timing thereof and all other
conditions thereto and any changes to the financial terms of this Agreement
proposed by Parent and Acquisition.
(b) The Company shall immediately notify Parent and Acquisition after
receipt of any Acquisition Proposal, or any modification of or amendment to any
Acquisition Proposal, or any request for nonpublic information relating to the
Company or any of its Subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any Subsidiary
by any person or entity that informs the Board of Directors of the Company or
such Subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to Parent and Acquisition shall be made orally and in
writing, and, unless the Company Board concluded that such disclosure is
inconsistent with its fiduciary duties under applicable law, shall indicate the
identity of the person making the Acquisition Proposal or intending to make the
Acquisition Proposal or requesting nonpublic information or access to the books
and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 5.2(a). The
Company shall also immediately notify Parent and Acquisition, orally and in
writing, if it enters into negotiations concerning any Acquisition Proposal.
(c) Except as set forth in this Section 5.2, neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or indicate publicly its
intention to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Company Board or such committee of the Offer or the
Merger, (ii) approve or recommend, or indicate publicly its intention to approve
or recommend, any Acquisition Proposal or (iii) cause 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
Acquisition Proposal. Notwithstanding the foregoing, in the event that prior to
the Effective Time the Company Board reasonably determines in good faith, after
discussions with its counsel, that it is consistent with its fiduciary duties
under applicable law, the Company Board may (subject to this and the following
sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Merger and/or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Superior Proposal), but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Company Board has received a Superior Proposal
and, in the case of any previously received Superior Proposal that has been
materially modified or
32
33
amended, such modification or amendment and specifying the material terms and
conditions of such Superior Proposal, modification or amendment.
(d) Nothing herein shall prevent the Company Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to any tender offer,
and nothing herein shall prevent the Board from making such disclosure to the
Company's shareholders as, in the good faith judgment of the Company Board, is
done pursuant to the exercise of its fiduciary duties under the CGCL, provided
that the Company complies with the provisions of Section 7.3; provided further,
that neither the Company nor the Company Board nor any committee thereof shall,
except as permitted by Section 5.2(c), withdraw or modify, or indicate publicly
its intention to withdraw or modify, its position with respect to the Offer or
the Merger or approve or recommend, or indicate publicly its intention to
approve or recommend, an Acquisition Proposal.
(e) The Company shall advise its officers and directors and any investment
banker or attorney retained by the Company in connection with the transactions
contemplated by this Agreement of the restriction set forth in this Section 5.2.
Section 5.3. Access to Information.
(a) Between the date hereof and the Effective Time, the Company will
provide to Parent and Acquisition and their authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records of the Company and its Subsidiaries,
will permit Parent and Acquisition to make such inspections as Parent and
Acquisition may reasonably require and will cause the Company's officers and
those of its subsidiaries to furnish Parent and Acquisition with such financial
and operating data and other information with respect to the business and
properties of the Company and its Subsidiaries as Parent or Acquisition may from
time to time reasonably request.
(b) Each of Parent and Acquisition will hold and will cause its
consultants and advisors to hold in confidence all documents and information
concerning the Company and its Subsidiaries furnished to Parent or Acquisition
in connection with the transactions contemplated by this Agreement.
Section 5.4. Shareholders Meeting.
(a) If a vote of the Company's shareholders is required by law, the
Company will, as promptly as practicable following (i) the acceptance for
payment of shares of Company Common Stock by Acquisition pursuant to the Offer
or (ii) the termination of the offer by its terms, take, in accordance with
applicable law and its Articles of Incorporation and By-laws, all action
necessary to convene a meeting of holders of shares of Company Common Stock (the
"Shareholders Meeting") to consider and vote upon the approval of this
Agreement. The Company shall, as promptly as practicable, prepare and file with
the SEC a proxy statement for the solicitation of a vote of holders of shares of
Company Common Stock approving the Merger (the "Proxy Statement"), which shall
include the recommendation of the Company Board that shareholders of the Company
vote in favor of the approval and adoption of this Agreement and
33
34
the written opinion of the Financial Advisor that the cash consideration to be
received by the shareholders of the Company pursuant to the Merger is fair to
such shareholders from a financial point of view. The Company shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing and promptly thereafter mail the Proxy Statement
to the shareholders of the Company. The Company shall also use its best efforts
to obtain all necessary state securities law or "blue sky" permits and approvals
required in connection with the Merger and to consummate the other transactions
contemplated by this Agreement and will pay all expenses incident thereto.
Notwithstanding the foregoing, if Parent, Acquisition and/or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
Company Common Stock, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Shareholders Meeting in accordance with
Section 1110 of the CGCL.
(b) Parent and Acquisition agree to cause all shares of Company
Common Stock purchased pursuant to the Offer and all other shares of Company
Common Stock owned by Parent, Acquisition or any Subsidiary of Parent to be
voted in favor of the Merger.
Section 5.5. Additional Agreements; Reasonable Best Efforts. Subject to
the terms and conditions herein provided, each party agrees to use all
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Schedule 13E-3, the Proxy Statement, any filings that may be required
under the HSR Act and any amendments thereto, (b) the taking of all action
reasonably necessary, proper or advisable to secure any necessary consents under
existing debt obligations of the Company and its Subsidiaries or to amend the
notes, indentures or agreements relating thereto to the extent required by such
notes, indentures or agreements or redeem or repurchase such debt obligations,
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to use all reasonable efforts to cause
the Effective Time to occur as soon as practicable after the shareholder vote,
if any, with respect to the Merger. In case at any time after the Effective Time
any further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
Section 5.6. Consents. Parent, Acquisition and the Company each will use
all commercially reasonable efforts to obtain consents of all third parties and
Governmental Entities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement.
Section 5.7. Public Announcements. Parent, Acquisition and the Company, as
the case may be, will consult with one another and seek one anothers approval
before issuing any press release, or otherwise making any public statements,
with respect to the transactions contemplated by this Agreement, including,
without limitation, the Offer or the Merger and shall
34
35
not issue any such press release or make any such public statement prior to such
consultation and approval, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Nasdaq Stock Market, as
determined by Parent, Acquisition or the Company, as the case may be.
Section 5.8. Indemnification; Directors' and Officers' Insurance.
(a) Parent and Acquisition agree that all rights to indemnification
or exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries, as provided in their respective
charters or bylaws (or other similar governing instruments) or otherwise in
effect as of the date hereof with respect to matters occurring prior to the
Effective Time, shall survive the Merger and shall continue in full force and
effect. To the maximum extent permitted by the CGCL, such indemnification shall
be mandatory rather than permissive, and the Surviving Corporation shall advance
expenses in connection with such indemnification (subject to the Surviving
Corporation's receipt of an undertaking by the indemnified party to return such
advanced expenses to the Surviving Corporation if it is determined by a final,
non-appealable order of a court of competent jurisdiction that such indemnified
party is not entitled to retain such advanced expenses).
(b) Parent shall cause the Surviving Corporation to maintain in
effect for not less than five (5) years from the Effective Time the policies of
the directors' and officers' liability and fiduciary insurance most recently
maintained by the Company (provided, that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof so long
as such substitution does not result in gaps or lapses in coverage) with respect
to matters occurring prior to the Effective Time; provided, however, that in
satisfying its obligation under this Section, the Surviving Corporation shall
not be obligated to pay premiums in excess of $125,000 with respect to such
insurance.
(c) In the event the Surviving Corporation or its successor (i) is
consolidated with or merges into another person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any other
person in a single transaction or a series of related transactions, then in each
such case Parent shall make or cause to be made proper provision so that the
successor or transferee of the Surviving Corporation shall comply in all
material respect with the terms of this Section 5.8.
Section 5.9. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of the notifying party contained in this Agreement to
be untrue or inaccurate in any material respect as if made at the Effective Time
and (b) any material failure of the notifying party 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 5.9 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
35
36
Section 5.10. Employee Matters.
(a) Employees of the Company and its Subsidiaries shall be treated
after the Merger no less favorably under Parent ERISA Plans, to the extent
applicable, than other similarly situated employees of Parent and its
subsidiaries.
(b) For a period of one year following the Merger, Parent shall and
shall cause its subsidiaries to maintain with respect to their employees who had
been employed by the Company or any of its Subsidiaries prior to the Effective
Time and who remain employed following the Effective Time (i) base salary or
regular hourly wage rates for each such employee at not less than the rate
applicable immediately prior to the Merger to such employee and (ii) employee
benefits (as defined for purposes of Section 3(3) of ERISA) that are
substantially comparable in the aggregate to such employee benefits provided by
the Company and its Subsidiaries immediately prior to the Merger.
(c) To the extent they participate under such plans, Parent and its
subsidiaries shall credit employees of the Company and its Subsidiaries for
purposes of determining eligibility to participate or vesting under Parent ERISA
Plans with their service prior to the Merger with the Company and its
Subsidiaries to the same extent such service was counted under similar benefit
plans of the Company prior to the Merger.
(d) Nothing contained herein shall be construed as requiring Parent
or the Surviving Corporation to continue any specific plans or to continue the
employment of any specific person.
Section 5.11. SEC Filings. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Section 5.12. Guarantee of Performance. Parent hereby guarantees the
performance by Acquisition of its obligations under this Agreement and the
indemnification obligations of the Surviving Corporation pursuant to Section
5.8(a).
Section 5.13. Notice of Certain Events. The Company shall promptly notify
Acquisition and Acquisition shall promptly notify the Company of:
(a) 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;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) with respect only to the Company, any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge,
threatened which, if
36
37
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.9 or 3.13 or which relate to the consummation of
the transactions contemplated by this Agreement.
Section 5.14. Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute") is or may become applicable to the Offer or the Merger, the Company
will use reasonable best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) if required by applicable law, this Agreement shall have been
approved and adopted by the requisite vote of the shareholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger and the other
transactions described in the recitals to this Agreement under the HSR Act shall
have terminated or expired, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby shall
have been either filed or received; and
Section 6.2. Conditions to Obligations of Parent and Acquisition. The
obligations of Parent and Acquisition to effect the Merger are also subject to
the satisfaction or waiver by Parent prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date, as though made on and as of the Closing Date; it
being understood that representations and warranties shall be deemed to be true
and correct unless the respects in which the representations and warranties
(without giving effect to any "materiality" limitations or references to
"material adverse effect" set forth therein) are untrue or incorrect in the
aggregate is likely to have a Company Material Adverse Effect.
37
38
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
(c) The number of Company Dissenting Shares shall be less than five
percent (5%) of the total number of shares of Company Common Stock.
Section 6.3. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and Acquisition set
forth in this Agreement shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date, as though made on and as of the
Closing Date; it being understood that representations and warranties shall be
deemed to be true and correct unless the respects in which the representations
and warranties (without giving effect to any "materiality" limitations or
references to "material adverse effect" set forth therein) are untrue or
incorrect in the aggregate is likely to have a Parent Material Adverse Effect.
(b) Each of Parent and Acquisition shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent or Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States governmental
authority shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Offer or the
Merger and such order, decree, ruling or other action is or shall have become
nonappealable or (ii) the Merger has not been consummated by October 31, 1999
(unless otherwise extended by the parties; provided that no party may terminate
this Agreement pursuant to this clause (ii) if such party's failure to fulfill
any of its obligations under this Agreement shall have been the reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case which materially adversely affects the
consummation of the Offer, (ii) there shall have been a breach on the part of
Parent or Acquisition of any of their respective covenants or agreements
38
39
hereunder having a Parent Material Adverse Effect or materially adversely
affecting the consummation of the Offer, and Parent or Acquisition, as the case
may be, has not cured such breach prior to the earlier of (A) ten (10) days
following notice by the Company thereof and (B) two (2) Business Days prior to
the date on which the Offer expires; provided, however, that the Company has not
breached any of its obligations hereunder in a manner that proximately
contributed to such breach by Parent or Acquisition or (iii) prior to the
purchase of Shares pursuant to the Offer, the Company has received a Superior
Proposal and the Company Board by a majority vote shall have determined in its
good faith judgment, on advice of counsel, that it must do so in the exercise of
its fiduciary duties under the CGCL; provided, however, that, without limiting
Parent's rights under Section 7.3(a), such termination under this clause (iii)
shall not be effective until payment of the amount required by Section 7.3(b);
or
(d) by Parent or Acquisition prior to the purchase of shares of
Company Common Stock pursuant to the Offer if (i) the Company Board withdraws or
modifies in a manner materially adverse to Parent or Acquisition its favorable
recommendation of the Offer or the approval or recommendation of the Merger or
shall have recommended a Third Party Acquisition (as defined below), (ii) a
Third Party Acquisition occurs, (iii) there shall have been a breach of any
representation or warranty on the part of Company set forth in this Agreement,
or any representation or warranty of the Company shall have become untrue, in
either case if the respects in which the representations and warranties made by
the Company are inaccurate would in the aggregate have a Company Material
Adverse Effect or materially adversely affect (or delay) the consummation of the
Offer or the Merger, (iv) there shall have been a breach on the part of the
Company of its covenants or agreements hereunder having, individually or in the
aggregate, a Company Material Adverse Effect or materially adversely affecting
(or materially delaying) the consummation of the Merger, and, with respect to
clauses (iii) and (iv) above, the Company has not cured such breach prior to the
earlier of (A) ten (10) days following notice by the Parent or Acquisition
thereof and (B) two (2) Business Days prior to the date on which the Offer
expires; provided that, with respect to clauses (iii) and (iv) above, neither
Parent or Acquisition has breached any of their respective obligations hereunder
in a manner that proximately caused such breach by the Company or (v) Parent or
Acquisition shall have discovered that any information supplied to Parent or
Acquisition by the Company (excluding, for such purposes, any projections or
forecasts or other forward looking information supplied by the Company), at the
time provided to Parent or Acquisition, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and such misstatement or omission would have a Company Material
Adverse Effect.
Section 7.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void (except for the provisions of this Section 7.2 and Sections 5.3(b) and
7.3), and there shall be no liability or obligation on the part of any party or
its affiliates, directors, officers or shareholders, other than (a) the
provisions of this Section 7.2 and Sections 5.3(b) and 7.3 and (b) any liability
of any party for any breach of this Agreement prior to such termination.
Section 7.3. Fees and Expenses.
39
40
(a) In the event that this Agreement shall be terminated pursuant to
Section 7.1(c)(iii) or Section 7.1(d) and, within twelve (12) months thereafter,
a Third Party Acquisition occurs, then Parent and Acquisition would suffer
direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate Parent and Acquisition for such damages, the
Company shall pay to Parent the amount of $2.0 million as liquidated damages. It
is specifically agreed that the amount to be paid pursuant to this Section
7.3(a) represents liquidated damages and not a penalty.
"Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of the Company by merger or otherwise by
any person (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, Acquisition or any
affiliate thereof (a "Third Party"), (ii) the acquisition by a Third Party of
50% or more of the total assets of the Company and its Subsidiaries, taken as a
whole, (iii) the acquisition by a Third Party of shares of Company Common Stock
resulting in such person holding at least 50% or more of the outstanding shares
of Company Common Stock or (iv) the acquisition by a Third Party of shares of
the Company's capital stock resulting in such person being able to elect a
majority of the Company's directors.
(b) Upon the termination of this Agreement prior to the purchase of
Shares by Acquisition pursuant to the Offer pursuant to Section 7.1(c)(iii) or
7.1(d), the Company shall reimburse Parent, Acquisition and their affiliates
(not later than ten (10) Business Days after submission of statements therefor)
for all documented out-of-pocket fees and expenses, not to exceed $500,000,
reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). If Parent or Acquisition shall have submitted a request for
reimbursement hereunder, such party will provide the Company in due course with
invoices or other reasonable evidence of such expenses upon request. The Company
shall in any event pay the amount requested within ten (10) Business Days of
such request, subject to the Company's right to demand a return of any portion
as to which invoices are not received in due course. Nothing in this Section
7.3(b) shall relieve any party from any liability for breach of this Agreement.
(c) Upon the termination of this Agreement pursuant to Sections
7.1(e)(i) or (ii), Parent shall reimburse the Company and its affiliates (not
later than ten (10) Business Days after submission of statements therefor) for
all documented out-of-pocket fees and expenses, not to exceed $500,000,
reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). If the Company shall have submitted a request for reimbursement
hereunder, such party will provide Parent in due course with invoices or other
reasonable evidence of such expenses upon request. Parent shall in any event pay
the amount requested within ten (10) Business Days of such request, subject to
Parent's right to demand a return of any portion as to which invoices are not
received in due course. Nothing in this Section 7.3(c) shall relieve any party
from any liability for breach of this Agreement.
40
41
(d) Except as specifically provided in this Section 7.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 7.4. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time before or after approval of the
Merger by the shareholders of the Company (if required by applicable law) but,
after any such approval, no amendment shall be made which requires the approval
of such shareholders under applicable law without such approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time,
each party may (a) extend the time for the performance of any of the obligations
or other acts of the other party or parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement, except for Sections 3.12,
3.13, 3.23 and 8.1 hereunder.
Section 8.2. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and (b) shall
not be assigned by operation of law or otherwise; provided, however, that
Acquisition may assign any or all of its rights and obligations under this
Agreement to any wholly owned subsidiary of Parent, but no such assignment shall
relieve Acquisition of its obligations hereunder if such assignee does not
perform such obligations.
Section 8.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the other party as follows:
if to Parent or Acquisition: Tinicum Incorporated
41
42
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
with a copy to: Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
if to the Company to: Xxxxxx International, Inc.
000 X. Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: R. Xxxxxxx Xxxxxxx
Chief Executive Officer
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
000 X. Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Strong, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to the principles of conflicts of law thereof.
Section 8.6. Construction; Interpretation. The headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. Article, section, exhibit,
schedule, annex, party, preamble and recital references are to this Agreement
unless otherwise stated. No party, nor its respective counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions hereof,
and all provisions of this Agreement shall be construed according to their fair
meaning and not strictly for or against any party.
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party and its successors and permitted
assigns and, except as provided in Section 8.2, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.8. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
42
43
Section 8.9. Specific Performance. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
Section 8.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
43
44
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
XXXXXX INTERNATIONAL, INC., a California
corporation
By: /s/ XXXXXX XXXXXXXXX
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chairman
HI HOLDINGS INC., a Delaware corporation
By: /s/ XXXX XXXXXX
------------------------------------
Name: Xxxx Xxxxxx
Title:
HI MERGER SUBSIDIARY INC., a California
corporation
By: /s/ XXXX XXXXXX
-----------------------------------
Name: Xxxx Xxxxxx
Title:
44
45
GUARANTEE
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER TO WHICH THIS GUARANTEE IS ATTACHED.
Tinicum Capital Partners, L.P. and Xxxxxxxxx International, Inc. (the
"Guarantors") hereby jointly and severally, unconditionally and irrevocably
guarantee to the Company that if Parent or Acquisition fail to pay any damages
due to the Company (the "Obligations") arising from a breach or violation by
Parent or Acquisition of their Obligations under the Agreement and Plan of
Merger by and among Xxxxxx International, Inc., HI Holdings Inc. and HI Merger
Subsidiary, Inc. (the "Agreement"), then the Guarantors shall forthwith, upon
demand (which demand shall be for the sole purpose of providing notice to the
Guarantors and shall not require the Company to exhaust any remedy before
proceeding against the Guarantors), discharge the Obligations. The Guarantors
shall be liable to the Company for the reasonable costs and expenses (including,
without limitation, reasonable out-of-pocket legal fees and expenses) incurred
by the Company (following a demand upon the Guarantor) in any proceeding brought
by or on behalf of the Company to enforce this guarantee, except in the event a
court or adjudicatory panel of competent jurisdiction determines that a good
faith dispute existed with respect to the amount owed by the Guarantors
hereunder.
To the maximum extent permitted by applicable law, the Guarantors hereby
waive notice of acceptance of this guarantee, notice of any Obligations, notice
of protest, notice of dishonor or nonpayment of any Obligations, and any other
notice to the Guarantors (other than the demand referred to above). One or more
successive or concurrent actions may be brought hereon against the Guarantors,
either in the same action in which any obligor is sued or in separate actions.
To the maximum extent permitted by applicable law, the obligations of the
Guarantors under this guarantee shall not be affected by (i) any merger or
consolidation of the Company or any Subsidiary, (ii) any change in the direct or
indirect ownership of the Guarantors, (iii) any increase in the Obligations,
except for changes, amendments, waivers, or consents effected in accordance with
the Agreement.
45
46
This guarantee shall be governed by, and construed in accordance with, the laws
of the State of California. This guarantee is entered into for the sole and
exclusive benefit of the Company, and no other Person shall have any rights with
respect hereto. This guarantee shall be binding on the Guarantors' successors.
Executed as of March 15, 1999.
TINICUM CAPITAL PARTNERS, L.P., a
Delaware partnership
By: TINICUM LANTERN LLC, its General
Partner
By: /s/ XXXX XXXXXX
-------------------------------
Name: Xxxx Xxxxxx
Title:
XXXXXXXXX INTERNATIONAL, INC, a
California Corporation
By: /s/ XXXX X. XXXXXX
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
XXXXXX INTERNATIONAL, INC., a California
corporation
By: /s/ XXXXXX XXXXXXXXX
-------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chairman
46
47
ANNEX A
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER TO WHICH THIS ANNEX A IS ATTACHED.
Notwithstanding any other provisions of the Offer, Acquisition shall not
be required to accept for payment or pay for, and shall delay the acceptance for
payment of, or the payment for, any Shares and, if required pursuant to Section
1.1(b) of the Agreement, shall extend the Offer by one or more extensions until
May 28, 1999 and may terminate the Offer at any time after June 11, 1999 if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated or (iii) prior to the acceptance for payment of Shares, Acquisition
makes a determination (which shall be made in good faith) that any of the
following conditions exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, enacted, entered,
enforced or deemed applicable to the Offer, or any other action shall have been
taken, by any state or federal government or governmental authority or by any
U.S. court, other than the routine application to the Offer or the Merger of
waiting periods under the HSR Act, that (i) restrains, prohibits, or makes
illegal the acceptance for payment of, or the payment for, some or all of the
Shares or otherwise prohibits consummation of the Offer or the Merger, (ii)
restrains, prohibits, or imposes material limitations on the ability of
Acquisition or Parent to acquire or hold or to exercise effectively all rights
of ownership of the Shares, including, without limitation, the right to vote any
Shares purchased by Acquisition on all matters properly presented to the
shareholders of the Company or effectively to control in any material respect
the business, assets or operations of the Company, its subsidiaries, Acquisition
or any of their respective affiliates or (iii) otherwise has a Company Material
Adverse Effect or there shall be any litigation or suit pending by any person or
governmental authority seeking to do any of the foregoing; or
(b) (i) the representations and warranties of the Company set forth in the
Agreement (without giving effect to any "materiality" limitations or references
to "Material Adverse Effect" set forth therein) shall not be true and correct in
any material respect as of the date of the Agreement and as of consummation of
the Offer as though made on or as of such date, but only if the respects in
which the representations and warranties made by the Company are inaccurate and
would in the aggregate have a Company Material Adverse Effect, (ii) the Company
shall have breached or failed to comply in any material respect with any of its
obligations under the Agreement or (iii) any material adverse changes shall have
occurred that have had, or could reasonably be expected to have, a Company
Material Adverse Effect; or
(c) it shall have been publicly disclosed that any person (which includes
a "person" as such term is defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Acquisition, any of their affiliates, or any group of which
any of them is a member, shall have acquired beneficial ownership of more than
50% of the outstanding Shares or shall have entered into a definitive
47
48
agreement or an agreement in principle with the Company with respect to a tender
offer or exchange offer for any Shares or a merger, consolidation or other
business combination with or involving the Company, any of its subsidiaries or
any of their material assets; or
(d) the Agreement shall have been terminated in accordance with its terms;
or
(e) prior to the purchase of Shares pursuant to the Offer, the Company
Board shall have withdrawn or modified (including by amendment of the Schedule
14D-9) in a manner adverse to Acquisition its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended another offer, or
shall have adopted any resolution to effect any of the foregoing which, in the
good faith judgment of Acquisition in any such case, and regardless of the
circumstances (including any action or omission by Acquisition) giving rise to
any such condition, makes it inadvisable to proceed with such acceptance for
payment; or
(f) there shall have occurred any general suspension of, or limitation on
prices for, trading in the Shares on the Nasdaq Stock Market; or
(g) the Company shall commence a case under any chapter of Title XI of the
United States Code or any similar law or regulation; or a petition under any
chapter of Title XI of the United States Code or any similar law or regulation
is filed against the Company which is not dismissed within two (2) business
days; or
(h) any authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any governmental
entity required in order to consummate the Offer or the Merger or to permit the
Company and its Subsidiaries to conduct their businesses after the Offer and the
Merger as currently conducted shall not have been filed, granted, given,
occurred or satisfied.
48
