EXHIBIT 99.2
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARMOR HOLDINGS, INC.
AHI BULLETPROOF ACQUISITION CORP.
AND
SIMULA, INC.
DATED AS OF AUGUST 29, 2003
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TABLE OF CONTENTS
Page
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Article I Definitions....................................................................................... 1
1.1 Definitions.................................................................................... 1
1.2 Interpretation................................................................................. 19
Article II The Merger....................................................................................... 20
2.1 The Merger..................................................................................... 20
2.2 The Closing.................................................................................... 20
2.3 Effective Time................................................................................. 20
2.4 Articles of Incorporation, Bylaws, Directors and Officers of the Surviving Corporation......... 20
2.5 Section 338(g) Election........................................................................ 21
Article III Effect of the Merger on Securities of Purchaser and the Company................................. 22
3.1 Parent Securities.............................................................................. 22
3.2 Purchaser Securities........................................................................... 22
3.3 Company Common Stock........................................................................... 22
3.4 Exchange of Certificates Representing Company Common Stock..................................... 25
3.5 Adjustment of Merger Consideration............................................................. 28
3.6 Effect of Parent Election Of All Cash Merger Consideration;
Automatic Amendment of Certain Provisions of Agreement......................................... 29
Article IV Representations and Warranties of the Company.................................................... 30
4.1 Existence; Good Standing; Corporate Authority.................................................. 32
4.2 Authorization, Validity and Effect of Agreements............................................... 33
4.3 Compliance with Laws........................................................................... 34
4.4 Capitalization................................................................................. 34
4.5 Subsidiaries................................................................................... 36
4.6 No Violation; Consents......................................................................... 36
4.7 Company Reports; Financial Statements.......................................................... 37
4.8 Company Litigation............................................................................. 38
4.9 Absence of Certain Changes..................................................................... 38
4.10 Taxes.......................................................................................... 38
4.11 Company Employee Benefit Plans................................................................. 40
4.12 Labor and Employment Matters................................................................... 42
4.13 Intellectual Property Rights................................................................... 43
4.14 Permits........................................................................................ 44
4.15 Environmental Compliance....................................................................... 44
4.16 Material Contracts............................................................................. 45
4.17 Divestiture Agreements......................................................................... 47
4.18 Real Property.................................................................................. 47
4.19 Brokers........................................................................................ 49
4.20 Opinion of Financial Advisor................................................................... 49
4.21 State Takeover Statutes........................................................................ 49
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4.22 No Undisclosed Liabilities..................................................................... 50
4.23 Certain Business Practices..................................................................... 50
4.24 Affiliates..................................................................................... 50
4.25 Products....................................................................................... 50
4.26 Form S-4; Proxy Statement...................................................................... 50
Article V Representations and Warranties of Parent and Purchaser............................................ 51
5.1 Existence; Good Standing; Corporate Authority.................................................. 53
5.2 Authorization, Validity and Effect of Agreements............................................... 53
5.3 Compliance with Laws........................................................................... 54
5.4 Capitalization................................................................................. 54
5.5 No Violation; Consents......................................................................... 55
5.6 Parent Reports; Financial Statements........................................................... 56
5.7 Parent Litigation.............................................................................. 56
5.8 Absence of Certain Changes..................................................................... 57
5.9 Brokers........................................................................................ 57
5.10 No Undisclosed Liabilities..................................................................... 57
5.11 Certain Business Practices..................................................................... 57
5.12 Form S-4; Proxy Statement...................................................................... 57
5.13 Disclosure Materials........................................................................... 57
5.14 Parent Acknowledgement......................................................................... 58
Article VI Covenants........................................................................................ 58
6.1 Alternative Proposals.......................................................................... 58
6.2 Interim Operations............................................................................. 60
6.3 Preparation of the Form S-4 and the Proxy Statement; Company Shareholder Approval.............. 65
6.4 Filings; Other Action.......................................................................... 67
6.5 Access to Information.......................................................................... 69
6.6 Publicity...................................................................................... 69
6.7 Further Action................................................................................. 69
6.8 Indemnification of Company Directors and Officers, O&D Tail Insurance, Insurance............... 70
6.9 Conveyance Taxes............................................................................... 72
6.10 Certain Tax Matters............................................................................ 72
6.11 Benefit Plans and Option Plans................................................................. 72
6.12 Stock Exchange Listing......................................................................... 73
6.13 Affiliates; Shareholder Agreement.............................................................. 73
6.14 Escrow Agreement............................................................................... 73
6.15 Liquidation of Subsidiaries.................................................................... 74
6.16 Certain Benefit Plans.......................................................................... 74
6.17 Company Litigation............................................................................. 74
6.18 Control of Operations.......................................................................... 75
6.19 Pro Forma Financial Statements................................................................. 75
6.20 Termination of Certain Company Executive Officers.............................................. 75
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Article VII Conditions...................................................................................... 76
7.1 Conditions to Each Party's Obligation to Consummate the Merger................................. 76
7.2 Conditions to Obligation of Parent and Purchaser to Consummate the Merger...................... 77
7.3 Conditions to Obligation of the Company to Consummate the Merger
subject to Section 3.6......................................................................... 78
Article VIII Termination.................................................................................... 78
8.1 Termination by Mutual Consent.................................................................. 78
8.2 Termination by Either Parent or Company........................................................ 78
8.3 Termination by the Company..................................................................... 80
8.4 Termination by Parent.......................................................................... 80
8.5 Right to Terminate............................................................................. 81
8.6 Effect of Termination and Abandonment; Termination Fee......................................... 81
8.7 Termination Fees and Expenses.................................................................. 82
8.8 Extension; Waiver.............................................................................. 83
Article IX General Provisions............................................................................... 84
9.1 Nonsurvival of Representations and Warranties.................................................. 84
9.2 Notices........................................................................................ 84
9.3 Assignment; Binding Effect; No Third-Party Beneficiaries....................................... 85
9.4 Entire Agreement............................................................................... 85
9.5 Governing Law.................................................................................. 85
9.6 Jurisdiction and Venue......................................................................... 85
9.7 Waiver of Jury Trial........................................................................... 86
9.8 Fee and Expenses............................................................................... 86
9.9 Headings; Interpretation....................................................................... 86
9.10 Amendment; Waivers............................................................................. 86
9.11 Severability................................................................................... 87
9.12 Parent Actions................................................................................. 87
9.13 Remedies....................................................................................... 87
9.14 Execution...................................................................................... 87
9.15 Date for Any Action............................................................................ 87
9.16 Counterparts................................................................................... 87
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INDEX OF SCHEDULES AND EXHIBITS
Schedule I Total Consideration Adjustments
Schedule II Schedule of Production
Company Disclosure Schedule
Parent Disclosure Schedule
Schedule III Material Consents
Schedule 6.15 Subsidiaries to be Liquidated
Exhibit A Form of Affiliate Letter
Exhibit B Holders of Eligible Options
Exhibit C Form of Shareholder Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement"), dated as of August 29,
2003, by and among Armor Holdings, Inc., a Delaware corporation ("Parent"), AHI
Bulletproof Acquisition Corp., an Arizona corporation and a wholly-owned
subsidiary of Parent ("Purchaser"), and Simula, Inc., an Arizona corporation
(the "Company").
RECITALS
WHEREAS, the Company is engaged in the businesses of designing,
manufacturing, marketing, selling and licensing various military, public safety,
civilian and/or commercial safety systems products and technologies to, and
providing related services to, various industries, including but not limited to
the defense, aviation, aerospace, marine and automotive industries; and
WHEREAS, the respective boards of directors of Parent, Purchaser and
the Company each have approved and declared advisable this Agreement and the
merger of Purchaser with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value US$.01 per share, of the Company
(the "Company Common Stock"), other than shares of Company Common Stock owned by
Parent, Purchaser or the Company, will be converted into the right to receive
common stock, par value US$.01 per share, of Parent ("Parent Common Stock")
and/or cash as provided herein; and
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement, the following terms when used in this Agreement shall have the
meanings indicated below.
"Affiliate" shall mean, with respect to any Person, a Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person. For the purposes of
this definition and this Agreement, neither the Company nor any of its
Subsidiaries shall be deemed to be an Affiliate of Parent, Purchaser, or any of
their Subsidiaries, and none of the Parent, Purchaser, or any of their
respective Subsidiaries, shall be deemed to be an Affiliate of the Company or
any of its Subsidiaries.
"Affiliate Letter" shall have the meaning set forth in Section 3.4(b).
"Agreement" shall have the meaning set forth in the Preamble to this
Agreement.
"Allied Debt" shall mean the indebtedness evidenced by the Company's
US$25 million Senior Secured Note, dated September 26, 2001, and due December
31, 2003 (subject to acceleration of maturity or mandatory prepayment), issued
to Allied Capital Corporation.
"Alternative Transaction" shall mean a transaction involving a merger,
consolidation, recapitalization, reorganization or other business combination of
the Company or any material Subsidiary of the Company with any Person (other
than the Parent or the Purchaser), an acquisition involving all or a significant
part of the capital stock or assets of the Company or any material Subsidiary of
the Company by any Person (other than the Parent or the Purchaser), or a
material debt or equity investment (including debt convertible into equity) in
the Company or any material Subsidiary of Company, other than relating to the
sale, monetization or licensing of rights to use the Company's Cleargard(R)
transparent polyurethane polymer (and/or related technologies or products) that
is entered into in compliance with Section 6.2 of this Agreement. An
"Alternative Transaction" shall not include any refinancing permitted by Section
6.1(d)(i).
"AMEX" shall mean the American Stock Exchange, or any successor
exchange.
"Ancillary Document" shall mean any agreement or document executed and
delivered by the Company, on the one hand, or either of Parent or Purchaser (or
both), on the other, in connection with or pursuant to the provisions of this
Agreement or in connection with the consummation of the Merger.
"Applicable Law" shall mean, with respect to any Person, any
international, national, regional, state or local treaty, statute, law,
ordinance, rule, administrative action, regulation, order, writ, injunction,
judgment, decree or other requirement of any Governmental Authority and any
requirements imposed by common law or case law, applicable, through the date of
this Agreement or through the Closing Date, as applicable, to such Person or any
of its properties, assets, officers, directors, employees, consultants or agents
(in connection with their activities on behalf of such Person or any of its
Affiliates). Applicable Law includes, without limitation, Environmental Laws.
"Arizona Code" shall have the meaning set forth in Section 2.1.
"Arizona Real Estate" shall mean Company Owned Property consisting of
parcel(s) of vacant land adjacent to the Simula Technology Center and identified
as being currently subject to a contract of sale and in escrow in Section
4.18(a) of the Company Disclosure Schedule.
"Articles of Merger" shall have the meaning set forth in Section 2.3.
"ASD Transaction" shall mean the transactions contemplated by that
certain Asset Purchase Agreement, made as of June 11, 2003, by and among Zodiac
US Corporation, a Delaware corporation ("Zodiac"), the Company, and Simula
Automotive Safety Devices,
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Inc., an Arizona corporation ("ASD"), in which the Company caused to be sold and
transferred to Zodiac and certain Affiliates of Zodiac, and Zodiac and certain
Affiliates of Zodiac purchased and assumed, substantially all of the assets and
certain liabilities of ASD and Simula Automotive Safety Devices, Limited, a
limited liability company incorporated in England and Wales ("ASD UK").
"best efforts", "reasonable best efforts", "commercially reasonable
best efforts" and "commercially reasonable efforts", and any variations of such
terms, when utilized in this Agreement or in any of the Ancillary Documents,
shall mean, with respect to any Person obligated to fulfill, perform or satisfy
a related covenant, duty or obligation, that the level of effort required of
such obligated Person with respect to fulfilling, performing or satisfying such
related covenant, duty or obligation is the lawful efforts that a reasonable
business entity would undertake or make in good faith under similar
circumstances in light of commonly accepted commercial practices which afford
all parties to the transaction or agreement fair treatment, but shall require
such obligated Person to expend only that amount of funds that a reasonable
business Person would expend to achieve the desired result or effect.
"Budget and Forecast" shall mean the Company's budget and forecast
provided to the Parent on August 29, 2003.
"Business Day" shall mean any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by Applicable Law or executive order to close in the
state of New York.
"Cash Consideration Percentage" shall mean a percentage designated by
the Parent in a written notice to the Company, given not later than the Merger
Consideration Calculation Time, which percentage shall not be less than 20%;
provided, however, that the Parent may at any time prior to the Effective Time
revoke any prior written notice to the Company designating such percentage as
the Cash Consideration Percentage provided that the Parent, pursuant to such
written notice of revocation to the Company, designates the Cash Consideration
Percentage to be one hundred percent (100%), which such subsequent designation
shall be irrevocable.
"Change in the Company Recommendation" shall have the meaning set forth
in Section 6.3(b).
"CIT Debt" shall mean the indebtedness evidenced by the Revolving Line
of Credit extended by CIT Group, Inc. to the Company, currently due September
30, 2003 (subject to acceleration of maturity or mandatory prepayment).
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"Closing Date Payments" shall mean the Debt Pay-Off Amount plus the
amount of any Company's Transaction Fees.
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"COBRA" shall mean the Consolidated Omnibus Reconciliation Act of 1985.
"Code" shall mean the Internal Revenue Code of 1986.
"Company Benefit Plan" shall have the meaning set forth in Section
4.11.
"Company Common Stock" shall have the meaning set forth in the recitals
to this Agreement.
"Company Common Stock Certificates" shall have the meaning set forth in
Section 3.4(a).
"Company Disclosure Schedule" shall have the meaning set forth in the
preamble to Article IV.
"Company's Failure to Ship" shall mean the failure of the Company to
ship Monitored Products due to circumstances that are reasonably under the
Company's control, such as manufacturing delays and the failure to procure
sufficient raw materials from suppliers (other than suppliers which are the sole
suppliers of such raw materials or with whom the Company is contractually
obligated to exclusively purchase such raw materials), but, for the avoidance of
doubt, excluding any circumstances that constitute a Force Majeure.
"Company Intellectual Property" shall have the meaning set forth in
Section 4.13(b).
"Company Leased Property" shall have the meaning set forth in Section
4.18(a).
"Company Leases" shall have the meaning set forth in Section 4.18(a).
"Company MAC" shall have the meaning set forth in the preamble to
Article IV.
"Company Owned Property" shall have the meaning set forth in Section
4.18(a).
"Company Real Property" shall have the meaning set forth in Section
4.18(a).
"Company Permits" shall have the meaning set forth in Section 4.14.
"Company Preferred Stock" shall have the meaning set forth in Section
4.4(a).
"Company Reports" shall have the meaning set forth in Section 4.7(a).
"Company" shall have the meaning set forth in the Preamble to this
Agreement.
"Company Litigation" shall have the meaning set forth in Section 4.8.
"Company Material Contracts" shall have the meaning set forth in
Section 4.16.
"Company Shareholder Approval" shall have the meaning set forth in
Section 4.2.
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"Company Termination Notice" shall have the meaning set forth in the
preamble to Article V.
"Company's Transaction Fees" shall mean the aggregate amount of any
(without duplication) out-of-pocket costs, fees, or expenses incurred by the
Company in connection with the negotiation and preparation of this Agreement and
the consummation of the Merger with respect to which the Company has control
over such costs, fees or expenses but which remain unpaid by the Company as of
the Merger Consideration Calculation Time, including, but not limited to:
(i) all fees and expenses payable by the Company to the Company's
Financial Advisors;
(ii) all of the Company's proxy solicitation fees and expenses, SEC
filing fees, and printing costs;
(iii) all of the Company's legal fees and expenses (including any
filing fees relating to the HSR Act or any Non-US Anti-Trust
Law to the extent the Company is required to pay such fees
pursuant to Section 6.4(g));
(iv) all of the Company's management change of control contract
payments, retention bonuses (with respect to agreements in
effect at the Merger Consideration Calculation Time, whether
or not due and payable before or after the Closing Date) and
severance payments (other than any amounts related to the
Omitted Restructuring Costs), including any Tax gross-up
amounts and excise Taxes payable by the Company resulting from
such payments (other than any amounts related to the Omitted
Restructuring Costs), in each case where such payments were
initiated as a result of the Company's actions prior to the
Merger Consideration Calculation Time at the Company's sole
discretion (excluding any severance payments or charges
relating to the termination of any employees of the Company
resulting from the Merger or after the Merger Consideration
Calculation Time);
(v) all of the Company's fees and expenses relating to the
Company's due diligence investigation of the Parent and
Purchaser;
(vi) all of the Company's accounting fees and expenses; and
(vii) all of the fees and expenses of the Company's Tax advisors and
consultants (but not including any liability for Taxes nor any
fees and expenses incurred by the Company in connection with
the 338(g) Election and the preparation and filing of the
338(g) Election Form).
The fees and expenses set forth in items (i), (ii) (except with respect
to SEC filing fees), (iii), (v) (with respect to fees and expenses in excess of
US$10,000, individually, or US$50,000 in the aggregate), (vi) and (vii) of this
definition shall be as set forth on a final invoice or invoices submitted by the
Company to the Parent immediately prior to the
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Merger Consideration Calculation Time, which invoice or invoices shall set forth
all of the Company's Transaction Fees (a) actually incurred through the close of
business on such date and which remain unpaid by the Company through the close
of business on such date, (b) reasonably estimated by the Company to be incurred
by the Company following the Merger Consideration Calculation Time and prior to
the Effective Time, and (c) reasonably estimated by the Company to be incurred
by the Company after the Effective Time, all of which shall have been reviewed
and approved by the Company at the time of delivery of such invoice or invoices.
"Company Updates" shall have the meaning set forth in the preamble to
Article IV.
"Copyright" shall have the meaning set forth in the definition of
"Intellectual Property".
"Deadline Date" shall have the meaning set forth in Section 8.2(a).
"Debt Pay-Off Amount" shall mean, without duplication of any amounts
which will reduce the Total Consideration pursuant to Sections 3.3(a) or 3.3(b)
and as described in Part B of Schedule I hereto, an amount equal to the
aggregate outstanding principal of the Funded Indebtedness, and all accrued, but
unpaid (x) interest, fees, charges, lender make-whole payments, prepayment
penalties, and other penalties on the Funded Indebtedness, and (y) costs, fees,
and expenses incurred (after the date of this Agreement and prior to the Merger
Consideration Calculation Time) in connection with any refinancing of the Funded
Indebtedness, calculated as of the Merger Consideration Calculation Time and as
reasonably estimated through the Closing Date in accordance with Section 3.3(b),
less the aggregate amount of any cash in any bank accounts or bank lock boxes of
the Company or any of its Subsidiaries as of the close of business at the Merger
Consideration Calculation Time.
"Disclosure Materials" shall have the meaning set forth in Section
5.13.
"Divestiture Agreements" shall have the meaning set forth in Section
4.16(a).
"DOJ" shall mean the Department of Justice of the United States, or any
successor department thereto.
"Effective Time" shall have the meaning set forth in Section 2.3.
"8% Notes" shall mean the Company's 8% Senior Subordinated Convertible
Notes due May 1, 2004 (subject to acceleration of maturity or mandatory
prepayment).
"8% Notes Debt" shall mean the indebtedness evidenced by the 8% Notes.
"Eligible Option" shall have the meaning set forth in Section
3.3(a)(ii).
"Eligible Option Exercise Proceeds" shall mean the aggregate exercise
price of all Eligible Options plus the aggregate unpaid purchase price for any
shares of Company
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Common Stock issuable pursuant to the terms and conditions of the ESPP pursuant
to Section 3.3(d)(ii).
"Encumbrance" shall mean any claim, lien, charge, security interest,
pledge, mortgage, or any other restriction or encumbrance of any kind or nature.
"Environmental Claim" means any claim, order, investigation, action,
suit, proceeding, injunction, demand, citation, summons, directive, fine,
penalty, assessment or violation of or under any Environmental Laws or relating
to any Environmental Matters, including, without limitation, any claim, order,
investigation, action, suit, proceeding, injunction, demand, citation, summons,
directive, fine, penalty, assessment or violation brought or issued by any
Governmental Authority, and any notice, whether oral or written, advising the
applicable Person of any of the foregoing or of any fact, event or condition
which could reasonably be the basis for the assertion of any of the foregoing.
"Environmental Law" shall mean all applicable laws, statutes,
enactments, orders, regulations, rules and ordinances of any Governmental
Authority relating to Environmental Matters, including, without limitation (as
applicable), the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) and
the Occupational Safety and Health Act, 29 U.S.C. Section 653 et seq.
"Environmental Lien" shall mean any Encumbrances (except for Permitted
Encumbrances), whether recorded or unrecorded, in favor of any Governmental
Authority, relating to any liability of the Company or any of its Subsidiaries
with respect to an Environmental Claim.
"Environmental Matters" means any matter arising out of or relating to
pollution or protection of human health, safety, the environment, natural
resources or laws relating to releases or threatened releases of Hazardous
Substances into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport or handling of
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" shall mean any Person which is a member of the same
"controlled group of corporations," under "common control" or an "affiliated
service group" with any other Person within the meanings of Sections 414(b), (c)
or (m) of the Code, or required to be aggregated with such Person under Section
414(o) of the Code, or is under "common control" with such Person, within the
meaning of Section 400l(a)(14) of ERISA.
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"Escrow Agent" shall mean The Bank of New York, in its capacity as
escrow agent pursuant to the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement, dated July
23, 2003, by and among the Parent, the Company, and The Bank of New York.
"Escrow Release Letter" shall have the meaning set forth in Section
6.14.
"ESPP" shall have the meaning set forth in Section 3.3(d)(ii).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Agent" shall have the meaning set forth in Section 3.4(a).
"Exchange Fund" shall have the meaning set forth in Section 3.4(a).
"Failure Rate" shall mean the quotient of (a) the total number of units
of such Monitored Product delinquent due to the Company's Failure to Ship within
any Production Period during the Total Production Period in accordance with the
Schedule of Production divided by (b) the total number of units of such
Monitored Product scheduled to be shipped during the Total Production Period,
with the resulting quotient multiplied by 100 and expressed as a percentage.
"Financial Advisor" shall have the meaning set forth in Section 4.19.
"Force Majeure" shall mean, with respect to any Person, changes,
effects, circumstances or delays arising from war, riots, embargo, acts of God,
insurrections, floods, common carrier transportation disruptions (for which no
other commercially reasonable transportation is available), fires, explosions,
acts of terrorism or other catastrophes beyond the control of and without the
fault of such Person.
"Form S-4" shall have the meaning set forth in Section 4.26.
"FTC" shall have the meaning set forth in Section 6.4(c).
"Funded Indebtedness" shall mean, collectively: (a) the CIT Debt, the
Allied Debt, the 8% Notes Debt, the 9 1/2% Notes Debt, and the Rosestone Debt,
together with any refinancings thereof entered into by the Company or any of its
Subsidiaries prior to the Merger Consideration Calculation Time; (b) any
additional indebtedness for borrowed money or capital leases entered into by the
Company or any of its Subsidiaries after June 30, 2003, and prior to the Merger
Consideration Calculation Time; and (c) any financing of insurance premiums
incurred by the Company or any of its Subsidiaries after June 30, 2003, and
prior to the Merger Consideration Calculation Time (without duplication of any
amounts which will reduce the Total Consideration pursuant to Section 3.3(a) and
as described in Part B of Schedule I hereto).
"GAAP" shall mean United States generally accepted accounting
principles, as in effect from time to time.
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"Governmental Authority" shall mean any domestic, international,
national, territorial, regional, state or local governmental authority,
quasi-governmental authority, instrumentality, court, commission, arbitrator or
arbitration panel, or tribunal, or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Governmental Contract" shall mean any contract with any Governmental
Authority, any branch of the U.S. or foreign military, or any police or fire
department or other first responder, and any contractor, subcontractor, or
supplier of any of the foregoing.
"Hazardous Substances" means any chemicals, materials or substances
which are defined or regulated as dangerous, toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous or as a pollutant or contaminant under any Environmental Law,
including but not limited to urea-formaldehyde, polychlorinated biphenyls,
asbestos or asbestos-containing materials, petroleum and petroleum products.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976.
"Indemnified Person" shall have the meaning set forth in Section
6.8(a).
"Indemnified Losses" shall have the meaning set forth in Section
6.8(a).
"Intellectual Property" shall mean any United States, foreign,
international and state patents and patent applications, industrial design
registrations, certificates of invention and utility models (collectively,
"Patents"); material unregistered trademarks and service marks, trademark and
service xxxx registrations and applications, material trade names and general
intangibles of like nature, together with all goodwill related to the foregoing
(collectively, "Trademarks"); material Internet domain names; material
unregistered copyrights, and copyright registrations and applications
(collectively, "Copyrights"); Software, technology, trade secrets and other
confidential information, know-how, proprietary processes, formulae, algorithms,
models and methodologies (collectively, "Trade Secrets").
"Knowledge", "know", "known", "to the knowledge of", and all variations
thereof and other words of similar meaning, whether or not capitalized, when
used with respect to:
(a) the Company or any of its Subsidiaries, shall be deemed to
refer to the (i) actual knowledge and/or awareness of Xxxxxxx X. Xxxxx,
Xxxxxx X. Xxxxxxx and Xxxx Xxxxxx, after due inquiry; and (ii) the
actual knowledge and/or awareness of the following officers and
employees of the Company and its Subsidiaries, after due inquiry of any
current employees of the Company and its Subsidiaries who report to any
of the following officers and employees of the Company and its
Subsidiaries: Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxx Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxx, Xxx Xxxxx,
Mick
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Xxxxxx, and Xxxx Xxxxxxxxx; provided that in each case, with respect to
the directors, officers and employees of the Company and its
Subsidiaries listed in this item (a), any knowledge acquired by any
such Person following termination of employment shall not be deemed to
be actual knowledge of any remaining director, officer, or employee of
the Company or its Subsidiaries, or the Company.
(b) the Parent, Purchaser, or any of their respective
Subsidiaries, shall be deemed to refer to the (i) actual knowledge
and/or awareness of Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxx and after
due inquiry; and (ii) actual knowledge and/or awareness of the
following officers and employees of the Parent and its Subsidiaries,
after due inquiry of any current employees of the Parent and its
Subsidiaries who report to any of the following officers and employees
of the Parent and its Subsidiaries: Xxxx Xxxxxxxxx, Xxxxxx Xxxxxxxx,
Xxxx Xxxxx, Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxxx,
Xxxxxx Xxxxxxx, and Xxxx Xxxxxxx and the following consultant to the
Parent and its Subsidiaries: Xxxx Xxxxxx; provided that in each case,
with respect to the directors, officers and employees of the Parent and
its Subsidiaries listed in this item (b), any knowledge acquired by any
such Person following termination of employment shall not be deemed to
be actual knowledge of any remaining director, officer, or employee of
the Parent or its Subsidiaries, or the Parent.
"Material Adverse Change" shall mean, when used with respect to:
(a) the Company or any of its Subsidiaries, any change in the
condition (financial or otherwise), results of operations, assets,
liabilities, properties or business of the Company, or any of its
Subsidiaries, which individually or in the aggregate (taking into
account all other such changes), materially and adversely affects, or
is reasonably likely to materially and adversely affect, the condition
(financial or otherwise), results of operations, assets, liabilities,
properties or business of the Company and its Subsidiaries, taken as a
whole, including, but not limited to:
(i) the termination or amendment of any written contract,
purchase order, or customer order to which the Company or any
of its Subsidiaries is a party as of the date hereof for any
reason (including the failure to obtain, prior to the
Effective Time, the consent of any party thereto other than
the Company or any of its Subsidiaries which is required to be
obtained by the terms of such contract as a result of the
consummation by the Company of the transactions contemplated
by this Agreement or the Ancillary Documents, including the
Merger), but excluding a Governmental Authority's exercise of
a non-appropriation clause contained in any such contract for
products (other than spare parts) to be provided by or
services to be rendered by the Company or any of its
Subsidiaries after the date hereof, which terminations or
amendments, individually or in the aggregate, are reasonably
likely to result in a loss of anticipated Company revenues
from the date hereof through December 31,
10
2004, (net of the anticipated aggregate amount of Company
revenues from the date hereof through December 31, 2004, that
are reasonably likely to result from any new written
contracts, purchase orders, or customer orders entered into or
received by the Company or any of its Subsidiaries from the
date hereof through the Effective Time (but excluding spare
parts and the Army SAPI Bid), which revenues were not included
in the Budget and Forecast for the period beginning on the
date hereof and continuing through December 31, 2004), in
excess of US$10,000,000; or
(ii) The Failure Rate with respect to any Monitored
Product scheduled for shipment during the Total Production
Period shall exceed twenty five percent (25%), determined as
of the last day of the Total Production Period; or
(iii) Army SAPI MAC shall mean the occurrence of all of the
following prior to the Closing Date:
(A) receipt by the Company or any of its
Subsidiaries prior to the Closing Date of official
notice ("Company Non-Selection Notice", a copy of
which shall promptly be delivered to Parent) from the
Army SAPI Contracting Organization pursuant to FAR
15.506 that, for any reason, the bid of the Company
or any of its Subsidiaries is not in the competitive
range and has received no portion of an award with
respect to Army SAPI Bid (DSCP Solicitation Number
SP0100-03-R-0007, such Solicitation being referred to
as the "Army SAPI Bid"); and
(B) receipt by Parent or any of its Subsidiaries
prior to the Closing Date of official notice ("Parent
Non-Selection Notice", a copy of which shall promptly
be delivered to Company) from the Army SAPI
Contracting Organization pursuant to FAR 15.506 that,
for any reason, the bid of the Parent or any of its
Subsidiaries is not in the competitive range and has
received no portion of an award with respect to the
Army SAPI Bid; and
(C) in the event that (A) and (B) above occur,
the Parent shall have the right to declare a Material
Adverse Change and terminate the Merger Agreement by
written notice to the Company ("MAC Termination
Notice"), given within three Business Days following
the later of receipt by Parent of a copy of the
Company Non-Selection Notice and the Parent
Non-Selection Notice, such termination to be
effective on the third Business Day following the
date the MAC Termination Notice is given to the
Company; provided, however, (i) the Company may
deliver to Parent a notice in writing that the Parent
shall delay the effective date of the MAC Termination
Notice for a period of fifteen (15) days, without
prejudice of the rights of the Parent hereunder, in
order to allow
11
the Company to investigate the official reason for
the Army SAPI Contracting Organization issuance of
the Company Non-Selection Notice; and (ii) within
such fifteen (15) day period the Company shall
provide to the Parent information provided by the
Army SAPI Contracting Organization obtained by the
Company at the formal debriefing, as well as actions
proposed by the Company intended to remedy the
determination of the Army SAPI Contracting Activity
that the Company was not in the competitive range,
and/or to obtain future awards from the Army. The
Parent may, upon review of the information provided
by the Company, in Parent's sole discretion, either
a) waive the Material Adverse Change and withdraw its
MAC Termination Notice and consummate the Merger in
accordance with the Merger Agreement, b) reaffirm its
MAC Termination Notice and terminate the Merger
Agreement forthwith, or c) if acceptable to the
Company delay the effective date of the MAC
Termination Notice for such additional period as
Parent, in it's sole discretion, may determine to
allow the Company to remedy the Company
Non-Selection, and
(D) notwithstanding (A), (B), or (C), any delay
in making an award with respect to the Army SAPI Bid
beyond the Closing Date, any expiration of the Army
SAPI Bid prior to the Closing Date, or any
re-solicitation of the Army SAPI Bid prior to the
Closing Date, shall not, of itself, constitute a
Material Adverse Change.
or
(b) the Parent, Purchaser, or any of their respective
Subsidiaries, any change in the condition (financial or otherwise),
results of operations, assets, liabilities, properties or business of
the Parent, Purchaser, or any of their respective Subsidiaries, which
individually or in the aggregate (taking into account all other such
changes), materially and adversely affects, or is reasonably likely to
materially and adversely affect, the condition (financial or
otherwise), results of operations, assets, liabilities, properties or
business of the Parent, Purchaser, and their respective Subsidiaries,
taken as a whole;
provided that a Material Adverse Change:
(1) shall not be deemed to have occurred with respect to the
Company or any of its Subsidiaries with respect to or relating to any
matter which is the subject of paragraphs (a)(i), (a)(ii) or (a)(iii)
above unless and until the specific circumstances outlined above in
paragraphs (a)(i), (a)(ii) or (a)(iii) occur and constitute a Material
Adverse Change or when aggregated together with any other breach of any
representation, warranty, covenant, or agreement by the Company,
otherwise constitutes a Material Adverse Change with respect to the
Company; and
12
(2) shall not (with respect to any Person or any of its
Subsidiaries) include any change, effect, condition, event or
circumstance occurring after the date hereof arising out of or
attributable to:
(aa) any decrease in the market price of a Person's
securities in and of itself (but not any change, effect,
conditions, event or circumstance underlying such decrease to
the extent that it would otherwise constitute a Material
Adverse Change);
(bb) changes, effects, conditions, events or circumstances
that generally affect any of the defense, aviation (military,
public safety, civilian, or commercial), aerospace (military,
public safety, civilian, or commercial), marine (military,
public safety, civilian, or commercial), automotive or ground
vehicle (military, public safety, civilian, or commercial) or
personnel (military, public safety, civilian, or commercial)
safety systems industries of which the Person is a member
(including legal and regulatory changes) (provided that any
such change, effect or circumstance does not affect the
affected Person in a materially disproportionate manner);
(cc) general economic conditions or changes, effects,
conditions, or circumstances affecting the financial markets
(provided that any such change, effect or circumstance does
not affect the affected Person in a materially
disproportionate manner);
(dd) general economic conditions or changes, effects,
conditions, or circumstances arising from a Force Majeure and
which are not primarily limited in their effect to such
Person's operations, assets, liabilities, properties or
business (provided that any such change, effect or
circumstance does not affect the affected Person in a
materially disproportionate manner);
(ee) changes to the affected Person which the affected
Person successfully bears the burden of demonstrating arose
primarily (or with respect to paragraph (a) (iii), solely)
from the announcement or performance of this Agreement; or
(ff) the actions of any Person (or their Subsidiaries,
Affiliates, or any of their respective Representatives), who
is a party to this Agreement and who claims that a Material
Adverse Change has occurred with respect to any other Person
(who is not a Subsidiary or Affiliate of the Person claiming
that a Material Adverse Change has occurred but who is also a
party to this Agreement), which leads to or precipitates any
such change, effect, condition, event or circumstance,
directly or indirectly, that would constitute a Material
Adverse Change ("Precipitating Conduct"), provided however,
that Precipitating Conduct shall not include fair and lawful
competition in the ordinary course of its business unless the
affected Person successfully bears the burden of demonstrating
that such
13
competition by the non-affected Person was unfair, unlawful or
materially violated any agreement between the affected Person
(or any of its Subsidiaries) and the non-affected Person (or
any of its Subsidiaries);
provided, however, the foregoing provisos (2)(aa) - (2)(ee), inclusive,
shall not apply to paragraph (a)(ii) of this definition and the foregoing
provisos (2)(aa) - (2)(dd), inclusive, shall not apply to paragraphs (a)(i) or
(a)(iii) of this definition.
"Material Adverse Effect" shall mean any event or condition of any
character which results in, has resulted in, or could reasonably be expected to
result in, a Material Adverse Change on the condition (financial or otherwise),
results of operations, assets, liabilities, properties, or business of a Person
and its Subsidiaries, taken as a whole, or would prevent or unreasonably delay
consummation of the transactions contemplated hereby.
"Merger" shall have the meaning set forth in the in the recitals to
this Agreement.
"Merger Consideration" shall have the meaning set forth in Section
3.3(a)(i).
"Merger Consideration Calculation Time" shall mean 5:00 p.m. (Phoenix
time) on the day that is five (5) Business Days prior to the anticipated Closing
Date.
"Monitored Products" shall mean the SAPI-Marines, SAPI-Army (other than
with respect to the Army SAPI Bid), Seats (Cockpit and Troop), and Cockpit
Airbag Systems ("CABS") product lines of the Company (but excluding in all cases
spares).
"9 1/2% Notes Debt" shall mean the indebtedness evidenced by the 9 1/2%
Notes.
"9 1/2% Notes" shall mean the Company's 9 1/2% Senior Subordinated
Notes due September 30, 2003 (subject to acceleration of maturity or mandatory
prepayment).
"Non-U.S. Anti-Trust Law" shall mean any anti-trust or similar law of
any Governmental Authority (other than a Governmental Authority within the
United States), including Article 6(1)(b) or 8(2) of Council Regulation No.
4064/89 of the European Community.
"NYSE" shall mean the New York Stock Exchange, or any successor
exchange.
"O&D Tail Insurance" shall have the meaning set forth in Section
6.8(b)(i).
"Option Cancellation Agreement" shall have the meaning set forth in
Section 3.3(a)(ii).
"Option Plan(s)" shall have the meaning set forth in Section
3.3(a)(ii).
"Outstanding Company Shares" shall mean the total number of issued and
outstanding shares of Company Common Stock immediately prior to the Effective
Time plus the total number of shares of Company Common Stock deemed to be issued
upon
14
exercise of all Eligible Options plus the total number of shares of Company
Common Stock deemed to be issued in connection with the ESPP.
"Parent" shall have the meaning set forth in the Preamble to this
Agreement.
"Parent Average Trading Price" shall be the mean of the average between
the bid and the ask price of Parent Common Stock on the NYSE (as reported on the
NYSE Composite Tape) at the close of the market for the twenty (20) consecutive
trading days ending ten (10) trading days prior to the Closing Date.
"Parent Common Stock Consideration Percentage" shall mean 100% less the
Cash Consideration Percentage.
"Parent Common Stock" shall have the meaning set forth in the recitals
to this Agreement.
"Parent-Company Confidentiality Agreement" shall mean the
Confidentiality Agreement, dated January 28, 2003, between the Parent and the
Company.
"Parent Disclosure Schedule" shall have the meaning set forth in the
preamble to Article V.
"Parent Litigation" shall have the meaning set forth in Section 5.7.
"Parent MAC" shall have the meaning set forth in the preamble to
Article V.
"Parent Preferred Stock" shall have the meaning set forth in Section
5.4(a).
"Parent Reports" shall have the meaning set forth in Section 5.6.
"Parent Specified Line of Business" shall mean (i) the provision of
security products, training or services to civilian and military law enforcement
agencies and corrections departments, homeland security providers, U.S. and
foreign militaries, Governmental Authorities, non-governmental organizations,
fire departments and other first responders; and (ii) the provision of vehicle
armoring systems to individuals, companies and the other Persons described in
(i) above.
"Parent Termination Notice" shall have the meaning set forth in the
preamble to Article IV.
"Parent Transaction Expenses" shall mean the aggregate amount (without
duplication) of all reasonable, documented, out-of-pocket costs, fees, or
expenses incurred by the Parent in connection with the negotiation and
preparation of this Agreement and the consummation of the Merger and with
respect to which Parent has control over such costs, fees and expenses, all as
such costs, fees or expenses shall have been incurred by the Parent commencing
on July 23, 2003, and ending on the earlier to occur of (a) termination of this
Agreement or (b) acceptance by the Company of an Unsolicited Offer:
15
(i) the reasonable, documented, out-of-pocket expenses incurred by
Wachovia Securities, Inc. in connection with the negotiation and
preparation of this Agreement and the consummation of the Merger (other
than the expenses generally described in item (ii) below), which are
reimbursable to such investment advisor by Parent pursuant to a binding
agreement on the Parent as of the date of this Agreement (but not any
other fees of such investment advisor, howsoever described, except as
set forth in item (ii) of this definition);
(ii) up to but not exceeding US$250,000 of the total fees of
Wachovia Securities, Inc., which are payable to such investment advisor
by Parent pursuant to a binding agreement on the Parent as of the date
of this Agreement, relating to the investment advisor's preparation of
a "fairness opinion" for the Parent relating to the Merger;
(iii) the other consulting, legal, Escrow Agent, Tax and accounting,
printing, travel, due diligence and related fees and expenses incurred
by the Parent in connection with the negotiation and preparation of
this Agreement and the consummation of the Merger (including any fees
incurred by Parent or the Purchaser pursuant to Section 6.4(g)); and
(iv) if the Company breaches its obligations under Sections 8.2(d)
and 8.7 and the Parent prevails in enforcing Sections 8.2(d) and 8.7
against the Company, the Parent Transaction Expenses shall include,
without duplication, the interest, fees and expenses payable by the
Company as described in and pursuant to the terms and conditions of the
last two sentences of Section 8.7(f).
"Parent Updates" shall have the meaning set forth in the preamble to
Article V.
"Participating Company Shares" or "Participating Company Stock" shall
mean any Outstanding Company Shares other than shares of Company Common Stock,
if any, cancelled pursuant to Section 3.3(a)(iv).
"Patents" shall have the meaning set forth in the definition of
Intellectual Property.
"Permitted Encumbrances" shall mean any and all (a) Encumbrances for
Taxes and other charges or assessments of any Governmental Authority which (i)
arise by operation of Applicable Law, (ii) are not due and payable at the Merger
Consideration Calculation Time, and (iii) for which adequate reserves have been
established on the books, records, and financial statements of the Company; (b)
Encumbrances of landlords with respect to Company Leases where the Company or
any of its Subsidiaries is a lessee or tenant, and all mechanics' liens,
workmen's liens, common carrier liens, warehousemen's liens and other similar
liens or Encumbrances incurred in the ordinary course of business for sums not
yet due and payable, (c) purchase money security interests relating to the
acquisition of goods in the ordinary course of business, (d) any and all
restrictions, easements or other imperfections of title or Encumbrances on any
Real Property or other property or asset that do not materially diminish the
value thereof
16
or materially interfere with the use thereof in the operations of the Company or
any of its Subsidiaries, (e) any Encumbrances arising from or related to the
Funded Indebtedness or other immaterial capital leases of the Company or its
Subsidiaries, and (f) any other Encumbrances disclosed on the Company Disclosure
Schedules.
"PBGC" shall have the meaning set forth in Section 4.11(g).
"Person," whether or not capitalized, shall mean any natural person,
corporation, unincorporated organization, partnership, limited liability
company, association, joint stock company, joint venture, trust or government,
or any agency or political subdivision of any government or any other entity.
"Post Signing Returns" shall have the meaning set forth in Section
6.10(a).
"Product" shall have the meaning set forth in Section 4.25.
"Production Period" shall mean each consecutive complete two (2) week
period beginning with the two (2) week period which commences on August 31, 2003
and ends on September 13, 2003; ending with the last complete two (2) week
period ending prior to the Closing Date.
"Proxy Statement" shall have the meaning set forth in Section 4.26.
"Proxy Statement/Prospectus" shall have the meaning set forth in
Section 6.3(a).
"Purchaser" shall have the meaning set forth in the Preamble to this
Agreement.
"Regulatory Challenge" shall have the meaning set forth in Section
6.4(d).
"Regulatory Law" shall have the meaning set forth in Section 6.4(c).
"Regulatory Restrictions" shall have the meaning set forth in Section
6.4(b).
"Reporting Requirements" shall have the meaning set forth in Section
6.2(b)(xvii).
"Representatives" shall mean, with respect to any Person, any officer,
director, employee, investment banker, advisor, consultant agent or other
representative of such Person, its Subsidiaries or its Affiliates.
"Restraints" shall have the meaning set forth in Section 7.1(b).
"Rosestone Debt" shall mean the indebtedness evidenced by the Company's
US$800,000 promissory note, dated June 13, 2000, issued to Rosestone Properties,
LLC.
"RSP" shall have the meaning set forth in Section 3.3(d)(i).
"Schedule of Production" shall mean each two week schedule of
production for any Production Period during the Total Production Period of
Monitored Products
17
attached hereto as Schedule II and which are the subject of binding customer
agreements or purchase orders, subject to, and as modified from time to time by,
the Company hereinafter (with written notice to the Parent) as necessary to
reflect changes in planned production arising in the ordinary course of business
during the Production Period which are occasioned by delays in production of any
Monitored Products requested by any customer of the Company with respect to such
Monitored Products.
"SEC" shall mean the Securities and Exchange Commission of the United
States.
"Securities Act" shall mean the Securities Act of 1933.
"Shareholder Agreement" shall have the meaning set forth in the
Preamble to this Agreement.
"Shareholders Meeting" shall have the meaning set forth in Section 4.2.
"Software" shall mean any and all material computer programs (excluding
mass market software licensed to Company that is available in consumer retail
stores or otherwise commercially available and subject to "shrink-wrap" or
"click-through" license agreements), including any and all related (i) software
implementations of algorithms, models and methodologies, whether in source code
or object code form, (ii) databases, compilations, and any other electronic data
files, including any and all collections of data, whether machine readable or
otherwise, (iii) descriptions, flow-charts, technical and functional
specifications, and other work product used to design, plan, organize, develop,
test, troubleshoot and maintain any of the foregoing, (iv) without limitation of
the foregoing, the software technology supporting any functionality contained on
any Internet site(s), and (v) documentation, including technical, end-user,
training and troubleshooting manuals and materials, relating to any of the
foregoing.
"Subsidiary" of any specified Person shall mean any corporation fifty
percent (50%) or more of the outstanding capital stock of which, or any
partnership, joint venture, limited liability company or other entity fifty
percent (50%) or more of the ownership interests of which, is directly or
indirectly owned or controlled by such specified Person, or any such
corporation, partnership, joint venture, limited liability company, or other
entity which may otherwise be controlled, directly or indirectly, by such
Person.
"Subsidiary Liquidations" shall have the meaning set forth in Section
6.15.
"Superior Transaction" shall have the meaning set forth in Section
6.1(b).
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax" or "Taxation" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer,
18
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Group" shall have the meaning set forth in Section 4.10(a).
"Tax Return" shall mean a report, return or other information
(including any attached schedules or any amendments to such report, return or
other information) supplied to or filed with, or required to be supplied to or
filed with, a Governmental Authority with respect to any Tax, including an
information return, claim for refund, amended return or declaration of estimated
Tax.
"Terminating Company Breach" shall have the meaning set forth in
Section 8.4(a).
"Terminating Parent Breach" shall have the meaning set forth in Section
8.3.
"Total Consideration" shall mean US$ 110,500,000.
"Total Production Period" shall mean the period beginning on the first
day of the first Production Period and ending on the last day of the last
Production Period.
"Trademarks" shall have the meaning set forth in the definition of
Intellectual Property.
"Trade Secrets" shall have the meaning set forth in the definition of
Intellectual Property.
"Unsolicited Offer" shall have the meaning set forth in Section 6.1(b).
"WARN Act" shall have the meaning set forth in Section 4.12.
1.2 Interpretation. For purposes of this Agreement, (i) the words
"include," "includes" and "including" shall be deemed to be followed by the
words "without limitation", (ii) the words "herein", "hereof", "hereby",
"hereto" and "hereunder" and words of similar import refer to this Agreement as
a whole, including the Exhibits and Schedules, and (iii) unless the context
clearly indicates otherwise, words describing the singular number shall include
the plural, and vice versa, and words denoting any gender shall include all
genders. Any references herein to Articles, Sections, Exhibits and Schedules
mean the Articles and Sections of, and the Exhibits and Schedules attached to,
this Agreement. Any reference herein to any agreement, instrument, report,
filing, financial statement, balance sheet, schedule, exhibit or other document
(howsoever described) means such agreement, instrument, report, filing,
financial statement, balance sheet, schedule, exhibit or other document as from
time to time amended, modified or supplemented, including (in the case of
agreements, instruments, schedules or exhibits) by waiver or consent, and all
attachments thereto and instruments incorporated therein. Any Applicable Law
defined or referred to herein (i) means, if the law is a statutory law, rule or
regulation, such statutory law, rule or regulation as from time to time amended,
19
modified or supplemented or replaced by succession of comparable successor
statutes, rules or regulations, in each case through the date of this Agreement
or through the Closing Date, as applicable; and (ii) includes, if the law is a
statutory law, all rules and regulations issued or promulgated thereunder. All
references to a Person are also to such Person's permitted successors and
assigns.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time, upon the terms and subject
to the conditions of this Agreement and the applicable provisions of the Arizona
Business Corporation Act, A.R.S. xx.xx. 10-001, et. seq. (the "Arizona Code"),
Purchaser shall be merged with and into the Company and the separate corporate
existence of Purchaser shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall become a wholly-owned Subsidiary of Parent. The Merger
shall have the effects specified in Section 10-1106(A) of the Arizona Code.
Without limiting the generality of the foregoing and subject thereto, at the
Effective Time, all of the property, rights, privileges, immunities, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, and duties of the Company and Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
2.2 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Kane, Kessler, P.C., 1350 Avenue of the Americas, New York, New York,
on the third Business Day following the date of satisfaction (or waiver, if
permissible) of the conditions set forth in Article VII (excluding conditions
that, by their terms, cannot be satisfied until the Closing Date, but subject to
the fulfillment or waiver of such conditions on the Closing Date), or at such
other time, date or place as Parent and the Company may agree. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date."
2.3 Effective Time. On the Closing Date, the parties hereto shall
(i) file articles of merger with respect to the Merger (the "Articles of
Merger") in such form as is required by and executed in accordance with the
Arizona Code and (ii) make all other filings or recordings required under the
Applicable Laws of the State of Arizona in connection with the consummation of
the Merger. The Merger shall become effective at the date and time of filing of
the Articles of Merger (or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger as may be permitted by the Arizona Code) (the "Effective Time").
2.4 Articles of Incorporation, Bylaws, Directors and Officers of
the Surviving Corporation.
Unless otherwise agreed by the Company and Parent prior to the Closing,
at the Effective Time, without any further action on the part of Parent,
Purchaser or the Company:
20
(a) The Articles of Incorporation of the Purchaser in
effect immediately prior to the Effective Time shall be at and after the
Effective Time the Articles of Incorporation of the Surviving Corporation, until
thereafter amended as provided by Applicable Law and such Articles of
Incorporation; provided, however, that Article I of such Articles of
Incorporation shall be amended to read as follows: "The name of the corporation
is Simula, Inc.";
(b) The Bylaws of Purchaser as in effect immediately
prior to the Effective Time shall be at and after the Effective Time (until
amended as provided by Applicable Law, its Articles of Incorporation and its
Bylaws, as applicable) the Bylaws of the Surviving Corporation;
(c) The officers of the Purchaser immediately prior to
the Effective Time shall serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
elected or appointed and qualified or until their resignation or removal; and
(d) The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time, until their successors are elected or appointed and
qualified or until their resignation or removal.
2.5 Section 338(g) Election. At the election of Parent, in its
sole and absolute discretion, the Parent may make the election provided under
Section 338(g) of the Code (including under any comparable statutes in any other
jurisdiction) with respect to all Subsidiaries of the Company. Such election
(the "338(g) Election") shall be in accordance with the Code and all other
Applicable Law. In the event that the Parent elects to make the 338(g) Election,
the Parent shall give timely written notice thereof to the Company, and the
Company shall cooperate with the Parent in order to facilitate the 338(g)
Election, and the Parent shall file the appropriate IRS Form ("338(g) Election
Form"). The Parent shall specify the calculations which shall be used concerning
(i) the assets deemed purchased pursuant to the 338(g) Election contained in
this Section 2.5, (ii) the computation of the Modified Aggregate Deemed Sale
Price ("MADSP") and the Adjusted Gross-Up Base, each as defined pursuant to the
Code, and (iii) the allocation of the MADSP among the assets of the Company and
its Subsidiaries. The Parent shall choose the accounting and Tax advisors to
assist in the preparation and filing of the 338(g) Election Form. Upon
submission by the Company of proper invoices or other similar documentation
prior to the Merger Consideration Calculation Time, the Parent shall pay the
reasonable fees, costs and expenses incurred by the Company in connection with
the 338(g) Election and the preparation and filing of the 338(g) Election Form
(including reasonable advisory and consulting fees, costs and expenses), and
such amounts shall not be deducted from the Total Consideration or the Merger
Consideration.
21
ARTICLE III
EFFECT OF THE MERGER ON SECURITIES OF PURCHASER AND THE COMPANY
3.1 Parent Securities. Each share of capital stock of Parent
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
3.2 Purchaser Securities. At the Effective Time, each share of
common stock, par value US$.01 per share, of Purchaser that is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted into and
become one validly issued, fully paid and non-assessable share of common stock,
par value US$.01 per share, of the Surviving Corporation.
3.3 Company Common Stock.
(a) Company Common Stock.
(i) At the Effective Time, each
Participating Company Share shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into the right to receive the following (the "Merger
Consideration"):
(A) an amount of cash equal to
the quotient of: (i) the product of (a) the Total
Consideration (as increased by the amounts described
in Part A of Schedule I and decreased by the amounts
described in Part B of Schedule I, as increased by
the Eligible Option Exercise Proceeds, and as
decreased by the Closing Date Payments) multiplied by
(b) the Cash Consideration Percentage, divided by
(ii) the aggregate number of Participating Company
Shares; and
(B) the number of shares, or
fraction thereof, of Parent Common Stock, equal to
the quotient of: (i) ((a) the product of (1) the
Total Consideration (as increased by the amounts
described in Part A of Schedule I and decreased by
the amounts described in Part B of Schedule I, as
increased by the Eligible Option Exercise Proceeds,
and as decreased by the Closing Date Payments)
multiplied by (2) the Parent Common Stock
Consideration Percentage, divided by (b) the
aggregate number of Participating Company Shares),
divided by (ii) the Parent Average Trading Price.
(ii) At the Effective Time, each
outstanding option to purchase Company Common Stock granted
under the Company's 1992 Stock Option Plan, 1994 Stock Option
Plan, and 1999 Stock Option Plan (collectively the "Option
Plans") which (a) has not previously expired or
22
been exercised in full and (b) has an exercise price less than
the Merger Consideration (each such option, an "Eligible
Option"), whether or not vested or exercisable on the Closing
Date, shall be deemed for the purposes of this Section 3.3 to
have been exercised by "cashless exercise" immediately prior
to the Effective Time for the number of shares of Company
Common Stock issuable upon exercise of such Eligible Option
and shall have the right to receive the Merger Consideration
for each resulting Participating Company Share pursuant to
Section 3.3(a)(i), subject to the deduction of applicable
withholding Taxes; and provided, that
(A) the cash portion of the
Merger Consideration payable with respect to each
such Participating Company Share shall be reduced by
an amount equal to (x) the exercise price of such
Eligible Option multiplied by (y) the Cash
Consideration Percentage; and
(B) the number of shares of
Parent Common Stock issued to the holder of such
Participating Company Shares as a portion of the
Merger Consideration with respect to such
Participating Company Shares held by such holder
shall be reduced by a number of shares of Parent
Common Stock equal to the result of (x) the aggregate
exercise price of all Eligible Options held by such
holder multiplied by (y) the Parent Common Stock
Consideration Percentage and divided by (z) the
Parent Average Trading Price.
No payment of Merger Consideration with respect to an
Eligible Option shall be made to the holder of such Eligible Option until
receipt by the Exchange Agent of an Option Cancellation Agreement, in a form
mutually acceptable to the Company and the Parent ("Option Cancellation
Agreement"), with respect to all Eligible Options signed by the holder of such
Eligible Option. The Exchange Agent shall be required to deliver to the
Surviving Corporation all such executed Option Cancellation Agreements promptly
after receipt.
(iii) As a result of the Merger and
without any action on the part of the holders thereof, at the
Effective Time, all shares of Company Common Stock shall cease
to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of a share of Company Common
Stock (other than the Company, the Parent, and the Purchaser)
shall thereafter cease to have any rights with respect to such
shares of Company Common Stock, except with respect to holders
of Participating Company Shares, the right to receive, without
interest, the Merger Consideration in accordance with Section
3.3 upon the surrender of a certificate or certificates
representing such shares of Company Common Stock (if any such
certificates had been issued by the Company with respect to
such shares of Company Common Stock).
23
(iv) At the Effective Time, each share
of Company Common Stock held by the Parent or the Purchaser or
held in the Company's treasury at the Effective Time shall, by
virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding and shall be cancelled
and retired without payment of any Merger Consideration or any
other consideration therefor.
(v) If the aggregate number of shares
of Parent Common Stock to be delivered to any holder of
Participating Company Shares as a portion of the Merger
Consideration includes any fractional shares, the aggregate
number of shares of Parent Common Stock to be delivered to
such holder of Participating Company Shares shall be rounded
down to the nearest whole number of shares of Parent Common
Stock and, if so rounded down, such holder of Participating
Company Shares shall receive, in lieu of the fractional shares
not delivered due to such rounding, a cash payment therefor
pursuant to Section 3.4(e).
(b) Parent will: (i) on or after the Effective Time, pay
off any and all amounts due and owing with respect to the Funded Indebtedness,
including but not limited to the aggregate outstanding principal amount of, and
all accrued, but unpaid, interest, fees, charges and penalties on, the Funded
Indebtedness, to the holders thereof in accordance with the terms and conditions
of the notes, agreements, documents and/or instruments evidencing the Funded
Indebtedness in a timely manner when due (including any mandatory redemption
thereof); and (ii) at Closing, pay off any and all amounts of the Company's
Transaction Fees which have accrued, or are due and owing, but remain unpaid and
outstanding immediately prior to the Closing (which may include a reasonable
estimate of unbilled expenses, up to seven (7) days reasonably estimated legal
fees prior to the Closing, and a reasonable estimate of potential post-Closing
legal fees and expenses). No later than the Merger Consideration Calculation
Time, the Company shall provide Parent with such bills, invoices and other
supporting documentation as Parent may reasonably request in respect of the
Company's Transaction Fees, and with payoff letters from each holder of, or
trustee with respect to, Funded Indebtedness (if available from such holder or
trustee or, if unavailable, in such form as reasonably acceptable to Parent), or
such other evidence acceptable to the Parent of the aggregate outstanding amount
of any portion of the Funded Indebtedness. If a payoff letter cannot be obtained
with respect to any Funded Indebtedness, the payoff amount of such Funded
Indebtedness shall be calculated pursuant to the terms of the notes, agreements,
documents, indentures, and/or instruments evidencing such Funded Indebtedness,
or after consultation with the holders of such Funded Indebtedness.
(c) Option Plan(s).
(i) At the Effective Time, all Option
Plans shall be terminated by the Company and all Options and
certificates representing Options, if any, shall no longer be
outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of an Option (and of
a certificate representing an Option, if any) shall cease to
have any
24
rights with respect thereto, other than and subject to the
rights of holders of Eligible Options to receive the Merger
Consideration pursuant to Section 3.3(a)(ii).
(ii) The Company's board of directors,
or any committee appointed by the Company's board of directors
to administer the Option Plans, shall take any and all actions
reasonably required to vest and make fully exercisable all of
the Eligible Options granted under the Option Plans and to
provide all of the holders of such Eligible Options with the
right to exercise all of such Eligible Options regardless of
whether such Eligible Options were exercisable on the date of
this Agreement.
(d) Restricted Stock Plan and Employee Stock Purchase
Plan.
(i) The Company's 1992 Restricted Stock
Plan (the "RSP") shall terminate.
(ii) The Company's Employee Stock
Purchase Plan adopted on June 20, 1996 (the "ESPP") shall
terminate and be liquidated. As of the Effective Time, each of
the purchase rights to purchase a share of Company Common
Stock granted or awarded under the ESPP, whether or not vested
or exercisable on the date of this Agreement, shall become
fully vested and exercised immediately prior to the Effective
Time and shall be deemed to be a Participating Company Share
and retired and converted at the Effective Time into the right
to receive the Merger Consideration pursuant to Section
3.3(a), subject to (A) the Surviving Corporation's withholding
by payroll deduction of the unpaid purchase price therefor
pursuant to the terms and conditions of the ESPP, and (B) the
deduction of applicable withholding Taxes, if any.
3.4 Exchange of Certificates Representing Company Common Stock.
(a) On or prior to the Closing, (i) Parent shall appoint
Bank of America, N.A., to act as exchange agent (the "Exchange Agent") hereunder
for payment of the Merger Consideration to the holders of the Participating
Company Stock upon surrender of certificates representing any shares of Company
Common Stock cancelled pursuant to Section 3.3(a) (the "Company Common Stock
Certificates") and the delivery of Option Cancellation Agreements; and (ii)
Parent shall enter into an agreement with the Exchange Agent reasonably
satisfactory to the Company which shall provide that Parent shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of the holders of
Participating Company Stock, the aggregate Merger Consideration for exchange in
accordance with this Article III through the Exchange Agent, including
certificates representing the aggregate number of whole shares of Parent Common
Stock issuable pursuant to Section 3.3 in exchange for outstanding shares of
Participating Company Stock and an amount of cash equal to the aggregate cash
amount payable to the holders of Participating Company Stock pursuant to the
terms of Section 3.3 (such shares
25
of Parent Common Stock and cash, together with any dividends or distributions
with respect thereto with a record date after the Effective Time, being
hereinafter collectively referred to as the "Exchange Fund").
(b) Promptly after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record of Participating Company
Stock whose Participating Company Stock was converted into the right to receive
the Merger Consideration pursuant to Section 3.3: (i) a letter (in such form and
having such provisions as are customary for letters of this nature) specifying
that delivery of the Participating Company Stock shall be effected, and risk of
loss and title to Participating Company Stock shall pass, only upon delivery of
the Company Common Stock Certificates or Option Cancellation Agreements to the
Exchange Agent, as applicable, together with a form letter of transmittal; and
(ii) instructions for effecting the surrender of such Company Common Stock
Certificates and delivery of Option Cancellation Agreements to the Exchange
Agent in exchange for the Merger Consideration. Upon surrender of a Company
Common Stock Certificate or delivery of an Option Cancellation Agreement to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may be reasonably required by the Exchange Agent, (i) the Exchange Agent
shall promptly deliver to the holder of such Participating Company Stock in
exchange therefor certificates representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article III, certain dividends or other distributions in
accordance with Section 3.4(c), and a check in the amount equal to the cash
which such holder has the right to receive pursuant to the provisions of this
Article III (including any cash in lieu of any fractional shares in accordance
with Section 3.4(e)), and (ii) such shares of Participating Company Stock so
surrendered shall forthwith be cancelled. No interest will be paid or will
accrue on the cash payable upon surrender of any Participating Company Stock. In
the event of a transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, exchange and payment may be
made with respect to such Company Common Stock to such a transferee if the
Company Common Stock Certificate representing such shares of Company Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer. The Parent or the Purchaser shall pay all
applicable transfer and stamp Taxes with respect to the issuance of Parent
Company Stock as payment of Merger Consideration. Until surrendered as
contemplated by this Section 3.4, each Company Common Stock Certificate shall be
deemed at any time after the Effective Time for all purposes, to represent only
the right to receive upon surrender the Merger Consideration with respect to the
shares formerly represented thereby. Notwithstanding the foregoing, Company
Common Stock Certificates surrendered for, or Option Cancellation Agreements
delivered for, exchange by any Person constituting an "affiliate" (as that term
is used in Rule 145 under the Securities Act) of the Company shall not be
exchanged until Parent has received an Affiliate Letter in substantially the
form attached hereto as Exhibit A ("Affiliate Letter"). From and after the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of the shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Company Common Stock
Certificates or Option Cancellation Certificates are presented
26
to the Surviving Corporation, they shall be cancelled and exchanged as provided
in this Article III.
(c) No dividends or other distributions with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Participating Company Stock with respect to
shares of Parent Common Stock represented thereby, and no cash which such holder
has the right to receive pursuant to the provisions of this Article III
(including any cash payment in lieu of fractional shares pursuant to Section
3.4(e)) shall be paid to any such holder, and all such dividends, other
distributions and cash shall be paid by Parent to the Exchange Agent and shall
be included in the Exchange Fund, in each case until the surrender of such
Company Common Stock Certificate or delivery of the Option Cancellation
Agreement in accordance with this Article III. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Company
Common Stock Certificate or delivery of an Option Cancellation Agreement, as
applicable, there shall be paid to the holder of the certificate representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and the amount of cash which
such holder has the right to receive pursuant to the provisions of this Article
III (including any cash payable in lieu of a fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 3.4(e)) and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time and with a payment date subsequent
to such surrender payable with respect to each whole share of Parent Common
Stock.
(d) All shares of Parent Common Stock issued upon the
surrender for exchange of Participating Company Stock in accordance with the
terms of this Article III and any cash paid pursuant to this Article III shall
be deemed to have been issued and paid at the Effective Time in full
satisfaction of all rights pertaining to the shares of Company Common Stock,
theretofore represented by such Participating Company Stock, 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 of Company Common Stock in
accordance with the terms of the Agreement, which remain unpaid at the Effective
Time.
(e) (i) Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares of
Parent Common Stock shall be issued in the Merger upon the surrender for
exchange of Participating Company Stock, no dividend or distribution of Parent
shall relate to such fractional share interests, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. In lieu of the issuance of such fractional shares, the
Exchange Agent shall pay each former holder of Participating Company Stock an
amount in cash equal to the product obtained by multiplying (A) the fractional
share interest to which such former holder would otherwise be entitled by (B)
the Parent Average Trading Price.
27
(ii) As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of
Participating Company Stock with respect to any fractional share
interests, the Exchange Agent shall deliver such amounts to such
holders of Participating Company Stock subject to and in accordance
with the terms of Section 3.4(b).
(f) Any portion of the Exchange Fund (including the
proceeds of any interest and other income received by the Exchange Agent in
respect of all such funds) that remains unclaimed by the holders of the
Participating Company Stock six months after the Effective Time shall be
delivered to Parent. Any holders of the Participating Company Stock who have not
theretofore complied with this Article III shall thereafter look only to the
Surviving Corporation as general creditors for payment of any Merger
Consideration, without any interest thereon, that may be payable in respect of
each share of Participating Company Stock held by such holder as determined
pursuant to this Agreement.
(g) None of Parent, the Purchaser, the Company, the
Surviving Corporation, the Exchange Agent or any other Person shall be liable to
any former holder of Participating Company Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) In the event any Company Common Stock Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Company Common Stock Certificate to be
lost, stolen or destroyed, and, if required by the Surviving Corporation, the
posting by such Person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim which may be made against
it with respect to such Company Common Stock Certificate, the Exchange Agent
will issue, in each case, in exchange for such lost, stolen or destroyed Company
Common Stock Certificate, the Merger Consideration payable in respect thereof
pursuant to this Agreement.
(i) In addition to the other deposits to be made by the
Parent in the Exchange Fund, the Parent shall separately pay (a) all of the fees
and expenses of the Exchange Agent, and (b) all of the fees and expenses related
to the preparation, handling and mailing of 1099 Tax forms with respect to
payments from the Exchange Fund.
(j) In the event that any amounts are withheld for the
payment of Taxes as permitted by this Agreement from any payments from the
Exchange Fund to a holder of the Participating Company Stock in respect of which
such deduction and withholding was made, such withheld amounts shall be held in
trust and paid in a timely manner to the applicable Governmental Authorities on
account of such Tax liabilities and treated for all purposes of this Agreement
as having been paid to the holder of the Participating Company Stock in respect
of which such deduction and withholding was made.
3.5 Adjustment of Merger Consideration. If, subsequent to the date
of determination of the Parent Average Trading Price but prior to the Effective
Time, the
28
number or class of outstanding shares of Parent Common Stock is changed into a
different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or other similar transaction, then the Merger
Consideration shall be adjusted accordingly to provide to the holders of
Participating Company Stock the same economic effect as contemplated by this
Agreement prior to such stock split, reverse stock split, stock dividend,
subdivision, reclassification, combination, exchange, recapitalization or other
similar transaction.
3.6 Effect of Parent Election Of All Cash Merger Consideration;
Automatic Amendment of Certain Provisions of Agreement. In the event that Parent
shall irrevocably elect to designate the Cash Consideration Percentage to be one
hundred percent (100%), then, notwithstanding any other provision of this
Agreement to the contrary and without further notice to, or the consent or
agreement of, any party to this Agreement, the following Sections, Subsections,
clauses, Schedules or Exhibits of or to this Agreement shall be automatically
deemed to be amended in the manner set forth herein ab initio and deleted in
their entirety from this Agreement, or if less than in their entirety, in part
as described below; and no party to this Agreement shall have any right to
receive a Company Update or Parent Update with respect to any such Sections,
Subsections, clauses, Schedules or Exhibits of or to this Agreement; and any
inaccuracy contained in any such Sections, Subsections, clauses, Schedules or
Exhibits, or amended portion thereof, of or to this Agreement, any breach
thereof, or any failure to satisfy any condition therein by any party to this
Agreement, shall be deemed to be waived by all of the parties to this Agreement
and shall not constitute a breach of this Agreement, a Material Adverse Change,
a Material Adverse Effect, a basis for any assertion of any duty, liability or
obligations of, or claim, demand or suit against, any party to this Agreement, a
condition to the obligations of any party to this Agreement to consummate the
Merger, or a reason or event by or pursuant to which this Agreement may be
terminated by any party to this Agreement:
(a) Representations and Warranties of the Company:
Section 4.26, but only with respect to clause (a) thereof relating to the Form
S-4, together with any Schedules or Exhibits set forth therein and any sections
or subsections of the Company Disclosure Schedule or Company Updates relating
thereto;
(b) Representations and Warranties of the Parent and
Purchaser: Throughout Article V, any references to the Parent's Subsidiaries or
Affiliates (other than the Purchaser); Subsection 5.1(b); the following clauses
of Section 5.3 - (b)(i) and (b)(ii); Sections 5.4, 5.6, 5.7 (except with respect
to any Parent Litigation or orders of Governmental Authorities which would
challenge, enjoin, prevent, hinder or delay any of the transactions contemplated
by the Agreement or the Parent's or Purchaser's performance of their respective
obligations under this Agreement and the Ancillary Documents), 5.8 (except with
respect to any event, condition, circumstance or state of facts that constitutes
a Material Adverse Change or Material Adverse Effect and which would challenge,
enjoin, prevent, hinder or delay any of the transactions contemplated by the
Agreement or the Parent's or Purchaser's performance of their respective
obligations under this Agreement and the Ancillary Documents), 5.10 (except with
respect to any
29
liabilities or indebtedness which would prevent, hinder or delay any of the
transactions contemplated by the Agreement or the Parent's or Purchaser's
performance of their respective obligations under this Agreement and the
Ancillary Documents), and 5.12 (but only with respect to clause (a) thereof
relating to the Form S-4), together with any Schedules or Exhibits set forth
therein and any sections or subsections of the Parent Disclosure Schedule or
Parent Updates relating thereto;
(c) Covenants of the Company: Section 6.13 (but only to
the extent of those matters with respect to, or relating to, the Affiliate
Letter and Rule 145 promulgated under the Securities Act);
(d) Covenants of the Parent and/or the Purchaser: Section
6.12;
(e) Mutual Covenants of the Parties: Section 6.3 (but
only to the extent of those matters with respect to, or relating to, the Form
S-4);
(f) Conditions to Obligation of the Company to Consummate
the Merger: Subsections 7.3(a) (but only with respect to those Parent and/or
Purchaser representations and warranties described in Section 3.6(b) above); and
7.3(b) (but only with respect to those covenants of the Parent and/or Purchaser
or mutual covenants described in Sections 3.6(d) or 3.6(e) above);
(g) Conditions to Obligation of Parent and Purchaser to
Consummate the Merger: Subsections 7.2(a) (but only with respect to those
Company representations and warranties described in Section 3.6(a) above), and
7.2(b) (but only with respect to those covenants of the Company or mutual
covenants described in Sections 3.6(c) or 3.6(e) above);
(h) Conditions to Each Party's Obligation to Consummate
the Merger: Subsection 7.1(c); and
(i) Other Provisions: Section 3.5 (Adjustment of Merger
Consideration) and Exhibit A to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that as of
the date of this Agreement the statements contained in this Article IV, when
read together with and qualified by the Disclosure Schedule delivered by the
Company to Parent in connection with and prior to the execution of this
Agreement (the "Company Disclosure Schedule"), are true and correct except for
events, transactions or occurrences contemplated or required by this Agreement.
The Company Disclosure Schedule is divided into sections and subsections
corresponding to the sections and subsections of Article IV of this Agreement.
Whether or not specifically required by the terms of this Article IV or
otherwise, the Company may modify the Company's representations and warranties
contained in this Agreement by disclosing relevant facts on the Company
30
Disclosure Schedule; provided, however, that for any such disclosure to be
effective, it must indicate the specific section or subsection of this Agreement
to which it relates. The disclosure of any information in the Company Disclosure
Schedule shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality. Unless
otherwise specifically defined therein or the context otherwise requires,
capitalized terms set forth in the Company Disclosure Schedule shall have the
meanings ascribed to such terms in this Agreement.
Promptly following the Company having knowledge of or receiving notice
of the occurrence of any matter or event arising after the date of this
Agreement which (a) may be deemed to constitute a Material Adverse Change with
respect to the Company (a "Company MAC"); (b) if existing or occurring at or
before the date of this Agreement, would have been required to be set forth or
described in such Company Disclosure Schedule; or (c) is necessary to correct
any information in such Company Disclosure Schedule or in the representations
and warranties of the Company herein which have been rendered inaccurate by such
matter or event, the Company shall supplement or amend the affected sections or
subsections of the Company Disclosure Schedule in writing with respect to such
matter or event in the same manner as required of the Company for making
disclosures and taking exceptions to the Company's representations and
warranties in the Company Disclosure Schedule (the "Company Updates").
Upon receipt of any such Company Update, the Parent shall have ten (10)
Business Days following the receipt of the Company Updates: (a) to review,
investigate and analyze the information disclosed in the Company Update; (b) to
make a determination whether or not the information disclosed in the Company
Update, individually or together with any other information previously disclosed
in any other Company Updates, disclose events or circumstances that constitute a
Company MAC; and (c) if the Parent reasonably determines that the information
disclosed in the Company Update, individually or together with any other
information previously disclosed in any other Company Updates or other events
occurring after the date hereof, disclose events or circumstances that
constitute a Company MAC, to notify the Company in writing that the Parent has
determined that such a Company MAC has occurred, including a reasonable
explanation of the reasons for such determination, and that the Parent has
elected to terminate this Agreement pursuant to Section 8.4 of this Agreement
(subject to the expiration of any cure or grace periods contained therein or
applicable to the breach giving rise to the Company MAC) (a "Parent Termination
Notice"). If any Company Update is received by the Parent within ten (10)
Business Days prior to the scheduled Closing Date and the Parent has not, in its
reasonable discretion, had an adequate opportunity to review, investigate and
make a determination with respect to the matters or events disclosed therein as
of the scheduled Closing Date, or the parties have not come to a resolution with
respect thereto, notwithstanding any other provision of this Agreement to the
contrary, the Parent may postpone the Closing Date to a date that is ten (10)
Business Days following the date of the Parent's receipt of the applicable
Company Update. Upon the timely delivery of a Parent Termination Notice to the
Company pursuant to this paragraph, this Agreement shall terminate, except as
provided by
31
Section 9.1 hereof, and all duties and obligations of the Parent and Purchaser
under this Agreement and to consummate the Merger shall terminate.
In the event that (a) a Company Update does not, either individually or
in the aggregate with any or all prior Company Updates delivered to the Parent
prior to the Closing, disclose events or circumstances that constitute a Company
MAC; (b) the Parent does not timely deliver a Parent Termination Notice to the
Company with respect to the Company Update pursuant to the terms contained in
the preceding paragraph; or (c) the Closing occurs without the Parent timely
delivering a Parent Termination Notice to the Company, then the Parent and
Purchaser shall no longer have the rights of termination described above with
respect to such Company Update and all other Company Updates previously
delivered as described above and the events or circumstances so disclosed shall
not constitute a Company MAC, provided, however, if the Company delivers a
subsequent Company Update to the Parent the events and circumstances disclosed
therein may be aggregated with the events and circumstances disclosed in all
prior Company Updates previously delivered by the Company to the Parent pursuant
to the terms set forth above. Notwithstanding the immediately preceding
sentence, in the event that a new Company Update is thereafter received by the
Parent that either individually or together with all Company Updates previously
delivered by the Company to the Purchaser pursuant to the terms set forth above
disclose events or circumstances that constitute a Company MAC, then provided
that the Purchaser timely delivers a Parent Termination Notice to the Company
with respect thereto, the delivery of such Parent Termination Notice shall be
effective to terminate this Agreement pursuant to Section 8.4 of this Agreement.
4.1 Existence; Good Standing; Corporate Authority.
(a) The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation. The Company and each of
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing under the laws of any other state of the United States in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or in
good standing would not be reasonably likely to have a Material Adverse Effect.
The Company and each of its Subsidiaries has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business substantially as now being conducted. Attached to Section 4.1(a) of the
Company Disclosure Schedule are true and correct copies of the Articles of
Incorporation and Bylaws (or equivalent organizational documents) as currently
in full force and effect for the Company and each of its Subsidiaries. Each
Company Subsidiary is wholly-owned by the Company and all of the capital stock
and other interests of the Company Subsidiaries so held by the Company are
directly or indirectly owned by it, free and clear of any Encumbrances with
respect thereto, except for Permitted Encumbrances.
(b) Section 4.1(b) of the Company Disclosure Schedule
sets forth, as of the date of this Agreement, a true, complete, and correct list
of each Subsidiary of the Company, together with (i) the name and jurisdiction
of incorporation or organization of
32
each such Subsidiary; and (ii) an indication of whether each such Subsidiary is
a "significant subsidiary" as defined in Regulation S-X under the Exchange Act.
Except for the Company's Subsidiaries, and except for securities, equity
interests, or other ownership interests held by the Company or its Subsidiaries
as passive investments, there is no other Person with respect to which: (i) the
Company or any of its Subsidiaries beneficially owns, directly or indirectly,
any outstanding securities, equity interests, or other ownership interests of
such Person; (ii) any other Person, other than a natural person, which the
Company or any of its Subsidiaries may be deemed to be an Affiliate of because
of factors or relationships other than any outstanding securities, equity
interests, or other ownership interests owned by the Company or any of its
Subsidiaries; or (iii) the Company or any of its Subsidiaries may be liable
under any circumstances for the payment of additional amounts with respect to
securities, equity interests, or other ownership interests held by the Company
or its Subsidiaries, whether in the form of assessments, capital calls,
installment payments, general partner liability or otherwise. Other than the
Company, no Person controls any of the Subsidiaries, whether by contract or
otherwise.
4.2 Authorization, Validity and Effect of Agreements. The
Company's board of directors has (a) determined that the Company's execution and
delivery of this Agreement and the Ancillary Documents to which the Company is a
party, and the transactions contemplated by this Agreement and such Ancillary
Documents, including but not limited to the Merger, are advisable and in the
best interest of the Company and its shareholders and has approved this
Agreement and the Ancillary Documents to which the Company is a party in
accordance with all Applicable Laws, (b) resolved to recommend the approval of
this Agreement and the Ancillary Documents to which the Company is a party, and
the transactions contemplated by this Agreement and such Ancillary Documents,
including but not limited to the Merger, by the Company's shareholders at a
meeting thereof duly called and held in accordance with the Company's Articles
of Incorporation and Bylaws and the requirements of the Arizona Code (the
"Shareholders Meeting"), and (c) subject to Section 6.3, directed that this
Agreement and the Ancillary Documents to which the Company is a party, and the
transactions contemplated by this Agreement and such Ancillary Documents,
including but not limited to the Merger, be submitted to the Company's
shareholders for approval. The Company has the requisite corporate power and
authority to execute and deliver this Agreement, and all Ancillary Documents to
which it is a party, and to consummate the transactions contemplated hereby and
thereby, including but not limited to the Merger. The execution and delivery of
this Agreement and the Ancillary Documents to which it is a party by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Company's board of
directors, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement, to authorize the Ancillary Documents to
which it is a party, or to consummate the transactions contemplated hereby and
thereby, including but not limited to the Merger, other than, with respect to
the Merger, the approval of this Agreement, all Ancillary Documents to which the
Company is a party, and the transactions contemplated hereby and thereby,
including but not limited to the Merger, by the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock (voting as one
class with each share of
33
Company Common Stock having one vote) (the "Company Shareholder Approval") based
upon the foregoing recommendation of the Company's Board of Directors and the
filing and recordation of the Articles of Merger in accordance with the Arizona
Code. This Agreement and any Ancillary Documents to which the Company is a party
at the time of execution has been or will be duly and validly executed and
delivered by the Company, and (assuming this Agreement and such Ancillary
Documents each constitutes a valid and binding obligation of any other parties
thereto) constitutes and will constitute the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, subject to (a) applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting the enforcement of creditors' rights
generally; and (b) the effect of general principles of equity (including
specific performance) regardless of whether considered in a proceeding in equity
or at law.
4.3 Compliance with Laws. The Company and each of its Subsidiaries
is in material compliance with and is not in default under or in violation of
(a) its respective Articles of Incorporation and Bylaws (or equivalent
organizational documents) or (b) any Applicable Law, including, but not limited
to, those relating to (i) the development, manufacture, distribution, marketing,
and sale of its products and services and (ii) the bidding for Government
Contracts or conducting its business with respect to Government Contracts.
Neither the Company, nor any of its Subsidiaries, is subject to any material
judicial, governmental or administrative order, judgment or decree of any
Governmental Authority currently in effect to which the Company or any Company
Subsidiary, or its or any of their respective assets or properties, are subject.
Attached to Section 4.3 of the Company Disclosure Schedule are true and correct
copies of all reports of inspections of each of the Company's and its
Subsidiaries' businesses and properties which occurred during the past three (3)
years under Applicable Law which resulted or could, after the date hereof,
result in the imposition of a material fine, penalty, or other restriction. The
Company has not received notice of any material breach, default or violation (or
notice of any investigation, inspection, audit, or other proceeding by any
Governmental Authority involving an allegation of any material breach, default
or violation) of any Applicable Law by or affecting the Company or any of its
Subsidiaries, and to the knowledge of the Company, no such investigation,
inspection, audit, or other proceeding by any Governmental Authority is
threatened or pending.
4.4 Capitalization.
(a) As of the date hereof, the authorized capital stock
of the Company consists of 50,000,000 shares of Company Common Stock and
50,000,000 shares of preferred stock of the Company, US$0.05 par value per share
("Company Preferred Stock").
(b) Of the authorized shares of Company Common Stock, as
of the close of business on August 25, 2003, (i) there are issued and
outstanding 13,058,046 shares of Company Common Stock; (ii) no shares of Company
Common Stock are issued and held in the treasury of Company; (iii) 5,310,000
shares of Company common Stock were reserved for issuance pursuant to the Option
Plans (of which 4,613,680 shares of
34
Company Common Stock are subject to outstanding Options); (iv) 1,774,074 shares
of Company Common Stock were reserved for issuance pursuant to the 8% Notes; (v)
600,000 shares of Company Common Stock were reserved for issuance pursuant to
the Company's ESPP; (vi) 19,500 shares of Company Common Stock were reserved for
issuance pursuant to the Company's RSP, and (vii) no other shares of Company
Common Stock of the Company are issued or outstanding, reserved for issuance, or
subject to any outstanding options, warrants, or other purchase or conversion
rights. Exhibit B attached hereto, or delivered by the Company to the Purchase
within ten (10) Business Days after the date hereof sets forth the names of the
holders of the Eligible Options as of August 25, 2003, the number of shares of
Participating Company Stock attributable to such Eligible Options and the number
of shares of Participating Common Stock issuable upon a "cashless" exercise of
such Eligible Options, each based on the assumption, for illustrative purposes
only, that the Merger Consideration shall be equal to US$3.00 per share of
Participating Company Stock.
(c) Of the authorized shares of Company Preferred Stock,
as of the close of business on August 25, 2003, no shares of Company Preferred
Stock are issued or outstanding, and except for the issued or outstanding
Company Common Stock described in Section 4.4(b), no other capital stock of the
Company is issued or outstanding.
(d) The 8% Notes (i) are due May 1, 2004, (ii) bear
interest at 8% per annum, payable semi-annually, (iii) are convertible into
shares of Company Common Stock at a price of US$17.55 per share of Company
Common Stock, and (iv) may be redeemed at the Company's option in whole or in
part on a pro rata basis, on or after May 1, 1999, at certain specified
redemption prices plus accrued interest payable to the redemption date. As of
the close of business on August 25, 2003, the aggregate principal amount of the
8% Notes Debt outstanding and unpaid was US$31,135,000 and accrued but unpaid
interest thereon was US$167,392.51. As of the close of business on August 25,
2003, the aggregate outstanding principal amount of the Funded Indebtedness
(including the 8% Notes Debt) was US$59,673,588.82 and the accrued, but unpaid,
interest thereon was US$1,015,976.52. The Company has made available to Parent
true and correct copies of all of the notes, agreements, documents and/or
instruments evidencing the Funded Indebtedness.
(e) Except as described in this Section 4.4, there are no
restrictions upon the transfer of or otherwise pertaining to the Company Common
Stock or any capital stock of the Company's Subsidiaries (including, but not
limited to, the ability to pay dividends thereon), or the ownership thereof, or
retained earnings of the Company and the Company Subsidiaries, other than those
imposed by the Securities Act, the Exchange Act, applicable state securities
laws, or other Applicable Laws.
(f) Except for the stock options issued or issuable
pursuant to the Option Plans, shares of Company Common Stock issued or issuable
pursuant to the ESPP or the RSP, the notes, agreements, documents and/or
instruments evidencing the Funded Indebtedness, or as otherwise described in
this Section 4.4, there are no outstanding securities, bonds, debentures,
promissory notes, unsatisfied rights (including stock
35
appreciation rights and preemptive rights), subscriptions, warrants, puts,
calls, options or other agreements of any kind issued by the Company or its
Subsidiaries, to which the Company or its Subsidiaries is a party (other than
this Agreement), or which is binding upon the Company or any of its
Subsidiaries, of any kind or character, which: (i) relate to any of the
outstanding, authorized but not issued, unauthorized, or shares held in
treasury, capital stock or other securities of the Company or any of its
Subsidiaries; (ii) entitle third parties to vote with the shareholders of the
Company or its Subsidiaries on any matter submitted to a vote of the
shareholders of the Company or its Subsidiaries; (iii) are convertible into or
exercisable for securities having such voting rights; or (iv) obligate the
Company or any of its Subsidiaries to (A) issue, transfer or sell any shares of
capital stock or other equity interests of the Company or any of its
Subsidiaries (or securities convertible into or exchangeable for such shares or
equity interests), (B) grant, extend, issue or enter into any such subscription,
option, warrant, call, convertible securities, or other similar right,
agreement, arrangement or commitment, (C) redeem or otherwise acquire any such
shares of capital stock or other equity interests of the Company or any of its
Subsidiaries, or (D) make any investment (in the form of a loan, capital
contribution or otherwise) in any Person. All issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable. Except as contemplated by this Agreement, there are no voting
trusts, voting agreements or other agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock or other
equity interests of the Company or any of its Subsidiaries.
4.5 Subsidiaries. Neither the Company nor any of its Subsidiaries
nor any of their respective current or to the Company's knowledge former
officers, employees or directors have issued, granted or sold, or promised,
committed or proposed to issue, grant or sell, to any person any options,
warrants, shares or other equity interests in any Subsidiary of the Company
which remain outstanding. No Subsidiary of the Company owns any capital stock or
has any equity interest in the Company. Each of the outstanding shares of
capital stock (or such other ownership interests) of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
Section 4.5 of the Company Disclosure Schedule sets forth the following
information for each Subsidiary of the Company: (a) its authorized capital stock
or share capital, (b) the number of issued and outstanding shares of capital
stock, share capital or other equity interests, and (c) any debt securities
issued by it.
4.6 No Violation; Consents. Neither the execution and delivery by
the Company of this Agreement or any of the Ancillary Documents to which it is a
party, nor the consummation by the Company of the transactions contemplated
hereby or thereby, will: (a) violate, conflict with or result in a material
breach of the respective Articles of Incorporation or Bylaws (or equivalent
organizational documents) of the Company or any Subsidiary of the Company; (b)
except for the notes, agreements, documents and/or instruments evidencing the
Funded Indebtedness, violate, conflict with, result in a material breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the termination or in a right of termination of, accelerate the
performance required by or benefit obtainable under, result in the triggering of
any payment or other obligations pursuant to, result in the creation of any
Encumbrances
36
(except for Permitted Encumbrances) upon any of the properties of the Company or
its Subsidiaries under, or result in there being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of,
any Company Material Contracts to which the Company or any of its Subsidiaries
is a party, as identified in Section 4.6 to the Company Disclosure Schedules, or
by which the Company or any of its Subsidiaries or any of their respective
properties or assets is bound, as identified in Section 4.6 to the Company
Disclosure Schedules, except where the Company or any of its Subsidiaries has
obtained or will obtain prior to the Closing the necessary written agreements,
waivers, releases or consents of the other parties to such Company Material
Contracts to avoid, release or waive any such default, conflict, material
breach, violation, termination, right to terminate or accelerate, or triggering
of payment with respect to such Company Material Contracts (provided, however
that the parties rights with respect to the Company's failure to obtain any such
consents shall be as set forth in paragraph (a)(i) of the definition of
"Material Adverse Change" and Section 7.2(h) of this Agreement); or (c) require
any consent, approval or authorization of, or filing or registration with, any
Governmental Authority, except for (A) applicable requirements of the Securities
Act and the Exchange Act, (B) the applicable pre-merger notification
requirements of the HSR Act, any Non-U.S. Anti-Trust Laws or other Regulatory
Laws, (C) if required, the receipt of a decision under any Non-U.S. Anti-Trust
Laws declaring the Merger compatible with any Non-U.S. Anti-Trust Laws, and (D)
the filing and recordation of the Articles of Merger pursuant to the Arizona
Code (provided however, the parties rights with respect to the failure to obtain
any such consents shall be as set forth in paragraph (a)(i) of the definition of
"Material Adverse Change" and Section 7.2(h) of this Agreement).
4.7 Company Reports; Financial Statements. The Company has made
available to Parent true and complete copies of (i) its Annual Report on Form
10-K, for the fiscal years ended December 31, 2000, December 31, 2001, and
December 31, 2002, as filed with the SEC under the Securities Act and/or the
Exchange Act, as applicable, (ii) its proxy statements relating to all of the
meetings of shareholders (whether annual or special) of the Company since
January 1, 2001, as filed with the SEC, and (iii) all other reports, statements
and registration statements and amendments thereto (including, without
limitation, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
required to be filed by the Company with the SEC under the Securities Act and/or
the Exchange Act, as applicable, since January 1, 2000. The reports and
statements set forth in clauses (i) through (iii), above, including all exhibits
and information incorporated by reference therein, are referred to collectively
herein as the "Company Reports."
(a) Since December 31, 2000, the Company filed all
Company Reports required to be filed by it with the SEC under the Securities Act
and/or the Exchange Act, as applicable. As of their respective filing dates (and
if amended or supplemented by a filing prior to the date of this Agreement, then
as of the date of such amended or supplemented filing), the Company Reports (i)
complied in all material respects with the then-applicable requirements of the
Securities Act and the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
37
(b) No Subsidiary of the Company is required to file any
forms, reports or other documents with the SEC.
(c) The audited consolidated financial statements and
unaudited interim financial statements of the Company included in the Company
Reports have been prepared in accordance with GAAP applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and present fairly,
in all material respects, the financial position of the Company and the Company
Subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein, and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act.
(d) The Company has established adequate reserves, in
accordance with GAAP, in the books, records, and financial statements of the
Company as of the date hereof for all bonuses required to be paid to any
employee of the Company or its Subsidiaries with respect to the period beginning
January 1, 2003, through the date hereof, pursuant to any written agreement or
policy binding upon the Company or which may be required to be paid in
connection with the consummation of the Merger.
4.8 Company Litigation. There are no actions, suits, arbitrations,
claims or proceedings or, to the knowledge of the Company, investigations,
pending, publicly announced or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its Subsidiaries, at law or in equity
(collectively, "Company Litigation"), and there are no outstanding settlement
agreements, consent decrees or agreements, forbearance to xxx agreements, or
similar agreements or obligations binding upon the Company or its Subsidiaries,
which in either case are required to be described in any Company Report that are
not so described.
4.9 Absence of Certain Changes. Since June 30, 2003, except for
the consummation of the ASD Transaction and the sale of the Arizona Real Estate,
the Company and its Subsidiaries have conducted their respective businesses only
in the ordinary course, consistent with past practice, and there has not been or
occurred any action taken by the Company that, if taken after the date of this
Agreement without the prior written consent of Parent, would be a violation of
Section 6.2(b) hereof.
4.10 Taxes. Unless the context clearly requires otherwise, all
references in this Section 4.10 to the Company shall include the Company and its
Subsidiaries.
(a) The Company has made available to Parent true,
correct and complete copies of the Tax Returns of the Company for the past five
fiscal years of the Company which were due, without regard to any extensions
granted, on or before the date hereof. All Tax Returns required to be filed with
respect to the income, operations, business or assets of the Company or each
affiliated, combined or unitary group ("Tax Group") of which the Company has
been a member for the past five fiscal years of the Company, including, but
limited to, federal and state Tax Returns with respect to the
38
Company's fiscal year ending December 31, 2002, have been timely filed (or
appropriate extensions have been obtained which extensions are listed in Section
4.10 of the Company Disclosure Schedule) with the appropriate Governmental
Authorities in all jurisdictions in which such returns and reports are required
to be filed. All of the foregoing Tax Returns as filed are true, correct and
complete and, in all material respects, reflect accurately in all material
respects all liability for Taxes of the Company for the periods to which such
returns relate, and all amounts in excess of US$10,000 shown as owing thereon
have been paid, other than Taxes being contested in good faith as set forth in
Section 4.10 of the Company Disclosure Schedule or Taxes for which adequate
reserves (in accordance with GAAP) have been established in the Company's
financial statements set forth in the Company Reports or, for periods
thereafter, on the books of the Company. All Taxes in excess of US$10,000, if
any, collectible or payable by the Company or relating to or chargeable against
any of its assets, revenues or income or relating to any employee, independent
contractor, creditor, stockholder or other third party, for the period from
December 31, 2000, through December 31, 2002, were fully collected and paid by
December 31, 2002, other than Taxes being contested in good faith or for which
adequate reserves (in accordance with GAAP) have been established in the
Company's financial statements set forth in the Company Reports or, for periods
thereafter, on the books of the Company.
(b) No Government Authority with respect to Taxation has
sought to audit, and the Company has not received notice of an audit of, the
records of the Company for the purpose of verifying or disputing any Tax
Returns, reports or related information and disclosures provided to such
Government Authority with respect to Taxation, or related to the Company's
alleged failure to provide any such Tax Returns, reports or related information
and disclosure. To the Companies knowledge, no material claims, deficiencies, or
assessments in excess of US$100,000 have been asserted against, or inquiries
raised with, the Company with respect to any Taxes of the Company which have not
been paid or otherwise satisfied, including claims that, or inquiries whether,
the Company has not filed a Tax Return that it was required to file. The Company
has not waived any restrictions on assessment or collection of Taxes relating to
the Company or consented to the extension of any statute of limitations relating
to Taxation of the Company. The Company has not filed a consent under Section
341(f) of the Code concerning collapsible corporations, and the Company has not
been a United States real property holding corporation within the meaning of
Code Section 897(c)(2), during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(c) No notice of claim has been delivered to the Company,
nor does the Company know of any claim that is pending, by a Governmental
Authority in any jurisdiction where the Company does not file Tax Returns
alleging that the Company is or may be subject to Taxation in that jurisdiction.
(d) Except for Permitted Encumbrances, to the Company's
knowledge there is no Tax Encumbrance imposed by any Government Authority with
respect to Taxation outstanding against any of the assets or properties of the
Company.
39
(e) The Company has not executed any material "closing
agreement" or similar agreement with any Governmental Authority relating to
Taxes.
(f) The Company has not agreed to, and is not required
to, make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of other Applicable Laws relating to Taxes by reason of a change in
accounting method initiated by it or any other relevant party nor has it any
knowledge that any Governmental Authority with respect thereto has proposed any
such adjustment or change in accounting method. The Company does not have any
application pending with any Governmental Authority relating to Taxes requesting
permission for any changes in accounting methods.
(g) The Company has not made any payments, nor is the
Company obligated to make any payments, nor is the Company a party to any
agreement that under certain circumstances could obligate it to make payments,
that will not be deductible under Section 280G or 162(m) of the Code.
(h) The Company is not a member of a Tax Group that has
filed an election pursuant to Rev. Proc. 95-11, 1995-1 C.B. 505, or under
Treasury Regulation Section 1.1502-75(c) or any other similar provision of
Applicable Laws with respect to the Company.
(i) None of the Company and its Subsidiaries is a party
to any currently effective Income Tax allocation or sharing agreement.
(j) None of the Company and its Subsidiaries has been a
member of an affiliated group filing a consolidated federal Income Tax Return
(other than a group the common parent of which was the Company).
(k) None of the Company and its Subsidiaries has been a
party to or otherwise participated in any transaction that would constitute a
"listed transaction" or "reportable transaction" as defined in Treasury
Regulation Section 1.6011-4.
(l) To the Company's knowledge, the Company and its
Subsidiaries have disclosed all positions taken therein that could give rise to
a substantial understatement of income tax within the meaning of Section 6662 of
the Code and any comparable statutes in any other jurisdictions.
4.11 Company Employee Benefit Plans. Section 4.11 of the Company
Disclosure Schedule, as supplemented within ten (10) Business Days after the
date of this Agreement, lists each current Employee Benefit Plan (as defined in
Section 3(3) of ERISA), whether or not subject to ERISA, which the Company or
any of its Subsidiaries or ERISA Affiliates maintains, or to which the Company
or any of its Subsidiaries or ERISA Affiliates contributes, has within the last
six (6) years contributed (to the extent available to the Company utilizing
commercially reasonable efforts to obtain the same), or has any obligation to
contribute ("Company Benefit Plan").
40
(a) Each Company Benefit Plan (and each related trust,
insurance contract, or fund) has been maintained, funded and administered in
accordance with the terms of such Company Benefit Plan and complies in form and
in operation in all material respects with the applicable requirements of ERISA,
the Code, and other Applicable Laws.
(b) All required reports and descriptions (including Form
5500 annual reports, summary annual reports, and summary plan descriptions) have
been timely filed and/or distributed in accordance with the applicable
requirements of ERISA and the Code with respect to each such Company Benefit
Plan. The requirements of COBRA have been met with respect to each Company
Benefit Plan and each Employee Benefit Plan maintained by an ERISA Affiliate
which is an Employee Welfare Benefit Plan (as defined in Section 3(2) of ERISA)
subject to COBRA.
(c) All contributions (including all employer
contributions and employee salary reduction contributions) that are due have
been made within the time periods prescribed by ERISA and the Code to each such
Company Benefit Plan that is an Employee Pension Benefit Plan (as defined in
Section 3(2) of ERISA) and all contributions for any period ending on or before
the Closing Date which are not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the Company and its Subsidiaries. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with respect to each
Company Benefit Plan that is an Employee Welfare Benefit Plan.
(d) Each Company Benefit Plan which is intended to meet
the requirements of a "qualified plan" under Code Section 401(a) has received a
determination from the Internal Revenue Service that such Company Benefit Plan
is so qualified, and nothing has occurred since the date of such determination
that could adversely affect the qualified status of any such Company Benefit
Plan. All such Company Benefit Plans have been or will be timely amended for the
requirements of the Tax legislation commonly known as "GUST" and "EGTRRA" and
have been or will be submitted to the Internal Revenue Service for a favorable
determination letter on the GUST requirements within the remedial amendment
period prescribed by GUST.
(e) There have been no Prohibited Transactions (as
defined in under Section 406 of ERISA) with respect to any Company Benefit Plan
or any Employee Benefit Plan maintained by an ERISA Affiliate. No fiduciary has
any liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of any Company
Benefit Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any Company
Benefit Plan (other than routine claims for benefits) is pending or threatened.
The Company does not have any knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
(f) The Company has made available to the Purchaser
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent annual
41
report (Form 5500, with all applicable attachments), and all related trust
agreements, insurance contracts, and other funding arrangements which implement
each Company Benefit Plan.
(g) With respect to each Company Benefit Plan or Employee
Benefit Plan of any ERISA Affiliate to which any of them contributes or has any
obligation to contribute, or with respect to which any of them has any liability
or potential liability:
(i) No such Company Benefit Plan that
is an Employee Pension Benefit Plan (other than any
Multiemployer Plan (as defined in Section 3(37) of ERISA)) has
been completely or partially terminated or been the subject of
a "reportable event". No proceeding by the Pension Benefit
Guaranty Corporation ("PBGC") to terminate any such Employee
Pension Benefit Plan has been instituted or threatened. The
market value of assets under each such Company Benefit Plan
that is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions
applicable to an Employee Pension Benefit Plan terminating on
the date for determination; and
(ii) Neither the Company nor any of its
Subsidiaries has incurred, and none of the Company, its
Subsidiaries, or their employees with responsibility for
employee benefits matters has any reason to expect that the
Company or any of its Subsidiaries will incur, any liability
to the PBGC (other than with respect to PBGC premium payments
not yet due) or otherwise under Title IV of ERISA or under the
Code with respect to any Company Benefit Plan which is an
Employee Pension Benefit Plan.
(h) None of the Company, its Subsidiaries, and any ERISA
Affiliate contributes to, has any obligation to contribute to, or has any
liability (including withdrawal liability as defined in ERISA Section 4201)
under or with respect to any Multiemployer Plan.
(i) Neither the Company nor any of its Subsidiaries
maintains, contributes to or has an obligation to contribute to, or has any
liability or potential liability with respect to, any Employee Welfare Benefit
Plan providing health or life insurance or other welfare-type benefits for
current or future retired or terminated directors, officers or employees (or any
spouse or other dependent thereof) of the Company or any of its Subsidiaries
other than in accordance with COBRA.
4.12 Labor and Employment Matters. Neither the Company nor any of
its Subsidiaries is a party to, or bound by, any collective bargaining agreement
with employees or other Company Material Contracts or understandings with a
labor union or labor organization. There are no strikes or lockouts with respect
to any employee of the Company or any Subsidiary, and to the knowledge of the
Company, there is no union organizing effort pending or threatened against the
Company or any Subsidiary. There is
42
no unfair labor practice, labor dispute (other than routine individual
grievances) or labor arbitration proceedings pending or, to the knowledge of the
Company, threatened, against the Company or its Subsidiaries relating to their
business; there is no slowdown, work stoppage or to the Company's knowledge a
threat thereof by or with respect to the employees of the Company or its
Subsidiaries; and the Company and its Subsidiaries are in material compliance
with all Applicable Laws respecting (A) employment and employment practices, (B)
terms and conditions of employment and wages and hours, and (C) unfair labor
practices. Section 4.12 of the Company Disclosure Schedule lists any claims
pending or threatened in writing against the Company or any of its Subsidiaries
alleging systematic or routine violations of Applicable Law relating to
employment and employment practices. Neither the Company nor any of its
Subsidiaries has any liabilities under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") as a result of any action taken by the
Company.
4.13 Intellectual Property Rights. Unless the context clearly
requires otherwise, all references in this Section 4.13 to the Company shall
include the Company and its Subsidiaries.
(a) Section 4.13(a) of the Company Disclosure Schedule
sets forth a complete and accurate list (showing in each case the registered
owner, title (in the case of Patents), xxxx, applicable jurisdiction,
application number, registration number (where applicable) and date of filing or
registration (if any) of all (i) Patents, (ii) Trademarks and assumed or
fictitious names under which Company is currently conducting business, (iii)
material Internet domain names currently being utilized by the Company, and (iv)
registered Copyrights, which are owned by the Company.
(b) Section 4.13(b) of the Company Disclosure Schedule
sets forth a complete and accurate list and description of all material
agreements, licenses, contracts or sublicenses pursuant to which Company uses or
grants others the right to use any Intellectual Property and Software of the
Company. All of the Intellectual Property described in Sections 4.13(a) and
4.13(b) of the Company Disclosure Schedule shall be denominated herein as
"Company Intellectual Property".
(c) The Company either owns or has the valid right to use
all Company Intellectual Property currently used in connection with the business
of the Company.
(d) (i) All of the registrations or applications set
forth in Section 4.13(a) of the Company Disclosure Schedule are valid and
subsisting, in full force and effect, and have not expired or been canceled or
abandoned; and (ii) there is no pending or, to the Company's knowledge,
threatened opposition, interference or cancellation proceeding before any court
or registration authority in any jurisdiction against the Company Intellectual
Property described in Section 4.13(a) of the Company Disclosure Schedule.
(e) The licenses or sublicenses granted by the Company to
third parties and described in Section 4.13(b) of the Company Disclosure
Schedule or the
43
terms and conditions of any licenses or sublicenses granted to the Company by
third parties and described in Section 4.13(b) of the Company Disclosure
Schedule are valid and binding obligations of the Company, enforceable in
accordance with their terms against the Company in accordance with their
respective terms, subject to (a) applicable bankruptcy, reorganization,
insolvency, moratorium, and similar laws affecting the enforcement of creditors'
rights generally; and (b) the effect of general principles of equity (including
specific performance) regardless of whether considered in a proceeding in equity
or at law, and to the Company's knowledge there currently exists no event or
condition which will result in a violation or breach of, or constitutes (with or
without due notice or lapse of time or both) a default by the Company, under any
such agreement.
(f) To the Company's knowledge, the manufacture,
advertising, sale or use of any products now being manufactured or sold by the
Company did not and does not infringe (nor to the Company's knowledge has any
claim been made that any such action infringes) the Intellectual Property rights
of others, and the Company has not received any notice of a third party claim or
suit, (i) alleging that the Company's activities or the conduct of the business
of the Company infringes or constitutes the unauthorized use of the Intellectual
Property rights of any third party, or (ii) challenging the ownership, use,
validity or enforceability of any Company Intellectual Property.
(g) To the knowledge of the Company, no Person (other
than the Company or the Company's Subsidiaries) is infringing on the Company
Intellectual Property or upon the rights of the Company therein.
(h) The Company owns or has the right to use all Software
set forth in Sections 4.13(a) and 4.13(b) of the Company Disclosure Schedule and
all material "shrink wrap license" software used or owned by the Company.
4.14 Permits. The Company and its Subsidiaries are in possession of
all material franchises, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, certificate of occupancy,
approvals and orders of any Governmental Authority necessary for the Company and
its Subsidiaries to own, lease and operate their properties and assets or to
carry on their businesses as they are now being conducted (the "Company
Permits"). All Company Permits are in full force and effect.
4.15 Environmental Compliance. (a) To the Company's knowledge, the
Company and its Subsidiaries are in material compliance with all applicable
Environmental Laws; and (b) the Company and its Subsidiaries are in possession
of, and in material compliance with, all permits, certificates, licenses,
approvals, tariffs and other authorizations of or issued by Governmental
Authorities required by applicable Environmental Laws with respect to
Environmental Matters relating to the operations of the Company or its
Subsidiaries; and (c) there are no current Environmental Claims pending, or to
the Company's knowledge threatened, against the Company or its Subsidiaries.
Neither the Company nor any of its Subsidiaries has either expressly or, to the
Company's knowledge by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person relating to
any
44
Environmental Claims. To the Company's knowledge, no Environmental Lien has
attached to any property leased or owned by the Company or any of its
Subsidiaries for which the Company has any material liability.
4.16 Material Contracts. Unless the context clearly requires
otherwise, all references in this Section 4.16 to the Company shall include the
Company and its Subsidiaries.
(a) Section 4.16(a) of the Company Disclosure Schedule
sets forth a list of each of the following contracts and agreements to which, as
of the date hereof, the Company is a party or signatory or pursuant to which the
Company has third party rights (except for the Company Benefit Plans which are
disclosed in Section 4.11 of the Company Disclosure Schedule or the Company
Leases which are disclosed in Section 4.18 of the Company Disclosure Schedule):
(i) any contract or series of contracts resulting in a commitment or potential
commitment for expenditure or other obligation or potential obligation, or which
provides for the receipt or potential receipt, involving in excess of Fifty
Thousand Dollars (US$50,000.00) in any instance, or series of related contracts
that in the aggregate give rise to rights or obligations exceeding such amount
other than contracts with Governmental Authorities referred to in clause (ii);
(ii) contract, agreement, binding bid, binding proposal, or binding quotation
with a Governmental Authority resulting in a commitment or potential commitment
for expenditure or other obligation or potential obligation, or which provides
for the receipt or potential receipt, involving in excess of One Hundred
Thousand Dollars (US$100,000.00) in any instance, or series of related contracts
that in the aggregate give rise to rights or obligations exceeding such amount;
(iii) employment and retention agreements, collective bargaining agreements and
any amendments or modifications thereof and union recognition agreements, (iv)
indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment for the borrowing or lending of money or Encumbrance of
assets owned by the Company or any of its Subsidiaries involving more than Ten
Thousand Dollars (US$10,000.00) in each instance; (v) agreement which restricts
the Company from engaging in the Parent Specified Line of Business; (vi) the
Company has provided to Parent examples of warranties made by the Company or any
of its Subsidiaries for their products in the context of government and
commercial products, including a parachute warranty provision; (vii) all
agreements or arrangements entered into by the Company or any of its
Subsidiaries beginning on January 1, 1995, with respect to which the Company has
a continuing obligation of performance or liability and pursuant to which the
Company sold or divested itself, directly or through a Subsidiary, of any
material portion of its assets, other than obsolete or damaged equipment or
inventory and other than in the ordinary course of business, including the sale
of all or substantially all of the capital stock or other ownership interests of
any of its Subsidiaries ("Divestiture Agreements"); and (viii) any partnership,
shareholder, joint venture, teaming, or similar agreement or arrangement to
which the Company is a party and as to which the Company has a continuing
obligation of performance or liability (collectively, and together with the
Company Leases, Company Benefit Plans and all other agreements required to be
disclosed on any schedule to this Agreement, the "Company Material Contracts").
The Company has previously made available to Purchaser true, complete and
correct copies of each of the Company Material Contracts.
45
(b) All such Company Material Contracts are valid and
binding upon the Company or the Company Subsidiaries, as applicable, and are in
full force and effect and enforceable against the Company or such Company
Subsidiaries in accordance with their respective terms; subject to (i)
applicable bankruptcy, reorganization, insolvency, moratorium, and similar laws
affecting the enforcement of creditors' rights generally; and (ii) the effect of
general principles of equity (including specific performance) regardless of
whether considered in a proceeding in equity or at law.
(c) Neither the Company nor any of its Subsidiaries has
received notice that it is in violation of, material breach of, or default under
any, or is in violation of, material breach of, or default under any, such
Company Material Contract, nor to the Company's knowledge is any other party to
any such Company Material Contract in violation of, material breach of, or
default under any such Company Material Contract; except that in the case of the
notes, agreements, documents and/or instruments evidencing the Funded
Indebtedness, the Merger and the consummation of the transactions contemplated
by this Agreement and the Ancillary Documents may result in a violation of,
material breach of, or default under a covenant or covenants contained therein.
(d) The Company has, with respect to all Governmental
Contracts that are Company Material Contracts: (i) complied in all material
respects with all certifications and representations that the Company has
executed, acknowledged or set forth with respect to each such Company Material
Contract, (ii) complied in all material respects with all clauses, provisions
and requirements incorporated expressly, by reference or by operation of law in
each such Company Material Contract, and (iii) submitted certifications and
representations with respect to each such Company Material Contract that were
accurate, current and complete when submitted in all material respects, and were
properly updated in all material respects to the extent required by Applicable
Law or the applicable Company Material Contract.
(e) The Company has not, with respect to any Governmental
Contract that is a Company Material Contract: (i) received notice that the
Company has materially breached or violated any Applicable Law, certification,
representation, clause, provision, or requirement with respect to any such
Company Material Contract, (ii) received any show cause notice or cure notice
with respect to any such Company Material Contract, (iii) received any formal or
informal determination that costs incurred under any such Company Material
Contract have been questioned or disallowed, (iv) received any adverse decision
from a contracting officer relating to any such Company Material Contract issued
by any Governmental Authority, or (v) received any notice that monies due under
any such Company Material Contract are or may be subject to withholding or
setoff.
(f) With respect to any Governmental Contracts that are
Company Material Contracts, there are no pending claims against any Governmental
Authority or, to the knowledge of the Company, threatened claims against any
prime contractor, subcontractor or vendor, arising out of or relating to any
such Governmental Contracts.
46
(g) The Company has not received any notice that the
Company is currently debarred or suspended from doing business with any
Governmental Authority, nor has the Company received any notice that the Company
has been declared ineligible for doing business with any Governmental Authority,
nor has the Company received any notice nor does the Company have any knowledge
that a Governmental Authority intends to institute any debarment, suspension or
ineligibility proceedings against the Company.
(h) The Company has not received any negative
determination of responsibility by any Governmental Authority or government
prime contractor with respect to the Company. The Company does not have
knowledge of any reasonably likely negative determination of responsibility by
any Governmental Authority or government prime contractor with respect to the
Company.]
(i) The Company possesses all necessary and material
security clearances and permits for the execution of its obligations with
respect to any Governmental Contract that constitutes a Material Contract or any
material bid, proposal or quotation the Company currently has pending before any
Governmental Authority or government prime contractor. The Company has never
been denied a facility security clearance and to the Company's knowledge none of
its employees has been denied a personal clearance for material reasons.
4.17 Divestiture Agreements. Section 4.17 of the Company Disclosure
Schedule sets forth (a) a statement of the reserves set aside by the Company or
its Subsidiaries for any liabilities, contingent liabilities, or continuing or
executory obligations of performance or payment that the Company or its
Subsidiaries has or may have as of the date of the Company's most recent Company
Report setting forth such reserves pursuant to or in connection with any of the
Divestiture Agreements, and (b) a statement summarizing any claims made by third
parties with respect to such liabilities, contingent liabilities, or continuing
or executory obligations of performance or payment through the date of this
Agreement pursuant to or in connection with any of the Divestiture Agreements.
The Company has used the net proceeds from the consummation of the ASD
Transaction for general corporate purposes (including paying debt to the holders
of the Funded Indebtedness and other indebtedness to the extent permitted by
this Agreement) and has not used the proceeds from the ASD Transaction to pay
any bonuses (except as required by pre-existing contracts, as required by
Applicable Law, or as otherwise permitted by Section 6.2).
4.18 Real Property. Unless the context clearly indicates otherwise,
all references to the Company in this Section 4.18 shall include the Company and
all of its Subsidiaries.
(a) The Company does not own any fee simple interest in
real property other than the Arizona Real Estate. The Company does not lease or
sublease (as lessee, sublessee or sublessor) any real property other than the
Company Leased Property. Section 4.18(a) of the Company Disclosure Schedule sets
forth the street address of each parcel of real property owned by the Company
(the "Company Owned Property") or leased or subleased (as lessee, sublessee or
sublessor) by the Company (the "Company
47
Leased Property" and, together with the Company Owned Property, the "Company
Real Property"). Attached to Section 4.18(a) of the Company Disclosure Schedule
is a list of all of the lease and sublease agreements and all other instruments
granting such leasehold interests, rights, options, or other interests (the
"Company Leases") relating to the Company Leased Property. A true, complete, and
correct copy of each of the Company Leases has previously been made available to
the Purchaser. The Company Leases are valid, binding upon the Company, and in
full force and effect, subject to (a) applicable bankruptcy, reorganization,
insolvency, moratorium, and similar laws affecting the enforcement of creditors'
rights generally; and (b) the effect of general principles of equity (including
specific performance) regardless of whether considered in a proceeding in equity
or at law; all rent and other sums and charges due and payable thereunder are
current; no notice of default or termination under any of the Company Leases has
been received by the Company or delivered by the Company and is outstanding; and
no termination event or condition or uncured default on the part of the Company
or, to the knowledge of the Company, on the part of the landlord or sublandlord,
as the case may be, thereunder, exists under any the Company Leases. Except for
the Company Leases, there are no other subleases, licenses or other agreements
granting to any Person other than the Company any right to possession, use,
occupancy or enjoyment of the premises demised by the Company Leases. Except as
contemplated by the ASD Transaction, and to the Company's knowledge no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a default or termination event or
condition under any of the Company Leases. In the event that any of the Company
Leases is a sublease, the Company or its Subsidiaries, as sublessee or
sublessor, as the case may be, has obtained the required consent of the prime
landlord to such sublease, and to the Company's knowledge such prime lease is in
full force and effect, and to Company's knowledge no right of Company or its
Subsidiaries in any such sublease conflicts with such prime lease. All of the
Company Real Property is used in the conduct of the Company's business.
Notwithstanding any of the provisions of this Section 4.18(a) to the contrary,
none of the foregoing representations and warranties of the Company shall apply
to the Company's financial liability related to its former Airline Interiors
facility located in Poway, California. Copies of the documents relating to such
financial liability have been made available to the Parent (which documents have
not been amended except as indicated herein); the Company has adequately
reserved against any such financial liability in its financial statements
contained in the Company Reports in accordance with GAAP; the prime lease and
any sublease contained in such documents are in full force and effect; neither
the lessee nor sublessee thereunder is in default with respect to any financial
terms of such documents or, to the Company's knowledge, with respect to any of
the other terms of such documents and to the knowledge of the Company no
condition or event exists that would give rise to any such default; and the
Company has not, and shall not have, between the date of this Agreement and the
Closing Date, amended any of the documents relating to such financial liability
which have been available to the Parent.
(b) The Company has good title in fee simple or otherwise
to the Company Owned Property and good leasehold title to the Company Leased
Property and to all plants, buildings, and improvements thereon, free and clear
of any Encumbrances (except for Permitted Encumbrances). The Company enjoys a
peaceful and undisturbed
48
possession of the Company Real Property and to Company's knowledge, no landlord
under the Company Leases has any plans to make any alterations to any of the
Company Leased Property (i) which will interfere in any material respect with
the Company's peaceful and undisturbed possession of the Company Leased Property
or the Company's use of any material portion of the Company Leased Property or
(ii) the costs of which alterations would be borne in any part by the Company
under the applicable Company Lease.
(c) All of the material improvements (including material
heating, ventilation, air conditioning, plumbing and electrical systems) located
on the Company Real Property are maintained by the Company in good working order
and repair in the ordinary course of business and are in a condition adequate
and reasonably suitable for the conduct therein of the business as conducted by
the Company. The Company has not experienced any material and prolonged
interruption in such electrical, water, waste removal or other utility services
provided to any of the Company Real Property within the last year.
(d) The Company has not received any written notice of
nor has it any knowledge of any pending or threatened condemnation or eminent
domain proceeding with respect to or affecting any Company Real Property or any
material part thereof.
(e) The Company and its Subsidiaries maintain all
insurance policies and coverage required of the Company and it Subsidiaries
under the Company Leases for Company Leased Property, and to the Company's
knowledge, all subtenants under any Company Lease that is a sublease maintain
all insurance policies required under the Company Leases for the Company Leased
Property. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Company and its
Subsidiaries, and to the Company's knowledge all subtenants under any Company
Lease that is a sublease, has complied in all material respects with all terms
and conditions of such policies, including premium payments.
4.19 Brokers. Except for Libra Securities, LLC and Relational
Advisors, LLC (individually or collectively, the "Financial Advisors", no
broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement that is based upon any arrangement made by or on behalf of the Company
or any of its Subsidiaries. True and correct copies of the engagement letter
between the Company and any of the Financial Advisors have been made available
to Parent.
4.20 Opinion of Financial Advisor. The Company has received the
written opinion of Relational Advisors, LLC to the effect that, as of the date
hereof, the Merger Consideration is fair, from a financial point of view, to the
shareholders of the Company.
4.21 State Takeover Statutes. The approval of the Company's board
of directors described in Section 4.2 is sufficient, assuming the accuracy of
Parent's and Purchaser's representations and warranties set forth in Article V,
to render inapplicable to the Merger, this Agreement, and the transactions
contemplated hereby and thereby, the
49
limitations on business combinations contained in Sections 10-2741 through
10-2743 of the Arizona Code.
4.22 No Undisclosed Liabilities. Except (i) as reflected or
reserved against in the Company's consolidated balance sheets (or the notes
thereto) included in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2003, (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, (iii)
for liabilities and obligations incurred in the ordinary course of business,
consistent with past practice, (iv) the Funded Indebtedness and Company's
Transaction Fees, and (v) liabilities or obligations of the Company incurred in
connection with Divestiture Transactions, since June 30, 2003, neither the
Company nor any Subsidiary of the Company has incurred any material 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 (or in the notes thereto) in the Company
Reports.
4.23 Certain Business Practices. None of the Company, the Company
Subsidiaries, nor any directors, officers, agents, or employees of the Company
or any Company Subsidiary has (i) used any funds of the Company for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity or (ii) made any unlawful payment by the Company 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.
4.24 Affiliates. Section 4.24 of the Company Disclosure Schedule
sets forth the name of each Person who is, in the Company's reasonable judgment,
an affiliate (as that term is used in Rule 145 under the Securities Act) of the
Company.
4.25 Products. To the Company's knowledge, there exists no
reasonably likely basis for (i) the withdrawal or suspension of any
authorization of any Governmental Authority, approval or consent of any
Governmental Authority with respect to any product distributed or sold by any of
the Company or any of its Subsidiaries (a "Product"), or (ii) the recall,
withdrawal or suspension by order of any Governmental Authority of any Product.
To the Company's knowledge, there are no defects in the designs, specifications,
or process with respect to any Product currently sold or otherwise distributed
that will give rise to any material liabilities, damages, fines, assessments,
losses, penalties, or expenses.
4.26 Form S-4; Proxy Statement. None of the information supplied in
writing by the Company for inclusion in, and none of the information regarding
the Company from the Company Reports incorporated by reference in (a) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in connection with
the Merger, or any of the amendments or supplements thereto (the "Form S-4")
will, at the time the Form S-4 is filed with the SEC, or at any time it is
amended or supplemented, or at the time it becomes effective under the
Securities Act, or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein
50
or necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading, and (b) the proxy statement for use
relating to the Company Shareholder Approval or any of the amendments or
supplements thereto (collectively, the "Proxy Statement"), will not, at the date
it is first mailed to the Company's shareholders and at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of the Parent and Purchaser represents and warrants to the Company
that as of the date of this Agreement the statements contained in this Article
V, when read together with and qualified by the Disclosure Schedule delivered by
the Parent and Purchaser to the Company in connection with and prior to the
execution of this Agreement (the "Parent Disclosure Schedule"), are true and
correct except for events, transactions or occurrences contemplated or required
by this Agreement. Whether or not specifically required by the terms of this
Article V or otherwise, Parent and Purchaser may modify their representations
and warranties contained in this Agreement by disclosing relevant facts on the
Parent Disclosure Schedule; provided, however, that for any such disclosure to
be effective, it must indicate the specific Section or Subsection of this
Agreement to which it relates. The disclosure of any information in the Parent
Disclosure Schedule shall not be deemed to constitute an acknowledgment that
such information is required to be disclosed in connection with the
representations and warranties made by the Parent and Purchaser in this
Agreement or that it is material, nor shall such information be deemed to
establish a standard of materiality. Unless otherwise specifically defined or
the context otherwise requires, capitalized terms set forth in the Parent
Disclosure Schedule shall have the meanings ascribed to such terms in this
Agreement.
Promptly following the Parent or Purchaser having knowledge of or
receiving notice of the occurrence of any matter or event arising after the date
of this Agreement which (a) may be deemed to constitute a Material Adverse
Change with respect to the Parent or Purchaser (a "Parent MAC"); (b) if existing
or occurring at or before the date of this Agreement, would have been required
to be set forth or described in such Parent Disclosure Schedule; or (c) is
necessary to correct any information in such Parent Disclosure Schedule or in
the representations and warranties of the Parent and Purchaser herein which have
been rendered inaccurate by such matter or event, the Parent and Purchaser shall
supplement or amend the affected sections or subsections of the Parent
Disclosure Schedule in writing with respect to such matter or event in the same
manner as required of the Parent and Purchaser for making disclosures and taking
exceptions to the Parent's and Purchaser's representations and warranties in the
Disclosure Schedule (the "Parent Updates").
51
Upon receipt of any such Parent Update, the Company shall have ten (10)
Business Days following the receipt of the Parent Updates: (a) to review,
investigate and analyze the information disclosed in the Parent Update; (b) to
make a determination whether or not the information disclosed in the Parent
Update, individually or together with any other information previously disclosed
in any other Parent Updates, disclose events or circumstances that constitute a
Parent MAC; and (c) if the Company reasonably determines that the information
disclosed in the Parent Update, individually or together with any other
information previously disclosed in any other Parent Updates or other events
occurring after the date hereof, disclose events or circumstances that
constitute a Parent MAC, to notify the Parent in writing that the Company has
determined that such a Parent MAC has occurred, including a reasonable
explanation of the reasons for such determination, and that the Company has
elected to terminate this Agreement pursuant to Section 8.3 of this Agreement
(subject to the expiration of any cure or grace periods contained therein or
applicable to the breach giving rise to the Parent MAC) (a "Company Termination
Notice"). If any Parent Update is received by the Company within ten (10)
Business Days prior to the scheduled Closing Date and the Company has not, in
its reasonable discretion, had an adequate opportunity to review, investigate
and make a determination with respect to the matters or events disclosed therein
as of the scheduled Closing Date, or the parties have not come to a resolution
with respect thereto, notwithstanding any other provision of this Agreement to
the contrary, the Company may postpone the Closing Date to a date that is ten
(10) Business Days following the date of the Company's receipt of the applicable
Parent Update. Upon the timely delivery of a Company Termination Notice to
Parent pursuant to this paragraph, this Agreement shall terminate, except as
provided by Section 9.1 hereof, and all duties and obligations of the Company
under this Agreement and to consummate the Merger shall terminate.
In the event that (a) a Parent Update does not, either individually or
in the aggregate with any or all prior Parent Updates delivered to the Company
prior to the Closing, disclose events or circumstances that constitute a Parent
MAC; (b) the Company does not timely deliver a Company Termination Notice to
Parent with respect to the Parent Update pursuant to the terms contained in the
preceding paragraph; or (c) the Closing occurs without the Company timely
delivering a Company Termination Notice to Parent, then the Company shall no
longer have the rights of termination described above with respect to such
Parent Update and all other Parent Updates previously delivered as described
above and the events or circumstances so disclosed shall not constitute a Parent
MAC, provided, however, if the Parent delivers a subsequent Parent Update to the
Company the events and circumstances disclosed therein may be aggregated with
the events and circumstances disclosed in all prior Parent Updates previously
delivered by the Parent to the Company pursuant to the terms set forth above.
Notwithstanding the immediately preceding sentence, in the event that a new
Parent Update is thereafter received by the Company that either individually or
together with all Parent Updates previously delivered by Parent and Purchaser to
the Company pursuant to the terms set forth above disclose events or
circumstances that constitute a Parent MAC, then provided that the Company
timely delivers a Company Termination Notice to Parent with respect thereto, the
delivery of such Company Termination Notice shall be effective to terminate this
Agreement pursuant to Section 8.3 of this Agreement.
52
5.1 Existence; Good Standing; Corporate Authority.
(a) The Parent and each of its Subsidiaries (including
the Purchaser) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation.
The Parent and each of its Subsidiaries (including the Purchaser) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
would not be reasonably likely to have a Material Adverse Effect. The Parent and
each of its Subsidiaries (including the Purchaser) has all requisite corporate
power and authority to own or lease and operate its properties and to carry on
its business substantially as now being conducted. Attached to Section 5.1(a) of
the Parent Disclosure Schedule are true and correct copies of the Articles of
Incorporation and Bylaws (or equivalent organizational documents) as currently
in full force and effect for the Parent and the Purchaser. Purchaser is
wholly-owned by the Parent and all of the capital stock and other interests of
the Purchaser so held by the Parent are directly or indirectly owned by it, free
and clear of any Encumbrances with respect thereto, except for Permitted
Encumbrances. As of the date of this Agreement, the Purchaser is a newly-formed
shell corporation with no material assets, liabilities or operations.
5.2 Authorization, Validity and Effect of Agreements. Each of the
Parent's and Purchaser's respective boards of directors has determined that the
Parent's and Purchaser's execution and delivery this Agreement and the Ancillary
Documents to which the Parent and Purchaser are a party, and the transactions
contemplated by this Agreement and such Ancillary Documents, including but not
limited to the Merger, are advisable and in the best interest of the Parent,
Purchaser and their respective shareholders and has approved this Agreement and
the Ancillary Documents to which the Parent is a party in accordance with all
Applicable Laws. Each of the Parent and the Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement, and all
Ancillary Documents to which it is a party, and to consummate the transactions
contemplated hereby and thereby, including but not limited to the Merger. The
execution and delivery of this Agreement and the Ancillary Documents to which it
is a party by the Parent or the Purchaser and the consummation by the Parent or
the Purchaser of the transactions contemplated hereby and thereby have been duly
and validly authorized by each of the Parent's and Purchaser's respective boards
of directors, and no other corporate proceedings on the part of the Parent or
the Purchaser are necessary to authorize this Agreement, to authorize the
Ancillary Documents to which it is a party, or to consummate the transactions
contemplated hereby and thereby, including but not limited to the Merger, other
than the filing and recordation of the Articles of Merger in accordance with the
Arizona Code. This Agreement and any Ancillary Documents to which the Parent or
the Purchaser is a party at the time of execution has been or will be duly and
validly executed and delivered by the Parent and/or the Purchaser, and (assuming
this Agreement and such Ancillary Documents each constitutes a valid and binding
obligation of any other parties thereto) constitutes and will constitute the
valid and binding obligations of the Parent and/or the Purchaser, enforceable
against the Parent and/or the Purchaser in accordance with their respective
terms, subject to (a)
53
applicable bankruptcy, reorganization, insolvency, moratorium, and similar laws
affecting the enforcement of creditors' rights generally; and (b) the effect of
general principles of equity (including specific performance) regardless of
whether considered in a proceeding in equity or at law.
5.3 Compliance with Laws. Since August 18, 2003, Parent and each
of its Subsidiaries (including Purchaser) is in material compliance with and is
not in default under or in violation of (a) its respective Articles of
Incorporation and Bylaws (or equivalent organizational documents) or (b) any
Applicable Law, including, but not limited to, those relating to (i) the
development, manufacture, distribution, marketing, and sale of its products and
services and (ii) the bidding for Government Contracts or conducting its
business with respect to Government Contracts. Neither the Parent, nor any of
its Subsidiaries (including Purchaser), is subject to any material judicial,
governmental or administrative order, judgment or decree of any Governmental
Authority currently in effect to which the Parent or any of its Subsidiaries
(including Purchaser), or its or any of their respective assets or properties,
are subject. Attached to Section 5.3 of the Parent Disclosure Schedule are true
and correct copies of all reports of inspections of each of the Parent's and its
Subsidiaries' (including Purchaser's) businesses and properties which occurred
during the past three (3) years under Applicable Law which resulted or could,
after the date hereof, result in the imposition of a material fine, penalty, or
other restriction. The Parent has not received notice of any material breach,
default or violation (or notice of any investigation, inspection, audit, or
other proceeding by any Governmental Authority involving an allegation of any
material breach, default or violation) of any Applicable Law by or affecting the
Parent or any of its Subsidiaries (including Purchaser), and to the knowledge of
the Parent, no such investigation, inspection, audit, or other proceeding by any
Governmental Authority is threatened or pending.
5.4 Capitalization.
(a) As of the date hereof, the authorized capital stock
of the Parent consists of 50,000,000 shares of Parent Common Stock, US$0.01 par
value per share, and 5,000,000 shares of preferred stock of the Parent, US$0.01
par value per share ("Parent Preferred Stock"). Of the authorized shares of
Parent Common Stock, as of the close of business on August 25, 2003, (i) there
were issued and outstanding 33,947,988 shares of Parent Common Stock; (ii)
6,060,222 shares of Parent Common Stock were issued and held in the treasury of
Parent; (iii) 1,346,135 shares of Parent common Stock were reserved for issuance
pursuant to the Parent's 2002 Stock Incentive Plan, and 2002 Executive Stock
Plan; and (iv) no shares of Parent Preferred Stock were issued and outstanding.
As of the date of this Agreement, as of the Closing Date, and as of the
Effective Time, except for the issued or outstanding Parent Common Stock
described herein, no other capital stock of the Parent is issued or outstanding.
(b) As of the date of this Agreement, as of the Closing
Date, and as of the Effective Time, the Parent shall have a sufficient number of
shares of Parent Common Stock authorized and reserved for issuance as may be
required for the payment of the Merger Consideration to the holders of the
Participating Company Stock as set
54
forth in this Agreement and are not reserved for any other purpose whatsoever.
When issued to the holders of the Participating Company Stock pursuant to the
terms and conditions set forth in this Agreement, such shares of Parent Common
Stock shall be free and clear of all Encumbrances, shall be duly authorized,
validly issued, fully paid and nonassessable.
(c) Except as described in this Section 5.4, there are no
restrictions upon the transfer of or otherwise pertaining to the Parent Common
Stock (including, but not limited to, the ability to pay dividends thereon), or
the ownership thereof, or retained earnings of the Parent and the Parent
Subsidiaries, other than those imposed by the Securities Act, the Exchange Act,
applicable state securities laws, or other Applicable Laws.
(d) All issued and outstanding shares of Parent Common
Stock are duly authorized, validly issued, fully paid and nonassessable. Except
as contemplated by this Agreement, there are no voting trusts, voting agreements
or other agreements to which the Parent is a party with respect to the voting of
the capital stock or other equity interests of the Parent.
5.5 No Violation; Consents. Neither the execution and delivery by
the Parent or the Purchaser of this Agreement or any of the Ancillary Documents
to which it is a party, nor the consummation by the Parent or the Purchaser of
the transactions contemplated hereby or thereby, will: (a) violate, conflict
with or result in a material breach of the respective Articles of Incorporation
or Bylaws (or equivalent organizational documents) of Parent or any Subsidiary
of Parent (including Purchaser); (b) violate, conflict with, result in a
material breach of, constitute (with or without due notice or lapse of time or
both) a default under, result in the termination or in a right of termination
of, accelerate the performance required by or benefit obtainable under, result
in the triggering of any payment or other obligations pursuant to, result in the
creation of any Encumbrances (except for Permitted Encumbrances) upon any of the
properties of the Parent or its Subsidiaries (including Purchaser) under, or
result in there being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of, any material contract to
which the Parent or any of its Subsidiaries (including Purchaser) is a party, or
by which the Parent or any of its Subsidiaries (including Purchaser) or any of
their respective properties or assets is bound, except where the Parent or any
of its Subsidiaries (including Purchaser) has obtained or will obtain prior to
the Closing the necessary written agreements, waivers or consents of the other
parties to such material contracts to avoid, release or waive any such default,
conflict, breach, violation, termination, right to terminate or accelerate, or
triggering of payment with respect to such material contracts; or (c) require
any consent, approval or authorization of, or filing or registration with, any
Governmental Authority, except for (A) applicable requirements of the Securities
Act and the Exchange Act, (B) the applicable pre-merger notification
requirements of the HSR Act, any Non-U.S. Anti-Trust Laws or other Regulatory
Laws, (C) if required, the receipt of a decision under any Non-U.S. Anti-Trust
Laws, declaring the Merger compatible with any Non-U.S. Anti-Trust Laws, and (D)
the filing and recordation of the Articles of Merger pursuant to the Arizona
Code,
55
5.6 Parent Reports; Financial Statements. The Parent has made
available to the Company true and complete copies of (i) its Annual Report on
Form 10-K, for the fiscal years ended December 31, 2000, December 31, 2001, and
December 31, 2002, as filed with the SEC under the Securities Act and/or the
Exchange Act, as applicable, (ii) its proxy statements relating to all of the
meetings of shareholders (whether annual or special) of the Parent since January
1, 2001, as filed with the SEC, and (iii) all other reports, statements and
registration statements and amendments thereto (including, without limitation,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) required to be
filed by the Parent with the SEC under the Securities Act and/or the Exchange
Act, as applicable, since January 1, 2000. The reports and statements set forth
in clauses (i) through (iii), above, including all exhibits and information
incorporated by reference therein, are referred to collectively herein as the
"Parent Reports."
(a) Since December 31, 2000, the Parent filed all Parent
Reports required to be filed by it with the SEC under the Securities Act and/or
the Exchange Act, as applicable. As of their respective filing dates (and if
amended or supplemented by a filing prior to the date of this Agreement, then as
of the date of such amended or supplemented filing), the Parent Reports (i)
complied in all material respects with the then-applicable requirements of the
Securities Act and the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(b) No Subsidiary of the Parent is required to file any
forms, reports or other documents with the SEC.
(c) The audited consolidated financial statements and
unaudited interim financial statements of the Parent included in the Parent
Reports have been prepared in accordance with GAAP applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and present fairly,
in all material respects, the financial position of the Parent and the Parent
Subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein, and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act.
5.7 Parent Litigation. Except (a) as required to be disclosed in
any Parent Report and so disclosed in any Parent Report on or before August 18,
2003, and (b) since August 18, 2003, there are no actions, suits, arbitrations,
claims or proceedings or, to the knowledge of the Parent, investigations,
pending, publicly announced or, to the knowledge of the Parent, threatened,
against or affecting the Parent or any of its Subsidiaries (including
Purchaser), at law or in equity (collectively, "Parent Litigation"), and there
are no outstanding settlement agreements, consent decrees or agreements,
forbearance to xxx agreements, or similar agreements or obligations binding upon
the Parent or any of its Subsidiaries (including Purchaser).
56
5.8 Absence of Certain Changes. Since August 18, 2003, the Parent
and its Subsidiaries have conducted their respective businesses only in the
ordinary course, consistent with past practice.
5.9 Brokers. Except for Wachovia, no broker, finder or financial
advisor is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement that is based
upon any arrangement made by or on behalf of the Parent or any of its
Subsidiaries.
5.10 No Undisclosed Liabilities. Except (i) as reflected or
reserved against in the Parent's consolidated balance sheets (or the notes
thereto) included in the Parent's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2003, (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, and
(iii) for liabilities and obligations incurred in connection with the issuance
of the 8 1/4% Notes and in the ordinary course of business, consistent with past
practice, since June 30, 2003, neither the Parent nor any Subsidiary of the
Parent has incurred any material 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 Parent and its
Subsidiaries (or in the notes thereto) in the Parent Reports.
5.11 Certain Business Practices. None of the Parent, the Parent
Subsidiaries, nor any directors, officers, agents, or employees of the Parent or
any Parent Subsidiary has (i) used any funds of the Parent for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity or (ii) made any unlawful payment by the Parent 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, which will constitute a Material Adverse Effect.
5.12 Form S-4; Proxy Statement. None of the information supplied in
writing by the Parent for inclusion in, and none of the information regarding
the Parent from the Parent Reports incorporated by reference in (a) the
registration statement on Form S-4 to be filed with the SEC by the Parent in
connection with the Merger will, at the time the Form S-4 is filed with the SEC,
or at any time it is amended or supplemented, or at the time it becomes
effective under the Securities Act, or at the time of the Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they are made, not misleading, and
(b) the Proxy Statement will, at the date it is first mailed to the Parent's
shareholders and at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The Form
S-4 will comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable.
5.13 Disclosure Materials. None of the information contained in the
certain disclosure materials delivered by the Parent to the Company under cover
dated August 29, 2003 (the "Disclosure Materials"), except specifically with
respect to any information
57
therein also disclosed in the Parent's Form 8-K filed with the SEC on August 12,
2003, any pro forma financial information therein, and any information relating
to the financial results specifically associated with Parent's individual
product categories therein, did not as of the date of each document contained in
the Disclosure Materials, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
5.14 Parent Acknowledgement. The Parent acknowledges that Xxxxxx X.
Xxxxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxx, and counsel to the Parent have read the
entire Company Disclosure Schedule.
ARTICLE VI
COVENANTS
6.1 Alternative Proposals.
(a) Subject to Section 6.1(b), since July 23, 2003, the
Company has not, and until the earlier of the Effective Time or the termination
of this Agreement as provided herein, the Company agrees that neither it nor any
of its Subsidiaries or Affiliates, nor any of their Representatives, shall,
directly or indirectly, (i) encourage, invite, initiate or solicit any inquiries
relating to or the submission or making of a proposal by any Person with respect
to an Alternative Transaction or (ii) participate in or encourage, invite,
initiate or solicit negotiations or discussions with, or furnish or cause to be
furnished any information to, any Person relating to an Alternative Transaction.
Any violation of the restriction set forth in this Section 6.1 by any
Representative of the Company or any of its Subsidiaries, whether or not such
Representative is authorized to act on behalf of the Company or otherwise, shall
be deemed to be a breach of this Section 6.1 by the Company. Upon the execution
of this Agreement, the Company shall immediately cease, or cause to be ceased,
any discussions or negotiations with any Person regarding any proposed or
potential Alternative Transaction and shall request the prompt return to the
Company, or destruction of, any confidential information provided in connection
with any such discussions or negotiations. Except in accordance with Section
6.1(b), the Company's board of directors shall not (1) make a Change in the
Company Recommendation, or (2) cause the Company to enter into any memorandum of
understanding, agreement in principle, letter of intent, contract or agreement
(whether written or oral) related to any Alternative Transaction.
(b) Anything set forth herein to the contrary
notwithstanding, the board of directors of the Company may, prior to receipt of
the Company Shareholder Approval, review, negotiate, and provide information
(subject to a confidentiality agreement at least as restrictive as the Parent -
Company Confidentiality Agreement) in connection with the review and negotiation
of an unsolicited, bona fide written proposal regarding an Alternative
Transaction (an "Unsolicited Offer"), provided that: (i) the Company's board of
directors, in the exercise of its fiduciary duties, shall have concluded in good
faith, after considering Applicable Law, on the basis of advice of counsel, that
58
such actions are not inconsistent with its fiduciary duties to the Company's
stockholders under Applicable Law, (ii) the Company's board of directors shall
have determined in good faith (after consultation with its financial advisors)
that the acquiring party is capable of consummating such Alternative
Transaction, (iii) if any cash consideration is involved, such Alternative
Transaction shall not be subject to any financing contingency, and (iv) the
Company's board of directors shall have determined that such Alternative
Transaction is superior to the Merger from a financial point of view to the
stockholders of the Company (a proposed Alternative Transaction that meets the
criteria set forth in subsections (i) - (iv) of this Section 6.1(b) is referred
to herein as a "Superior Transaction").
(c) In the event a third party makes an inquiry, offer or
proposal to the Company with respect to any Alternative Transaction, the
Company, subject to any related confidentiality agreement existing on the date
hereof that, in the opinion of counsel to the Company, is binding on the Company
and precludes such disclosure, will promptly inform Parent of any such inquiry,
offer or proposal (including the terms thereof and the identity of the third
party making such inquiry, offer or proposal) and will promptly furnish to
Parent a copy of any such inquiry, offer or proposal, if in written form, or
otherwise a summary of the principal terms thereof; provided, that, in the event
that any existing confidentiality agreement, as described above, precludes any
such disclosure, then the Company will provide Parent with written notice of the
existence of such other inquiry, offer or proposal for an Alternative
Transaction and will provide as much information as is permissible consistent
with the provisions of such confidentiality agreement.
(d) Notwithstanding anything contained in Section 6.1 of
this Agreement to the contrary, the Company shall be permitted to (i) discuss
and pursue with its existing or replacement lenders regarding extensions and
refinancings of all or any portion of the Funded Indebtedness (provided that all
such extensions and refinancings of Funded Indebtedness shall provide that such
indebtedness may by prepaid at any time and that no warrants, options, or other
securities exercisable or convertible, in the aggregate, into more than ten
percent (10%) of the outstanding capital stock of the Company, shall be issued
in connection therewith) and (ii) provide information to its current lenders
that is required pursuant to contractual obligations existing as of the date
hereof, or information historically provided, consistent with past practices,
including status reports on the transactions contemplated herein, excluding,
however, any nonpublic competitive, price, strategic or valuation information or
principal deal terms relating to the Merger or this Agreement (except to the
extent such disclosure is required by the terms of the notes, agreements,
documents and/or instruments evidencing the Funded Indebtedness to a holder of
the Funded Indebtedness) and provided that the Company promptly provides to
Parent copies of all such information provided to current lenders.
(e) Nothing contained in this Section 6.1 or elsewhere in
this Agreement shall prohibit the Company from (i) taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated
under the Exchange Act or (ii) making any other disclosure to the Company's
shareholders if, in the good
59
faith judgment of the board of directors of the Company, after consultation with
its outside legal advisors, failure to do so would be inconsistent with
Applicable Law; provided, however that in no event shall the Company or its
board of directors or any committee thereof, take, agree to take, or resolve to
take any action expressly prohibited by this Section 6.1.
6.2 Interim Operations.
(a) From the date of this Agreement until the earlier of
the Effective Time and the termination of this Agreement pursuant to the terms
hereof, unless Parent has consented in writing thereto, or except as otherwise
expressly contemplated by this Agreement, the Company shall, and shall cause its
Subsidiaries to:
(i) conduct its business, financial,
and other operations in the ordinary course of business,
consistent with past practice, including the payment of all
accounts payable and other routine and customary expenses as
they become due and payable (provided that the sole and
exclusive remedy for a failure to pay such accounts payable
and expenses as they become due and payable shall be a
reduction of the Total Consideration as set forth in Part B of
Schedule I).
(ii) except as provided in Section
6.8(d), use commercially reasonable efforts to preserve intact
its business organizations and goodwill, keep available the
services of its officers and employees, and maintain
satisfactory relationships with those Persons having business
relationships with the Company or its Subsidiaries;
(iii) in the event the Company chooses to
pay any indebtedness for borrowed money (other than repayments
of its Funded Indebtedness and other principal and interest
payments as they become due, all in the ordinary course of
business consistent with past practice), promptly notify the
Parent in writing of its intent to do so along with such
amount to be paid prior to such payment being made;
(iv) provide the Parent with an itemized
schedule of the Company's Transaction Fees on each of the date
hereof, the first day of each calendar month following the
date hereof, and the Merger Consideration Calculation Time;
(v) within thirty (30) days following
the end of each calendar month, provide the Parent with the
Company's (a) consolidated financial statements, (b) record of
sales backlog for 2003 and 2004, (c) monthly and year-to-date
sales booking schedules of days sales outstanding and days
payable outstanding, (d) a statement of bidding and proposal
expenses, (e) revisions to, updates of, and reports of
production under the Schedule of Production, (f) amounts of
any severance paid or agreed to be paid and the recipients
thereof, each as of the end of such
60
month, and (g) research and development and bid and proposal
expenses, (the first of such reports shall include the
foregoing information for the months ended June 30 and July
31, 2003);
(vi) provide the Purchaser with (x) a
written report every ten (10) Business Days of any accounts
receivable which are thirty (30) days or more past due (as of
a date preceding such report with respect to which such
accounts receivable are reasonably ascertainable by the
Company) through the Merger Consideration Calculation Time and
(y) prompt notice of any account receivable of any
Governmental Authority or commercial customer in excess of
US$1,000,000 which is more than thirty (30) days past due; and
(vii) will use the proceeds from the
consummation of the ASD Transaction and the sale of the
Arizona Real Property for general corporate purposes
(including paying debt to the holders of the Funded
Indebtedness and other indebtedness to the extent permitted by
this Agreement) and shall not use the proceeds from the ASD
Transaction or the sale of the Arizona Property to pay any
bonuses (except as required by pre-existing contracts, as
required by Applicable Law, or as otherwise permitted by this
Section 6.2).
(b) Without limiting the generality of Section 6.2(a),
from and after the date of this Agreement until the Effective Time, except for
actions required to be taken by the Company or any of its Subsidiaries in the
performance of their respective obligations under the Company Material
Contracts, or as otherwise expressly permitted by Section 6.2(a), unless Parent
has consented in writing thereto, which consent will not be unreasonably
withheld (except with respect to subsections (vii), (viii) and (xiv), for which
Parent may withhold consent for any or no reason), or except as otherwise
expressly contemplated or permitted by this Agreement, the Company shall not,
and shall not permit its Subsidiaries to:
(i) amend their respective certificate
of incorporation, bylaws, or other organizational documents;
(ii) subject to Section 6.1(d)(i) and
the Company's obligations with respect to the ESPP, 8% Notes
Debt, or the Option Plans, issue, sell, pledge, dispose of or
encumber, or authorize the issuance, sale, pledge, disposition
or encumbrance of, any shares of its capital stock or other
ownership interest in the Company or any Subsidiaries or any
securities convertible into or exchangeable for any such
shares or ownership interest, or any rights, warrants or
options to acquire or with respect to any such shares of
capital stock, ownership interest, or convertible or
exchangeable securities;
(iii) subject to the Company's
obligations with respect to the ESPP, 8% Notes Debt, or the
Option Plans, split, combine or
61
reclassify its capital stock, or otherwise change its
capitalization as it exists on the date hereof, or propose the
issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock or any other
equity interest;
(iv) grant, confer or award any option,
warrant, convertible security or other right to acquire any
shares of its capital stock or take any action to cause to be
exercisable any otherwise unexercisable option under the
Option Plans or create any new equity based plan, convertible
security, or right to acquire any capital stock of the Company
(except (a) as otherwise required by the express terms of any
unexercisable options outstanding on the date hereof, (b) in
connection with grants of options to purchase Company Common
Stock to newly hired non-executive employees of the Company or
any of its Subsidiaries in the ordinary course of business,
consistent with past practice or (c) as may be required with
respect to the ESPP, 8% Notes Debt, or the Option Plans,.
(v) declare, set aside or pay any
dividend or make any other distribution or payment (whether in
cash, stock or property or any combination thereof) with
respect to any shares of its capital stock or other ownership
interests, including any constructive or deemed distributions,
or make any other payments to shareholders in their capacity
as such (other than any such payments by any Subsidiary to the
Company);
(vi) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock
or capital stock of the Subsidiaries;
(vii) transfer, license, mortgage,
encumber, sell, lease or otherwise dispose of any of its
material assets (including capital stock of the Subsidiaries);
provided that (x) the Company may sell, transfer or dispose of
the stock or assets of the International Center for Safety
Education, a Subsidiary of the Company, in an arms-length
transaction to any Person that is not an Affiliate of the
Company and (y) the Company may sell, transfer or dispose of
the Arizona Real Estate in an arms-length transaction to any
Person that is not an Affiliate of the Company;
(viii) enter into a new, or extend an
existing, license with Intercast Europe S.P.A. with respect to
the Company's Cleargard(R) transparent polyurethane polymers;
(ix) acquire by merger, purchase or any
other manner, any business, entity or division, or make any
capital expenditures or otherwise acquire any material
property or assets, except for purchases of supplies or
capital equipment in the ordinary course of business,
consistent with past practice;
62
(x) incur, assume, or otherwise become
liable for any indebtedness for borrowed money in excess of
US$10,000, individually, or US$50,000 in the aggregate, except
(w) for any indebtedness which is Funded Indebtedness, (x) for
checks or other instruments endorsed by the Company or any of
its Subsidiaries, and (y) indebtedness to trade creditors of
the Company or its Subsidiaries, in the ordinary course of
business, consistent with past practice;
(xi) guaranty any obligation in excess
of US$10,000, individually, or US$50,000, in the aggregate,
except pursuant to any potential increase in the Company's
guaranty obligations related to its former Airline Interiors
facility located at 00000 Xxxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx.
(xii) make or forgive any loans, advances
or capital contributions to, or investments in, any other
Person (other than advances in respect of business expenses
and loans and advances in respect of relocation arrangements,
in each case made to officers or employees in the ordinary
course of business, consistent with past practice);
(xiii) modify, amend, terminate or waive
any rights under any confidentiality agreement entered into in
connection with any Alternative Transaction, except in the
case of a modification, amendment, or waiver that would not
make such agreement less restrictive than the Parent - Company
Confidentiality Agreement;
(xiv) enter into any agreement or
contract which requires the payment by the Company or any of
its Subsidiaries after the Effective Time of more than
US$150,000, individually, or US$500,000 in the aggregate, or
which is not cancelable upon thirty (30) days' notice without
payment of a penalty;
(xv) modify, amend, terminate or waive
any rights under any Company Material Contracts, except in the
ordinary course of business consistent with past practice;
(xvi) except as may be required of the
Company or any of its Subsidiaries under any plan, agreement,
policy, arrangement, or obligation currently in effect, or as
otherwise required by Applicable Law: (a) increase the
compensation, severance, bonus or, other benefits payable or
to become payable to any of the directors, officers or
employees of the Company or any of its Subsidiaries, (b) grant
any severance or termination pay to, or enter into any new
employment, consulting, retention, salary continuation or
severance agreement with, any officer or director of the
Company or any of its Subsidiaries, or (c) establish, adopt,
enter into, amend or modify in any material respect any
collective bargaining agreement, employee benefit plan, trust,
fund, policy or arrangement for
63
the benefit of any current or former directors, officers or
employees of the Company or any of its Subsidiaries, or any of
their beneficiaries;
(xvii) take any action to change
accounting policies, procedures or practices, except as
required by a change in GAAP or Applicable Law after the date
hereof ("Reporting Requirements");
(xviii) subject to Section 6.3 or the
submission of a Superior Transaction to the vote of the
Company's shareholders, and except for the election of
directors in the ordinary course at an annual meeting of the
Company's shareholders to be held concurrently with the
Shareholders Meeting, approve or authorize any action to be
submitted to the shareholders of the Company for approval
other than pursuant to this Agreement;
(xix) materially change any method of
reporting income, deductions or other material items for
income Tax purposes, make or change any material election with
respect to Taxes, agree to or settle any material claim or
assessment in respect of Taxes in violation of Section 6.17
hereto, or agree to an extension or waiver of the limitation
period to any material claim or assessment in respect of
Taxes, other than in the ordinary course of business
consistent with past practice or as required by Reporting
Requirements;
(xx) settle or compromise any Company
Litigation, or other pending or threatened suit, action, or
claim in violation of Section 6.17 hereto;
(xxi) demand the acceleration of payment
any account receivable or trade receivable when such invoice
is not in default, or accept an accelerated payment of less
than the amount of the original invoice of any accounts
receivable or trade receivables as a result of a discount
granted by the Company, in either case not in the ordinary
course of business consistent with past practice (provided
that the sole and exclusive remedy for a breach of this
Section 6.2(b)(xxi) shall be a reduction of the Total
Consideration as set forth in Part B of Schedule I);
(xxii) enter into any binding oral or
written agreement to take any of the actions prohibited by
this Section 6.2(b).
(c) Notwithstanding anything contained Sections 6.2(a)
and (b), the Company shall, and the Company shall cause its Subsidiaries to,
maintain (i) research and development spending of not less than US$1,000,000
between July 1, 2003 and October 31, 2003, and of not less than US$250,000 for
each complete calendar month thereafter until the Closing Date and (ii) fees and
expenses associated with applying for and defending its Patents and other
Intellectual Property of not less than US$100,000 between July 1, 2003 and
October 31, 2003, and of not less than US$25,000 for each
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complete calendar month thereafter until the Closing Date, provided, however,
that the Company's breach of any item contained in this Section 6.2(c) shall not
constitute a Company MAC; and provided further the Company's breach of any item
contained in Section 6.2(c) when aggregated together with any other breach of
any representation, warranty, covenant, or agreement by the Company may
otherwise constitute a Company MAC.
6.3 Preparation of the Form S-4 and the Proxy Statement; Company
Shareholder Approval.
(a) Subject to Section 6.1, promptly following the date
of this Agreement, the Company shall, with the assistance and approval of Parent
(which approval shall not be unreasonably withheld or delayed), prepare and file
with the SEC the Proxy Statement, and Parent shall, with the assistance and
approval of the Company (which approval shall not be unreasonably withheld or
delayed), prepare and file with the SEC the Form S-4, in which the Proxy
Statement will be included (the "Proxy Statement/Prospectus"). Each of the
Company and Parent shall use commercially reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. The Company shall include in its Proxy Statement a discussion of
the Tax consequences of the Merger to the Company's shareholders in which it
shall advise its shareholders that the Merger is not a Tax free reorganization
and that the Merger Consideration is taxable to the shareholders and that they
shall consult with their tax advisors. The Company will call a special meeting
of its shareholders and cause the Proxy Statement to be mailed to its
shareholders as promptly as practicable after the Form S-4 is declared effective
under the Securities Act and, subject to Section 6.1, use its commercially
reasonable efforts to solicit from holders of shares of Company Common Stock
proxies in favor of the adoption of this Agreement and take all other action
reasonably necessary or advisable to secure, at the Shareholders Meeting, the
Company Shareholder Approval. Parent also shall take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state securities law in
connection with the issuance of Parent Common Stock in connection with the
Merger, and the Company shall furnish all information concerning the Company and
the holders of the Company Common Stock and rights to acquire Company Common
Stock pursuant to the Company Stock Option Plans as may be reasonably required
in connection with any such action. No filing of, or amendment or supplement to,
the Form S-4 or the Proxy Statement will be made by Parent or the Company,
respectively, without providing the other party the opportunity to review and
comment thereon; provided, that with respect to documents filed by a party which
are incorporated by reference in the Form S-4 or Proxy Statement/Prospectus,
this right of approval shall apply only with respect to information relating to
the other party or its business, financial condition or results of operations;
and provided, further, that the Company, may, upon termination of this Agreement
in accordance with Section 8.2(d), withdraw the Registration Statement and cease
the solicitation of proxies in favor of approval of the Agreement. Parent will
advise the Company, promptly after it receives notice thereof, of the time when
the Form S-4 has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of the
Parent Common Stock issuable in
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connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. The Company
will provide Parent, promptly after it receives notice thereof, a copy of any
request by the SEC for the amendment of the Proxy Statement and responses
thereto or requests by the SEC for additional information. Each of Parent,
Purchaser and the Company shall furnish all information concerning itself to the
other as may be reasonably requested in connection with any such action and the
preparation, filing and distribution of the Form S-4 and the preparation, filing
and distribution of the Proxy Statement. The Company, Parent and Purchaser each
agree to correct any information provided by it for use in the Form S-4 or the
Proxy Statement which shall have become false or misleading. If, at any time
prior to the Effective Time, any information relating to Parent or the Company,
or any of their respective affiliates (as that term is used in Rule 145 under
the Securities Act), officers or directors, should be discovered by Parent or
Company which should be but is not set forth in an amendment or supplement to
any of the Form S-4 or the Proxy Statement, so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and, to the extent required by Applicable Law, disseminated to the
shareholders of the Company.
(b) Subject to Section 6.1 and Section 6.3(c), and prior
to any termination of this Agreement pursuant to Section 8.2(d), the Company,
acting through the Company's board of directors, shall in accordance with
Applicable Law and the Company's Bylaws (i) duly call, give notice of, convene
and hold, as promptly as practicable following the date upon which the Form S-4
becomes effective, the Shareholders Meeting and (ii) use its best efforts to
solicit from holders of shares of Company Common Stock proxies in favor of the
adoption of this Agreement and take all other action necessary or advisable to
secure, at the Shareholders Meeting, the Company Shareholder Approval, by the
vote described in Section 6.3 of this Agreement, and the Company's board of
directors shall unanimously recommend adoption of this Agreement and the
transaction contemplated hereby by the shareholders of the Company (the "Company
Recommendation"), and shall not withdraw, revoke or change the Company
Recommendation unless the board of directors of the Company, after complying
with the provisions of Section 6.1, has publicly announced or notified Parent
that it has approved a binding agreement for a Superior Transaction (a "Change
in the Company Recommendation"); provided, that, the foregoing shall not
prohibit accurate disclosure (and such disclosure shall not be deemed to be a
Change in the Company Recommendation) of factual information regarding the
business, financial condition or results of operations of Parent or the Company
or the fact that a proposal for an Alternative Transaction has been made, the
identity of the party making such proposal or the material terms of such
proposal in the Form S-4 or the Proxy Statement/Prospectus or otherwise, only to
the extent such information, facts, identity or terms is required to be
disclosed under Applicable Law.
66
(c) If there is a Change in the Company Recommendation in
accordance with Section 6.3(b) hereof, then from and after the date of such
Change in the Company Recommendation, in performing its obligations under this
Section 6.3, the Company shall not be obligated to solicit from holders of
shares of Company Common Stock proxies in favor of the adoption of this
Agreement or to take any action necessary or advisable to secure, at the
Shareholders Meeting, the Company Shareholder Approval.
6.4 Filings; Other Action.
(a) Subject to the terms and conditions herein provided,
each of the Company, Parent and Purchaser shall: (i) use reasonable best efforts
to cooperate with one another in (A) determining which filings are required or
advisable to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required or advisable to be obtained
prior to the Effective Time from, Governmental Authorities or other third
parties in connection with the execution and delivery of this Agreement, and any
other Ancillary Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby and (B) timely making all such
filings and timely seeking all such consents, approvals, permits, authorizations
and waivers; and (ii) use reasonable best efforts to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Documents to which it is a
party. If, at any time after the Effective Time, any further action is necessary
or desirable to carry out the purpose of this Agreement, the proper officers and
directors of Parent and the Surviving Corporation shall take all such necessary
action.
(b) In furtherance and not in limitation of the
foregoing, each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act, if required, appropriate
filings under any Non-U.S. Anti-Trust Law, and appropriate filings under any
other Regulatory Law (as hereinafter defined) with respect to the transactions
contemplated hereby as promptly as practicable after the date hereof and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act, any Non-U.S. Anti-Trust
Law, and any other Regulatory Law and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act, if required, to obtain the receipt of any approvals required pursuant
to any Non-U.S. Anti-Trust Law, and to cause the expiration or termination of
the applicable waiting periods under any other Regulatory Law as soon as
practicable. Nothing in this Agreement shall require any of Parent and its
Subsidiaries or the Company and its Subsidiaries to sell, hold separate or
otherwise dispose of or conduct their business in a specified manner, or agree
to sell, hold separate or otherwise dispose of or conduct their business in a
specified manner, or permit the sale, holding separate or other disposition of,
any material assets of Parent, the Company or their respective Subsidiaries or
the conduct of their business in a specified manner, whether as a condition to
obtaining any such approval from a Governmental Authority or any other Person or
for any other reason ("Regulatory Restrictions").
67
(c) Each of Parent and the Company shall, in connection
with the efforts referenced in Section 6.4(a), obtain all requisite material
approvals and authorizations for the transactions contemplated by this Agreement
under the HSR Act, any Non-U.S. Anti-Trust Law, or any other Regulatory Law, use
commercially reasonable efforts to (i) cooperate in all respects with each other
in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) promptly inform the other party of any communication received by
such party from, or given by such party to, the Antitrust Division of the DOJ,
the Federal Trade Commission (the "FTC") or any other Governmental Authority and
of any material communication received or given in connection with any
proceeding by a private party, in each case regarding any of the transactions
contemplated hereby, and (iii) permit the other party to review any
communication given by it to, and consult with each other in advance of any
meeting or conference with, the DOJ, the FTC or any such other Governmental
Authority or, in connection with any proceeding by a private party, with any
other Person, and to the extent appropriate or permitted by the DOJ, the FTC or
such other applicable Governmental Authority or other Person, give the other
party the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "Regulatory Law" means, if
applicable, the Xxxxxxx Act, the Federal Trade Commission Act, and all other
federal, state and foreign, if any, Applicable Laws that are designed or
intended to prohibit, restrict or regulate antitrust violations or
anti-competitive activities.
(d) Subject to the terms and conditions of this
Agreement, in furtherance and not in limitation of the covenants of the parties
contained in Section 6.4(a) and 6.4(b), if any administrative or judicial action
or proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any Regulatory Law (a "Regulatory Challenge"), each of
Parent and the Company shall cooperate in all respects with each other and use
its respective commercially reasonable efforts in order to contest and resist
any such Regulatory Challenge and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement.
(e) If any objections are asserted with respect to the
transactions contemplated hereby under any Regulatory Law or if any suit is
instituted by any Governmental Authority or any private party challenging any of
the transactions contemplated hereby as violative of any Regulatory Law, each of
Parent and the Company shall use commercially reasonable efforts and cause its
respective Subsidiaries to use their commercially reasonable efforts to resolve
any such objections or challenge as such Governmental Authority or private party
may have to such transactions under such Regulatory Law so as to permit
consummation of the transactions contemplated by this Agreement.
(f) The Company and Parent agree to cooperate in
connection with sharing necessary information with respect to and making all
necessary filings under the HSR Act, any Non-U.S. Anti-Trust Law and any other
Regulatory Law; and making any
68
preliminary filings of the Proxy Materials with the SEC, as promptly as
practicable, on a confidential basis pursuant to Rule 14a-6(e)(2) under the
Exchange Act, to the extent such treatment is available.
(g) Any fees incurred in connection with filings made or
consents sought pursuant to the HSR Act or any required filings made pursuant to
any Non-U.S. Anti-Trust Law shall be borne equally by the Company and the
Parent.
6.5 Access to Information.
(a) From the date of this Agreement until the Closing,
the Company shall, and shall cause its Subsidiaries to, (i) give Parent, its
officers and a reasonable number of its employees and its authorized
Representatives, reasonable access at all reasonable times during normal
business hours to the Company Material Contracts, books, records, analysis,
projections, plans, systems, personnel, commitments, offices and other
facilities and properties of the Company and its Subsidiaries and their
accountants and accountants' work papers and (ii) furnish Parent on a timely
basis with such financial and operating data and other information with respect
to the business and properties of the Company and its Subsidiaries as Parent may
from time to time reasonably request and use commercially reasonable efforts to
make available at all reasonable times during normal business hours to the
officers, employees, accountants, counsel, financing sources and other
Representatives of the Parent the appropriate individuals (including management
personnel, attorneys, accountants and other professionals) for discussion of the
Company's business, properties, prospects and personnel as Parent may reasonably
request.
(b) Not later than the Merger Consideration Calculation
Time, Parent shall use commercially reasonable efforts to make available during
normal business hours to Representatives of the Company Xxxxxx Xxxxxxxx, Xxxxx
Xxxxx, Xxxxxx Xxxxxxx and Xxxx Xxxxx for a meeting in person or by telephone
conference call for the purpose of updating the Company's due diligence
investigation of the Parent and Purchaser and to confirm the continuing accuracy
of the representations and warranties made by Parent and Purchaser in Article V
of this Agreement.
6.6 Publicity. Any press release relating to this Agreement or its
termination (except for press releases relating to a Superior Transaction) shall
be issued jointly by the Company and Parent in a form previously agreed upon by
the Company and Parent; provided, however, that any party may, without the prior
written consent of the others, issue such press release or make such public
statement as may, upon the advice of counsel, be required by Applicable Law or
the rules and regulations of the SEC or the NYSE in the case of Parent or the
rules and regulations of the SEC or the AMEX in the case of Company, in advance
of obtaining such prior written consent, in which case, the issuing party shall
use commercially reasonable efforts to consult with the other party before
issuing any such release or making any such public statement.
6.7 Further Action. Upon the terms and subject to the conditions
set forth in this Agreement, but without limiting the rights of the parties
hereunder, each of the
69
parties agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including using its best
efforts to accomplish each of the following:
(a) the taking of all acts reasonably necessary to cause
the Closing to be consummated as promptly as practicable;
(b) subject to Section 6.4 the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Authorities), including, without limitation, filings
pursuant to the taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, a Governmental Authority;
(c) the obtaining of all necessary consents, approvals or
waivers from third parties;
(d) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement, or
the consummation of the transactions contemplated hereby and thereby;
(e) the taking of all necessary actions to prevent the
entry of Restraints and to appeal as promptly as possible any such Restraints
that may be entered; and
(f) the execution and delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
6.8 Indemnification of Company Directors and Officers, O&D Tail
Insurance, Insurance.
(a) Parent agrees that commencing at the Effective Time
and for seven (7) years and one (1) Business Day after the Effective Time, the
bylaws of the Surviving Corporation shall provide that the Surviving
Corporation, shall indemnify and hold harmless and pay expenses to the present
and former directors and officers of the Company, and each person who prior to
the Effective Time becomes an officer or director of the Company (each an
"Indemnified Person"), in respect of acts or omissions by any of them in their
capacities as such occurring at or prior to the Effective Time (including,
without limitation, for acts or omissions occurring in connection with this
Agreement and the consummation of the Merger) to the fullest extent permissible
under Applicable Law and, in any event, on terms no less favorable than the
terms of the bylaws of the Company in effect immediately prior to the Effective
Time (collectively, the "Indemnified Losses"). Such provisions of the Surviving
Corporation's articles of incorporation and bylaws relating to the
indemnification of Indemnified Persons for Indemnified Losses shall not be
amended, modified, repealed or rescinded for a period of seven (7) years and one
(1) Business Day after the Effective Time in any manner that
70
would materially and adversely effect the rights of Indemnified Persons
thereunder, unless such modification shall be required by Applicable Law.
Without limiting the generality of the foregoing, the Indemnified Losses shall
include reasonable costs of prosecuting a claim under this Section 6.8. The
Parent shall cause the Surviving Corporation to honor, assume and perform the
obligations of the Company in the place and stead of the Company under any and
all indemnification agreements between the Company and any such Indemnified
Persons in existence on the Closing Date (which agreements have been made
available by the Company to the Parent).
(b) Parent agrees that commencing at the Effective Time
and for six (6) years and one (1) Business Day after the Effective Time:
(i) Parent shall obtain and provide at
its expense, or shall cause the Surviving Corporation to
obtain and provide at its expense, (and shall provide evidence
to the Company that the Parent has obtained and provided or
caused the Surviving Corporation to obtain or provide same on
or before the Closing) officers' and directors' liability
insurance or officers' and directors' liability tail insurance
policies with respect to acts or omissions occurring prior to
the Effective Time (including, without limitation, for acts or
omissions occurring in connection with this Agreement and the
consummation of the Merger) covering each Indemnified Person
on terms with respect to coverage and amount (including with
respect to the payment of attorney's fees) no less favorable
than those of the Company's policy in effect on the date
hereof (which policies have been made available by the Company
to Parent) (the "O&D Tail Insurance").
(ii) The rights of each Indemnified
Person and his or her heirs and legal representatives under
this Section 6.8 shall be in addition to any rights such
Indemnified Person may have under the articles of
incorporation or bylaws of the Company, any agreement
providing for indemnification, or under the laws of the State
of Arizona or any other Applicable Laws. These rights shall
survive consummation of the Merger and are intended to
benefit, and shall be enforceable by, each Indemnified Person.
(c) Immediately upon the execution and delivery of this
Agreement by the Company, the Parent and the Purchaser, the Company shall
appoint AON Risk Services, Inc. as its exclusive broker to negotiate the
extension, through December 31, 2003, of its director and officer liability
insurance. The Company shall, using a broker of its own choosing, timely
negotiate extensions, through December 31, 2003, of all of its other insurance
policies due to expire on October 1, 2003.
(d) Within ten (10) Business Days after the date of this
Agreement, the Company shall, and shall cause each of its Subsidiaries to, if
necessary, obtain adequate property and casualty insurance covering each piece
of real property owned or leased by the Company or any of its Subsidiaries. The
Company shall give the Parent prompt
71
notice of any insurable loss arising with respect to any real property owned or
leased by the Company or any of its Subsidiaries. In the event an insurable loss
occurs with respect to any real property owned or leased by the Company or any
of its Subsidiaries, neither the Company nor any of its Subsidiaries shall,
without the prior written consent of the Parent, which consent shall not be
unreasonably withheld, use the proceeds of any insurance policy received as a
result of or in connection with such insurable loss to rebuild or repair any
property, or any structure thereon, which is the basis for such insurable loss.
6.9 Conveyance Taxes. The Company and Parent shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees and any similar Taxes which become
payable in connection with the transactions contemplated by this Agreement that
are required or permitted to be filed on or before the Effective Time.
6.10 Certain Tax Matters.
(a) During the period from the date hereof to the
Effective Time, each of the Company and the Parent shall, and shall cause each
of its Subsidiaries to: (i) timely file all Tax Returns ("Post Signing Returns")
required to be filed by it and such Post Signing Returns shall be prepared in a
manner consistent with past practice, (ii) timely pay all Taxes due and payable
in respect of such Post Signing Returns that are so filed, (iii) accrue a
reserve in its books and records and financial statements, in accordance with
past practice, for all Taxes payable by it for which no Post Signing Return is
due prior to the Effective Time, and (iv) promptly notify the other parties to
this Agreement of any federal or state income or franchise, or other material
Tax, suit, claim, action, investigation, proceeding or audit pending against or
with respect to it or any of its Subsidiaries in respect of any Tax matters (or
any significant developments with respect to any ongoing Tax matters), including
material Tax liabilities and material refund claims; provided, that the Merger
Consideration shall not be reduced solely due to any increase in corporate tax
liability resulting solely from the effect of the Parent making the 338(g)
Election; provided, further, however, that the Company acknowledges that the
transaction contemplated by this Agreement is taxable and will not qualify or be
reported as a tax free reorganization under the Internal Revenue Code.
(b) The Company shall make all required estimated tax
payments due before the Effective Time. The total estimated income/franchise tax
payments (including federal, state, local or foreign tax payments) shall reflect
the total tax liability based on taxable income calculated by annualizing actual
taxable income as of August 31, 2003.
(c) The Parent shall prepare or cause to be prepared and
file or cause to be filed all Tax Returns for the Company and its Subsidiaries
which are filed after the Effective Time.
6.11 Benefit Plans and Option Plans.
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(a) Subject to Section 6.11(b) below, between the date of
this Agreement and through the Effective Time, no discretionary award or grant
under any benefit plan of the Company or a Company Subsidiary shall be made
without the consent of Parent; nor shall the Company or a Company Subsidiary
take any action or permit any action to be taken to accelerate the vesting of
any warrants or options previously granted pursuant to any such benefit plan
except as specifically required or permitted pursuant to (i) the terms of this
Agreement and (ii) the terms thereof as in effect on July 23, 2003. Subject to
Section 6.11(b) below, neither the Company nor any Company Subsidiary shall make
any amendment to any benefit plan or any awards thereunder, or establish any new
benefit plan, without the consent of Parent, provided that the Company shall as
required by Applicable Law amend or modify any benefit plan (including its
401(k) plan) to conform to legal and regulatory requirements and/or to change
the administrator or provider thereunder.
(b) Prior to the Effective Time, the Company shall, if
necessary, amend the Option Plans, ESPP and RSP in order to allow and provide
for acceleration of the vesting of the Eligible Options and termination of the
Option Plans, ESPP and RSP, each as provided in Article III.
6.12 Stock Exchange Listing. Parent shall use commercially
reasonable efforts to have the Parent Common Stock to be issued in the Merger
approved for listing on the NYSE prior to the Effective Time, subject to
official notice of issuance.
6.13 Affiliates; Shareholder Agreement. The Company shall use
commercially reasonable efforts to obtain an executed Affiliate Letter from (i)
each Person identified on Section 4.24 of the Company Disclosure Schedule hereto
within thirty (30) days following the date of this Agreement and (ii) from any
Person who, to the knowledge of the Company, may be deemed to have become an
affiliate (as that term is used in Rule 145 under the Securities Act) of the
Company after the date of this Agreement and prior to the Effective Time as soon
as practicable after attaining such status. Notwithstanding the foregoing,
Parent shall be entitled to place a restrictive legend, substantially in the
form set forth in the Affiliate Letter, on the certificates evidencing any of
the Parent Common Stock to be received by (i) any Person identified on Section
4.24 of the Company Disclosure Schedule or (ii) any Person Parent reasonably
identifies in writing to the Company as being a Person who is an "affiliate"
within the meaning of Rule 145 promulgated under the Securities Act, and to
issue appropriate stop transfer instructions to the transfer agent for such
Parent Common Stock, regardless whether such Person has executed an Affiliate
Letter and regardless whether such Person's name appears on Section 4.24 of the
Company Disclosure Schedule. In addition, the Company shall use commercially
reasonable efforts to cause each of the Company's executive officers and
directors to execute and deliver to the Parent a Shareholders Agreement
substantially in the form annexed hereto as Exhibit C (the "Shareholders
Agreement") prior to any filing made by the Parent and the Company pursuant to
the HSR Act.
6.14 Escrow Agreement. The Parties agree that at the Effective
Time, the Parent and the Company shall execute and deliver to the Escrow Agent a
joint instruction
73
letter instructing the Escrow Agent to release and deliver to the Parent all
amounts held by the Escrow Agent pursuant to the Escrow Agreement, including
accumulated, but unpaid, interest thereon, to the order of the Parent (the
"Escrow Release Letter").
6.15 Liquidation of Subsidiaries. Prior to the Effective Time, the
Company shall, in consultation with the Parent, use commercially reasonable
efforts to cause the legal existence of each of its Subsidiaries which are shell
companies or are non-operating companies and listed on Schedule 6.15 to be
terminated and the assets of such Subsidiaries transferred to the Company and
the liabilities of such Subsidiaries to be paid, to the extent they are due and
payable, or transferred to the Company (the "Subsidiary Liquidations");
provided, that at least 15 Business Days prior to each such termination and
transfer the Company shall inform the Parent in writing of the amount and nature
of such assets and liabilities to be paid or transferred to the Company; and
provided, further that if following receipt of such notice the Parent should
notify the Company that any such Subsidiary should not be liquidated, the
Company will take no action with respect to the liquidation of such Subsidiary
and the transfer of its assets and liabilities to the Company.
6.16 Certain Benefit Plans. At the Parent's option, by written
notice to the Company not later than 30 days prior to the Closing Date: the
Company shall initiate all actions necessary to freeze, as of the Effective
Time, any Company Benefit Plan and any qualified or non-qualified defined
benefit plans of the Company. On or before September 30, 2003, to the extent
required by Applicable Law, the Company will prepare and file with the U.S.
Internal Revenue Service an application for a determination letter with respect
to the Company's defined benefit pension plan to comply with the requirements of
the Tax legislation commonly known as "GUST" and "EGTRRA", and all plan
amendments shall give effect to the most recent qualification letter through the
date of such filing. Prior to the Closing Date, the Company shall give to the
U.S. Internal Revenue Service, the Pension Benefits Guaranty Corporation, the
Department of Labor, and all participants in each Company Benefit Plan, all
notices of the Merger required to be given ERISA or the Code.
6.17 Company Litigation. Subject in each case to the good faith
conclusion of the Company's board of directors, in the exercise of its fiduciary
duties, after considering the best interests of the Company, Applicable Law, and
the advice of counsel, that a settlement of any Company Litigation is in the
best interests of the Company, until the earlier of the termination of this
Agreement in accordance with its terms and the Effective Time, the Company and
the Company's Subsidiaries:
(a) shall permit the Parent to monitor, at its own
expense and with separate counsel, the defense or settlement of Company
Litigation brought by any Company shareholder against the Company or the board
of directors of the Company relating to this Agreement or the Merger, and shall
not settle any such Company Litigation, without first consulting with the Parent
(if practicable) regarding the nature and terms of such settlement;
74
(b) shall not settle any other Company Litigation to
which it is a party without first consulting with the Parent (if practicable)
regarding the nature and terms of such settlement; and
(c) shall not settle any Company Litigation unless the
payment by the Company or its Subsidiaries of any cash amount is paid prior to
the Merger Consideration Calculation Time and such settlement does not impose
any material restriction on the business, assets, or operations of the Surviving
Corporation (as successor to the Company) following the Closing Date.
6.18 Control of Operations. Nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct the
operations of the Company and its Subsidiaries prior to the Effective Time.
Prior to the Effective Time, the Company shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its operations.
6.19 Pro Forma Financial Statements. . The Company will timely file
with the SEC any Form 8-K containing any pro forma financial information
required to be filed by the Company pursuant to Article 11 of Regulation S-X
promulgated pursuant to the Exchange Act with respect to the consummation of the
ASD Transaction and/or the sale of the Arizona Real Estate.
6.20 Termination of Certain Company Executive Officers. To
effectuate the intent of the parties to the Agreement that all costs and
expenses associated with the termination of all employment agreements with the
President and Chief Executive Officer of the Company (Xxxxxxx X. Xxxxx) and the
Executive Vice President and Chief Development Officer of the Company (Xxxxxx X.
Xxxxxxx), be paid by the Company at or prior to the Closing, the board of
directors of the Company and the Company shall take such actions as shall be
necessary prior to the Closing and in compliance with such employment agreements
and Applicable Law, and Parent hereby consents to such actions, to: (a) give
notice and terminate the President and Chief Executive Officer of the Company
(Xxxxxxx X. Xxxxx) and the Executive Vice President and Chief Development
Officer of the Company (Xxxxxx X. Xxxxxxx), without cause, effective immediately
following the Closing; (b) pay all salary earned or accrued through the
Termination Date and all management change of control contract payments and
severance payments, including any Tax gross-up amounts and excise Taxes
resulting from such payments, associated with or resulting from the termination
of such executive officers of the Company at Closing; and (c) notwithstanding
any other provision contained in this Agreement to the contrary, any amounts
described in item (b) above which remain unpaid immediately following the
Closing shall constitute Company's Transaction Fees. This covenant shall not be
deemed to prohibit or require the Parent and either of such executive officers
from entering into any interim or permanent employment or consulting agreement
with Parent or Surviving Corporation following the Closing.
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ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Consummate the
Merger. The respective obligation of each party to consummate the Merger shall
be subject to the satisfaction or, where permitted by Applicable Law, the waiver
prior to the Effective Time, of each of the following conditions:
(a) The Company's shareholders shall have approved the
Merger and this Agreement in accordance with the Arizona Code and the rules and
regulations of the American Stock Exchange; provided, that this Section 7.1(a)
shall not constitute a condition to the obligation of the Company to consummate
the Merger if the Company shall have breached Section 6.3;
(b) No temporary restraining order, preliminary or
permanent injunction or other judgment or order issued by any Governmental
Authority of competent jurisdiction or pursuant to any statute, law, rule, legal
restraint or prohibition (collectively, "Restraints") shall be in effect
prohibiting the consummation of the Merger or the transactions contemplated
hereby; provided that this Subsection 7.1(b) shall not constitute a condition to
the obligations of any party to this Agreement to consummate the Merger that
files suit or institutes proceedings with respect to, obtains, or otherwise
affirmatively seeks to obtain, directly or indirectly, or any of its respective
Subsidiaries that files suit or institutes proceedings with respect to, obtains,
or otherwise affirmatively seeks to obtain, directly or indirectly, any such
Restraints;
(c) The Form S-4 and any required post-effective
amendment thereto shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order;
provided that this Subsection 7.1(c) shall not constitute a condition to the
obligations of Parent or Purchaser to consummate the Merger if Parent is in
breach of Section 6.3;
(d) Any waiting period (and any extension thereof) or
approval of a Governmental Authority applicable to the consummation of the
Merger under the HSR Act, Non-U.S. Anti-Trust Law, or other Regulatory Law shall
have terminated, expired or been obtained; provided that this Subsection 7.1(d)
shall not constitute a condition to the obligations of any party to this
Agreement to consummate the Merger that fails, or fails to cause any of its
respective Subsidiaries, to timely make any filing with or give any notice to
any Governmental Authority, or to use its commercially reasonable efforts to
obtain any approval from any Governmental Authority under the HSR Act, any
Non-U.S. Anti-Trust Law, or other Regulatory Law, required of such party or its
Subsidiary; and
(e) All consents, approvals and actions of, filings with,
and notices to any Governmental Authority required of the Company, Parent,
Purchaser or any of their respective Subsidiaries under any Regulatory Law with
respect to the consummation of the Merger (other than the filing of a
certificate of merger pursuant to the Arizona Code)
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shall have been obtained or made; provided that this Subsection 7.1(e) shall not
constitute a condition to the obligations of any party to this Agreement to
consummate the Merger that fails, or fails to cause any of its respective
Subsidiaries, to make any filing with or give any notice to any Governmental
Authority, or to use its commercially reasonable efforts to obtain any consent,
approval or action by any Governmental Authority, required of such party or its
Subsidiary.
7.2 Conditions to Obligation of Parent and Purchaser to Consummate
the Merger. The obligation of Parent and Purchaser to consummate the Merger
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
(a) The representations and warranties of the Company set
forth in this Agreement or any Ancillary Document shall be true and correct both
when made and as of the Closing (except to the extent expressly made as of a
specified date or as updated pursuant to a Company Update, in which case as of
such date), except where the failure of such representations and warranties to
be true, complete and correct would not, in the aggregate, result in a Company
MAC;
(b) The Company shall have performed and complied in all
material respects with all obligations, agreements and covenants required by
this Agreement to be performed or complied with by it prior to the Effective
Time, except (i) where non-performance or non-compliance follows Parent's or
Purchaser's breach of this Agreement, (ii) unless such failure to perform or
comply would not have a Material Adverse Effect on the Company, or (iii) unless
such failure to perform or comply is a matter which is the subject of a decrease
in the Total Consideration pursuant to Part B of Schedule I, in which case such
adjustment shall be the sole consequence of such non-performance or
non-compliance and the matter shall not constitute or be deemed to be a Material
Adverse Change or Material Adverse Effect;
(c) Parent shall have received a certificate signed by
the chief financial officer of the Company, dated as of the Closing Date, to the
effect that, to such officer's knowledge, the conditions set forth in Sections
7.2(a) - (b) have been satisfied;
(d) This Agreement and the Merger shall have been
approved by the holders of a majority of the shares of Company Common Stock;
(e) Each of the executive officers and directors of the
Company shall have executed and delivered to the Parent the Shareholders
Agreement;
(f) No Change in the Company Recommendation shall have
occurred;
(g) The Company shall have duly executed and delivered to
the Parent the Escrow Release Letter, which release shall be effective as of the
Effective Time; and
(h) All consents of third parties required pursuant to
the terms of any Company Material Contract identified on Schedule III shall have
been obtained.
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7.3 Conditions to Obligation of the Company to Consummate the
Merger subject to Section 3.6. Subject to Section 3.6, the obligation of the
Company to consummate the Merger shall be subject to the fulfillment or waiver
at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and
Purchaser set forth in this Agreement or any Ancillary Document shall be true
and correct both when made, and as of the Closing Date (except to the extent
expressly made as of a specified date, or as updated pursuant to a Parent
Update, in which case as of such date), except where the failure of such
representations and warranties to be true, complete and correct would not, in
the aggregate, result in a Parent MAC;
(b) Parent and Purchaser shall have performed and
complied in all material respects with all obligations, agreements and covenants
required by this Agreement to be performed and complied with by them prior to
the Effective Time, except (i) where non-performance or non-compliance follows
Company's breach of this Agreement, or (ii) unless such failure to perform or
comply would not have a Material Adverse Effect on the Parent;
(c) The shares of Parent Common Stock issuable as a
portion of the Merger Consideration shall have been approved for listing on the
NYSE, subject to official notice of issuance, unless the Parent shall have
irrevocably designated the Cash Consideration Percentage to be 100% (which
designation is in effect at the Closing Date or the Effective Time);
(d) Parent shall have provided evidence to the Company in
a form reasonably acceptable to the Company that the Parent has obtained the O&D
Tail Insurance; and
(e) The Company shall have received a certificate signed
by the chief financial officer of Parent, dated as of the Closing Date, to the
effect that, to such officer's knowledge, the conditions set forth in Section
7.3(a) through Section 7.3(d) have been satisfied.
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger abandoned at any time prior to the Effective Time,
whether or not the Company Shareholder Approval has been obtained, by the mutual
consent of Parent and the Company.
8.2 Termination by Either Parent or Company. This Agreement may be
terminated by the Parent or the Company and the Merger abandoned at any time
prior to the Effective Time as follows:
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(a) whether or not the Company Shareholder Approval has
been obtained, if the Effective Time shall not have occurred on or prior to
December 31, 2003 (the "Deadline Date"), provided, however, that the right to
terminate this Agreement under this Section 8.2(a) shall not be available to any
party whose failure to fulfill any obligation under this Agreement shall have
principally caused, or resulted in, the failure of the Merger to be consummated
on or prior to such date;
(b) whether or not the Company Shareholder Approval has
been obtained, if a Governmental Authority shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the consummation of the Merger, provided, however, that the right to terminate
this Agreement under this Section 8.2(b) shall not be available to any party
whose actions, or failure to act, principally caused, or resulted in, directly
or indirectly, the Governmental Authority issuing a nonappealable final order,
decree or ruling or taken any other nonappealable final action having the effect
of permanently restraining, enjoining or otherwise prohibiting the consummation
of the Merger;
(c) if the Shareholders Meeting has been held and the
Company Shareholder Approval shall not have been obtained; or
(d) if, prior to the receipt of Company Shareholder
Approval, (x) a Change in the Company Recommendation shall have occurred or (y),
the board of directors of the Company, has publicly announced or has provided
written notice to the Parent that the Company's board of directors has approved
a binding agreement for a Superior Transaction; provided, that the Company may
not terminate this Agreement and abandon the Merger pursuant to this Section
8.2(d) unless:
(i) the Company shall have complied
with Section 6.1 and Section 6.3 in all respects; and
(ii) the Company shall have (1) notified
the Parent in writing, at least two (2) Business Days prior to
the vote of the Company's board of directors to approve a
Change in the Company Recommendation or a Superior
Transaction, of the Company's receipt of a proposal for such
Superior Transaction, and that the Company intends to make a
Change in the Company Recommendation or enter into a binding
written agreement with respect to such Superior Transaction
subject to Section 8.2(d)(iii) below and (2) provided to the
Parent, together with the notice set forth in the immediately
preceding clause, a copy of the current written version of
such Superior Transaction (or if there is no written version,
a summary of all material terms and conditions of such
Superior Transaction), subject to any related confidentiality
agreement existing on the date hereof that, in the opinion of
counsel to the Company, is binding on the Company and
precludes such disclosure; and
79
(iii) the Parent does not make, within
two (2) Business Days after receipt of the Company's written
notice pursuant to Section 8.2(d)(ii) above, an offer that the
board of directors of the Company shall have concluded in good
faith (following consultation with its financial advisors and
outside legal counsel) is at least as favorable, considering
all relevant terms, to the Company shareholders as such
Superior Transaction; and
(iv) the Company shall,
contemporaneously with making such Change in the Company
Recommendation or entering into such Superior Transaction,
terminate this Agreement by delivery of notice of such
termination to Parent, (x) concurrently pay to Parent such
amounts and take such actions as specified in Sections
8.7(a)(i) and 8.7(a)(ii), and (y) shall deliver to the Parent
a written undertaking to pay the amount specified in Sections
8.7(a)(iii) as required by and pursuant to the terms of
Sections 8.7(a)(iii) upon the consummation of such Superior
Transaction.
8.3 Termination by the Company. Subject to Section 3.6 above, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time by action of the Company's board of directors, whether or not the
Company Shareholder Approval has been obtained, upon a failure to satisfy any of
the conditions set forth in Sections 7.3(a) or 7.3(b) (a "Terminating Parent
Breach"); provided that, if such Terminating Parent Breach is curable by Parent
or Purchaser through the exercise of commercially reasonable efforts within
thirty (30) days following notice of such Terminating Parent Breach, for so long
as Parent or Purchaser continues to exercise such commercially reasonable
efforts, and such Terminating Parent Breach is cured within such thirty (30) day
period, the Company may not terminate this Agreement under this Section 8.3
within such thirty (30) day period; and provided further that the preceding
proviso shall not in any event be deemed to extend the Deadline Date; or upon
the occurrence of any other Material Adverse Change with respect to the Parent.
8.4 Termination by Parent. This Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time, by action of the
board of directors of Parent, on behalf of Parent and Purchaser, whether or not
the Company Shareholder Approval has been obtained:
(a) upon a failure to satisfy any of the conditions set
forth in Sections 7.2(a) or 7.2(b) (a "Terminating Company Breach"); provided
that, if such Terminating Company Breach is curable by Company through the
exercise of commercially reasonable efforts within thirty (30) days following
notice of such Terminating Company Breach, for so long as Company continues to
exercise such commercially reasonable efforts, the Parent may not terminate this
Agreement under this Section 8.4 within such thirty (30) day period; and
provided further that the preceding proviso shall not (i) in any event be deemed
to extend the Deadline Date, or (ii) be operative in the case of a Change in the
Company Recommendation or a breach which results in a termination pursuant to
Section 6.1 or 8.2(d) or a Company MAC; or
80
(b) if an Alternative Transaction shall have been
announced or otherwise become publicly known as a result of any action or
inaction of the Company, and the board of directors of Company shall have (A)
failed to recommend against acceptance of such by its shareholders (including by
taking no position, or indicating its inability to take a position, with respect
to the acceptance by its shareholders of an Alternative Transaction involving a
tender offer or exchange offer), (B) failed to reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby within
five (5) Business Days after Parent requests in writing that such recommendation
be reconfirmed or (C) determined that such Alternative Transaction was a
Superior Transaction and takes any of the actions allowed by clause (ii) of
Section 6.1(a), or the board of directors of Company resolves to take any of the
actions described above.
(c) Upon the occurrence of any other Material Adverse
Change with respect to the Company.
8.5 Right to Terminate. The right of any party to terminate this
Agreement and abandon the Merger pursuant to this Article VIII shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any party hereto or any of their Representatives, whether before
or after the date of this Agreement; provided, that if the Company can
demonstrate that the Parent or Purchaser had knowledge (as defined in Section
1.1 but without any obligation to conduct due inquiry) as of the date hereof of
any event, fact, or condition which would otherwise give rise to the right to
terminate this Agreement, the Parent may not terminate this Agreement as a
result of such breach of such representation, warranty, covenant, or agreement
made by the Company, or the Company's failure to satisfy such condition to the
obligation of Parent and the Purchaser to consummate the Merger set forth in
Section 7.2 arising out of such event, fact, or condition; provided that any
such breach or failure to satisfy such condition, when aggregated together with
any other breach of any representation, warranty, covenant or agreement, or
failure to satisfy a condition, may otherwise constitute a Company MAC.
8.6 Effect of Termination and Abandonment; Termination Fee. In the
event of the termination of this Agreement pursuant to Article VIII, written
notice thereof shall forthwith be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become void and there shall be no liability on the
part of any party hereto or any of its Affiliates or Representatives, except for
the obligation of the Company to make the payments set forth in Section 8.7
under the circumstances described in such Section and the rights of the parties
to receive the amounts held in escrow pursuant to the Escrow Agreement.
Notwithstanding the foregoing, or any other provision of this Agreement (but
subject to Sections 8.7(a), (b), (d) and (f)), nothing herein shall relieve the
Company, Parent or Purchaser from liability for any prior material breach
hereof.
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8.7 Termination Fees and Expenses.
(a) If (x) the Company shall have entered into a binding
agreement for a Superior Transaction as a result of an Unsolicited Offer and
either Parent or the Company shall have elected to terminate this Agreement
pursuant to Section 8.2(d) or (y) there shall have occurred a Change the Company
Recommendation, then:
(i) in accordance with Section
8.2(d)(iv), the Company shall promptly pay to Parent the
Parent Transaction Expenses;
(ii) in accordance with Section
8.2(d)(iv), the Company shall promptly instruct the Escrow
Agent to release and pay to the Parent all amounts held by the
Escrow Agent pursuant to the Escrow Agreement; and
(iii) if (x) in the event of a Superior
Transaction, such Superior Transaction is consummated within
one (1) year after the date the Company shall have approved
such Superior Transaction or (y) any Alternative Transaction
is consummated within 180 days, after the date of termination
of this Agreement following a Change in the Company
Recommendation, the Company shall pay to Parent,
simultaneously with the consummation of such Superior
Transaction, or Alternative Transaction, as the case may be,
an amount equal to US$5,000,000, less the amount of any Parent
Transaction Expenses previously paid to Parent.
(b) If as a result of the Company's violation of Section
6.1(a), Parent shall have elected to terminate this Agreement pursuant to
Section 8.4, then:
(i) the Company shall promptly pay to
the Parent US$1,500,000;
(ii) the Company shall promptly instruct
the Escrow Agent to release and pay to the Parent all amounts
held by the Escrow Agent pursuant to the Escrow Agreement; and
(iii) if an Alternative Transaction is
consummated by the Company within one (1) year after such
termination, the Company shall pay to Parent, simultaneously
with the consummation of such Alternative Transaction, an
additional US$3,500,000.
(iv) For avoidance of doubt, under the
circumstances described in Section 8.7(b), no Parent
Transaction Expenses shall be due and payable by the Company
to the Parent.
(c) In the event this Agreement is terminated upon (i)
mutual agreement of the Company and the Parent, (ii) a material breach of the
Agreement by the Company, (iii) the failure to obtain any approval of a
Governmental Authority required to consummate the Merger, or (iv) failure of the
Company to satisfy a material condition to
82
the Parent's obligation to consummate the Merger that has not been waived in
writing by the Parent or excused pursuant to the terms of this Agreement, the
Company shall promptly instruct the Escrow Agent to release and pay to the
Parent all amounts held by the Escrow Agent pursuant to the Escrow Agreement.
(d) Notwithstanding anything herein to the contrary, the
aggregate amount to be paid by the Company to Parent pursuant to this Section
8.7 shall not exceed US$5,000,000 under any circumstances. For the avoidance of
doubt, payment of any monies by the Company pursuant to this Section 8.7 shall
be in addition to the release to the Parent of all moneys held by the Escrow
Agent pursuant to the Escrow Agreement, and none of the amounts paid by the
Company pursuant to this Section 8.7 or the monies held by the Escrow Agent
pursuant to the Escrow Agreement shall be set-off or deducted from each other.
For avoidance of doubt, the fees and expenses payable pursuant to Sections
8.7(a) and 8.7(b) are not cumulative, but are alternative remedies, and
constitute liquidated damages.
(e) Any monies to be paid by the Company pursuant to this
Section 8.7 shall be paid by wire transfer of same day funds to an account
designated by Parent.
(f) The agreements contained in Section 8.2(d) and
Section 8.7 are an integral part of the transactions contemplated hereby, do not
constitute a penalty, and constitute liquidated damages and constitute the sole
remedy of the Parent and the Purchaser with respect to a termination of this
Agreement and/or abandonment of the Merger under the circumstances described in
Section 8.2(d). In the event of any dispute between the Company and Parent as to
whether any monies are due and payable pursuant to Section 8.2(d) or Section
8.7, the prevailing party shall be entitled to receive from the other party the
reasonable costs and expenses (including reasonable legal fees and expenses)
incurred in connection with any action, including the filing of any lawsuit or
other legal action relating to such dispute. Interest, calculated at the
publicly announced prime rate of the Bank of America, N.A., shall be paid on the
amount of any unpaid monies required to be paid by the Company pursuant to this
Section 8.7, calculated from the date such monies were required to be paid.
8.8 Extension; Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its board of directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein; provided, that, any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. The
representations and warranties in this Agreement, and in any instrument
delivered pursuant to this Agreement, shall terminate at the Effective Time or
upon termination of this Agreement pursuant to Article VIII, as the case may be.
This Section 9.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time. Notwithstanding
anything else contained herein, Section 6.3(b), Section 8.2(d)(iv), Section 8.7
and Article IX shall survive termination of this Agreement.
9.2 Notices. All notices, requests, claims, demands, or other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given or made as of the date of receipt and shall be
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by a nationally recognized overnight courier
services, or sent by facsimile (with proof of sending), to the applicable party
at the following addresses or facsimile numbers (or at such other address or
telecopy number for a party as shall be specified by like notice):
If to Parent or Purchaser:
Armor Holdings, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 212-245-3009
If to the Company:
Simula, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
84
with a copy to:
Xxxxx Xxxx LLP
Xxx Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
9.3 Assignment; Binding Effect; No Third-Party Beneficiaries.
Neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties; provided,
however, that either Parent or Purchaser (or both) may assign its rights
hereunder to a wholly-owned Subsidiary of Parent; and, provided further that
nothing shall relieve the assignor from its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto, or their respective heirs, successors, executors,
administrators and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.4 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, the Parent - Company Confidentiality Agreement, the Escrow
Agreement, the Ancillary Documents and any other documents delivered by the
parties in connection herewith constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior
representations, warranties, agreements and understandings among the parties,
both written and oral, with respect thereto, including but not limited to the
Letter of Intent between the Parent and the Company, dated July 23, 2003;
provided, that if there is any conflict between the Parent - Company
Confidentiality Agreement and this Agreement, this Agreement shall prevail.
9.5 Governing Law. THIS AGREEMENT HAS BEEN ENTERED INTO AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
9.6 Jurisdiction and Venue. THIS AGREEMENT SHALL BE SUBJECT TO THE
EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK. THE PARTIES TO THIS AGREEMENT AGREE THAT ANY BREACH OF ANY
TERM OR CONDITION OF THIS AGREEMENT SHALL BE DEEMED TO BE A BREACH OCCURRING IN
THE STATE OF NEW YORK BY VIRTUE OF A FAILURE TO PERFORM AN ACT REQUIRED TO BE
PERFORMED IN THE STATE OF NEW YORK AND IRREVOCABLY AND EXPRESSLY AGREE TO SUBMIT
TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF
RESOLVING ANY DISPUTES AMONG THE PARTIES RELATING TO THIS
85
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY JUDGMENT ENTERED BY ANY
COURT IN RESPECT HEREOF BROUGHT IN NEW YORK COUNTY, NEW YORK, AND FURTHER
IRREVOCABLY WAIVE ANY CLAIM THAT ANY SUIT, ACTION OR PROCEEDING BROUGHT IN NEW
YORK COUNTY, NEW YORK HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES
HERETO AGREE TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED UNITED STATES
MAIL, POSTAGE PREPAID, ADDRESSED TO THE PARTY IN QUESTION.
9.7 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
9.8 Fee and Expenses. Whether or not the Merger is consummated,
except as otherwise provided in this Agreement, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
9.9 Headings; Interpretation. Headings of the Articles and
Sections of this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever. The table of
contents contained in this Agreement is for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
9.10 Amendment; Waivers. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties. Except as
otherwise provided herein, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver, by the party taking such action, of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement or in any of the Ancillary Documents. Any term,
covenant or condition of this Agreement may be waived at any time by the party
which is entitled to the benefit thereof, but only by a written notice signed by
such party expressly waiving such term or condition. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other provision
hereunder.
86
9.11 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written. It
is the desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies of
each jurisdiction in which enforcement is sought. If any provision of this
Agreement relating to a time period or scope of activities is declared by a
court of competent jurisdiction to exceed the maximum permissible time period or
scope of activities, as the case may be, the time period or scope of activities
shall be reduced to the maximum which such court deems enforceable.
9.12 Parent Actions. The Company hereby acknowledges that from and
after the date of this Agreement, Parent or any of its Subsidiaries may take
actions involving (i) a merger, reorganization, share exchange, spin-off,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving Parent or any of its Subsidiaries, (ii) any purchase or sale of the
consolidated assets of a Person or any division or unit thereof by Parent or any
of its Subsidiaries, (iii) any purchase or sale of, or tender or exchange offer
for, equity securities of any Person by Parent or any of its Subsidiaries, (iv)
the acquisition of any equity securities of any Person by Parent or any of its
Subsidiaries or (v) any financings by the Parent or any of its Subsidiaries.
9.13 Remedies. Except under or with respect to any circumstance,
condition or event which results in an obligation of the Company to make the
payments set forth in Section 8.7 (in which case, such obligation of the Company
shall be the Parent's and the Purchaser's sole, exclusive and liquidated remedy
under and with respect to this Agreement, the Merger, or otherwise, whether at
law or in equity): (a) any and all remedies herein expressly conferred upon a
party shall be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy shall not preclude the exercise of any other remedy, (b)
the parties agree that irreparable damage will occur in the event that any of
the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, and (c) the parties further agree they
shall be entitled to an injunction to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement, this remedy
being in addition to any other remedy to which the parties are entitled at law
or in equity.
9.14 Execution. This Agreement may be executed by facsimile
signatures by any party and such signature shall be deemed binding for all
purposes hereof, without delivery of an original signature being thereafter
required.
9.15 Date for Any Action. In the event that any date on which any
action is required to be taken hereunder by any of the parties hereto is not a
Business Day, such action shall be required to be taken on the next succeeding
day which is a Business Day.
9.16 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which, when so executed and delivered,
shall be an
87
original. All such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
88
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same
to be duly delivered on their behalf on the day and year first written above.
Armor Holdings, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx
Chief Operating Officer and Chief
Financial Officer
AHI Bulletproof Acquisition Corp.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx
President
Simula, Inc.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive
Officer
89
EXHIBIT A
FORM OF AFFILIATE LETTER
_____________ ___, 20___
Ladies and Gentlemen:
The undersigned, a holder of shares of common stock, par value US$0.01
per share ("Company Common Stock"), of Simula, Inc., an Arizona corporation (the
"Company"), acknowledges that the undersigned may be deemed an "affiliate" of
the Company within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), by the Securities and
Exchange Commission (the "SEC"), although nothing contained herein should be
construed as an admission that the undersigned is, in fact, an affiliate of the
Company.
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
August 29, 2003, among Armor Holdings, Inc., a Delaware corporation ("Parent"),
AHI Bulletproof Acquisition Corp., an Arizona corporation and a wholly-owned
subsidiary of Parent ("Purchaser"), and the Company, Purchaser will be merged
with and into the Company (the "Merger"), and in connection with the Merger, the
undersigned is entitled to receive common stock, par value US$0.01 per share
("Parent Common Stock"), of Parent.
If, in fact, the undersigned were an affiliate of the Company under the
Securities Act, the undersigned's ability to sell, assign or transfer the shares
of Parent Common Stock received by the undersigned in exchange for any shares of
Company Common Stock in connection with the Merger may be restricted unless such
transaction is registered under the Securities Act or an exemption from such
registration is available. The undersigned understands that such exemptions are
limited and the undersigned has obtained or will obtain advice of counsel as to
the nature and conditions of such exemptions, including information with respect
to the applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Parent
will not be required to maintain the effectiveness of any registration statement
under the Securities Act for the purposes of resale of Parent Common Stock by
the undersigned.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the shares of Parent Common
Stock received by the undersigned in exchange for shares of Company Common Stock
in connection with the Merger except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in conformity with the volume and other
limitations of Rule 145 or (iii) in a transaction which, in the opinion of
counsel to the undersigned, such counsel to be reasonably satisfactory to Parent
and such opinion to be in form and substance reasonably satisfactory to Parent,
or as described in a "no-action" or interpretive letter from the Staff of the
SEC specifically issued with respect to a transaction to be engaged in by the
undersigned, is not required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of the
shares of Parent Common Stock pursuant to Rule 145, the undersigned will supply
Parent with evidence of compliance with such Rule, in the form of a letter in
the form of Annex I hereto or the opinion of counsel or no-action letter
referred to above. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any shares of Parent Common Stock
disposed of by the undersigned, but that (provided that such transfer is not
prohibited by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Parent shall cause the transfer agent to effectuate the
transfer of the shares of Parent Common Stock sold as indicated in such letter.
Parent covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of the shares
of Parent Common Stock by the undersigned under Rule 145 in accordance with the
terms thereof.
The undersigned acknowledges and agrees that the legend set forth below
will be placed on certificates representing the shares of Parent Common Stock
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legend will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to Parent from counsel reasonably satisfactory to Parent to the
effect that such legend is no longer required for purposes of the Securities
Act.
There will be placed on the certificates for Parent Common Stock issued
to the undersigned in connection with the Merger, or any substitutions therefor,
a legend stating in substance:
"The shares represented by this certificate were issued, in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), applies. The
shares have not been acquired by the holder with a view to, or
for resale in connection with, any distribution thereof within
the meaning of the Securities Act. The shares may not be sold,
pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of the Securities
Act."
It is understood and agreed that certificates with the legend set forth
above will be substituted by delivery of certificates without such legends if
(i) one year shall have elapsed from the date the undersigned acquired the
Parent Common Stock received in the Merger and the provisions of Rule 145(d)(2)
are then available, (ii) two years shall have elapsed from the date the
undersigned acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then available or (iii) Parent has received
either a written opinion of counsel, which opinion of counsel shall be
reasonably satisfactory to Parent, or a "no-action" letter obtained by the
undersigned from the SEC, to the effect that the restrictions imposed by Rule
145 under the Securities Act no longer apply to the undersigned.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement to
Parent's obligations to consummate the Merger.
Very truly yours,
Annex I
To Exhibit A
_____________ ___, 20___
Ladies and Gentlemen:
On ___________ ___, 20___, the undersigned sold the securities of Armor
Holdings, Inc., a Delaware corporation ("Parent"), described below in the space
provided for that purpose (the "Securities"). The Securities were received by
the undersigned in connection with the merger of AHI Bulletproof Acquisition
Corp., an Arizona corporation and a wholly-owned Subsidiary of Parent, with and
into Simula, Inc., an Arizona corporation.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
{Space to be provided for description of the Securities}
SCHEDULE I
TOTAL CONSIDERATION ADJUSTMENTS
PART A. INCREASE IN TOTAL CONSIDERATION: The Total Consideration shall
be increased pursuant to Section 3.3(a) by the aggregate amount of the following
(in the case of each of the following categories of amounts by which the Total
Consideration shall be increased, without duplication of any amounts otherwise
described by any of the other following categories of amounts by which the Total
Consideration shall be increased):
(i) The amount of any prepaid insurance premiums (other than with
respect to the O&D Tail Insurance) as of the Merger
Consideration Calculation Time which the applicable insurers
agree in writing will be rebated in cash to the Parent or the
Purchaser for any period following the Effective Time.
(ii) The amount of any insurance receivables payable to the Company
or any of its Subsidiaries with respect to any claims by the
Company or any of its Subsidiaries under any of their business
interruption insurance policies which claims are outstanding
as of the Merger Consideration Calculation Time, provided that
the applicable insurer for such claims has confirmed in
writing the amount and payment to the Company or its
Subsidiaries, without reservation of rights.
(iii) The aggregate amount of all accounts receivable of the Company
or any of its Subsidiaries where the payor is a Governmental
Authority or in the sole judgment of the Parent is a credit
worthy prime contractor or subcontractor which are more than
thirty (30) days past due as of the Merger Consideration
Calculation Time and which the Parent has determined in its
sole discretion will be paid following the Merger
Consideration Calculation Time pursuant to a written statement
received from such payor that the applicable account
receivable will be paid in full, without reservation of
rights, after the Merger Consideration Calculation Time.
(iv) The amount of any insurance receivables payable to the Company
or any of its Subsidiaries with respect to any claims of the
Company or any of its Subsidiaries under any policies of
property and casualty insurance (other than business
interruption or directors and officers liability insurance
policies) which claims are outstanding as of the Merger
Consideration Calculation Time to the extent the Company or
any of its Subsidiaries have previously paid funds to repair
or replace any of their tangible assets or to make payments to
any third parties with respect to such loss, provided that (a)
the applicable insurer for such claims has confirmed in
writing the amount and payment to be paid to the Company or
its Subsidiaries, without reservation of rights, following the
Merger Consideration Calculation Time, and (b) such
expenditures by the Company or its Subsidiaries have been made
in compliance with the terms of this Agreement.
PART B. DECREASE IN TOTAL CONSIDERATION: The Total Consideration shall
be reduced pursuant to Section 3.3(a) by the aggregate amount of the following
(in the case of each of the following categories of reduction amounts, without
duplication of any Closing Date Payments or amounts otherwise described by any
of the other following categories of reduction amounts):
(i) An amount equal to the result of (x) US$1,100,000 (if the last
day of the month preceding the Merger Consideration
Calculation Time occurs before November 30, 2003, but if the
last day of the month preceding the Merger Consideration
Calculation Time occurs on or after November 30, 2003, then
US$1,375,000) minus (y) the aggregate amount of all capital
expenditures and "bid and proposal" expenditures actually paid
by the Company and/or any of its Subsidiaries during the
period beginning on July 1, 2003 and ending on the last day of
the month preceding the Merger Consideration Calculation Time.
(ii) The amount of the Omitted Restructuring Changes (as defined in
the letter agreement between the Parent and the Company, dated
of even date herewith);
(iii) The aggregate amount of any license or other fees or payments
payable to the Company pursuant to any new or extended license
entered into by the Company or any of its Subsidiaries
following the date of this Agreement, including but not
limited to any extension of the license rights regarding the
Intercast Europe, S.P.A. helmet visor for the territory
outside Europe and the United States to the extent such fees
or payments are received by the Company or any of its
Subsidiaries following the date of this Agreement and prior to
the Merger Consideration Calculation Time.
(iv) The amount of the accounts payable overage, if such accounts
payable overage is a positive number, calculated as follows:
The product of (ADO - 45) multiplied by ADC, where
ADO (Average Days Outstanding) means, with respect to
aggregate accounts payable of the Company or any of
its Subsidiaries which are outstanding as of the last
day of the calendar month end immediately preceding
the month in which the Merger Consideration
Calculation Time occurs, the quotient of (a) the
accounts payable from the most recent month end prior
to the month in which the Merger Consideration
Calculation Time occurs divided by (b) the ADC, with
such result rounded up or down to the nearest whole
number.
ADC (Average Daily Cost) shall equal the sum of the
costs of goods sold (excluding depreciation) and
selling, general and administrative expenses for the
most recent three calendar months
prior to the Merger Consideration Calculation Time
and divided by ninety (90) days, rounded up or down
to the nearest whole number.
(v) The amount of the original invoice of any Company account or
trade receivable outstanding at any time between the date
hereof and the Merger Consideration Calculation Time that is
collected through the Merger Consideration Calculation Time as
a result of (a) a demand for the acceleration of payment
thereof by the Company when such invoice is not in default, or
(b) an acceptance of an accelerated payment of less than the
amount of the original invoice therefor as a result of a
discount granted by the Company, in either case not in the
ordinary course of business consistent with past practice.
(vi) An amount equal to the result of (x) US$3,150,000 minus (y)
the aggregate value of the customary and usable commercial
inventory, net of any slow moving or obsolete inventory
provision, of the Company and its Subsidiaries determined and
valued as of last day of the month preceding the Merger
Consideration Calculation Time in accordance with GAAP applied
in a manner consistent with the Company's past practice, but
only if such result is greater than US$1.00.
(vii) The amount of any due but unpaid Tax liabilities (including
due but unpaid estimated Tax payments, but excluding the
amount of any Alternative Minimum Tax arising as a result of
the consummation of the Merger and except for any VAT
liabilities relating to ASD, ASD UK, or the ASD Transaction)
of the Company or any of its Subsidiaries which were due to be
paid prior to the Merger Consideration Calculation Time.
(viii) The amount of any due but unpaid insurance premiums other than
(x) the premiums with respect to the O&D Tail Insurance, (y)
any premiums which are financed and constitute Funded
Indebtedness, and (z) customary accruals for employee health
insurance benefits premiums, including for long term
disability, vision, dental, group health, workers compensation
and supplemental life which are outstanding at the Merger
Consideration Calculation Time.
(ix) The net proceeds received by the Company or its Subsidiaries
prior to the Merger Consideration Calculation Time from any
sale of the outstanding capital stock or assets having an
aggregate value in excess of US$10,000 of the International
Center for Safety Education.
(x) The amount of any insurance proceeds received by the Company
or any of its Subsidiaries, including any payments thereof to
holders of Funded Indebtedness for the benefit of the Company
or its Subsidiaries, with respect to any claims by the Company
or any of its Subsidiaries under any of their property and
casualty insurance policies (but not business interruption
insurance proceeds) between the date of this Agreement and
the Merger Consideration Calculation Time, which are not used
by the Company or its Subsidiaries to repair or replace any of
their tangible assets or to make payments to any third parties
with respect to a loss relating to such insurance proceeds
prior to the Merger Consideration Calculation Time; provided
that such expenditures by the Company have been made in
compliance with this Agreement.
