EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
SVERDRUP CORPORATION
XXXXXX ENGINEERING GROUP INC., AND
JACOBS ACQUISITION CORP.
DATED AS OF DECEMBER 21, 1998
TABLE OF CONTENTS
Page
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TABLE OF DEFINITIONS.................................................................. vi
ARTICLE 1 THE MERGER................................................................. 1
SECTION 1.1. The Merger.............................................................. 1
SECTION 1.2. Conversion of Shares.................................................... 2
SECTION 1.3. Payment of Initial Aggregate Merger Consideration, Initial
Aggregate Company Option Consideration and Initial Aggregate Redeemed
Company Shares Consideration................................................ 3
SECTION 1.4. Escrow Amount........................................................... 6
SECTION 1.5. Payment of Deferred Consideration....................................... 8
SECTION 1.6. Dissenting Shares....................................................... 13
SECTION 1.7. Stock Options........................................................... 13
SECTION 1.8. Certain Redeemed Shares................................................. 14
SECTION 1.9. Payments with Respect to Certain Shares................................. 14
ARTICLE 2 THE SURVIVING CORPORATION.................................................. 14
SECTION 2.1. Articles of Incorporation............................................... 14
SECTION 2.2. Bylaws.................................................................. 15
SECTION 2.3. Directors and Officers.................................................. 15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 15
SECTION 3.1. Corporate Existence and Power........................................... 15
SECTION 3.2. Subsidiaries............................................................ 16
SECTION 3.3. Corporate Records....................................................... 16
SECTION 3.4. Corporate Authorization................................................. 16
SECTION 3.5. Governmental Authorization.............................................. 17
SECTION 3.6. Non-Contravention....................................................... 17
SECTION 3.7. Capitalization.......................................................... 18
SECTION 3.8. Company Reports and Financial Statements................................ 19
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SECTION 3.9. Receivables............................................................. 19
SECTION 3.10. Absence of Undisclosed Liabilities..................................... 20
SECTION 3.11. Information Supplied................................................... 20
SECTION 3.12. Absence of Certain Changes............................................. 20
SECTION 3.13. Litigation............................................................. 21
SECTION 3.14. Employee Benefit Plans................................................. 21
SECTION 3.15. Taxes.................................................................. 24
SECTION 3.16. Compliance with Laws................................................... 25
SECTION 3.17. Takeover Statutes...................................................... 26
SECTION 3.18. Finders' Fees.......................................................... 26
SECTION 3.19. Environmental Matters.................................................. 26
SECTION 3.20. Insurance; Bonds....................................................... 27
SECTION 3.21. Labor and Employment Matters........................................... 27
SECTION 3.22. Material Contracts..................................................... 28
SECTION 3.23. Related Party Transactions............................................. 31
SECTION 3.24. Real Estate............................................................ 31
SECTION 3.25. Government Contracting................................................. 33
SECTION 3.26. Foreign Corrupt Practices.............................................. 34
SECTION 3.27. Year 2000.............................................................. 34
SECTION 3.28. Intellectual Property.................................................. 34
SECTION 3.29. Title to Assets........................................................ 35
SECTION 3.30. Accuracy and Completeness of Securityholders' Schedules................ 35
SECTION 3.31. No Other Representations............................................... 35
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF JACOBS................................... 36
SECTION 4.1. Corporate Existence and Power........................................... 36
SECTION 4.2. Corporate Authorization................................................. 36
SECTION 4.3. Governmental Authorization.............................................. 37
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SECTION 4.4. Non-Contravention.......................................................37
SECTION 4.5. Jacobs SEC Reports and Financial Statements.............................37
SECTION 4.6. Absence of Undisclosed Liabilities......................................38
SECTION 4.7. Information Supplied....................................................38
SECTION 4.8. Absence of Certain Changes..............................................39
SECTION 4.9. Financing...............................................................39
ARTICLE 5 COVENANTS OF THE COMPANY...................................................39
SECTION 5.1. Confidentiality.........................................................39
SECTION 5.2. Conduct of the Company..................................................39
SECTION 5.3. Advice of Changes.......................................................41
SECTION 5.4. Merger Approval; Proxy Materials; Fiduciary Out.........................41
SECTION 5.5. Acquisition Proposals...................................................42
SECTION 5.6. Access to Information...................................................43
SECTION 5.7. Notices of Certain Events...............................................43
SECTION 5.8. HSR Act Filing..........................................................44
SECTION 5.9. Return of Information...................................................44
ARTICLE 6 COVENANTS OF JACOBS........................................................44
SECTION 6.1. Confidentiality.........................................................44
SECTION 6.2. Conduct of Jacobs.......................................................44
SECTION 6.3. Access to Information...................................................43
SECTION 6.4. Obligations of Merger Subsidiary........................................43
SECTION 6.5. Notices of Certain Events...............................................45
SECTION 6.6. Employee Benefits.......................................................45
SECTION 6.7. Indemnification.........................................................46
SECTION 6.8. HSR Act Filing..........................................................47
SECTION 6.9. Return of Information...................................................47
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ARTICLE 7 COVENANTS OF JACOBS AND THE COMPANY........................................47
SECTION 7.1. Reasonable Best Efforts.................................................47
SECTION 7.2. Certain Filings.........................................................47
SECTION 7.3. Proxy Statement.........................................................48
SECTION 7.4. Publicity...............................................................48
SECTION 7.5. Further Assurances......................................................48
ARTICLE 8 CONDITIONS TO THE MERGER...................................................48
SECTION 8.1. Conditions to the Obligations of Each Party.............................48
SECTION 8.2. Conditions to Obligations of Jacobs.....................................49
SECTION 8.3. Conditions to Obligations of the Company................................50
ARTICLE 9 TERMINATION................................................................51
SECTION 9.1. Termination.............................................................51
SECTION 9.2. Procedure Upon Termination
SECTION 9.3. Termination Fee Payable by the Company..................................52
SECTION 9.4. Termination Fee Payable by Jacobs.......................................53
ARTICLE 10 MISCELLANEOUS.............................................................53
SECTION 10.1. Notices................................................................53
SECTION 10.2. Survival of Representations and Warranties and Covenants...............54
SECTION 10.3. Appointment of Securityholder Committee................................54
SECTION 10.4. Amendments; No Waivers.................................................55
SECTION 10.5. Expenses...............................................................56
SECTION 10.6. Entire Agreement/No Third Party Beneficiaries..........................56
SECTION 10.7. Waivers................................................................56
SECTION 10.8. Amendments, Supplements or Modifications...............................56
SECTION 10.9. Successors and Assigns.................................................56
SECTION 10.10. Governing Law.........................................................57
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SECTION 10.11. Exclusive Jurisdiction................................................57
SECTION 10.12. Disclosure Schedules..................................................57
SECTION 10.13. Counterparts; Effectiveness...........................................57
SECTION 10.14. Severability..........................................................57
SECTION 10.15. Incorporation of Exhibits and Schedules...............................57
SECTION 10.16. Headings..............................................................58
SECTION 10.17. Knowledge.............................................................58
SECTION 10.18. Construction..........................................................58
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TABLE OF DEFINITIONS
1999 Earnout Payment..........................................................Section 1.5.(a)(i)
1999 Jacobs Stock Price.......................................................Section 1.5.(a)(iv)
2000 Earnout Payment..........................................................Section 1.5.(a)(ii)
2000 Jacobs Stock Price.......................................................Section 1.5.(a)(v)
2001 Earnout Payment..........................................................Section 1.5.(a)(iii)
2001 Jacobs Stock Price.......................................................Section 1.5.(a)(vi)
Acquisition Proposal..........................................................Section 5.5.(a)
Aggregate Options Exercise Price..............................................Section 1.2.
Aggregate Redeemed Shares Price...............................................Section 1.2.
Bid...........................................................................Section 3.22.
Board Action..................................................................Section 5.3.(c)
Client Contract...............................................................Section 3.22.(c)
Closing.......................................................................Section 1.1.(b)
Closing Date..................................................................Section 1.1.(b)
Closing Price.................................................................Section 1.5.(a)(vii)
Code..........................................................................Section 3.14.(c)
Committee Chairman............................................................Section 10.3.(b)
Company.......................................................................Introduction
Company Balance Sheet.........................................................Section 3.8.
Company Balance Sheet Date....................................................Section 3.8.
Company Benefit Arrangements..................................................Section 3.14.(d)
Company Common Stock..........................................................Section 1.2.(a)
Company Disclosure Schedule...................................................Article 3.
Company Financial Statements..................................................Section 3.8.
Company Material Adverse Effect...............................................Section 3.1.
Company Option................................................................Section 1.7.(a)
Company Plans.................................................................Section 3.14.(a)
Company Reports...............................................................Section 3.8.
Company Securities............................................................Section 3.7.(b)
Company Shareholder Meeting...................................................Section 5.4.(a)
Company Subsidiaries..........................................................Section 3.2.
Competing Proposal............................................................Section 5.5.(b)
Confidentiality Letter........................................................Section 5.1.
Contracts.....................................................................Section 3.22.(a)(x)
Deferred Consideration........................................................Section 1.5.(a)(viii)
Deferred Consideration Letter of Transmittal..................................Section 1.5.(b)(i)
Dissenting Shares.............................................................Section 1.6.
DOJ...........................................................................Section 5.8.
Earnout Payments..............................................................Section 1.5.(a)(ix)
Effective Time................................................................Section 1.1.(b)
Eligible Holder...............................................................Section 1.5.(a)(x)
Environmental Law.............................................................Section 3.19.
ERISA.........................................................................Section 3.14.(a)
ERISA Affiliate...............................................................Section 3.14.(c)
Ernst & Young.................................................................Section 3.18.
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Escrow........................................................................Section 1.4.(a)
Escrow Agent..................................................................Section 1.4.(a)
Escrow Agreement..............................................................Section 1.4.(a)
Escrow Amount.................................................................Section 1.4.(a)
Exchange Agent................................................................Section 3.11.(a)
Exchange Act..................................................................Section 3.5.
Excluded Shares...............................................................Section 1.2.(c)
Facilities....................................................................Section 3.24.(a)(ii)
Fixed Expense Fee.............................................................Section 9.3.
Fixed Price Construction Contracts............................................Sectoin 3.22.(a)(i)
Flexi-Trust...................................................................Section 1.9.
FOCI..........................................................................Section 3.25.(c)
FTC...........................................................................Section 5.8.
GAAP..........................................................................Section 3.8.
GBCL..........................................................................Section 1.1.(a)
Government....................................................................Section 3.15.(d)
Government Authority..........................................................Section 3.22.
Government Contract...........................................................Section 3.22.
Hazardous Substance...........................................................Section 3.19.
Xxxxxxxx Xxxxx................................................................Section 3.4.
HSR Act.......................................................................Section 3.5.
Indemnitees...................................................................Section 6.6.(a)
Initial Aggregate Consideration...............................................Section 1.2.(c)
Initial Company Option Consideration..........................................Section 1.7.(a)
Initial Per Share Merger Consideration........................................Section 1.2.(c)
Initial Redeemed Company Shares Consideration.................................Section 1.8.
Intellectual Property Rights..................................................Section 3.28.
ISO Plan......................................................................Section 1.7.(a)
Jacobs........................................................................Introduction
Jacobs Balance Sheet..........................................................Section 4.5.
Jacobs Balance Sheet Date.....................................................Section 4.5.
Jacobs Disclosure Schedule....................................................Article 4.
Jacobs Financial Statements...................................................Section 4.5.
Jacobs Material Adverse Effect................................................Section 4.1.
Jacobs SEC Reports............................................................Section 4.5.
Jacobs Stock..................................................................Section 1.5.(a)(xi)
Jacobs Subsidiaries...........................................................Section 4.1.
Leased Property...............................................................Section 3.24.(a)(ii)
Leases........................................................................Section 3.24.(a)(ii)
Legal Proceeding..............................................................Section 3.13.
Lien..........................................................................Section 3.6.
Loss Contract.................................................................Section 3.22.(c)(vi)
Losses........................................................................Section 1.4.(c)
Merger........................................................................Section 1.1.(a)
Merger Approval...............................................................Section 5.4.(a)
Merger Subsidiary.............................................................Introduction
Missouri Secretary of State...................................................Section 1.1.(b)
Net Risk Dollars Amount.......................................................Section 1.4.(c)
NYSE..........................................................................Section 1.5(a)(vii)
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Other Proposal................................................................Section 5.3.(c)
Owned Property................................................................Section 3.24.(a)(i)
Payment Agreement.............................................................Section 3.1.(a)
Pension Plans.................................................................Section 3.14.(b)
Percentage Interest...........................................................Section 1.54.(a)(xii)
Person........................................................................Section 1.5.(a)(xiii)
Plan(s).......................................................................Section 3.14.(a)
Proxy Statement...............................................................Section 3.11.
Redeemed Company Shares.......................................................Section 1.8.
Risk Contracts................................................................Section 1.4.(c)
Risk Litigation...............................................................Section 1.5(g)
SEC...........................................................................Section 4.5.
Securityholder Committee......................................................Section 10.3.(a)
Securityholders...............................................................Section 10.3.(a)
Securities Act................................................................Section 3.5.
Shares........................................................................Section 1.2.(c)
Surviving Corporation.........................................................Section 1.1.(a)
Takeover Statute..............................................................Section 3.17.
Tax Returns...................................................................Section 3.15.(a)
Taxes.........................................................................Section 3.15.(d)
Termination Fee...............................................................Section 9.3.
Year 2000 Compliance..........................................................Section 3.27.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of December 21, 1998, and is
by and among SVERDRUP CORPORATION, a Missouri corporation (the "Company"),
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XXXXXX ENGINEERING GROUP INC., a Delaware corporation ("Jacobs") and JACOBS
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ACQUISITION CORP., a Missouri corporation and a wholly-owned subsidiary of
Jacobs ("Merger Subsidiary").
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RECITALS
WHEREAS, the Boards of Directors of Company and Jacobs xxxx it advisable
and in the best interests of their respective shareholders that they combine
their businesses, and to that end the Boards of Directors of the Company, Xxxxxx
and Merger Subsidiary have approved the merger of Merger Subsidiary with and
into the Company upon the terms and subject to the conditions set forth herein;
and
WHEREAS, certain shareholders of the Company holding in the aggregate more
than a majority of the outstanding voting stock of the Company have entered into
an agreement with Jacobs pursuant to which such shareholders will have agreed to
vote their respective shares of Company Common Stock (as defined in Section
1.2(a)) in favor of the merger of Merger Subsidiary with and into the Company
upon the terms and subject to the conditions set forth herein at any meeting of
the shareholders of the Company called for such purpose.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger.
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(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.1(b)), Merger Subsidiary shall be merged
with and into the Company (the "Merger") in accordance with the General Business
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and Corporation Law of Missouri ("GBCL"), whereupon the separate existence of
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Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
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(b) The consummation of the Merger (the "Closing") shall take place
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(i) at the offices of Xxxxx Xxxx LLP, One Metropolitan Square, 000 X. Xxxxxxxx,
Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx at 10:00 A.M., on such date (the "Closing Date")
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which is the later to occur of (A) January 8, 1999 and (B) the date which is
five business days after the date on which the last
1
of the conditions set forth in Article 8 hereof shall have been satisfied or
waived in accordance with this Agreement, or (ii) such other place, time and
date as the parties hereto shall agree. Prior to the Closing, Merger Subsidiary
and the Company shall execute and deliver to the Secretary of State of the State
of Missouri (the "Missouri Secretary of State"), a Certificate of Merger in the
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form of Exhibit 1.1(b) hereto for filing under the GBCL on the day of the
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Closing, and the Merger shall become effective upon the filing of the
Certificate of Merger with the Missouri Secretary of State or at such later time
as may be specified in the Certificate of Merger, such time being herein called
the "Effective Time."
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(c) The Merger shall have the effects set forth in Section 351.450 of
the GBCL. Without limiting the generality of the foregoing, at the Effective
Time (i) the Surviving Corporation shall possess all assets and property of
every description, and every interest therein, wherever located, and the rights,
privileges, immunities, powers, franchises, and authority, of a public as well
as of a private nature, of each of the Company and Merger Subsidiary and all
obligations belonging to or due each of them shall be vested in the Surviving
Corporation without further act or deed; (ii) title to any real estate or any
interest therein vested in either of the Company or Merger Subsidiary shall not
revert or in any way be impaired by reason of the Merger; (iii) all rights of
creditors and all liens on any property of the Company and Merger Subsidiary
shall be preserved unimpaired; and (iv) the Surviving Corporation shall be
liable for all the obligations of the Company and Merger Subsidiary, and any
claim existing, or action or proceeding pending, by or against either of them,
may be prosecuted to judgment with the right of appeal, as if the Merger had not
taken place.
(d) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties, or assets of the Company or Merger Subsidiary acquired or to be
acquired as a result of, or in connection with, the Merger or to otherwise carry
out this Agreement, the officers and directors of the Surviving Corporation
shall and will be authorized to execute and deliver, in the name and on behalf
of the parties hereto or otherwise, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of such parties or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.2. Conversion of Shares. At the Effective Time, by virtue of
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the Merger and without any action on the part of the holder thereof:
(a) each share of common stock, par value $0.0625, of the Company
("Company Common Stock") held by the Company as treasury stock or owned by
----------------------
Jacobs or any subsidiary of Jacobs immediately prior to the Effective Time shall
be canceled, retired, and shall cease to exist, and no payment shall be made
with respect thereto;
2
(b) each share of common stock of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and such shares in the
aggregate shall constitute the only outstanding shares of capital stock of the
Surviving Corporation; and
(c) each share of Company Common Stock outstanding immediately prior
to the Effective Time ("Shares") shall, except as otherwise provided in Section
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1.2(a) or as provided in Section 1.6 with respect to Shares as to which
appraisal rights have been exercised (collectively, the "Excluded Shares"), be
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converted into the right to receive (A) a cash payment per Share, without
interest, equal to (x) the total of (1) one hundred and ninety-eight million
dollars ($198,000,000), minus (2) the Escrow Amount (as defined in Section
1.4(a)), plus (3) the Aggregate Options Exercise Price (as defined below), plus
(4) the Aggregate Redeemed Shares Price (as defined below) and plus (5) the
Aggregate Flexi-Trust Debt (as defined in Section 1.3(b)), divided by (y) the
total of (1) the number of Shares issued and outstanding immediately prior to
the Effective Time, plus (2) the number of shares of the Company Common Stock
issuable upon exercise of the Company Options (as defined in Section 1.7)
immediately prior to the Effective Time and plus (3) the number of Redeemed
Company Shares immediately prior to the Effective Time (the "Initial Per Share
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Merger Consideration"), (B) an additional pro rata amount of cash, payable as
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set forth in Section 1.5, equal to a portion of the Deferred Consideration (as
defined in Section 1.5(a)(viii)), if any, determined in accordance with Section
1.5, and (C) an additional pro rata amount of cash, payable as set forth in
Section 1.4, equal to a portion of the Opportunity Premium Payment (as defined
below) and/or the Escrow Amount (as defined in Section 1.4(a)).
For purposes of this Agreement, the "Aggregate Options Exercise Price"
--------------------------------
shall mean the sum of all exercise prices payable upon the exercise of all
Company Options, the "Aggregate Redeemed Shares Price" shall mean the sum of the
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purchase prices (whether paid in cash or notes) previously paid by the Company
to the holders of the Redeemed Company Shares in connection with the redemption
of such shares, and "Opportunity Premium Payment" shall mean the amount of cash,
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other than all or any portion of the Escrow Amount, which is payable in
accordance with the terms of Section 1.4(c) to the Eligible Holders (as defined
in Section 1.5(a)(x)) in the manner set forth in Section 1.4(d).
SECTION 1.3 Payment of Initial Aggregate Merger Consideration, Initial
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Aggregate Company Option Consideration and Initial Aggregate Redeemed Company
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Shares Consideration.
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(a) Bank of America, N.T. & S.A. or another bank or trust company
designated by Xxxxxx and reasonably acceptable to the Company, shall act as the
payment agent (the "Payment Agent"), for the benefit of the holders of Shares in
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connection with the payment to such holders of a portion of the Initial
Aggregate Merger Consideration (as defined below) to which they are entitled
pursuant to the terms of this Agreement. At the Effective Time, Xxxxxx will
deposit with the Payment Agent an amount of cash equal to the difference between
(i) the product of (A) the aggregate number of Shares issued and outstanding as
of the Effective Time
3
(other than Excluded Shares) multiplied by (B) the Initial Per Share Merger
Consideration minus (ii) the Aggregate Flexi-Trust Debt (as defined below) (the
"Initial Aggregate Merger Consideration"). Promptly after the Effective Time,
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Xxxxxx shall cause the Payment Agent to mail to (A) each Person (as defined in
Section 1.5(a)(xiii)) who owns Shares of record as of the Effective Time, other
than the Flexi-Trust (as defined in Section 1.9) and other than Persons who own
Excluded Shares at such time and (B) each Person who owns a beneficial interest
in the Flexi-Trust as of the Effective Time, a letter of transmittal in the form
of Exhibit 1.3 in order to facilitate the distribution of the Initial Aggregate
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Merger Consideration to such Persons. Upon delivery of an executed letter of
transmittal, the Payment Agent shall deliver to each such Person a portion of
the Initial Aggregate Merger Consideration in cash in an amount equal to each
such Person's Initial Net Merger Consideration (as defined below) and (ii) to
NationsBank, N.A. (the "Lender"), an amount in cash equal to the Aggregate Bank
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Debt (as defined below). At the Closing, the Company shall provide Xxxxxx with a
schedule which lists (i) each Person who owns Shares of record as of the
Effective Time (other than the Flexi-Trust) and each Person who owns a
beneficial interest in the Flexi-Trust as of the Effective Time, (ii) the
mailing address of each such Person, (iii) the number of Shares which each such
Person owns of record at such time, (iv) the number of Shares which are owned by
the Flexi-Trust and attributable to each such Person in accordance with the
terms of Section 1.9 at such time (with respect to each such Person, such
Person's "Flexi-Trust Shares," and together with the Flexi-Trust Shares
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attributable to each other Person who owns a beneficial interest in the Flexi-
Trust, the "Aggregate Flexi-Trust Shares"), (v) the amount of each such Person's
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Bank Debt as of the Effective Time and (vi) the amount of each such Person's
Flexi-Trust Debt as of the Effective Time.
(b) The term "Initial Net Merger Consideration" shall mean, with
--------------------------------
respect to any Person (other than the Flexi-Trust), an amount equal to the
difference between (i) the product of (A) the sum of (1) the number of Shares
owned of record by such Person as of the Effective Time plus (2) such Person's
Flexi-Trust Shares multiplied by (B) the Initial Per Share Merger Consideration
minus (ii) the sum of (A) the aggregate amount of indebtedness which is (1) due
and owing by such Person to the Lender at the Effective Time, (2) secured by a
pledge of Shares by such Person to the Lender and (3) guaranteed by the Company
(with respect to each such Person, such Person's "Bank Debt," and together with
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the aggregate Bank Debt of all other Persons, the "Aggregate Bank Debt") plus
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(B) the portion of the aggregate amount of indebtedness associated with the
Flexi-Trust at the Effective Time which is attributable to such Person (with
respect to each such Person, such Person's "Flexi-Trust Debt," and together with
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the aggregate Flexi-Trust Debt of all other such Persons, the "Aggregate Flexi-
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Trust Debt").
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(c) The portion of the Initial Aggregate Merger Consideration paid
with respect to Shares in accordance with the terms hereof shall be deemed to
have been paid in full satisfaction of all rights pertaining to such Shares,
including any preemptive rights that such holders may have had with respect to
such Shares, subject, however, to the distribution of any portion of the Escrow
Amount or Opportunity Premium Payment as provided in Section 1.4 and any portion
of the Deferred Consideration as provided in Section 1.5, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of such Shares which were outstanding immediately prior to the
Effective Time. By voting to approve the Merger or accepting the Initial
Aggregate Merger Consideration or the Initial Redeemed
4
Company Shares Consideration, the holders of the Company Common Stock and the
former holders of the Redeemed Company Shares shall automatically be deemed to
have released and forever discharged all right, title and interest in and to all
manner of claims, demands, actions, causes of action, damages, debts, accounts,
bonds, contracts, losses, costs, liabilities and/or expenses whatever which may
be made or brought by any such holder or former holder, or any of their
predecessors, successors or assigns in respect of, or in any way relating to,
any failure by the Company at any time to have offered to such holder or former
holder the opportunity to purchase any additional shares of capital stock of the
Company in connection with, or in respect of, any and all preemptive rights to
which any such holder or former holder may have been entitled at any time.
(d) Immediately prior to the Effective Time, the Company shall deliver
to the Payment Agent a schedule which lists the name and address of, and the
amount to be paid to, each holder of a Company Option and each former holder of
a Redeemed Company Share. At or prior to the Effective Time, Xxxxxx will
deposit with the Payment Agent an amount of cash equal to the sum of (i) the
Initial Aggregate Company Option Consideration (as defined in Section 1.7) plus
(ii) the Initial Aggregate Redeemed Company Shares Consideration (as defined in
Section 1.8). Promptly after the Effective Time, the Payment Agent shall mail
to each such holder of Company Options and each such former holder of Redeemed
Company Shares: (i) a letter of transmittal and (ii) instructions for the
execution and delivery of documentation relating to the termination of the
rights of such Persons with respect to such Company Options or Redeemed Company
Shares, as the case may be, in exchange for the cash payments contemplated by
Section 1.7(a) or 1.8, as appropriate. Such letter of transmittal and
instructions shall be in the form of Exhibit 1.3 hereto.
(e) Upon delivery of an executed letter of transmittal, the Payment
Agent shall pay (i) to each holder of Company Options by check an amount equal
to such holder's Initial Company Option Consideration (as defined in Section
1.7(a)) and (ii) to each former holder of Redeemed Company Shares by check an
amount equal to such holder's Initial Redeemed Company Shares Consideration (as
defined in Section 1.8).
(f) Any portion of the Initial Aggregate Consideration (as defined
below) which remains undistributed pursuant to this Section 1.3 for six months
after the Effective Time shall be delivered to Xxxxxx, upon demand, and any
shareholder of the Company, holder of Company Options or former holder of
Redeemed Company Shares who has not theretofore complied with this Article 1
shall thereafter look only to Xxxxxx for payment of their claim for any monies
pursuant to the terms of this Agreement. For purposes of this Agreement, the
term "Initial Aggregate Consideration" shall mean the sum of the Initial
-------------------------------
Aggregate Merger Consideration plus the Initial Aggregate Company Option
Consideration plus the Initial Aggregate Redeemed Company Shares Consideration.
SECTION 1.4. Escrow Amount.
-------------
(a) Promptly after the Effective Time, Xxxxxx will pay ten million
dollars ($10,000,000) of the Initial Aggregate Merger Consideration (the "Escrow
------
Amount") to Bank of
------
5
America, N.T. & S.A. (the "Escrow Agent") as the escrow (the "Escrow")
------------ ------
established hereunder by the escrow agreement (the "Escrow Agreement") to be
----------------
entered into among Xxxxxx, the Securityholder Committee (as defined in Section
10.3) and the Escrow Agent, the form of which is attached hereto as Exhibit
-------
1.4(a). Within 15 days of the second anniversary of the Closing Date, Xxxxxx
------
shall deliver, or caused to be delivered, to the Securityholder Committee
pursuant to Section 10.1 a notice setting forth Xxxxxx' calculation of the Net
Risk Dollars Amount (as defined in Section 1.4(c)) and any documentation
supporting such calculation. Xxxxxx' calculation of the Net Risk Dollars Amount
shall become final and binding for purposes of this Agreement unless, within 30
days of its receipt of the notice from Xxxxxx, the Securityholder Committee
furnishes written notice to Xxxxxx pursuant to Section 10.1 of any dispute or
disagreement with Xxxxxx' calculation of the Net Risk Dollars Amount. Such
written notice shall specify, in reasonable detail, the nature and extent of
such dispute or disagreement.
(b) If the Securityholder Committee timely notifies Xxxxxx of any
dispute or disagreement with Xxxxxx' calculation of the Net Risk Dollars Amount,
the Securityholder Committee and Xxxxxx shall meet promptly to resolve such
dispute or disagreement in good faith. If the Securityholder Committee and
Xxxxxx are unable to resolve such dispute or disagreement within 30 days after
receipt by Xxxxxx of the Securityholders Committee's written notice of dispute
or disagreement, either the Securityholder Committee or Xxxxxx shall be entitled
to submit such dispute or disagreement for final determination to Xxxxxx
Xxxxxxxx LLP (unless another accounting firm is mutually agreed upon by the
Securityholder Committee and Xxxxxx). Such accounting firm shall act as an
arbitrator to determine and resolve such dispute or disagreement within 30 days
after the date upon which the Securityholder Committee or Xxxxxx submits the
dispute or disagreement, together with their presentation and evidence, and in
that undertaking shall not be required to follow any particular procedure but
shall proceed in a manner designed to achieve a speedy and economic resolution
of the dispute. Such accounting firm shall set forth its determination, which
shall be binding and conclusive, absent a showing of fraud, in a written
statement delivered to Xxxxxx and the Securityholder Committee, stating its
reasons therefor.
(c) Promptly after the final determination of the Net Risk Dollars
Amount by Xxxxxx or the accounting firm, as applicable, if:
(i) the absolute amount of the Net Risk Dollars Amount (without
regard to whether such number is positive or negative) is less than two
million dollars ($2,000,000), then Xxxxxx shall instruct the Escrow Agent
to release the full Escrow Amount to the Eligible Holders;
(ii) the amount of the Net Risk Dollars Amount is equal to or
greater than two million dollars ($2,000,000) but less than seven million
dollars ($7,000,000), then Xxxxxx shall (a) instruct the Escrow Agent to
release the full Escrow Amount to the Eligible Holders and (b) pay to the
Eligible Holders an additional amount equal to fifty percent (50%) of the
amount by which the Net Risk Dollars Amount exceeds two million dollars
($2,000,000);
6
(iii) the amount of the Net Risk Dollars Amount is equal to or
less than negative two million dollars (-$2,000,000) but greater than
negative seven million dollars (-$7,000,000), then Xxxxxx shall (a)
instruct the Escrow Agent to release to Xxxxxx out of the Escrow an amount
equal to fifty percent (50%) of the negative number of the amount by which
the Net Risk Dollars Amount exceeds two million dollars ($2,000,000) and
(b) instruct the Escrow Agent to release to the Eligible Holders any funds
remaining in the Escrow after payment to Xxxxxx pursuant to clause (a);
(iv) the amount of the Net Risk Dollars Amount is equal to or
greater than seven million dollar ($7,000,000), then Xxxxxx shall (a)
instruct the Escrow Agent to release the full Escrow Amount to the Eligible
Holders and (b) pay to the Eligible Holders an additional amount equal to
the sum of (x) two and a half million dollars ($2,500,000) and (y) the Net
Risk Dollars Amount minus seven million dollars ($7,000,000); provided,
however, that any additional amount shall not exceed twenty million dollars
($20,000,000); and
(v) the amount of the Net Risk Dollars Amount is equal to or less
than negative seven million dollar (-$7,000,000), then Xxxxxx shall (a)
instruct the Escrow Agent to release to Xxxxxx out of the Escrow an amount
equal to the negative of the sum of (x) negative two and a half million
dollars (-$2,500,000) and (y) the Net Risk Dollars Amount plus seven
million dollars ($7,000,000) and (b) instruct the Escrow Agent to release
to the Eligible Holders any funds remaining in the Escrow after payment to
Xxxxxx pursuant to clause (a); provided, however, that Xxxxxx shall have
such offset rights against the Deferred Consideration as provided in
Section 1.5(g).
"Net Risk Dollars Amount" shall mean an amount equal to (i) the amount
-----------------------
equal to (a) the aggregate dollar gross profit or loss (with any loss expressed
as a negative number) recognized and reasonably expected to be recognized on the
Risk Contracts as determined as of and at the second anniversary of the Closing
Date, minus (b) an amount equal to all Losses incurred by or reasonably expected
to be incurred by Xxxxxx and its affiliates at the second anniversary of the
Closing Date with respect to those certain litigation matters set forth on
Exhibit 1.4(b) (the "Special Litigation Matters"), minus (ii) the amount equal
--------------------------
to the remaining aggregate dollar gross profit or loss expected by the Company
to be recognized on the Risk Contracts as set forth on Exhibit 1.4(b). In
making such determination, gross profit or loss shall be calculated in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods.
For purposes of this Agreement, the term, "Losses" means any and all
------
deficiencies, judgments, settlements, demands, claims, suits, actions or causes
of action, assessments, liabilities, losses, damages (whether direct, indirect,
incidental or consequential), interest, fines, penalties, costs and expenses
(including, without limitation, reasonable legal, accounting and other costs and
expenses incurred in connection with investigating, defending, settling or
satisfying any and all demands, claims, actions, causes of action, suits,
proceedings, assessments, judgments or appeals, and in seeking indemnification
therefor).
7
For purposes of this Agreement, the term "Risk Contracts" means those
--------------
certain contracts set forth on Exhibit 1.4(b).
(d) Immediately prior to the Effective Time, the Company shall deliver
to the Escrow Agent a schedule listing the name, address and Percentage Interest
(as defined below) of the Eligible Holders. Any payments to the Eligible
Holders pursuant to Section 1.4(c) shall be made pro rata in proportion to their
Percentage Interests. Interest or other earnings on any funds in the Escrow
shall be paid to the Eligible Holders annually pro rata in proportion to their
Percentage Interests and such interest or other earnings shall not be deemed
part of the funds held in escrow hereunder and shall not be subject to the
claims of Xxxxxx hereunder.
(e) Xxxxxx and the Securityholder Committee shall cooperate in the
defense of the Special Litigation Matters and make available to each other all
relevant information in their possession relating to the Special Litigation
Matters, subject to protection of attorney client and attorney work product
privileges. Notwithstanding the foregoing, Xxxxxx shall control the defense of
the Special Litigation Matters using its reasonable best efforts to limit the
amount of the Losses resulting therefrom. The Securityholder Committee shall
have the right to participate in the defense of any of the Special Litigation
Matters with its own counsel; provided, however, that notwithstanding any
provision to the contrary set forth in Section 10.3, Xxxxxx shall not be liable
for any cost or expense incurred by the Securityholder Committee pursuant to
such participation. There shall be no settlement by Xxxxxx of any of the
Special Litigation Matters without the consent (which shall not be unreasonably
withheld) of the Securityholder Committee; provided, however, that if the
Securityholder Committee withholds its consent to any such settlement proposed
by Xxxxxx, then if the ultimate resolution of the Special Litigation Matters
results in Losses in excess of the proposed settlement amount, such excess
Losses shall be allocated fully to the Eligible Holders for purposes of
calculating the Net Risk Dollars Amount.
(f) Notwithstanding anything to the contrary contained herein or
elsewhere, Xxxxxx agrees that it shall not provide the Escrow Agent with any
disbursement notice or disbursement instructions pursuant to Section 3(b) of the
Escrow Agreement other than those disbursement notices or disbursement
instructions which Xxxxxx is entitled to provide to the Escrow Agent pursuant to
this Section 1.4.
SECTION 1.5. Payment of Deferred Consideration.
---------------------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "1999 Earnout Payment" means the product of (a) 466,667 and
--------------------
(b) the amount, if any, by which the 1999 Xxxxxx Stock Price exceeds
$37.00.
(ii) "2000 Earnout Payment" means the product of (a) 466,667 and
--------------------
(b) the amount, if any, by which the 2000 Xxxxxx Stock Price exceeds
$42.00; provided, however:
8
(A) if the 2000 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(ii)
hereof, then the 2000 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 1999 Xxxxxx Stock Price exceeds $42.00; and
(B) if the 1999 Earnout Payment is equal to 0, then the 2000
Earnout Payment shall mean the product of (a) 560,000.5 and (b) the amount,
if any, by which the 2000 Xxxxxx Stock Price exceeds $42.00.
(iii) "2001 Earnout Payment" means the product of (a) 466,667
--------------------
and (b) the amount, if any, by which the 2001 Xxxxxx Stock Price exceeds
$47.50; provided, however:
(A) if the 2001 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(ii)
hereof, then the 2001 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 1999 Xxxxxx Stock Price exceeds $47.50;
(B) if the 2001 Earnout Payment is eligible for acceleration
and is accelerated in accordance with the provisions of Section 1.5(b)(iii)
hereof, then the 2001 Earnout Payment means the product of (a) 466,667 and
(b) the amount by which the 2000 Xxxxxx Stock Price exceeds $47.50;
(C) if the 1999 Earnout Payment is equal to 0 and the 2000
Earnout Payment is greater than 0, then the 2001 Earnout Payment shall mean
the product of (a) 560,000.5 and (b) the amount, if any, by which the 2001
Xxxxxx Stock Price exceeds $47.50, except that if the 1999 Earnout Payment
is equal to 0, the 2000 Earnout Payment is greater than 0, and the 2001
Earnout Payment is eligible for acceleration and is accelerated in
accordance with the provisions of Section 1.5(b)(iii) hereof, then the 2001
Earnout Payment means the product of (a) 560,000.5 and (b) the amount by
which the 2000 Xxxxxx Stock Price exceeds $47.50;
(D) if the 1999 Earnout Payment is greater than 0 and the
2000 Earnout Payment is equal to 0, then the 2001 Earnout Payment shall
mean the product of (a) 513,334 and (b) the amount, if any, by which the
2001 Xxxxxx Stock Price exceeds $47.50; and
(E) if the 1999 Earnout Payment is equal to 0 and the 2000
Earnout Payment is equal to 0, then the 2001 Earnout Payment shall mean the
product of (a) 700,001 and (b) the amount, if any, by which the 2001 Xxxxxx
Stock Price exceeds $47.50.
(iv) "1999 Xxxxxx Stock Price" means the average of the Closing
-----------------------
Prices of Xxxxxx Stock for the twenty five consecutive trading days ending
on December 31, 1999.
9
(v) "2000 Xxxxxx Stock Price" means the average of the Closing
-----------------------
Prices of Xxxxxx Stock for the twenty five consecutive trading days ending
on December 31, 2000.
(vi) "2001 Xxxxxx Stock Price" means the average of the Closing
-----------------------
Prices of Xxxxxx Stock for the twenty five consecutive trading days ending
on December 31, 2001.
(vii) "Closing Price" means, with respect to any trading day,
-------------
the last sale price, regular way, as reported in the principal consolidated
transaction reporting system for securities listed on the New York Stock
Exchange ("NYSE") or any other principal stock exchange listing, or over-
----
the-counter market quoting, the Xxxxxx Stock (as defined below) if the
Xxxxxx Stock is no longer listed on the NYSE.
(viii) "Deferred Consideration" shall mean the sum of (1) the
----------------------
1999 Earnout Payment, (2) the 2000 Earnout Payment and (3) the 2001 Earnout
Payment.
(ix) "Earnout Payments" shall mean the 1999 Earnout Payment, the
----------------
2000 Earnout Payment and the 2001 Earnout Payment referred to collectively.
(x) "Eligible Holder" means any of the following Persons (as
---------------
defined below): (A) a Person (other than the Flexi-Trust) who owns Shares
(specifically excluding Excluded Shares) of record or who owns a beneficial
interest in the Flexi-Trust; (B) a Person who is entitled to receive a
payment with respect to Company Options pursuant to Section 1.7(b); or (C)
a Person who is entitled to receive a payment with respect to Redeemed
Company Shares pursuant to Section 1.8.
(xi) "Xxxxxx Stock" means shares of common stock, par value 1.00
------------
per share, of Xxxxxx.
(xii) "Percentage Interest" means, with respect to each Eligible
-------------------
Holder, the percentage interest set forth next to the name of each such
Eligible Holder on Section 1.5(a)(xii) of the Company Disclosure Schedule.
(xiii) "Person" means an individual, a corporation, a limited
------
liability company, a limited liability partnership, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof.
(b) The Deferred Consideration shall be payable as follows:
(i) Promptly after each of January 1, 2000, January 1, 2001 and
January 1, 2002, the Securityholder Committee and Xxxxxx shall agree on the
calculation of the 1999 Xxxxxx Stock Price, the 2000 Xxxxxx Stock Price or
the 2001 Xxxxxx Stock Price, as applicable, and the amount of any
applicable Earnout Payments in accordance with this Section 1.5, and the
Securityholder Committee thereafter shall send to (i) Xxxxxx
10
a notice pursuant to Section 10.1 as to whether or not the Securityholder
Committee is accelerating any Earnout Payments and (ii) each Eligible
Holder a letter of transmittal substantially in the form of Exhibit 1.5(b)
--------------
hereto (a "Deferred Consideration Letter of Transmittal"). Such letter of
---------------------------------------------
transmittal shall set forth the Xxxxxx Stock Price for the relevant year,
demonstrate the calculation of any Earnout Payments for such year and state
whether or not the Securityholder Committee has decided to accelerate the
Earnout Payments for subsequent year(s). Notwithstanding the foregoing, the
Securityholder Committee shall not be obligated to send a Deferred
Consideration Letter of Transmittal (A) in the year 2001 in the event that
(1) (aa) the 2000 Earnout Payment has been accelerated in accordance with
the terms of Section 1.5(b)(ii) and (bb) the 2000 Xxxxxx Stock Price does
not exceed $47.50 or (2) each of the 2000 Earnout Payment and the 2001
Earnout Payment has been accelerated in accordance with Section 1.5(b)(ii)
or (B) in the year 2002 in the event that the 2001 Earnout Payment has been
accelerated in accordance with the terms of Section 1.5(b)(ii) or (iii).
(ii) On or before January 31, 2000, Xxxxxx will mail or otherwise
deliver to the Eligible Holders a portion of the Deferred Consideration
equal to the 1999 Earnout Payment, and the 2000 Earnout Payment and the
2001 Earnout Payment, if such additional Earnout Payments are eligible for
acceleration and the Securityholder Committee has properly notified Xxxxxx
of its intention to accelerate such Earnout Payments as provided for in
Section 1.5(b)(i). Each Eligible Holder shall receive a check for the
portion of the Deferred Consideration equal to the sum of (x) the product
of such Eligible Holder's Percentage Interest and the 1999 Earnout Payment,
(y) the product of such Eligible Holder's Percentage Interest and any
accelerated 2000 Earnout Payment and (z) the product of such Eligible
Holder's Percentage Interest and any accelerated 2001 Earnout Payment.
(iii) On or before January 31, 2001, subject to Section 1.5(g),
Xxxxxx will mail or otherwise deliver to the Eligible Holders a portion of
the Deferred Consideration equal to the 2000 Earnout Payment and the 2001
Earnout Payment, if the 2001 Earnout Payment has not previously been
accelerated and is eligible for acceleration and the Securityholder
Committee has properly notified Xxxxxx of its intention to accelerate the
2001 Earnout Payment as provided for in Section 1.5(b)(i). Each Eligible
Holder shall receive a check for the portion of the Deferred Consideration
equal to the sum of (x) the product of such Eligible Holder's Percentage
Interest and the 2000 Earnout Payment (as it may be reduced by any offset
amount) and (y) the product of such Eligible Holder's Percentage Interest
and any accelerated 2001 Earnout Payment (as it may be reduced by any
offset amount).
(iv) On or before January 31, 2002, subject to Section 1.5(g),
Xxxxxx will mail or otherwise deliver to the Eligible Holders a portion of
the Deferred Consideration equal to the 2001 Earnout Payment provided,
however, that Xxxxxx shall not be required to deliver any such amount if
the 2001 Earnout Payment has been accelerated and paid by Xxxxxx in
accordance with the provisions of Section 1.5(b)(ii) or (iii). Each
Eligible Holder will receive a portion of the Deferred Consideration equal
to
11
the product of (A) such Eligible Holder's Percentage Interest and (B) the
2001 Earnout Payment (as it may be reduced by any offset amount).
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, the Eligible Holders shall not be entitled to receive any Deferred
Consideration pursuant to this Agreement in excess of an aggregate of
$31,000,000.
(d) In the event that at any time prior to December 31, 2001, there is
any change in the number of shares of outstanding Xxxxxx Stock by reason of
stock dividends, recapitalizations, split-ups, combinations or exchanges of
shares and the like, the respective strike prices for the respective Earnout
Payments (i.e., $37.00 for the 1999 Earnout Payment, $42.00 for the 2000 Earnout
Payment and $47.50 for the 2001 Earnout Payment) and the applicable multipliers
for such Earnout Payments (i.e., 466,667, 560,000.5, 513,334 and 700,001) shall
be adjusted proportionately from and after any such event so that the Eligible
Holders would derive the same benefits from such Earnout Payments as they would
have derived had any such event not occurred.
(e) The right to receive a portion of the Deferred Consideration in
accordance with the terms hereof may not be sold, assigned or otherwise
transferred by any Eligible Holder or any other Person except by operation of
law and except by will or laws of descent and distribution upon the death of an
Eligible Holder.
(f) Exhibit 1.5(f) attached hereto provides, by way of example only,
--------------
illustrations of the calculation of the Deferred Consideration.
(g) If the Net Risk Dollars Amount set forth in Xxxxxx' notice to the
Securityholder Committee pursuant to Section 1.4(a) is less than negative
fourteen and a half million dollars (-$14,500,000), then an amount of any 2000
Earnout Payment and any accelerated 2001 Earnout Payment equal to the lesser of
(i) the amount equal to negative fourteen and a half million dollars (-
$14,500,000) minus the Net Risk Dollars Amount and (ii) ten million dollars
($10,000,000) shall be treated in the same manner as if it were additional funds
in the Escrow in accordance with Section 1.4 and shall not be paid to the
Eligible Holders pursuant to Section 1.5(b) until final resolution of the
Escrow. In addition, if the Net Risk Dollars Amount as finally determined is
less than negative fourteen and a half million dollars (-$14,500,000) and the
portion of any 2000 Earnout Payment and any accelerated 2001 Earnout Payment
withheld pursuant to the preceding sentences (the "Withheld Amount") is less
---------------
than ten million dollars ($10,000,000), then Xxxxxx shall have the right to
offset against any 2001 Earnout Payment an amount equal to the lesser of (x) the
amount equal to negative fourteen and a half million dollars (-$14,500,000),
minus the Net Risk Dollars Amount and minus the Withheld Amount and (y) ten
million dollars ($10,000,000) minus the Withheld Amount.
SECTION 1.6. Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares which are held by shareholders who have (i)
objected to the Company, in writing, to the Merger prior to the Company
shareholder vote on the Merger, (ii) not voted in favor of, or whose Shares are
not entitled to vote regarding approval of, the Merger and (iii) properly and
timely perfected appraisal rights under Section 351.455 of the GBCL
12
("Dissenting Shares") shall not be converted into or be exchangeable for the
-----------------
right to receive the consideration described in Section 1.2, Section 1.4 and/or
Section 1.5 hereof (unless and until such holder shall have effectively
withdrawn or lost his or her right to appraisal and payment under the GBCL) but
shall be converted into the right to receive such cash consideration as may be
properly determined and payable to such holder as provided in the GBCL.
SECTION 1.7. Stock Options.
-------------
(a) At the Effective Time, each holder of an option to purchase
Company Common Stock (a "Company Option") then outstanding pursuant to the
--------------
Company's 1995 Incentive Stock Option Plan ("ISO Plan"), whether or not such
--------
Company Option is exercisable at such time, and whether or not such Company
Option is vested at such time, shall be entitled, in exchange for the
termination of such Company Option, to receive (i) cash from the Payment Agent
in an amount equal to the product of (x) the difference of (A) the Initial Per
Share Merger Consideration minus (B) the exercise price per share of such
Company Option multiplied by (y) the number of shares underlying such Company
Option (with respect to each such holder individually, such holder's "Initial
-------
Company Option Consideration"), and together with the aggregate Initial Company
----------------------------
Option Consideration of all other such holders, the "Initial Aggregate Company
-------------------------
Option Consideration"), plus (ii) an additional amount in cash from the
--------------------
Securityholder Committee, payable in accordance with Section 1.5(b), equal to
such Eligible Holder's Percentage Interest in the Deferred Consideration and
(iii) an additional pro rata amount of cash, payable as set forth in Section
1.4, equal to such Eligible Holder's Percentage Interest in the Escrow Amount
and the Opportunity Premium Payment. Any amounts payable by Xxxxxx to the
holders of Company Options pursuant to (i), (ii) and (iii) above shall be paid
to such holders by Xxxxxx net of any applicable withholding taxes.
(b) Each holder of a Company Option, upon surrender to the Payment
Agent of the Option Agreement relating to any such Company Option together with
a properly completed letter of transmittal covering such Company Option, will
receive the Initial Company Option Consideration in respect of such Company
Option (and, if applicable, such Eligible Holder's Percentage Interest of any
portion of the Deferred Consideration or the Escrow Amount payable prior to the
date of surrender). Until so surrendered, each such Option Agreement shall,
after the Effective Time, represent for all purposes only the right to receive
the amounts provided for herein. No interest shall be paid on such amounts.
SECTION 1.8. Certain Redeemed Shares. Each current or former
-----------------------
shareholder of the Company who has had or will have had shares of Company Common
Stock repurchased by the Company during the period from and after June 24, 1998
to and including the Closing Date pursuant to the terms of the Company's
Shareholder Agreement (as defined below) (any such shares being referred to as
"Redeemed Company Shares") shall be entitled to receive (a) cash from the
------------------------
Payment Agent in an amount equal to the product of (i) the difference of (A) the
cash value of the Initial Per Share Merger Consideration minus (B) the price per
share which the Company paid for such Redeemed Company Shares multiplied by (ii)
the number of Redeemed Company Shares which such Person had so repurchased at
such price by the Company during such period (with respect to each such Person
individually, such Person's "Initial Redeemed
----------------
13
Company Shares Consideration", and together with the aggregate Initial Redeemed
----------------------------
Company Shares Consideration, the "Initial Aggregate Redeemed Company Shares
-----------------------------------------
Consideration"), (b) an additional amount in cash from the Securityholder
-------------
Committee, payable in accordance with Section 1.5(b), in an amount equal to such
Eligible Holder's Percentage Interest in the Deferred Consideration and (c) an
additional pro rata amount of cash, payable as set forth in Section 1.4, equal
to such Eligible Holder's Percentage Interest in the Escrow Amount and the
Opportunity Premium Payment. At Closing, the Company will certify to Xxxxxx the
number of Redeemed Company Shares and the holders thereof at the time of
repurchase by the Company. No interest shall be paid on such amount.
SECTION 1.9. Payments with Respect to Certain Shares. Notwithstanding
---------------------------------------
anything contained herein to the contrary, any amounts of money which are
payable hereunder to the Sverdrup Flexible Benefits Trust, dated December 20,
1993 (the "Flexi-Trust"), whether as a result of such Flexi-Trust being the
-----------
record holder of Shares or the holder of Company Options or otherwise, shall not
be paid to such Flexi-Trust, but shall instead be paid directly to the account
holders in such Flexi-Trust in proportion to the number of Shares held in such
account holder's account in such Flexi-Trust. The number of Shares held in each
such account holder's account is set forth on Section 1.9 of the Company
Disclosure Schedule. Such account holders shall be deemed to be the Eligible
Holders of the Shares, Company Options or Redeemed Company Shares for all
purposes hereunder. Notwithstanding anything contained herein to the contrary,
the Aggregate Flexi-Trust Debt shall be deemed to have been paid in full and
extinguished as a consequence of the payment of the Initial Aggregate Merger
Consideration by Xxxxxx to the Payment Agent in the manner provided in the
second sentence of Section 1.3(a) hereof.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. Articles of Incorporation. The articles of incorporation
-------------------------
of Merger Subsidiary in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation, except that such articles of
incorporation shall be amended to change the name of the Surviving Corporation
to "Sverdrup Corporation."
SECTION 2.2. Bylaws. The bylaws of Merger Subsidiary in effect at the
------
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with the applicable law.
SECTION 2.3. Directors and Officers. From and after the Effective
----------------------
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (a) Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx shall be the directors of the
Surviving Corporation, and (b) the officers of Merger Subsidiary at the
Effective Time shall be the officers of the Surviving Corporation.
14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Xxxxxx that, except as otherwise
disclosed on the disclosure schedules delivered on or prior to the date hereof
to Xxxxxx by the Company (collectively, the "Company Disclosure Schedule"):
---------------------------
SECTION 3.1. Corporate Existence and Power. The Company is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Missouri, and has all corporate powers and all licenses,
authorizations, consents and approvals required to carry on its business as now
conducted other than any such licenses, authorizations, permits, registrations,
consents and approvals the failure of which to have would not reasonably be
expected to have a Company Material Adverse Effect. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not reasonably be
expected to have a Company Material Adverse Effect. The Company has heretofore
delivered to Xxxxxx true and complete copies of the Company's articles of
incorporation and bylaws as currently in effect. For purposes of this
Agreement, a "Company Material Adverse Effect" or the term "material" or any
-------------------------------
variations thereof used in conjunction with the Company means (i) any material
adverse change in, or a material adverse effect on, the assets, liabilities,
business or operations of the Company and the Company Subsidiaries (as defined
in Section 3.2) taken as a whole in an amount in excess of $500,000 individually
or $1,000,000 in the aggregate with respect to all matters arising under the
relevant section of this Agreement, or (ii) any event or circumstance that would
prevent, materially hinder or materially delay the consummation of the
transactions contemplated by this Agreement. For purposes of this Agreement,
any reference to any event, change or effect being "material" with respect to
any Person other than the Company and the Company Subsidiaries means an event,
change or effect which is material in relation to the assets, liabilities,
business or operations of such Person (and its subsidiaries, if any) taken as a
whole or on the ability of such Person to perform its obligations hereunder.
Notwithstanding anything to the contrary herein, a Company Material Adverse
Effect shall not include events, changes or effects relating to or caused by (i)
general economic or industry conditions or (ii) the announcement or pendency of
this Agreement or any of the transactions or actions contemplated hereby.
SECTION 3.2. Subsidiaries. Section 3.2 of the Company Disclosure
------------
Schedule contains a true and complete list of all of the Company's subsidiaries
(the "Company Subsidiaries"). Such list sets forth the authorized capital
--------------------
stock, the number of shares duly issued and outstanding, the number so owned by
the Company and the jurisdiction of incorporation of each of the Company
Subsidiaries. The shares of capital stock of the Company Subsidiaries owned
directly or indirectly by Company are validly issued, fully paid and non-
assessable (subject to statutory obligations of holders, if any), and are owned
free and clear of any liens, claims, charges or encumbrances except as set forth
on such list. Except as set forth on
15
Section 3.2 of the Company Disclosure Schedule, the Company (i) does not have
any direct or indirect subsidiaries other than the Company Subsidiaries, and
(ii) other than in the ordinary course of business of the Company, has not made
any advances to or investments in, and does not own any securities of or other
interests in, any Person other than the Company Subsidiaries. Each of the
Company Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has the
requisite corporate power to own or lease its properties and carry on its
business as now being conducted in all material respects, and is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure so to qualify would not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.3. Corporate Records. The corporate minute books, transfer
-----------------
books and stock ledgers of the Company and each of the Company Subsidiaries are
complete and accurate in all material respects.
SECTION 3.4. Corporate Authorization.
-----------------------
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby are within the Company's corporate powers, subject to the conditions set
forth in this Agreement. Except for the approval by the Company's shareholders,
this Agreement, the Merger, and the transactions contemplated hereby have been
duly authorized by all necessary corporate action. Subject to the approval of
the Company's shareholders of this Agreement and assuming due authorization,
execution and delivery of this Agreement by Xxxxxx and Merger Subsidiary, this
Agreement constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditors rights and by the
availability of equitable remedies.
(b) The Company's Board of Directors, at a meeting duly called and
held, has, by majority vote of the members of the Company's Board of Directors
present at such meeting, duly and validly approved, and taken all corporate
actions required to be taken by the Company's Board of Directors for the
consummation of, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing, the Company's Board of
Directors has (i) determined that the Merger is fair and in the best interests
of the Company and its shareholders, (ii) received the opinion of Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx ("Xxxxxxxx Xxxxx") to the effect that the consideration to be
--------------
received by the shareholders of the Company in the Merger is fair to such
shareholders from a financial point of view, (iii) adopted this Agreement in
accordance with the GBCL and (iv) directed that this Agreement and the Merger be
submitted to the shareholders of the Company for their adoption and approval and
resolved to recommend that the shareholders of the Company approve and adopt
this Agreement and the Merger.
SECTION 3.5. Governmental Authorization . The execution, delivery and
--------------------------
performance by the Company of this Agreement and the consummation of the Merger
by the
16
Company require no action by or in respect of, or filing with, any court or
tribunal or administrative governmental or regulatory body, agency, official or
authority other than (a) the filing of a certificate of merger in accordance
with the GBCL; (b) compliance with any applicable requirements of the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (c)
-------
compliance with any applicable requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (the "Exchange Act");
------------
(d) compliance with any applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"); (e) compliance with any applicable foreign or
--------------
state securities or blue sky laws; (f) compliance with state takeover, antitrust
and competition law filings and approvals; and (g) such actions by or filings
with governmental bodies, agencies, officials or authorities, the failure of
which to obtain or make would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
SECTION 3.6. Non-Contravention. The execution, delivery and
-----------------
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not, (a) assuming the
approval by the Company's shareholders, contravene or conflict with the articles
or certificate of incorporation or bylaws (or similar governing documents) of
the Company or any of the Company Subsidiaries, or (b) except for any such
matters that do not have, and would not reasonably be expected to have, a
Company Material Adverse Effect or except as set forth on Section 3.6 of the
Company Disclosure Schedule, (i) assuming compliance with the matters referred
to in Section 3.5, contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company, any Company Subsidiary or any of
their respective assets, (ii) result in a violation or breach of, or constitute
a default under, or give rise to a right of termination, amendment, cancellation
or acceleration of any right or obligation of the Company or any Company
Subsidiary or to a loss of any benefit to which the Company or any Company
Subsidiary is entitled under any provision of any note, bond, mortgage,
indenture, lease, agreement, contract or other instrument binding upon the
Company or to which the Company or such Company Subsidiary is a party or by
which it is affected or any license, franchise, permit or other similar
authorization held by the Company or such Company Subsidiary or to which the
Company or such Company Subsidiary is a party or by which it is affected, or
(iii) result in the creation or imposition of any Lien (as defined below) on any
asset of the Company or any Company Subsidiary. For purposes of this Agreement,
"Lien" means, with respect to an asset, any mortgage, lien, pledge, charge,
----
security interest or encumbrance of any kind in respect of such asset other than
purchase money security interests incurred in connection with the purchase of
assets in the ordinary course of business.
SECTION 3.7. Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 10,000,000
shares of Company Common Stock. There are issued and outstanding 3,108,837
shares of Company Common Stock and Company Options to purchase 309,500 shares of
Company Common Stock.
(b) Except as set forth in Section 3.7 of the Company Disclosure
Schedule, all outstanding shares of capital stock of the Company have been duly
authorized and validly issued
17
and are fully paid and nonassessable and were issued free of preemptive or
similar rights and in compliance with all applicable state and federal
securities laws and regulations. Except as set forth in this Section 3.7, there
are outstanding (i) no other shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (iii) no other options, warrants, calls, rights (including preemptive
rights), commitments or any other agreement of any character to acquire from the
Company, and no obligation of the Company to issue, transfer, dispose of, sell,
purchase, redeem or otherwise acquire (or to refrain from doing any of the
foregoing), any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
-------
Securities").
----------
(c) The number of Redeemed Company Shares and the price paid by the
Company therefor are as set forth in Section 3.7(c) of the Company Disclosure
Schedule.
(d) All of the Company Options were issued pursuant to the ISO Plan or
the Company's 1992 Incentive Stock Option Plan. Section 3.7(d) of the Company
Disclosure Schedule sets forth a true, correct and complete list, as of the date
of this Agreement, of the name of each holder of outstanding Company Options,
the exercise price therefor and the number of shares of Company Common Stock
exercisable therefor, and indicating the portion of such Company Options that
are vested. Immediately after the Effective Time, upon execution and delivery
to the Payment Agent by each holder of a Company Option of a letter of
transmittal in the form of Exhibit 1.3 hereto and payment of the amounts set
-----------
forth in Section 1.7, no holder of Company Options shall have any right or claim
with respect to the Company Common Stock issuable upon the exercise therefor.
(e) Except as set forth on Section 3.7(e) of the Company Disclosure
Schedule and except for the Company Options, there are no shareholders
agreements, investors' rights agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which the Company is bound
relating to the voting of, or placing any restrictions on, any shares of the
capital stock of the Company.
(f) None of the securities of the Company are registered or required
to be registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
-------------
(g) The number of Redeemed Company Shares as of the date hereof and
the names of the holders thereof at the time of repurchase by the Company are
set forth on Section 3.7(g) of the Company Disclosure Schedule. All redemptions
of the Company Common Stock prior to the date hereof have been made in
accordance with the terms and conditions of the Company's standard form of
shareholders agreement, a copy of which form of agreement has been provided to
Xxxxxx prior to the date hereof, or otherwise in accordance with applicable law.
No event has occurred and no circumstance, matter or set of facts exist which
would constitute a valid basis for the assertion by any third party of any claim
or Legal Proceeding (as defined in Section 3.13) relating to such redemptions by
the Company, except as will be resolved by the payments to be made hereunder to
the former holders of Redeemed Company Shares.
18
SECTION 3.8. Company Reports and Financial Statements. The Company has
----------------------------------------
delivered or made available to Xxxxxx true and complete copies of each financial
report, proxy statement or annual information statement, including, without
limitation, its Annual Reports to Shareholders, delivered to its shareholders,
at any time since January 1, 1994 (collectively, the "Company Reports"). Except
---------------
as set forth in Section 3.8 of the Company Disclosure Schedule, as of the
respective dates of such Company Reports, none of such Company Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the audited consolidated financial statements of the Company
(including any related notes and schedules) included in the Company Reports for
each of the five fiscal years ended December 31, 1993, 1994, 1995, 1996 and
1997, and each of the interim unaudited financial statements of the Company
(including any related notes and schedules) for each of the interim periods
subsequent to December 31, 1997 (collectively, the "Company Financial
-----------------
Statements"), fairly present, in conformity with generally accepted accounting
----------
principles ("GAAP") applied on a basis consistent with prior periods (except as
----
may be indicated in the notes thereto), the consolidated financial position of
the Company and the Company Subsidiaries as of its date and the consolidated
results of operations and cash flows for the period then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements). For purposes of this Agreement, "Company Balance Sheet" means the
---------------------
Company's unaudited balance sheet dated as of October 30, 1998 and "Company
-------
Balance Sheet Date" means October 30, 1998.
------------------
SECTION 3.9. Receivables. Except as set forth on Section 3.9 of the
-----------
Company Disclosure Schedule, with respect to accounts receivable in excess of
$500,000, there is (i) no account debtor that has refused (or, to the knowledge
of the Company, threatened to refuse) to pay its obligations for any reason,
(ii) to the knowledge of the Company, no account debtor that is insolvent or
bankrupt, and (iii) no account receivable which is pledged to any third party by
the Company.
SECTION 3.10. Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the Company
Balance Sheet (or reflected in the notes thereto), or which were incurred after
the date of the Company Balance Sheet in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, the Company and the Company Subsidiaries do not
have any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected in, reserved against or
otherwise described in the Company Balance Sheet (or reflected in the notes
thereto).
SECTION 3.11. Information Supplied. None of the information supplied or
--------------------
to be supplied by the Company or the Company Subsidiaries, or on their behalf by
their auditors, attorneys, financial advisors, or other consultants or advisors
for inclusion in the proxy statement and any amendment or supplement thereto to
be distributed in connection with the meeting of the shareholders of the Company
to vote upon this Agreement and the transactions contemplated hereby (the "Proxy
-----
Statement"), will: (1) at the time of the mailing of the Proxy Statement and any
---------
amendments or supplements thereto, and (2) at the time of the Company's meeting
of
19
shareholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to correct as promptly as practicable
any such information provided by it that shall have become false or misleading
in any material respect and to take all steps necessary to cause the Proxy
Statement as so corrected to be disseminated to the Company shareholders to the
extent required by applicable law.
SECTION 3.12. Absence of Certain Changes. Except as described in Section
--------------------------
3.12 of the Company Disclosure Schedule, since the Company Balance Sheet Date,
the Company and the Company Subsidiaries have conducted their respective
businesses in the ordinary and usual course and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other ownership interests in, the Company, other than
the Redeemed Company Shares;
(b) any incurrence, assumption or guarantee by the Company or any of
the Company Subsidiaries of any outstanding amount of indebtedness for borrowed
money or any other liabilities of any nature, whether or not accrued, contingent
or otherwise, other than in the ordinary course of business;
(c) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of the Company Subsidiaries relating to
their respective assets or businesses (including the acquisition or disposition
of any assets) or any loss or relinquishment by the Company or any of the
Company Subsidiaries of any material contract or other material right, other
than transactions and commitments in the ordinary course of business in
accordance with their customary practices;
(d) any material change in any method of accounting or accounting
practice or policy or application thereof by the Company or any of the Company
Subsidiaries, except as required by GAAP;
(e) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of compensation payable or to become payable by the Company or
any of the Company Subsidiaries to their directors, officers, employees or
consultants, except increases occurring in the ordinary course of business; or
(f) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of any bonus, insurance, pension or other employee benefit plan
or contract, payment or arrangement made to, for or with any director, officer,
employee or consultant of the Company or any of the Company Subsidiaries, except
increases occurring in the ordinary course of business.
20
SECTION 3.13. Litigation. Except as set forth in Section 3.13 of the
----------
Company Disclosure Schedule, there is no action, suit, claim, investigation or
proceeding (each a "Legal Proceeding") pending against, or to the knowledge of
----------------
the Company threatened against or affecting, the Company or any of the Company
Subsidiaries or any of their respective assets before any court or arbitrator or
any administrative, regulatory or governmental body, agency or official which
would reasonably be expected to have a Company Material Adverse Effect or which
in any manner challenges or seeks to prevent, enjoin, alter or delay the Merger
or any of the other transactions contemplated hereby. To the knowledge of the
Company, no event has occurred and no circumstance, matter or set of facts exist
which would constitute a valid basis for the assertion by any third party of any
claim or Legal Proceeding, other than those listed in Section 3.13 of the
Company Disclosure Schedule, which would be expected to result in a Company
Material Adverse Effect. There is no outstanding or, to the knowledge of the
Company, threatened, judgment, injunction, order, consent or decree of any
Governmental Authority against the Company, any Company Subsidiary or any of
their respective assets.
SECTION 3.14. Employee Benefit Plans. (a) Section 3.14 of the Company
----------------------
Disclosure Schedule contains a list of each employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which are hereinafter referred to individually as a "Plan" and
----- ----
collectively as the "Plans") pursuant to which the Company, the Company
-----
Subsidiaries or any ERISA Affiliates (as defined below) has any present or
future obligations or liabilities with respect to its employees or former
employees or their dependents or beneficiaries (the "Company Plans"). There are
-------------
no negotiations, demands or proposals (other than routine claims for benefits)
which are pending or, to the knowledge of the Company, threatened that concern
matters now covered, or that would be covered, by the Company Plans.
(b) The Company has delivered or made available to Xxxxxx copies of
the following documents, as they may have been amended to the date hereof,
embodying or relating to the Company Plans: (i) each of the Company Plans
listed in Section 3.14 of the Company Disclosure Schedule, including all
amendments thereto, and any related trust agreements, group annuity contracts,
insurance policies or other funding agreements, (ii) the most recent
determination letter, if any, from the Internal Revenue Service with respect to
the Company Plans that are pension benefit plans as defined in Section 3(2)(A)
of ERISA (hereinafter referred to as "Pension Plans"); (iii) current summary
-------------
plan descriptions and prospectuses; (iv) the three (3) most recently filed
annual returns/reports on Form 5500 for each of the Company Plans; and (v)
general notification to employees of their rights under Code Section 4980B and
form of letter(s) distributed upon the occurrence of a qualifying event
described in Code Section 4980B, in the case of a plan that is a "group health
plan" as defined in Code Section 5000(b)(1).
(c) Except as set forth in Section 3.14 of the Company Disclosure
Schedule: (i) the written terms of each of the Company Plans and any related
trust agreement, group annuity contract, insurance policy or other funding
arrangement are in substantial compliance with ERISA, the Internal Revenue Code
of 1986, as amended (the "Code") and all other applicable legal requirements,
----
and each of the Company Plans has been administered in
21
substantial compliance with, and has no direct or indirect material liability in
connection with such regulatory requirements, (ii) each of the Company Plans has
been administered in substantial compliance with its terms; (iii) each Company
Plan which is a Pension Plan meets the requirements of Section 401(a), and, if
applicable, Sections 409 and 4975(e)(7), of the Code and has been so qualified
since its inception date to the date of this Agreement, and each trust forming a
part thereof is exempt from income tax pursuant to Section 501(a) of the Code;
(iv) no Company Plan has engaged in, participated in or been a party to any
"prohibited transaction" (as defined in Section 4975 of the Code or Sections 406
or 407 of ERISA) which could subject the Company or any of its ERISA Affiliates
to any material tax or penalty under Section 4975 of the Code or Title I of
ERISA; (v) there is no material violation of any reporting or disclosure
requirement imposed by ERISA or the Code with respect to any Company Plan; (vi)
there are no actions, suits, arbitrations or claims pending (other than routine
claims for benefits), legal, administrative or other proceedings or governmental
investigations pending or, to the Company's knowledge, threatened, against (X)
the Company Plans, the Company Plan fiduciaries or the Company Plan assets, or
(Y) the Company or the Company Subsidiaries with respect to claims related to
such Company Plans, (vii) no officer, director or employee of the Company or a
Company Subsidiary has committed a material breach of any responsibility or
obligation imposed on fiduciaries by Title I of ERISA with respect to any
Company Plan, (viii) all contributions due and payable from the Company with
respect to each of the Company Plans and all expenses and liabilities relating
to each of the Company Plans for all calendar (plan) years through December 31,
1997 are reflected on the financial statements of the Company and each of the
Company Subsidiaries, to the extent required by GAAP; (ix) no Company Pension
Plan which is a "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, nor any single-employer plan of any entity which is
considered a predecessor of the Company or one employer with the Company under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") is
---------------
subject to Section 412 of the Code or Title IV of ERISA; (x) no Company Plan
maintained currently or within the past five (5) years by the Company or an
ERISA Affiliate, and no other "employee benefit plan" under which the Company or
an ERISA Affiliate has any liability or other obligation, is or was a "multiple
employer plan" (within the meaning of Section 413(c) of the Code) or a
"multiemployer plan" (as defined in Section 3(37) of ERISA); (xi) neither the
Company nor any of its ERISA Affiliates has incurred any withdrawal liability
under Subtitle E of Title IV of ERISA with respect to a multiemployer plan;
(xii) neither the Company nor any of the Company Subsidiaries has any
obligations for retiree health, life or other welfare benefits under any Company
Plan or pursuant to any agreement or understanding other than pursuant to
Section 4980B of the Code, (xiii) with respect to the qualified status of each
Company Pension Plan under Section 401(a) of the Code, a favorable determination
letter has been received within the last three years, or an application for a
favorable determination letter has been filed within the applicable remedial
amendment period under Code Section 401(b), is pending, and no indication of an
adverse response has been received; and (xiv) the Company and the Company's
ERISA Affiliates have materially complied with all applicable notice
requirements and have provided group health care continuation and conversion
coverage under Section 4980B of the Code and/or any other applicable law and
have complied with the provisions of Code Sections 9801 and 9802.
22
(d) Section 3.14(d) of the Company Disclosure Schedule lists each
employment, severance or other similar contract, arrangement or policy, each
cafeteria, educational assistance, dependent care assistance, and fringe benefit
plan or arrangement, and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post retirement insurance, compensation or benefits which (i) is not one of the
Company Plans, and (ii) is entered into, maintained or contributed to, as the
case may be, by the Company. Such contracts, plans and arrangements as are
described above are referred to collectively herein as the "Company Benefit
---------------
Arrangements." Each Company Benefit Arrangement has been maintained in material
------------
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such Company
Benefit Arrangement. Except as set forth on Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any of the Company Subsidiaries has
any obligations for post-retirement benefits under any Company Benefit
Arrangement other than pursuant to Section 490B of the Code. There are no
negotiations, demands or proposals (other than routine claims for benefits) that
are pending, or to the knowledge of the Company, threatened which concern
matters now covered, or that would be covered, by the foregoing types of Company
Benefit Arrangements. The Company has delivered or made available to Xxxxxx
copies of all documents evidencing or describing the Company Benefit
Arrangements, including documents of the type listed in paragraph 3.13(b).
(e) Except as disclosed in Section 3.14(e) of the Company Disclosure
Schedule, no individual shall accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Company Plan or Company
Benefit Arrangement, including the right to receive any parachute payment, as
defined in Section 280G of the Code, or become entitled to severance termination
allowance or similar payments as a direct result of the transactions
contemplated by this Agreement.
(f) Except as disclosed on Section 3.14(f) of the Company Disclosure
Schedule, the Company is not a party to or subject to any collective bargaining
agreement with any union or any employment contract or arrangement providing for
annual future compensation of any officer, consultant, director or employee.
SECTION 3.15. Taxes. Except as disclosed on Section 3.15 of the Company
-----
Disclosure Schedule and except for any matter that would not reasonably be
expected to have a Company Material Adverse Effect:
(a) The Company and the Company Subsidiaries have timely filed all Tax
Returns (as defined below) required to have been filed by them and all such Tax
Returns are true, correct and complete in all respects; each affiliated group
with which any of the Company and the Company Subsidiaries files a consolidated
or combined Tax Return has filed all such Tax Returns that it was required to
file for each taxable period during which any of the Company and the Company
Subsidiaries was a member of the group and all such consolidated and combined
Tax Returns were correct and complete in all respects; none of such Tax Returns
contains a
23
disclosure statement under Section 6662 of the Code (or any predecessor statute)
or any similar provision of state, local or foreign law.
(b) All Taxes due and payable by the Company and the Company
Subsidiaries (whether or not shown on any Tax Return) have been timely paid in
full or reflected as a reserve on the Company Financial Statements.
(c) The charges, accruals and reserves for Taxes (including deferred
Taxes) currently reflected on the Company Financial Statements were adequate to
cover all unpaid Taxes accruing or payable by the Company and the Company
Subsidiaries in respect of taxable periods that end on or before the date of
each such Company Financial Statement.
(d) There are no audits or administrative proceedings, court
proceedings or claims pending against the Company or any of the Company
Subsidiaries with respect to any Taxes and no assessment, deficiency or
adjustment has been asserted or, to the knowledge of the Company, proposed with
respect to any Tax Return of or with respect to the Company or any of the
Company Subsidiaries and there are no liens for Taxes upon the assets or
properties of the Company or any of the Company Subsidiaries, except for liens
for Taxes not yet due and owing.
(e) Within the past five years, no written claim has been made by an
authority in a jurisdiction where the Company or any of the Company Subsidiaries
currently do not file Tax Returns that any of the Company or the Company
Subsidiaries are or may be subject to taxation by that jurisdiction.
(f) The Company and each of the Company Subsidiaries have withheld and
paid over all Taxes required to have been withheld and paid over in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(g) Neither the Company nor any Company Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of other law or regulations) by reason of a change in
accounting method nor does the Company or any such Subsidiary have any knowledge
that the IRS (or other taxing authority) has proposed, or is considering, any
such change in accounting method.
(h) The Company and the Company Subsidiaries are in full compliance
with Section 263A of the Code and the Treasury Regulations thereunder for all
taxable years for which the statute of limitations is not yet closed.
(i) Neither the Company nor any Company Subsidiary has been included
in any consolidated, combined or unitary Tax Return (other than for a group of
which the Company is the common parent) provided for under the laws of the
United States, any state or locality with respect to Taxes for any taxable
period for which the statute of limitations has not expired; and neither the
Company nor any Company Subsidiaries has any liability for the Taxes of any
Person under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
24
(j) Neither the Company nor any of the Company Subsidiaries are a
party to or bound by any affiliated group consolidated return tax allocation
agreement, tax sharing agreement or tax indemnification agreement, other than
among themselves.
(k) As of the Closing Date there will be no excess loss accounts,
deferred intercompany gains or losses, or other like items pertaining to the
Company or any of the Company Subsidiaries.
As used in this Agreement, "Taxes" means all taxes, charges, fees,
-----
levies, or other like assessments, including without limitation income, gross
receipts, ad valorem, value added, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or any
other nation, state, or bilateral or multilateral governmental authority, any
local governmental unit or subdivision thereof, or any branch, agency, or
judicial body thereof ("Government") irrespective of whether imposed directly or
----------
indirectly, as a successor or transferee liability, as a joint and several
liability pursuant to Section 1.1502-6 of the Treasury Regulations or comparable
or similar provisions of state, local or foreign law; and shall include any
interest, fines, penalties, assessments, or additions to tax resulting from,
attributable to, or incurred in connection with any such Taxes or any contest or
dispute thereof. "Tax Return" means all returns, reports, statements, forms or
----------
other materials or information required to be filed with any Taxing authority.
SECTION 3.16. Compliance with Laws. Except as disclosed in Section 3.16
--------------------
of the Company Disclosure Schedule, and except for any matter that would not
reasonably be expected to have a Company Material Adverse Effect, neither the
Company nor any Company Subsidiary is in violation of any applicable provisions
of any laws, statutes, ordinances or regulations.
SECTION 3.17. Takeover Statutes. No "fair price," "moratorium" or
-----------------
"control share acquisition" or other similar anti-takeover statute or regulation
(each a "Takeover Statute") or any applicable anti-takeover provision in the
----------------
Company's Articles of Incorporation or bylaws is applicable to the Company, this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement.
SECTION 3.18. Finders' Fees. Except for Ernst & Young LLP ("Ernst &
------------- -------
Young"), there is no investment banker, broker, finder or other intermediary
-----
which has been retained by or is authorized to act on behalf of the Company who
would be entitled to any fee or commission upon consummation of the transactions
contemplated by this Agreement.
SECTION 3.19. Environmental Matters. Except as disclosed in Section 3.19
---------------------
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has (i) received any notice of noncompliance with, violation of, or
liability or potential liability under, any Environmental Law (as defined below)
since January 1, 1994; (ii) entered into or agreed to any consent decree or
order, and is not subject to any pending action, claim, judgment, decree,
injunction or judicial order under any Environmental Law or relating to the
cleanup of any hazardous materials or wastes
25
(including infectious and medical wastes); (iii) agreed to undertake, and has
not undertaken, any other material cleanup of hazardous materials or wastes
(including infectious and medical wastes) relating to properties currently or
formerly owned or leased by the Company or any of the Company Subsidiaries; (iv)
disposed or arranged for disposal of Hazardous Substances (as defined below) on
any third party property that has subjected or may subject the Company or any of
the Company Subsidiaries to material liability under any Environmental Law; or
(v) entered into any indemnity agreement or other contractual arrangement in
which it has agreed to assume the liabilities of any other party under any
Environmental Law. The Company and the Company Subsidiaries are in compliance
with (and, to the knowledge of the Company, have at all times been in compliance
with) all Environmental Laws in all material respects. There has been no
disposal, release, or threatened release of Hazardous Substances on, under, in,
or from properties currently or formerly owned or leased by the Company or any
of the Company Subsidiaries, or otherwise related to the operations of the
Company or any of the Company Subsidiaries that has subjected or may subject the
Company or any of the Company Subsidiaries to material liability under any
Environmental Law. No underground storage tanks, asbestos-containing material,
or polychlorinated biphenyls have ever been located on properties currently or
formerly owned or leased by the Company or any of the Company Subsidiaries, in
any such case, the presence of which has, or would reasonably be expected to
have, a Company Material Adverse Effect. The Company has delivered to Xxxxxx
copies of all environmental assessments, audits, studies, and other
environmental reports in its possession or in the possession of any of the
Company Subsidiaries relating to the Company, any of the Company Subsidiaries or
any of their current or former properties or operations.
For purposes of this Agreement, "Environmental Law" means any federal,
-----------------
state, local or foreign law, statute, ordinance, rule, regulation, or treaty;
all judicial, administrative, and regulatory orders, judgments, decrees,
permits, and authorizations; and common law relating to: (A) the protection,
investigation, remediation, or restoration of the environment or natural
resources, (B) the handling, use, storage, treatment, disposal, release or
threatened release of any Hazardous Substance, (C) noise, odor, pollution,
contamination, land use, any injury or threat of injury to persons or property
or (D) the protection of the health and safety of employees or the public.
For purposes of this Agreement, "Hazardous Substance" means any substance,
-------------------
material, or waste that is: (A) listed, classified or regulated in any
concentration pursuant to any Environmental Law; (B) any petroleum hydrocarbon,
asbestos-containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon; or (C) any other substance, material,
or waste which may be the subject of regulatory action by any governmental
entity pursuant to any Environmental Law.
SECTION 3.20. Insurance; Bonds. The Company has provided to Xxxxxx a
----------------
complete list accurately describing all insurance policies, other than insurance
policies purchased by subcontractors or other third parties under which the
Company or any of the Company Subsidiaries are additional named insureds, held
by or for the benefit of the Company or any of the Company Subsidiaries or
concerning their respective businesses and properties, including but not limited
to all casualty, errors and omissions insurance and officers' and directors'
liability insurance policies that cover the Company or any of the Company
Subsidiaries or their officers and directors and all material outstanding
bonds, letters of credit and other surety arrangements
26
issued or entered into in connection with the businesses, assets and liabilities
of the Company or any of the Company Subsidiaries. There are no pending material
claims against such insurance by the Company or any of the Company Subsidiaries
as to which the applicable insurers have denied coverage. In addition, there
exist no material claims under such insurance that have not been properly filed
by the Company or any of the Company Subsidiaries. During the past three (3)
years, neither the Company nor any Company Subsidiary has been refused any
insurance coverage by any insurer from which the Company or any Company
Subsidiary has sought coverage.
SECTION 3.21. Labor and Employment Matters. Except as set forth in
----------------------------
Section 3.21 of the Company Disclosure Schedule, there is no collective
bargaining agreement or other labor agreement to which the Company or any of the
Company Subsidiaries is a party or by which the Company or any of the Company
Subsidiaries is bound. Each of the Company and the Company Subsidiaries has
complied in all material respects with all applicable laws, rules and
regulations relating to the employment of the employees of the Company and the
Company Subsidiaries, including, without limitation, those related to wages,
hours, collective bargaining and the payment and withholding of taxes and other
sums as required by appropriate governmental authorities and have withheld and
paid to the appropriate governmental entities, or are holding for payment not
yet due to such authorities, all material amounts required to be withheld from
the employees of the Company or the Company Subsidiaries and are not liable for
any material arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing. There is no: (a) unfair labor practice
complaint against the Company or any of the Company Subsidiaries pending before
the National Labor Relations Board or any state or local agency; (b) pending
labor strike or other material labor trouble involving the Company or any
Company Subsidiary; (c) material labor grievance pending against the Company or
any Company Subsidiary; (d) pending representation question respecting the
employees of the Company or any Company Subsidiary; or (e) pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Company or any Company Subsidiary is a party or by which it is bound.
SECTION 3.22. Material Contracts. (a) Section 3.22 of the Company
------------------
Disclosure Schedule lists all of the following types of contracts or
arrangements to which the Company or any Company Subsidiary is a party or by
which any of their respective properties or assets are bound:
(i) all Client Contracts (as defined below) (A) which are "fixed-
price," "guaranteed maximum price" or similar contracts, (B) pursuant to
which the Company or any of the Company Subsidiaries has responsibility for
any construction activity and (C) with a total contract value in excess of
$5,000,000, including all such contracts involving a joint venture,
partnership or teaming arrangement of the Company or any of the Company
Subsidiaries with another party (collectively, the "Fixed-Price
-----------
Construction Contracts");
----------------------
27
(ii) any agreement, other than Client Contracts and purchase
orders or sub-contracts associated with Client Contracts, presently in
effect for the purchase of inventory, supplies, equipment or other personal
property, or the procurement of services, except individual purchase orders
or aggregate purchase orders to a single vendor involving payments of less
than $500,000;
(iii) any lease presently in effect or ownership of equipment,
machinery or other personal property involving aggregate annual payments in
excess of $500,000;
(iv) any agreement presently in effect relating to the purchase
or acquisition, by merger or otherwise, of a significant portion of its
business, assets or securities by any other Person, or of any other Person
by it, other than as contemplated herein;
(v) any agreement presently in effect containing a covenant or
covenants which purport to limit its ability or right to engage in any
lawful business activity material to it or to compete with any Person in a
business material to it;
(vi) any agreement presently in effect pursuant to which it has
appointed any Person to act as its sales agent or pursuant to which it has
been appointed a sales agent by any third party;
(vii) any agreement presently in effect with any of its officers
or directors and any material agreement presently in effect with any of its
employees or affiliates, not otherwise listed on Section 3.14(d) of the
Company Disclosure Schedule, including all non-competition and
indemnification agreements;
(viii) any agreement presently in effect for the license of any
patent, copyright, trade secret or other proprietary information agreements
involving the payment by or to the Company or any Company Subsidiary in
excess of $500,000 per year;
(ix) any agreement entered into outside the ordinary course of
business and presently in effect, involving payments to or obligations of
in excess of $500,000, not otherwise described in this Section 3.22, and
other than Client Contracts; and
(x) any loan agreement, agreement of indebtedness, note, security
agreement, guarantee or other document pursuant to or in connection with
the Company's or any of the Company Subsidiaries' receipt or extension of
credit in excess of $500,000 other than in connection with Client Contracts
(items listed in (i) through (x) are collectively referred to herein as the
"Contracts").
---------
(b) The Company has delivered or otherwise made available to Xxxxxx
and its representatives all Contracts, Client Contracts and all Bids (as defined
below) for Fixed-Price Construction Contracts (and all amendments, modifications
and supplements thereto and all side letters to which the Company or any Company
Subsidiary is a party affecting the obligations of any party thereunder).
28
(c) Except as set forth in Section 3.22(c) of the Company Disclosure
Schedule (and with respect to clauses (i), (ii), (iii), (iv) and (v) below,
except as otherwise would not reasonably be expected to have a Company Material
Adverse Effect):
(i) There is no default under any Contract or Client Contract
either by the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or any of the Company
Subsidiaries or, to the knowledge of the Company, any other party;
(ii) No party to any Contract or Client Contract has given notice
to the Company or any Company Subsidiary of or made a claim against the
Company or any Company Subsidiary with respect to any breach or default
thereunder;
(iii) To the knowledge of the Company, no party to any Contract
or Client Contract intends to cancel, withdraw, modify or amend any such
Contract or Client Contract;
(iv) With respect to each and every Client Contract or Bid, (a)
the Company has fully complied with all terms and conditions of such Client
Contract or Bid, including all clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (b)
the Company has fully complied with all requirements of any statute, rule,
regulation or order of any Governmental Authority or any agreement,
pertaining to such Client Contract or Bid, including the International
Trade in Arms Regulation; (c) all representations and certifications
executed, acknowledged or set forth in or pertaining to such Client
Contract or Bid were current, accurate and complete as of their effective
date, and the Company has fully complied with all such representations and
certifications, including, without limitation, all representations and
certifications required by or relating to the Truth-In-Negotiations-Act,
the Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost
Accounting Standards, the regulations and rules relating to Foreign
Military Sales and the regulations and rules relating to the submission of
progress payment requests; (d) no Governmental Authority nor any prime
contractor, subcontractor or other Person has notified the Company, either
orally or in writing, that the Company has breached or violated any
statute, rule, regulation, certification, representation, clause, provision
or requirement; (e) no termination for convenience, termination for
default, cure notice or show cause notice has been issued; (f) no cost
incurred by the Company has been questioned or disallowed; and (g) no money
due to the Company has been withheld or set off;
(v) There exist (a) no financing arrangements with respect to
performance of any Client Contract; (b) no outstanding claims or requests
for equitable or financial adjustments against the Company or any of the
Company Subsidiaries, either by any party to a Client Contract, any
Governmental Authority or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Client Contract or Bid;
(c) no facts that are known by the Company or any of the Company
Subsidiaries
29
upon which such a claim may be validly based in the future; (d) no disputes
between the Company or any of the Company Subsidiaries and any party to a
Client Contract, any Governmental Authority or any prime contractor,
subcontractor or vendor arising under or relating to any Client Contract or
Bid; and (e) no facts that are known by the Company or any of the Company
Subsidiaries over which such a dispute may validly arise in the future; and
(vi) There exists no uncompleted Client Contract as to which the
Company's estimated cost at completion (including material and labor costs,
other direct costs, overheads, engineering costs and manufacturing costs,
whether incurred or yet to be incurred) as of the Company Balance Sheet
Date exceeds by $500,000 the aggregate contract revenue recorded or to be
recorded under such Client Contract through completion (a "Loss Contract").
-------------
For purposes of this Agreement, "Client Contract" means any contract,
---------------
subcontract, teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order, change order, or
other enforceable commitment of any kind relating to the business of the Company
or any of the Company Subsidiaries pursuant to which the Company or any of the
Company Subsidiaries has derived, or is expected to derive, any revenue.
For purposes of this Agreement, "Government Contract" means (a) any Client
-------------------
Contract between the Company or any of the Company Subsidiaries and (i) any
Governmental Authority, (ii) any prime contractor to any Governmental Authority,
or (iii) any subcontractor with respect to any contract described in clause (i)
or (ii) and (b) any Client Contract which is wholly or partially funded by,
directly or indirectly, or through any Governmental Authority.
For purposes of this Agreement, "Bid" means any quotation, bid or proposal
---
by the Company or any of the Company Subsidiaries which, if accepted or awarded,
would lead to a Fixed-Price Construction Contract.
For purposes of this Agreement, "Governmental Authority" means any foreign,
----------------------
domestic, federal, territorial, state or local governmental authority, quasi-
governmental authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
SECTION 3.23. Related Party Transactions. Except as set forth in
--------------------------
Sections 3.22 or 3.23 of the Company Disclosure Schedule and except for
compensation and benefits payable in the ordinary course of business and except
for normal travel advances made in the ordinary course of business consistent
with past practice, no shareholder, director, officer, partner, employee,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of the Company Subsidiaries (a) since
January 1, 1996, has lent or borrowed any monies to or from or has outstanding
any indebtedness or other similar obligations to the Company or any of the
Company Subsidiaries (other than such Person's Flexi-Trust Debt), (b) to the
knowledge of the Company, owns any direct or indirect interest of any kind
(except
30
with respect to the ownership of not more than one percent (1%) of any class of
equity security in a publicly-held company) in, or is a director, officer,
employee, partner, affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any Person that is a competitor, supplier, customer, distributor,
lessor, tenant, creditor or debtor of the Company or any of the Company
Subsidiaries, (c) is otherwise a party to, or since January 1, 1996 has been a
party to, any contract, arrangement or understanding with the Company or any of
the Company Subsidiaries involving payments equal to or in excess of $60,000 per
year or (d) to the knowledge of the Company, owns or has any rights in any
assets, properties, licenses or rights which are used or leased (or, since
January 1, 1996, were used or leased) by the Company or any of the Company
Subsidiaries in the conduct of their respective businesses.
SECTION 3.24. Real Estate. (a) The Company has delivered or otherwise
-----------
made available to Xxxxxx and its representatives a complete and accurate list of
the following:
(i) all real property and interests in real property and the
buildings, structures and improvements thereon (the "Owned Property") which
--------------
the Company or any of the Company Subsidiaries owns;
(ii) all leases (the "Leases") of real property and interests in
------
real property and the buildings, structures and improvements thereon (the
"Leased Property" and together with the Owned Property, the "Facilities")
---------------- ----------
pursuant to which the Company or any of the Company Subsidiaries is the
lessee;
(iii) all contracts or options (and all amendments, extensions
and modifications thereto) held by the Company or any of the Company
Subsidiaries, or contractual obligations (and all amendments, extensions
and modifications thereto) on the part of either the Company or any of the
Company Subsidiaries, to purchase or acquire any interest in real property;
(iv) all contracts or options (and all amendments, extensions and
modifications thereto) granted by either the Company or any of the Company
Subsidiaries, or contractual obligations (and all amendments, extensions
and modifications thereto) on the part of either the Company or any of the
Company Subsidiaries, to sell or dispose of any interest in real property;
and
(v) all policies of title insurance issued to the Company or any
of the Company Subsidiaries with respect to the Facilities.
The Facilities are sufficient for the conduct of the Company's business as such
business is now being conducted. All Owned Properties have received all
required approvals of Governmental Authorities (including, without limitation,
permits and a certificate of occupancy or other similar certificate permitting
lawful occupancy of the Facilities) required in connection with the operation
thereof and are being operated and maintained in all material respects in
accordance
31
with applicable laws, rules and regulations. The improvements constructed on the
Facilities, including, without limitation, all leasehold improvements situated
in or on the Leased Property and owned by the Company, and all material fixtures
and equipment and other material tangible assets owned, leased or used by the
Company or any of the Company Subsidiaries at the Facilities are (i) subject to
no known material defects, (ii) in good operating condition and repair, subject
to ordinary wear and tear, and (iii) in conformity in all material respects with
all applicable laws, ordinances, orders, regulations and other requirements
relating thereto currently in effect.
(b) Except as set forth in Section 3.24 of the Company Disclosure
Schedule, (i) each Lease is in full force and effect, (ii) neither the Company
nor any of the Company Subsidiaries is in default in any material respect of
their respective obligations under any Lease, and (iii) the Company and the
Company Subsidiaries have no knowledge of any restriction or any asserted
restriction that does or could reasonably be expected to impair in any material
respect the use of the applicable Facility in the business of the Company or any
Company Subsidiary as now used.
(c) Except as set forth in Section 3.24 of the Company Disclosure
Schedule and except for matters that do not have, and would not reasonably be
expected to have, a Company Material Adverse Effect and except for matters
disclosed on any policies of title insurance issued to the Company or any of the
Company Subsidiaries with respect to the Owned Properties which have been made
available to Xxxxxx, none of the Owned Properties are subject to any liens,
mortgages, deeds of trust, claims against title, security interests, rights of
way, written agreements, reservations of an interest in title or other
encumbrances on title.
SECTION 3.25. Government Contracting. (a) Except as set forth in Section
----------------------
3.25 of the Company Disclosure Schedule: (i) neither the Company, any of the
Company Subsidiaries nor any of the Company's and the Company Subsidiaries'
directors, officers or employees, or to the knowledge of the Company, any of the
Company's and the Company Subsidiaries' agents or consultants, is (or for the
last five years has been) under administrative, civil or criminal investigation
(including as a result of a qui tam or similar action brought under the Civil
-------
False Claims Act or any similar state or local law, rule or regulation),
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission arising under or relating to any
Government Contract or Bid or is (or for the last five years has been) in
violation of any statutes or regulations relative to prohibited practices,
including but not limited to the False Claims Act, prohibitions against "Buying
In", the Anti-Kickback Act, the Federal Election Campaign Act, Truth-In-
Negotiations-Act, the Procurement Integrity Act, the Foreign Corrupt Practices
Act, International Trade in Arms Regulation, Cost Accounting Standards,
prohibitions against conflict of interest and anti-trust laws or any
governmental accounting regulations; (ii) neither the Company nor any of the
Company Subsidiaries have made a voluntary disclosure to any Governmental
Authority with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid that has led or
would reasonably be expected to lead, either before
32
or after the Closing Date, to any of the consequences set forth in (i) - (ii)
above or any other material damage, penalty assessment, recoupment of payment or
disallowance of cost.
(b) Except as set forth in Section 3.25 of the Company Disclosure
Schedule, neither the Company, any of the Company Subsidiaries nor any of the
Company's and the Company Subsidiaries' directors, officers or employees is (or
for the last five years has been) suspended or debarred from doing business with
any Governmental Authority or has been declared nonresponsible or ineligible for
U.S. Government contracting. The Company knows of no circumstances that would
warrant the institution of suspension or debarment proceedings or the finding of
nonresponsibility or ineligibility on the part of the Company or any of the
Company Subsidiaries in the future.
(c) Except to the extent prohibited by the Industrial Security Manual
For Safeguarding Classified Information, Section 3.25 of the Company Disclosure
Schedule sets forth all facility security clearances held by the Company or any
of the Company Subsidiaries. The Company and the Company Subsidiaries and each
of their respective officers, directors or employees are in compliance in all
material respects with all laws, rules, regulations and other requirements
relating to such facility security clearances or the safeguarding of classified
information, and none of the Company or any of the Company Subsidiaries know of
any facts or circumstances which would result in the revocation of such facility
security clearances. The Company and the Company Subsidiaries are in full
compliance with all Foreign Ownership and Control Interests ("FOCI") regulations
----
and have received all appropriate approvals within the last five years.
(d) Except as set forth in Section 3.25 of the Company Disclosure
Schedule, the Company's cost accounting and procurement systems with respect to
Government Contracts are in compliance in all material respects with all
applicable governmental regulations and rules.
SECTION 3.26. Foreign Corrupt Practices. Neither the Company, the Company
-------------------------
Subsidiaries nor any director, officer or employee of the Company or any Company
Subsidiary, nor, to the knowledge of the Company, any other Person acting on
behalf of the Company or any of the Company Subsidiaries, has, directly or
indirectly, within the past four years (a) given or agreed to give any gift or
similar benefit to any customer, supplier, governmental official or employee,
representative of a political party, or other person who is or may be in a
position to help or hinder the Company or any Company Subsidiary (or assist the
Company or any Company Subsidiary in connection with any actual or proposed
transaction) which (i) is in violation of applicable federal, state, local or
foreign law, (ii) for any of the purposes described in Section 162(c) of the
Foreign Corrupt Practices Act, or (iii) for establishment or maintenance of any
concealed fund or concealed bank account, or (b) acted in a manner which would
be unlawful under any applicable United States or foreign laws pertaining to the
export or import of technical data, restrictive trade practices or boycotts or
the regulations under any of such statutes or laws.
SECTION 3.27. Year 2000. Except as set forth in Section 3.27 of the
---------
Company Disclosure Schedule, all of the material computer software, computer
firmware, computer
33
hardware (whether general or special purpose), and other similar or related
items of automated, computerized, and/or software system(s) that are used or
relied on in any material respect by the Company or any of the Company
Subsidiaries in the conduct of their respective businesses will not malfunction
in any material respect, will not cease to function in any material respect,
will not generate incorrect data in any material respect, and will not produce
incorrect results in any material respect when processing, providing, and/or
receiving (i) date-related data into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries, in any such case, assuming that all
computer software, computer firmware, computer hardware (whether general or
special purpose) and other similar or related items of automated, computerized
and/or software system(s) that are used by any other Person (including Xxxxxx
and/or its affiliates) after the Effective Time in combination with the
foregoing property of the Company, properly exchange date/time data with such
Company property (collectively, "Year 2000 Compliance"). Neither the Company nor
--------------------
any of the Company Subsidiaries have (i) received any communications asserting
any claim with respect to the Company's or any of the Company Subsidiaries' Year
2000 Compliance and (ii) made any certifications relating to Year 2000
Compliance.
SECTION 3.28. Intellectual Property. The Company and the Company
---------------------
Subsidiaries own, or are validly licensed or otherwise have the right to use all
(i) foreign and United States federal and state patents, trademarks, trade
names, service marks and copyright registrations, (ii) foreign and United States
federal and state patent, trademark, trade name, service xxxx and copyright
applications for registration, (iii) common law claims to trademarks, service
marks and trade names, (iv) claims of copyright which exist although no
registrations have been issued with respect thereto, (v) fictitious business
name filings with any state or local Governmental Authority and (vi) inventions,
concepts, designs, improvements, original works of authorship, computer
programs, know-how, research and development, techniques, modifications to
existing copyrightable works of authorship, data and other proprietary and
intellectual property rights (whether or not patentable or subject to copyright
or trade secret protection), in each case which are material to the conduct of
the business of the Company and the Company Subsidiaries, taken as a whole
(collectively, the "Intellectual Property Rights"). There are no Liens on the
----------------------------
Intellectual Property Rights. There are no outstanding and, to the Company's
knowledge, no threatened material disputes or disagreements with the Company or
any of the Company Subsidiaries with respect to any Intellectual Property
Rights.
SECTION 3.29. Title to Assets. Except as set forth in Section 3.29 of the
---------------
Company Disclosure Schedule and except where the failure to have a good, valid
and indefeasible title would not reasonably be expected to have a Company
Material Adverse Effect, each of the Company and the Company Subsidiaries has
good, valid and indefeasible title to all of the tangible assets purported to be
owned by it, whether real, personal or mixed. All tangible property owned by the
Company or any of the Company Subsidiaries is free and clear of restrictions
on or conditions to transfer or assignment, and free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, claims, easements, rights of
way, covenants, conditions or restrictions, except for those disclosed in the
Company Financial Statements, except for matters disclosed on any policies of
title insurance issued to the Company or any of
34
the Company Subsidiaries with respect to any Facilities and made available to
Xxxxxx and except for those not reasonably expected to have a Company Material
Adverse Effect.
SECTION 3.30. Accuracy and Completeness of Securityholders' Schedules.
-------------------------------------------------------
The schedules provided or to be provided by the Company to Xxxxxx, the Payment
Agent or the Escrow Agent pursuant to Article I shall accurately and completely
reflect the corresponding information set forth in the books and records of the
Company and the Flexi-Trust, respectively.
SECTION 3.31. No Other Representations. Neither the Company nor any
------------------------
Person affiliated therewith shall be deemed to have made to Xxxxxx or any other
Person any representation or warranty other than as expressly made by the
Company in this Article 3. Neither the Company nor any Person affiliated
therewith makes any representation or warranty regarding any projections,
estimates, budgets or forward-looking information heretofore delivered to or
made available to Xxxxxx or any other Person regarding future revenues, expenses
or expenditures, future results of operation or, except as expressly covered by
a representation and warranty contained in Article 3 hereof, any other
information or documents made available to Xxxxxx or any other Person with
respect to the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF XXXXXX
Xxxxxx represents and warrants to the Company that, except as otherwise
disclosed on a disclosure schedule delivered on or prior to the date hereof to
the Company by Xxxxxx (the "Xxxxxx Disclosure Schedule") or any Xxxxxx SEC
--------------------------
Reports (as defined herein):
SECTION 4.1. Corporate Existence and Power. Xxxxxx is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Missouri
and each of Xxxxxx and Merger Subsidiary has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted other than any such licenses, authorizations,
permits, registrations, consents and approvals the failure of which to have
would not reasonably be expected to have a Xxxxxx Material Adverse Effect (as
defined below). Each of Xxxxxx and Merger Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not reasonably be expected to have a
Xxxxxx Material Adverse Effect. Xxxxxx has heretofore delivered to the Company
true and complete copies of the certificate or articles of incorporation and
bylaws as currently in effect for each of Xxxxxx and Merger Subsidiary. For
purposes of this Agreement, a "Xxxxxx Material Adverse Effect" means a material
------------------------------
adverse effect on the assets, liabilities, business or operations of Xxxxxx
and/or any of the Xxxxxx Subsidiaries (as defined below) taken as a whole, or on
the ability of Xxxxxx to
35
perform its obligations hereunder. The Xxxxxx Disclosure Schedule contains a
true and complete list of all of Xxxxxx' subsidiaries (the "Xxxxxx
------
Subsidiaries").
------------
SECTION 4.2. Corporate Authorization. The execution, delivery and
-----------------------
performance by Xxxxxx and Merger Subsidiary of this Agreement and the
consummation by Xxxxxx and Merger Subsidiary of the transactions contemplated
hereby are within Xxxxxx' and Merger Subsidiary's corporate powers subject to
the conditions set forth in this Agreement, and have been duly authorized by the
Boards of Directors of Xxxxxx and Merger Subsidiary, and by Xxxxxx as the sole
shareholder of Merger Subsidiary, and no other corporate proceedings on the part
of Xxxxxx or Merger Subsidiary are necessary to authorize this Agreement, the
Merger, and the transactions contemplated hereby. This Agreement constitutes a
valid and binding agreement of Xxxxxx and Merger Subsidiary, enforceable against
Xxxxxx and Merger Subsidiary in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditors rights and by the
availability of equitable remedies.
SECTION 4.3. Governmental Authorization. The execution, delivery and
--------------------------
performance by Xxxxxx and Merger Subsidiary of this Agreement and the
consummation of the transactions contemplated hereby and the Merger by Xxxxxx
and Merger Subsidiary require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of a
certificate of merger in accordance with the GBCL; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any applicable
requirements of the Exchange Act and the Securities Act, (d) compliance with any
applicable foreign or state securities or Blue Sky laws; (e) compliance with
state takeover, antitrust and competition law filings and approvals; and (f)
such actions by or filings with governmental bodies, agencies, officials or
authorities, the failure of which to obtain or make would not reasonably be
expected to: (1) have, individually or in the aggregate, a Xxxxxx Material
Adverse Effect; (2) impair the ability of Xxxxxx and Merger Subsidiary to
perform their obligations under this Agreement; or (3) prevent the consummation
of the transactions contemplated by this Agreement.
SECTION 4.4. Non-Contravention. The execution, delivery and performance
-----------------
by Xxxxxx and/or Merger Subsidiary of this Agreement and the consummation by
Xxxxxx and Merger Subsidiary of the transactions contemplated hereby do not and
will not (except in the case of clauses (b), (c) and (d) of this Section 4.4,
for any such matters that have not had, and would not reasonably be expected to
have, a Xxxxxx Material Adverse Effect): (a) contravene or conflict with the
articles or certificate of incorporation or bylaws of Xxxxxx, Merger Subsidiary
or the Xxxxxx Subsidiaries, (b) assuming compliance with the matters referred to
in Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or instrument
binding upon or applicable to Xxxxxx, the Xxxxxx Subsidiaries and/or Merger
Subsidiary or any of their respective assets, (c) result in a violation or
breach of, or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Xxxxxx
and/or Merger Subsidiary or to a loss of any benefit to which Xxxxxx and/or
Merger Subsidiary is entitled under any provision of any agreement, contract or
other decree binding upon Xxxxxx and/or Merger Subsidiary or to which
36
Xxxxxx and/or Merger Subsidiary is a party or by which it is affected or any
license, franchise, permit or other similar authorization held by Xxxxxx and/or
Merger Subsidiary or to which Xxxxxx and/or Merger Subsidiary is a party or by
which it is affected or (d) result in the creation or imposition of any Lien on
any asset of Xxxxxx and/or Merger Subsidiary.
SECTION 4.5. Xxxxxx SEC Reports and Financial Statements. Xxxxxx has
-------------------------------------------
delivered to the Company true and complete copies of each registration
statement, report and proxy or information statement, including, without
limitation, its Annual Reports to Shareholders incorporated in material part by
reference in certain of such reports, in the form (including exhibits and any
amendments thereto) required to be filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1996 (collectively, the "Xxxxxx SEC
--- ----------
Reports"). Except as set forth in the Xxxxxx Disclosure Schedule, as of the
-------
respective dates such Xxxxxx SEC Reports were filed or, if any such Xxxxxx SEC
Reports were amended, as of the date such amendment was filed, each of the
Xxxxxx SEC Reports (i) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder, 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 in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
audited consolidated financial statements and unaudited consolidated interim
financial statements of Xxxxxx (including any related notes and schedules)
included (or incorporated by reference) in its Annual Reports on Form 10-K for
each of the three fiscal years ended September 30, 1996, 1997 and 1998, when
filed, and Quarterly Reports on Form 10-Q for all interim periods subsequent
thereto (the "Xxxxxx Financial Statements") fairly present, in conformity with
---------------------------
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Xxxxxx and the Xxxxxx
Subsidiaries as of its date and the consolidated results of operations and cash
flows for the period then ended (subject to normal year-end adjustments in the
case of any unaudited interim financial statements). There has been no change
in Xxxxxx' accounting policies or methods of making accounting estimates or
changes in estimates that are material to the Xxxxxx Financial Statements,
except as described in the notes thereto. For purposes of this Agreement,
"Xxxxxx Balance Sheet" means Xxxxxx' balance sheet dated as of September 30,
---------------------
1998 and "Xxxxxx Balance Sheet Date" means September 30, 1998.
-------------------------
SECTION 4.6. Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the Xxxxxx
Financial Statements (or reflected in the notes thereto) or which were incurred
after the Xxxxxx Balance Sheet Date in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, Xxxxxx and the Xxxxxx Subsidiaries do not have
any material liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto).
SECTION 4.7. Information Supplied. None of the information supplied or
--------------------
to be supplied by Xxxxxx, the Xxxxxx Subsidiaries, or on their behalf by their
auditors, attorneys, financial advisors, other consultants or advisors for
inclusion in the Proxy Statement, will at the time of any meeting of
shareholders of the Company to vote upon this Agreement and the
37
transactions contemplated hereby 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 light of the circumstances in which they are
made, not misleading or necessary to correct any statement in any earlier
communication (including the Proxy Statement) to shareholders of the Company
with respect to the transactions contemplated by this Agreement. The Proxy
Statement as it relates to Xxxxxx and the Xxxxxx Subsidiaries will comply as to
form in all material respects with the provisions of all applicable laws
including the provisions of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder, except that no representation is
made by Xxxxxx with respect to information supplied by or on behalf of the
Company specifically for inclusion therein.
SECTION 4.8. Absence of Certain Changes. Since the Xxxxxx Balance Sheet
--------------------------
Date, Xxxxxx and the Xxxxxx Subsidiaries have conducted their business in the
ordinary course consistent with past practices and there has not been any Xxxxxx
Material Adverse Effect.
SECTION 4.9. Financing. Xxxxxx has and until the Effective Time will
---------
continuously have sufficient funds or binding commitments therefor, subject to
no material conditions other than those contained herein, in amounts sufficient
to fund all amounts payable hereunder.
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.1. Confidentiality. The Company hereby acknowledges that all
---------------
non-public documents and information concerning Xxxxxx furnished to the Company
in connection with the transactions contemplated by this Agreement are subject
to the terms and conditions of a confidentiality letter dated July 22, 1998, by
and between the Company and Xxxxxx, as amended from time to time (the
"Confidentiality Letter"). The Confidentiality Letter is incorporated herein by
-----------------------
this reference. Effective upon Closing, and only upon Closing, the
Confidentiality Letter shall terminate.
SECTION 5.2. Conduct of the Company. During the period from the date of
----------------------
this Agreement and continuing until the Effective Time, the Company agrees
(except as expressly contemplated or permitted by this Agreement, or to the
extent that Xxxxxx shall otherwise consent in writing, which consent shall not
be unreasonably withheld) as follows:
(a) The Company and the Company Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practice
(provided, however, that neither the Company nor any of the Company Subsidiaries
shall enter into any Fixed-Price Construction Contract or any other contract,
agreement, arrangement or understanding that would involve amounts in excess of
$10,000,000) and use their reasonable best efforts to preserve intact their
present business organizations, keep available the services of their present
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing business shall not be impaired in any material respect at
the Effective Time.
38
(b) The Company shall not, nor shall it permit any of the Company
Subsidiaries to, nor shall it propose to, (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock, except that it
may continue the declaration and payment of regular quarterly cash dividends,
with usual record and payment dates for such dividends in accordance with the
Company's past dividend practice, (ii) split, combine or reclassify its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) except as required by the Company's Shareholder Agreement, repurchase,
redeem or otherwise acquire, any shares of capital stock of the Company or any
of the Company Subsidiaries. It is understood that the foregoing shall not
prevent the Company from taking any action required by the terms of the Company
Options.
(c) The Company shall not, nor shall it permit any of the Company
Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into, or any rights (including preemptive rights),
warrants, calls, subscriptions or options to acquire, any such shares or
convertible securities, other than (i) the issuance of shares of Company Common
Stock upon the exercise of Company Options outstanding on the date hereof and
(ii) issuance by a Company Subsidiary of its capital stock to its parent.
(d) Neither the Company nor any of the Company Subsidiaries shall
amend or propose to amend their respective Articles of Incorporation or bylaws
except as may be necessary to accomplish the Merger and other transactions
contemplated by this Agreement on the terms and conditions hereof.
(e) The Company shall provide Xxxxxx, within 5 business days, copies
of all filings made by the Company with any Governmental Authority in connection
with this Agreement and the transactions contemplated hereby, other than the
portions of such filings that include confidential information not directly
related to the transactions contemplated by this Agreement.
(f) The Company shall not (i) enter into, adopt, amend in any material
respect (except as may be required by law) or terminate any Company Benefit Plan
or other employee benefit plan or any agreement, arrangement, plan or policy
between the Company and one or more of its directors or officers, or (ii) except
as may be required for the Company to satisfy its obligations pursuant to the
Company Bonus Plan and except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a greater than 5% increase in benefits or compensation expense to the Company or
any of the Company Subsidiaries, increase by more than 5% in the aggregate the
compensation or fringe benefits of the directors and officers of the Company and
the Company Subsidiaries or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options, restricted stock, or similar stock-based awards)
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing, except as otherwise provided herein.
39
(g) Each of the Company and the Company Subsidiaries shall use its
reasonable best efforts to materially comply with all laws, rules and
regulations and comply with all material contractual and other material
obligations applicable to such Company or the Company Subsidiaries.
(h) Neither the Company nor any of the Company Subsidiaries shall
incur any indebtedness for borrowed money, not issue any bond, debenture or
promissory note and, except for trade payables and any other liabilities or
obligations incurred in the ordinary course of business (consistent with past
practice), not create, incur, acquire, assume, guarantee or become subject to,
or agree to incur or become subject to, any other obligation or liability
(contingent or otherwise) in excess of $500,000.
(i) Each of the Company and the Company Subsidiaries shall be
obligated to not subject any of its respective assets (whether tangible or
intangible) to any Lien (except for leases that do not materially impair the use
of the property subject thereto).
(j) Each of the Company and the Company Subsidiaries shall be
obligated to not acquire any material properties or assets in excess of $500,000
and not sell, assign, transfer, convey, lease or otherwise dispose of any of its
material properties or assets in excess of $500,000 (except for fair
consideration in the ordinary course of business consistent with past practice).
(k) Each of the Company and the Company Subsidiaries shall be
obligated to not cancel or compromise any material debt or material claim or
waive or release any material right of the Company or any of the Company
Subsidiaries except in the ordinary course of business consistent with past
practice;
(l) Each of the Company and the Company Subsidiaries shall be
obligated to not enter into any commitment for capital expenditures of the
Company in excess of $100,000 for any individual commitment and $250,000 for all
commitments in the aggregate except as set forth on Section 5.2 of the Company
Disclosure Schedule.
(m) Each of the Company and the Company Subsidiaries shall not agree
to take any action which would be prohibited by this Section 5.2.
SECTION 5.3. Advice of Changes. The Company shall confer on a regular and
-----------------
frequent basis with Xxxxxx, report on operational matters and promptly advise
Xxxxxx orally and in writing of any change or event having, or which, insofar as
reasonably can be foreseen, would have, a Company Material Adverse Effect.
SECTION 5.4. Merger Approval; Proxy Materials. (a) Subject to Section
--------------------------------
5.4(c), the directors of the Company shall recommend approval of this Agreement,
the Merger, and the transactions contemplated hereby ("Merger Approval") by the
---------------
Company's shareholders and the Company shall cause a meeting of its shareholders
(the "Company Shareholder Meeting") to be duly called and held as soon as
---------------------------
40
reasonably practicable, but in any event no later than 30 days after the date of
this Agreement, for the purpose of voting on the Merger Approval.
(b) Subject to Section 5.5, in connection with the Company Shareholder
Meeting, the Company (i) as soon as reasonably practicable, will participate in
the preparation of and thereafter mail to its shareholders, the Proxy Statement
and all other proxy materials for such meeting, and (ii) will use its best
efforts to obtain the requisite vote of shareholders in favor of the Merger
Approval.
SECTION 5.5. Acquisition Proposals. (a) The Company agrees that it has had
---------------------
sufficient opportunity, and has taken advantage of such opportunity, to solicit
other competing Acquisition Proposals (as defined below). In view of the
foregoing, the Company agrees that neither it nor any of the Company
Subsidiaries shall authorize or permit any of its officers, directors,
employees, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of the Company
Subsidiaries) to directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal, tender offer or exchange offer to
the Company's shareholders) for the acquisition of the Company or any of the
Company Subsidiaries (whether by way of merger, consolidation, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
capital stock or assets by any Person other than Xxxxxx and Merger Subsidiary
(any such proposal or offer being hereinafter referred to as an "Acquisition
-----------
Proposal") or engage in any negotiations concerning or provide any confidential
--------
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Company shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties (other than Xxxxxx) conducted heretofore with respect to any of the
foregoing. The Company will take the necessary steps to inform promptly the
appropriate individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.5. The Company also agrees that it
promptly shall request each other Person (other than Xxxxxx) that has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any of the Company Subsidiaries to return all
confidential information heretofore furnished to such Person by or on behalf of
the Company or any of the Company Subsidiaries and enforce any such
confidentiality agreements.
(b) The Company shall notify Xxxxxx immediately of any communications
received by, or any request for information from, the Company relating to a
possible Acquisition Proposal, and the Company shall promptly (and in no event
more than two days) thereafter provide to Xxxxxx in writing the details of, and
copies of any written material reflecting, any such communication or request.
In the event that the Company receives a bona fide Acquisition Proposal that is,
in the reasonable good faith judgment of the Board of Directors of the Company,
after consultation with the Company's financial advisors, financially more
favorable to the Company's shareholders than the terms of the Merger (a
"Competing Proposal"), then, notwithstanding Section 5.5(a), the Company may
-------------------
provide information to and negotiate with the
41
party making the Competing Proposal, communicate the Competing Proposal to the
Company's shareholders and make a recommendation in favor of the Competing
Proposal if the Board of Directors of the Company determines in good faith,
after consultation with outside legal counsel, that such action or actions are
required by reason of the fiduciary duties of the members of the Board of
Directors of the Company to the Company's shareholders under applicable law;
provided, however, that the Company shall not enter into any written agreement
relating to a Competing Proposal without first terminating this Agreement
pursuant to Section 9.1 and paying to Xxxxxx the amounts required under Section
9.3. Until such termination of this Agreement, the Company shall advise Xxxxxx
on a daily basis of all discussions and negotiations relating to a Competing
Proposal and, promptly upon the Company's (or its representative's) receipt or
delivery of any draft or definitive agreement relating to a Competing Proposal,
the Company shall deliver a copy thereof to Xxxxxx. Nothing in this Section
5.5(b) shall limit Xxxxxx' right or ability to seek equitable or injunctive
relief in enforcing this Agreement.
(c) Nothing contained in this Agreement shall prohibit the Company
from making any disclosure to the Company's shareholders if, in the opinion of
the Board of Directors of the Company, after consultation with outside legal
counsel, failure so to disclose would be inconsistent with its fiduciary duties
to the Company's shareholders.
SECTION 5.6. Access to Information. From the date hereof until the
---------------------
Effective Time, the Company will provide Xxxxxx, its counsel, financial
advisors, auditors and other authorized representatives reasonable supervised
access during normal business hours to the offices, properties, books and
records of the Company and each of the Company Subsidiaries and will furnish to
Xxxxxx, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's and each of the
Company Subsidiaries' employees, counsel and financial advisors to cooperate
with Xxxxxx in its investigation of the business of the Company and each of the
Company Subsidiaries. From the date hereof until the Effective Time, the Company
will allow Xxxxxx, its counsel, financial advisors, auditors and other
authorized representatives to make extracts and copies of the books and records
of the Company and each of the Company Subsidiaries during normal business
hours. The Company shall use its commercial best efforts to cause the Company's
officers, employees, consultants, agents, accountants, attorneys and other
representatives to cooperate in all reasonable respects with Xxxxxx' counsel,
financial advisors, auditors and other authorized representatives in connection
with such review and examination.
SECTION 5.7. Notices of Certain Events. The Company shall promptly notify
-------------------------
Xxxxxx of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
42
(b) any notice or other communication from or to any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 3.12 or which relate to the consummation of the transactions
contemplated by this Agreement;
(d) any notice of, or other communication relating to, a default,
received by it subsequent to the date of this Agreement and prior to the Closing
Date, under any contract material to the financial condition, properties,
businesses or results of operations of the Company to which it is a party or is
subject; and
(e) any material adverse change in the financial condition,
properties, businesses, prospects or results of operations of the Company, other
than changes resulting from general economic conditions.
SECTION 5.8. HSR Act Filing. The Company has filed, or shall file
--------------
promptly after the execution and delivery of this Agreement, with the Federal
Trade Commission ("FTC") and the Department of Justice ("DOJ") any applicable
--- ---
notification and report or similar required form and shall file any supplemental
information which may be requested in connection therewith pursuant to the HSR
Act, which report and notification form and supplemental information has
complied or will comply in all material respects with the requirements of the
HSR Act.
SECTION 5.9. Return of Information. In the event that this Agreement
---------------------
is terminated for any reason, the Company and the Company Subsidiaries shall,
and shall cause their respective officers, directors, employees, counsel,
financial advisors, auditors and other representatives to, return all
confidential information heretofore furnished to any such Persons by or on
behalf of Xxxxxx and to otherwise enforce the terms of the Confidentiality
Letter.
ARTICLE 6
COVENANTS OF XXXXXX
SECTION 6.1. Confidentiality. Xxxxxx hereby acknowledges that all non-
---------------
public documents and information concerning the Company and the Company
Subsidiaries furnished to Xxxxxx or any of its advisors in connection with the
transactions contemplated by this Agreement are subject to the terms and
conditions of the Confidentiality Letter. Effective upon Closing, and only upon
Closing, the Confidentiality Letter shall terminate.
SECTION 6.2. Conduct of Xxxxxx. During the period from the date of this
-----------------
Agreement and continuing until the Effective Time, Xxxxxx agrees (except as
expressly contemplated or permitted by this Agreement, or to the extent that
Xxxxxx shall otherwise consent in writing) as follows:
43
(a) Ordinary Course. Xxxxxx and the Xxxxxx Subsidiaries shall carry on
---------------
their respective businesses in the ordinary course and use all reasonable
efforts to preserve intact their present business organizations, keep available
the services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them to the end that their goodwill and ongoing business shall not be impaired
in any material respect at the Effective Time.
(b) Governing Documents. Xxxxxx shall not amend or propose to amend
-------------------
its Certificate of Incorporation or bylaws except as may be necessary to
accomplish the Merger and other transactions contemplated by this Agreement on
the terms and conditions hereof.
(c) Filings. Xxxxxx shall promptly provide the Company copies of all
-------
filings made by such party with any Federal, state or foreign governmental
entity in connection with this Agreement and the transactions contemplated
hereby, other than the portions of such filings that include confidential
information not directly related to the transactions contemplated by this
Agreement.
SECTION 6.3. Access to Information. From the date hereof until the
---------------------
Effective Time, Xxxxxx will provide the Company, its counsel, financial
advisors, auditors and other authorized representatives reasonable supervised
access during normal business hours to the offices, properties, books and
records of Xxxxxx and each of the Xxxxxx Subsidiaries and will furnish to the
Company, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct Xxxxxx' and each of the Xxxxxx
Subsidiaries employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of Xxxxxx and each of the Xxxxxx
Subsidiaries.
SECTION 6.4. Obligations of Merger Subsidiary. Xxxxxx will take all
--------------------------------
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 6.5. Notices of Certain Events. Xxxxxx shall promptly notify
-------------------------
the Company of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Xxxxxx which relate to the consummation of the
transaction contemplated by this Agreement.
44
SECTION 6.6. Employee Benefits. Xxxxxx shall (or shall cause Surviving
-----------------
Corporation to) provide the eligible employees of Surviving Corporation and its
subsidiaries with employment benefits, including but not limited to, health
benefits, dental benefits, life insurance and disability benefits, medical
reimbursement benefits, 401(k) plan benefits, pension, retirement, deferred
compensation and similar benefits, vacation benefits, dependent care benefits,
severance benefits and the like that are generally as favorable in the aggregate
as the benefits provided to the eligible employees of Xxxxxx and the Xxxxxx
Subsidiaries. Xxxxxx shall (or shall cause Surviving Corporation to) pay any
severance, change of control or similar payments contemplated herein to
employees and directors of the Company, if any, who are entitled thereto
pursuant to agreements or plans of the Company existing as of the date hereof
and disclosed to Xxxxxx in Section 3.22 of the Company Disclosure Schedule.
SECTION 6.7. Indemnification. (a) The Surviving Corporation shall honor,
---------------
and Xxxxxx shall cause and take such steps (including, but not limited to, the
provision of funds) as are necessary to allow the Surviving Corporation and the
Company Subsidiaries to honor, any obligation of the Company and the Company
Subsidiaries prior to the Effective Time to indemnify and hold harmless the
present and former officers and directors of the Company and of the Company
Subsidiaries (the "Indemnitees") to the full extent required or allowed by the
-----------
Company's and the Company Subsidiaries' Articles of Incorporation and bylaws, or
any indemnification agreement to which the Company and the Company Subsidiaries
and any Indemnitee are parties and which are described on Section 3.22 of the
Company Disclosure Schedule.
(b) The Surviving Corporation shall, and Xxxxxx shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation and the Company Subsidiaries to,
indemnify and hold harmless any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
including without limitation derivative actions, against expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement to the full extent allowed by law.
(c) The Surviving Corporation shall, and Xxxxxx shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation and the Company Subsidiaries to,
pay expenses as incurred by an Indemnitee in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
Indemnity to repay such amount if it shall finally be judicially determined that
such Indemnitee was not entitled to indemnification as provided in this Section
6.7.
(d) The Surviving Corporation shall, and Xxxxxx shall cause and take
such steps (including, but not limited to, the provision of funds) as are
necessary to allow the Surviving Corporation to, reimburse all expenses,
including reasonable attorneys' fees, incurred
45
by any person required to enforce the indemnity and other obligations of the
Surviving Corporation and Xxxxxx under this Section 6.7.
(e) For three years after the Effective Time, Xxxxxx will cause and
will take such steps (including, but not limited to, the provision of funds) as
are necessary to allow the Surviving Corporation to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such Indemnitee on terms with respect to
coverage and amounts at least as favorable as the coverage and amounts currently
provided by the Company's policy.
(f) The rights under this Section 6.7 shall be in addition to any
other rights under the GBCL or otherwise. This Section 6.7 shall survive the
consummation of the Merger.
SECTION 6.8. HSR Act Filing. Xxxxxx has filed, or shall file promptly
--------------
after the execution and delivery of this Agreement, with the FTC and DOJ any
applicable notification and report or similar required form, has paid or shall
pay any required filing fee in connection therewith (as its sole and separate
expense) and shall file any supplemental information which may be requested in
connection therewith pursuant to the HSR Act, which report and notification form
and supplemental information has complied or will comply in all material
respects with the requirements of the HSR Act.
SECTION 6.9. Return of Information. In the event that this Agreement is
---------------------
terminated for any reason, Jacobs shall, and shall cause its officers,
directors, employees, counsel, financial advisors, auditors and other
representatives to, return all confidential information heretofore furnished to
any such Persons by or on behalf of the Company and any of the Company
Subsidiaries and to otherwise enforce the terms of the Confidentiality Letter.
ARTICLE 7
COVENANTS OF JACOBS AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. Reasonable Best Efforts. Subject to the terms and conditions
-----------------------
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
SECTION 7.2. Certain Filings. The Company and Jacobs shall cooperate with
---------------
each other (a) in connection with the preparation of the Proxy Statement, (b) in
determining whether any action by or in respect of, or filing with, any,
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (c) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or
46
with the Proxy Statement and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 7.3. Proxy Statement. The Company shall provide Jacobs a copy
---------------
of the Proxy Statement at least 2 days prior to the mailing of such Proxy
Statement to the Company's shareholders. The Company agrees to consider in good
faith incorporating Jacobs' comments to the Proxy Statement prior to the mailing
of such Proxy Statement to the Company's shareholders. Each of Jacobs, Merger
Subsidiary and the Company agrees to provide promptly to the other such
information concerning its business and financial statements and affairs as may
be reasonably required or appropriate for inclusion in the Proxy Statement or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the same.
If, at any time prior to the Effective Time, any event with respect to the
Company, its officers and directors or any of the Company Subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the Proxy Statement, as applicable, the Company shall promptly so advise Jacobs
and Merger Subsidiary and such event shall be so described, and such amendment
or supplement (which Jacobs and Merger Subsidiary shall have a reasonable
opportunity to review) shall, if required by law, be promptly disseminated to
the shareholders of the Company.
SECTION 7.4. Publicity. On or prior to the Closing Date, Jacobs, Merger
---------
Subsidiary and the Company will consult with each other and will mutually agree
upon any press release or public announcement pertaining to this Agreement and
the transactions contemplated thereby and shall not issue any such press release
or make any such public announcement prior to such consultation and agreement,
except that either party and its affiliates may issue any such release or make
any such public announcement as it determines, in its reasonable discretion, is
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case such party shall, and shall
cause its affiliates to, use reasonable efforts to consult in good faith with
the other party before issuing any such press release or making any such public
announcement.
SECTION 7.5. Further Assurances. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
47
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The obligations
-------------------------------------------
of the Company, Xxxxxx and Merger Subsidiary to consummate the Merger are
subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:
(a) The shareholders of the Company shall have duly approved and
adopted this Agreement, the Merger, and the other transactions contemplated
hereby to the extent required by applicable requirements of law and the Articles
of Incorporation and bylaws of the Company.
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or terminated;
(c) the transactions contemplated by this Agreement shall have been
approved by any federal, state, foreign or local governmental or regulatory
authority or self-regulatory body the approval of which is required to permit
the consummation thereof;
(d) no court, arbitrator or governmental body, agency or official
shall have issued any order or injunction and there shall not be any statute,
rule or regulation, restraining or prohibiting the consummation of the Merger;
provided that prior to invoking this condition, each party shall use all
commercially reasonable efforts to have any such order, injunction, legal
restraint or prohibition vacated;
(e) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of the
Merger, shall have been obtained.
SECTION 8.2. Conditions to Obligations of Jacobs. The obligation of
-----------------------------------
Jacobs to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver at or prior to the Closing of the
following additional conditions; provided, however, that for purposes of this
Section 8.2, the term "Company Material Adverse Effect" shall be modified to
mean only a $4,000,000 aggregate threshold:
(a) The representations and warranties of the Company set forth in
Article 3 shall also be true and correct as of the Closing (except to the extent
that any change therein is as a result of the transactions contemplated hereby)
with the same effect as though made on the date of the Closing, except where any
breach of the representations and warranties of the Company set forth in Article
3 would not have, or would not be reasonably be expected to have a Company
Material Adverse Effect.
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time.
48
(c) The Company shall have given all notices to, and obtained all
consents, approvals or authorizations of or from, any Person which may be
necessary to permit the consummation of the transactions contemplated hereby
(including, without limitation, any consents required under contracts and
agreements to which the Company or any of the Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries or any of their assets
may be bound, or which may be required to permit the change of ownership of the
Company); provided, however, that the condition specified in this Section 8.2(c)
shall not include any required novations under any Government Contract or any
notice, consent, approval or authorization which if not obtained by the Company,
would not have a Company Material Adverse Effect.
(d) Employment agreements, substantially in the form of Exhibit
-------
8.2(d)(1) hereto, or a non-competition agreement containing the same covenant
--------
not to compete as is contained in the employment agreement, in form reasonably
acceptable to the Company and Jacobs, as the case may be, shall have been duly
executed and delivered by each of the individuals listed on Exhibit 8.2(d)(2)
----------------
hereto, and shall be in full force and effect.
(e) Since the date of this Agreement, there shall have been no event,
change, occurrence or circumstance having, or which would reasonably be expected
to have a Company Material Adverse Effect.
(f) Jacobs shall have received from Ernst & Young, a letter, dated the
Closing Date and addressed to the Board of Directors of Jacobs, stating that on
the basis of the results of certain agreed-upon procedures (not constituting an
audit) performed on the latest available accounting records of the Company,
which will include consultations with officers of the Company and the Company
Subsidiaries responsible for financial and accounting matters and other
pertinent inquiries that such accountants may deem necessary, such accountants
have no reason to believe that during the period from the Company Balance Sheet
Date to a specified date not more than five business days before the Closing
Date there was any change in the financial condition or results of operations of
the Company except for changes that have occurred in the ordinary and usual
course of its business during that period.
(g) Jacobs shall have received the opinions of the Company's counsel,
dated the Effective Time, substantially in the form of Exhibit 8.2(g) hereto.
--------------
(h) Jacobs shall have received a certificate dated as of the date of
the Closing and signed on behalf of Company by the Chief Executive Officer and
Chief Financial Officer of the Company, to the effect that the conditions to
Jacobs' obligations set forth in Sections 8.2(a), (b), (c) and (e) have been
satisfied. In addition, Jacobs shall have received a certificate dated as of
the date of the Closing and signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company certifying (i) the
number of shares underlying and the aggregate exercise price of the unexercised
Company Options as of the Effective Time and (ii) the number of Redeemed Company
Shares as of the Effective Time and the price paid by the Company therefor.
49
(i) The Company shall have amended its Benefit Replacement Plan as set
forth on Exhibit 8.2(i).
SECTION 8.3. Conditions to Obligations of the Company. The obligation of
----------------------------------------
the Company to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction or waiver at or prior to the Closing of the
following additional conditions:
(a) The representations and warranties of Jacobs set forth in Article
4 shall also be true and correct in all material respects as of the Closing
(except to the extent that any change therein is as a result of the transactions
contemplated hereby) with the same effect as though made on the date of the
Closing.
(b) Jacobs and Merger Subsidiary shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Effective Time.
(c) The Company shall have received the opinions of the Jacobs'
counsel, dated the Effective Time, substantially in the form of Exhibit 8.3(c)
--------------
hereto.
(d) The Company shall have received a certificate dated as of the date
of the Closing and signed on behalf of Jacobs and Merger Subsidiary by the
respective Chief Executive Officers and Chief Financial Officers of each such
entity, to the effect that the conditions to the Company's obligations set forth
in Sections 8.3(a), (b) and (e) have been satisfied.
(e) Since the date of this Agreement, there shall have been no event,
change, occurrence or circumstance having, or which would reasonably be expected
to have, a Jacobs Material Adverse Effect.
ARTICLE 9
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time (notwithstanding any
Merger Approval by the shareholders of the Company):
(a) by mutual written consent of the Company and Jacobs, on behalf of
itself and Merger Subsidiary;
(b) by either the Company or Jacobs, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Jacobs or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(c) by either Jacobs or the Company, if the Effective Time shall not
have occurred on or before February 26, 1999, or as otherwise extended by the
parties; provided that
50
no party may terminate this Agreement pursuant to this clause (c) if such
party's failure to fulfill any of its obligations under this Agreement shall
have directly or indirectly resulted in the failure of the Effective Time to
occur on or before said date;
(d) by either Jacobs or the Company, if the shareholders of the
Company fail to make the Merger Approval by requisite vote at a meeting duly
convened therefor;
(e) by the Company, if the Company's Board of Directors shall have
approved a Competing Proposal in a manner permitted by Section 5.5(b);
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Jacobs or Merger Subsidiary set forth
in this Agreement, or (ii) there shall have been a breach by Jacobs and Merger
Subsidiary of any of their respective covenants or agreements hereunder
materially adversely affecting (or materially delaying) the consummation of the
Merger, and Jacobs or Merger Subsidiary, as the case may be, has not cured such
breach within twenty (20) business days after notice by the Company thereof,
provided that, with respect to clauses (i) and (ii) above, the Company has not
materially breached any of its obligations hereunder and has not failed to
timely cure such breach; or
(g) by Jacobs and Merger Subsidiary if (i) there shall have been a
breach of any representation or warranty on the part of the Company set forth in
this Agreement which would reasonably be expected to have a Company Material
Adverse Effect, or (ii) there shall have been a breach by the Company of its
covenants or agreements hereunder having a Company Material Adverse Effect or
materially adversely affecting the consummation of the Merger, and the Company
has not cured such breach within twenty (20) business days after notice by
Jacobs or Merger Subsidiary thereof, provided that, with respect to clauses (i)
or (ii) above, neither Jacobs nor Merger Subsidiary has materially breached any
of their respective obligations hereunder and has not failed to timely cure such
breach; provided, further, that with respect to this Section 9.1(g), the term
"Company Material Adverse Effect" shall be modified to include a $4,000,000
rather than a $500,000 threshold.
The party desiring to terminate this Agreement pursuant to this Section 9.1
shall give written notice of such termination to the other party in accordance
with Section 10.1.
SECTION 9.2. Procedure Upon Termination. In the event of termination and
--------------------------
abandonment pursuant to this Article 9, this Agreement shall terminate and the
Merger shall be abandoned without further action by the Company or Jacobs,
provided that the agreements contained in Sections 5.1 [Confidentiality (by
Company)], 6.1 [Confidentiality (by Jacobs)], 7.3 [Public Announcements], 9.3
[Termination Fee Payable by the Company] and 9.4 [Termination Fee Payable by
Jacobs] hereof shall remain in full force and effect. If this Agreement is
terminated as provided herein, each party shall use its reasonable best efforts
to redeliver all documents, work papers and other material (including any copies
thereof) of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same. Nothing contained in this Agreement shall relieve any party
from any liability for any willful breach of this Agreement prior to
termination.
51
SECTION 9.3. Termination Fee Payable by the Company. Concurrently with
--------------------------------------
a termination of this Agreement pursuant to Section 9.1(e), the Company will pay
to Jacobs as liquidated damages an amount equal to the sum of $6.0 million (the
"Termination Fee") plus an additional $850,000 to cover all out-of-pocket
---------------
expenses, including, without limitation, attorneys' and accountants' fees
whether or not actually incurred by Jacobs in connection with the transaction
contemplated by this Agreement (the "Fixed Expense Fee"). If Jacobs terminates
-----------------
this Agreement pursuant to Section 9.1(d) or (g), the Company shall, within two
business days of such termination, pay Jacobs the Fixed Expense Fee as
liquidated damages.
SECTION 9.4. Termination Fee Payable by Jacobs. If the Company terminates
---------------------------------
this Agreement pursuant to Section 9.1(f), Jacobs will pay to the Company as
liquidated damages $850,000 to cover all out-of-pocket expenses, including,
without limitation, attorneys' fees and accountants' fees whether or not
actually incurred by the Company in connection with the transaction contemplated
by this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Jacobs or Merger Subsidiary, to:
Xxxxxx Engineering Group Inc.
0000 X. Xxxxxx Xxxxxxx 91105
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xx. Xxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company, to:
Sverdrup Corporation
00000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
52
with a copy to: Xxxxx Xxxx LLP
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
if to the Securityholder Committee, to:
Sverdrup Corporation
00000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx,
Chairman
Facsimile: (000) 000-0000
or such other address or facsimile number as such party may hereafter specify by
notice to the other parties hereto. Each such notice, request or other
communication shall be effective (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and the
appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.2. Survival of Representations and Warranties and Covenants.
--------------------------------------------------------
If this Agreement is not terminated pursuant to Section 9.1, the representations
and warranties and agreements of the Company and Jacobs contained herein and in
any certificate or other writing delivered pursuant hereto shall not survive the
Effective Time, provided that each covenant and agreement set forth in this
Agreement which, by its terms, is to be performed after the Effective Time shall
survive the execution and delivery of this Agreement and shall continue until
the expiration of the applicable statute of limitations period, unless otherwise
expressly provided for herein. Following the Effective Time, none of Jacobs,
the Company, their respective subsidiaries and affiliates, and any party
claiming through or under any of them (including, without limitation, through
any claim or right of subrogation) shall have any claim against any of the
shareholders of the Company or the directors or officers of the Company or any
of the Company Subsidiaries or their respective affiliates for any breach of any
representation, warranty or covenant contained herein or any act or omission
occurring prior to the Effective Time, whether based on contract, tort,
contribution, negligence or breach of duty; provided, however, that this
sentence shall not preclude any claim against any of the shareholders of the
Company or the directors or officers of the Company or any of the Company
Subsidiaries or their respective affiliates based on fraud.
SECTION 10.3. Appointment of Securityholder Committee.
---------------------------------------
(a) By voting to approve the Merger or accepting the Initial Aggregate
Merger Consideration, the Initial Company Option Consideration or the Initial
Redeemed Company Shares Consideration, the holders of the Company Common Stock,
the Company Options and the Redeemed Company Shares (collectively, the
"Securityholders") shall AUTOMATICALLY BE DEEMED TO HAVE APPOINTED XXXXXXX X.
-----------------
XXXXXX, XXXXX X. XXXXXXX AND XXXXXX X. XXXXXX, AND EACH OF THEIR SUCCESSORS, AS
THE ATTORNEYS-IN-
53
FACT AND REPRESENTATIVES OF THE SECURITYHOLDERS (collectively, the
"Securityholder Committee"). The Securityholder Committee shall have full power
------------------------
to act on behalf of the Securityholders in connection with all matters with
respect to which action by the Securityholder Committee is contemplated by this
Agreement including, but not limited to the right to (x) authorize any payment
to Jacobs from the Escrow, (y) elect to accelerate the payment of any Deferred
Consideration pursuant to Section 1.5 and (z) agree on behalf of the
Securityholders as to the amount of payments to the Eligible Holders with
respect to any Earnout Payment, any remaining Escrow Amount or the Opportunity
Premium Payment. No further documentation shall be required to evidence such
appointment and such power of attorney shall be coupled with an interest and
shall be irrevocable. The Securityholder Committee shall be entitled to
reasonable administrative support and reimbursement from Jacobs of all
documented reasonable expenses incurred in the performance of its duties under
this Agreement including, but not limited to the right to employ financial
advisors, attorneys and other advisors and agents to undertake or assist in the
assessment of arbitration, litigation, and/or settlement of any such disputes.
The Securityholder Committee is expressly authorized to rely upon the advice of
any advisors, consultants and agents. THE SECURITYHOLDERS SHALL AUTOMATICALLY BE
DEEMED TO HAVE WAIVED ANY RIGHT OR CAUSE OF ACTION FOR ANY ACTION, OF ANY NATURE
WHATSOEVER, TAKEN OR OMITTED FROM BEING TAKEN BY THE SECURITYHOLDER COMMITTEE OR
ANY SUCCESSOR ABSENT A CLEAR SHOWING OF GROSS ERROR OR FRAUD.
(b) The Securityholder Committee shall take all actions required to be
taken by the Securityholder Committee under this Agreement and may take any
action contemplated by this Agreement on behalf of the Securityholders.
Immediately prior to the Closing, the Securityholder Committee shall elect a
Chairman (the "Committee Chairman") of such Securityholder Committee and inform
------------------
Jacobs of his or her identity, address and phone and fax numbers. By giving
notice to the Committee Chairman in the manner provided by Section 10.1, Jacobs
shall be deemed to have given notice to the Securityholder Committee and all of
the Securityholders and any action taken by the Committee Chairman may be
considered by Jacobs to be, and relied upon by Jacobs as, the action of the
Securityholder Committee and each Securityholder for whom such action was taken
for all purposes of this Agreement. The actions of the Securityholder Committee
shall be final and binding on the Securityholders. The Securityholder
Committee's duties shall terminate upon the final distribution of any Earnout
Payment and the Escrow.
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, any member of the Securityholder Committee may resign his position as
a member of the Securityholder Committee at any time for any reason whatsoever.
Upon the resignation of one or more members of the Securityholder Committee, the
remaining member or members of the Securityholder Committee shall promptly
appoint by unanimous consent a substitute member or members to the
Securityholder Committee to fill any such vacancy or vacancies.
54
SECTION 10.4. Amendments; No Waivers. (a) Any provision of this Agreement
----------------------
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Xxxxxx and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the shareholders of the Company, no such amendment
or waiver shall, without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any Shares of capital stock of the Company; (ii) any term of the Articles of
Incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the holders of any Shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.5. Expenses. Except as otherwise provided in this Agreement,
--------
each party hereto shall pay its own legal and accounting fees, costs and
expenses in connection with the negotiation and execution of this Agreement and
the transactions contemplated hereby.
SECTION 10.6. Entire Agreement/No Third Party Beneficiaries. Except for the
---------------------------------------------
Confidentiality Letter, all prior negotiations and agreements between the
parties hereto relating to the subject matter hereof are superseded by this
Agreement and as of the date hereof there are no representations, warranties,
understandings or agreements, whether written or oral, expressed or implied,
other than those specifically set forth herein. Except for the shareholders,
directors, officers, employees and agents of the Company to the extent such
persons benefit from the provisions set forth herein, there are no third party
beneficiaries to this Agreement.
SECTION 10.7. Waivers. Any failure by any of the parties hereto to comply
-------
with any of the obligations, agreements or conditions set forth herein may be
waived by the other party or parties provided, however, that any such waiver
shall not be deemed a waiver of any other obligation, agreement or condition.
SECTION 10.8. Amendments, Supplements or Modifications. Each of the
----------------------------------------
parties agrees to cooperate fully in the effectuation of the transactions
contemplated hereby and to execute any and all additional documents or take such
additional actions as shall be reasonably necessary or appropriate for such
purpose.
SECTION 10.9. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
55
SECTION 10.10. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws and not the conflicts of laws
provisions of the State of Missouri.
SECTION 10.11. Exclusive Jurisdiction. The parties agree that any legal
----------------------
action, suit or proceeding arising out of or relating to this Agreement or the
agreements and transactions contemplated hereby shall be instituted in a Federal
district court located in the city or county of St. Louis, Missouri or a
Missouri state court located in the city or county of St. Louis, Missouri, which
shall be the exclusive jurisdiction and venue of said legal proceedings, and
each party hereto waives any objection which such party may now or hereafter
have to the laying of venue of any such action, suit or proceeding.
SECTION 10.12. Disclosure Schedules. Notwithstanding anything herein to
--------------------
the contrary, any matter disclosed in any Section of either the Company
Disclosure Schedule or the Jacobs Disclosure Schedule shall be deemed to be
disclosed in all parts of such Schedules regardless of whether such matter is
specifically cross-referenced. The disclosure of any matter in a Schedule is not
to be deemed determinative of or an indication that such matter is material to
the operations of the Company or Jacobs, as the case may be.
SECTION 10.13. Counterparts; Effectiveness. This Agreement may be signed
---------------------------
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 10.14. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal, or incapable of being enforced by any rule or
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.15. Incorporation of Exhibits and Schedules. The Company
---------------------------------------
Disclosure Schedule, the Jacobs Disclosure Schedule and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
SECTION 10.16. Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.17. Knowledge. Whenever used in this Agreement, the terms
---------
"knowledge," "to the knowledge of" "has received no notice" or "is not aware"
(and all variants and derivatives thereof) with respect to any Person, means the
current actual knowledge
56
of such Person. Notwithstanding the foregoing, the foregoing terms, when applied
to the Company, shall mean the actual knowledge of any and all Persons listed on
Section 10.17 of the Company Disclosure Schedule.
SECTION 10.18. Construction. The language used in this Agreement will
------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
either party. Whenever required by the context, any gender shall include any
other gender, the singular shall include the plural and the plural shall include
the singular. Whenever the word "including" is used in this Agreement, it shall
be deemed to mean "including, without limitation," "including, but not limited
to" or other words of similar import such that the items following the word
"including" shall be deemed to be a list by way of illustration only and shall
not be deemed to be an exhaustive list of applicable items in the context
thereof.
[signature page(s) follow]
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SVERDRUP CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
XXXXXX ENGINEERING GROUP INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Chief Executive Officer
JACOBS ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
President
58
EXHIBITS
EXHIBIT 1.1(b) FORM OF CERTIFICATE OF MERGER
EXHIBIT 1.3 FORM OF LETTER OF TRANSMITTAL FOR SHARES, COMPANY OPTIONS AND
REDEEMED COMPANY SHARES
EXHIBIT 1.4(a) FORM OF ESCROW AGREEMENT
EXHIBIT 1.4(b) RISK SCHEDULE
EXHIBIT 1.5(b) FORM OF LETTER OF TRANSMITTAL FOR DEFERRED MERGER CONSIDERATION
EXHIBIT 1.5(f) ILLUSTRATIONS OF CALCULATIONS OF DEFERRED CONSIDERATION
EXHIBIT 8.2(d)(1)FORM OF EMPLOYMENT AGREEMENT
EXHIBIT 8.2(d)(2)NAMES OF PERSONS TO HAVE EMPLOYMENT AGREEMENTS
EXHIBIT 8.2(g) FORM OF COMPANY COUNSEL'S OPINION
EXHIBIT 8.2(i) AMENDMENT TO BENEFIT REPLACEMENT PLAN
EXHIBIT 8.3(c) FORM OF JACOBS COUNSEL'S OPINION
59
TABLE OF CONTENTS OF COMPANY DISCLOSURE SCHEDULES
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Section 1.3(a)..................................................Payment Schedule
Section 1.5(a)(xii)..........................................Percentage Interest
Section 1.9..........................................................Flexi-Trust
Section 3.2.................................................Company Subsidiaries
Section 3.6....................................................Non-Contravention
Section 3.7.......................................................Capitalization
Section 3.7(c)...........................................Redeemed Company Shares
Section 3.7(d)...................................................Company Options
Section 3.7(e)...........................................Shareholders Agreements
Section 3.7(g)...................................................Redeemed Shares
Section 3.8.............................Company Reports and Financial Statements
Section 3.9..........................................................Receivables
Section 3.12..........................................Absence of Certain Changes
Section 3.13..........................................................Litigation
Section 3.14..............................................Employee Benefit Plans
Section 3.14(d).............................................Employment Contracts
Section 3.14(e)..............................................Additional Benefits
Section 3.14(f)........Collective Bargaining Agreements and Employment Contracts
Section 3.15...............................................................Taxes
Section 3.16................................................Compliance with Laws
Section 3.19...............................................Environmental Matters
Section 3.21........................................Labor and Employment Matters
Section 3.22(a)...............................................Material Contracts
Section 3.22(c)...........................Exceptions to Contract Representations
Section 3.23..........................................Related Party Transactions
Section 3.24.........................................................Real Estate
Section 3.25..............................................Government Contracting
Section 3.27...........................................................Year 2000
Section 3.29.....................................................Title to Assets
Section 10.17..................................................Knowledge Persons
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