Exhibit A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 8, 2001
BETWEEN
ES ACQUISITION CORP.
AND
ENVIROSOURCE, INC.
TABLE OF CONTENTS
Page
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ARTICLE I. THE MERGER.......................................................................................... 2
1.1 The Merger............................................................................................... 2
1.2 Closing.................................................................................................. 2
1.3 Effective Time........................................................................................... 2
1.4 Effects of the Merger.................................................................................... 2
1.5 Charter.................................................................................................. 2
1.6 Bylaws................................................................................................... 3
1.7 Officers and Directors................................................................................... 3
1.8 Effect on Stock.......................................................................................... 3
1.9 Surrender and Payment.................................................................................... 5
ARTICLE II. REPRESENTATIONS AND WARRANTIES..................................................................... 7
2.1 Representations and Warranties of the Company............................................................ 7
2.2 Representations and Warranties of Merger Sub............................................................. 17
ARTICLE III. COVENANTS......................................................................................... 20
3.1 Covenants of the Company................................................................................. 20
3.2 Communication and Advice of Changes...................................................................... 23
ARTICLE IV. ADDITIONAL AGREEMENTS.............................................................................. 23
4.1 Preparation of Proxy Statement; the Company Stockholders' Meeting........................................ 23
4.2 Access to Information.................................................................................... 24
4.3 Approvals and Consents; Cooperation...................................................................... 24
4.4 No Solicitation.......................................................................................... 24
4.5 Fees and Expenses........................................................................................ 27
4.6 Indemnification; Directors' and Officers' Insurance...................................................... 27
4.7 Public Announcements..................................................................................... 29
4.8 Takeover Statutes........................................................................................ 29
4.9 Identification of Directors.............................................................................. 29
ARTICLE V. CONDITIONS PRECEDENT................................................................................ 29
5.1 Conditions to Each Party's Obligation to Effect the Merger............................................... 29
ARTICLE VI. TERMINATION AND AMENDMENT.......................................................................... 30
6.1 Termination.............................................................................................. 30
6.2 Effect of Termination.................................................................................... 31
6.3 Amendment................................................................................................ 31
6.4 Extension; Waiver........................................................................................ 32
ARTICLE VII. GENERAL PROVISIONS................................................................................ 32
7.1 Non-Survival of Representations, Warranties and Agreements; No Other Representations and Warranties...... 32
7.2 Notices.................................................................................................. 32
7.3 Interpretation........................................................................................... 33
7.4 Counterparts............................................................................................. 34
7.5 Entire Agreement; No Third Party Beneficiaries........................................................... 34
7.6 Governing Law; Jurisdiction; Waiver of Jury Trial........................................................ 34
7.7 Severability............................................................................................. 35
7.8 Assignment............................................................................................... 36
i
7.9 Enforcement.............................................................................................. 36
7.10 Definitions.............................................................................................. 36
ii
GLOSSARY OF DEFINED TERMS
Location of
Definition Defined Term
Affiliate....................................................................................... Section 7.10
Agreement....................................................................................... Preamble
Board of Directors.............................................................................. Section 7.10
Business Day.................................................................................... Section 7.10
CERCLA.......................................................................................... Section 2.1(o)(ii)
Certificate of Merger........................................................................... Section 1.3
Certificates.................................................................................... Section 1.9(b)
Closing......................................................................................... Section 1.2
Closing Date.................................................................................... Section 1.2
Code............................................................................................ Section 1.9(g)
Company......................................................................................... Preamble
Company Application Period...................................................................... Section 4.4(a)
Company Board................................................................................... Recitals
Company Common Stock............................................................................ Section 7.10
Company Disclosure Schedule..................................................................... Section 2.1
Company Equity Plans............................................................................ Section 1.8(e)
Company Options................................................................................. Section 1.8(e)
Company Permits................................................................................. Section 2.1(f)(i)
Company Plans................................................................................... Section 2.1(k)(i)
Company Representative.......................................................................... Annex B
Company SEC Reports............................................................................. Section 2.1(d)(i)
Company Stockholders' Meeting................................................................... Section 4.1(a)
Company Takeover Proposal....................................................................... Section 4.4(e)
Control......................................................................................... Section 7.10
DGCL............................................................................................ Recitals
Dissenting Shares............................................................................... Section 1.8(d)
Effective Time.................................................................................. Section 1.3
Employee Retention Policies..................................................................... Section 7.10
Environmental Law............................................................................... Section 7.10
Environmental Permit............................................................................ Section 7.10
ERISA........................................................................................... Section 2.1(k)(i)
Exchange Act.................................................................................... Section 2.1(d)
Exchange Agreement.............................................................................. Section 7.10
Exchange Offers................................................................................. Recitals
Existing Credit Facility........................................................................ Section 7.10
Expenses........................................................................................ Section 4.5(a)
Financial Advisor............................................................................... Section 4.4(e)
GAAP............................................................................................ Section 2.1(d)(i)
Governmental Entity............................................................................. Section 2.1(c)(iii)
Hazardous Substance............................................................................. Section 7.10
HSR Act......................................................................................... Section 7.10
Indemnified Liabilities......................................................................... Section 4.6(b)
Indemnified Parties............................................................................. Section 4.6(b)
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Indentures...................................................................................... Recitals
Intellectual Property........................................................................... Section 7.10
Laws............................................................................................ Section 7.10
Liens........................................................................................... Section 2.1(b)(ii)
Material Adverse Effect......................................................................... Section 7.10
Material Contracts.............................................................................. Section 2.1(p)(i)
Merger.......................................................................................... Recitals
Merger Consideration............................................................................ Recitals
Merger Sub...................................................................................... Preamble
Merger Sub Representative....................................................................... Section 4.2(a)
New Financing................................................................................... Section 3.1(e)
New Incentive Plan.............................................................................. Section 7.10
Option Termination Expense...................................................................... Section 1.8(c)
Organizational Documents........................................................................ Section 7.10
Parent.......................................................................................... Preamble
Paying Agent.................................................................................... Section 1.9(a)
Payment Fund.................................................................................... Section 1.9(a)
Permit Modifications............................................................................ Section 2.1(o)(i)
Person.......................................................................................... Section 7.10
Preferred Stock................................................................................. Section 1.5
Prepackaged Plan................................................................................ Section 7.10
Proprietary Information......................................................................... Annex B
Proxy Statement................................................................................. Section 2.1(c)(iii)
Release......................................................................................... Section 7.10
Required Company Vote........................................................................... Section 2.1(j)
Restructuring................................................................................... Recitals
SEC............................................................................................. Section 2.1(a)(i)
Senior Notes.................................................................................... Recitals
Subordinated Notes.............................................................................. Recitals
Specified Vote.................................................................................. Section 6.1(h)
Subsidiary...................................................................................... Section 7.10
Superior Company Proposal....................................................................... Section 4.4(e)
Support Agreements.............................................................................. Section 7.10
Surviving Corporation........................................................................... Section 1.1
Surviving Corporation Common Stock.............................................................. Section 7.10
Surviving Corporation Preferred Stock........................................................... Section 1.5
Tax............................................................................................. Section 7.10
Taxable......................................................................................... Section 7.10
Taxes........................................................................................... Section 7.10
Tax Return...................................................................................... Section 7.10
Terminating Company Breach...................................................................... Section 6.1(f)
Terminating Merger Sub Breach................................................................... Section 6.1(8)
Termination Fee................................................................................. Section 4.5(b)
Violation ...................................................................................... Section 2.1(c)(ii)
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This AGREEMENT AND PLAN OF MERGER, dated as of June 8, 2001 (this
"Agreement"), is by and between ES Acquisition Corp., a Delaware corporation
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("Merger Sub") and a direct, wholly owned subsidiary of GSC Recovery II, L.P., a
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Delaware limited partnership ("Parent"), and Envirosource, Inc., a Delaware
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corporation (the "Company").
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W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Merger Sub and the
Company have approved the merger of Merger Sub with and into the Company with
the Company as the surviving corporation (the "Merger"), upon the terms and
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subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law ("DGCL"), whereby each issued and outstanding share of
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Company Common Stock not owned by Merger Sub or the Company or its Subsidiaries
will be converted, subject to adjustment as provided in Section 1.8(c) hereof),
into the right to receive $0.20 in cash, without interest (the "Merger
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Consideration"), subject to the exercise of appraisal rights pursuant to the
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DGCL;
WHEREAS, the Board of Directors of the Company (the "Company Board")
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has (a) determined that this Agreement and the Merger are fair to and in the
best interests of the Company's stockholders, (b) approved this Agreement and
the transactions contemplated hereby, and (c) declared the advisability of this
Agreement and resolved to recommend that the Company's stockholders approve this
Agreement and the Merger;
WHEREAS, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, the Merger is being effected as an integral part of a
comprehensive restructuring of the Company's outstanding indebtedness (the
"Restructuring"), and as such, contemporaneously with the Merger, the Company
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will offer to exchange all of its outstanding 9 3/4% Senior Notes due 2003 and 9
3/4% Senior Notes due 2003, Series B (together, the "Senior Notes") for an
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aggregate of at least $63 million in the form of cash or principal amount of the
Company's 14% Subordinated Notes due 2008 (the "Subordinated Notes") (or a
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combination thereof), 270,000 shares of Surviving Corporation Preferred Stock
(as defined herein) and 1,080,000 shares of Surviving Corporation Common Stock
(as defined herein), which will constitute all of the issued and outstanding
shares of Surviving Corporation Common Stock (together, the "Exchange Offers"),
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amend the indentures governing the Senior Notes (the "Indentures") and solicit
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acceptances from the holders of the Senior Notes of a proposed pre-packaged plan
of reorganization of the Company under Chapter 11 of the United States
Bankruptcy Code under which the security holders of the Company would receive
the same consideration as in the Merger and Exchange Offers.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and
into the Company. Following the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation").
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1.2 Closing.
The closing of the Merger (the "Closing") will take place as soon as
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practicable after satisfaction or waiver (as permitted by this Agreement and
applicable law) of all of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date but subject to the
satisfaction or waiver of such conditions) set forth in Article V (the "Closing
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Date"), unless another time or date is agreed to in writing by the parties
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hereto. The Closing shall be held at the offices of Akin, Gump, Strauss, Xxxxx
& Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another
place is agreed to in writing by the parties hereto.
1.3 Effective Time.
Upon the Closing, Company and Merger Sub shall file or cause to be
filed with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger") executed in accordance with the relevant
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provisions of the DGCL, and shall make all other filings, recordings or
publications required under the DGCL in connection with the Merger. The Merger
shall become effective at 5:00 p.m. New York City Time on the date that the
Certificate of Merger is duly filed with, and accepted for recording by, the
Secretary of State of the State of Delaware, or at such other time as the
parties may agree and specify in the Certificate of Merger (the time the Merger
becomes effective being herein referred to as the "Effective Time").
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1.4 Effects of the Merger.
At and after the Effective Time, the Merger will have the effects set
forth in Section 259(a) of the DGCL.
1.5 Charter.
At the Effective Time and without any further action on the part of
the Company or the Merger Sub, the Amended and Restated Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation,
until duly amended as provided therein or by applicable law, except as amended
hereby pursuant to Section 251(e) of the DGCL in the form attached hereto as
Annex A. The Company shall file the Certificate of Designations with respect to
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the Series A Redeemable Preferred Stock, par value $0.001 per share, of the
Surviving Corporation
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("Surviving Corporation Preferred Stock") with the Secretary of State of
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Delaware concurrently with the Certificate of Merger, and such Certificate of
Designations shall become effective as of the Effective Time.
1.6 Bylaws.
At the Effective Time and without any further action on the part of
the Company or Merger Sub, the bylaws of the Company as in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
1.7 Officers and Directors.
The directors of Merger Sub at the Effective Time and Xx. Xxxx X.
XxXxxxxx shall be the directors of the Surviving Corporation, until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be.
1.8 Effect on Stock.
As of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of
Company Common Stock or any shares of capital stock of Merger Sub:
(a) Cancellation of Stock of Merger Sub. Each issued and outstanding
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share of stock of Merger Sub shall automatically be cancelled and shall cease to
be outstanding.
(b) Cancellation of Certain Company Common Stock. Each share of
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Company Common Stock that is owned by the Company, any wholly owned Subsidiary
of the Company or by Merger Sub shall automatically be cancelled and shall cease
to be outstanding, and no Merger Consideration shall be delivered in exchange
therefor.
(c) Conversion of Company Common Stock. At the Effective Time each
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share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock to be cancelled in
accordance with Section 1.8(b) or Dissenting Shares for which appraisal rights
have been properly asserted in accordance with Section 1.8(d)) shall be
converted into the right to receive from the Surviving Corporation the Merger
Consideration. As of the Effective Time, all shares of Company Common Stock
(exclusive of shares of Surviving Corporation Common Stock to be issued pursuant
to the Exchange Offers) shall no longer be outstanding and shall automatically
be retired and shall cease to be outstanding, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
such certificates, the Merger Consideration (or to the extent entitled thereto,
amounts paid upon the proper and timely assertion of appraisal rights). If
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the Company's representation in Section 2.1(b) as it relates to (i) the number
of outstanding Company Options, (ii) the cancellation of such outstanding
Company Options without cost to the Company or (iii) the number of outstanding
shares of Company Common Stock, shall not be true and correct and, as a result
thereof, the aggregate amount of Merger Consideration payable in cash hereunder
together with the expense to cancel any such outstanding Company Options
("Option Termination Expense") would exceed $1,262,679, then the aggregate of
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the Merger Consideration and the Option Termination Expense payable hereunder
shall be reduced to $1,162,679 with appropriate adjustment to the per share
consideration.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
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the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has properly demanded appraisal for such
shares in accordance with the DGCL to the extent available thereunder (the
"Dissenting Shares"), shall not be converted into the right to receive the
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Merger Consideration, but rather, each holder shall have the right to receive
such consideration as may be determined to be due such dissenting stockholder
pursuant to Section 262 of the DGCL unless such holder fails to perfect or
withdraws or otherwise loses its right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or otherwise loses its right to
appraisal, such shares of Company Common Stock shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of shares of Company Common Stock,
attempted withdrawals of such demands and any instruments served pursuant to the
DGCL and received by the Company relating to the exercise of the stockholders'
rights of appraisal, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, prior to the Effective Time, except with the prior written consent of
Merger Sub or upon the entry of a final judgment by a court of competent
jurisdiction, make any payment with respect to, or settle or offer to settle,
any such demands.
(e) Stock Options. (i) At the Effective Time, each unexpired and
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unexercised outstanding option, whether or not then vested or exercisable in
accordance with its terms, to purchase shares of Company Common Stock (the
"Company Options") previously granted by the Company or its Subsidiaries under
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any plan, agreement or arrangement (collectively, the "Company Equity Plans")
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shall be cancelled and shall be automatically converted into the right to
receive from the Surviving Corporation, at the Effective Time, cash in an amount
equal to the product of (x) the Merger Consideration minus the exercise price
per share under such Company Option, times (y) the number of shares of Company
Common Stock which may be purchased upon exercise of such Company Option
(whether or not then exercisable or vested), less any required withholding, and
thereupon each Company Option shall terminate and each holder thereof shall have
no further rights to any Company Common Stock with respect thereto.
(ii) Prior to the Effective Time, the Company shall (A) obtain all
necessary consents from, and provide (in a form acceptable to Merger Sub) any
required notices to, holders of Company Options and (B) amend the terms of the
applicable Company Equity Plan, in each case as is necessary to give effect to
the provisions of paragraph (i) of this Section 1.8(e)
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(including, without limitation, obtaining from each holder of any outstanding
Company Option issued under the Envirosource Stock Option Plan for Non-Affiliate
Directors, a consent to all of the foregoing).
1.9 Surrender and Payment.
(a) Paying Agent. Prior to the Effective Time, the Company shall
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designate a bank or trust company to act as agent (the "Paying Agent") for the
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holders of shares of Company Common Stock and Company Options in connection with
the Merger and the payment of the Merger Consideration to which holders of
shares of Company Common Stock and Company Options, if applicable, shall become
entitled pursuant to Section 1.8. Prior to, or promptly after, the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, the
Company shall deposit with the Paying Agent cash in an aggregate amount equal to
the product of (i) the number of shares of Company Common Stock issued and
outstanding (and not to be canceled pursuant to Section 1.8(b)) immediately
prior to the Effective Time, multiplied by (ii) the Merger Consideration (plus
any additional amount as required in connection with the cancellation of Company
Options pursuant to Section 1.8(e)). The deposit made by the Company pursuant to
the preceding sentence is hereinafter referred to as the "Payment Fund." The
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Paying Agent shall cause the Payment Fund to be (i) held for the benefit of the
holders of Company Common Stock and (ii) promptly applied to making the payments
provided for in Section 1.8(c). The Payment Fund shall not be used for any
purpose that is not provided for herein.
(b) Payment Procedures. As soon as reasonably practicable after the
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Effective Time, the Paying Agent shall provide to each holder of record of a
certificate or certificates or other instrument or instruments (the
"Certificates") which immediately prior to the Effective Time represented issued
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and outstanding shares of Company Common Stock (other than shares to be canceled
in accordance with Section 1.8(b)), (i) a letter of transmittal (which shall be
upon customary terms and may specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with
such letter of transmittal, duly executed in accordance with the letter of
transmittal and the instructions thereto, and such other documents as may
reasonably be required by the Paying Agent, the Paying Agent shall pay the
holder of such Certificate the Merger Consideration in respect of such
Certificate, and the Certificate so surrendered shall forthwith be retired and
shall cease to exist. If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the shares of Company Common
Stock represented by the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Paying Agent any transfer or other taxes required as a result of such payment to
a Person other than the registered holder of such shares or establish to the
satisfaction of the Paying Agent that such tax has been paid or is not payable.
Until surrendered as contemplated by this Section 1.9, each Certificate (other
than Certificates representing Dissenting Shares or shares of Company Common
Stock to
5
be canceled pursuant to Section 1.8(b)) shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
(without interest) upon such surrender.
(c) No Further Ownership Rights in Company Common Stock. All Merger
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Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article I shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates. At and after the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of shares of Company Common Stock outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates for such shares are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article I, except as otherwise provided by law.
(d) Unclaimed Funds. Any portion of the Payment Fund made available
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to the Exchange Agent pursuant to Section 1.9(a) that remains unclaimed by
holders of Certificates for one year after the Effective Time of the Merger
shall be delivered to the Surviving Corporation, upon demand, and any holders of
Certificates who have not theretofore complied with this Article I shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration.
(e) No Liability. Neither Surviving Corporation nor the Paying Agent
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shall be liable to any Person in respect of any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. Subject to applicable law and public policy, if any Certificates
shall not have been surrendered immediately prior to such date on which any
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity, any amounts payable in
respect of such Certificate shall, to the extent permitted by applicable law and
public policy, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(f) Lost Certificates. In the event that any Certificate shall have
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been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed in form
reasonably satisfactory to the Surviving Corporation, and, if requested by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate or the payment of
the Merger Consideration, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration with respect to such
Certificate to which such Person is entitled pursuant hereto.
(g) Withholding Rights. The Company shall be entitled to deduct and
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withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock, Company Options or Certificates such amounts as are required to be
deducted and withheld with respect to the making
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of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of applicable state or local tax law, due to the
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residency of, or the applicability of United States federal, state or local
backup withholding requirements to such holder or otherwise. To the extent that
amounts are so deducted and withheld, such deducted and withheld amounts shall
be treated for all purposes of this Agreement as having been paid to such
holders in respect of which such deduction and withholding was made.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company.
Except as expressly set forth in the Company Disclosure Schedule
(which shall, in each case, be specific in its reference to a representation and
warranty herein contained and sought therein to be modified) delivered by the
Company to Merger Sub or its Affiliates at or prior to the execution of this
Agreement (the "Company Disclosure Schedule"), or as, otherwise disclosed,
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contained in or referred to in any Company SEC Report filed after December 31,
2000 and prior to the date of this Agreement the Company represents and warrants
to Merger Sub or its Affiliates as follows:
(a) Organization, Standing and Power. Each of the Company and its
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Subsidiaries has been duly incorporated and is validly existing and in good
standing under the laws of its jurisdiction of incorporation and has requisite
corporate power and authority to carry on its business as presently conducted.
Each of the Company and its Subsidiaries is duly qualified and in good standing
or otherwise authorized to do business in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify does not and
would not reasonably be expected to have a Material Adverse Effect on the
Company or materially impair or delay the ability of the Company to consummate
the transactions contemplated hereby. True, complete and correct copies of the
Organizational Documents of the Company and its Subsidiaries as in effect on the
date of this Agreement were made available to Merger Sub or its Affiliates.
Exhibit 21.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 sets forth a true, correct and complete list of all
Subsidiaries of the Company. The Company does not own, directly or indirectly,
beneficially or of record any capital stock or other equity interest in any
Person other than the Subsidiaries listed on such Exhibit 21.1, other than (i)
non-controlling investments in the ordinary course of business and corporate
partnering, development, corporate marketing and similar undertakings and
arrangements entered into in the ordinary course of business and (ii) other
investments of less than $1,000,000.
(b) Capital Structure.
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(i) As of the date of this Agreement, the authorized stock of
the Company consists of (A) 20,000,000 shares of Company Common Stock, of
which 5,813,394 shares are issued and outstanding and (B) 5,620,000 shares
of preferred stock,
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par value $0.25 per share, of which no shares are issued and outstanding
and there are no shares of Company Common Stock or preferred stock of the
Company held in treasury. Immediately after the Effective Time there will
be 20,000,000 shares of Surviving Corporation Common Stock, 270,000 shares
of Surviving Corporation Preferred Stock and 5,350,000 shares of preferred
stock, par value $0.001 per share, authorized. All issued and outstanding
shares of the stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, and no class of stock is entitled to
preemptive rights. As of the date of this Agreement, there are no
outstanding options, warrants or other rights to acquire stock or assets
from the Company or its Subsidiaries other than options representing in the
aggregate the right to purchase 275,637 shares of Company Common Stock
under the Company Equity Plans. As of the date of this Agreement, there
were approximately 865,072 shares of Company Common Stock reserved for
issuance in connection with options, warrants and conversion rights. Each
outstanding Company Option will be cancelled without any payment required
to be made thereon and converted at the Effective Time in accordance with
its terms and without further action by the Company, Company Board or any
committee thereof.
(ii) All of the issued and outstanding shares of stock of the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company, free and clear of any liens,
claims, encumbrances, restrictions, preemptive rights or any other claims
of any third party ("Liens").
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(iii) Except as otherwise set forth in this Section 2.1(b), as of
the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any
kind to which the Company or any of its Subsidiaries is a party or by which
any of them is bound obligating the Company or a Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of stock or other voting securities of the Company or such
Subsidiary or obligating the Company or such Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any shares of stock
of the Company or such Subsidiary.
(c) Authority; No Conflicts.
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(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and, subject to the adoption of this
Agreement and approval of the Merger by the requisite vote of the holders
of Company Common Stock, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company by a unanimous vote
of all the members of the Company Board, subject in the case of the
consummation of the Merger to the approval of this Agreement and the Merger
by the requisite vote of the holders of Company Common Stock. This
Agreement has been duly
8
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally and by general equity principles (regardless
of whether such enforceability is considered in a proceeding in equity or
at law).
(ii) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby (including the
Exchange Offers) does not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of consent, termination, amendment,
cancellation or acceleration of any obligation or the loss of a benefit
under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of consent, termination, amendment, cancellation
or acceleration, loss or creation, a "Violation") pursuant to: (A) any
---------
provision of the Organizational Documents of the Company or any of its
Subsidiaries or (B) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement, note,
bond, indenture, benefit plan, lease or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company, the Company's Subsidiaries or their respective real properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof, or
any quasi-governmental or private body exercising any regulatory, taxing,
or other governmental or quasi-governmental authority (a "Governmental
------------
Entity"), is required by or with respect to the Company or any Subsidiary
------
in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, except for (x) those required under or in relation to (A) the
filing of a proxy statement in definitive form relating to the meeting of
the Company's stockholders to be held in connection with the Merger
(together with all amendments, supplements and exhibits thereto, the "Proxy
-----
Statement") and (B) the DGCL with respect to the filing and recordation of
---------
appropriate merger or other documents, including the Certificate of Merger,
and (y) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure to make or obtain which would not
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby.
(d) Reports and Financial Statements.
--------------------------------
(i) The Company has filed all required reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since March 31, 1999
---
(collectively, including all
9
exhibits thereto, the "Company SEC Reports"). None of the Company SEC
-------------------
Reports, as of their respective dates (and, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. Each of the financial statements (including the
related notes) included in the Company SEC Reports presents fairly, in all
material respects, the consolidated financial position and consolidated
results of operations and cash flows of the Company and its Subsidiaries as
of the respective dates or for the respective periods set forth therein,
all in conformity with U.S. generally accepted accounting principles
("GAAP") consistently applied during the periods involved except as
----
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements, to the absence of complete notes and normal year-end
adjustments. All of such Company SEC Reports, as of their respective dates
(and as of the date of any amendment to the respective Company SEC Report),
complied as to form in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations promulgated thereunder. None
------------
of the Subsidiaries is, or has been at any time, subject to the reporting
requirements of Sections 13(a) and 15(d) of the Exchange Act.
(ii) Except for liabilities and obligations incurred in the
ordinary course of business since December 31, 2000, the Company does not
have any liabilities or obligations of any nature required by GAAP to be
set forth on a consolidated balance sheet of the Company which would be
reasonably expected to have a Material Adverse Effect on the Company.
(e) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement
including any supplement or amendment thereto will, at the time such
document is filed with the SEC, and when first published, sent or given to
the stockholders of the Company, nor will such proxy statement or the
offering memorandum delivered to holders of the Senior Notes in connection
with the Exchange Offers, contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading or, at the time of the Company
Stockholders' Meeting (as defined in Section 4.1(a)) and at the Effective
Time, contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders' Meeting, which shall have become misleading. The
Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
10
(ii) Notwithstanding the foregoing provisions of this Section
2.1(e), no representation or warranty is made by the Company with
respect to statements made or incorporated by reference in the Proxy
Statement based on information supplied in writing by Merger Sub or
its Affiliates for inclusion or incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters. The Company and
---------------------------------------------------
its Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
---------------
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a Material Adverse Effect on the Company and its Subsidiaries
or materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except failures so to comply
which, individually or in the aggregate, are not having and would not reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby. Except as disclosed in the
Company SEC Reports filed after December 31, 2000 and prior to the date of this
Agreement, the Company and its Subsidiaries are not in violation of or default
under any Law or order of any Governmental Entity, except for such violations or
defaults which, individually or in the aggregate, are not having and would not
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby.
(g) Litigation. There is no litigation, arbitration, claim, suit, action,
----------
investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any Subsidiary which would
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby, nor is there any judgment, award, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Subsidiary which would reasonably be expected to have
a Material Adverse Effect on the Company or materially impair or delay the
ability of the Company to consummate the transactions contemplated hereby. No
investigation or review by any Governmental Entity with respect to the Company
or its Subsidiaries is pending or, to the knowledge of the Company, threatened,
nor has any Governmental Entity indicated in writing an intention to conduct the
same, except for investigations or reviews which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries or materially impair
or delay the ability of the Company to consummate the transactions contemplated
hereby.
(h) Taxes.
-----
(i) Each of the Company and its Subsidiaries has duly filed all
federal, state, foreign and local income and franchise and other material
Tax Returns and reports
11
required to be filed by it on or prior to the date hereof, and all such Tax
Returns and reports are complete and accurate in all material respects.
(ii) The Company and each of its Subsidiaries has paid (or the
Company has paid on behalf of each such Subsidiary) and as at the Closing
will have so paid all Taxes payable by them, except to the extent
adequately reserved on its books and records in accordance with GAAP.
(iii) The most recent financial statements contained in the
Company SEC Reports reflect an adequate reserve in accordance with GAAP for
all Taxes payable by the Company and its Subsidiaries for all taxable
periods and portions thereof accrued through the date of such financial
statements.
(iv) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries on or prior to the
date hereof that are not adequately reserved for in accordance with GAAP.
(v) No requests for waivers of the time to assess any Taxes against
the Company or any of its Subsidiaries have been granted or are pending.
(vi) There are no Liens for Taxes on any asset of the Company or any
Subsidiary of the Company, except for Liens for Taxes not yet due and
payable.
(vii) Neither the Company nor any of its Subsidiaries is a party
to or is bound by any Tax sharing, allocation or indemnification agreement
or arrangement (including by operation of law), other than such an
agreement or arrangement exclusively between or among the Company and its
Subsidiaries.
(viii) Within the past five years, neither the Company nor any of
its Subsidiaries has been a "distributing corporation" or a "controlled
corporation" in a distribution intended to qualify under Section 355(a) of
the Code.
(ix) There is no contract, agreement, plan or arrangement to which
the Company or any Subsidiary of the Company is a party, covering any
person that individually or collectively (either alone or upon the
occurrence of any additional or subsequent event), could give rise to the
payment of any amount that would not be deductible by Merger Sub or its
Affiliates by reason of Section 280G of the Code, or would constitute
compensation in excess of the limitation set forth in Section 162(m) of the
Code.
(x) There are no audits, investigations or claims asserted for Taxes
or assessments upon the Company or any Subsidiary of the Company, nor has
the Company or any Subsidiary of the Company received any notice from any
taxing authority that it intends to conduct such an audit, investigation,
or assertion of a claim.
12
(i) Absence of Certain Changes or Events. Since March 31, 2001 (a)
------------------------------------
there has not been any change, event or development having, or that would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its Subsidiaries or materially impair or delay
the ability of the Company to consummate the transactions contemplated hereby,
other than events, changes or effects that are related to or result from the
execution and delivery of this Agreement or from any action or inaction on the
part of Merger Sub or its Affiliates, and (b)(i) the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice and (ii) neither the Company nor any of its
Subsidiaries has taken any action which, if taken after the date hereof, would
constitute a breach of any provision of Section 3.1 hereto.
(j) Vote Required. The requisite affirmative vote of the holders of a
-------------
majority of the outstanding shares of Company Common Stock (the "Required
--------
Company Vote") is the only vote of the holders of any class or series of equity
------------
securities of the Company or any Subsidiary securities necessary to adopt this
Agreement, the Merger and the transactions contemplated by this Agreement.
(k) Employee Benefit Plans; Labor Matters.
-------------------------------------
(i) The Company has no material "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), severance, change-in-control
-----
or employment plan, program or agreement, stock option, bonus plan, or
incentive plan or program ("Company Plans"). Copies or descriptions of the
-------------
Company Plans have been or will be made available to Merger Sub or its
Affiliates.
(ii) Except as would not have a Material Adverse Effect on the
Company, each Company Plan has been administered and is in compliance with
the terms of such Plan and all applicable laws, rules and regulations.
(iii) Each Company Plan intended to be qualified has received a
favorable determination from the Internal Revenue Service and, except as
would not have a Material Adverse Effect on the Company, to the Company's
knowledge nothing has occurred since that would adversely affect such
qualification.
(iv) Except as would not have a Material Adverse Effect on the
Company and its Subsidiaries: (i) no "reportable event" (as such term is
used in section 4043 of ERISA) (other than those events for which the 30
day notice has been waived pursuant to the regulations) is pending with
respect to any Company Plan, and (ii) no "accumulated funding deficiency"
(as such term is used in section 412 or 4971 of the Code) has occurred
during the last five years with respect to any Company Plan.
(v) No litigation or administrative or other proceeding
involving any Company Plans has occurred or, to the Company's knowledge,
are threatened, where, in either case, an adverse determination would
result in liability that would have a Material Adverse Effect on the
Company and its Subsidiaries.
13
(vi) The Company has not contributed to any "multiemployer
plan" (within the meaning of section 3(37) of ERISA) and neither the
Company nor any member of its Controlled Group (defined as any organization
which is a member of a controlled group of organizations within the meaning
of Code sections 414(b), (c), (m) or (o)) has incurred any withdrawal
liability which remains unsatisfied in an amount which would result in
liability that would have a Material Adverse Effect on the Company and its
Subsidiaries.
(vii) No Company Plan, or plan sponsored by any member of the
Company's Controlled Group, has been terminated, where such termination has
resulted in liability under Title IV of ERISA that would have a Material
Adverse Effect on the Company and its Subsidiaries.
(viii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will give any
party to any collective bargaining agreement or union contract covering
employees of the Company or its Subsidiaries the right to renegotiate or
terminate such collective bargaining agreement or union contract.
(l) Change of Control Payments; Takeover Restrictions.
-------------------------------------------------
(i) Neither the Company nor its Subsidiaries has any plans or
agreements, other than this Agreement, to which they are parties, or by
which they or their properties are bound, pursuant to which payments,
including with respect to the acceleration of benefits, will be required
upon (A) or as a result of the execution of this Agreement or consummation
of the transactions contemplated hereby, including the Exchange Offers, or
(B) the termination or closing of any of the Company's operations or
facilities.
(ii) No state takeover statute or similar statute, including
any "moratorium", "control share", "fair price", "Affiliate transaction",
"business combination" or other antitakeover Laws and regulations of any
state, including, without limitation, Section 203 of the DGCL, or any
antitakeover provision in the Company's certificate of incorporation and
bylaws applies to this Agreement or any of the transactions contemplated
hereby, including the Exchange Offers and the Merger. No provision of the
Charter or Bylaws of the Company or any Subsidiary would, directly or
indirectly, restrict or impair the ability of Merger Sub or its Affiliates
to vote, or otherwise to exercise the rights of a stockholder with respect
to securities of the Company or any Subsidiary that may be acquired or
controlled by Merger Sub or its Affiliates pursuant to the Exchange Offers
or permit any stockholder to acquire securities of the Company on a basis
not available to Merger Sub or its Affiliates in the event that Merger Sub
or its Affiliates were to acquire securities of the Company.
(m) No Undisclosed Liabilities. Since December 31, 2000, there have
--------------------------
not been incurred any liabilities by the Company or its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, which would be required
14
by GAAP, applied on a basis consistent with the financial statements, to be
disclosed in the consolidated balance sheet of the Company and its Subsidiaries
and the notes thereto, other than: (i) liabilities disclosed or referenced in
the Company SEC Reports; (ii) liabilities incurred in the ordinary course of
business consistent with past practice; and (iii) liabilities incurred in
connection with the Restructuring of which the transactions set forth in this
Agreement are a part.
(n) Intellectual Property. The Company owns or possesses valid
---------------------
licenses or other valid rights to use (in each case free and clear of all Liens)
all Intellectual Property used in the conduct of its business, except where the
failure to own or have rights in such Intellectual Property would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries. To the knowledge of the
Company, (i) no material claims are pending or threatened that the Company or
any Subsidiary is infringing on or otherwise violating the rights of any person
with regard to any Intellectual Property nor to the knowledge of the Company is
there any reasonable basis for any such claim and (ii) no person is infringing
on or otherwise violating any right of the Company or any Subsidiary with
respect to any Intellectual Property owned by and/or licensed to the Company or
any Subsidiary except for such claims and infringements which, individually or
in the aggregate, are not having and would not reasonably be expected to have a
Material Adverse Effect on the Company or its Subsidiaries or materially impair
or delay the ability of the Company to consummate the transactions contemplated
hereby.
(o) Environmental Matters.
---------------------
(i) Each of the Company and its Subsidiaries has obtained all
Environmental Permits, except for such failures to have Environmental Permits
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries. Each of
such Environmental Permits is in full force and effect and each of the Company
and its Subsidiaries is and has been in compliance with the terms and conditions
of all such Environmental Permits and with any applicable Environmental Law and
to the knowledge of Company, no action is pending or threatened to revoke,
amend, terminate or otherwise modify such Permits (collectively "Permit
------
Modifications") except for such noncompliance or Permit Modifications which,
-------------
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries.
(ii) No site or facility now or to the knowledge of the
Company, previously owned, operated or leased by the Company or any of its
Subsidiaries is listed or proposed for listing on the National Priorities List
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations thereunder
("CERCLA"), or on any similar state or local list of sites.
------
(iii) Except for such releases of Hazardous Substances which
individually or in the aggregate would not reasonably be expected to result in a
Material Adverse Effect on the Company and its Subsidiaries or which have been
in accordance with Environmental Permits, there have been no releases of
Hazardous Substances from facilities
15
while owned, operated or leased by the Company or its Subsidiaries.
(iv) The Company is not aware of any facts, circumstances or
conditions associated with the Company, the Company's Subsidiaries any current
or former property owned, operated or leased by the Company or its Subsidiaries
or any Person or entity to which the Company or its Subsidiaries has contractual
liability, which would reasonably be expected to result in the Company or its
Subsidiaries incurring liability under Environmental Laws that could reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries.
(v) The Company has made available to Merger Sub or its
Affiliates prior to the execution of this Agreement copies of all environmental
investigations, studies, audits, tests, reviews or other analyses in the
possession, custody or control of, the Company or any of its Subsidiaries in
relation to any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries.
(p) Material Contracts.
------------------
(i) The Company has heretofore made available to Merger Sub or
its Affiliates true, correct and complete copies of all written contracts and
agreements (and all amendments, modifications and supplements thereto and all
side letters to which the Company or any of its Subsidiaries is a party
affecting the obligations of any party thereunder) to which the Company or any
of its Subsidiaries is a party or by which any of its properties or assets are
bound that are material to the business, properties or assets of the Company and
its Subsidiaries taken as a whole, including, without limitation, to the extent
any of the following are, individually or in the aggregate, material to the
business, properties or assets of the Company and its Subsidiaries taken as a
whole, all: (i) employment, severance, product design or development, personal
services, consulting, non-competition or indemnification contracts (including,
without limitation, any contract to which the Company or any of its Subsidiaries
is a party involving employees of the Company); (ii) licensing, merchandising,
representation or distribution agreements; (iii) contracts granting a right of
first refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of material
properties or assets of the Company (by merger, purchase or sale of assets or
stock or otherwise) entered into since January 1, 1998; (vi) contracts or
agreements with any Governmental Entity; (vii) loan or credit agreements,
mortgages, indentures or other agreements or instruments evidencing indebtedness
for borrowed money by the Company or any of its subsidiaries or any such
agreement pursuant to which indebtedness for borrowed money may be incurred;
(viii) agreements that purport to limit, curtail or restrict the ability of the
Company or any of its subsidiaries to compete in any geographic area or line of
business; (ix) contracts or agreements that would be required to be filed as an
exhibit to a Form 10-K filed by the Company with the SEC on the date hereof; and
(x) commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 6.1
hereof, the "Material Contracts"). Neither the Company nor any of its
------------------
Subsidiaries is a party to or bound by any severance or other agreement with any
employee or consultant pursuant to which such
16
person would be entitled to receive any additional compensation or an
accelerated payment of compensation as a result of the consummation of the
transactions contemplated hereby.
(ii) Each of the Material Contracts constitutes the valid and
legally binding obligation of the Company or its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. There is no
default under any Material Contract so listed either by the Company or any of
its Subsidiaries or, to the Company's knowledge, 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 its
Subsidiaries or, to the Company's knowledge, any other party.
(iii) No party to any such Material Contract has given notice to
the Company or any of its Subsidiaries of or made a claim against the Company or
any of its Subsidiaries with respect to any breach or default thereunder.
(q) Insurance. The insurance policies maintained by the Company and
---------
its Subsidiaries are fully paid and in force and have been issued by insurers,
which, to the Company's knowledge, are reputable and financially sound and
provide coverage for the operations conducted by the Company and its
Subsidiaries of a scope and coverage consistent with customary industry
practice.
(r) Opinion of Financial Advisor. Xxxxxxxxx & Company, Inc. (the
----------------------------
"Financial Advisor") has delivered to the Company Board its opinion, dated the
-----------------
date of this Agreement, to the effect that, as of such date, consideration to be
received in the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view, and such opinion has not been
withdrawn or modified. The Company has been authorized by the Financial Advisor
to permit the inclusion of such opinion in its entirety in the Proxy Statement,
so long as such inclusion is in form and substance reasonably satisfactory to
the Financial Advisor and its counsel.
(s) Brokers. No broker, finder or investment banker (other than the
-------
Financial Advisor, a true and correct copy of whose engagement agreement has
been provided to Merger Sub or an Affiliate thereof) is entitled to any
brokerage, finder's or other fee or commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company or any of its Affiliates.
2.2 Representations and Warranties of Merger Sub.
Merger Sub represents and warrants to the Company as follows:
(a) Organization, Standing and Power. Except where a failure would
--------------------------------
materially impair or delay the ability of Merger Sub to consummate the
transactions contemplated hereby, Merger Sub has been duly incorporated and is
validly existing and in good standing under the laws of the State of Delaware;
Merger Sub was formed solely for the purpose
17
of engaging in the transactions contemplated by this Agreement, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby. Merger Sub is a direct, wholly owned subsidiary of Parent.
(b) Authority; No Conflicts.
-----------------------
(i) Merger Sub has all requisite corporate power and corporate
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Parent, as the sole stockholder of Merger Sub, has approved
this Agreement and the transactions contemplated hereby. The execution, delivery
and performance by Merger Sub of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action on the part of Merger Sub. This Agreement has
been duly executed and delivered by Merger Sub and constitutes a valid and
binding agreement of Merger Sub, enforceable against Merger Sub in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by Merger Sub of
this Agreement does not or will not, as the case may be, and the consummation of
the transactions contemplated hereby will not, result in any Violation of: (A)
any provision of the Organizational Documents of Merger Sub or (B) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Merger Sub or its respective properties or assets except, in each
case, as would not reasonably be expected to materially impair or delay the
ability of Merger Sub to consummate the transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Merger Sub in connection with the execution and delivery of
this Agreement by Merger Sub or the consummation by Merger Sub of the
transactions contemplated hereby, except for (A) the consents, approvals,
orders, authorizations, registrations, declarations and filings required under
or in relation to clause (x) of Section 2.1(c)(iii), and (B) such consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure to make or obtain which would not reasonably be expected to materially
impair or delay the ability of Merger Sub to consummate the transactions
contemplated hereby. Without limiting the generality of the foregoing, Merger
Sub has determined, upon consultation with competent legal counsel, that no
filing under the HSR Act is required to be made by Parent or any Affiliate of
Parent in connection with this Agreement or the consummation by Merger Sub of
the transactions contemplated hereby.
18
(c) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by
Merger Sub in writing for inclusion or incorporation by reference in the Proxy
Statement will, at the time such document is filed with the SEC, and when first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading or, at the
time of the Company Stockholders' Meeting, and at the Effective Time, contain
any untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders'
Meeting, which shall have become misleading.
(ii) Notwithstanding the foregoing provisions of this Section
2.2(c), no representation or warranty is made by Merger Sub with respect to
statements made or incorporated by reference in the Proxy Statement based on
information supplied by the Company for inclusion or incorporation by reference
therein.
(d) Vote Required. No vote of the holders of the outstanding voting
-------------
securities of Parent is necessary to approve this Agreement or any of the
transactions contemplated hereby.
(e) Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Merger Sub.
(f) Ownership of Company Stock. As of the date of this Agreement,
--------------------------
neither Merger Sub nor, to the best of its knowledge, any of its Affiliates or
associates (as such term is defined under the Exchange Act) (i) beneficially
owns, directly or indirectly or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
case of either clause (i) or (ii), shares of stock of the Company except
ownership of less than 5% of the outstanding shares of Company Common Stock and
Affiliates of Merger Sub are third party beneficiaries of the Support
Agreements. As of the date of this Agreement, neither Merger Sub nor any
Affiliate of the Merger Sub is an "interested stockholder" of the Company within
the meaning of Section 203 of the DGCL.
(g) No Business Activities. Merger Sub is not a party to any material
----------------------
agreements and has not conducted any activities other than in connection with
the organization of Merger Sub, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby. Merger Sub, as of
the date of this Agreement, has no Subsidiaries and no material liabilities.
19
ARTICLE III.
COVENANTS
3.1 Covenants of the Company.
During the period from the date of this Agreement and continuing until
the Effective Time (except as expressly contemplated or permitted by this
Agreement or the Exchange Offers or to the extent that Merger Sub shall
otherwise consent in writing):
(a) Ordinary Course. The Company shall, and shall cause its
---------------
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in all material respects, and shall use all reasonable best
efforts to keep available the service of its current officers, preserve intact
their present business organizations and preserve their relationships with
customers, suppliers and others having business dealings with them.
(b) Dividends; Changes in Share Capital. The Company shall not, and
-----------------------------------
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its stock, (ii) split, combine or reclassify
any of its 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
stock, or (iii) repurchase, redeem or otherwise acquire any shares of its stock
or any securities convertible into or exercisable or exchangeable for any shares
of its stock except as otherwise permitted under certain option agreements to
effect cashless option exercises.
(c) Issuance of Securities. The Company shall not and shall not cause
----------------------
its Subsidiaries to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its stock of any class or any
securities convertible into or exercisable or exchangeable for, or any rights,
warrants or options to acquire, any such shares or bonds, debentures, notes or
other indebtedness of the Company having the right to vote on any matter on
which stockholders may vote, or enter into any agreement with respect to any of
the foregoing, other than the issuance of Company Common Stock upon the exercise
of stock options granted in accordance with the terms of the Company Equity
Plans as in effect on the date of this Agreement.
(d) Organizational Documents. Except to the extent required to comply
------------------------
with their respective obligations to Merger Sub hereunder, the Company and its
Subsidiaries shall not amend or propose to amend their respective Organizational
Documents other than to adopt and file with the Secretary of State of the State
of Delaware the Certificate of Designations for the Preferred Stock.
(e) Indebtedness. Neither the Company nor any of its Subsidiaries
------------
shall (i) incur any indebtedness for borrowed money, other than financing to be
incurred in connection with the Restructuring, which shall be on terms and
conditions acceptable to Merger Sub or Parent (the "New Financing"), or assume,
-------------
endorse or guarantee or otherwise become liable for any such indebtedness or
issue, assume or sell any debt securities or warrants or rights to acquire any
debt securities of the Company or guarantee or otherwise become liable for any
debt securities of other Persons other than (w) the Subordinated Notes, (x)
indebtedness of the Company or its Subsidiaries to the Company or its
Subsidiaries, (y) borrowings under existing credit lines, including in support
of letters of credit, in the ordinary
20
course of business or (z) otherwise in the ordinary course of business for
capital or operating leases, (ii) make any loans, advances or capital
contributions to, or investments in, any other Person, other than by the Company
or its Subsidiaries to or in the Company or its Subsidiaries or (iii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than, in the case of
clauses (ii) and (iii), loans, advances, capital contributions, investments,
payments, discharges or satisfactions incurred or committed to in the ordinary
course of business or in connection with the Restructuring. Notwithstanding
anything herein to the contrary, the Company shall be permitted to release any
officer or director of the Company or any of its Subsidiaries from any and all
liabilities arising from acts or omissions in their respective capacities as
officers or directors at and prior to the Effective Time, except for acts of
willful misconduct or gross negligence. The Company will not repurchase or
otherwise acquire any Senior Notes other than pursuant to the Exchange Offers.
(f) Benefit Plans. The Company shall not, and shall not permit its
-------------
Subsidiaries to, (i) take any action with respect to the grant of any severance
or termination pay, or stay bonus or other incentive arrangement, other than
pursuant to benefit plans and policies in effect on the date of this Agreement
and the New Incentive Plan or to the extent payments to be made to employees
under stay bonuses or other incentive arrangements do not exceed $60,000 in
the aggregate or (ii) amend, establish or create any benefit plan, arrangement,
policy or agreement which would be a Company Plan if in existence as of the date
of this Agreement, except any such increases or grants made in the ordinary
course of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the Company
and its Subsidiaries taken as a whole other than pursuant to the Employee
Retention Policies or (iii) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof except in the
ordinary course of business consistent with past practice. The Company Board or
any committee thereof shall take no action to waive any provision of any Company
Equity Plan that would otherwise cause the Company Options thereunder to be
cancelled or converted at the Effective Time in accordance with their terms and
without further action by the Company, the Company Board or any committee
thereof. The Company shall not grant any Company Options or reduce the exercise
price of any existing Company Option.
(g) Investments. The Company shall not directly or indirectly
-----------
acquire, make any investment in, or make any contributions to, any Person (other
than a Subsidiary of the Company).
(h) Accounting. The Company shall not make any change in any method
----------
of accounting or accounting practice or policy, except as required by GAAP. The
Company shall not revalue any material assets of the Company or any of its
Subsidiaries, including but not limited to writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course of
business or as required by GAAP.
(i) Transfer of Assets. (1) The Company shall not, and shall cause
------------------
its Subsidiaries not to, acquire, sell, transfer, lease or encumber any assets
except in the ordinary
21
course of business and consistent with past practice, enter into any commitment
or transaction outside the ordinary and usual course of business consistent with
past practice, or (2)(A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein or (B) enter into any contract
or agreement, other than in the ordinary and usual course of business consistent
with past practice or amend in any material respect any other agreement that is
material to the Company or any of its Subsidiaries, except in the ordinary
course of business consistent with past practice.
(j) Liquidation or Dissolution. The Company shall not adopt a plan of
--------------------------
complete or partial liquidation or adopt resolutions providing for the complete
or partial liquidation, dissolution, consolidation, merger, restructuring or
recapitalization of the Company or any of its Subsidiaries other than the
Restructuring.
(k) Transactions with Affiliates. The Company shall not, and shall
----------------------------
cause its Subsidiaries not to, sell or transfer any property or assets of the
Company or its Subsidiaries to, or purchase or acquire any property or assets
from, or otherwise engage in any of the foregoing transactions with, any
Affiliate of the Company or a Subsidiary of the Company, except that the Company
may engage in any of the foregoing transactions with any Subsidiary that is
directly or indirectly wholly owned by the Company and except as expressly
contemplated by the Restructuring.
(l) Exchange Offers. At the Effective Time the Company shall accept
---------------
for payment all Senior Notes properly tendered and not withdrawn in the Exchange
Offers.
(m) Other Actions. The Company shall not, and shall not permit its
-------------
Subsidiaries to, take or agree to take any action that does, or would reasonably
be expected to, result in (i) any of the representations or warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) except as otherwise
permitted by Sections 4.1(a) or 4.4, any of the conditions to the Merger set
forth in Article VI not being satisfied. The Company shall not (x) make or
revoke any Tax election, or settle or compromise any Tax liability, or change
(or make a request to any taxing authority to change) any aspect of its method
of accounting for the Tax purposes except in the ordinary course of business
consistent with past practice; (y) settle or compromise any pending or
threatened suit, action or claim relating to the transactions contemplated
hereby; or (z) enter into any agreement or arrangement that limits or otherwise
restricts the Company or any of its Subsidiaries or any successor thereto or
that could, after the Effective Time, limit or restrict the Surviving
Corporation and its Affiliates (including Parent) or any successor thereto, from
engaging or competing in any line of business or in any geographic area.
(n) Agreements. The Company shall not, and shall not permit its
----------
Subsidiaries, to, enter into any agreement to do any of the foregoing.
22
3.2 Communication and Advice of Changes.
Each party shall (a) confer on a regular and frequent basis with the
other party, (b) report to the other party (to the extent not prohibited by law,
regulation and any applicable confidentiality agreement) on operational matters
related to the Company or the transactions contemplated hereby and (c) promptly
notify the other party orally and in writing if the party learns of the
occurrence of any Material Adverse Effect to the Company or Merger Sub or any
event that could reasonably be expected to result in a Material Adverse Effect
to the Company or Merger Sub or has or could reasonably be expected to result in
the breach of a representation and warranty or the failure of a condition
contained in this Agreement.
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 Preparation of Proxy Statement; the Company Stockholders' Meeting.
(a) The Company shall as promptly as practicable prepare and file the
Proxy Statement relating to the Company Stockholders' Meeting to be held in
connection with the approval of the Merger (the "Company Stockholders' Meeting")
-----------------------------
with the SEC and will use its reasonable best efforts to respond after
consultation with Merger Sub and its counsel to the comments of the SEC and to
cause the Proxy Statement to be mailed to the Company's stockholders at the
earliest practical time. The Company will notify Merger Sub promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Merger Sub with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the stockholders' meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will promptly prepare, after consultation with
Merger Sub and its counsel, and mail to its stockholders such an amendment or
supplement.
(b) The Company will, through the Company Board, recommend to its
stockholders approval of this Agreement, the Merger and the other transactions
contemplated hereby, unless the taking of such action would be inconsistent with
the Company Board's fiduciary duties to stockholders under applicable laws.
Subject to the Company Board's fiduciary duties under applicable laws, the
Company shall solicit from Company stockholders entitled to vote at the Company
Stockholders' Meeting proxies in favor of such approval and shall take all other
action necessary or, in the judgment of Merger Sub, helpful to secure the vote
or consent of such holders required by the DGCL or this Agreement to effect the
Merger. Notwithstanding any withdrawal or modification of the Company Board's
recommendation to the stockholders of the Company to vote for the adoption of
this Agreement unless the Prepackaged Plan has been filed, the Company shall
cause the Company Stockholders' Meeting to be held. The Company shall
coordinate and cooperate with Merger Sub with respect to the timing of such
meeting but which meeting shall be held not later than July 12, 2001.
23
4.2 Access to Information.
(a) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement in accordance with the terms hereof, upon
reasonable notice, the Company shall afford to the officers, employees,
accountants, counsel, financial advisors and auditors and other representatives
of Merger Sub ("Merger Sub Representatives") reasonable access during normal
--------------------------
business hours, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records and its officers, management employees and
representatives and, during such period, the Company shall furnish promptly to
Merger Sub, all information concerning its and its Subsidiaries' business,
properties and personnel as the other party may reasonably request; provided,
--------
however, the Company may restrict the foregoing access to the extent that (i) a
-------
Governmental Entity requires the Company or any of its Subsidiaries to restrict
access to any properties or information reasonably related to any such contract
on the basis of applicable Laws and regulations or (ii) any Law, treaty, rule or
regulation of any Governmental Entity applicable to the Company or any of its
Subsidiaries requires the Company or any of its Subsidiaries to restrict access
to any properties or information (and subject, however, to existing
confidentiality and similar non-disclosure obligations and the preservation of
attorney client and work product privileges).
(b) From the date hereof until the earlier of the Effective Time or
the date that is 30 days after the termination of this Agreement, Merger Sub and
its Affiliates shall abide by the confidentiality provisions set forth in Annex
-----
B hereto. The provisions of this Section 4.2(b) shall supersede the provisions
-
of that Certain Confidentiality Agreement, dated March 8, 2001, between the
Company and GSCP (N.J.), L.P., which is hereby terminated and shall be of no
further force and effect.
4.3 Approvals and Consents; Cooperation.
The Company and Merger Sub shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) its reasonable best
efforts to take or cause to be taken all actions, and do or cause to be done all
things, necessary, proper or advisable on their part under this Agreement and
applicable Laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable. The Company
and Merger Sub shall, upon request by the other, furnish the other with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may reasonably be necessary for inclusion
in the Proxy Statement or any other statement, filing, tax ruling request,
notice or application made by or on behalf of the Company and Merger Sub or any
of their respective Affiliates to any third party and/or any Governmental Entity
in connection with the Merger, Exchange Offers or the other transactions
contemplated by this Agreement.
4.4 No Solicitation.
(a) The Company shall not, nor shall it permit any Subsidiary of the
Company to, nor shall it authorize any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or Company Subsidiary to, (i) solicit, initiate, knowingly encourage the
submission of, or participate in any discussions or negotiations
24
regarding or furnish to any person any information with respect to, or take any
other action to knowingly facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to any Company Takeover
Proposal (as defined in Section 4.4(e)), or (ii) enter into any agreement with
respect to any Company Takeover Proposal; provided, however, that at any time
-------- -------
during the period following the execution of the Agreement and prior to the
Effective Date (the "Company Application Period"), if the Company receives a
--------------------------
proposal or offer that was not solicited by the Company and that did not
otherwise result from a breach of this Section 4.4(a) and that the Company Board
determines in good faith (after consultation with its outside counsel and its
financial advisor) could result in a third party making a Superior Company
Proposal (as defined in Section 4.4(e)), and subject to compliance with Section
4.4(c), the Company may, to the extent necessary to comply with the applicable
fiduciary duties of the Company Board, as determined in good faith by it after
consultation with outside counsel, (A) furnish information with respect to the
Company to the Person making such proposal or offer pursuant to a
confidentiality agreement containing terms at least as stringent as set forth in
Annex B, as determined by the Company after consultation with its outside
-------
counsel, and (B) participate in discussions or negotiations with such Person
regarding such proposal or offer. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in the preceding sentence by
any executive officer of the Company or any Company Subsidiary or any Affiliate,
director or investment banker, attorney or other advisor or representative of
the Company or any of the Company Subsidiaries, shall be deemed to be a breach
of this Section 4.4(a) by the Company. The Company shall, and shall cause its
officers and directors and any investment banker, attorney or other advisor or
representative of the Company or any Company Subsidiary to, cease immediately
all discussions and negotiations regarding any proposal that constitutes, or
would reasonably be expected to lead to, a Company Takeover Proposal.
(b) Except as expressly permitted by this Section 4.4, neither the
Company Board nor any committee thereof shall approve any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any Company Takeover Proposal or approve or recommend, or propose to approve or
recommend, any Company Takeover Proposal. The Company may terminate this
Agreement pursuant to Section 6.1(e) only if (i) the Company Board has received
a Superior Company Proposal, (ii) in light of such Superior Company Proposal the
Company Board has determined in good faith, after consultation with outside
counsel, that it is necessary for the Company Board to withdraw or modify its
approval or recommendation of this Agreement or the Merger in order to comply
with applicable fiduciary duties of the members of the Company Board, (iii) the
Company has notified Merger Sub in writing of the determination described in
clause (ii) above, (iv) the Company is in compliance with this Section 4.4, and
(v) the Company Board concurrently approves, and the Company concurrently enters
into, a definitive agreement providing for the implementation of such Superior
Company Proposal.
(c) The Company shall advise Merger Sub orally and in writing
promptly upon receipt of any Company Takeover Proposal or any inquiry with
respect to or that would reasonably be expected to lead to any Company Takeover
Proposal, the identity of the person making any such Company Takeover Proposal
or inquiry and the material terms of any such Company Takeover Proposal or
inquiry.
25
(d) Neither the Company nor the Company Board nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to Merger Sub, the approval or recommendation of the Company
Board of this Agreement or the Merger, or approve or recommend, or propose
publicly to approve or recommend, a Company Takeover Proposal, unless a
withdrawal or modification of such approval or recommendation is, in the good
faith judgment of the Company Board after consultation with its outside counsel,
necessary to comply with applicable fiduciary duties. Nothing contained in this
Section 4.4 shall prohibit the Company (i) from taking and disclosing to its
stockholders a position and making disclosure required by Rule 14e-2 promulgated
under the Exchange Act or (ii) from making any other required disclosure to the
Company's stockholders if, in the good faith judgment of the Company Board,
after consultation with its outside counsel, failure to make such other disclose
would be inconsistent with its fiduciary duties under law.
(e) For purposes of this Agreement:
"Company Takeover Proposal" means any inquiry, proposal or offer for a
-------------------------
merger, consolidation, dissolution, liquidation, recapitalization or other
business combination involving the Company or Company Subsidiary, any
proposal or offer for the issuance by the Company of over 50% of its equity
securities as consideration for the assets or securities of any person or
any proposal or offer to acquire in any manner, directly or indirectly,
over 50% of the equity securities of consolidated total assets of the
Company, in each case, other than the transactions contemplated by this
Agreement.
"Superior Company Proposal" means any proposal made by a third party
-------------------------
to acquire all or substantially all of the equity securities or assets of
the Company, pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization, a sale of
its assets or otherwise, which a majority of the Company Board determines
in its good faith judgment (i) to be superior from a financial point of
view to the holders of Company Common Stock and Senior Notes (in light of
the Company Board's fiduciary duties as contemplated by clause (g) of this
Section 4.4) than the transactions contemplated by this Agreement and the
Exchange Offers (after consultation with the Financial Advisor), taking
into account all the terms and conditions of such proposal and this
Agreement and (ii) reasonably capable of being completed, taking into
account all financial, regulatory, legal and other aspects of such
proposal.
(f) Notwithstanding anything to the contrary contained in this
Section 4.4 or elsewhere in this Agreement, prior to the Effective Time, the
Company may refer any third party to this Section 4.4 and make a copy of this
Section 4.4 available to a third party.
(g) It is understood that for all purposes of this Section 4.4, any
references to the fiduciary duty of the Company Board shall include fiduciary
duties of the Company Board to the holders of the Senior Notes as well as to
stockholders as such may exist under applicable law.
26
4.5 Fees and Expenses.
(a) Except as expressly provided in Section 4.5(b) or the Exchange
Agreement, each party shall bear its own Expenses incurred in connection with
the negotiation, execution and performance of this Agreement. The Expenses
incurred in connection with the printing, filing and mailing to stockholders of
the Proxy Statement, shall be borne by the Company. As used in this Agreement,
"Expenses" includes all reasonable out-of-pocket expenses (including, without
--------
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
Exchange Offers and the transactions contemplated hereby and all other matters
related to the transactions contemplated hereby.
(b) If (x) the Company terminates this Agreement pursuant to Section
6.1(e), then the Company shall pay, or cause to be paid to Merger Sub or, at the
direction of Merger Sub to any Affiliate thereof, at the time of termination or
(y) Merger Sub terminates this Agreement pursuant to Section 6.1(h), then the
Company shall pay, or cause to be paid to Merger Sub or, at the direction of
Merger Sub, to any Affiliate thereof, within five Business Days of termination,
in either such case (but in no event shall amounts be paid under both clause (x)
and (y) above) an amount equal to Two Million, Five Hundred Thousand Dollars
($2,500,000) (the "Termination Fee") plus an amount equal to the actual and
---------------
reasonably documented Expenses of Merger Sub and its Affiliates (except to the
extent otherwise paid under the Exchange Agreement). Any payments required to
be made pursuant to this Section 4.5(b) shall be made by wire transfer of same
day funds to an account designated by Merger Sub.
(c) The Company acknowledges that the agreements contained in Section
4.5(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Merger Sub would not have entered into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to Section 4.5(b), and, in order to obtain such payment, Merger Sub
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 4.5, the Company shall pay to Merger Sub its reasonable
out-of-pocket costs and expenses (including attorneys' fees) in connection with
such suit.
4.6 Indemnification; Directors' and Officers' Insurance.
(a) As of the Effective Time, the certificate of incorporation of the
Surviving Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the certification of incorporation of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time
were directors, officers or employees of the Company. Merger Sub and the
Company agree that the directors, officers and employees of the Company covered
thereby are intended to be third party beneficiaries under this Section 4.6 and
shall have the right to enforce the obligations of the Surviving Corporation and
Merger Sub.
27
(b) From and after the Effective Time and until the sixth anniversary
of the Effective Time and for so long thereafter as any claim for
indemnification asserted on or prior to such date has not been fully
adjudicated, the Surviving Corporation shall indemnify, defend and hold harmless
each person who is now or who becomes prior to the Effective Time, a director or
officer of the Company or any of its Subsidiaries (the "Indemnified Parties")
-------------------
against (i) all losses, claims, damages, costs and expenses (including
reasonable attorneys' fees), liabilities, judgments and settlement amounts that
are paid or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at or after the Effective Time) that is
based in whole or in part on, or arises in whole or in part out of, the fact
that such Indemnified Party is or was a director or officer or agent of the
Company or any of its Subsidiaries and relates to or arises out of any action or
omission occurring at or prior to the Effective Time except to the extent
arising out of an Indemnified Party's gross negligence or willful misconduct
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole
-----------------------
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent a corporation is permitted under applicable law to indemnify its own
directors or officers, as the case may be; provided that the Surviving
Corporation shall not be liable for any settlement of any claim effected without
its written consent, which consent shall not be unreasonably withheld. Without
limiting the foregoing, in the event that any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising prior to or after the Effective Time), (w) the Surviving Corporation
will pay upon request reimbursement of documented expenses reasonably incurred
in advance of the final disposition of any such claim, action, suit, proceeding
or investigation to each Indemnified Party to the full extent permitted by
applicable law; provided that the person to whom expenses are advanced provides
any undertaking required by applicable law to repay such advance if it is
ultimately determined that such person is not entitled to indemnification; (x)
the Indemnified Parties shall retain counsel reasonably satisfactory to the
Surviving Corporation; (y) the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties (subject to the
final sentence of this paragraph) promptly as statements therefor are received;
and (z) the Surviving Corporation shall use all reasonable efforts to assist in
the defense of any such matter. Any Indemnified Party wishing to claim
indemnification under this Section, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify the Surviving Corporation, but
the failure so to notify the Surviving Corporation shall not relieve the
Surviving Corporation from any liability which it may have under this paragraph
except to the extent such failure materially prejudices the Surviving
Corporation. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, in the view of
counsel to the Indemnified Party under applicable standards of professional
conduct, a conflict or potential conflict on any significant issue between the
positions of any two or more Indemnified Parties in which case, the Indemnified
Parties may retain more than one law firm.
(c) Prior to the Effective Time, the Company has purchased policies
or extensions of current policies of directors' and officers' liability
insurance providing coverage for a six (6) year period after the Effective Time
with respect to claims arising from acts, facts, errors, omissions or events
that occurred on or prior to the Effective Time, including, without limitation,
in respect of the transactions contemplated hereby. The Surviving Corporation
shall
28
take no actions to cancel or modify in a manner adverse to the persons covered
by such insurance policy such policy.
4.7 Public Announcements.
So long as this Agreement is in effect, the Company and Merger Sub shall
use all reasonable best efforts to consult with each other before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby.
4.8 Takeover Statutes.
If any "fair price," "moratorium," "control share acquisition," "business
combination," or other form of antitakeover law or regulation shall become
applicable to the transactions contemplated hereby, the Company and the Company
Board shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.
4.9 Identification of Directors.
The Merger Sub shall deliver to the Company not less than five days prior
to the initially scheduled expiration time of the Exchange Offers written notice
setting forth the names of each of the individuals, other than Xx. Xxxx X.
XxXxxxxx, who will serve as directors of the Surviving Corporation by operation
of Section 1.7 herein and the Merger or to be appointed as a director by the
board of directors of the Surviving Corporation upon the consummation of the
Merger.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger.
The obligations of the Company and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. The Company shall have obtained all
--------------------
approvals of holders of shares of Company Common Stock necessary to adopt this
Agreement to the extent required by law.
(b) Exchange Offers. All conditions to the consummation of the
---------------
Exchange Offers shall have been satisfied or waived.
(c) No Injunctions or Restraints, Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
a court or other Governmental Entity of competent jurisdiction shall be in
effect and have the effect of making the Merger
29
illegal or otherwise prohibiting consummation of the Merger; provided, however,
-------- -------
that the provisions of this Section 5.1(c) shall not be available to any party
whose failure to fulfill its obligations pursuant to Section 4.3 hereto shall
have been the cause of, or shall have resulted in, such order or injunction.
(d) Effectiveness of Agreement. This Agreement shall not have been
--------------------------
terminated by the Company or Merger Sub pursuant to its terms.
ARTICLE VI.
TERMINATION AND AMENDMENT
6.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the Board of Directors of the terminating
party or parties, whether before or after approval of this Agreement and the
matters contemplated herein, including the Merger, by the stockholders of the
Company:
(a) By mutual written consent of Merger Sub and the Company by action
of their respective Boards of Directors;
(b) By the Company or Merger Sub if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(c) By the Company or Merger Sub if the Merger has not been
consummated on or before July 14, 2001; provided, however, that the party
-------- -------
seeking to terminate this Agreement pursuant to this Section 6.1(c) shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have materially contributed to the failure to consummate
the Merger on or before that date;
(d) By the Company or Merger Sub if any approval by the stockholders
of the Company required for the consummation of the Merger or the other
transactions contemplated hereby shall not have been obtained at the Company
Stockholders' Meeting or any adjournment thereof by reason of the failure to
obtain the required votes at a duly held meeting of stockholders or at any
adjournment thereof;
(e) By the Company in accordance with all of the requirements of
Section 4.4(b) provided the Company has materially complied with all provisions
thereof, including the notice provisions therein, and that it simultaneously
terminates this Agreement and makes payment to Merger Sub or an Affiliate
thereof, at the direction of Merger Sub, of the Expenses (as hereinafter
defined) and the Termination Fee pursuant to Section 4.5(b);
30
(f) By Merger Sub upon a breach of any covenant or agreement on the part
of the Company, or any representation or warranty of the Company set forth in
this Agreement that shall have been or become untrue (each, a "Terminating
-----------
Company Breach") and such Terminating Company Breach has not been cured within
--------------
ten (10) Business Days following notice of such breach to the Company by Merger
Sub; provided, however, that Merger Sub may not terminate this Agreement in the
-------- -------
event that such Terminating Company Breach would not individually or in the
aggregate constitute a Material Adverse Effect; and provided further that the
-------- -------
Effective Time may not occur during the pendency of any such notice period if
the notice would be one that relates to circumstances that would, if not cured,
permit termination of this Agreement under this clause (f);
(g) By the Company (i) upon a material breach of any covenant or agreement
on the part of Merger Sub set forth in this Agreement, or (ii) if (A) any
representation or warranty of Merger Sub that is qualified as to materiality
shall have become untrue or (B) any representation or warranty of Merger Sub
that is not so qualified shall have become untrue in any material respect
("Terminating Merger Sub Breach") and such Terminating Merger Sub Breach has not
-------------------------------
been cured within ten (10) Business Days following notice of such breach to
Merger Sub by the Company; or
(h) By Merger Sub in accordance with Section 2.02 of the Exchange
Agreement if the Company Board by the Specified Vote (defined below) shall
withdraw or modify, in a manner adverse to Merger Sub, its approval or
recommendation of this Agreement or the Merger (notice of which the Company
shall promptly provide to Merger Sub in writing) and FS Equity Partners II, L.P.
shall have terminated its Support Agreement pursuant to Section 2(iii) thereof.
"Specified Vote" shall mean a vote of the Company Board in which at least four
--------------
of the following five directors (or their replacements, if any of them shall no
longer be directors, so long as such replacements are not affiliated with FS
Equity Partners II, L.P.) shall approve the withdrawal or modification at issue:
Messrs. Askins, Caldiero, DiLacqua, Gurnitz and Xxxxxx; provided, however, that
-------- -------
Merger Sub may make such termination conditional upon its receipt of the
payments referred to in Section 4.5(b) hereof.
6.2 Effect of Termination.
In the event of termination of this Agreement by either the Company or
Merger Sub as provided in Section 6.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Merger Sub or
the Company or their respective officers or directors except, with respect to
the parties hereto, (i) with respect to Section 4.2(b), Section 4.5, this
Section 6.2 and Article VII and (ii) with respect to any liabilities or damages
incurred or suffered by a party as a result of the willful breach by the other
party of any of its covenants or other agreements set forth in this Agreement.
6.3 Amendment.
This Agreement may be amended by the parties hereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after
31
any such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
6.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties hereto may otherwise have at law or in equity. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VII.
GENERAL PROVISIONS
7.1 Non-Survival of Representations, Warranties and Agreements; No Other
Representations and Warranties.
None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VII. Both parties hereto agree that,
except for the representations and warranties contained in this Agreement or in
any instrument or agreement delivered pursuant to this Agreement, neither the
Company nor Merger Sub makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement, the documents and the instruments referred to herein, or the
transactions contemplated hereby or thereby.
7.2 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed duly given (a) on the date of delivery if delivered personally,
(b) on the first Business
32
Day following the date of dispatch if delivered by a nationally recognized next-
day courier service, (c) on the earlier of the date of receipt or the third
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy sent on the same day in the manner provided
in (a) or (b) or (c) above, when transmitted with confirmation that transmission
was made. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Merger Sub, to:
ES Acquisition Corp.
x/x Xxxxxxxxx Xxxxxx Xxxxxxx Partners
000 Xxxxxx Xxxxx Xxxxx 000
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq. and Xxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Company, to:
Envirosource, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xx. Xxxx X. XxXxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq. and Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
7.3 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits,
Annexes or Schedules, such reference shall be to a Section of or Exhibit or
Annex or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and
33
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of any
specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and neither party shall use the fact of setting of such
amounts or the fact of the inclusion of such item in the Schedules or Exhibits
in any dispute or controversy between the parties as to whether any obligation,
item or matter is or is not material for purposes hereof.
7.4 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
7.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement (including the Schedules, Exhibits and Annexes)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
(x) Article I (as relates to the payment of the Merger Consideration) and (y)
Section 4.6 (which is intended to be for the benefit of the Indemnified Parties
covered thereby and may be enforced by such Indemnified Parties).
7.6 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) Except with respect to applicable statutory obligations of the
Company Board and the state law requirements to effect the Merger, to which the
DGCL shall apply, this Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to the laws that might be
applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the
Federal court of the United States of
34
America sitting in the borough of Manhattan or, if such court will not accept
jurisdiction, the New York State Supreme Court sitting in the borough of
Manhattan, and any appellate court from any thereof, in any action or proceeding
brought by any party arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (i)
agrees not to commence any such action or proceeding except in such courts, (ii)
agrees that any claim in respect of any such action or proceeding may be heard
and determined, to the extent permitted by law, in such New York State court or
such Federal court, (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such New York State or
Federal court, and (iv) waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such New York State or Federal court. Each of the parties hereto agrees
that a final judgment (after any appeals) in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in Section
7.2. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
(c) BOTH PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES CERTIFY AND ACKNOWLEDGE THAT (i) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (ii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iii) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
7.6(c).
7.7 Severability.
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect.
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 an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible. Any provision of this Agreement held invalid or unenforceable
only in part, degree or certain jurisdictions will remain in full force and
effect to the extent not held invalid or unenforceable. To the extent permitted
by
35
applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
7.8 Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective permitted successors and assigns.
7.9 Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the parties shall be
entitled to specific performance of the terms hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
7.10 Definitions.
As used in this Agreement:
"Affiliate" means, when used with respect to a specified Person, another
---------
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Board of Directors" means the Board of Directors of any specified Person
------------------
and any properly serving and acting committees thereof.
"Business Day" means any day on which banks are not required or authorized
------------
to close in the City of New York.
"Company Common Stock" means all of the issued and outstanding shares of
--------------------
common stock, par value $0.05 per share, of the Company.
"Control" means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
term "Controlled" shall have a correlative meaning.
----------
"Employee Retention Policies" means that certain stay bonus policies
---------------------------
adopted by the Company Board, or a committee thereof, on or about June 4, 2001
in connection with the Restructuring.
36
"Environmental Law" means any Law relating to: (i) the protection,
-----------------
investigation or restoration of the environment, health, safety, or natural
resources; (ii) the handling, use, presence, disposal, Release or threatened
Release of any Hazardous Substance; or (iii) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property or
notifications to government agencies or the public in connection with any
Hazardous Substance including but not limited to, CERCLA, the Resources
Conservation and Recovery Act, the Clear Air Act, the Clear Water Act, the
Hazardous Materials Transportation Act, the Occupational Safety and Health Act.
"Environmental Permit" means any permit, license, approval or other
--------------------
authorization required by or necessary to achieve or maintain compliance with
any Environmental Law.
"Exchange Agreement" means that certain exchange and voting agreement
------------------
between the Company and certain holders of in excess of 63% of the aggregate
principal amount of the Senior Notes dated the date hereof.
"Existing Credit Facility" means the senior credit facility between
------------------------
International Mill Service, Inc. and Bank of America in effect on the date
hereof and as amended.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
-------
as amended.
"Hazardous Substance" means any substance, material or waste that is
-------------------
listed, classified or regulated pursuant to any Environmental Law, including but
not limited to any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
electromagnetic fields, microwave transmission, radioactive materials or radon.
"Intellectual Property" means patents, copyrights, trademarks (registered
---------------------
and unregistered); service marks, brand names, trade names, and registrations in
any jurisdiction of, and applications in any jurisdiction to register, the
foregoing.
"Laws" means any law, statute, ordinance, regulation, judgment, order,
----
decree, injunction, arbitration award, license, authorization, opinion, agency
requirement or permit of any Governmental Entity or common law as of the date of
this Agreement.
"Material Adverse Effect" means, with respect to the Company, any adverse
-----------------------
change measured from the date of this Agreement to the date of determination
that, individually or in the aggregate with all other adverse changes, has had,
or any event that could reasonably be expected to have, a material adverse
effect on the business, results of operations, assets, liabilities, financial
condition of the Company and its Subsidiaries taken as a whole; provided that no
adverse change shall be considered in determining if a Material Adverse Effect
has occurred if it results or arises from any announcement of the Restructuring,
as an effect of the Restructuring or effect or change caused by economic,
financial or market conditions generally or the steel industry specifically;
provided further that with respect to Merger Sub, the term Material
37
Adverse Effect means solely, any adverse change, circumstance, event or effect
that is materially adverse to Merger Sub's ability to perform its obligations
under this Agreement.
"New Incentive Plan" means that certain stock incentive plan for the grant
------------------
of options to be exercisable for shares of Surviving Corporation Common Stock.
"Organizational Documents" means, with respect to any entity, the
------------------------
certificate of incorporation, bylaws or other similar governing documents of
such entity.
"Person" means an individual, corporation, partnership, limited liability
------
company, association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
"Prepackaged Plan" means that certain pre-packaged plan of reorganization
----------------
of the Company under Chapter 11 of the United States Bankruptcy Code described
in the offering memorandum to be delivered to holders of the Senior Notes in
connection with the Exchange Offers and contemplated by the Exchange Agreement.
"Release" has the meaning provided for in CERCLA as defined by statute and
-------
construed by the courts as of the date of this Agreement.
"Support Agreements" means those certain support agreements dated the date
------------------
hereof between the Company and each of FS Equity Partners II, L.P. and the IBM
Retirement Plan Trust Fund pursuant to which such stockholders are obligated to
vote in favor of the Merger.
"Surviving Corporation Common Stock" means the common stock, par value
----------------------------------
$0.001, authorized to be issued by the Surviving Corporation.
"Subsidiary" when used with respect to any Person means any corporation or
----------
other organization, whether incorporated or unincorporated, (i) of which such
Person or any other Subsidiary of such Person is a general partner (excluding
partnerships, the general partnership interests of which held by such Person or
any Subsidiary of such Person do not have a majority of the voting and economic
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries.
"Tax" (including, with correlative meaning, the terms "Taxes" and
--- -----
"Taxable") shall mean (i) all federal, state, local or foreign taxes, charges,
-------
fees, imposts, levies or other assessments, including, without limitation, all
net income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever, (ii) all interest, penalties, fines, additions
to tax or additional amounts imposed by any taxing authority in connection with
any item described in clause (i); and liability for the payment of any of the
foregoing as a result of (x) being a member of an affiliated, consolidated,
combined or unitary
38
group, (y) being party to any tax sharing agreement and (z) any express or
implied obligation to indemnify any other person with respect to the payment of
any of the foregoing.
"Tax Return" means all returns and reports (including elections, claims,
----------
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a taxing or other governmental authority in
respect of any Taxes.
[Signature Page Follows]
39
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
ES ACQUISITION CORP.
By:_________________________
Name:
Title:
ENVIROSOURCE, INC.
By:_________________________
Xxxx X. XxXxxxxx
Chief Executive Officer
40
ANNEX A
Form of Certificate of Incorporation
------------------------------------
CERTIFICATE OF INCORPORATION
OF
ENVIROSOURCE, INC.
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is "Envirosource, Inc."
SECOND: The registered office of the Corporation in the State of
Delaware is to be located at 0000 Xxxxxx Xxxxxx in the City of Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware from time to time as amended..
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 25,620,000 shares, consisting of
(a) 5,620,000 shares of Preferred Stock, par value $0.001 per share, and
(b) 20,000,000 shares of Common Stock, par value $0.001 per share.
Except as otherwise provided by law, the shares of stock of the
Corporation, regardless of class, may be issued by the Corporation from time to
time in such amounts, for such consideration and for such corporate purposes as
the Board of Directors may from time to time determine.
Shares of Preferred Stock may be issued from time to time in one or
more series of any number of shares as may be determined from time to time by
the Board of Directors, provided that the aggregate number of shares issued and
not cancelled of any and all such series shall not exceed the total number of
shares of Preferred Stock authorized by this Certificate of Incorporation. Each
series of Preferred Stock shall be distinctly designated. Except in respect of
the particulars fixed for series by the Board of Directors as permitted hereby,
all shares shall be alike in every particular, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon shall be cumulative. The voting powers, if any, of each such series and
the preferences and relative, participating, optional and other special rights
of each such series and the qualifications, limitations and restrictions
thereof, if any, may differ from those of any and all other series at any time
outstanding; and the Board of Directors is hereby expressly granted authority to
fix, in the resolution or resolutions providing for the issue
A-1
of a particular series of Preferred Stock, the voting powers, if any, of each
such series and the designations, preferences and relative, participating,
optional and other special rights of each such series and the qualifications,
limitations and restrictions thereof to the full extent now or hereafter
permitted by this Certificate of Incorporation and the laws of the State of
Delaware.
Subject to the provisions of applicable law or of the By-laws with
respect to the closing of the transfer books or the fixing of a record date for
the determination of stockholders entitled to vote, and except as otherwise
provided by law or by the resolution or resolutions providing for the issue of
any series of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess the voting power for the election of directors and for
all other purposes, each holder of record of shares of Common Stock being
entitled to one vote for each share of Common Stock standing in his name on the
books of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in this Certificate of
Incorporation, by-laws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any by-laws adopted
by the Board of Directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
SIXTH: The Corporation shall indemnify, to the full extent permitted
by Section 145 of the General Corporation Law of Delaware, as amended from time
to time, all persons whom it may indemnify pursuant thereto. No director shall
be personally liable to the Corporation or any stockholder for monetary damages
for breach of fiduciary duty as a director, except for any matter in respect of
which such director shall be liable under Section 174 of Title 8 of the General
Corporation Law of Delaware or any amendment thereto or successor provision
thereto or shall be liable by reason that, in addition to any and all other
requirements for such liability, such director (i) shall have breached his or
her duty of loyalty to the Corporation or its stockholders, (ii) shall not have
acted in good faith or, in failing to act, shall not have acted in good faith,
(iii) shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law or (iv) shall have derived
an improper personal benefit. Neither the amendment nor repeal of this Article
Sixth or the adoption of any provision of the Certificate of Incorporation
inconsistent with this Article Sixth, shall eliminate or reduce the effect of
this Article Sixth in respect of any matter occurring, or any cause of action,
suit or claim that, but for this Article Sixth, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
A-2
ANNEX B
Confidentiality Provisions
--------------------------
Except as required by Law, unless otherwise agreed to in writing by
the Company, Merger Sub agrees, and will cause its Affiliates (i) to keep all
Proprietary Information confidential and not to disclose or reveal any
Proprietary Information to any Person other than Merger Sub Representatives who
are actively and directly participating in the Merger or the Restructuring or
who otherwise need to know the Proprietary Information for the purpose of
consummating the Merger or the Restructuring and to cause those Persons to
observe the terms of Section 4.2(b) and this Annex B, (ii) not to use
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Proprietary Information for any purpose other than in connection with the
consummation of the Merger in a manner that the Company has approved and (iii)
not to disclose to any Person (other than those Merger Sub Representatives who
are actively and directly participating in the consummation of the Merger or who
otherwise need to know the Proprietary Information for the purpose of
consummating the Merger and, in the case of Merger Sub Representatives, whom
Merger Sub will cause to observe the terms of Section 4.2(b) and this Annex B)
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any information about the Merger, or the terms and conditions or any other facts
relating thereto, including, without limitation, the fact that Proprietary
Information has been made available to Merger Sub and Merger Sub
Representatives. Merger Sub shall be responsible for any breach of the terms of
Section 4.2(b) and this Annex B by Merger Sub or Merger Sub Representative.
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In the event that Merger Sub is requested pursuant to, or required by,
legal process or otherwise by Law to disclose any Proprietary Information or any
other information concerning the Company or the Merger, Merger Sub agrees that
it shall provide the Company with prompt notice of such request or requirement
in order to enable the Company to seek an appropriate protective order or other
remedy, to consult with Merger Sub with respect to the Company's taking steps to
resist or narrow the scope of such request or legal process, or to waive
compliance, in whole or in part, with the terms of Section 4.2(b) and this Annex
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B. In any such event, Merger Sub shall use its reasonable best efforts to
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ensure that all Proprietary Information and any other information that is so
disclosed will be accorded confidential treatment.
If this Agreement is terminated pursuant to Article VI hereof, (1) the
provisions of this Annex B shall survive for thirty days following such
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termination and (2) Merger Sub shall, upon the written request of the Company,
promptly deliver to the Company or destroy all Proprietary Information,
including all copies, reproductions or extracts thereof or based thereon in the
possession of Merger Sub or Merger Sub Representatives. Except as set otherwise
set forth herein, each and every provision set forth herein shall terminate and
be of no further force or effect upon distribution by the Company of any
Offering Memorandum and Solicitation of Consents and Acceptances in connection
with one or both Exchange Offers regardless of whether the same is later amended
and regardless of whether the Exchange Offers shall later be withdrawn.
Notwithstanding the foregoing, Merger Sub shall, and shall cause its
Affiliates, to keep confidential for a period of two years after the earlier of
the termination of this Agreement
B-1
or the Effective Time all commercially sensitive non-public information of the
Company, other than such information that would be required to be disclosed in
accordance with federal securities laws in connection with the purchase or sale
of the Company's securities.
The provisions of this Annex B contain the entire agreement between
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the Company and Merger Sub concerning the confidentiality of the Proprietary
Information, and shall supersede the terms and conditions of any existing
confidentiality agreement between or among the Company, on the one hand, and
Merger Sub or any of its Affiliates, on the other hand. In furtherance and not
in limitation of the foregoing, it is understood that upon the effectiveness of
the foregoing Confidentiality Provisions, the provisions of that certain
Confidentiality Agreement, dated March 8, 2001, between the Company and GSCP
(N.J.), L.P., shall be terminated and shall be of no further force and effect.
"Merger Sub Representative" and "Company Representative" means, as to
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any Person, such Person's Affiliates and its and their directors, officers,
employees, agents, advisors (including, without limitation, financial advisors,
counsel and accountants) and controlling Persons.
"Proprietary Information" means all information about the Company
-----------------------
furnished by the Company or the Company Representatives, whether furnished
before or after the date of this Agreement, whether oral or written, and
regardless of the manner in which it was furnished, but does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by Merger Sub or a Merger Sub Representative, (ii)
was available to Merger Sub or any of its Affiliates on a nonconfidential basis
prior to its disclosure by the Company or a Company Representatives or (iii)
becomes available to Merger Sub on a nonconfidential basis from a Person other
than the Company or a Company Representative who is not known to Merger Sub to
be otherwise bound by a confidentiality agreement with the Company or any
Company Representative.
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