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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
LENNOX INTERNATIONAL INC.,
LII ACQUISITION CORPORATION,
AND
SERVICE EXPERTS, INC.
DATED AS OF OCTOBER 26, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER......................................................................................2
1.1 The Merger; Effective Time of the Merger........................................................2
1.2 Closing.........................................................................................2
1.3 Effects of the Merger...........................................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES..................................................................................3
2.1 Effect on Capital Stock.........................................................................3
(a) Capital Stock of Merger Sub............................................................3
(b) Cancellation of Treasury Stock.........................................................3
(c) Exchange Ratio for Company Common Stock................................................3
(d) Treatment of Company Stock Options, Warrants
and Restricted Stock Awards............................................................3
(e) Company Convertible Notes..............................................................3
2.2 Exchange of Certificates........................................................................4
(a) Exchange Agent.........................................................................4
(b) Exchange Procedures....................................................................4
(c) Distributions with Respect to Unexchanged Shares.......................................5
(d) No Further Ownership Rights............................................................5
(e) No Fractional Shares...................................................................5
(f) Termination of Exchange Fund...........................................................6
(g) No Liability...........................................................................6
(h) Lost, Stolen, or Destroyed Certificates................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................................................7
3.1 Representations and Warranties of the Company...................................................7
(a) Organization, Standing and Power.......................................................7
(b) Capital Structure......................................................................8
(c) Authority; No Violations; Consents and Approvals.......................................9
(d) SEC Documents.........................................................................11
(e) Information Supplied..................................................................11
(f) Absence of Certain Changes or Events..................................................12
(g) No Undisclosed Material Liabilities...................................................12
(h) No Default............................................................................12
(i) Compliance with Applicable Laws.......................................................12
(j) Litigation............................................................................13
(k) Taxes.................................................................................13
(l) Pension and Benefit Plans; ERISA......................................................15
(m) Labor Matters.........................................................................16
(n) Intangible Property...................................................................17
(o) Environmental Matters.................................................................18
(p) Insurance.............................................................................20
(q) Opinion of Financial Advisor..........................................................20
(r) Vote Required.........................................................................20
(s) Beneficial Ownership of Parent Common Stock...........................................20
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(t) Brokers...............................................................................20
(u) Tax Matters...........................................................................21
(v) State Takeover Statutes...............................................................21
3.2 Representations and Warranties of Parent.......................................................21
(a) Organization, Standing and Power......................................................21
(b) Capital Structure.....................................................................21
(c) Authority; No Violations, Consents and Approvals......................................22
(d) SEC Documents.........................................................................24
(e) Information Supplied..................................................................24
(f) Absence of Certain Changes or Events..................................................25
(g) No Undisclosed Material Liabilities...................................................25
(h) No Default............................................................................25
(i) Compliance with Applicable Laws.......................................................25
(j) Litigation............................................................................26
(k) Taxes.................................................................................26
(l) Pension and Benefit Plans; ERISA......................................................27
(m) Labor Matters.........................................................................28
(n) Intangible Property...................................................................29
(o) Environmental Matters.................................................................30
(p) Opinion of Financial Advisor..........................................................31
(q) Vote Required.........................................................................31
(r) Beneficial Ownership of Company Common Stock..........................................31
(s) Brokers...............................................................................31
(t) Tax Matters...........................................................................31
(u) Interim Operations of Merger Sub......................................................31
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
PENDING THE MERGER...........................................................................32
4.1 Conduct of Business by the Company Pending the Merger..........................................32
(a) Ordinary Course.......................................................................32
(b) Dividends; Changes in Stock...........................................................32
(c) Issuance of Securities................................................................32
(d) Governing Documents...................................................................33
(e) No Acquisitions.......................................................................33
(f) No Dispositions.......................................................................33
(g) No Dissolution, Etc...................................................................33
(h) Certain Employee Matters..............................................................33
(i) Indebtedness; Leases; Capital Expenditures............................................34
(j) Accounting............................................................................34
(k) Affiliate Transactions................................................................34
(l) Contracts.............................................................................34
(m) Insurance.............................................................................34
(n) Permits...............................................................................35
(o) Tax Matters...........................................................................35
(p) Discharge of Liabilities..............................................................35
(q) Other Actions.........................................................................35
(r) Agreements............................................................................35
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(s) 368(a) Reorganization.................................................................35
4.2 Conduct of Business by Parent Pending the Merger...............................................35
(a) Dividends; Changes in Stock...........................................................36
(b) Governing Documents...................................................................36
(c) Other Actions.........................................................................36
(d) Agreements............................................................................36
(e) 368(a) Reorganization.................................................................36
4.3 No Solicitation................................................................................36
4.4 Board of Directors.............................................................................37
ARTICLE V ADDITIONAL AGREEMENTS..........................................................................38
5.1 Preparation of S-4 and the Joint Proxy Statement...............................................38
5.2 Letter of the Company's Accountants............................................................38
5.3 Letter of Parent's Accountants.................................................................38
5.4 Access to Information..........................................................................38
5.5 Stockholders Meetings..........................................................................39
(a) Company Stockholders' Meeting.........................................................39
(b) Parent Stockholders' Meeting..........................................................39
5.6 HSR and Other Approvals........................................................................39
(a) HSR Act...............................................................................39
(b) Other Regulatory Approvals............................................................40
5.7 Agreements of Rule 145 Affiliates..............................................................40
5.8 Authorization for Shares and Stock Exchange Listing............................................40
5.9 Employee Matters...............................................................................41
5.10 Stock Options and Warrants; Restricted Stock Awards;
and Stock Purchase Plans.......................................................................41
5.11 Indemnification; Directors' and Officers' Insurance............................................42
5.12 Agreement to Defend............................................................................44
5.13 Public Announcements...........................................................................44
5.14 Other Actions..................................................................................44
5.15 Advice of Changes; SEC Filings.................................................................44
5.16 Reorganization.................................................................................44
5.17 Conveyance Taxes...............................................................................44
5.18 Other Agreements...............................................................................45
5.19 Company Credit Agreement.......................................................................45
ARTICLE VI CONDITIONS PRECEDENT...........................................................................45
6.1 Conditions to Each Party's Obligation to Effect the Merger.....................................45
(a) The Company Stockholder Approval......................................................45
(b) Parent Stockholder Approval...........................................................45
(c) NYSE Listing..........................................................................45
(d) Other Approvals.......................................................................45
(e) S-4...................................................................................46
(f) No Injunctions or Restraints..........................................................46
6.2 Conditions of Obligations of Parent............................................................46
(a) Representations and Warranties of the Company.........................................46
(b) Performance of Obligations of the Company.............................................46
(c) Letters from Rule 145 Affiliates......................................................46
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(d) Tax Opinion...........................................................................46
6.3 Conditions of Obligations of the Company.......................................................47
(a) Representations and Warranties of Parent and Merger Sub...............................47
(b) Performance of Obligations of Parent and Merger Sub...................................47
(c) Tax Opinion...........................................................................47
ARTICLE VII TERMINATION AND AMENDMENT......................................................................48
7.1 Termination....................................................................................48
7.2 Effect of Termination..........................................................................49
7.3 Amendment......................................................................................50
7.4 Extension; Waiver..............................................................................50
ARTICLE VIII GENERAL PROVISIONS.............................................................................51
8.1 Payment of Expenses............................................................................51
8.2 Nonsurvival of Representations, Warranties and Agreements......................................51
8.3 Notices........................................................................................51
8.4 Interpretation.................................................................................52
8.5 Counterparts...................................................................................52
8.6 Entire Agreement; No Third Party Beneficiaries.................................................53
8.7 Governing Law..................................................................................53
8.8 Jurisdiction...................................................................................53
8.9 No Remedy in Certain Circumstances.............................................................53
8.10 Assignment.....................................................................................53
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EXHIBITS:
Exhibit 3.1(i) Senior Managers
Exhibit 5.18 Voting Agreements
SCHEDULES:
COMPANY DISCLOSURE SCHEDULE:
Schedule 3.1(a)(i) Company Significant Subsidiaries
Schedule 3.1(a)(ii) Company Material Adverse Effect
Schedule 3.1(b)(iv) Company Warrants
Schedule 3.1(b)(v) Company Restricted Stock
Schedule 3.1(b)(viii) Company Convertible Subordinated Notes
Schedule 3.1(b)(ix) Company Subsidiaries
Schedule 3.1(b)(x) Company Capital Stock Liens and Rights
Schedule 3.1(c) Company Conflicts
Schedule 3.1(f) Company Changes or Events
Schedule 3.1(g) Company Undisclosed Liabilities
Schedule 3.1(h) Company Defaults
Schedule 3.1(j) Company Litigation
Schedule 3.1(k) Company Tax Information
Schedule 3.1(l) Company Pension and Benefit Plan and Related Information
Schedule 3.1(m) Company Labor Matters
Schedule 3.1(o) Company Environmental Matters
Schedule 4.1 Conduct of Business
PARENT DISCLOSURE SCHEDULE:
Schedule 3.2(a)(i) Parent Significant Subsidiaries
Schedule 3.2(a)(ii) Parent Material Adverse Effect
Schedule 3.2(b)(i) Parent Subsidiaries
Schedule 3.2(b)(ii) Parent Capital Stock Liens and Rights
Schedule 3.2(c) Parent Conflicts
Schedule 3.2(f) Parent Changes or Events
Schedule 3.2(k) Parent Tax Information
Schedule 3.2(l) Parent Pension and Benefit Plan and Related Information
Schedule 3.2(m) Parent Labor Matters
Schedule 3.2(o) Parent Environmental Matters
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GLOSSARY OF DEFINED TERMS
Defined Term Defined in Section
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Acquisition Proposal...................................................................... 4.3(b)
Affiliate................................................................................. 4.1(k)
Agreement................................................................................. Preamble
Antitrust Division........................................................................ 5.6(a)
Bank Credit Facility...................................................................... 5.19
Certificate............................................................................... 2.2(b)
Certificate of Merger..................................................................... 1.1
Closing................................................................................... 1.1
Closing Date.............................................................................. 1.2
Code...................................................................................... Recitals
Company................................................................................... Preamble
Company Common Stock...................................................................... 2.1
Company Convertible Notes................................................................. 3.1(b)
Company Counsel........................................................................... 6.3(c)
Company Disclosure Schedule............................................................... 3.1(a)
Company Employee Benefit Plans............................................................ 3.1(l)(i)
Company ERISA Affiliate................................................................... 3.1(l)(i)
Company Intangible Property............................................................... 3.1(n)
Company Litigation........................................................................ 3.1(j)
Company Option............................................................................ Recitals
Company Option Agreement.................................................................. Recitals
Company Order............................................................................. 3.1(j)
Company Pension Plan...................................................................... 3.1(l)(i)
Company Permits........................................................................... 3.1(i)
Company Preferred Stock................................................................... 3.1(b)
Company SEC Documents..................................................................... 3.1(d)
Company Stock Option...................................................................... 5.10
Company Stock Plans....................................................................... 3.1(b)
Company Stockholders' Meeting............................................................. 5.5(a)
Company Warrants.......................................................................... 3.1(b)
Confidentiality Agreements................................................................ 5.4
Constituent Corporations.................................................................. 1.3(a)
Conversion Number......................................................................... 2.1(c)
DGCL...................................................................................... 1.1
Effective Time............................................................................ 1.1
Environmental Laws........................................................................ 3.1(o)(A)
ERISA..................................................................................... 3.1(l)(i)
Excess Securities......................................................................... 2.2(e)
Exchange Act.............................................................................. 3.1(c)(iii)
Exchange Agent............................................................................ 2.2(a)
Exchange Fund............................................................................. 2.2(a)
Final Purchase Date....................................................................... 5.10(b)
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Defined Term Defined in Section
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Fractional Dividends...................................................................... 2.2(e)
FTC....................................................................................... 5.6(a)
GAAP...................................................................................... 3.1(d)
Governmental Entity....................................................................... 3.1(c)(iii)
Hazardous Materials....................................................................... 3.1(o)(B)
HSR Act................................................................................... 3.1(c)(iii)
Indemnified Liabilities................................................................... 5.11(a)
Indemnified Parties....................................................................... 5.11(a)
Injunction................................................................................ 6.1(f)
IRS....................................................................................... 3.1(k)(v)
Joint Proxy Statement..................................................................... 3.1(c)(iii)
Knowledge................................................................................. 3.1(i)
Letter of Transmittal..................................................................... 2.2(b)
Material Adverse Change................................................................... 3.1(a)
Material Adverse Effect................................................................... 3.1(a)
Merger.................................................................................... Recitals
Merger Sub................................................................................ Preamble
NYSE...................................................................................... 2.2(e)
Parent.................................................................................... Preamble
Parent Common Stock....................................................................... 2.1(c)
Parent Counsel............................................................................ 6.2(d)
Parent Disclosure Schedule................................................................ 3.2
Parent Employee Benefit Plans............................................................. 3.2(l)(i)
Parent ERISA Affiliate.................................................................... 3.2(l)(i)
Parent Intangible Property................................................................ 3.2(n)
Parent Litigation......................................................................... 3.2(j)
Parent Order.............................................................................. 3.2(j)
Parent Pension Plan....................................................................... 3.2(l)(i)
Parent Permits............................................................................ 3.2(i)
Parent Preferred Stock.................................................................... 3.2(b)
Parent SEC Documents...................................................................... 3.2(d)
Parent Stock Plan......................................................................... 3.2(b)
Parent Stockholders' Meeting.............................................................. 5.5(b)
Purchase Plans............................................................................ 5.10(b)
Reincorporation Agreement................................................................. 4.1(d)
Release................................................................................... 3.1(o)(C)
Remedial Action........................................................................... 3.1(o)(D)
Restricted Stock Award.................................................................... 3.1(b)
Rule 145 Affiliates....................................................................... 5.7
S-4....................................................................................... 3.1(e)
SEC....................................................................................... 3.1(a)
Securities Act............................................................................ 3.1(d)
Significant Subsidiary.................................................................... 3.1(a)
Subsidiary................................................................................ 3.1(a)
Surviving Corporation..................................................................... 1.3(a)
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Defined Term Defined in Section
------------ ------------------
SVE Tennessee............................................................................. 4.1(d)
Tax or Taxes.............................................................................. 3.1(k)
Tax Return................................................................................ 3.1(k)
Voting Debt............................................................................... 3.1(b)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 26, 1999
(this "Agreement"), among Lennox International Inc., a Delaware corporation
("Parent"), LII Acquisition Corporation, a Delaware corporation and a direct
wholly owned subsidiary of Parent ("Merger Sub"), and Service Experts, Inc., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company each have determined that it is in the best interests of
their respective stockholders for Merger Sub to merge with and into the Company
(the "Merger") upon the terms and subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and that
this Agreement shall be and is hereby adopted as a plan of reorganization for
purposes of Section 368 of the Code;
WHEREAS, as a condition of the willingness of Parent to enter
into this Agreement, certain stockholders of the Company will, simultaneously
with the execution of this Agreement, enter into stockholder voting agreements
pursuant to which each such stockholder will agree to vote in favor of this
Agreement and the Merger at the Company Stockholder Meeting (as hereinafter
defined);
WHEREAS, as a condition of the willingness of the Company to
enter into this Agreement, certain stockholders of Parent will, simultaneously
with the execution of this Agreement, enter into stockholder voting agreements
pursuant to which each such stockholder will agree to vote in favor of the
issuance of Parent Common Stock (as hereinafter defined) in connection with the
Merger at the Parent Stockholder Meeting (as hereinafter defined);
WHEREAS, as a condition of the willingness of Parent to enter
into this Agreement, the Company will, simultaneously with the execution of this
Agreement, enter into a stock option agreement (the "Company Option Agreement"),
pursuant to which the Company will grant Parent the option (the "Company
Option") to purchase shares of Company Common Stock (as hereinafter defined),
upon the terms and subject to the conditions set forth therein; and
WHEREAS, Parent, 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;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), Merger Sub shall be merged with and into the
Company at the Effective Time (as hereinafter defined). As soon as practicable
at or after the closing of the Merger (the "Closing"), a certificate of merger,
prepared and executed in accordance with the relevant provisions of the DGCL,
with respect to the Merger (the "Certificate of Merger") shall be filed with the
Delaware Secretary of State. The Merger shall become effective at such time as
is provided in the Certificate of Merger (the "Effective Time").
1.2 Closing. The Closing shall take place at 10:00 a.m. on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver in accordance with this Agreement) of the
conditions set forth in Article VI (other than those conditions that by their
nature are to be satisfied at the Closing) (the "Closing Date"), at the offices
of Xxxxx & Xxxxx, L.L.P., 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, unless another
date or place is agreed to by the parties.
1.3 Effects of the Merger.
(a) At the Effective Time: (i) Merger Sub shall be merged with
and into the Company, the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (Merger Sub and the Company
are sometimes referred to herein as the "Constituent Corporations" and the
Company is sometimes referred to herein as the "Surviving Corporation"); (ii)
the Certificate of Incorporation of Merger Sub as in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law provided that Article I of the Certificate of Incorporation of
the Surviving Corporation shall be amended to read in its entirety as "Article
I. The name of the corporation is Service Experts, Inc. (the "Corporation")";
and (iii) the Bylaws of Merger Sub 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.
(b) The directors and officers of Merger Sub at the Effective
Time shall, from and after the Effective Time, be the initial directors and
officers of the Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Restated
Certificate of Incorporation and Bylaws. After the Effective Time, Parent will
cause such officers of the Company as Parent deems appropriate to be appointed
officers of Surviving Corporation.
(c) The Merger shall have the effects set forth in this
Section 1.3 and the applicable provisions of the DGCL.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of common
stock, par value $.01 per share, of the Company ("Company Common Stock"), or
capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of common stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall continue to evidence ownership
of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock and all other shares of capital stock of the Company that are owned
by the Company as treasury stock shall be canceled and retired and shall cease
to exist and no stock of Parent or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Subject to the
provisions of Section 2.2(e) hereof, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the right to
receive 0.67 (the "Conversion Number") of a share of common stock, par value
$.01 per share ("Parent Common Stock"), of Parent. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Parent Common
Stock and cash in lieu of fractional shares of Parent Common Stock, as
contemplated by Section 2.2(e), to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Treatment of Company Stock Options, Warrants and
Restricted Stock Awards. Each outstanding Company Stock Option (as hereinafter
defined), Company Warrants (as hereinafter defined) and each Restricted Stock
Award (as hereinafter defined) shall be assumed by Parent as provided in Section
5.10.
(e) Company Convertible Notes. Parent shall agree to be bound
by the conversion provisions of the Company Convertible Notes (as hereinafter
defined), such that the Company Convertible Notes shall be convertible into
Parent Common Stock in accordance with the terms of the Company Convertible
Notes.
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2.2 Exchange of Certificates
(a) Exchange Agent. As of the Effective Time, Parent shall
deposit with ChaseMellon Shareholder Services, L.L.C. or such other bank or
trust company designated by Parent and reasonably acceptable to the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the shares of Parent Common Stock (such shares
of Parent Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund"), issuable
pursuant to Section 2.1 in exchange for outstanding shares of Company Common
Stock. The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Parent Common Stock contemplated to be issued pursuant to Section 2.1 out of
the Exchange Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which, immediately prior to the Effective Time,
represented outstanding shares of Company Common Stock (the "Certificates"),
which holder's shares of Company Common Stock were converted into the right to
receive shares of Parent Common Stock pursuant to Section 2.1: (i) a letter of
transmittal ("Letter of Transmittal") which shall specify that delivery shall be
effected and risk of loss and title to the Certificates shall pass only upon
delivery of the Certificates to the Exchange Agent, and shall be in such form
and have such other provisions as Parent may reasonably specify; and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with the Letter of
Transmittal, duly executed, and any other documents reasonably required by
Parent or the Exchange Agent, (A) the holder of a Certificate shall receive in
exchange therefore a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II, cash in lieu of fractional shares of Parent
Common Stock as contemplated by Section 2.2(e), and any unpaid dividends and
distributions that such holder has the right to receive pursuant to Section
2.2(c); and (B) the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the appropriate number of shares of Parent Common Stock may be issued to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 2.2 and any unpaid
dividends and distributions that such holder has the right to receive pursuant
to Section 2.2(c). The Exchange Agent shall not be entitled to vote or exercise
any rights of ownership with respect to the Parent Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect thereto for the account of
persons entitled thereto.
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(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared or
made after the Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the right
to receive shares of Parent Common Stock represented thereby and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder thereof, without
interest: (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights. All shares of Parent Common
Stock issued upon the surrender for exchange of shares of Company Common Stock
in accordance with the terms hereof (including any cash paid pursuant to Section
2.2(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date hereof and
which remain unpaid at the Effective Time, and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article II, and, except
as provided in this Section 2.2(e), no dividend or other distribution, stock
split or interest shall relate to any such fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder of Parent. In lieu of any fractional security, each
holder of shares of Company Common Stock who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange pursuant to this Article II will be paid an amount in cash (without
interest) equal to such holder's proportionate interest in the sum of (i) the
gross proceeds from the sale or sales by the Exchange Agent in accordance with
the provisions of this Section 2.2(e), on behalf of all such holders of the
aggregate fractional shares of Parent Common Stock issued pursuant to this
Article II and (ii) the aggregate dividends or other distributions that are
payable with respect to such shares of Parent Common Stock pursuant to Section
2.2(c) (such dividends and distributions being herein called the "Fractional
Dividends"). As soon as practicable following the Effective Time, the Exchange
Agent shall determine the excess of the aggregate of (x) the number of full
shares of Parent Common Stock delivered to the Exchange Agent by
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Parent pursuant to Section 2.2(a) over (y) the aggregate number of full shares
of Parent Common Stock to be distributed to holders of Company Common Stock
pursuant to Section 2.2(b) (such excess being herein called the "Excess
Securities") and the Exchange Agent, as agent for the former holders of Company
Common Stock, shall sell the Excess Securities at the prevailing prices on the
New York Stock Exchange ("NYSE"). The sale of the Excess Securities by the
Exchange Agent shall be executed on the NYSE through one or more member firms of
the NYSE. Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Securities.
Until the gross proceeds of such sale of Excess Securities and the Fractional
Dividends have been distributed to the former stockholders of the Company, the
Exchange Agent will hold such proceeds and dividends in trust for such former
stockholders. As soon as practicable after the determination of the amount of
cash to be paid to former stockholders of the Company in lieu of any fractional
interests, the Exchange Agent shall make available in accordance with this
Agreement such amounts to such former stockholders.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund and any cash in lieu of fractional shares of Parent Common Stock made
available to the Exchange Agent that remain undistributed to the former
stockholders of the Company on the first anniversary of the Effective Time shall
be delivered to Parent, upon demand, and any stockholders of the Company who
have not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock. Parent shall cause the Surviving Corporation to
pay all charges and expenses of the Exchange Agent.
(g) No Liability. None of Parent, the Company or Merger Sub
shall be liable to any holder of shares of Parent Common Stock or Company Common
Stock, as the case may be, for such shares (or dividends or distributions with
respect thereto) or cash in lieu of fractional shares of Parent Common Stock
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Any amounts remaining unclaimed by holders of any such
shares at such date as is immediately prior to the time at which such amounts
would otherwise escheat to or become property of any governmental entity shall,
to the extent permitted by applicable law, become the property of Parent, free
and clear of any claims or interest of any such holders or their successors,
assigns or personal representatives previously entitled thereto.
(h) Lost, Stolen, or Destroyed Certificates. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in such reasonable amount as Parent may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Certificate the
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II, cash in lieu of fractional shares of Parent Common Stock as
contemplated by Section 2.2(e), and any unpaid dividends and distributions that
such holder has the right to receive pursuant to Section 2.2(c).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Standing and Power. Each of the Company and
the Company's Significant Subsidiaries (as defined below) is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of its state of incorporation or organization, has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect (as defined below) on the
Company. The Company has heretofore delivered to Parent complete and correct
copies of its Restated Certificate of Incorporation and Bylaws, each as amended
to date. All Significant Subsidiaries of the Company and their respective
jurisdictions of incorporation or organization are identified on Schedule
3.1(a)(i) of the disclosure schedule dated as of the date hereof and signed by
an authorized officer of the Company and delivered to Parent on or prior to the
date hereof (the "Company Disclosure Schedule"). As used in this Agreement: (i)
a "Significant Subsidiary" means any Subsidiary of the Company or Parent, as the
case may be, that would constitute a Significant Subsidiary of such party within
the meaning of Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "SEC"); (ii) a "Material Adverse Effect" or "Material Adverse
Change" shall mean, in respect of the Company or Parent, as the case may be, any
effect or change that is or would reasonably be expected to be materially
adverse to the business, operations, assets, condition (financial or otherwise)
or results of operations of such party and its Subsidiaries taken as a whole,
other than any change, circumstance or effect to the extent it results from or
arises out of (1) changes in the economy in general, (2) changes or
circumstances affecting in general the industries in which such party operates,
(3) in the case of the Company, the failure of the Company to retain its general
managers and other key employees or any material disruption in supplier
relationships as a result of the transaction contemplated by this Agreement or
the public announcement thereof or policies or other actions adopted or taken by
Parent or any of its affiliates or Subsidiaries (it being understood that the
Company shall be responsible for the control of its business prior to the
Effective Time), (4) in the case of the Company, matters disclosed on Schedule
3.1(a)(ii) of the Company Disclosure Schedule or (5) in the case of Parent,
matters disclosed on Schedule 3.2(a)(ii) of the Parent Disclosure Schedule (as
hereinafter defined); and (iii) "Subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which: (1) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which are
held by such party or any Subsidiary of such party that do not have a majority
of the voting interest in such partnership) or (2) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
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functions with respect to such corporation or other organization is, directly or
indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 30,000,000 shares of Company Common
Stock and 10,000,000 shares of preferred stock, par value $.01 per share, of the
Company ("Company Preferred Stock"). At the close of business on October 22,
1999 (except as otherwise indicated): (i) 18,183,374 shares of Company Common
Stock were issued and outstanding; (ii) 100,000, 333,224, 1,300,000, 350,000,
150,000, and 427,420 shares of Company Common Stock were reserved for issuance
pursuant to the Company's 1996 Non-Employee Director Stock Option Plan, the
Company's Service Center Stock Option Plan, the Company's 1996 Incentive Stock
Plan, the Company's 1996 Employee Stock Purchase Plan, the Company's 1997
Non-Qualified Stock Purchase Plan and the Company's 1997 Non-Qualified Stock
Option Plan (collectively, the "Company Stock Plans"), respectively; (iii) as of
September 30, 1999, 2,166,451 shares of Company Common Stock were subject to
issuance pursuant to outstanding options under the Company Stock Plans; (iv)
365,527 shares of Company Common Stock are reserved for issuance pursuant to
warrants (the "Company Warrants") to purchase shares of Company Common Stock
upon the terms and conditions set forth on Schedule 3.1(b)(iv) of the Company
Disclosure Schedule; (v) 20,000 shares of Company Common Stock are reserved for
issuance pursuant to restricted stock awards ("Restricted Stock Awards") having
the terms and conditions set forth on Schedule 3.1(b)(v) of the Company
Disclosure Schedule; (vi) no shares of Company Common Stock were held by the
Company in its treasury or by its wholly owned Subsidiaries; (vii) no shares of
Company Preferred Stock were issued and outstanding; and (viii) except for the
$13,801,853 aggregate principal amount of the Company's convertible subordinated
notes identified on Schedule 3.1(b)(viii) of the Company Disclosure Schedule
(the "Company Convertible Notes"), which is convertible into an aggregate of
410,831 shares of Company Common Stock upon the terms and conditions set forth
on Schedule 3.1(b)(viii) of the Company Disclosure Schedule, no Voting Debt (as
defined below) was issued and outstanding. The term "Voting Debt" means bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into securities having the right to vote) on any matters on which stockholders
of the Company or Parent, as the case may be, may vote. All outstanding shares
of Company Common Stock are validly issued, fully paid and nonassessable and are
not subject to preemptive rights. Except as set forth on Schedule 3.1(b)(ix) of
the Company Disclosure Schedule, all outstanding shares of capital stock of the
Subsidiaries of the Company are owned by the Company, or a direct or indirect
wholly owned Subsidiary of the Company, free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except as set forth in this
Section 3.1(b) or Schedule 3.1(b)(x) of the Company Disclosure Schedule and
except for changes since October 22, 1999 resulting from the exercise of stock
options granted pursuant to, or from issuances or purchases under, the Company
Stock Plans, the Company Warrants or the Company Convertible Notes or as
contemplated by this Agreement, there are outstanding: (i) no shares of capital
stock, Voting Debt or other voting securities of the Company; (ii) no securities
of the Company or any Subsidiary of the Company convertible into or exchangeable
for shares of capital stock, Voting Debt or other voting securities of the
Company or any Subsidiary of the Company; and (iii) no options, warrants, calls,
rights (including preemptive rights), commitments or agreements to
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which the Company or any Subsidiary of the Company is a party or by which it is
bound in any case obligating the Company or any Subsidiary of the Company to
issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of capital
stock or any Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Except as contemplated by this Agreement, there are not
as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting of
any shares of the capital stock of the Company that will limit in any way the
solicitation of proxies by or on behalf of the Company from, or the casting of
votes by, the stockholders of the Company with respect to the Merger. There are
no restrictions on the Company to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Boards of Directors of the Company has (A)
approved the Merger, this Agreement and the Company Option Agreement, (B)
declared the Merger, this Agreement and the Company Option Agreement to be
advisable and in the best interests of the stockholders of the Company, and (C)
resolved to recommend that the Company stockholders vote for the approval and
adoption of the Merger and this Agreement. The directors of the Company have
advised the Company and Parent that they intend to vote or cause to be voted all
of the shares of Company Common Stock beneficially owned by them and their
affiliates in favor of approval of the Merger and this Agreement. The Company
has all requisite corporate power and authority to enter into this Agreement and
the Company Option Agreement and, subject, with respect to consummation of the
Merger, to approval of this Agreement and the Merger by the stockholders of the
Company in accordance with the DGCL and the Restated Certificate of
Incorporation and Bylaws of the Company, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Company Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, with respect to
consummation of the Merger, to approval of this Agreement and the Merger by the
stockholders of the Company in accordance with the DGCL and the Restated
Certificate of Incorporation and Bylaws of the Company. This Agreement and the
Company Option Agreement have been duly executed and delivered by the Company
and, subject, with respect to consummation of the Merger, to approval of this
Agreement and the Merger by the stockholders of the Company in accordance with
the DGCL and the Restated Certificate of Incorporation and Bylaws of the
Company, and assuming this Agreement and the Company Option Agreement
constitutes the valid and binding obligation of Parent and Merger Sub, as
applicable, constitute valid and binding obligations of the Company enforceable
in accordance with their terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
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(ii) Except as set forth on Schedule 3.1(c) of the
Company Disclosure Schedule, the execution and delivery of this Agreement and
the Company Option Agreement does not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to the
loss of a material benefit under, or give rise to a right of purchase under,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of its Subsidiaries
under, or otherwise result in a material detriment to the Company or any of its
Subsidiaries under, any provision of (i) the Restated Certificate of
Incorporation or Bylaws of the Company or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries, (iii) any joint venture or other ownership
arrangement or (iv) assuming the consents, approvals, authorizations or permits
and filings or notifications referred to in Section 3.1(c)(iii) are duly and
timely obtained or made and the approval of the Merger and this Agreement by the
stockholders of the Company has been obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights, liens, security interests, charges, encumbrances or detriments that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Company Option Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby and thereby, as applicable, as to which
the failure to obtain or make would have a Material Adverse Effect on the
Company, except for: (A) the filing of a premerger notification report by the
Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration or termination of the applicable
waiting period with respect thereto; (B) the filing with the SEC of (x) a joint
proxy statement in preliminary and definitive form relating to the meeting of
the stockholders of the Company and Parent to be held in connection with the
Merger (the "Joint Proxy Statement") and (y) such reports under Section 13(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such
other compliance with the Exchange Act and the rules and regulations thereunder,
as may be required in connection with this Agreement and the transactions
contemplated hereby; (C) the filing of a Certificate of Merger with the Delaware
Secretary of State; (D) filings with, and approval of, the NYSE; (E) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws, or environmental laws; and (F) such filings and
approvals as may be required by any foreign premerger notification, securities,
corporate or other law, rule or regulation.
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(d) SEC Documents. The Company has made available to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since December 31,
1996 and prior to the date of this Agreement (the "Company SEC Documents") which
are all the documents (other than preliminary material) that the Company was
required to file with the SEC since such date. As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Documents, and none of the Company SEC Documents
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 light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material) the consolidated
financial position of the Company and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of the Company and its consolidated Subsidiaries for the periods
presented therein.
(e) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time the S-4 becomes effective under the Securities Act or
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 to make
the statements therein not misleading, and none of the information supplied or
to be supplied by the Company and included or incorporated by reference in the
Joint Proxy Statement will, at the date mailed to stockholders of the Company or
Parent, as the case may be, or at the time of the meeting of such stockholders
to be held in connection with the Merger or 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 therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time, any event with respect to the Company or any
of its Subsidiaries, or with respect to other information supplied by the
Company for inclusion in the Joint Proxy Statement or S-4, shall occur which is
required to be described in an amendment of, or a supplement to, the Joint Proxy
Statement or the S-4, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Joint Proxy Statement,
insofar as it relates to the Company or the other Subsidiaries of the Company or
other information supplied by the Company for inclusion therein, will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
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(f) Absence of Certain Changes or Events. Except as set forth
in Schedule 3.1(f) of the Company Disclosure Schedule or disclosed in, or
reflected in the financial statements included in, the Company SEC Documents, or
except as contemplated by this Agreement, since December 31, 1998, there has not
been: (i) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock; (ii) any amendment of any term of any outstanding
equity security of the Company or any Significant Subsidiary of the Company;
(iii) any repurchase, redemption or other acquisition by the Company or any
Subsidiary of the Company of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, the Company or any
Subsidiary of the Company, except as contemplated by the Company Stock Plans;
(iv) any material change in any method of accounting or accounting practice or
any tax method, practice or election by the Company or any Significant
Subsidiary of the Company; or (v) any other transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) that would have a Material Adverse
Effect on the Company.
(g) No Undisclosed Material Liabilities. Except as disclosed
in the Company SEC Documents or as set forth in Schedule 3.1(g) of the Company
Disclosure Schedule, as of the date hereof, there are no liabilities of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that would have a
Material Adverse Effect on the Company, other than: (i) liabilities adequately
provided for on the balance sheet of the Company dated as of June 30, 1999
(including the notes thereto) contained in the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 and (ii) liabilities under this
Agreement.
(h) No Default. Neither the Company nor any of its
Subsidiaries is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation) of
any term, condition or provision of (i) the Restated Certificate of
Incorporation or Bylaws of the Company or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license to which the Company or any
of its Subsidiaries is now a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound except as
set forth on Schedule 3.1(h) of the Company Disclosure Schedule or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate would not have a Material Adverse
Effect on the Company.
(i) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses as they are now being conducted (the
"Company Permits"), except where the failure so to hold would not have a
Material Adverse Effect on the Company. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so to
comply would
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not have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Documents, the businesses of the Company and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on the Company. As of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge (as hereinafter
defined) of the Company as of the date hereof, threatened, other than those the
outcome of which would not have a Material Adverse Effect on the Company. For
purposes of this Agreement "knowledge" means the actual knowledge of the
officers or directors of Parent or the Company, as the case may be, and the
senior managers identified on Exhibit 3.1(i)(a) (in the case of Parent) or
Exhibit 3.1(i)(b) (in the case of the Company), in each case after due inquiry.
(j) Litigation. Except as disclosed in the Company SEC
Documents or as set forth on Schedule 3.1(j) of the Company Disclosure Schedule,
there is no suit, action or proceeding pending, or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary of the
Company ("Company Litigation"), and the Company and its Subsidiaries have no
knowledge of any facts that are likely to give rise to any Company Litigation,
that (in any case) is reasonably likely to have a Material Adverse Effect on the
Company, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary of the Company ("Company Order") that is reasonably likely to have a
Material Adverse Effect on the Company or its ability to consummate the
transactions contemplated by this Agreement.
(k) Taxes. Except as set forth on Schedule 3.1(k) or
3.1(l)(ii) of the Company Disclosure Schedule:
(i) Each of the Company and its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which the
Company or any of its Subsidiaries is or was a member has (A) duly filed on a
timely basis (taking into account any extensions) all Tax Returns (as
hereinafter defined) required to be filed or sent by or with respect to it other
than Tax Returns that would report immaterial Tax liability and as to which the
failure to file would not itself give rise to material Tax liability, (B) duly
paid or deposited on a timely basis all material Taxes (as hereinafter defined)
that are shown to be due and payable on or with respect to such Tax Returns, and
all material Taxes that are otherwise due and payable (except for audit
adjustments not material in the aggregate or to the extent that liability
therefor is reserved for in the Company's most recent audited financial
statements) for which the Company or any of its Subsidiaries may be liable, (C)
established reserves that are adequate for the payment of all material Taxes not
yet due and payable with respect to the results of operations of the Company and
its Subsidiaries through the date hereof, and (D) complied in all material
respects with all applicable laws, rules and regulations relating to the
reporting, payment and withholding of material Taxes that are required to be
withheld from payments to employees, independent contractors, creditors,
shareholders or any other third party and has in all material respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over;
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(ii) Except to the extent being contested in good
faith, all material deficiencies asserted as a result of such examinations and
any examination by any applicable taxing authority have been paid, fully settled
or adequately provided for in the Company's most recent audited financial
statements. No audits or other administrative proceedings or court proceedings
are presently pending, or to the knowledge of the Company, threatened, with
regard to any Taxes for which the Company or any of its Subsidiaries would be
liable in an amount reasonably expected to exceed $100,000, and no material
deficiency (to the extent remaining unsatisfied) for any Taxes has been
proposed, asserted or assessed (whether by examination report or prior to
completion of examination by means of notices of proposed adjustment or other
similar requests or notices) pursuant to such examination against the Company or
any of its Subsidiaries by any taxing authority with respect to any period;
(iii) Except as set forth in Schedule 3.1(k) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to an agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
or that would constitute compensation whose deductibility is limited under
Section 162(m) of the Code;
(iv) To the knowledge of the Company, no material
reassessments (for property or ad valorem Tax purposes) of any assets or any
property owned or leased by the Company or any of its Subsidiaries have been
proposed in written form;
(v) Neither the Company nor any of its Subsidiaries
has agreed to make any adjustment pursuant to section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has any application pending with any taxing authority requesting
permission for any changes in any accounting method of the Company or any of its
Subsidiaries. To the knowledge of the Company, neither the Internal Revenue
Service ("IRS") nor any other taxing authority has proposed in writing, and
neither the Company nor any of its Subsidiaries is otherwise required to make,
any such adjustment or change in accounting method; and
(vi) Neither the Company, nor, to the knowledge of
the Company, any member of its affiliated group that joins in the consolidated
federal income tax return (i) has been a member of any other affiliated group
that filed a consolidated federal income tax return or (ii) has assumed, or
agreed to indemnify against, the liability for Taxes of any person other than a
person that is a present or former member (or predecessor of such a member in
the case of the acquisition of such predecessor by such member) of the
affiliated group of which the Company is the common parent.
For purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes") means any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
production, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
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assessment or charge of any kind whatsoever, together with any interest and/or
any penalty, addition to tax or additional amount imposed by any taxing
authority.
"Tax Return" (and with correlative meaning, "Tax Returns")
means all returns, declarations, reports, estimates, information returns and
statements relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereto.
(l) Pension and Benefit Plans; ERISA.
(i) Schedule 3.1(l)(i) of the Company Disclosure
Schedule contains a list of each "employee pension benefit plan" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (hereinafter a "Company Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(l) of ERISA), stock option, stock purchase,
deferred compensation plan or arrangement, and other employee fringe benefit
plan or arrangement maintained, contributed to or required to be maintained or
contributed to by the Company, any of its Significant Subsidiaries or any other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each a "Company
ERISA Affiliate") for the benefit of any present or former officers, employees,
directors or independent contractors of the Company or any Company ERISA
Affiliate (all the foregoing being herein called "Company Employee Benefit
Plans"). The Company has made available to Parent true, complete and correct
copies of (1) each Company Employee Benefit Plan and amendments thereto, (2) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each Company Employee Benefit Plan (if any such report was
required by applicable law), (3) the most recent summary plan description for
each Company Employee Benefit Plan for which such a summary plan description is
required by applicable law and (4) each trust agreement and insurance or annuity
contract relating to any Company Employee Benefit Plan.
(ii) Each Company Employee Benefit Plan has been
administered in accordance with its terms except as would not have a Material
Adverse Effect. The Company, the Company ERISA Affiliates and all Company
Employee Benefit Plans are in compliance in all material respects with the
applicable provisions of ERISA and the Code. Except as disclosed in Schedule
3.1(l)(ii) of the Company Disclosure Schedule or except as would not have a
Material Adverse Effect, all reports, returns and similar documents with respect
to Company Employee Benefit Plans required to be filed with any governmental
agency or distributed to any Company Employee Benefit Plan participant have been
duly, timely and accurately filed or distributed. Except as disclosed in
Schedule 3.1(l)(ii) of the Company Disclosure Schedule or except as would not
have a Material Adverse Effect, there are no investigations by any governmental
agency, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Company Employee Benefit Plans), suits or
proceedings against or involving any Company Employee Benefit Plan or asserting
any rights or claims to benefits under any Company Employee Benefits Plan that
could give rise to any liability, and there are not any facts to the Company's
knowledge that could give rise to any material liability in the event of any
such investigation, claim, suit or proceeding.
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(iii) Except as disclosed in Schedule 3.1(l)(iii) of
the Company Disclosure Schedule, no Company Pension Plan is subject to Title IV
of ERISA and none of the Company or any Company ERISA affiliate has maintained
or been required to contribute to a plan that is subject to Title IV of ERISA
during the past six years.
(iv) Except as disclosed in Schedule 3.1(l)(iv) of
the Company Disclosure Schedule, each Company Pension Plan intended to be
qualified has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Company Pension Plan is qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code; no such determination letter has been revoked, and, to the
knowledge of the Company, revocation has not been threatened; and such Company
Pension Plan has not been amended since the effective date of its most recent
determination letter in any respect that might adversely affect its
qualification or materially increase its cost. The Company has made available to
Parent a copy of the most recent determination letter received from the Internal
Revenue Service with respect to each Company Pension Plan for which such a
letter has been issued, as well as a copy of any pending application for a
determination letter.
(v) Except as disclosed on Schedule 3.1(l)(v) of the
Company Disclosure Schedule or except as would not have a Material Adverse
Effect, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee or group of employees of the Company or any
of its Subsidiaries; (ii) increase any benefits otherwise payable under any
Company Employee Benefit Plan or Company Pension Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits. Except as
disclosed on Schedule 3.1(l)(v) of the Company Disclosure Schedule or in the
Company SEC Documents, there are no severance agreements or employment
agreements between the Company or any of its Subsidiaries and any employee of
the Company or such Subsidiary. True and correct copies of all such severance
agreements and employment agreements have been made available to Parent. Except
as set forth on Schedule 3.1(l)(v) of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries has any consulting agreement or
arrangement with any natural person involving compensation in excess of $50,000,
except as are terminable upon one month's notice or less.
(vi) Except as disclosed on Schedule 3.1(l)(vi) of
the Company Disclosure Schedule, no stock or other security issued by the
Company or any of its subsidiaries forms or has formed a material part of the
assets of any Company Employee Benefit Plan or Company Pension Plan.
(m) Labor Matters. Except as set forth on Schedule 3.1(m) of
the Company Disclosure Schedule or in the Company SEC Documents:
(i) Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or other current labor
agreement with any labor union or organization, and to the Company's knowledge
currently there is no union that claims to represent employees of the Company or
any of its Subsidiaries, nor does the Company or any of
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its Subsidiaries know of any activity or proceeding of any labor organization
(or representative thereof) or employee group (or representative thereof) to
organize any such employees;
(ii) There is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or other grievance
procedure against the Company or any of its Subsidiaries pending, or, to the
knowledge or the Company or any of its Subsidiaries, threatened, that has, or is
reasonably likely to have, a Material Adverse Effect on the Company;
(iii) There is no complaint, lawsuit or proceeding in
any forum by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against the Company or any of its
Subsidiaries pending, or, to the knowledge of the Company or any of its
Subsidiaries, threatened, that has, or is reasonably likely to have, a Material
Adverse Effect on the Company;
(iv) There is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of the Company or any of its
Subsidiaries, threatened, against or involving the Company or any of its
Subsidiaries that has, or is reasonably likely to have, a Material Adverse
Effect on the Company;
(v) The Company and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that does not have,
and is not reasonably likely to have, a Material Adverse Effect on the Company;
and
(vi) As of the date hereof, there is no proceeding,
claim, suit, action or governmental investigation pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened, in respect to which any
current or former director, officer, employee or agent of the Company or any of
its Subsidiaries is or may be entitled to claim indemnification from the Company
or any of its Subsidiaries pursuant to the Restated Certificate of Incorporation
or Bylaws of the Company or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, as provided in any
indemnification agreement to which the Company or any Subsidiary of the Company
is a party or pursuant to applicable law that has, or is reasonably likely to
have, a Material Adverse Effect on the Company.
(n) Intangible Property. The Company and its Subsidiaries
possess, have adequate rights to use, or have adequate licenses to all material
trademarks, trade names, patents, service marks, brand marks, brand names,
domain names, computer programs, databases, industrial designs and copyrights
necessary for the operation of the businesses of each of the Company and its
Subsidiaries (collectively, the "Company Intangible Property"), except where the
failure to possess or have adequate rights to use such properties would not
reasonably be expected to have a Material Adverse Effect on the Company. All of
the Company Intangible Property that is owned by the Company or its Subsidiaries
in whole or in part is owned free and
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clear of any and all liens, claims or encumbrances, except those that are not
reasonably likely to have a Material Adverse Effect on the Company, and neither
the Company nor any such Subsidiary has forfeited or otherwise relinquished any
Company Intangible Property which forfeiture would result in a Material Adverse
Effect on the Company. The Company and its Subsidiaries are not in violation of
or in default under any contract or license giving the Company and its
Subsidiaries rights to use or licenses to the Company Intangible Property,
unless such violation or default would not reasonably be expected to have a
Material Adverse Effect on the Company. To the knowledge of the Company, the
operation of the Company's business has not, does not, and will not in any
material respect, conflict with, infringe upon, violate or interfere with or
constitute a misappropriation or dilution of any right, title, interest or
goodwill, including, without limitation, any intellectual property right,
trademark, trade name, patent, service xxxx, brand xxxx, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other person and there have been no claims made and neither the
Company nor any of its Subsidiaries has received any notice of any claim or
otherwise knows that any of the Company Intangible Property is invalid or
conflicts with the asserted rights of any other person or has not been used or
enforced or has been failed to be used or enforced in a manner that would result
in the abandonment, cancellation or unenforceability of any of the Company
Intangible Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that would not reasonably be expected to have a Material Adverse Effect on the
Company. To the knowledge of the Company, no other person has, is or is planning
to infringe upon, violate or interfere with or misappropriate or dilute any of
the Company Intangible Property, except where the foregoing would not reasonably
be expected to have a Material Adverse Effect on the Company.
(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Laws" means all federal, state and
local laws, rules and regulations relating to pollution or the protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials and including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act and any
state law counterparts;
(B) "Hazardous Materials" means (x) any petroleum or
petroleum products, radioactive materials, hydrochlorofluorocarbons asbestos in
any form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (y) any chemicals, materials or substances which are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances" or "toxic pollutants," or
words of similar import, under any Environmental Law and (z) any other chemical,
material, substance or waste, exposure to which
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is now prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries operates (for
purposes of Section 3.1(o)) or in which Parent or any of its Subsidiaries
operates (for purposes of Section 3.2(n)).
(C) "Release" means any release, spill, effluent,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or out of
any property owned, operated or leased by the applicable party or its
Subsidiaries; and
(D) "Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by a Governmental Entity
or required under any Environmental Law, or voluntarily undertaken to (w) clean
up, remove, treat, or in any other way ameliorate or address any Hazardous
Materials or other substance in the indoor or outdoor environment; (x) prevent
the Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not endanger or threaten to endanger the public
health or welfare of the indoor or outdoor environment; (y) perform pre-remedial
studies and investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (z) bring the applicable party into compliance with
any Environmental Law.
Except as disclosed on Schedule 3.1(o) of the Company
Disclosure Schedule or in the Company SEC Documents:
(i) The operations of the Company and its
Subsidiaries have been and, as of the Closing Date, will be, in compliance with
all Environmental Laws, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on the Company;
(ii) The Company and its Subsidiaries have obtained
and will maintain all permits, licenses and registrations, or applications
relating thereto, and have made and will make all filings, reports and notices
required under applicable Environmental Laws for the continued operations of
their respective businesses, except such matters the lack or failure of which
would not lead to a Material Adverse Effect on the Company;
(iii) The Company and its Subsidiaries are not
subject to any outstanding written orders or material contracts with any
Governmental Entity or other person respecting (A) Environmental Laws, (B)
Remedial Action or (C) any Release or threatened Release of a Hazardous
Material, except such orders or contracts the compliance with which would not
reasonably be expected to have a Material Adverse Effect on the Company;
(iv) The Company and its Subsidiaries have not
received any written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which violation or
liability would reasonably be expected to have a Material Adverse Effect on the
Company;
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(v) Neither the Company nor any of its Subsidiaries
has any contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor environment (whether on-site or off-site)
that would reasonably be expected to lead to a Material Adverse Effect on the
Company;
(vi) The operations of the Company or its
Subsidiaries involving the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined and regulated under 40 C.F.R. Parts
260-270 (in effect as of the date of this Agreement) or any state equivalent,
are in compliance with applicable Environmental Laws, except where the failure
to so comply would not reasonably be expected to have a Material Adverse Effect
on the Company; and
(vii) There is not now on or in any property of the
Company or its Subsidiaries any of the following: (A) any underground storage
tanks or surface impoundments, (B) any asbestos-containing materials, or (C) any
polychlorinated biphenyls, any of which ((A), (B), or (C) preceding) could have
a Material Adverse Effect on the Company.
(p) Insurance. The Company has delivered to Parent an
insurance schedule of the Company's and each of its Subsidiaries' directors' and
officers' liability insurance, primary and excess casualty insurance policies,
providing coverage for bodily injury and property damage to third parties,
including products liability and completed operations coverage, and worker's
compensation, in effect as of the date hereof. The Company maintains insurance
coverage reasonably adequate for the operation of the business of the Company
and each of its Subsidiaries (taking into account the cost and availability of
such insurance), and the transactions contemplated by this Agreement will not
materially adversely affect such coverage.
(q) Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinions of each of SunTrust Equitable Securities
Corporation and Xxxxxxxxxxx Xxxxxxx & Co., Inc. (copies of which have been
delivered to Parent) to the effect that, as of the date hereof, the Conversion
Number is fair from a financial point of view to the holders of Company Common
Stock.
(r) Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(s) Beneficial Ownership of Parent Common Stock. As of the
date hereof, neither the Company nor its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) any of the outstanding Parent
Common Stock or any of Parent's outstanding debt securities.
(t) Brokers. Except for the fees and expenses payable to each
of SunTrust Equitable Securities Corporation and Xxxxxxxxxxx Xxxxxxx & Co.,
Inc., which fees are reflected in its agreement with the Company (copies of
which have been delivered to Parent), no broker,
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30
investment banker, or other person is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company.
(u) Tax Matters. Neither the Company nor any of the officers
of the Company is aware of any reason why the Merger could fail to qualify as a
tax-free reorganization pursuant to section 368(a) of the Code.
(v) State Takeover Statutes. The Board of Directors of the
Company has approved the Merger and this Agreement, and such approval is
sufficient to render the provisions of Section 203 of the DGCL inapplicable to
the Merger, this Agreement and the other transactions contemplated hereby. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or the other transactions
contemplated hereby.
3.2 Representations and Warranties of Parent. Parent and
Merger Sub jointly and severally represent and warrant to the Company as
follows:
(a) Organization, Standing and Power. Each of Parent and its
Significant Subsidiaries is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on Parent. Parent has heretofore
delivered to the Company complete and correct copies of its Restated Certificate
of Incorporation and Amended and Restated Bylaws, each as amended to date. All
Significant Subsidiaries of Parent and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.2(a)(i) of the
disclosure schedule dated as of the date hereof and signed by an authorized
officer of Parent and delivered to the Company on or prior to the date hereof
(the "Parent Disclosure Schedule").
(b) Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 200,000,000 shares of Parent Common Stock
and 25,000,000 shares of preferred stock, par value $.01 per share, of Parent
("Parent Preferred Stock"). At the close of business on October 22, 1999 (i)
44,958,240 shares of Parent Common Stock were issued and outstanding; (ii)
4,603,500, 40,000 and 825,000 shares of Parent Common Stock were reserved for
issuance pursuant to Parent's 1998 Incentive Plan, Parent's Nonemployee
Director's Compensation and Deferral Plan and Parent's Employee Stock Purchase
Plan (collectively, the "Parent Stock Plans"); (iii) 3,667,653 shares of Parent
Common Stock were subject to issuance pursuant to outstanding awards under the
Parent Stock Plans; (iv) no shares of Parent Common Stock were held by Parent in
its treasury or by its wholly owned Subsidiaries; (v) no shares of Parent
Preferred Stock were issued and outstanding; and (vi) no Voting Debt was issued
and outstanding. All outstanding shares of Parent capital stock are validly
issued, fully paid and
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nonassessable and not subject to preemptive rights. Except as set forth on
Schedule 3.2(b)(i) of the Parent Disclosure Schedule, all outstanding shares of
capital stock of the Subsidiaries of Parent are owned by Parent or a direct or
indirect wholly owned Subsidiary of Parent, free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as set forth in
this Section 3.2(b) or Schedule 3.2(b)(ii) of the Parent Disclosure Schedule and
except for changes since October 22, 1999 resulting from the exercise of
employee stock options granted pursuant to, or from issuances or purchases
under, the Parent Stock Plans or as contemplated by this Agreement, there are
outstanding: (i) no shares of capital stock, Voting Debt or other voting
securities of Parent; (ii) no securities of Parent or any Subsidiary of Parent
convertible into or exchangeable for shares of capital stock, Voting Debt or
other voting securities of Parent or any Subsidiary of Parent; and (iii) no
options, warrants, calls, rights (including preemptive rights), commitments or
agreements to which Parent or any Subsidiary of Parent is a party or by which it
is bound in any case obligating Parent or any Subsidiary of Parent to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, additional shares of capital stock or any
Voting Debt or other voting securities of Parent or of any Subsidiary of Parent,
or obligating Parent or any Subsidiary of Parent to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. Except as
contemplated by this Agreement, there are not as of the date hereof and there
will not be at the Effective Time any stockholder agreements, voting trusts or
other agreements or understandings to which Parent is a party or by which it is
bound relating to the voting of any shares of the capital stock of Parent that
will limit in any way the solicitation of proxies by or on behalf of Parent
from, or the casting of votes by, the stockholders of Parent with respect to the
Merger. There are no restrictions on Parent to vote the stock of any of its
Subsidiaries. As of the date hereof, the authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, par value $.01 per share, 1,000 shares
of which are validly issued, fully paid and nonassessable and are owned by
Parent and the balance of which are not issued or outstanding.
(c) Authority; No Violations, Consents and Approvals.
(i) The Boards of Directors of Parent and Merger Sub
have (A) approved the Merger and this Agreement, (B) declared the Merger and
this Agreement to be advisable and in the best interests of the stockholders of
Parent and Merger Sub, respectively, and (C) in the case of the Board of
Directors of Parent, resolved to recommend that Parent stockholders vote for the
approval of the issuance of Parent Common Stock pursuant to the Merger. The
directors of Parent have advised the Company and Parent that they intend to vote
or cause to be voted all of the shares of Parent Common Stock beneficially owned
by them and their affiliates in favor of approval of the issuance of Parent
Common Stock pursuant to the Merger. Parent has all requisite corporate power
and authority to enter into this Agreement subject with respect to consummation
of the Merger, to approval of the issuance of Parent Common Stock pursuant to
the Merger by the stockholders of Parent in accordance with the DGCL, the
Restated Certificate of Incorporation and Amended and Restated Bylaws of Parent
and the NYSE listing requirements, 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 Parent and Merger Sub, subject, with respect to
the consummation of the Merger, to approval of
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the issuance of Parent Common Stock pursuant to the Merger by the stockholders
of Parent in accordance with the DGCL, the Restated Certificate of Incorporation
and Amended and Restated Bylaws of Parent and the NYSE listing requirements.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, subject with respect to consummation of the Merger, to approval of the
issuance of Parent Common Stock pursuant to the Merger by the stockholders of
Parent in accordance with the DGCL, the Restated Certificate of Incorporation
and Amended and Restated Bylaws of Parent and the NYSE listing requirements, and
assuming this Agreement constitutes the valid and binding obligation of the
Company, constitutes a valid and binding obligation of Parent and Merger Sub
enforceable in accordance with its terms, subject as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
(ii) Except as set forth in Schedule 3.2(c) of the
Parent Disclosure Schedule, the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation or to the loss of a material benefit under, or give rise to a right
of purchase under, result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, or otherwise result in a material detriment to Parent or any
of its Subsidiaries under, any provision of (i) the Restated Certificate of
Incorporation or Amended and Restated Bylaws of Parent or any provision of the
comparable charter or organizational documents of any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its Subsidiaries, (iii) any joint venture or other ownership
arrangement or (iv) assuming the consents, approvals, authorizations or permits
and filings or notifications referred to in Section 3.2(c)(iii) are duly and
timely obtained or made and the approval of the issuance of Parent Common Stock
pursuant to the Merger by the stockholders of Parent has been obtained, any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges, encumbrances
or detriments that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent, materially impair the ability of Parent to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or Merger
Sub or the consummation by Parent or Merger Sub of the transactions contemplated
hereby, as to which the failure to obtain or make would have a Material Adverse
Effect on Parent, except for: (A) the filing of a premerger notification report
by Parent under the HSR Act and the expiration or termination of the applicable
waiting period with respect thereto; (B) the filing with the SEC of the Joint
Proxy Statement, the S-4, such reports under Section 13(a) of the Exchange Act
and such other compliance with the Securities Act and
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the Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, and the
obtaining from the SEC of such orders as may be so required; (C) the filing of a
Certificate of Merger with the Delaware Secretary of State; (D) filings with,
and approval of, the NYSE; (E) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws or environmental
laws; and (F) such filings and approvals as may be required by any foreign
premerger notification, securities, corporate or other law, rule or regulation.
(d) SEC Documents. Parent has made available to the Company a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Parent with the SEC since July 28, 1999 and
prior to the date of this Agreement (the "Parent SEC Documents"), which are all
the documents (other than preliminary material) that Parent was required to file
with the SEC since such date. As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Documents, and
none of the Parent SEC Documents 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 light of the circumstances under
which they were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which will be material) the consolidated
financial position of Parent and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Parent and its consolidated Subsidiaries for the periods presented
therein.
(e) Information Supplied. None of the information supplied or
to be supplied by Parent for inclusion or incorporation by reference in the S-4
will, at the time the S-4 becomes effective under the Securities Act or 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 to make the
statements therein not misleading, and none of the information supplied or to be
supplied by Parent and included or incorporated by reference in the Joint Proxy
Statement will, at the date mailed to stockholders of the Company or Parent, as
the case may be, or at the time of the meeting of such stockholders to be held
in connection with the Merger or 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 therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time, any event with respect to Parent or any of its
Subsidiaries, or with respect to other information supplied by Parent for
inclusion in the Joint Proxy Statement or the S-4, shall occur which is required
to be described in an amendment of, or a supplement to, the Joint Proxy
Statement or the S-4, such event shall be so described, and, in the case of the
S-4, such amendment or supplement shall be promptly filed with the SEC. The
Joint Proxy Statement, insofar as it relates to Parent or its
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Subsidiaries of Parent or other information supplied by Parent for inclusion
therein, will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as set forth
in Schedule 3.2(f) of the Parent Disclosure Schedule or disclosed in, or
reflected in the Parent SEC Documents, or except as contemplated by this
Agreement, since December 31, 1998, there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of Parent's capital stock (other than
quarterly dividends of approximately $0.085 per share of Parent Common Stock);
(ii) any amendment of any term of any outstanding equity security of Parent or
any Significant Subsidiary of Parent; (iii) any repurchase, redemption or other
acquisition by Parent or any Subsidiary of Parent of any outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
Parent or any Subsidiary of Parent, except as contemplated by the Parent Stock
Plans; (iv) any material change in any method of accounting or accounting
practice or any tax method, practice or election by Parent or any Significant
Subsidiary of Parent; or (v) any other transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character (whether or not in
the ordinary course of business) that would have a Material Adverse Effect on
Parent.
(g) No Undisclosed Material Liabilities. Except as set forth
in the Parent SEC Documents, as of the date hereof, there are no liabilities of
Parent or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that would have a
Material Adverse Effect on Parent, other than: (i) liabilities adequately
provided for on the balance sheet of Parent dated as of June 30, 1999 (including
the notes thereto) contained in the Parent's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 and (ii) liabilities under this Agreement.
(h) No Default. Neither Parent nor any of its Subsidiaries is
in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (i) the Restated Certificate of Incorporation or
Amended and Restated Bylaws of Parent or any provision of the comparable charter
or organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license to which Parent or any of
its Subsidiaries is now a party or by which Parent or any of its Subsidiaries or
any of their respective properties or assets is bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any of
its Subsidiaries, except in the case of (ii) and (iii) for defaults or
violations which in the aggregate would not have a Material Adverse Effect on
Parent.
(i) Compliance with Applicable Laws. Parent and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses as they are now being conducted (the
"Parent Permits"), except where the failure so to hold would not have a Material
Adverse Effect on Parent. Parent and its Subsidiaries are in compliance with the
terms of the
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Parent Permits, except where the failure so to comply would not have a Material
Adverse Effect on Parent. Except as disclosed in the Parent SEC Documents, the
businesses of Parent and its Subsidiaries are not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity, except for
possible violations which would not have a Material Adverse Effect on Parent. As
of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to Parent or any of its Subsidiaries is pending or, to the
knowledge of Parent as of the date hereof, threatened, other than those the
outcome of which would not have a Material Adverse Effect on Parent.
(j) Litigation. Except as disclosed in the Parent SEC
Documents, there is no suit, action or proceeding pending, or, to the knowledge
of Parent, threatened against or affecting Parent or any Subsidiary of Parent
("Parent Litigation"), and Parent and its Subsidiaries have no knowledge of any
facts that are likely to give rise to any Parent Litigation, that (in any case)
is reasonably likely to have a Material Adverse Effect on Parent, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any Subsidiary of Parent ("Parent
Order") that is reasonably likely to have a Material Adverse Effect on Parent or
its ability to consummate the transactions contemplated by this Agreement.
(k) Taxes. Except as set forth on Schedule 3.2(k) or
3.2(l)(ii) of the Parent Disclosure Schedule:
(i) Each of Parent, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which Parent or
any of its Subsidiaries is or was a member has (A) duly filed on a timely basis
(taking into account any extensions) all U.S. federal income Tax Returns, and
all other material Tax Returns required to be filed or sent by or with respect
to it other than Tax Returns that would report immaterial Tax liability and as
to which the failure to file would not itself give rise to material Tax
liability, (B) duly paid or deposited on a timely basis all material Taxes (as
hereinafter defined) that are shown to be due and payable on or with respect to
such Tax Returns, and all material Taxes that are otherwise due and payable
(except for audit adjustments not material in the aggregate or to the extent
that liability therefor is reserved for in Parent's most recent audited
financial statements) for which Parent or any of its Subsidiaries may be liable,
(C) established reserves that are adequate for the payment of all material Taxes
not yet due and payable with respect to the results of operations of Parent and
its Subsidiaries through the date hereof, and (D) complied in all material
respects with all applicable laws, rules and regulations relating to the
reporting, payment and withholding of material Taxes that are required to be
withheld from payments to employees, independent contractors, creditors,
shareholders or any other third party and has in all material respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over;
(ii) Except to the extent being contested in good
faith, all material deficiencies asserted as a result of such examinations and
any examination by any applicable taxing authority have been paid, fully settled
or adequately provided for in Parent's most recent audited financial statements.
No audits or other administrative proceedings or court proceedings are presently
pending, or to the knowledge of Parent, threatened, with regard to any Taxes for
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which Parent or any of its Subsidiaries would be liable in an amount reasonably
expected to exceed $100,000, and no material deficiency (to the extent remaining
unsatisfied) for any Taxes has been proposed, asserted or assessed (whether by
examination report or prior to completion of examination by means of notices of
proposed adjustment or other similar requests or notices) pursuant to such
examination against Parent or any of its Subsidiaries by any taxing authority
with respect to any period;
(iii) To the knowledge of Parent, no material
reassessments (for property or ad valorem Tax purposes) of any assets or any
property owned or leased by Parent or any of its Subsidiaries have been proposed
in written form; and
(iv) Neither Parent nor any of its Subsidiaries has
agreed to make any adjustment pursuant to section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of
Parent or any of its Subsidiaries, and neither Parent nor any of its
Subsidiaries has any application pending with any taxing authority requesting
permission for any changes in any accounting method of Parent or any of its
Subsidiaries. To the knowledge of Parent, neither the IRS nor any other taxing
authority has proposed in writing, and neither Parent nor any of its
Subsidiaries is otherwise required to make, any such adjustment or change in
accounting method.
(l) Pension and Benefit Plans; ERISA.
(i) Schedule 3.2(l)(i) of the Parent Disclosure
Schedule contains a list of each "employee pension benefit plan" (as defined in
Section 3(2) of (ERISA)) (hereinafter a "Parent Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(l) of ERISA), stock option, stock
purchase, deferred compensation plan or arrangement, and other employee fringe
benefit plan or arrangement maintained, contributed to or required to be
maintained or contributed to by Parent, any of its Significant Subsidiaries or
any other person or entity that, together with Parent, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each a "Parent ERISA
Affiliate") for the benefit of any present or former officers, employees,
directors or independent contractors of Parent or any Parent ERISA Affiliate
(all the foregoing being herein called "Parent Employee Benefit Plans"). Parent
has made available to the Company true, complete and correct copies of (1) each
Parent Employee Benefit Plan and amendments thereto, (2) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Parent Employee Benefit Plan (if any such report was required by applicable
law), (3) the most recent summary plan description for each Parent Employee
Benefit Plan for which such a summary plan description is required by applicable
law and (4) each trust agreement and insurance or annuity contract relating to
any Parent Employee Benefit Plan.
(ii) Each Parent Employee Benefit Plan has been
administered in accordance with its terms except as would not have a Material
Adverse Effect. Parent, the Parent ERISA Affiliates and all the Parent Employee
Benefit Plans are in compliance in all material respects with the applicable
provisions of ERISA and the Code. Except as disclosed in Schedule 3.2(l)(ii) of
the Parent Disclosure Schedule or except as would not have a Material Adverse
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Effect, all reports, returns and similar documents with respect to the Parent
Employee Benefit Plans required to be filed with any governmental agency or
distributed to any Parent Employee Benefit Plan participant have been duly,
timely and accurately filed or distributed. Except as disclosed in Schedule
3.2(l)(ii) of the Parent Disclosure Schedule or except as would not have a
Material Adverse Effect, there are no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Parent Employee Benefit Plans), suits or proceedings
against or involving any Parent Employee Benefit Plan or asserting any rights or
claims to benefits under any Parent Employee Benefits Plan that could give rise
to any material liability, and there are not any facts to Parent's knowledge
that could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(iii) Except as disclosed on Schedule 3.2(l)(iii) of
the Parent Disclosure Schedule, there has been no "reportable event" as that
term is defined in Section 4043 of ERISA and the regulations thereunder with
respect to the Parent Pension Plans subject to Title IV of ERISA that would
require the giving of notice or any event requiring disclosure under Section
4041(c)(3)(C) or 4063(a) of ERISA.
(iv) Except as disclosed in Schedule 3.2(l)(iv) of
the Parent Disclosure Schedule, each Parent Pension Plan intended to be
qualified has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Parent Pension Plan is qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code; no such determination letter has been revoked, and, to the
knowledge of Parent, revocation has not been threatened; and such Parent Pension
Plan has not been amended since the effective date of its most recent
determination letter in any respect that might adversely affect its
qualification or materially increase its cost. Parent has made available to the
Company a copy of the most recent determination letter received from the
Internal Revenue Service with respect to each Parent Pension Plan for which such
a letter has been issued, as well as a copy of any pending application for a
determination letter. Parent has also provided to the Company a list of all
Parent Pension Plan amendments as to which a favorable determination letter has
not yet been received.
(v) Except as disclosed on Schedule 3.2(l)(v) of the
Parent Disclosure Schedule, no stock or other security issued by Parent or any
of its subsidiaries forms or has formed a material part of the assets of any
Parent Employee Benefit Plan or Parent Pension Plan.
(m) Labor Matters. Except as set forth on Schedule 3.2(m) of
the Parent Disclosure Schedule or in the Parent SEC Documents:
(i) Neither Parent nor any of its Subsidiaries is a
party to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and to Parent's knowledge currently there
is no union that claims to represent employees of Parent or any of its
Subsidiaries, nor does Parent or any of its Subsidiaries know of
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any activity or proceeding of any labor organization (or representative thereof)
or employee group (or representative thereof) to organize any such employees;
(ii) There is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or other grievance
procedure against Parent or any of its Subsidiaries pending, or, to the
knowledge or Parent or any of its Subsidiaries, threatened, that has, or is
reasonably likely to have, a Material Adverse Effect on Parent;
(iii) There is no complaint, lawsuit or proceeding in
any forum by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against Parent or any of its
Subsidiaries pending, or, to the knowledge of Parent or any of its Subsidiaries,
threatened, that has, or is reasonably likely to have, a Material Adverse Effect
on Parent;
(iv) There is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of Parent or any of its
Subsidiaries, threatened, against or involving Parent or any of its Subsidiaries
that has, or is reasonably likely to have, a Material Adverse Effect on Parent;
(v) Parent and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that does not have,
and is not reasonably likely to have, a Material Adverse Effect on Parent; and
(vi) There is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of Parent or any of its
Subsidiaries, threatened, in respect to which any current or former director,
officer, employee or agent of Parent or any of its Subsidiaries is or may be
entitled to claim indemnification from Parent or any of its Subsidiaries
pursuant to the Restated Certificate of Incorporation or Amended and Restated
Bylaws of Parent or any provision of the comparable charter or organizational
documents of any of its Subsidiaries, as provided in any indemnification
agreement to which Parent or any Subsidiary of Parent is a party or pursuant to
applicable law that has, or is reasonably likely to have, a Material Adverse
Effect on Parent.
(n) Intangible Property. Parent and its Subsidiaries possess,
have adequate rights to use, or have adequate licenses to all material
trademarks, trade names, patents, service marks, brand marks, brand names,
domain names, computer programs, databases, industrial designs and copyrights
necessary for the operation of the businesses of each of Parent and its
Subsidiaries (collectively, the "Parent Intangible Property"), except where the
failure to possess or have adequate rights to use such properties would not
reasonably be expected to have a Material Adverse Effect on Parent. All of the
Parent Intangible Property that is owned by Parent or its Subsidiaries in whole
or in part is owned free and clear of any and all liens, claims or
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encumbrances, except those that are not reasonably likely to have a Material
Adverse Effect on Parent and neither Parent nor any such Subsidiary has
forfeited or otherwise relinquished any Parent Intangible Property which
forfeiture would result in a Material Adverse Effect on Parent. Parent and its
Subsidiaries are not in violation of or in default under any contract or license
giving Parent and its Subsidiaries rights to use or licenses to the Parent
Intangible Property, unless such violation or default would not reasonably be
expected to have a Material Adverse Effect on Parent. To the knowledge of
Parent, the operation of Parent's business has not, does not, and will not in
any material respect, conflict with, infringe upon, violate or interfere with or
constitute a misappropriation or dilution of any right, title, interest or
goodwill, including, without limitation, any intellectual property right,
trademark, trade name, patent, service xxxx, brand xxxx, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other person and there have been no claims made and neither
Parent nor any of its Subsidiaries has received any notice of any claim or
otherwise knows that any of the Parent Intangible Property is invalid or
conflicts with the asserted rights of any other person or has not been used or
enforced or has been failed to be used or enforced in a manner that would result
in the abandonment, cancellation or unenforceability of any of the Parent
Intangible Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that would not reasonably be expected to have a Material Adverse Effect on
Parent. To the knowledge of Parent, no other person has, is or is planning to
infringe upon, violate or interfere with or misappropriate or dilute any of the
Parent Intangible Property, except where the foregoing would not reasonably be
expected to have a Material Adverse Effect on the Company.
(o) Environmental Matters. Except as disclosed on Schedule
3.2(o) of the Parent Disclosure Schedule or in the Parent SEC Documents:
(i) The operations of Parent and its Subsidiaries
have been and, as of the Closing Date, will be, in compliance with all
Environmental Laws, except where the failure to so comply would not reasonably
be expected to have a Material Adverse Effect on Parent;
(ii) Parent and its Subsidiaries have obtained and
will maintain all permits, licenses and registrations, or applications relating
thereto, and have made and will make all filings, reports and notices required
under applicable Environmental Laws for the continued operations of their
respective businesses, except such matters the lack or failure of which would
not lead to a Material Adverse Effect on Parent;
(iii) Parent and its Subsidiaries are not subject to
any outstanding written orders or material contracts with any Governmental
Entity or other person respecting (A) Environmental Laws, (B) Remedial Action or
(C) any Release or threatened Release of a Hazardous Material, except such
orders or contracts the compliance with which would not reasonably be expected
to have a Material Adverse Effect on Parent;
(iv) Parent and its Subsidiaries have not received
any written communication alleging, with respect to any such party, the
violation of or liability under any
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Environmental Law, which violation or liability would reasonably be expected to
have a Material Adverse Effect on Parent;
(v) Neither Parent nor any of its Subsidiaries has
any contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor environment (whether on-site or off-site)
that would reasonably be expected to lead to a Material Adverse Effect on
Parent;
(vi) The operations of Parent or its Subsidiaries
involving the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in
effect as of the date of this Agreement) or any state equivalent, are in
compliance with applicable Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect on
Parent; and
(vii) There is not now on or in any property of
Parent or its Subsidiaries any of the following: (A) any underground storage
tanks or surface impoundments, (B) any asbestos-containing materials, or (C) any
polychlorinated biphenyls, which ((A), (B), or (C) preceding) could have a
Material Adverse Effect on Parent.
(p) Opinion of Financial Advisor. The Board of Directors of
Parent has received the opinion of Warburg Dillon Read LLC (a copy of which has
been delivered to the Company) to the effect that, as of the date hereof, the
Conversion Number is fair from a financial point of view to the holders of
Parent Common Stock.
(q) Vote Required. The affirmative vote of the holders of
Parent Common Stock required by the rules and regulations of the NYSE is the
only vote of the holders of any class or series of Parent capital stock
necessary to approve the issuance of the Parent Common Stock pursuant to the
Merger. No other vote of the holders of any class or series of Parent capital
stock is necessary to approve this Agreement and the transactions contemplated
hereby.
(r) Beneficial Ownership of Company Common Stock. As of the
date hereof and except for the Company Option, neither Parent nor any of its
Subsidiaries beneficially own any shares of outstanding Company Common Stock.
(s) Brokers. Except for the fees and expenses payable to
Warburg Dillon Read LLC, which fees are reflected in its agreement with Parent,
no broker, investment banker or other person is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
(t) Tax Matters. Neither Parent nor any of the officers of
Parent is aware of any reason why the Merger could fail to qualify as a tax-free
reorganization pursuant to section 368(a) of the Code.
(u) Interim Operations of Merger Sub. Merger Sub was formed by
Parent solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business or activities, has incurred no other
obligations or liabilities, has no other assets and has conducted its operations
only as contemplated hereby. All of the outstanding capital stock of Merger Sub
is owned directly by Parent.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company Pending the Merger.
Prior to the Effective Time, The Company agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or set forth in Section 4.1 of the Company Disclosure Schedule, or to
the extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. Each of the Company and its Subsidiaries
shall carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use its
reasonable efforts to preserve intact its present business organizations, keep
available the services of its current officers and key employees and endeavor to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. Except for transactions
solely among the Company and its Subsidiaries, the Company shall not and it
shall not permit any of its Subsidiaries to: (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock; (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company capital stock; or (iii) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any shares of its capital stock, except as required
by the terms of its securities outstanding on the date hereof or as contemplated
by any existing employee benefit plan.
(c) Issuance of Securities. The Company shall not and it shall
not permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose to issue, deliver or sell, any shares of its capital stock of any class,
any Voting Debt or other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, Voting Debt,
other voting securities or convertible securities, other than: (i) the issuance
of Company Common Stock upon the exercise of stock options granted under the
Company Stock Plans (except for the Purchase Plans (as hereinafter defined))
that are outstanding on the date hereof, or in satisfaction of stock grants or
stock based awards made prior to the date hereof pursuant to the Company Stock
Plans, (ii) the issuance of Company Common Stock upon the exercise of the
Company Warrants or the conversion of the Company Convertible Notes that are
outstanding on the date hereof and (iii) issuances by a wholly owned Subsidiary
of its capital stock to its parent.
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(d) Governing Documents. Except as contemplated hereby or in
connection herewith, the Company shall not amend or propose to amend its
Restated Certificate of Incorporation or Bylaws. The Company shall not take any
steps to change its state of incorporation and the Company shall not, and it
shall cause Service Experts, Inc., a Tennessee corporation and a direct, wholly
owned subsidiary of the Company ("SVE Tennessee"), not to consummate the
transactions contemplated by the Agreement and Plan of Merger, dated as of April
9, 1999 (the "Reincorporation Agreement"), between the Company and SVE
Tennessee. The Company agrees to and agrees to cause SVE Tennessee to, abandon
and terminate the Reincorporation Agreement immediately prior to the Effective
Time.
(e) No Acquisitions. The Company shall not and it shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof in any individual transaction where the aggregate purchase
price exceeds $1.0 million or in transactions where the aggregate purchase price
exceeds $15.0 million.
(f) No Dispositions. Other than sales, leases, encumbrances or
dispositions in the ordinary course of business consistent with past practice
that are not material, individually or in the aggregate, to the Company and its
Subsidiaries taken as a whole, the Company shall not and it shall not permit any
of its Subsidiaries to sell, lease, encumber or otherwise dispose of, or agree
to sell, lease (whether such lease is an operating or capital lease), encumber
or otherwise dispose of, any of its assets.
(g) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, the Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of the Company or any of its Significant
Subsidiaries.
(h) Certain Employee Matters. The Company shall not and it
shall not permit any of its Subsidiaries to: (i) grant any increases in the
compensation of any of its directors, officers or employees, including the grant
of bonuses, except increases or bonuses to employees who are not directors or
officers made in the ordinary course of business and in accordance with past
practice, provided that the Company may pay bonuses to general managers (or any
employees who are junior to general managers) that are officers only of
Subsidiaries of the Company and that are made in the ordinary course of business
consistent with past practice; (ii) pay or agree to pay any material pension,
retirement allowance or other employee benefit not required or contemplated by
any of the existing Company Employee Benefit Plans or Company Pension Plans as
in effect on the date hereof to any such director, officer or employee, whether
past or present; (iii) amend or modify in any material respect any Company
Pension Plan in each case, except as required by law; (iv) enter into any new,
or amend any existing, employment or severance or termination agreement with any
director, officer or employee; or (v) become obligated under any new Company
Employee Benefit Plan or Company Pension Plan, which was not in existence or
approved by the Board of Directors of the Company prior to or on the date
hereof, or, except as required by law, amend any such plan or arrangement in
existence on the
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date hereof if such amendment would have the effect of materially enhancing any
benefits thereunder. Notwithstanding the foregoing, nothing in this Section
4.1(h) shall prevent the Company from employing general managers (or any
employees junior to general managers) and entering into employment agreements
with persons in each case in the ordinary course of business consistent with
past practice.
(i) Indebtedness; Leases; Capital Expenditures. The Company
shall not, nor shall the Company permit any of its Subsidiaries to, (i) incur
any indebtedness for borrowed money (except for working capital under the
Company's existing credit facilities, and (x) refinancings of existing debt and
(y) other immaterial borrowings that, in the case of either (x) or (y), permit
prepayment of such debt without penalty (other than LIBOR breakage costs)) or
guarantee any such indebtedness or issue or sell any debt securities or rights
to acquire any debt securities of the Company or any of its Subsidiaries (other
than debt securities in connection with transactions permitted by Section
4.1(e)) or guarantee any debt securities of others, (ii) except in the ordinary
course of business, enter into any material lease (whether such lease is an
operating or capital lease) or create any material mortgages, liens, security
interests or other encumbrances on the property of the Company or any of its
Subsidiaries in connection with any indebtedness thereof, or (iii) make or
commit to make aggregate capital expenditures in excess of $2.5 million.
(j) Accounting. The Company shall not, nor shall it permit any
of its Subsidiaries to, make any changes in their accounting methods which would
be required to be disclosed under the rules and regulations of the SEC, except
as required by law or GAAP.
(k) Affiliate Transactions. The Company shall not, nor shall
it permit any of its Subsidiaries to, enter into any agreement or arrangement
with any of their respective affiliates (as such term is defined in Rule 405
under the Securities Act, an "Affiliate"), other than with wholly owned
Subsidiaries of the Company, on terms less favorable to the Company or such
Subsidiary, as the case may be, than could be reasonably expected to have been
obtained with an unaffiliated third party on an arm's-length basis.
(l) Contracts. The Company shall not, nor shall it permit any
of its Subsidiaries to, except in the ordinary course of business consistent
with past practice, modify, amend, terminate, renew or fail to use reasonable
business efforts to renew any material contract or agreement to which it or any
of its Subsidiaries is a party or waive, release or assign any material rights
or claims. Except as permitted under Section 4.1(e), the Company shall not, nor
shall it permit any of its Subsidiaries to, enter into any contract except in
the ordinary course of business consistent with past practice.
(m) Insurance. The Company shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are customary for
companies engaged in their respective businesses.
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(n) Permits. The Company shall, and shall cause its
Subsidiaries to, use reasonable efforts to maintain in effect all existing
Company Permits which are material to their respective operations.
(o) Tax Matters. The Company shall not (i) make or rescind any
material express or deemed election relating to Taxes unless it is reasonably
expected that such action will not materially and adversely affect the Company
or Parent, including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other investments where the
Company has the capacity to make such binding election, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, except where
such settlement or compromise will not materially and adversely affect the
Company or Parent or (iii) change in any material respect any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of its federal income Tax Returns that have been
filed for prior taxable years, except as may be required by applicable law or
except for changes that are reasonably expected not to materially and adversely
affect the Company or Parent.
(p) Discharge of Liabilities. The Company shall not, nor shall
it permit any of its Subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice (which includes
the payment of final and unappealable judgments) or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, or incurred in the ordinary course of business consistent
with past practice.
(q) Other Actions. The Company shall not, and shall not permit
any of its Subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or delay
the Merger.
(r) Agreements. The Company shall not, nor shall it permit any
of its Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
(s) 368(a) Reorganization. From the date hereof through the
Closing Date, the Company shall not take any action, or cause any action to be
taken, which would prevent the transactions contemplated hereby from qualifying
as a reorganization described in Section 368(a) of the Code.
4.2 Conduct of Business by Parent Pending the Merger. Prior to
the Effective Time, Parent agrees as to itself and its Subsidiaries that (except
as expressly contemplated or permitted by this Agreement or to the extent that
the other parties shall otherwise agree in writing):
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(a) Dividends; Changes in Stock. Parent shall not (i) engage
in any material repurchase, recapitalization, restructuring or reorganization
with respect to its capital stock (other than in connection with the Merger),
including, without limitation, by way of any extraordinary dividends on or other
extraordinary distributions in respect of any of its capital stock, (ii) engage
in any repurchase of Parent Common Stock (other than pursuant to any existing
employee benefit plan) during the period beginning 45 days prior to the
Effective Time and ending at the Effective Time, (iii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Parent Common Stock or (iv) amend any material term or provision
of the Parent Common Stock.
(b) Governing Documents. Parent shall not amend or propose to
amend its Restated Certificate of Incorporation or Bylaws with respect to the
rights of the holders of Parent Common Stock except as contemplated herein.
(c) Other Actions. Parent shall not, and shall not permit any
of its Subsidiaries to, take or fail to take any other action which would
reasonably be expected to prevent or materially impede, interfere with or delay
the Merger.
(d) Agreements. Parent shall not, nor shall it permit any of
its Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with the foregoing.
(e) 368(a) Reorganization. From the date hereof through the
Closing Date, Parent shall not take any action, or cause any action to be taken,
which would prevent the transactions contemplated hereby from qualifying as a
reorganization described in Section 368(a) of the Code.
4.3 No Solicitation.
(a) Except as expressly contemplated by this Agreement or
otherwise consented to in writing by Parent, from the date of this Agreement
until the Effective Time, the Company will not directly or indirectly, and will
not permit any of its Subsidiaries to directly or indirectly, initiate, solicit
or encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into discussions or negotiate with any person or
entity in furtherance of such inquires to obtain an Acquisition Proposal, or
enter into an agreement with respect to any Acquisition Proposal or agree to or
endorse any Acquisition Proposal, or authorize or permit any of the officers,
directors or employees of the Company or any of its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its Subsidiaries to take any
such action, and the Company shall promptly notify Parent of all relevant terms
of any such inquiries and proposals received by the Company or any of its
Subsidiaries or by any such officer, director, investment banker, financial
advisor or attorney, and if such inquiry or proposal is in writing, the Company
shall deliver or cause to be delivered to Parent a copy of such inquiry or
proposal and the Company shall inform Parent on a
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prompt basis of the status of any discussions or negotiations with such person
or entity and any changes to the terms and conditions of such Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prohibit the Board of Directors of the Company from (i) complying with Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal; or (ii) at any time prior to the vote of the Company's
stockholders contemplated hereby, furnishing information to, or entering into
discussions or negotiations with, any persons or entity in connection with an
unsolicited bona fide proposal in writing by such person or entity to acquire
the Company pursuant to a merger, consolidation, share exchange, business
combination or other similar transaction or to acquire all or substantially all
of the assets of the Company or any of its Significant Subsidiaries or
recommending the same to the Company's stockholders, if, and only to the extent
that (A) the Board of Directors of the Company, after consultation with
independent legal counsel (which may include its regularly engaged independent
legal counsel), determines in good faith that such action is required for the
Board of Directors of the Company to comply with its fiduciary duties to its
stockholders imposed by Delaware law; (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity the
Company (x) provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity and (y) obtains from such person or entity a customary
confidentiality agreement; and (C) the Company determines in good faith (after
consultation with its financial advisor) that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all legal,
financial and regulatory aspects of the proposal and the person making the
proposal and would, if consummated, result in a more favorable transaction than
the transaction contemplated by this Agreement, taking into account the
long-term prospects and interests of the Company and its stockholders. The
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company agrees that it will take the
necessary steps to promptly inform its officers, directors and advisors of the
obligations undertaken in this Section 4.3.
(b) "Acquisition Proposal" means any of the following
involving the Company or any of its Significant Subsidiaries: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction (other than the transactions contemplated by this Agreement); (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
15% or more of the assets of the Company and its Subsidiaries, taken as a whole,
in a single transaction or series of transactions; (iii) any tender offer or
exchange offer for 15% or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; (iv) the acquisition by any person of "beneficial
ownership" or the right to acquire beneficial ownership of, or the formation of
any "group" (as such terms are defined under Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder) which beneficially owns,
or has the right to acquire beneficial ownership of 15% or more of the then
outstanding shares of capital stock of the Company; or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing.
4.4 Board of Directors. Parent will take commercially
reasonable actions as may be necessary or advisable to nominate and recommend
one individual proposed by the
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Company and acceptable to Parent who is currently a member of the Board of
Directors of the Company for election to a three-year term on the Board of
Directors of Parent at Parent's next annual meeting following the Effective
Time. After the Effective Time and prior to such individual's election to the
Board of Directors of Parent, such individual shall be invited to meetings of
the Board of Directors of Parent as a non-voting participant.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. Parent
and the Company shall promptly prepare and file with the SEC, the Joint Proxy
Statement and Parent and the Company shall prepare, and Parent will file with
the SEC, the S-4 in which the Joint Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use its reasonable best efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Each of Parent and the Company shall use its
reasonable best efforts to cause the Joint Proxy Statement to be mailed to its
respective stockholders at the earliest practicable date. Each of Parent and
Merger Sub shall use its reasonable best efforts to obtain all necessary state
securities laws or "blue sky" permits, approvals and registrations in connection
with the issuance of Parent Common Stock in the Merger and upon the exercise of
the Company Stock Options and the Company Warrants and the Company shall furnish
all information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with obtaining such permits,
approvals and registrations.
5.2 Letter of the Company's Accountants. The Company shall use
its reasonable best efforts to cause to be delivered to Parent a letter of Ernst
& Young LLP, the Company's independent public accountants, dated a date within
two business days before the date on which the S-4 shall become effective and
addressed to Parent and the Company, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.3 Letter of Parent's Accountants. Parent shall use its
reasonable best efforts to cause to be delivered to the Company a letter of
Xxxxxx Xxxxxxxx LLP, Parent's independent public accountants, dated a date
within two business days before the date on which the S-4 shall become effective
and addressed to Parent and the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, Parent and
the Company, as the case may be, shall (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of Parent and the Company,
as the case may be, shall (and shall cause each of their respective Subsidiaries
to) furnish promptly
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to the other (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to SEC
requirements and (b) all other information concerning its business, properties
and personnel as such other party may reasonably request. Each of Parent and the
Company agrees that it will not, and will cause its respective representatives
not to, use any information obtained pursuant to this Section 5.4 for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement. The Confidentiality Agreements dated October 15, 1999 and October 19,
1999 between Parent and the Company (collectively, the "Confidentiality
Agreements") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
5.5 Stockholders Meetings.
(a) Company Stockholders' Meeting. The Company shall (i) call
a meeting of its stockholders (the "Company Stockholders' Meeting") to be held
as promptly as practicable after the date hereof for the purpose of voting upon
this Agreement and the Merger, (ii) through its Board of Directors, recommend to
its stockholders the advisability and approval of such matters and not rescind
such recommendation, (iii) use its best efforts to obtain approval and adoption
of this Agreement and the Merger by its stockholders and (iv) use all reasonable
efforts to hold such meeting as soon as practicable after the date upon which
the S-4 becomes effective; provided, however, that nothing herein obligates the
Company to take any action that would cause its Board of Directors to act
inconsistently with their fiduciary duties as determined by the Board of
Directors of the Company in good faith after consultation with independent legal
counsel (which may include its regularly engaged independent legal counsel). The
Company Stockholders' Meeting shall be held on such date as soon as practicable
after the date upon which the S-4 becomes effective as the Company and Parent
shall mutually determine.
(b) Parent Stockholders' Meeting. Parent shall (i) call a
meeting of its stockholders (the "Parent Stockholders' Meeting") to be held as
promptly as practicable after the date hereof for the purpose of voting upon
this Agreement and the issuance of Parent Common Stock pursuant to the Merger,
(ii) through its Board of Directors, recommend to its stockholders approval of
such matters and not rescind such recommendation, (iii) use its best efforts to
obtain approval and adoption of this Agreement and the issuance of Parent Common
Stock pursuant to the Merger by its stockholders and (iv) use all reasonable
efforts to hold such meeting as soon as practicable after the date upon which
the S-4 becomes effective. The Parent Stockholders' Meeting shall be held on
such date as soon as practicable after the date upon which the S-4 becomes
effective as the Company and Parent shall mutually determine.
5.6 HSR and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be filed
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") any notification required to be
filed by their respective "ultimate parent" companies under the HSR Act and the
rules and regulations promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all commercially reasonable efforts
to make such filings promptly and to respond on a timely basis to any requests
for
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additional information made by either of such agencies. Each of the parties
hereto agrees to furnish the others with copies of all correspondence, filings
and communications (and memoranda setting forth the substance thereof) between
it and its affiliates and their respective representatives, on the one hand, and
the FTC, the Antitrust Division or any other Governmental Entity or members or
their respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby. Each party hereto agrees to furnish the
others with such necessary information and reasonable assistance as such other
parties and their respective affiliates may reasonably request in connection
with their preparation of necessary filings, registrations or submissions of
information to any Governmental Entities, including without limitation any
filings necessary under the provisions of the HSR Act.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all commercially reasonable
efforts to obtain (and will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made by
Parent or the Company or any of their respective Subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement.
5.7 Agreements of Rule 145 Affiliates. Prior to the Effective
Time, the Company shall cause to be prepared and delivered to Parent a list
identifying all persons who, at the time of the Company Stockholders' Meeting
may be deemed to be "affiliates" of the Company, as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such Company list to deliver
to Parent, at or prior to the Effective Time, a written agreement, in form and
substance agreeable to Parent and the Company, that such Rule 145 Affiliate will
not sell, pledge, transfer or otherwise dispose of any shares of Parent Common
Stock issued to such Rule 145 Affiliate pursuant to the Merger, except pursuant
to an effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act. The Company
and the Rule 145 Affiliates shall be relieved of this obligation under the
foregoing provisions of this Section 5.7 and such written agreements if, and to
the extent, such Rule 145 is amended not to require such written agreements or
any of the covenants contained therein.
5.8 Authorization for Shares and Stock Exchange Listing. Prior
to the Effective Time, Parent shall have taken all action necessary to permit it
to issue the number of shares of Parent Common Stock required to be issued
pursuant to Section 2.1. Parent shall use all reasonable efforts to cause the
shares of Parent Common Stock to be issued in the Merger and the shares of
Parent Common Stock to be reserved for issuance upon exercise of the Company
Stock Options and the Company Warrants and issuances under the Company Stock
Plans to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Closing Date.
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5.9 Employee Matters. Parent and the Company agree that all
employees of the Company immediately prior to the Effective Time shall be
employed by the Surviving Corporation immediately after the Effective Time, it
being understood that Parent and the Surviving Corporation shall not have any
obligations to continue employing such employees for any length of time
thereafter. Parent and the Company further agree that Company Employee Benefit
Plans in effect at the date of this Agreement shall, to the extent practicable,
remain in effect until otherwise determined after the Effective Time. To the
extent such Company Employee Benefit Plans are not continued, (i) the Company
employees will be covered by Parent Employee Benefit Plans applicable to
similarly situated employees of Parent or (ii) Parent will maintain for a period
of one year after the Effective Time benefit plans that are not less favorable,
in the aggregate, to the employees covered by Company Employee Benefit Plans
than are the Company Employee Benefit Plans. In the case of Company Pension
Plans that are continued and under which the employees' interests are based upon
Company Common Stock, Parent and the Company agree that such interests shall be
based on Parent Common Stock in an equitable manner (and in the case of any such
interests existing at the Effective Time, on the basis of the Conversion
Number); provided, however, that nothing contained herein shall be construed as
requiring Parent or the Surviving Corporation to continue any specific Company
Pension Plan. Parent and the Surviving Corporation further agree that any
present employees of the Company shall be credited for their service with the
Company and its predecessor entities, for purposes of eligibility and vesting in
the plans provided by Parent and the Surviving Corporation. Those employees'
benefits under Parent's and the Surviving Corporation's medical benefit plan
shall not be subject to any exclusions for any pre-existing conditions, and
credit shall be received for any deductibles or out-of-pocket amounts previously
paid during the current year.
5.10 Stock Options and Warrants; Restricted Stock Awards; and
Stock Purchase Plans.
(a) At the Effective Time, each outstanding option to purchase
Company Common Stock and any stock appreciation rights related thereto that has
been granted pursuant to a Company Stock Plan ("Company Stock Option") and the
Company Warrants, whether vested or unvested, shall be assumed by Parent. Each
such option or warrant shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Company Stock Option
or Company Warrant, a number of shares of Parent Common Stock equal to the
number of shares of Company Common Stock purchasable pursuant to such Company
Stock Option or Company Warrant multiplied by the Conversion Number, at a price
per share equal to the per-share exercise price for the shares of Company Common
Stock purchasable pursuant to such Company Stock Option or Company Warrant
divided by the Conversion Number; provided, however, that in the case of any
option to which Section 421 of the Code applies by reason of its qualification
under any of Sections 422-424 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code; and provided further, that, unless otherwise provided in the
applicable Company Stock Plan, Company Stock Option or Company Warrant, the
number of shares of Parent Common Stock that may be purchased upon exercise of
such Company Stock Option or Company Warrant shall not include any fractional
share and, upon exercise of such Company Stock Option or
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Company Warrant, a cash payment shall be made for any fractional share based
upon the closing price of a share of Parent Common Stock on the NYSE on the
trading day immediately preceding the date of exercise.
(b) The Company shall take such action as is necessary to
amend the Company's 1996 Employee Stock Purchase Plan and the Company's 1997
Nonqualified Stock Purchase Plan (collectively referred to herein as the
"Purchase Plans") to cause the Exercise Date of the current Plan Year (as each
is defined under each of the Purchase Plans) to be immediately prior to the
Effective Time (the "Final Purchase Date"), provided that such change in the
Exercise Date shall be conditioned upon the consummation of the Merger. On the
Final Purchase Date, the Company shall apply the funds credited as of such date
under such Purchase Plan within each participant's contribution account to the
purchase of whole shares of Company Common Stock in accordance with the terms of
such Purchase Plan. Any cash balance remaining in a participant's account which
is insufficient to purchase an additional whole share of Company Common Stock
shall be refunded to such participant as soon as practicable following the Final
Purchase Date.
(c) At the Effective Time, each Company Restricted Stock
Award, whether vested or unvested, shall be deemed to constitute a restricted
stock award on the same terms and conditions as were applicable under the
Restricted Stock Award, which shall constitute the right to receive a number of
shares of Parent Common Stock equal to the number of shares of Company Common
Stock granted pursuant to such Restricted Stock Award multiplied by the
Conversion Number, at a vesting strike price equal to the vesting strike price
for the Restricted Stock Award divided by the Conversion Number.
(d) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Company Stock Options, Company Warrants and
Company Restricted Stock Awards assumed in accordance with this Section 5.10. As
soon as practicable after the Effective Time, Parent shall file with the SEC a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Parent Common Stock subject to
the Company Stock Options and shall use its reasonable best efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as Company Stock Options remain outstanding.
5.11 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time,
Parent and the Surviving Corporation shall, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
any of its Subsidiaries or an employee of the Company or any of its Subsidiaries
who acts as a fiduciary under any Company Employee Benefit Plans or Company
Pension Plans (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees), liabilities or judgments or amounts
that are paid in
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settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer, or such employee of the Company or any Subsidiary whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including 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 permitted under applicable Delaware law (and Parent and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law). Without limiting the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and the Company
(or them and Parent and the Surviving Corporation after the Effective Time) and
the Company (or after the Effective Time, Parent and the Surviving Corporation)
shall pay all fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (ii) the Company (or after the
Effective Time, Parent and the Surviving Corporation) will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
neither the Company, Parent nor the Surviving Corporation shall be liable for
any settlement effected without its written consent, which consent, however,
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.11, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, Parent and the Surviving Corporation), but the failure so to
notify shall not relieve a party from any liability that it may have under this
Section 5.11, except to the extent such failure materially prejudices such
party. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict or a potential conflict
on any significant issue between the positions of any two or more Indemnified
Parties. The Company, Parent and Merger Sub agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
(including in the Restated Certificate of Incorporation or Bylaws of the
Company) with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect.
(b) For a period of six years after the Effective Time, Parent
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions that are no less
advantageous in any material respect to the Indemnified Parties) with respect to
matters arising before the Effective Time, provided that Parent shall not be
required to pay an annual premium for such insurance in excess of two times the
last annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
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5.12 Agreement to Defend. In the event any claim, action,
suit, investigation or other proceeding by any governmental body or other person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
5.13 Public Announcements. The parties hereto will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement without
the consent of the other parties, except as may be required by applicable law or
by obligations pursuant to any listing agreement with any national securities
exchange or transaction reporting system so long as the other parties are
notified promptly by the disclosing party of such press release or public
statement.
5.14 Other Actions. Except as contemplated by this Agreement,
neither Parent nor the Company shall, and shall not permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VI not being satisfied. Each of the parties
agrees to use its reasonable best efforts to satisfy the conditions to Closing
set forth in this Agreement.
5.15 Advice of Changes; SEC Filings. Parent and the Company,
as the case may be, shall confer on a regular basis with each other, report on
operational matters and promptly advise each other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have, a Material Adverse Effect on Parent or the Company, as the case may be.
Parent and the Company shall promptly provide each other (or their respective
counsel) copies of all filings made by such party with the SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
5.16 Reorganization. It is the intention of Parent and the
Company that the Merger will qualify as a reorganization described in Section
368(a) of the Code. Neither Parent nor the Company (nor any of their respective
Subsidiaries) will take or omit to take any action (whether before, on or after
the Closing Date) that would cause the Merger not to be so treated. The parties
will characterize the Merger as such a reorganization for purposes of all Tax
Returns and other filings.
5.17 Conveyance Taxes. Parent and the Company will (a)
cooperate in the preparation, execution and filing of all material returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the transactions contemplated by
this Agreement that are required or permitted to be filed on or before the
Effective Time, (b) cooperate in the preparation, execution and filing of all
material returns, questionnaires, applications or other
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documents regarding any material applicable exemptions to any such tax or fee,
and (c) each pay any such material tax or fee which becomes payable by it on or
before the Effective Time.
5.18 Other Agreements. Concurrently with the execution of this
Agreement, (i) Parent shall enter into an agreement reasonably satisfactory to
Parent with each of the persons identified on Exhibit 5.18(a) hereto regarding
the voting of shares of Company Common Stock at the Company Stockholders'
Meeting and (ii) the Company shall enter into an agreement reasonably
satisfactory to the Company with each of the persons identified in Exhibit
5.18(b) hereto regarding the voting of shares of Parent Common Stock at the
Parent Stockholders' Meeting.
5.19 Company Credit Agreement. At or prior to the Closing,
Parent shall refinance (or arrange for the continuation of) or repay all the
Company's debt under its $200 million bank credit facility with SunTrust Bank,
Nashville, N.A., NationsBank, N.A., and The First National Bank of Chicago and
the other lenders thereunder (the "Bank Credit Facility"). Parent acknowledges
that the Merger may constitute an "Event of Default" under the Bank Credit
Facility. Notwithstanding the foregoing, Parent acknowledges that the receipt of
the consent or waiver of the lenders under the Bank Credit Facility shall not be
a condition to Parent's obligation to effect the Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) The Company Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock entitled
to vote thereon.
(b) Parent Stockholder Approval. The issuance of Parent Common
Stock pursuant to the Merger shall have been approved and adopted by the
affirmative vote of the holders of Parent Common Stock required by the rules and
regulations of the NYSE.
(c) NYSE Listing. The shares of Parent Common Stock issuable
to the Company stockholders pursuant to this Agreement in the Merger shall have
been authorized for listing on the NYSE upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all filings required to be made prior to the Effective Time with,
and all consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the consummation of the
transactions
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contemplated hereby shall have been made or obtained (as the case may be),
except where the failure to obtain such consents, approvals, permits and
authorizations would not be reasonably likely to result in a Material Adverse
Effect on Parent (assuming the Merger has taken place) or to materially
adversely affect the consummation of the Merger, and no such consent, approval,
permit or authorization shall impose terms or conditions that would have, or
would be reasonably likely to have, a Material Adverse Effect on Parent
(assuming the Merger has taken place).
(e) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect; provided, however,
that prior to invoking this condition, each party shall have complied fully with
its obligations under Section 5.6 hereof and, in addition, shall use all
reasonable efforts to have any such decree, ruling, injunction or order vacated,
except as otherwise contemplated by this Agreement.
6.2 Conditions of Obligations of Parent. The obligations of
Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Parent.
(a) Representations and Warranties of the Company. Each of the
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, except where the failure to be so true and correct (without giving effect
to the individual materiality qualifications and thresholds otherwise contained
in Section 3.1 hereof) would not in the aggregate have a Material Adverse Effect
on the Company, and Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Letters from Rule 145 Affiliates. Parent shall have
received from each person named in the Company list referred to in Section 5.7
an executed copy of an agreement as provided in such section.
(d) Tax Opinion. Parent shall have received an opinion from
Xxxxx & Xxxxx, L.L.P. ("Parent's Counsel"), in form and substance reasonably
satisfactory to Parent, dated the Closing Date, a copy of which will be
furnished to the Company, substantially to the effect that,
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on the basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code, and that, accordingly for federal income tax purposes (i) no gain
or loss will be recognized by Parent, Merger Sub or the Company as a result of
the Merger and (ii) no gain or loss will be recognized by a stockholder of the
Company as a result of the Merger upon the conversion of shares of Company
Common Stock into shares of Parent Common Stock (except with respect to cash, if
any, received in lieu of fractional shares of Parent Common Stock). In rendering
such opinion, Parent's Counsel may receive and rely upon representations of fact
and covenants contained in certificates of officers of the Company and Parent,
reasonably satisfactory in form and substance to such counsel.
6.3 Conditions of Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
the Company:
(a) Representations and Warranties of Parent and Merger Sub.
Each of the representations and warranties of Parent and Merger Sub set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.2 hereof) would not in the aggregate have a
Material Adverse Effect on Parent, and the Company shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by the Chief Executive Officer and the Chief Financial Officer
of Parent to such effect.
(c) Tax Opinion. The Company shall have received an opinion
from Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, A Professional Limited Liability Company
("Company's Counsel"), in form and substance reasonably satisfactory to the
Company, dated the Closing Date, a copy of which will be furnished to Parent,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code, and that,
accordingly for federal income tax purposes (i) no gain or loss will be
recognized by Parent, Merger Sub or the Company as a result of the Merger and
(ii) no gain or loss will be recognized by a stockholder of the Company as a
result of the Merger upon the conversion of shares of Company Common Stock into
shares of Parent Common Stock (except with respect to cash, if any, received in
lieu of fractional shares of Parent Common Stock). In rendering such opinion,
the Company's Counsel may receive and rely upon representations of fact and
covenants contained in certificates of officers of the Company and Parent,
reasonably satisfactory in form and substance to such counsel.
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company and the stockholders of Parent:
(a) by mutual written consent of Parent and the Company, or by
mutual action of their respective Boards of Directors;
(b) by either Parent or the Company if (i) any Governmental
Entity shall have issued any Injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the Merger
and such Injunction or other action shall have become final and nonappealable;
or (ii) any required approval of the stockholders of a party shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of stockholders or at any adjournment or postponement
thereof;
(c) by Parent or the Company if the Merger shall not have been
consummated by April 30, 2000; provided, however, that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date;
(d) by Parent if (i) the Company shall have failed to comply
in any material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by it at or prior to such date
of termination (provided such breach has not been cured within 30 days following
receipt by the Company of notice of such breach and is existing at the time of
termination of this Agreement); (ii) any representation or warranty of the
Company contained in this Agreement shall not be true in all material respects
when made or on or at the time of termination as if made on such date of
termination (except to the extent it relates to a particular date), provided
such breach has not been cured within 30 days following receipt by the Company
of notice of such breach and is existing at the time of termination of this
Agreement, except where the failure to be so true and correct (without giving
effect to the individual materiality qualifications and thresholds otherwise
contained in Section 3.1 hereof) would not have a Material Adverse Effect on the
Company; or (iii) after the date hereof there has been any Material Adverse
Change with respect to the Company;
(e) by the Company if (i) Parent or Merger Sub shall have
failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by it at or prior
to such date of termination (provided such breach has not been cured within 30
days following receipt by Parent of notice of such breach and is existing at the
time of termination of this Agreement); (ii) any representation or warranty of
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Parent or Merger Sub contained in this Agreement shall not be true in all
material respects when made or on or at the time of termination as if made on
such date of termination (except to the extent it relates to a particular date),
provided such breach has not been cured within 30 days following receipt by
Parent of notice of such breach and is existing at the time of termination of
this Agreement, except where the failure to be so true and correct (without
giving effect to the individual materiality qualifications and thresholds
otherwise contained in Section 3.2 hereof) would not have a Material Adverse
Effect on Parent; or (iii) after the date hereof there has been any Material
Adverse Change with respect to Parent;
(f) by Parent if (i) the Board of Directors of the Company
shall have withdrawn or modified, in any manner which is adverse to Parent, its
recommendation or approval of the Merger or this Agreement and the transactions
contemplated hereby or shall have resolved to do so, (ii) the Board of Directors
of the Company shall have failed to call the Company Stockholder Meeting in
accordance with Section 5.5(a), (iii) if the Board of Directors of the Company
have failed to mail the Joint Proxy Statement to its stockholders within a
reasonable period of time after the Joint Proxy Statement shall be available for
mailing or failed to include therein such approval and recommendation (including
the recommendation that the stockholders of the Company vote in favor of this
Agreement and the Merger) or (iv) the Board of Directors of the Company shall
have recommended to the stockholders of the Company any Acquisition Proposal or
any transaction described in the definition of Acquisition Proposal, or shall
have resolved to do so; and
(g) by the Company, if the Company shall exercise the right
specified in clause (ii) of Section 4.3(a); provided that the Company may not
effect such termination pursuant to this Section 7.1(g) unless and until (i)
Parent receives at least two days' prior written notice from the Company of its
intention to effect such termination pursuant to this Section 7.1(g); (ii)
during such two day period, the Company shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that Parent may propose; and (iii) the Company pays
the amounts required by Section 7.2 concurrently with such termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party
hereto as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of any party hereto
except (i) with respect to this Section 7.2, the second and third sentences of
Section 5.4, and Section 8.1, and (ii) to the extent that such termination
results from the willful breach (except as provided in Section 8.8) by a party
hereto of any of its representations or warranties or of any of its covenants or
agreements contained in this Agreement.
(b) If (i) Parent terminates this Agreement pursuant to
Section 7.1(d)(i) and at the time of such termination an Acquisition Proposal is
pending, (ii) if Parent terminates this Agreement pursuant to Section 7.1(f) or
(iii) the Company terminates this Agreement pursuant to Section 7.1(g), the
Company shall, on the day of such termination, pay Parent a fee of $5.0
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million in cash by wire transfer of immediately available funds to an account
designated by Parent.
(c) If within six months of any termination of this Agreement
by Parent pursuant to Section 7.1(d)(i), the Company agrees to or consummates an
Acquisition Proposal, then at the closing of any Acquisition Proposal, the
Company shall pay Parent a fee of $5.0 million in cash by wire transfer of
immediately available funds to an account designated by Parent; provided,
however, that if the Company has already paid a fee of $5.0 million to Parent
pursuant to Section 7.2(b), then the Company shall not be obligated to pay
another fee pursuant to this Section 7.2(c); provided further, that if the
Company has already paid a fee of $4.0 million to Parent pursuant to Section
7.2(d), then the Company shall only be obligated to pay $1.0 million pursuant to
this Section 7.2(c).
(d) If this Agreement is terminated by Parent pursuant to
Section 7.1(b)(ii) (with respect to a failure to obtain the requisite
shareholder vote of the Company), and Parent shall not be entitled to a
termination fee under any other provision of this Agreement, and if prior to the
event giving rise to such termination by Parent, the Company shall not be
entitled to terminate this Agreement pursuant to Sections 7.1(b)(i), 7.1(c) or
7.1(e), then the Company shall, on the date of such termination, pay Parent a
fee of $4.0 million in cash by wire transfer of immediately available funds to
an account designated by Parent.
(e) If this Agreement is terminated by the Company pursuant to
Section 7.1(b)(ii) (with respect to a failure to obtain the requisite
shareholder vote of Parent), and if prior to the event giving rise to such
termination by the Company, Parent shall not be entitled to terminate this
Agreement pursuant to Sections 7.1(b)(i), 7.1(c), 7.1(d) or 7.1(f), Parent
shall, on the day of such termination, pay the Company a fee of $4.0 million in
cash by wire transfer of immediately available funds to an account designated by
the Company.
7.3 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 and the stockholders of Parent,
but, after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without first obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.4 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, to the extent legally allowed: (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.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own
expenses incident to preparing for entering into and carrying out this Agreement
and the consummation of the transactions contemplated hereby, whether or not the
Merger shall be consummated, except that Parent and the Company shall share
equally the expenses incurred by Parent and the Company in connection with the
printing and mailing of the Joint Proxy Statement.
8.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time and any liability for breach or violation thereof shall terminate
absolutely and be of no further force and effect at and as of the Effective
Time, except for the agreements contained in Sections 2.1, 2.2, 4.4, 5.9 through
5.11, and 7.2 and Article VIII, the agreements delivered pursuant to Section 5.7
and the representations, covenants and agreements contained in Section 5.16. The
Confidentiality Agreements shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreements shall apply to
all information and material delivered hereunder.
8.3 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, return
receipt requested and shall be deemed to be given, dated and received (i) when
so delivered personally, (ii) upon receipt of an appropriate electronic
answerback or confirmation when so delivered by telegraph or telecopy (to such
number specified below or another number or numbers as such person may
subsequently designate by notice given hereunder) or, (iii) five business days
after the date of mailing to the following address or to such other address or
addresses as such person may subsequently designate by notice given hereunder,
if so delivered by mail:
(a) if to Parent, to:
Lennox International Inc.
0000 Xxxx Xxxx Xxxx.
Xxxxxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
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with a copy to:
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
and (b) if to the Company, to:
Service Experts, Inc.
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with copies to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
0 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
and
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx,
A Professional Limited Liability Company
000 Xxxxx Xxxxxx
Xxxxx 0000, Xxxxxxxxx Xxxx Center
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: X. Xxxxx Xxxx, Esq.
8.4 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms and
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 word "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." Unless the
context otherwise requires, "or" is disjunctive but not necessarily exclusive,
and words in the singular include the plural and in the plural include the
singular.
8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become
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effective when two or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Confidentiality Agreements, the Company Option
Agreement and any other documents and instruments referred to herein and (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereto and (b) except as provided in Sections 5.9 through 5.11,
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
8.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
8.8 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement, the Company Option Agreement or the transactions
contemplated hereby or thereby may be brought in any federal or state court
located in the State of Delaware, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any suit, action or proceeding may
be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 8.3 shall be
deemed effective service of process on such party.
8.9 No Remedy in Certain Circumstances. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes this Agreement impossible to perform, in which case this
Agreement shall terminate pursuant to Article VII hereof. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall not incur any liability or obligation unless such party
breached its obligations under Section 5.6 hereof or did not in good faith seek
to resist or object to the imposition or entering of such order or judgment.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law
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or otherwise) without the prior written consent of the other parties, except
that Merger Sub may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any newly formed, direct wholly owned
Subsidiary of Parent, which Subsidiary would then be substituted for Merger Sub
for purposes of this Agreement, provided such assignment would not cause (or
potentially cause) the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code. 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 successors and assigns.
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IN WITNESS WHEREOF, each party has caused this Agreement to be
signed by its respective officers thereunto duly authorized, all as of the date
first written above.
LENNOX INTERNATIONAL INC.
By: /s/ Xxxx X. Xxxxxx, Xx
Name: Xxxx X. Xxxxxx, Xx.
Title: Chairman of the Board and
Chief Executive Officer
LII ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxxx, Xx.
Name: Xxxx X. Xxxxxxx, Xx.
Title: Vice President
SERVICE EXPERTS, INC.
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
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EXHIBIT 3.1(i)
SENIOR MANAGERS
Section (a) - Senior Managers of Parent
Xxxx Xxxxx
Xxx Xxxxxxx
Xxx Xxxxxxxxx
Xxxxx Xxxx
Xxxx Xxxxx
Section (b) - Senior Managers of the Company
Xxxxxx Xxxx
Xxxx Xxxxxx
Xxxxxx Xxxx, Xx.
Xxxxxx Xxxxx
Xxxxxx XxXxxxxxxx, Jr.
Xxxx XxXxxxxx
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxxxx
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EXHIBIT 5.18
VOTING AGREEMENTS
Section (a) - Stockholders of the Company
Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxx
Section (b) - Stockholders of Parent
Xxxx X. Xxxxxx, Xx.
H. E. French
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxxxx
Xxxx X. Xxxxxxx, Xx.
X. Xxxx Xxxxxxxxxx
Xxxxx X. Xxxxx
Xxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Xxxxx X. Xxxxxx
Xxxx X. Major
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
Xxx X. Xxxxxxxx Trust
Xxxxx X. Xxxxxxxx Trust
Xxxxx Xxxx Trust
1996 Xxxxxxxx GST Exempt Trust
