1
Exhibit 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXX TECHNOLOGY, INC.,
M2C ACQUISITION CORPORATION
AND
CFM TECHNOLOGIES, INC.
JUNE 27, 2000
2
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGER........................................................................ 2
Section 1.1 The Merger............................................................. 2
Section 1.2 The Closing............................................................ 2
Section 1.3 Effective Time......................................................... 2
Section 1.4 Effects of the Merger.................................................. 2
Section 1.5 Certificate of Incorporation and Bylaws................................ 3
Section 1.6 Officers............................................................... 3
Section 1.7 Conversion of Company Common Stock..................................... 3
Section 1.8 Stock Options.......................................................... 4
Section 1.9 Conversion of the Acquisition Corporation Common Stock................. 6
Section 1.10 Early Condition Satisfaction Date...................................... 6
ARTICLE 2 STOCKHOLDER AND SHAREHOLDER APPROVALS............................................. 7
Section 2.1 Company Actions........................................................ 7
Section 2.2 Parent Corporation Actions............................................. 8
Section 2.3 Cooperation............................................................ 9
ARTICLE 3 EXCHANGE OF CERTIFICATES.......................................................... 9
Section 3.1 Exchange of Certificates............................................... 9
Section 3.2 Exchange Agent; Exchange Procedures.................................... 9
Section 3.3 Transfer Books........................................................ 10
Section 3.4 Termination of Exchange Fund.......................................... 10
Section 3.5 Lost Certificates..................................................... 11
Section 3.6 No Rights as Stockholder.............................................. 11
Section 3.7 Withholding........................................................... 11
Section 3.8 Escheat............................................................... 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 11
Section 4.1 Due Incorporation..................................................... 12
Section 4.2 Due Authorization..................................................... 12
Section 4.3 Non-Contravention/Consents and Approvals.............................. 13
Section 4.4 Capitalization........................................................ 14
Section 4.5 Financial Statements; Undisclosed Liabilities; Other Documents........ 15
Section 4.6 SEC Filings........................................................... 15
Section 4.7 No Company Material Adverse Effects or Changes........................ 15
Section 4.8 Properties............................................................ 16
Section 4.9 Registration Statement and Proxy Statement/Prospectus................. 16
Section 4.10 Intellectual Property................................................. 17
Section 4.11 Insurance............................................................. 18
Section 4.12 Employee Matters and ERISA............................................ 19
Section 4.13 Labor Matters......................................................... 21
Section 4.14 Tax Returns and Audits................................................ 21
Section 4.15 Environmental Matters................................................. 24
Section 4.16 Litigation............................................................ 25
Section 4.17 Compliance with Applicable Laws....................................... 26
Section 4.18 Contracts; No Defaults................................................ 26
i
3
TABLE OF CONTENTS
(continued)
Page
----
Section 4.19 Opinion of Financial Advisor.......................................... 27
Section 4.20 Change in Control and Severance Payments.............................. 27
Section 4.21 Year 2000............................................................. 27
Section 4.22 Vote Required......................................................... 27
Section 4.23 Broker's/Finder's Fees................................................ 28
Section 4.24 Ownership of Parent Common Stock...................................... 28
Section 4.25 Applicability of Certain Pennsylvania Law............................. 28
Section 4.26 The Company Rights Agreement.......................................... 28
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PARENT CORPORATION AND THE ACQUISITION
CORPORATION.................................................................... 29
Section 5.1 Due Incorporation, Subsidiaries and Due Authorization................. 29
Section 5.2 Non-Contravention; Consents and Approvals............................. 30
Section 5.3 Capitalization........................................................ 31
Section 5.4 Financial Statements; Undisclosed Liabilities; Other Documents........ 32
Section 5.5 SEC Filings........................................................... 32
Section 5.6 No Parent Corporation Material Adverse Effects or Changes............. 33
Section 5.7 Properties............................................................ 33
Section 5.8 Registration Statement and Proxy Statement/Prospectus................. 34
Section 5.9 Intellectual Property................................................. 34
Section 5.10 Insurance............................................................. 35
Section 5.11 Employee Matters and ERISA............................................ 35
Section 5.12 Labor Matters......................................................... 37
Section 5.13 Tax Returns and Audits................................................ 37
Section 5.14 Environmental Matters................................................. 39
Section 5.15 Litigation............................................................ 40
Section 5.16 Compliance with Applicable Laws....................................... 41
Section 5.17 Contracts; No Defaults................................................ 41
Section 5.18 Change in Control and Severance Payments.............................. 42
Section 5.19 Year 2000............................................................. 42
Section 5.20 Brokers and Finders................................................... 42
Section 5.21 Ownership of the Company Common Stock................................. 42
Section 5.22 Opinion of Financial Advisor.......................................... 42
Section 5.23 Vote Required......................................................... 42
Section 5.24 Steag Agreement....................................................... 43
ARTICLE 6 COVENANTS........................................................................ 43
Section 6.1 Covenant to Satisfy Conditions........................................ 43
Section 6.2 Access to Information and Facilities.................................. 43
Section 6.3 Company Conduct of Business Pending Effective Time.................... 43
Section 6.4 Parent Corporation Conduct of Business Pending Effective Time......... 46
Section 6.5 Proxy Materials and Shareholder Approval.............................. 46
Section 6.6 Intentionally Omitted................................................. 47
Section 6.7 Consents and Approvals................................................ 47
Section 6.8 Periodic Reports...................................................... 47
ii
4
Page
----
Section 6.9 Publicity............................................................. 47
Section 6.10 Acquisition Proposals................................................. 48
Section 6.11 No Breach, Etc........................................................ 49
Section 6.12 Blue Sky Approvals.................................................... 49
Section 6.13 Indemnification by the Surviving Corporation.......................... 49
Section 6.14 Certain Employee Agreements........................................... 51
Section 6.15 Employee Benefit Plans................................................ 51
Section 6.16 Actions Regarding Antitakeover Statutes............................... 53
Section 6.17 Defense of Orders and Injunctions..................................... 54
Section 6.18 Preservation of Tax Treatment......................................... 54
Section 6.19 Accountants' Comfort Letters.......................................... 55
Section 6.20 NASDAQ Listing........................................................ 55
Section 6.21 Directors............................................................. 55
ARTICLE 7 CONDITIONS TO THE CONSUMMATION OF THE MERGER..................................... 55
Section 7.1 Conditions to Each Party's Obligation to Consummate the Merger........ 55
Section 7.2 Conditions to Obligations of Parent Corporation and the Acquisition
Corporation to Consummate the Merger.................................. 56
Section 7.3 Conditions to Obligations of the Company to Consummate the Merger..... 57
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER................................................ 59
Section 8.1 Optional Termination.................................................. 59
Section 8.2 Automatic Termination................................................. 61
Section 8.3 Effect of Termination................................................. 61
ARTICLE 9 MISCELLANEOUS.................................................................... 62
Section 9.1 Nonsurvival of Representations........................................ 62
Section 9.2 Remedies.............................................................. 63
Section 9.3 Successors and Assigns................................................ 63
Section 9.4 Amendment............................................................. 63
Section 9.5 Extension and Waiver.................................................. 63
Section 9.6 Severability.......................................................... 63
Section 9.7 Counterparts.......................................................... 63
Section 9.8 Descriptive Headings.................................................. 63
Section 9.9 Notices............................................................... 63
Section 9.10 No Third Party Beneficiaries.......................................... 64
Section 9.11 Entire Agreement...................................................... 65
Section 9.12 Construction.......................................................... 65
Section 9.13 Submission to Jurisdiction............................................ 65
Section 9.14 Governing Law......................................................... 65
Section 9.15 Expenses.............................................................. 65
Section 9.16 Confidentiality and Return Information................................ 65
iii
5
EXHIBITS
Exhibit A Certain Definitions
Exhibit A-1 Certain Company Option Holders
Exhibit A-2 Form of Voting Agreement
Exhibit A-3 Form of Stockholder Voting Agreement
TABLE OF DEFINED TERMS
Acquisition Corporation Preamble
Acquisition Corporation Common Stock Section 5.3(b)
Acquisition Proposal Exhibit A
Acquisition Transaction Exhibit A
Additional Benefit Section 6.15(b)
Additional Parent Options Section 1.8(e)
Cap Section 6.13(e)
Certificate Section 3.1
Charter Amendment Section 2.2(a)
Closing Section 1.2
Closing Agreement Section 4.14(k)
Closing Date Section 1.2
COBRA Section 4.12(e)
Code Preamble
Company Preamble
Company Base Balance Sheet Section 4.5(b)
Company Benefit Plans Section 4.12(a)
Company Board Recommendation Section 2.1(d)
Company Common Stock Section 1.7(a)
Company Dissenting Shares Section 1.7(e)
Company Financial Statements Section 4.5(a)
Company Intellectual Property Section 4.10(a)
Company International Benefit Plans Section 4.12(a)
Company Material Adverse Effect Section 4.7
Company Option Section 1.8(a)
Company Permits Section 4.17
Company Preferred Stock Section 4.4(a)
Company Proposals Section 2.1(a)
Company Public Proposal Section 8.3(b)
Company Rights Section 4.4(a)
Company Rights Agreement Section 4.4(a)
Company SEC Documents Section 4.6
Company Shareholder Approval Section 2.1(a)
Company Shareholders Meeting Section 2.1(a)
Company Subsidiary Section 4.12(a)
Company Subsidiary Section 4.1(a)
Company Triggering Event Exhibit A
Confidentiality Agreement Section 9.16
Continuing Employee Section 6.15(a)
i
6
Company Early Condition Satisfaction Date Section 1.10
Delaware Act Section 1.1
Effective Time Section 1.3 Environmental Claim Section 4.15(f)(i)
Environmental Laws Section 4.15(f)(ii)
Environmental Permits Section 4.15(b)
ERISA Section 4.12(a)
Exchange Agent Section 3.1
Exchange Fund Section 3.2(a)
Governmental Entity Section 4.3(b)
Hazardous Materials Section 4.15(f)(iii)
HSR Act Section 4.3(b)(i)
Indemnified Liabilities Section 6.13(a)
Indemnified Parties Section 6.13(a)
IRS Section 4.12(c)
Joint Proxy Statement Section 2.1(b)
Laws Section 4.3(a)
Licensed Intellectual Property Section 4.10(f)
Local Approvals Section 4.3(b)(v)
Long Term Debt Section 6.3(h)
Loss Section 4.7
Merger Section 1.1
Merger Consideration Section 1.7(c)
NASDAQ Section 2.1
New Plans Section 6.15(a)
Old Plans Section 6.15(a)
Parent Common Stock Section 1.7(a)
Parent Corporation Preamble
Parent Corporation Base Balance Sheet Section 5.4(b)
Parent Corporation Benefit Plans Section 5.11(a)
Parent Corporation Material Adverse Effect Section 5.6
Parent Corporation Stockholder Approval Section 2.2(a)
Parent Corporation Stockholders Meeting Section 2.2(a)
Registration Statement Section 2.2(b)
SEC Section 1.8(c)
Second Additional Parent Options Section 1.8(e)
Securities Act Section 2.1(b)
Securities Exchange Act Section 1.8(f)
Share Issuance Section 2.2(a)
Steag Early Condition Satisfaction Date Actions Section 1.10
Stock Option Plans Section 1.8(a)
Subsidiary Section 1.7(d)
Surviving Corporation Section 1.1
Tax Section 4.14
Tax Return Section 4.14
Termination Fee Section 8.3(b)
ii
7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 27, 2000 among Xxxxxxx
Technology, Inc., a Delaware corporation (the "Parent Corporation"), M2C
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
the Parent Corporation (the "Acquisition Corporation"), and CFM Technologies,
Inc., a Pennsylvania corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent Corporation and the
Company have each determined that a business combination between the Parent
Corporation and the Company is desirable and in the best interests of the Parent
Corporation and its stockholders and the Company and its shareholders, and the
Boards of Directors of the Parent Corporation and the Company accordingly have
each duly adopted resolutions approving this Agreement and the transactions
contemplated hereby, including the Merger (as defined in Section 1.1);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is entering into a stock option agreement with the Parent
Corporation (the "Stock Option Agreement"), pursuant to which the Company has
granted to the Parent Corporation an option to purchase up to nineteen and
nine-tenths percent (19.9%) of the total number of shares of Company Common
Stock (as defined in Section 1.7(a) herein) issued and outstanding as of the
date of the Stock Option Agreement (which amount shall be adjusted to reflect
changes in the Company's capitalization occurring after the date of the Stock
Option Agreement in accordance with Section 11 thereof) at a price per share
equal to the average of the last sale prices of Company Common Stock on the ten
(10) trading days immediately prior to the announcement of the Merger;
WHEREAS, it is intended that the Merger provided for in this Agreement
will qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, prior to the execution and delivery of this Agreement, the
Company and Xxxxx X. Xxxxxxx, the President and Chief Executive Officer of the
Company, have entered into an Amendment No. 1 dated June 27, 2000 to Change of
Control and Severance Agreement.
WHEREAS, in order to induce the Parent Corporation and the Company to
enter this Agreement and to consummate the merger, a certain shareholder of the
Company is entering into a voting agreement pursuant to which he is agreeing to
vote in favor of the adoption and approval of the Merger, and a certain
stockholder of the Parent Corporation is entering into a voting agreement
pursuant to which he is agreeing to vote in favor of increasing the number of
shares of common stock that the Parent Corporation is authorized to issue and to
issue shares of the Parent Corporation common stock pursuant to the Merger; and
WHEREAS, concurrently herewith, the Parent Corporation and Steag Electronic
Systems A.G., an Aktiengesellschaft organized and existing under the laws of the
Federal Republic of Germany ("Steag"), are executing a Strategic Business
Combination Agreement of even date herewith (the "Steag Agreement") which
provides (among other things) that, subject to the terms and conditions thereof,
the parties thereto will consummate certain transactions that are
1
8
collectively referred to therein as the "Strategic Business Combination" and are
collectively referred to herein as the "Steag Combination," and it is the intent
and desire of the Parent Corporation, the Company and Steag that the Merger and
the Steag Combination be mutually conditioned on the simultaneous consummation
of both such transactions for the long-term strategic benefit of their
respective stockholders.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3) the
Acquisition Corporation will be merged with and into the Company (the "Merger")
in accordance with the provisions of both the Pennsylvania Business Corporation
Law (the "Pennsylvania Act") and the Delaware General Corporation Law (the
"Delaware Act"). Following the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Acquisition Corporation will cease.
Section 1.2 The Closing. Upon the terms and subject to the conditions
set forth in this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Xxxx Xxxx Xxxx & Freidenrich LLP located at 000 Xxxxxxxx Xxxxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000, at 10:00 a.m., local time, on the first business
day following the satisfaction or waiver of the conditions set forth in Article
7 (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or, where permitted, waiver of those
conditions), or at such other date, time or place as the Parent Corporation and
the Company may agree. The date upon which the Closing occurs is referred to in
this Agreement as the "Closing Date."
Section 1.3 Effective Time. The Merger will be consummated by the filing
of Articles of Merger, prepared in accordance with Section 1926 of the
Pennsylvania Act, in the Pennsylvania Department of State in accordance with
Section 1927 of the Pennsylvania Act, and by the filing of a Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
Section 252(c) of the Delaware Act. The time the Merger becomes effective in
accordance with Section 1928 of the Pennsylvania Act and Sections 103(d) and
252(c) of the Delaware Act is referred to in this Agreement as the "Effective
Time."
Section 1.4 Effects of the Merger. The Merger will have the effects set
forth in the Pennsylvania Act and the Delaware Act. Without limiting the
generality of the foregoing, as of the Effective Time, all properties, rights,
privileges, powers and franchises of the Company and the Acquisition Corporation
will vest in the Surviving Corporation and all debts, liabilities and duties of
the Company and the Acquisition Corporation will become debts, liabilities and
duties of the Surviving Corporation.
2
9
Section 1.5 Certificate of Incorporation and Bylaws. At the Effective
Time, the Certificate of Incorporation and Bylaws of the Acquisition Corporation
in the respective forms delivered by the Parent Corporation to the Company prior
to the date of this Agreement will be amended and restated to change the name of
the Acquisition Corporation to such name as the Parent Corporation may
determine. The Certificate of Incorporation and Bylaws of the Acquisition
Corporation, as so amended and restated, will be the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
Section 1.6 Officers. From and after the Effective Time, the individuals
identified as Surviving Corporation Officers on Schedule 1.6 hereto shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-Laws of the Surviving Corporation.
Section 1.7 Conversion of Company Common Stock.
(a) Subject to the provisions of Section 1.7(b), each share of
the Company's Common Stock, no par value (the "Company Common Stock"), issued
and outstanding immediately prior to the Effective Time (except as otherwise
provided in Section 1.7(b)) will, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled and converted into the right to
receive, upon the surrender of the certificate formerly representing such share,
that number of shares of the Parent Corporation's Common Stock, par value $0.001
per share (the "Parent Common Stock") equal to the Exchange Ratio. The Exchange
Ratio shall be .5223. In the event the number of shares of Parent Common Stock
issuable upon surrender of Company Common Stock by any holder shall include a
fraction of a share, the number of shares of Parent Common Stock issuable to
such holder shall be rounded down to the next lowest whole number of shares and
such holder shall be paid cash in lieu of such fractional share as set forth in
Section 3.2(c). In the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the outstanding shares of Parent Common Stock or
Company Common Stock are changed into a different number of shares or a
different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, combination, exchange, recapitalization
or similar transaction, the number of shares of Parent Common Stock into which
each share of Company Common Stock will be converted as a result of the Merger
will be adjusted appropriately.
(b) Each share of Company Common Stock held in the treasury of
the Company, held by any Subsidiary (as defined in Section 1.7(d)) of the
Company or held by the Parent Corporation or any Subsidiary of the Parent
Corporation immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled and
retired and will cease to exist. For purposes of this Section 1.7(b), shares of
Company Common Stock owned beneficially or held of record by any plan, program
or arrangement sponsored or maintained for the benefit of any current or former
employee of the Company, the Parent Corporation or any of their respective
Subsidiaries will not be deemed to be held by the Company, the Parent
Corporation or any such Subsidiary, regardless of whether the Company, the
Parent Corporation or any such Subsidiary has the power, directly or indirectly,
to vote or control the disposition of such shares.
3
10
(c) The shares of Parent Common Stock to be issued upon the
conversion of shares of Company Common Stock pursuant to Section 1.7(a) and any
cash to be paid in lieu of fractional shares of Parent Common Stock pursuant to
Section 3.2(c) are referred to in this Agreement collectively as the "Merger
Consideration."
(d) The term "Subsidiary" as used in this Agreement means any
corporation, partnership, limited liability company or other business entity 50
percent or more of the outstanding voting equity securities of which are owned,
directly or indirectly, by the Company or the Parent Corporation, as applicable.
(e) Company Dissenting Shares. Shares of Company Common Stock
held by any holder entitled to and seeking relief as a dissenting shareholder
under the Pennsylvania Act (the "Company Dissenting Shares") shall not be
converted into the right to receive Surviving Corporation Common Stock but shall
be converted into such consideration as may be due with respect to such shares
pursuant to the applicable provisions of the Pennsylvania Act, unless and until
the right of such holder to receive fair cash value for such Company Dissenting
Shares terminates in accordance with the Pennsylvania Act. If such right is
terminated otherwise than by the purchase of such shares by the Surviving
Corporation, then such shares shall cease to be Company Dissenting Shares and
shall be converted into and represent the right to receive the Parent Common
Stock as provided in Section 1.7(a).
Section 1.8 Stock Options.
(a) Subject to Section 1.8(b), at the Effective Time, each
outstanding option to purchase shares of Company Common Stock (a "Company
Option") granted under any stock option plan, program, agreement or arrangement
of the Company or any of its Subsidiaries ("Stock Option Plans") shall be
converted into an option to purchase Parent Common Stock, and the Parent
Corporation shall assume each such Company Option in accordance with the terms
(as in effect as of the date of this Agreement) of the Stock Option Plan under
which it was issued and the stock option agreement by which it is evidenced.
From and after the Effective Time, (i) each Company Option assumed by the Parent
Corporation may be exercised solely for shares of the Parent Common Stock, (ii)
the number of shares of Parent Common Stock subject to each such Company Option
shall be equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounding down to the nearest whole share, (iii) the per share
exercise price under each such Company Option shall be adjusted by dividing the
per share exercise price under such Company Option by the Exchange Ratio and
rounding up to the nearest tenth of a cent and (iv) any restriction on the
exercise of any such Company Option shall continue in full force and effect and
the term, exercisability, vesting schedule and other provisions of such Company
Option shall otherwise remain unchanged; provided, however, that each Company
Option assumed by the Parent Corporation in accordance with this Section 1.8(a)
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, division or subdivision of shares, stock
dividend, reverse stock split, consolidation of shares, reclassification,
recapitalization or other similar transaction subsequent to the Effective Time.
(b) Notwithstanding anything to the contrary contained in this
Section 1.8, in
4
11
lieu of assuming outstanding Company Options in accordance with Section 1.8(a),
the Parent Corporation may, at its election, cause such outstanding Company
Options to be replaced by issuing replacement stock options in substitution
therefor containing provisions and terms equivalent in all material respects
with those contained in such Company Options ("Replacement Options"). The number
of shares of Parent Common Stock subject to a Replacement Option, as well as the
per share exercise price of such Replacement Option shall be determined in the
manner specified in Section 1.8(a). If the Parent Corporation elects to
substitute Replacement Options in lieu of assuming outstanding Company Options,
the Parent Corporation shall take all corporate action necessary to approve the
Replacement Options described in this Section 1.8(b) in a manner qualifying
under Section 424(a) of the Code and shall deliver an agreement evidencing such
Replacement Options to each applicable holder of a Company Option within 30 days
after the Effective Time. Shares of Parent Common Stock issuable pursuant to the
Replacement Options granted pursuant to this Section 1.8(b) shall be registered
on the Form S-8 Registration Statement referred to in Section 1.8(c).
(c) The Parent Corporation will take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of all of the Company Options converted into
options to purchase Parent Common Stock pursuant to Section 1.8(a), Replacement
Options granted under Section 1.8(b), the Additional Parent Options and Second
Additional Parent Options (as defined in Section 1.8(e)). Not later than two
business days following the Effective Time, the Parent Corporation will file
with the Securities and Exchange Commission (the "SEC") a registration statement
on Form S-8 (or any successor or other appropriate form) with respect to the
shares of Parent Common Stock subject to the converted stock options and will
deliver prospectuses to the holders of such stock options. The Parent
Corporation will use all reasonable efforts to maintain the effectiveness of the
foregoing registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as any of the
converted stock options remain outstanding and unexercised.
(d) At the Effective Time, (i) all outstanding and unvested
Company Options granted under any Stock Option Plan, other than those Company
Options held by the individuals listed on Exhibit A-1 hereto, shall completely
vest to the extent and in the manner provided under the applicable Stock Option
Plan, and (ii) the vesting schedule of the Company Options held by the
individuals listed on Exhibit A-1 hereto shall accelerate such that vesting of
those Company Options will occur at twice the rate of vesting in effect
immediately prior to the Effective Time. Notwithstanding Section 1.8(d)(ii)
herein, as soon as reasonably practicable following the Effective Time, the
Surviving Corporation and the individuals listed on Exhibit A-1 shall enter into
separate agreements providing for the complete and immediate vesting of such
individual's outstanding Company Options in the event that the Parent
Corporation or the Surviving Corporation terminates such individual's employment
without cause following the Effective Time.
(e) At the Effective Time, the Parent Corporation will assume the
obligations of the Company under the Stock Option Plans as in effect at the
Effective Time. At the Effective Time, the Parent Corporation shall authorize
and grant 400,000 options to purchase Parent Common Stock (the "Additional
Parent Options") to be allocated among those individuals employed by the Company
or any Company Subsidiary immediately before the Effective Time
5
12
who remain employed by the Surviving Corporation, Parent Corporation or any of
its Subsidiaries after the Effective Time, including those individuals listed on
Exhibit A-1 hereto, which options shall be subject to the terms and conditions
of the Parent Corporation's 1989 Stock Option Plan (the "Parent Stock Option
Plan") and the applicable stock option agreement under which the respective
options are issued. The Additional Parent Options shall vest ratably on a
monthly basis over a four (4) year period and will otherwise be pursuant to the
Parent Corporation standard terms for employee stock options. The basis of
allocating the Additional Parent Options shall be developed jointly by the
Boards of Directors of the Company and the Parent Corporation and shall be
substantially similar to the Company's past practice of allocating Company
Options to its employees. At the Effective Time, the Parent Corporation shall
also, subject to approval by the Board of Directors of the Parent Corporation,
authorize and grant 100,000 options to purchase Parent Common Stock (the "Second
Additional Parent Options") to those individuals listed on Exhibit A-1 hereto,
which options shall be subject to the terms and conditions of the Parent Stock
Option Plan and the applicable stock option agreement under which the respective
options are issued. The Second Additional Parent Options shall "xxxxx xxxx" 100%
two years after the Effective Time. The basis of allocating the Second
Additional Parent Options to these individuals shall be determined by the
President and Board of Directors of the Company as of the Effective Time. No
additional Company Options will be granted pursuant to the Stock Option Plans
after the Effective Time.
(f) The Boards of Directors or Compensation Committees of the
Company and the Parent Corporation will each grant all approvals and take all
other actions required pursuant to Rules 16b-3(d) and 16b-3(e) under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations of the SEC thereunder, the "Securities Exchange Act"), to cause the
disposition in the Merger of Company Common Stock and Company Options and the
acquisition in the Merger of Parent Common Stock and options to acquire Parent
Common Stock to be exempt from the provisions of Section 16(b) of the Securities
Exchange Act.
Section 1.9 Conversion of the Acquisition Corporation Common Stock. Each
share of the Common Stock, par value $0.001 per share, of the Acquisition
Corporation issued and outstanding immediately prior to the Effective Time will,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of the Common Stock, no par value per
share, of the Surviving Corporation.
Section 1.10 Early Condition Satisfaction Date. If prior to December 1,
2000, (i) all of the conditions set forth in Section 7.1 have been satisfied and
all of the conditions set forth in Sections 7.2 and 7.3 (other than conditions
which, by their nature, can only be satisfied by delivery of documents or other
instruments on the Closing Date) would have been either satisfied or waived by
the relevant party were the Closing to occur at such time and (ii)
simultaneously with the actions contemplated by this Section 1.10, the actions
contemplated to be taken by Section 2.8 of the Steag Agreement (the "Steag Early
Condition Satisfaction Date Actions") also occur and the Company is provided
reasonably satisfactory evidence of the simultaneous occurrence thereof, then,
no later than three (3) business days thereafter (the "Company Early Condition
Satisfaction Date") at a place and time (simultaneous with the Steag Early
Condition Satisfaction Date Actions) to be mutually agreed upon by the parties
and Steag, the parties shall take the following actions:
6
13
(a) the Parent Corporation and the Company shall each deliver or
cause to be delivered to the other the closing certificates and other documents
that would have been required at the Closing pursuant to Sections 7.2(c), (d),
(h) and (i) and Sections 7.3(c), (d), (e) and (h); provided, that such
certificates and other documents shall be dated as of the Company Early
Condition Satisfaction Date and shall address representations, warranties and
covenants, in the case of certificates, opinions, in the case of legal opinions,
and other circumstances, in the case of other documents, as of such date; and
(b) the Parent Corporation shall execute and deliver to the
Company an irrevocable acknowledgement and waiver, in form and substance
reasonably satisfactory to the Company and Steag, of the satisfaction or waiver
of the closing conditions set forth in Section 7.2 and the waiver of the Parent
Corporation's termination rights set forth in Section 8.1; and the Company shall
execute and deliver to the Parent Corporation an irrevocable acknowledgement and
waiver, in form and substance reasonably satisfactory to the Parent Corporation
and Steag, of the satisfaction or waiver of the closing conditions set forth in
Section 7.3 and the waiver of the Company's termination rights set forth in
Section 8.1.
Notwithstanding anything contained in this Article 1, the Closing shall
not occur, and the Parent Corporation shall not acquire ownership of any equity
securities of the Company pursuant to the Merger or become obligated to issue
any of its equity securities pursuant thereto, prior to January 1, 2001.
For the purposes of this Section 1.10, the condition set forth in
Section 7.1(f) shall be deemed satisfied if, concurrently with the taking of the
actions referred to in clauses (a) and (b) above of this Section 1.10 on the
Company Early Condition Satisfaction Date, the Steag Early Condition
Satisfaction Date Actions are taken.
ARTICLE 2
STOCKHOLDER AND SHAREHOLDER APPROVALS
Section 2.1 Company Actions. The Company, acting through its Board of
Directors, in accordance with applicable law, its Articles of Incorporation, as
amended, and Bylaws, as amended, and the rules and listing requirements of the
Nasdaq National Market ("NASDAQ"), will:
(a) duly call, give notice of, convene and hold a special meeting
of its shareholders (the "Company Shareholders Meeting"), to be held (on a date
selected by the Company in consultation with the Parent Corporation) as soon as
practicable after the Form S-4 Registration Statement is declared effective, for
the purpose of submitting this Agreement, the Merger and the other transactions
contemplated hereby, as a single proposal (the "Company Proposals") for adoption
and approval by the affirmative vote of the holders of Company Common Stock as
set forth in Section 4.22 hereof (the "Company Shareholder Approval");
(b) cooperate with the Parent Corporation in preparing and filing
with the SEC as promptly as practicable after the date of this Agreement a Joint
Proxy Statement/Prospectus and related materials (the "Joint Proxy Statement")
with respect to the
7
14
Company Shareholders Meeting satisfying the requirements of the Securities Act
of 1933, as amended (together with the rules and regulations of the SEC
thereunder, the "Securities Act"), and the Securities Exchange Act, respond
promptly to any comments raised by the SEC with respect to the preliminary
version of the Joint Proxy Statement, and cause the definitive version of the
Joint Proxy Statement to be mailed to its shareholders as soon as it is legally
permitted to do so;
(c) provide the Parent Corporation with the information
concerning the Company required to be included in the Joint Proxy Statement and
the Registration Statement (as defined in Section 2.2(b)); and
(d) subject to the provisions of Section 6.10 and the fiduciary
duty of the Company's Board of Directors, include in the Joint Proxy Statement
(i) the recommendation of the Board of Directors of the Company that the
shareholders of the Company vote in favor of the Merger and the adoption and
approval of this Agreement and the transactions contemplated hereby (the
"Company Board Recommendation") and (ii) the written opinion dated as of the
date of this Agreement of Warburg Dillon Read LLC, financial advisor to the
Board of Directors of the Company, to the effect that as of the date of this
Agreement, the Merger Consideration is fair to the shareholders of the Company,
other than the Parent Corporation and its affiliates, from a financial point of
view.
Section 2.2 Parent Corporation Actions. The Parent Corporation, acting
through its Board of Directors, in accordance with applicable law, its
Certificate of Incorporation and Bylaws and the rules and listing requirements
of NASDAQ, will:
(a) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Parent Corporation Stockholders Meeting"), to be held
as soon as practicable after the date of this Agreement, for the purpose of
submitting, as a single proposal, the proposal adopted by the Board of Directors
of the Parent Corporation to (i) issue shares of Parent Common Stock pursuant to
the Merger and the Steag Combination (the "Share Issuance") to effectuate such
transactions and (ii) if necessary, increase the shares reserved under the
Parent Stock Option Plans (collectively, the "Parent Corporation Proposal") for
the approval by the holders of the outstanding shares of Parent Common Stock as
set forth in Section 5.23 hereof (the "Parent Corporation Stockholder
Approval");
(b) file with the SEC as promptly as practicable after the date
of this Agreement a Registration Statement on Form S-4 (which will include the
Joint Proxy Statement) complying in all material respects with the Securities
Act and the Securities Exchange Act registering the issuance of the Parent
Common Stock proposed to be issued by the Parent Corporation pursuant to the
Merger (the "Registration Statement"), respond promptly to any comments raised
by the SEC with respect to the preliminary version of the Joint Proxy Statement
or the Registration Statement, use all its reasonable efforts to cause the
Registration Statement to be declared effective by the SEC as promptly as
practicable and cause the definitive version of the Joint Proxy Statement to be
mailed to its stockholders as soon as it is legally permitted to do so;
8
15
(c) provide the Company with the information concerning the
Parent Corporation, the Acquisition Corporation and Steag (to the extent
available to the Parent Corporation) required to be included in the Joint Proxy
Statement; and
(d) subject to the fiduciary duty of the Parent Corporation's
Board of Directors, include in the Joint Proxy Statement (i) the recommendation
of the Board of Directors of the Parent Corporation that the stockholders of the
Parent Corporation vote in favor of the Parent Corporation Proposal (the "Parent
Corporation Board of Recommendation") and (ii) the written opinion dated as of
June 27, 2000 of Alliant Partners, financial advisor to the Board of Directors
of the Parent Corporation, to the effect that the Merger and Steag Combination,
together, are fair, from a financial point of view, to the Parent Corporation
stockholders.
Section 2.3 Cooperation. Each party will promptly advise the other of
its receipt of, and will promptly furnish the other party with copies of, all
comments received from the SEC with respect to the Registration Statement and
the Joint Proxy Statement and will consult with the other party in responding to
such comments.
ARTICLE 3
EXCHANGE OF CERTIFICATES
Section 3.1 Exchange of Certificates. From and after the Effective Time,
each holder of a certificate that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (a "Certificate") will be
entitled to receive in exchange therefor, upon surrender thereof to an exchange
agent to be designated by the parties (the "Exchange Agent"), the part of the
Merger Consideration into which the shares of Company Common Stock evidenced by
such Certificate were converted pursuant to the Merger. No interest will be
payable on the Merger Consideration to be paid to any holder of a Certificate
irrespective of the time at which such Certificate is surrendered for exchange.
Section 3.2 Exchange Agent; Exchange Procedures.
(a) As soon as reasonably practicable following the Effective
Time, the Parent Corporation will deposit, or cause to be deposited, with the
Exchange Agent, in trust for the benefit of holders of Certificates,
certificates representing the Merger Consideration and the amount of any
dividends or distributions payable in accordance with the provisions of Section
3.2(b) (the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time,
the Parent Corporation will instruct the Exchange Agent to mail to each record
holder of a Certificate (i) a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to such Certificates will
pass, only upon delivery of the Certificate to the Exchange Agent and will be in
such form and have such other provisions as the Parent Corporation will
reasonably specify) and (ii) instructions for use in effecting the surrender of
Certificates for certificates representing shares of Parent Common Stock.
Commencing immediately after the Effective Time, upon the surrender to the
Exchange Agent of such Certificate or Certificates, together with
9
16
a duly executed and completed letter of transmittal and all other documents and
other materials required by the Exchange Agent to be delivered in connection
therewith, the holder will be entitled to receive a certificate or certificates
representing the number of shares of Parent Common Stock into which the
Certificate or Certificates so surrendered have been converted in accordance
with the provisions of Section 1.7 and an amount of cash in lieu of fractional
shares which such holder has the right to receive pursuant to Section 3.2(c).
Unless and until any Certificate or Certificates are so surrendered, no dividend
or other distribution, if any, payable to the holders of record of shares of
Parent Common Stock as of any date subsequent to the Effective Time will be paid
to the holders of such Certificate or Certificates in respect of the shares of
Parent Common Stock into which such Certificates are convertible. Upon the
surrender of any Certificate or Certificates, the record holder of the
certificate or certificates representing shares of Parent Common Stock issued in
exchange therefor will be entitled to receive (i) at the time of surrender, the
amount of any dividends or other distributions (net of any applicable tax
withholdings) having a record date after the Effective Time and a payment date
prior to the surrender date, payable in respect of such shares of Parent Common
Stock and (ii) at the appropriate payment date, the amount of dividends or other
distributions (net of any applicable tax withholdings) having a record date
after the Effective Time and a payment date subsequent to the date of such
surrender, payable in respect of such shares of Parent Common Stock.
(c) No Fractional Securities. Notwithstanding any other provision
of this Agreement, no certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates and such fractional shares shall not entitle the owner thereof to
vote or to any other rights of a holder of Parent Common Stock. A holder of
Company Common Stock who would otherwise have been entitled to a fractional
share of Parent Common Stock shall be entitled to receive a cash payment in lieu
of such fractional share in an amount equal to the product of such fraction
multiplied by the average closing prices for the Company Common Stock as
reported in NASDAQ for the ten (10) days immediately preceding the date
immediately prior to the date on which the Effective Time occurs.
Section 3.3 Transfer Books. The stock transfer books of the Company will
be closed at the Effective Time and no transfer of any shares of Company Common
Stock will thereafter be recorded on any of the stock transfer books. In the
event of a transfer of ownership of any Company Common Stock prior to the
Effective Time that is not registered in the stock transfer records of the
Company at the Effective Time, a certificate or certificates representing the
number of shares of Parent Common Stock into which such Company Common Stock has
been converted in the Merger will be issued to the transferee together with a
cash payment in respect of dividends and distributions, if any, in accordance
with the provisions of Section 3.2(b), only if the Certificate is surrendered as
provided in Section 3.1, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
taxes.
Section 3.4 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed one year after the Effective Time will be
delivered to the Parent Corporation upon demand, and each holder of Company
Common Stock who has not theretofore surrendered Certificates in accordance with
the provisions of this Article 3 will thereafter look only to the Parent
Corporation for satisfaction of such holder's claims for shares of Parent
10
17
Common Stock and any dividends or distributions payable in accordance with the
provisions of Section 3.2(b).
Section 3.5 Lost Certificates. If any Certificate has 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
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
certificate the shares of Parent Common Stock issuable pursuant to Section 1.7,
unpaid dividends and distributions, if any, on shares of Parent Common Stock
deliverable in respect thereof, pursuant to this Agreement and any payment in
lieu of fractional shares.
Section 3.6 No Rights as Stockholder. From and after the Effective Time,
the holders of Certificates will cease to have any rights as stockholders of the
Surviving Corporation except as otherwise provided in this Agreement or by
applicable law and the Parent Corporation will be entitled to treat each
Certificate that has not yet been surrendered for exchange solely as evidence of
the right to receive the part of the Merger Consideration into which the shares
of Company Common Stock evidenced by such Certificate have been converted
pursuant to the Merger and the right to receive dividends and distributions, if
any, in accordance with the provisions of Section 3.2(b).
Section 3.7 Withholding. The Parent Corporation will be entitled to
deduct and withhold from the Merger Consideration otherwise payable to any
former holder of Company Common Stock all amounts required by law to be deducted
or withheld therefrom.
Section 3.8 Escheat. Neither the Parent Corporation, the Acquisition
Corporation nor the Company will be liable to any former holder of Company
Common Stock for any portion of the Merger Consideration delivered to any public
official pursuant to any applicable abandoned property, escheat or similar law.
In the event any Certificate has not been surrendered for exchange prior to the
sixth anniversary of the Closing Date, or prior to such earlier date as of which
such Certificate or the Merger Consideration payable upon the surrender thereof
would otherwise escheat to or become the property of any governmental entity,
then the Merger Consideration and any other distribution otherwise payable upon
the surrender of such Certificate will, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
rights, interests and adverse claims of any person.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent Corporation and the
Acquisition Corporation that except as disclosed in the reports, schedules,
forms, statements and other documents filed by the Company with the SEC and
publicly available prior to the date of this Agreement, as disclosed in the
Quarterly Report on Form 10-Q for the Company's fiscal quarter
11
18
ended April 30, 2000 delivered to the Parent Corporation prior to the date of
this Agreement or as disclosed on a Schedule hereto as contemplated below in
this Article 4:
Section 4.1 Due Incorporation.
(a) Each of the Company and its Subsidiaries (each a "Company
Subsidiary" and collectively, the "Company Subsidiaries") is a corporation duly
organized, validly existing and in good standing or subsisting under the laws of
its jurisdiction of organization, with all requisite power and authority to own,
lease and operate its properties and to carry on its business as they are now
being owned, leased, operated and conducted. Each of the Company and Company
Subsidiaries is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of the properties owned,
leased or operated by it and the business transacted by it require such
qualification, except where the failure to be so qualified could not have a
Company Material Adverse Effect (as defined in Section 4.7 hereof). The
jurisdictions in which the Company and Company Subsidiaries are qualified to do
business as a foreign corporation are set forth next to each entity's name on
Schedule 4.1 hereto. True, correct and complete copies of the Company's Articles
of Incorporation, as amended, and By-laws, as amended, and the organizational
documents of each Company Subsidiary, have been delivered to the Parent
Corporation.
(b) Except as set forth on Schedule 4.1 hereto, the Company has
no direct or indirect subsidiaries, either wholly or partially owned, and the
Company does not hold any economic, voting or management interest in any
corporation, proprietorship, firm, partnership, limited partnership, trust,
association, individual or other entity (a "Person") or own any security issued
by any Person. Schedule 4.1 hereto sets forth a description as of the date
hereof, of all subsidiaries and joint ventures of the Company, including the
name of each such entity, the state or jurisdiction of its incorporation or
organization, the Company's interest therein and a brief description of the
principal line or lines of business conducted by each such entity. Except as set
forth on Schedule 4.1 hereto, all of the issued and outstanding shares of
capital stock of each Company Subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by the Company free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever and
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment, except for any of the foregoing
that could not reasonably be expected to have a Company Material Adverse Effect.
As used in this Agreement, the term "joint venture" of a Person shall mean any
Person that is not a subsidiary of such Person, in which such Person or one or
more of its subsidiaries owns an equity interest, other than equity interests
held for passive investment purposes which are less than 10% of any class of the
outstanding voting securities or equity of any such Person.
Section 4.2 Due Authorization. The Company has full power and authority
to enter into this Agreement and to execute and file the Certificate of Merger
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the
12
19
Company of this Agreement have been duly and validly approved and authorized by
the Board of Directors of the Company, and, subject to obtaining the necessary
approval of the Merger by the shareholders of the Company, no other actions or
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions contemplated hereby. The Company has duly and validly
executed and delivered this Agreement. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or other laws from
time to time in effect which affect creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 4.3 Non-Contravention/Consents and Approvals.
(a) The execution and delivery of this Agreement by the Company
do not, and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any lien upon any of
the assets or properties of the Company or any Company Subsidiary under, any of
the terms, conditions or provisions of (i) the articles of incorporation or
bylaws (or other comparable charter documents) of the Company or any Company
Subsidiary, or (ii) subject to obtaining the necessary approval of this
Agreement and the Merger by the shareholders of the Company and the taking of
the actions described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any judgment, decree,
order, writ, permit or license, of any Governmental Entity (as defined in
paragraph (b) below), applicable to the Company or any Company Subsidiary or any
of their respective assets or properties, or (y) any contract, agreement or
commitment to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any of their respective assets or
properties is bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, terminations, modifications, accelerations and
creations and impositions of liens which would not have a Company Material
Adverse Effect or would not result in the inability of the Company to consummate
the transactions contemplated by this Agreement.
(b) No consent, approval, order or notice to or authorization of,
or registration, declaration or filing with any United States federal, state,
local or foreign court, administrative agency or commission or other
governmental authority or instrumentality, (including a stock exchange or other
self-regulatory body) (a "Governmental Entity"), is required by the Company or
any of the Company Subsidiaries for the execution and delivery of this Agreement
or the consummation by the Company of the transactions contemplated hereby, the
failure to obtain which would have a Company Material Adverse Effect or the
consummation of the transactions contemplated hereby, except for:
(i) the filing of a pre-merger 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 thereunder;
13
20
(ii) the filing of Articles of Merger with the Department
of State of the Commonwealth of Pennsylvania in accordance with the requirements
of the Pennsylvania Act, and the filing of the appropriate documents with the
relevant authorities of other states in which the Company is qualified to
transact business;
(iii) the filing of the Joint Proxy Statement with the SEC
pursuant to the Securities Exchange Act and the Securities Act and the
declaration of the effectiveness of the Registration Statement by the SEC and,
to the extent required, filings with various blue sky authorities;
(iv) required notices to NASDAQ; and
(v) such filings, authorization orders and approvals as
may be required of state and local governmental authorities (the "Local
Approvals") which are specified in Schedule 4.3 hereto.
Section 4.4 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
1,000,000 shares of preferred stock, no par value per share (the "Company
Preferred Stock"), of which 300,000 are designated Series A Junior Participating
Preferred Stock, no par value per share (the "Series A Preferred Stock"); and
(ii) 30,000,000 shares of Company Common Stock. On the date hereof, there are
issued and outstanding 7,812,713 shares of Company Common Stock (net of 189,617
treasury shares held by the Company) and no shares of preferred stock or Series
A Preferred Stock (all of which Series A Preferred Stock are reserved for
issuance in accordance with the Rights Agreement (the "Company Rights
Agreement") dated as of April 24, 1997, between the Company and American Stock
Transfer & Trust Co., as Rights Agent (the "Rights Agent") pursuant to which the
Company has issued rights (the "Company Rights") to purchase the Series A
Preferred Stock). All of the issued and outstanding shares of Company Common
Stock are validly issued, fully paid and nonassessable and the issuance thereof
was not subject to preemptive rights. On the date hereof, there are 612,517
shares of Company Common Stock reserved for issuance under the Stock Option
Plans of the Company set forth on Schedule 4.4 hereto.
(b) Schedule 4.4 sets forth the person who shall enter into a
voting agreement with the Parent Corporation (the "Voting Agreement"), the form
of which agreement is attached as Exhibit A-2; and which shall be and remain in
full force and effect through and until the last to occur of (i) the effective
date of any written consent controlling any vote regarding the Merger or (ii)
any shareholder meeting (including adjournments) at which a vote regarding the
Merger is taken. Except as set forth in Schedule 4.4 hereto and the Company
Rights, there are no subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Company to issue, transfer or sell any shares of capital stock or
other securities (whether or not such securities have voting rights) of the
Company. Except as set forth in Schedule 4.4 hereof, there are no outstanding
contractual obligations of the Company which relate to the purchase, sale,
issuance, repurchase, redemption, acquisition, transfer, disposition, holding or
voting of any shares of capital stock or other securities of the Company.
14
21
Section 4.5 Financial Statements; Undisclosed Liabilities; Other
Documents.
(a) For purposes of this Agreement, "Company Financial
Statements" shall mean the audited financial statements of the Company as of
October 31, 1999 and October 31, 1998 (including all notes thereto) and the
unaudited financial statements of the Company as of April 30, 2000 which are
included in the Company's Quarterly Report on Form 10-Q for the period ended
April 30, 2000, consisting of the consolidated balance sheets at such dates and
the related consolidated statements of income, stockholders' equity and cash
flows. The Company Financial Statements have been prepared in accordance with
GAAP consistently applied and present fairly the financial position, assets and
liabilities of the Company as at the dates thereof and the revenues, expenses,
results of operations and cash flows of the Company for the periods covered
thereby.
(b) The Company and Company Subsidiaries do not have any
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, except (i) as set forth on the April 30, 2000 balance sheet (the
"Company Base Balance Sheet") in the Company's Form 10-Q for the fiscal quarter
ended April 30, 2000 or (ii) trade payables incurred since April 30, 2000 in the
ordinary and usual course of its business and consistent in type and amount,
with past practices and experience.
Section 4.6 SEC Filings. The Company has timely filed all required
forms, reports and other documents with the SEC since November 1, 1997, all of
which complied when filed, in all material respects, with all applicable
requirements of the Securities Act and Securities Exchange Act, as applicable.
The Company has heretofore delivered to the Parent Corporation complete and
correct copies of (i) its Annual Report on Form 10-K for the fiscal year ended
October 31, 1999, (ii) its Quarterly Report on Form 10-Q for the quarter ended
April 30, 2000, (iii) all proxy statements relating to the Company's meetings of
shareholders (whether annual or special) since November 1, 1997 and (iv) all
other reports, forms and other documents filed by the Company with the SEC since
November 1, 1997 (together, the "Company SEC Documents"). As of their respective
dates, such reports, forms and other documents (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. The audited
financial statements and the unaudited interim financial statements of the
Company included or incorporated by reference in such reports, forms and other
documents were prepared in accordance with GAAP consistently applied during the
periods involved (except as may be otherwise indicated in the notes thereto),
and fairly present the financial position of the Company as of the dates thereof
and the results of its operations and changes in financial position for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments).
Section 4.7 No Company Material Adverse Effects or Changes. Except as
described on Schedule 4.7 hereto, or as disclosed in or reflected in the
financial statements included in the Company SEC Documents, or as contemplated
by this Agreement, since April 30, 2000, neither the Company nor any Company
Subsidiary have (i) taken any of the actions set forth in subparagraphs (a)
through (o) of Section 6.3 hereof, (ii) suffered any Company Material Adverse
Effect, and no facts or conditions exist which could have, in the aggregate, a
Company Material
15
22
Adverse Effect (iii) suffered any damage, destruction or Loss to any of its
assets or properties (whether or not covered by insurance), or (iv) increased
the compensation of any executive officer of the Company or Company
Subsidiaries. "Loss" shall mean liabilities, losses, costs, claims, damages
(including consequential damages), penalties and expenses (including attorneys'
fees and expenses and costs of investigation and litigation). "Company Material
Adverse Effect" shall mean an effect (or circumstance involving a prospective
effect) on the business, operations, assets, liabilities, results of operations,
cash flows, condition (financial or otherwise) or prospects of the Company and
Company Subsidiaries taken as a whole which is materially adverse to the Company
on a consolidated basis and not arising in connection with any litigation, claim
or other action relating to infringement by a third party of any Company
Intellectual Property or the validity or enforceability of patents owned by the
Company. Notwithstanding the foregoing, a "Company Material Adverse Effect"
shall include any litigation, claim or other action related to U.S. Patent
Number 4,911,761 (the "761 Patent") resulting in the substantial and permanent
impairment of the Company's ability to assert or exploit the 761 Patent. Further
notwithstanding the foregoing, a "Company Material Adverse Effect" shall not
include (a) any failure by the Company to meet internal earnings or revenue
projections, or any other revenue or earnings predictions or expectations, for
any period ending (or for which earnings are released) on or after the date of
this Agreement, or (b) any disruption of customer relationships, to the extent
attributable to or arising out of the announcement or the pendency of this
Agreement and the transactions contemplated hereby.
Section 4.8 Properties.
(a) Except as disclosed on Schedule 4.8 hereto, the Company and
Company Subsidiaries (i) have good and marketable title to, and are the lawful
owners of, all of the tangible and intangible assets, properties and rights used
in connection with or necessary for the conduct of their respective businesses
and all of the tangible and intangible assets, properties and rights reflected
in the Company Base Balance Sheet (other than assets leased under the leases set
forth in Schedule 4.8 hereto and assets disposed of in the ordinary course of
business since the date of the Company Base Balance Sheet), and (ii) at the
Effective Time will have good and marketable title to, and will be the lawful
owner of, all of such tangible and intangible assets, properties and rights, in
any case free and clear of any lien, encumbrance, pledge or similar interest.
(b) Except as otherwise identified in Schedule 4.8 hereto, the
material tangible assets of the Company and Company Subsidiaries, taken as a
whole, including all mobile equipment, are in all respects in good condition and
repair, reasonable wear and tear excepted, and are in condition suitable for the
use to which they are put in the respective business of the Company and Company
Subsidiaries.
Section 4.9 Registration Statement and Proxy Statement/Prospectus. None
of the information to be supplied by the Company or any of its accountants,
counsel or other authorized representatives for inclusion in (a) the
Registration Statement or (b) the Joint Proxy Statement will, in the case of the
Joint Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Joint Proxy Statement and any amendments or
supplements thereto, and at the time of the meeting of the shareholders of the
Company to be held in connection with the Merger, or, in the case of the
Registration Statement and any amendments
16
23
thereto, at the time it is declared effective and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, it being understood and agreed that no representation or warranty is
made by the Company with respect to any information supplied by the Parent
Corporation or its accountants, counsel or other authorized representatives. If
at any time prior to the Effective Time any event with respect to the Company,
its officers and directors or any Company Subsidiaries shall occur which is or
should be described in an amendment of, or a supplement to, the Joint Proxy
Statement or the Registration Statement, such event shall be so described and
the presentation in such amendment or supplement of such information will not
contain any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading in any material respect or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not false or misleading.
Section 4.10 Intellectual Property. Except as disclosed on Schedule 4.10
hereto:
(a) All of the trademarks, trade names, service marks, patents,
copyrights (including any registrations of or pending applications for any of
the foregoing), technology, trade secrets, inventions, know-how, designs,
computer programs, processes and all other intangible assets, properties and
rights used by the Company or any Company Subsidiary in the conduct of its
respective business (the "Company Intellectual Property") are either owned by
the Company or Company Subsidiary free and clear of any lien, encumbrance,
pledge or similar interest and are not subject to any license, royalty or other
agreement or are licensed to the Company pursuant to an agreement as set forth
on Schedule 4.10(h).
(b) None of the Company Intellectual Property has been or is the
subject of any pending or, to the Company's knowledge, threatened litigation or
claim of infringement.
(c) No license or royalty agreement to which the Company or any
Company Subsidiary is a party (including any agreement regarding licensed
intellectual property as defined below) is in breach or default by any party
thereto or the subject of any notice of termination given or threatened.
(d) The products manufactured or sold by the Company and Company
Subsidiaries and any process, method, part, design or material they employ, and
the marketing and use by the Company and Company Subsidiaries of any such
product or any service, do not infringe any trademark, service xxxx, trade name,
copyright, trade secret, patent or confidential or proprietary rights of another
(except such representation is qualified by the Company's knowledge with respect
to trademarks, service marks, trade names and patents), and the Company and
Company Subsidiaries have not received any notice contesting their right to use
any Company Intellectual Property.
(e) Each of the Company and the Company Subsidiaries owns or
possesses adequate rights in perpetuity in and to all the Company Intellectual
Property necessary to conduct its respective business as presently conducted.
17
24
(f) To the extent that any Company Intellectual Property is
licensed by a third party to Company or any Company Subsidiary (such Company
Intellectual Property referred to as "Licensed Intellectual Property"), the
assignment or transfer of such Licensed Intellectual Property to the Parent
Corporation upon or following the consummation of the transactions contemplated
hereunder will not (i) constitute a breach or default under any such agreement
which would give the other contracting party a right to terminate such
agreement; (ii) alter or diminish the rights assigned or transferred to the
Parent Corporation from that originally granted to the Company or Company
Subsidiary (as the case may be) under such agreement; or (iii) alter or increase
the obligations delegated or transferred to the Parent Corporation from that
originally imposed on the Company or Company Subsidiary (as the case may be)
under such agreement.
(g) The Company and Company Subsidiaries require all employees,
consultants and contractors having access to any Company Intellectual Property
to execute nondisclosure agreements with respect to the protection of the
Company Intellectual Property and the preservation of its proprietary and trade
secret nature, and where the development, invention or creation of any Company
Intellectual Property is involved, the Company and Company Subsidiaries have
obtained valid and enforceable assignment agreements from each such employee,
consultant and contractor such that all right, title and interest in and to the
Company Intellectual Property is vested in the Company and/or Company
Subsidiaries.
(h) Subsection (h) of Schedule 4.10 sets forth a true and
complete list of (i) all agreements regarding Licensed Intellectual Property;
(ii) all patents and patent applications, registered trademarks and service
marks, registered copyrights, registered mask works, trade names and service
marks and any applications therefor, included in the Company Intellectual
Property (other than any Licensed Intellectual Property), and specifies the
jurisdictions in which such Company Intellectual Property has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners; (iii) all agreements to which any of the Company
Intellectual Property (other than any Licensed Intellectual Property) may be
subject.
(i) There are no exclusive licenses, exclusive distributorship
agreements or noncompetition agreements with respect to the use of any Company
Intellectual Property or the development, sale or distribution of any Company
products, or any other restrictions regarding the right of the Company or any of
the Company Subsidiaries to fully exploit the Company Intellectual Property
anywhere in the world. Neither the Company nor any of the Company Subsidiaries
is a party to any reseller or distribution agreement, other than agreements that
can be cancelled or terminated without cost or penalty upon notice of sixty (60)
days or less.
Section 4.11 Insurance. Schedule 4.11 hereto contains an accurate and
complete list of all policies of fire, liability, worker's compensation, title
and other forms of insurance owned or held by the Company or any Company
Subsidiary. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Closing Date have
been, or prior to the Closing Date, will be, paid and no notice of cancellation
or termination has been received with respect to any such policy. Each of the
Company and Company Subsidiaries will, no later than sixty (60) days prior to
Closing, deliver to the Parent Corporation a true and complete copy of all
insurance policies, including all occurrence-based policies applicable to the
Company and Company Subsidiaries, for the three years prior to the Closing Date.
Except as set
18
25
forth in Schedule 4.11 hereto, neither the Company nor any Company Subsidiary
has been unable to obtain insurance with respect to its assets or operations
during the last three (3) years.
Section 4.12 Employee Matters and ERISA. Except as set forth in Schedule
4.12 hereto:
(a) Benefit Plans. Schedule 4.12 hereto contains a true and
complete list of each employee benefit plan, program, policy, arrangement or
agreement which is or has been sponsored, maintained or contributed to by the
Company and Company Subsidiaries covering employees, former employees, directors
or former directors of the Company and Company Subsidiaries or their
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any severance or change in
control agreement, plan, policy or program between the Company and Company
Subsidiaries and any employee thereof (collectively, the "Company Benefit
Plans"). For purposes of this Section 4.12, "Company Subsidiary" includes any
entity which, under Code Section 414(b), (c), (m) or (o), is required to be
considered as a single employer with the Company. Neither the Company nor any
Company Subsidiary is obligated to contribute to any "multiemployer plan" as
defined in Section 3(37) of ERISA. Schedule 4.12 separately lists each Company
Benefit Plan that has been adopted or maintained by the Company or Company
Subsidiary, whether formally or informally, for the benefit of employees outside
the United States ("Company International Benefit Plans").
(b) Contributions. All contributions and other payments required
to be made for any period through the date to which this representation speaks,
by the Company or any Company Subsidiary to any Company Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made or paid in full, or,
to the extent not required to be made or paid on or before the date to which
this representation speaks, have been properly reflected in the Company
Financial Statements.
(c) Qualification; Compliance. Each of the Company Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
either obtained from the Internal Revenue Service (the "IRS") a favorable
determination letter as to its qualified status under the Code, including all
amendments to the Code which are currently effective, or has time remaining to
apply under applicable Treasury Regulations or Internal Revenue Service
pronouncements for a determination or opinion letter and to make any amendments
necessary to obtain a favorable determination or opinion letter; and, to the
knowledge of the Company, no circumstances exist that could reasonably be
expected to result in the revocation of any such determination. The Company and
each Company Subsidiary is in compliance in all material respects with, and each
of the Company Benefit Plans is and has been operated in all material respects
in compliance with, all applicable laws, rules and regulations governing such
plan, including, without limitation, ERISA and the Code. Each Company Benefit
Plan intended to provide for the deferral of income, the reduction of salary or
other compensation, or to afford other income tax benefits, complies in all
material respects with the requirements of the applicable provisions of the Code
or other laws, rules and regulations required to provide such income tax
benefits. There are no pending or, to the knowledge of the Company, threatened
claims under or in respect of any Company Benefit Plan by or on behalf of any
employee, former
19
26
employee, director, former director, or beneficiary thereof, or otherwise
involving any Company Benefit Plan (other than routine claims for benefits).
(d) Title I or IV Liabilities. No event has occurred and, to the
knowledge of the Company, there exists no condition or set of circumstances that
could reasonably be expected (and none of the transactions contemplated
hereunder are reasonably expected) to subject the Company or any Company
Subsidiary to any liability (whether to a governmental agency, a multiemployer
plan or any other person or entity) arising under or based upon any provision of
Title I or Title IV of ERISA.
(e) Documents Made Available. The Company has made available to
the Parent Corporation a true and correct copy of each collective bargaining
agreement to which the Company or any Company Subsidiary is a party or under
which the Company or any Company Subsidiary has obligations and, with respect to
each Company Benefit Plan, where applicable, (i) such plan, including all
amendments thereto, and the most recent summary plan description, (ii) the five
(5) most recent annual reports filed with the IRS, (iii) each related trust
agreement and insurance contract, (iv) the most recent determination of the IRS
with respect to the qualified status of such Company Benefit Plan, (v) the most
recent actuarial report or valuation for the most recent three (3) years, (vi)
compliance and nondiscrimination tests for the last three (3) plan years, (vii)
all insurance policies and certificates purchased by or to provide benefits
under such plan, (viii) all contracts and agreements to which the Company or any
Company Subsidiary is a party with third party administrators, actuaries,
investment managers, consultants and other independent contractors that relate
to such plan, and (ix) standard Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA") forms and notices and (x) every private letter ruling,
prohibited transaction exemption or other ruling or determination from the IRS,
Department of Labor, Pension Benefit Guaranty Corporation or other Governmental
Entity with respect to such plan. To the knowledge of the Company, in the case
of each Company Benefit Plan, no employee handbook or similar employee
communication relating to such plan nor any written communication of benefits
under such plan from the administrator thereof, in either case that has not been
delivered or made available to the Parent Corporation, describes the terms of
such plan in a manner that is materially inconsistent with the documents and
summary plan descriptions relating to such plan that have been made available
pursuant to the foregoing sentence.
(f) Post-Retirement Obligations. No Company Benefit Plan provides
post-retirement health or welfare benefits to any individual, other than as
required by Section 601 et seq. of ERISA and Section 4980B of the Code or any
other laws, rules or regulations.
(g) International Employee Plans. Each Company International
Benefit Plan has been established, maintained and administered in compliance
with its terms and conditions and with the requirements prescribed by any and
all statutory or regulatory laws that are applicable to such Company
International Benefit Plan. No Company International Benefit Plan has unfunded
liabilities that, as of the Effective Time, will not be offset by insurance or
fully accrued. Except as required by law, no condition exists that would prevent
the Company or the Surviving Corporation from terminating or amending any
Company International Benefit Plan at any time for any reason.
20
27
Section 4.13 Labor Matters. The Company and each Company Subsidiary have
conducted and currently are conducting, their respective businesses in full
compliance with all laws relating to employment and employment practices, terms
and conditions of employment, wages and hours and nondiscrimination in
employment. Except as disclosed on Schedule 4.13 hereto, the relationship of the
Company and each Company Subsidiary with their respective employees is good and
there are, and during the past three years there have been, no labor strikes,
disputes, slow-downs, work stoppages or other labor difficulties pending or, to
the Company's knowledge, threatened against or involving the Company or any
Company Subsidiary. None of the employees of the Company or any Company
Subsidiary is covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated and no attempt is currently
being made or during the past three years has been made to organize any
employees of the Company or any Company Subsidiary to form or enter a labor
union or similar organization.
Section 4.14 Tax Returns and Audits. For the purposes of this Agreement,
a "Tax" or, collectively, "Taxes," means (i) any and all federal, state, local,
foreign and other taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, gains, franchise, capital stock, severance, withholding,
payroll, recapture, employment, excise, unemployment insurance, social security,
business license, occupation, business organization, stamp, environmental and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts; (ii) any liability for the payment of any amounts
described in clause (i) as a result of being a successor to or transferee of any
individual or entity or a member of an affiliated, consolidated or unitary group
for any period (including pursuant to Treas. Reg. Section 1.1502-6 or comparable
provisions of state, local or foreign tax law); and (iii) any liability for the
payment of amounts described in clause (i) or clause (ii) as a result of any
express or implied obligation to indemnify any Person or as a result of any
obligations under agreements or arrangements with any Person. Except as
otherwise specifically provided, for the purposes of this section, the Company
means the Company and each Company Subsidiary, as if each such entity were named
separately. "Tax Return", as used in this Agreement, means a report, return or
other information required to be supplied to a governmental entity with respect
to Taxes including, where permitted or required, combined or consolidated
returns for any group of entities that includes the Company or any Company
Subsidiary or the Parent Corporation or any Parent Corporation Subsidiary, as
the case may be.
Except as set forth in Schedule 4.14 hereto:
(a) Filing of Timely Tax Returns. The Company and each Company
Subsidiary have filed (or there has been filed on its behalf) all Tax Returns
required to be filed by each of them under applicable law. All such Tax Returns
were and are in all material respects true, complete and correct and filed on a
timely basis.
(b) Payment of Taxes. The Company and each Company Subsidiary
have, within the time and in the manner prescribed by law, paid all Taxes that
are currently due and payable except for those contested in good faith and for
which adequate reserves have been taken.
21
28
(c) Deferred Taxes. The Company and each Company Subsidiary have
accounted for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of the
Company or any Company Subsidiary except liens for Taxes not yet due.
(e) Withholding Taxes. The Company and each Company Subsidiary
have complied in all material respects with the provisions of the Code relating
to the withholding of Taxes, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required.
(f) Extensions of Time for Filing Tax Returns. Neither the
Company nor any Company Subsidiary has requested any extension of time within
which to file any Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Neither the Company nor
any Company Subsidiary has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all Taxes has expired for all applicable Tax
Returns of the Company and each Company Subsidiary or those Tax Returns have
been examined by the appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been proposed, asserted or
assessed against the Company or any Company Subsidiary that has not been
resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any Company Subsidiary.
(j) Powers of Attorney. No power of attorney currently in force
has been granted by the Company or any Company Subsidiary concerning any Tax
matter.
(k) Tax Rulings. Neither the Company nor any Company Subsidiary
has received a Tax Ruling (as defined below) or entered into a Closing Agreement
(as defined below) with any taxing authority that would have a continuing
Company Material Adverse Effect after the Closing Date. "Tax Ruling," as used in
this Agreement, shall mean a written ruling of a taxing authority relating to
Taxes. "Closing Agreement," as used in this Agreement, shall mean a written and
legally binding agreement with a taxing authority relating to Taxes.
(l) Availability of Tax Returns. The Company has made available
to the Parent Corporation complete and accurate copies of (i) all Tax Returns,
and any amendments thereto, filed by the Company or any Company Subsidiary since
January 1, 1996, (ii) all audit reports received from any taxing authority
relating to any Tax Return filed by the Company or any Company Subsidiary and
(iii) any Closing Agreements entered into by the Company or any Company
Subsidiary with any taxing authority.
22
29
(m) Tax Sharing Agreements. Neither the Company nor any Company
Subsidiary is a party to any agreement relating to allocating or sharing of
Taxes.
(n) Code Section 280G; Deductibility of Certain Payments. Neither
the Company nor any Company Subsidiary is a party to any agreement, contract or
arrangement that could result, on account of the transactions contemplated
hereunder, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code or could give
rise to the payment of any amount that would not be deductible pursuant to
Sections 404 or 162(m) of the Code.
(o) Liability for Others. Neither the Company nor any Company
Subsidiary has any liability for Taxes of any person other than the Company and
the Company Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor,
(ii) by contract or (iii) otherwise.
(p) Disposition of Certain Assets. The Company has not filed any
consent agreement under Section 341(f) of the Code or otherwise agreed to have
Section 341(f)(2) of the Code apply to any disposition of a Subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company.
(q) Affiliated Group. The Company is not and has not been a
member of an affiliated group of corporations filing a consolidated federal
income tax return (or a group of corporations filing a consolidated, combined or
unitary income tax return under comparable provisions of state, local or foreign
tax law) other than a group the common parent of which is or was the Company
itself (and not a subsidiary of the Company).
(r) Tax-Exempt Use Property. None of the assets of the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(s) Accounting Adjustments. The Company has not agreed to make,
nor is it required to make, any adjustment under Section 481 of the Code by
reason of a change in accounting method or otherwise.
(t) Partnerships or Joint Ventures. The Company is not and has
not been a member of a limited liability company or a party to any joint
venture, partnership or other arrangement or contract that is or could be
treated as a partnership for federal income tax purposes.
(u) Indemnities. The Company has not indemnified any person
against Tax in connection with any arrangement for the leasing of real or
personal property, except for indemnity with respect to acts of the Company.
(v) FIRPTA. The Company is not now and has not been within the
preceding five years a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code.
23
30
(w) Reorganization Treatment. Neither the Company nor any Company
Subsidiary has taken or agreed to take any action that would prevent the Merger
from constituting a reorganization qualifying under the provisions of Section
368(a) of the Code.
Section 4.15 Environmental Matters. Except as disclosed in Schedule 4.15
hereto:
(a) Compliance. The Company and each Company Subsidiary are in
compliance with all applicable Environmental Laws (as defined in Section
4.15(f)(ii) hereof); and neither the Company nor any Company Subsidiary has
received any communication from any person or Governmental Authority that
alleges that the Company or any Company Subsidiary is not in compliance with
applicable Environmental Laws, except where the failure to be in such compliance
would not in the aggregate have a Company Material Adverse Effect. The Company
has provided the Parent Corporation with complete and correct copies of all
inventories, reports, studies, assessments and test results in its possession
relating to any storage, use or disposal of Hazardous Materials (as defined in
Section 4.15(f)(iii) hereof) by the Company or any Company Subsidiary or on any
property owned, leased to, controlled by or used by the Company or any Company
Subsidiary.
(b) Environmental Permits. The Company and each Company
Subsidiary have obtained or have applied for all environmental, health and
safety permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the construction of their facilities or the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and the Company and each Company Subsidiary are in compliance
with all terms and conditions of the Environmental Permits, except where the
failure to be in compliance would not in the aggregate have a Company Material
Adverse Effect and the Company believes that any transfer, renewal or
reapplication for any Environmental Permit required as a result of the Merger
can be accomplished in the ordinary course of business.
(c) Environmental Claims. There are no Environmental Claims (as
defined in Section 4.15(f)(i) hereof) pending or threatened (i) against the
Company or any Company Subsidiary or joint ventures, or (ii) against any real or
personal property or operations the Company or any Company Subsidiary owns,
leases or manages, in whole or in part.
(d) Releases. To the Company's knowledge, there have been no
Releases (as defined in Section 4.15(f)(iv) hereof) of any Hazardous Materials
that would be reasonably likely to form the basis of any Environmental Claim
against the Company or any Company Subsidiary.
(e) Predecessors. The Company has no knowledge of any
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any Environmental
Claim, in each case against any person or entity (including, without limitation,
any predecessor of the Company or any Company Subsidiary) whose liability the
Company or any Company Subsidiary has or may have retained or assumed either
contractually or by operation of law or against any real or personal property
which the Company or any Company Subsidiary formerly owned, leased or managed,
in whole or in part.
24
31
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including any Governmental
Authority) alleging liability or potential liability (including, without
limitation, potential responsibility for or liability for enforcement costs,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
fines or penalties) arising out of, based on or resulting from (A) the presence,
or Release or threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned, operated, leased or managed by
the Company or any of its subsidiaries or joint ventures (for purposes of this
Section 4.15) or the Parent Corporation or any of its subsidiaries or joint
ventures (for purposes of Section 5.14); or (B) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law; or (C) any and
all claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local
laws, rules, regulations and requirements of common law relating to pollution,
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human health as
it relates to protection of the environment 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.
(iii) "Hazardous Materials" means (a) any petroleum or
petroleum products, radioactive materials, asbestos, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs") in regulated concentrations; and
(b) 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," "toxic pollutants," or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or waste,
which is regulated under any Environmental Law in a jurisdiction in which the
Company or any of its subsidiaries or joint ventures operate (for purposes of
this Section 4.15) or the Parent Corporation or any of its subsidiaries or joint
ventures operate (for purposes of Section 5.14).
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
Section 4.16 Litigation.
(a) Except as disclosed in Schedule 4.16 hereto or in the Company
SEC Documents, there are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations pending or, to
the Company's knowledge, threatened
25
32
against or affecting the Company, Company Subsidiaries or any of the Company's
or Company Subsidiaries' respective officers or directors in their capacity as
such, or any of their respective properties or businesses, which, if adversely
decided, would have a Company Material Adverse Effect, and the Company is not
aware of any facts or circumstances which may give rise to any of the foregoing.
Except as set forth on Schedule 4.16 hereto all of the proceedings pending
against the Company and Company Subsidiaries are covered and being defended by
insurers (subject to such deductibles as are set forth in such Schedule). Except
as disclosed in Schedule 4.16 hereto, neither the Company nor any Company
Subsidiary is subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other Governmental Authority. Since
November 1, 1997, neither the Company nor any Company Subsidiary has entered
into any agreement to settle or compromise any proceeding pending or threatened
against it which has involved any obligation other than the payment of money or
for which the Company or any Company Subsidiary, as the case may be, has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings, or
investigations pending or, to the Company's knowledge, threatened by or against
the Company with respect to this Agreement or in connection with the
transactions contemplated hereby or thereby, and the Company has no reason to
believe there is a valid basis for any such claim, action, suit, proceeding, or
investigation.
(c) Except as set forth on Schedule 4.16 hereto, there are no
pending or, to the Company's knowledge, threatened claims against any director,
officer, employee or agent of the Company, Company Subsidiaries, or any other
Person which could give rise to any claim for indemnification against the
Company or any Company Subsidiary.
Section 4.17 Compliance with Applicable Laws. Except as disclosed in
Schedule 4.17 hereto, the Company and each Company Subsidiary holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Authorities which are material to the operation of their respective businesses
(the "Company Permits"). The Company and each Company Subsidiary are in
compliance with the terms of the Company Permits, except where the failure so to
comply would not have a Company Material Adverse Effect. Except as disclosed in
Schedule 4.17 hereto, to the Company's knowledge, neither the Company nor any
Company Subsidiary is in violation of any law, ordinance or regulation of any
Governmental Authority, except for possible violations which individually and in
the aggregate do not, and, insofar as reasonably can be foreseen by the Company,
will not in the future have a Company Material Adverse Effect.
Section 4.18 Contracts; No Defaults. Except as set forth on the Exhibit
Index to the Company's Annual Report on Form 10-K for the year ended October 31,
1999, or as described in Schedule 4.18 hereto or any customer purchase order not
in excess of $3,000,000 received in the ordinary course of business, neither the
Company nor any Company Subsidiary is a party to or subject to any oral or
written agreement, contract or commitment (including, without limitation, leases
of real property) which (i) involve the payment or receipt by the Company or any
of the Company Subsidiaries of more than $100,000 under any one of such
contracts, (ii) have an initial term of more than one year and are not
cancelable without significant penalties by the Company or Company Subsidiary on
60 days' or less notice or (iii) otherwise would be required to be
26
33
included as an exhibit to an annual report of the Company on Form 10-K under the
regulations promulgated by the SEC under the Securities Exchange Act. Neither
the Company nor any Company Subsidiary is in default or alleged to be in default
under any such agreement, contract or commitment and, to the Company's
knowledge, no other party thereto is in default. Nothing has occurred which,
with or without the passage of time or giving or notice or both, would
constitute a default by the Company or any Company Subsidiary or, to the
Company's knowledge, by any other party under any such agreement, contract or
commitment. The Company has no reason to believe any material renewable
agreement, contract or commitment will not be renewed and has not received any
notification that any such agreement, contract or commitment is not likely to be
renewed. The Merger contemplated by this Agreement will not create a default
under or permit the termination of or otherwise adversely affect any such
agreement, contract or commitment in a manner that will have a Company Material
Adverse Effect. Except as described in Schedule 4.18 hereto, neither the Company
nor any Company Subsidiary is required to give any notice to any person
regarding this Agreement or the transactions contemplated hereby with respect to
any such agreement, contract or commitment.
Section 4.19 Opinion of Financial Advisor. The Company has received the
opinion of Warburg Dillon Read LLC, to the effect that, as of June 27, 2000, the
consideration to be received by the holders of Company Common Stock in the
Merger is fair from a financial point of view to the holders of Company Common
Stock. The Company has delivered to the Parent Corporation a copy of the
agreement between the Company and Warburg Dillon Read LLC.
Section 4.20 Change in Control and Severance Payments. Except as set
forth on Schedule 4.20 hereto, neither the Company nor any Company Subsidiary
have any plans, programs or agreements to which they are parties, or to which
they are subject, pursuant to which payments (or acceleration of benefits) may
be required upon, or may become payable directly or indirectly as a result of, a
change of control of the Company (including by reason of the consummation of the
Merger) or otherwise upon termination of employment of any individual with the
Company or any Company Subsidiary.
Section 4.21 Year 2000. As of the date hereof, the computer systems used
by the Company, any of the Company Subsidiaries and any third party service
providers used by either of the foregoing have not exhibited any deficiencies
with respect to formatting in connection with processing any dates after
December 31, 1999 ("Year 2000 Problem"). All issues and modifications, if any,
regarding Year 2000 Problem compliance by the Company or Company Subsidiaries
have been resolved and undertaken and, will in the future be resolved and
undertaken, by third-party service providers and the Company. The Company is not
aware of any inability on the part of any customer, insurance company or service
provider with which the Company or Company Subsidiaries transact business to
timely remedy their own deficiencies in respect of the Year 2000 Problem, which
inability, individually or in the aggregate, reasonably could be expected to
have a Company Material Adverse Effect.
Section 4.22 Vote Required. The approval of the Merger and the approval
and adoption of the Merger Agreement by the affirmative vote of a majority of
the votes cast in person or by proxy by the holders of Company Common Stock
entitled to vote is the only vote of the holders of any class or series of
capital stock of the Company or any of its subsidiaries required to approve the
Company Proposal and the transactions contemplated hereby.
27
34
Section 4.23 Broker's/Finder's Fees. Except for Warburg Dillon Read LLC,
neither the Company nor any officer, director or employee of the Company has
employed any broker, finder or investment banker or incurred any liability for
any brokerage or investment banking fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
Section 4.24 Ownership of Parent Common Stock. The Company does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Securities Exchange Act) any shares of any class of capital stock of the Parent
Corporation.
Section 4.25 Applicability of Certain Pennsylvania Law. None of the
provisions of Section 2538 and Subchapters E, F, G, H, I and J of Chapter 25 of
the Pennsylvania Act (except to the extent that Subchapter H may apply until the
shareholders of the Company have approved the Merger), or any similar provisions
of the Articles of Incorporation, as amended, or By-Laws, as amended, of the
Company are applicable to the transactions contemplated by this Agreement.
Without limiting the foregoing, the Company's Board of Directors has taken all
such action (i) under Subchapter F of Chapter 25 of the Pennsylvania Act to
approve (A) any acquisition of shares of Company Common Stock by the Parent
Corporation as contemplated in the Stock Option Agreement (assuming the
acquisition of the Company Common Stock thereunder will not then increase the
ownership interest attributable to the Parent Corporation in the Company to 20%
or more) and the Voting Agreements and (B) the Merger, in order that Subchapter
F shall not prohibit the transactions contemplated by the Agreement, and (ii)
under Section 2538(b) of the Pennsylvania Act, so that Section 2538 shall not
apply to any transaction contemplated by this Agreement.
Section 4.26 The Company Rights Agreement. Prior hereto, the Company has
delivered to the Parent Corporation and its designated counsel a true and
complete copy of the Company Rights Agreement in effect on the date hereof, and
assuming the accuracy of the representation contained in Section 5.21, neither
the Company's execution and delivery of the Stock Option Agreement, the
execution and delivery of the Voting Agreement by certain shareholders of the
Company, the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated by this Agreement will cause any change, effect or
result under the Company Rights Agreement or any similar agreement to which the
Company or its affiliates is a party which is adverse to the interests of the
Parent Corporation. Without limiting the generality of the foregoing, if
necessary to accomplish the foregoing, the Company Rights Agreement has been
amended to (i) render the Company Rights Agreement inapplicable to the Merger
and the other transactions contemplated by this Agreement, the Stock Option
Agreement and the Voting Agreement, (ii) ensure that (x) none of the Parent
Corporation or its Subsidiaries is an Acquiring Person (as defined in the
Company Rights Agreement) pursuant to the Company Rights Agreement by virtue of
the execution of this Agreement, the Stock Option Agreement or the Voting
Agreement, the consummation of the Merger or the other transactions contemplated
hereby or thereby and (y) a Distribution Date, Flip-In Event, or Flip-Over Event
(as such terms are defined in the Company Rights Agreement) does not occur by
reason of the execution of this Agreement, the Voting Agreement or the Stock
Option Agreement, the consummation of the Merger or the consummation of the
transactions contemplated hereby or thereby, and such provisions may not be
further amended by the Company without the prior
28
35
consent of the Parent Corporation in its sole discretion.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
THE PARENT CORPORATION AND THE ACQUISITION CORPORATION
Each of the Parent Corporation and the Acquisition Corporation
represents and warrants to the Company, jointly and severally, that except as
disclosed in the reports, schedules, forms, statements and other documents filed
by the Parent Corporation with the SEC and publicly available prior to the date
of this Agreement, as disclosed in the Quarterly Report on Form 10-Q for the
Parent Corporation's fiscal quarter ended March 26, 2000 delivered to the
Company prior to the date of this Agreement or as disclosed on a Schedule hereto
as contemplated below in this Article 5:
Section 5.1 Due Incorporation, Subsidiaries and Due Authorization.
(a) Due Incorporation. Each of the Parent Corporation, each of
the subsidiaries of the Parent Corporation (each a "Parent Corporation
Subsidiary" and collectively, the "Parent Corporation Subsidiaries") and the
Acquisition Corporation is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of the Parent
Corporation, each Parent Corporation Subsidiary, and the Acquisition Corporation
is qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of the properties owned, leased or operated
by it and the business transacted by it require such qualification, except where
the failure to be so qualified could not have a Parent Corporation Material
Adverse Effect (as defined in Section 5.6 hereof). True, correct and complete
copies of the Parent Corporation's Certificate of Incorporation and Bylaws, as
amended, have been delivered to the Company.
(b) Subsidiaries. Except as set forth on Schedule 5.1 hereto, the
Parent Corporation has no direct or indirect subsidiaries, either wholly or
partially owned, and the Parent Corporation does not hold any economic, voting
or management interest in any Person or own any security issued by any Person.
Except as set forth on Schedule 5.1 hereto, all of the issued and outstanding
shares of capital stock of each Parent Corporation Subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned,
directly or indirectly, by the Parent Corporation free and clear of any liens,
claims, encumbrances, security interests, equities, charges and options of any
nature whatsoever and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment,
29
36
except for any of the foregoing that could not reasonably be expected to have a
Parent Corporation Material Adverse Effect.
(c) Due Authorization. Each of the Parent Corporation and the
Acquisition Corporation have full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Parent Corporation of this Agreement have been
duly and validly approved by the Board of Directors of the Parent Corporation,
and no other actions or proceedings on the part of the Parent Corporation are
necessary to authorize this Agreement and the transactions contemplated hereby,
other than the approval of the Parent Corporation Proposal by the stockholders
of the Parent Corporation. The execution, delivery and performance by the
Acquisition Corporation of this Agreement have been duly and validly approved by
the Board of Directors and the sole stockholder of the Acquisition Corporation,
and no other actions or proceedings on the part of the Acquisition Corporation
or its stockholder are necessary to authorize this Agreement and the
transactions contemplated hereby. Each of the Parent Corporation and the
Acquisition Corporation has duly and validly executed and delivered this
Agreement. This Agreement constitutes the legal, valid and binding obligation of
each of the Parent Corporation and the Acquisition Corporation, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 5.2 Non-Contravention; Consents and Approvals.
(a) The execution and delivery of this Agreement by the Parent
Corporation and the Acquisition Corporation do not, and the performance by the
Parent Corporation and the Acquisition Corporation of their respective
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any lien upon any of the assets or properties of the Parent
Corporation or any of the Parent Corporation Subsidiaries under any of the
terms, conditions or provisions of (i) the articles or certificates of
incorporation or bylaws (or other comparable charter documents) of the Parent
Corporation, any Parent Corporation Subsidiary, or the Acquisition Corporation,
or (ii) subject to obtaining the necessary approval by the stockholders of the
Parent Corporation and the taking of the actions described in paragraph (b) of
this Section, (x) any Law or any judgment, decree, order, writ, permit or
license of any Governmental Entity or (y) any contract, agreement or commitment
to which the Parent Corporation, any Parent Corporation Subsidiary or the
Acquisition Corporation is a party or by which the Parent Corporation, any
Parent Corporation Subsidiary or the Acquisition Corporation or any of their
respective assets or properties is bound, including the Steag Agreement or any
other agreements relating to the Steag Combination but excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
liens which would not have a Parent Corporation Material Adverse Effect or
result in the inability of the Parent Corporation or the Acquisition Corporation
to consummate the transactions contemplated by this Agreement.
30
37
(b) No consent, approval, order or notice to or authorization of,
or registration, declaration or filing with any Governmental Entity is required
by the Parent Corporation or any of the Parent Corporation Subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
by each of the Parent Corporation and the Acquisition Corporation of the
transactions contemplated hereby, the failure to obtain which would have a
Parent Corporation Material Adverse Effect or the consummation of the
transactions contemplated hereby, except for:
(i) the filing of a pre-merger notification report under
the HSR Act and the expiration or termination of the applicable waiting period
thereunder;
(ii) the filing of the Certificate of Merger with the
Secretary of State of the State of the State of Delaware in accordance with the
requirements of the Delaware Act and the filing of the appropriate documents
with the relevant authorities of other states in which each of the Parent
Corporation and the Acquisition Corporation are qualified to transact business;
(iii) the filing of the Joint Proxy Statement with the SEC
pursuant to the Securities Act and Securities Exchange Act and the declaration
of the effectiveness of the Registration Statement by the SEC and, to the extent
required, filings with various blue sky authorities;
(iv) the approval of the shares of Parent Common Stock for
listing on NASDAQ upon official notice of issuance;
(v) the approval by the stockholders of the Parent
Corporation of the issuance of shares of Parent Common Stock pursuant to this
Agreement; and
(vi) the consents and approvals specified on Schedule 5.2
hereto, all of which have been obtained or made.
Section 5.3 Capitalization.
(a) The authorized capital stock of the Parent Corporation
consists of 60,000,000 shares of Parent Common Stock, par value $0.001 per
share, and 2,000,000 shares of Preferred Stock, par value $0.001 per share. On
the date hereof, there are issued and outstanding 20,887,070 shares of Parent
Common Stock and no shares of Preferred Stock. All of the issued and outstanding
shares of Parent Common Stock are, and all of the shares of Parent Common Stock,
when issued in accordance with the terms of this Agreement are or will be, duly
and validly authorized and issued and outstanding, fully paid and nonassessable.
On the date hereof, there are 1,523,204 shares of Parent Common Stock reserved
for issuance under the Parent Corporation Stock Option Plans and warrants.
(b) The authorized capital stock of the Acquisition Corporation
consists of 1,000 shares of Common Stock, par value $0.001 per share (the
"Acquisition Corporation Common Stock"). On the date hereof, there are issued
and outstanding 1,000 shares of Acquisition Corporation Common Stock, all of
which are owned by the Parent Corporation. All of the issued and outstanding
shares of Acquisition Corporation Common Stock are validly
31
38
issued, fully paid and nonassessable and the issuances thereof were not subject
to preemptive rights.
(c) Schedule 5.3 sets forth the person who shall enter into a
voting agreement with the Company (the "Stockholder Voting Agreement"), the form
of which agreement is attached as Exhibit A-3; and which shall be and remain in
full force and effect through and until the last to occur of (i) the effective
date of any written consent controlling any vote regarding the Parent
Corporation Proposal, or (ii) any shareholder meeting (including adjournments)
at which a vote regarding the Parent Corporation Proposal is taken. Except as
set forth in Schedule 5.3 hereto, there are no subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character obligating the Parent Corporation and/or the Acquisition Corporation
to issue, transfer or sell any shares of capital stock or other securities
(whether or not such securities have voting rights) of the Parent Corporation
and the Acquisition Corporation. Except as set forth in Schedule 5.3 hereto,
there are no outstanding contractual obligations of the Parent Corporation or
the Acquisition Corporation which relate to the purchase, sale, issuance,
repurchase, redemption, acquisition, transfer, disposition, holding or voting of
any shares of capital stock or other securities of each of the Parent
Corporation and the Acquisition Corporation.
Section 5.4 Financial Statements; Undisclosed Liabilities; Other
Documents.
(a) For purposes of this Agreement, "Parent Corporation Financial
Statements" shall mean the audited financial statements of the Parent
Corporation as of December 31, 1999 and December 31, 1998 (including all notes
thereto), and the unaudited financial statements of the Parent corporation that
are included in the Parent Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 26, 2000, consisting of the consolidated balance sheets at
such dates and the related consolidated statements of income, stockholders'
equity and cash flows for each of the twelve-month periods ended December 31,
1999, December 31, 1998 and December 31, 1997, and for the three month period
ended March 26, 2000. The Parent Corporation Financial Statements have been
prepared in accordance with GAAP consistently applied and present fairly the
financial position, assets and liabilities of the Parent Corporation as at the
dates thereof and the revenues, expenses, results of operations and cash flows
of the Parent Corporation for the periods covered thereby.
(b) The Parent Corporation and Parent Corporation Subsidiaries do
not have any liabilities or obligations of any nature, whether accrued,
contingent, absolute or otherwise, except (i) as set forth in the December 31,
1999 balance sheet (the "Parent Corporation Base Balance Sheet") in the Parent
Corporation's Form 10-K for the year ended December 31, 1999 or (ii) trade
payables incurred since December 31, 1999 in the ordinary and usual course of
its business and consistent in type and amount with past practices and
experience.
Section 5.5 SEC Filings. Except as set forth on Schedule 5.5 hereto, the
Parent Corporation has timely filed all required forms, reports and other
documents with the SEC since November 1, 1997 all of which complied when filed,
in all material respects, with all applicable requirements of the Securities Act
and Securities Exchange Act as applicable. The Parent Corporation has heretofore
delivered to the Company complete and correct copies of (i) its Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, (ii) its Quarterly
32
39
Report or Form 10-Q for the fiscal quarter ended Xxxxx 00, 0000, (xxx) all proxy
statements relating to the Parent Corporation's meetings of shareholders
(whether annual or special) since November 1, 1997 and (iv) all other reports,
forms and other documents filed by the Parent Corporation with the SEC since
November 1, 1997 (together, the "Parent Corporation SEC Documents"). Except as
set forth on Schedule 5.5 hereto, as of their respective dates, such reports,
forms and other documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The audited financial
statements and the unaudited interim financial statements of the Company
included or incorporated by reference in such reports, forms and other documents
were prepared in accordance with GAAP consistently applied during the periods
involved (except as may be otherwise indicated in the notes thereto), and fairly
present the financial position of the Parent Corporation as of the dates thereof
and the results of its operations and changes in financial position for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments).
Section 5.6 No Parent Corporation Material Adverse Effects or Changes.
Except as listed on Schedule 5.6 hereto, or as contemplated by this Agreement,
since March 26, 2000 neither the Parent Corporation nor any Parent Corporation
Subsidiary has (i) taken any of the actions set forth in subparagraphs (a)
through (g) of Section 6.4 hereof, (ii) suffered any Parent Corporation Material
Adverse Effect, and no fact or condition exists which could have, in the
aggregate, a Parent Corporation Material Adverse Effect, or (iii) suffered any
damage, destruction or Loss to any of its assets or properties (whether or not
covered by insurance), "Parent Corporation Material Adverse Effect" shall mean
an effect (or circumstance involving a prospective effect) on the business,
operations, assets, liabilities, results of operations, cash flows, conditions
or prospects of the Parent Corporation and the Parent Corporation Subsidiaries
taken as a whole which is materially adverse to the Parent Corporation and the
Parent Corporation Subsidiaries on a consolidated basis.
Section 5.7 Properties.
(a) Except as disclosed on Schedule 5.7 hereto, the Parent
Corporation and each Parent Corporation Subsidiary (i) has good and marketable
title to, and is the lawful owner of, all of the tangible and intangible assets,
properties and rights used in connection with its businesses and all of the
tangible and intangible assets, properties and rights reflected in the Parent
Corporation Base Balance Sheet (other than assets leased under the leases set
forth in Schedule 5.7 hereto and assets disposed of in the ordinary course of
business since the date of the Parent Corporation Base Balance Sheet), and (ii)
at the Effective Time will have good and marketable title to, and will be the
lawful owner of, all of such tangible and intangible assets, properties and
rights, in any case free and clear of any lien.
(b) Except as otherwise identified in Schedule 5.7 hereto, the
material tangible assets of the Parent Corporation and each Parent Corporation
Subsidiary, taken as a whole, including all mobile equipment, are in all
respects in good condition and repair, reasonable wear and tear excepted, and
are in condition suitable for the use to which they are put in the Parent
Corporation's business.
33
40
Section 5.8 Registration Statement and Proxy Statement/Prospectus. None
of the information to be supplied by the Parent Corporation or any of its
accountants, counsel or other authorized representatives for inclusion in (a)
the Registration Statement or (b) the Joint Proxy Statement will, in the case of
the Joint Proxy Statement or any amendments thereof or supplements thereto, at
the time of the mailing of the Joint Proxy Statement and any amendments or
supplements thereto and at the time of the meeting of the stockholders of the
Parent Corporation to be held in connection with the Merger, or, in the case of
the Registration Statement and any amendments thereto, at the time it is
declared effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, it being understood and
agreed that no representation or warranty is made by the Parent Corporation with
respect to any information supplied by the Company or its accountants, counsel
or other authorized representatives. If at any time prior to the Effective Time
any event with respect to the Parent Corporation, its officers and directors or
any of its subsidiaries shall occur which is or should be described in an
amendment of, or a supplement to, the Joint Proxy Statement or the Registration
Statement, such event shall be so described and the presentation in such
amendment or supplement of such information will not contain any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading in any material respect or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not false or
misleading. The Registration Statement will comply as to form in all material
respects with all applicable laws, including the provisions of the Securities
Act.
Section 5.9 Intellectual Property. Except as disclosed on Schedule 5.9
hereto:
(a) All of the trademarks, trade names, service marks, patents,
copyrights (including any registrations of or pending applications for any of
the foregoing), technology, trade secrets, inventions, know-how, designs,
computer programs, processes and all other intangible assets, properties and
rights used by the Parent Corporation or any Parent Corporation Subsidiary in
the conduct of its business (the "Parent Corporation Intellectual Property") are
either owned by the Parent Corporation or Parent Corporation Subsidiary free and
clear of any liens, and are not subject to any license, royalty or other
agreement or are licensed to the Parent Corporation or Parent Corporation
Subsidiary.
(b) None of the Parent Corporation Intellectual Property has been
or is the subject of any pending or, to the Parent Corporation's knowledge,
threatened litigation or claim of infringement.
(c) No license or royalty agreement to which the Parent
Corporation or any Parent Corporation Subsidiary is a party is in breach or
default by any party thereto or the subject of any notice of termination given
or threatened.
(d) The products manufactured or sold by the Parent Corporation
or any Parent Corporation Subsidiary and any process, method, part, design or
material they employ, or the marketing and use by the Parent Corporation or any
Parent Corporation Subsidiary of any such product or any service, do not
infringe any trademark, service xxxx, trade name, copyright,
34
41
trade secret, patent or confidential or proprietary rights of another (except
such representation is qualified by the Parent Corporation's knowledge with
respect to trademarks, service marks, trade names and patents), and the Parent
Corporation and Parent Corporation Subsidiaries have not received any notice
contesting their right to use any Parent Corporation Intellectual Property.
(e) Each of the Parent Corporation and Parent Corporation
Subsidiaries owns or possesses adequate rights in perpetuity in and to all
Parent Corporation Intellectual Property necessary to conduct its respective
business as presently conducted.
(f) The Parent Corporation and Parent Corporation Subsidiaries
require all employees, consultants and contractors having access to any Parent
Corporation Intellectual Property to execute nondisclosure agreements with
respect to the protection of the Parent Corporation Intellectual Property and
the preservation of its proprietary and trade secret nature, and where the
development, invention or creation of any Parent Corporation Intellectual
Property is involved, the Parent Corporation and Parent Corporation Subsidiaries
have obtained valid and enforceable assignment agreements from each such
employee, consultant and contractor such that all right, title and interest in
and to the Parent Corporation Intellectual Property is vested in the Parent
Corporation and/or Parent Corporation Subsidiaries.
(g) There are no exclusive licenses, exclusive distributorship
agreements or noncompetition agreements with respect to the use of any Parent
Corporation Intellectual Property or the development, sale or distribution of
any Parent Corporation products, or any other restrictions regarding the right
of the Parent Corporation or any of the Parent Corporation Subsidiaries to fully
exploit the Parent Corporation Intellectual Property anywhere in the world.
Neither the Parent Corporation nor any of the Parent Corporation Subsidiaries is
a party to any reseller or distribution agreement, other than agreements that
can be cancelled or terminated without cost or penalty upon notice of sixty (60)
days or less.
Section 5.10 Insurance. Schedule 5.10 hereto contains an accurate and
complete list of all policies of fire, liability, worker's compensation, title
and other forms of insurance owned or held by the Parent Corporation and Parent
Corporation Subsidiaries. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been or, prior to the Closing Date, will be paid and no notice
of cancellation or termination has been received with respect to any such
policy. Parent Corporation will, no later than sixty (60) days prior to Closing,
deliver to the Company a true and complete copy of all insurance policies,
including all occurrence-based policies applicable to the Parent Corporation or
the Parent Corporation Subsidiaries, for the three years prior to the Closing
Date. Except as set forth in Schedule 5.10 hereto, neither the Parent
Corporation nor any Parent Corporation Subsidiary has been unable to obtain
insurance with respect to its assets or operations during the last three (3)
years.
Section 5.11 Employee Matters and ERISA. Except as set forth in Schedule
5.11 hereto:
(a) Benefit Plans. Schedule 5.11 hereto contains a true and
complete list of each employee benefit plan, program, policy, arrangement or
agreement which is or has been sponsored, maintained or contributed to by the
Parent Corporation and Parent Corporation
35
42
Subsidiaries covering employees, former employees, directors or former directors
of the Parent Corporation and Parent Corporation Subsidiaries or their
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of ERISA, and any severance or change
in control agreement, plan, policy or program between the Parent Corporation and
Parent Corporation Subsidiaries and any employee thereof (collectively, the
"Parent Corporation Benefit Plans"). Neither the Parent Corporation nor any
Parent Corporation Subsidiary is obligated to contribute to any "multiemployer
plan" as defined in Section 3(37) of ERISA. Schedule 5.11 separately lists each
Parent Corporation Benefit Plan that has been adopted or maintained by any
Parent Corporation Subsidiary, whether formally or informally, for the benefit
of employees outside of the United States ("Parent Corporation International
Benefit Plans").
(b) Contributions. All contributions and other payments required
to be made for any period through the date to which this representation speaks,
by the Parent Corporation or any Parent Corporation Subsidiary to any Parent
Corporation Benefit Plan (or to any person pursuant to the terms thereof) have
been timely made or paid in full, or, to the extent not required to be made or
paid on or before the date to which this representation speaks, have been
properly reflected in the Parent Corporation Financial Statements.
(c) Qualification; Compliance. Each of the Parent Corporation
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code has either obtained from the IRS a favorable determination letter as to
its qualified status under the Code, including all amendments to the Code which
are currently effective, or has time remaining to apply under applicable
Treasury Regulations or Internal Revenue Service pronouncements for a
determination or opinion letter and to make any amendments necessary to obtain a
favorable determination or opinion letter; and, to the knowledge of the Parent
Corporation, no circumstances exist that could reasonably be expected to result
in the revocation of any such determination. The Parent Corporation and each
Parent Corporation Subsidiary is in compliance in all material respects with,
and each of the Parent Corporation Benefit Plans is and has been operated in all
material respects in compliance with, all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and the Code. Each
Parent Corporation Benefit Plan intended to provide for the deferral of income,
the reduction of salary or other compensation or to afford other income tax
benefits complies in all material respects with the requirements of the
applicable provisions of the Code or other laws, rules and regulations required
to provide such income tax benefits. There are no pending or, to the knowledge
of the Parent Corporation, threatened claims under or in respect of any Parent
Corporation Benefit Plan by or on behalf of any employee, former employee,
director, former director or beneficiary thereof, or otherwise involving any
Parent Corporation Benefit Plan (other than routine claims for benefits).
(d) Title I or IV Liabilities. No event has occurred and, to the
knowledge of the Parent Corporation, there exists no condition or set of
circumstances that could reasonably be expected (and none of the transactions
contemplated hereunder are reasonably expected) to subject the Parent
Corporation or any Parent Corporation Subsidiary to any liability (whether to a
governmental agency, a multiemployer plan or any other person or entity) arising
under or based upon any provision of Title I or Title IV of ERISA.
36
43
(e) Documents Made Available. The Parent Corporation has made
available to the Company a true and correct copy of each collective bargaining
agreement to which the Parent Corporation is a party or under which the Parent
Corporation has obligations and, with respect to each Parent Corporation Benefit
Plan, where applicable, (i) such plan, including all amendments thereto, and the
most recent summary plan description, (ii) the five (5) most recent annual
reports filed with the IRS, (iii) each related trust agreement and insurance
contract, (iv) the most recent determination of the IRS with respect to the
qualified status of such Parent Corporation Benefit Plan, (v) the most recent
actuarial report or valuation for the most recent three (3) years, (vi)
compliance and nondiscrimination tests for the last three (3) plan years, (vii)
all insurance policies and certificates purchased by or to provide benefits
under such plan, (viii) all contracts and agreements to which the Parent
Corporation or any Parent Corporation Subsidiary is a party with third party
administrators, actuaries, investment managers, consultants and other
independent contractors that relate to such plan, (ix) standard COBRA forms and
notices, and (x) every private letter ruling, prohibited transaction exemption,
or other ruling or determination from the IRS, Department of Labor, Pension
Benefit Guaranty Corporation or other Governmental Entity with respect to such
plan. To the knowledge of the Parent Corporation, in the case of each Parent
Corporation Benefit Plan, no employee handbook or similar employee communication
relating to such plan nor any written communication of benefits under such plan
from the administrator thereof, in either case that has not been delivered or
made available to the Company, describes the terms of such plan in a manner that
is materially inconsistent with the documents and summary plan descriptions
relating to such plan that have been made available pursuant to the foregoing
sentence.
(f) Post Retirement Obligations. No Parent Corporation Benefit
Plan provides post-retirement health or welfare benefits to any individual,
other than as required by Section 601 et seq. of ERISA and Section 4980 B of the
Code or any other laws, rules or regulations.
Section 5.12 Labor Matters. The Parent Corporation and each Parent
Corporation Subsidiary have conducted and currently are conducting their
businesses in full compliance with all laws relating to employment and
employment practices, terms and conditions of employment, wages and hours and
nondiscrimination in employment. Except as disclosed on Schedule 5.12 hereto,
the relationships of the Parent Corporation and Parent Corporation Subsidiaries
with their employees are good and there are, and during the past three years
there have been, no labor strikes, disputes, slow-downs, work stoppages or other
labor difficulties pending or, to the Parent Corporation's knowledge, threatened
against or involving the Parent Corporation or any Parent Corporation
Subsidiary. None of the employees of the Parent Corporation or any Parent
Corporation Subsidiary is covered by any collective bargaining agreement, no
collective bargaining agreement is currently being negotiated and no attempt is
currently being made or during the past three years has been made to organize
any employees of the Parent Corporation or Parent Corporation Subsidiaries to
form or enter a labor union or similar organization.
Section 5.13 Tax Returns and Audits. Except as set forth in Schedule
5.13 hereto:
(a) Filing of Timely Tax Returns. The Parent Corporation and each
Parent Corporation Subsidiary have filed (or there has been filed on its behalf)
all Tax Returns required
37
44
to be filed by it under applicable law. All such Tax Returns were and are in all
material respects true, complete and correct and filed on a timely basis.
(b) Payment of Taxes. The Parent Corporation and each Parent
Corporation Subsidiary have, within the time and in the manner prescribed by
law, paid all Taxes that are currently due and payable except for those
contested in good faith and for which adequate reserves have been taken.
(c) Deferred Taxes. The Parent Corporation and each Parent
Corporation Subsidiary have accounted for deferred income taxes in accordance
with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of the
Parent Corporation except liens for Taxes not yet due.
(e) Withholding Taxes. The Parent Corporation and each Parent
Corporation Subsidiary have complied in all material respects with the
provisions of the Code relating to the withholding of Taxes, as well as similar
provisions under any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither the Parent
Corporation nor any Parent Corporation Subsidiary has requested any extension of
time within which to file any Tax Return, which Tax Return has not since been
filed.
(g) Waivers of Statute of Limitations. Neither the Parent
Corporation nor any Parent Corporation Subsidiary has executed any outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all Taxes has expired for all applicable Tax
Returns of the Parent Corporation and each Parent Corporation Subsidiary or
those Tax Returns have been examined by the appropriate taxing authorities for
all periods through the date hereof, and no deficiency for any Taxes has been
proposed, asserted or assessed against the Parent Corporation or any Parent
Corporation Subsidiary that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. No audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Parent Corporation or any Parent
Corporation Subsidiary.
(j) Powers of Attorney. No power of attorney currently in force
has been granted by the Parent Corporation or any Parent Corporation Subsidiary
concerning any Tax matter.
(k) Tax Rulings. Neither the Parent Corporation nor any Parent
Corporation Subsidiary has received a Tax Ruling or entered into a Closing
Agreement with any taxing authority that would have a continuing adverse effect
after the Closing Date.
38
45
(l) Tax Sharing Agreements. Neither the Parent Corporation nor
any Parent Corporation Subsidiary is a party to any agreement relating to
allocating or sharing of Taxes.
(m) Liability for Others. The Parent Corporation does not have
any liability for Taxes of any person other than the Parent Corporation (i)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor, (ii) by contract or (iii)
otherwise.
(n) Disposition of Certain Assets. The Parent Corporation has not
filed any consent agreement under Section 341(f) of the Code or otherwise agreed
to have Section 341(f)(2) of the Code apply to any disposition of a Subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the Parent
Corporation.
(o) Affiliated Group. The Parent Corporation is not and has not
been a member of an affiliated group of corporations filing a consolidated
federal income tax return (or a group of corporations filing a consolidated,
combined or unitary income tax return under comparable provisions of state,
local or foreign tax law) other than a group the common parent of which is or
was the Parent Corporation itself (and not a subsidiary of the Parent
Corporation).
(p) Accounting Adjustments. The Parent Corporation has not agreed
to make, nor is it required to make, any adjustment under Section 481 of the
Code by reason of a change in accounting method or otherwise.
(q) Partnerships or Joint Ventures. The Parent Corporation is not
and has not been a member of a limited liability company or a party to any joint
venture, partnership or other arrangement or contract that is or could be
treated as a partnership for federal income tax purposes.
(r) Indemnities. The Parent Corporation has not indemnified any
person against Tax in connection with any arrangement for the leasing of real or
personal property, except for indemnity with respect to acts of the Parent
Corporation.
(s) Reorganization Treatment. The Parent Corporation, the
Acquisition Corporation and, to the knowledge of the Parent Corporation, the
Parent Corporation Subsidiaries, have not taken, agreed to take or proposed to
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(t) The Acquisition Corporation is a newly organized corporation
that has been formed to effect the transactions contemplated hereunder. The
Acquisition Corporation will not have conducted any business, incurred any
liabilities or engaged in any other transactions (other than entering into this
Agreement) prior to the Closing Date.
Section 5.14 Environmental Matters. Except as disclosed in Schedule 5.14
hereto:
(a) Compliance. The Parent Corporation and each Parent
Corporation Subsidiary is in compliance with all applicable Environmental Laws
and the Parent Corporation has not received any communication from any person or
Governmental Authority that alleges
39
46
that the Parent Corporation or any Parent Corporation Subsidiary is not in
compliance with applicable Environmental Laws, except where the failure to be in
such compliance would not in the aggregate have a Parent Corporation Material
Adverse Effect.
(b) Environmental Permits. The Parent Corporation and each Parent
Corporation Subsidiary have obtained or have applied for all Environmental
Permits necessary for the construction of their facilities or the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and the Parent Corporation and each Parent Corporation
Subsidiary is in compliance with all terms and conditions of the Environmental
Permits, except where the failure to be in compliance would not in the aggregate
have a Parent Corporation Material Adverse Effect, and the Parent Corporation
believes that any transfer, renewal or reapplication for any Environmental
Permit required as a result of the Merger can be accomplished in the ordinary
course of business.
(c) Environmental Claims. There are no Environmental Claims
pending or threatened (i) against the Parent Corporation or any Parent
Corporation Subsidiary, any subsidiary or joint ventures, or (ii) against any
real or personal property or operations the Parent Corporation or any Parent
Corporation Subsidiary owns, leases or manages, in whole or in part.
(d) Releases. To the Parent Corporation's knowledge, there have
been no Releases of any Hazardous Materials that would be reasonably likely to
form the basis of any Environmental Claim against the Parent Corporation or any
Parent Corporation Subsidiary.
(e) Predecessors. The Parent Corporation has no knowledge of any
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any Environmental
Claim, in each case against any person or entity (including, without limitation,
any predecessor of the Parent Corporation or any Parent Corporation Subsidiary)
whose liability the Parent Corporation has or may have retained or assumed
either contractually or by operation of law or against any real or personal
property which the Parent Corporation or any Parent Corporation Subsidiary
formerly owned, leased or managed, in whole or in part.
Section 5.15 Litigation.
(a) Except as disclosed on Schedule 5.15 hereto, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to the Parent
Corporation's knowledge, threatened against or affecting the Parent Corporation,
Parent Corporation Subsidiaries or any of their officers or directors in their
capacity as such, or any of their respective properties or businesses which, if
adversely decided, would have a Parent Corporation Material Adverse Effect, and
the Parent Corporation is not aware of any facts or circumstances which may give
rise to any of the foregoing. Except as set forth on Schedule 5.15 hereto, all
of the proceedings pending against the Parent Corporation and Parent Corporation
Subsidiaries are covered and being defended by insurers (subject to such
deductibles as are set forth in such Schedule). Except as disclosed on Schedule
5.15 hereto, neither the Parent Corporation nor any Parent Corporation
Subsidiary is subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other
40
47
Governmental Authority. Since January 1, 2000, neither the Parent Corporation
nor any Parent Corporation Subsidiary has entered into any agreement to settle
or compromise any proceeding pending or threatened against it which has involved
any obligation other than the payment of money or for which the Parent
Corporation or any Parent Corporation Subsidiary, as the case may be, has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings, or
investigations pending or, to the Parent Corporation's knowledge, threatened by
or against the Parent Corporation with respect to this Agreement or in
connection with the transactions contemplated hereby, and the Parent Corporation
has no reason to believe there is a valid basis for any such claim, action,
suit, proceeding, or investigation.
(c) Except as set forth on Schedule 5.15 hereof, there are no
pending or, to the Parent Corporation's knowledge, threatened claims against any
director, officer, employee or agent of the Parent Corporation, the Parent
Corporation Subsidiaries, or any other Person which could give rise to any claim
for indemnification against the Parent Corporation or any Parent Corporation
Subsidiary.
Section 5.16 Compliance with Applicable Laws. Except as disclosed in
Schedule 5.16 hereto, the Parent Corporation and each Parent Corporation
Subsidiary holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Authorities which are material to the operation of
its business (the "Parent Corporation Permits"). The Parent Corporation and each
Parent Corporation Subsidiary is in compliance with the terms of the Parent
Corporation Permits, except where the failure so to comply would not have a
Parent Corporation Material Adverse Effect. Except as disclosed in Schedule 5.16
hereto, to the Parent Corporation's knowledge, the Parent Corporation and each
Parent Corporation Subsidiary is not in violation of any law, ordinance or
regulation of any Governmental Authority, except for possible violations which
individually and in the aggregate do not, and, insofar as reasonably can be
foreseen by the Parent Corporation, will not in the future have a Parent
Corporation Material Adverse Effect.
Section 5.17 Contracts; No Defaults. Except as set forth on the Exhibit
Index to the Parent Corporation's Annual Report on Form 10-K for the year ended
December 31, 1999, or as described on Schedule 5.17 hereto, neither the Parent
Corporation nor any Parent Corporation Subsidiary is a party to or subject to
any oral or written agreement, contract or commitment (including, without
limitation, leases of real property) which would be required to be included as
an Exhibit to an annual report of the Parent Corporation on Form 10-K under the
Securities Exchange Act. Neither the Parent Corporation nor any Parent
Corporation Subsidiary is in default or alleged to be in default under any such
agreement, contract or commitment and, to the Parent Corporation's knowledge, no
other party thereto is in default. Nothing has occurred which, with or without
the passage of time or giving or notice or both, would constitute a default by
the Parent Corporation or any Parent Corporation Subsidiary or, to the Parent
Corporation's knowledge, by any other party under any such agreement, contract
or commitment. The Parent Corporation has no reason to believe any material
renewable agreement, contract or commitment will not be renewed and has not
received any notification that any such agreement, contract or commitment is not
likely to be renewed. The Merger contemplated by this Agreement will not create
a default under or permit the termination of or otherwise adversely affect any
such
41
48
agreement, contract or commitment in a manner that will have a Parent
Corporation Material Adverse Effect. Except as described in Schedule 5.17
hereto, neither the Parent Corporation nor any Parent Corporation Subsidiary is
required to give any notice to any person regarding this Agreement or the
transactions contemplated hereby with respect to any such agreement, contract or
commitment.
Section 5.18 Change in Control and Severance Payments. Except as set
forth on Schedule 5.18 hereto, neither the Parent Corporation nor any Parent
Corporation Subsidiary has any plans, programs or agreements to which it is a
party, or to which it is subject, pursuant to which payments (or acceleration of
benefits) may be required upon, or may become payable directly or indirectly as
a result of, or by reason of the consummation of the Merger.
Section 5.19 Year 2000. As of the date hereof, the computer systems used
by the Parent Corporation, any Parent Corporation Subsidiary and any third party
service providers used by either of the foregoing have not exhibited any
deficiencies with respect to formatting for the Year 2000 Problem. All issues
and modification, if any, regarding Year 2000 Problem compliance by the Parent
Corporation or Parent Corporation Subsidiaries have been resolved and
undertaken, and will in the future be resolved and undertaken, by third-party
service providers and the Parent Corporation. The Parent Corporation is not
aware of any inability on the part of any customer, insurance company or service
provider with which the Parent Corporation or Parent Corporation Subsidiaries
transact business to timely remedy their own deficiencies in respect of the Year
2000 Problem, which inability, individually or in the aggregate, reasonably
could be expected to have a Parent Corporation Material Adverse Effect.
Section 5.20 Brokers and Finders. Except for Alliant Partners, neither
the Parent Corporation nor any officer, director, or employee of the Parent
Corporation has employed any brokers, finder or investment banker or incurred
any liability for any brokerage or investment banking fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement.
Section 5.21 Ownership of the Company Common Stock. Except as set forth
in Schedule 5.21 hereto, as of the date of this Agreement, the Parent
Corporation does not "beneficially own" (as such term is defined for purposes of
Section 13(d) of the Securities Exchange Act) any shares of the Company Common
Stock.
Section 5.22 Opinion of Financial Advisor. The Parent Corporation has
received the opinion of Alliant Partners, as of June 27, 2000, to the effect
that the merger and Steag Combination, together, are fair, from a financial
point of view to the holders of Parent Common Stock. The Parent Corporation has
delivered to the Company a copy of the agreement between the Parent Corporation
and Alliant Partners.
Section 5.23 Vote Required. The approval of the Parent Corporation
Proposal by the affirmative vote of a majority of the votes cast in person or by
proxy by the holders of Parent Common Stock is the only vote of the holders of
any class or series of the capital stock of the Parent Corporation or any of its
subsidiaries required to approve the Parent Corporation Proposal.
42
49
Section 5.24 Steag Agreement. The Parent Corporation has furnished to
the Company a true and complete copy of the proposed Steag Agreement as well as
the disclosure schedule thereto and the proposed related voting agreement
contemplated by Recital G thereto, in each case in the form in which such
document is being executed by the respective parties thereto concurrently with
the execution of this Agreement by the Parent Corporation, the Acquisition
Corporation and the Company.
ARTICLE 6
COVENANTS
Section 6.1 Covenant to Satisfy Conditions. Subject to the terms and
conditions hereof, each party hereto shall use its reasonable commercial efforts
to take all action required of it to satisfy the conditions set forth in Article
7, and otherwise to fulfill its obligations under the terms of this Agreement
and to facilitate the consummation of the transactions contemplated hereby.
Section 6.2 Access to Information and Facilities.
(a) From and after the date of this Agreement, the Company and
each Company Subsidiary shall give the Parent Corporation and the Acquisition
Corporation and their representatives access during normal business hours to all
of the facilities, properties, books, contracts, commitments and records of the
Company and each Company Subsidiary and shall make their respective officers and
employees available to the Parent Corporation and the Acquisition Corporation
and their representatives as the Parent Corporation or the Acquisition
Corporation or their representatives shall from time to time reasonably request.
The Parent Corporation and the Acquisition Corporation and their representatives
will be furnished with any and all information concerning the Company and
Company Subsidiaries which the Parent Corporation or the Acquisition Corporation
or their representatives reasonably request.
(b) From and after the date of this Agreement, the Parent
Corporation and each Parent Corporation Subsidiary and the Acquisition
Corporation shall give the Company and its representatives access during normal
business hours to all of the facilities, properties, books, contracts,
commitments and records of the Parent Corporation and the Acquisition
Corporation and shall make the officers and employees of the Parent Corporation
and each Parent Corporation Subsidiary and the Acquisition Corporation available
to the Company and its representatives as the Company or its representatives
shall from time to time reasonably request. The Company and its representatives
will be furnished with any and all information concerning the Parent Corporation
and each Parent Corporation Subsidiary and the Acquisition Corporation, and, to
the extent accessible to the Parent Corporation or its representatives, all
information concerning Steag, which the Company or its representatives
reasonably requests.
Section 6.3 Company Conduct of Business Pending Effective Time. From the
date of this Agreement until the Closing Date, the Company and each Company
Subsidiary shall operate only in the ordinary and usual course of business
consistent with past practice, and shall use reasonable commercial efforts to
(a) preserve intact its respective business organization, (b) preserve the good
will and advantageous relationships with customers, suppliers, independent
43
50
contractors, employees and other Persons material to the operation of its
business and (c) not permit any action or omission which would cause any of the
representations or warranties contained herein to become inaccurate or any of
the covenants to be breached. Without limiting the generality of the foregoing,
or as may reasonably be required in order to effectuate the transactions
described in Section 6.7 prior to the Closing, except as set forth on Schedule
6.3, neither the Company nor any Company Subsidiary, shall, without the prior
written consent of the Parent Corporation:
(a) incur any obligation or enter into any contract which (x)
either (I) requires a payment by any party in excess of, or a series of payments
which in the aggregate exceed, $3,000,000 or provides for the delivery of goods
or performance of services, or any combination thereof, having a value in excess
of $500,000 or (II) has a term of, or requires the performance of any
obligations, over a period in excess of six months or (y) if the Company were a
party to such contract or agreement on the date hereof, such contract or
agreement would be required to be disclosed pursuant to Section 4.18 hereof;
(b) take any action, or enter into or authorize any contract or
transaction other than in the ordinary course of business and consistent with
past practice;
(c) sell, transfer, convey, assign or otherwise dispose of any of
its assets or properties, except sales of inventory in the ordinary course of
business consistent with past practice;
(d) waive, release or cancel any claims against third parties or
debts owing to it, or any rights which have any value in an amount greater than
$100,000;
(e) make any changes in its accounting systems, policies,
principles or practices, other than as may be required by reason of changes in
GAAP or rules and regulations of the SEC pertaining to accounting principles or
practices;
(f) except as otherwise provided under subsection (j) of this
Section 6.3, authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, convertible or exchangeable securities, commitments, subscriptions,
rights to purchase or otherwise) any shares of its capital stock or any other
securities, or amend any of the terms of any such securities;
(g) other than distributions by the Company to its shareholders
in accordance with past practice, split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire any of its securities;
(h) make any borrowings, incur any debt (other than trade
payables in the ordinary course of business) or assume, guarantee, endorse or
otherwise become liable (whether directly, contingently or otherwise) for the
obligations of any other Person or make any unscheduled payment or repayment of
principal in respect of any Long Term Debt. "Long Term Debt" shall mean the
aggregate original principal amount (less any cash repayments of principal
previously made) of, and any and all accrued interest on, all indebtedness with
respect to borrowed money and all other obligations (or series of related
obligations) to pay money with
44
51
respect to extensions of credit, including capitalized lease and deferred
compensation obligations, except indebtedness or obligations for which all
installments are payable within six months from the date of the advancement of
funds or extension of credit. The term "Long Term Debt" shall include any amount
listed or to be listed as a current liability on financial statements which
reflects the current portion or final installments of obligations originally
reflected as noncurrent liabilities;
(i) make any new loans, advances or capital contributions to, or
new investments in, any other Person, other than in the form of advances and
loans to and from subsidiaries existing at the Effective Date and in the normal
course of business;
(j) issue any shares of stock or grant any option or right to
acquire any shares of stock, enter into, adopt, amend or terminate any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any existing plan or arrangement or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing, other than (i)
the issuance of shares of stock upon the exercise of stock options outstanding
prior to the effectiveness of this Agreement (ii) the granting of stock options
to newly hired employees after the date of this Agreement in amounts consistent,
on an as-converted basis, based on the Exchange Ratio, with the Parent
Corporation's compensation guidelines, and on terms and conditions consistent
with the Parent Stock Option Plan and the related standard Parent Corporation
stock option agreement (which vest ratably on a monthly basis over a four (4)
year period, with no vesting until the first anniversary date of the
commencement of full-time employment, and no acceleration of vesting upon the
Closing or any a change of control), (iii) issuance of shares under the Employee
Stock Purchase Plan of the Company, and (iv) changes in compensation planned and
executed as a part of the annual salary review policy in the normal course of
business;
(k) except for capital expenditures contemplated by (l) below,
acquire, lease or encumber any assets outside the ordinary course of business or
any assets which are material;
(l) authorize or make any capital expenditures which individually
or in the aggregate are in excess of $500,000 per quarter;
(m) make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability, or waive or extend the statute of
limitations in respect of any such Taxes other than in the ordinary course of
business and consistent with past practice or incident to the filing for
extensions for Tax Returns;
(n) pay or agree to pay any amount in settlement or compromise of
any suits or claims of liability in an amount more than $100,000; or
(o) terminate, modify, amend or otherwise alter or change any of
the terms or provisions of any contract, or pay any amount not required by law
or by any contract in an
45
52
amount more than $100,000, other than modifications to purchase orders done in
the ordinary course of business and not exceeding $300,000.
Section 6.4 Parent Corporation Conduct of Business Pending Effective
Time. From the date of this Agreement until the Closing Date, the Parent
Corporation and each Parent Corporation Subsidiary shall use reasonable
commercial efforts to (a) preserve intact its respective business organization,
(b) preserve the good will and advantageous relationships with customers,
suppliers, independent contractors, employees and other Persons material to the
operation of its business, and (c) not permit any action or omission which would
cause any of the representations or warranties contained herein to become
inaccurate or any of the covenants to be breached. Without limiting the
generality of the foregoing, or as may reasonably be required in order to
effectuate the transactions described in Section 6.7 prior to the Closing,
neither the Parent Corporation nor any Parent Corporation Subsidiary, shall,
without the prior written consent of the Parent Corporation:
(a) sell, transfer, convey, assign or otherwise dispose of any of
its material assets or properties, except sales of inventory in the ordinary
course of business consistent with past practice;
(b) waive, release or cancel any claims against third parties or
debts owing to it, or any rights which have any value in an amount greater than
$5,000,000;
(c) make any changes in its accounting systems, policies,
principles or practices, other than as may be required by reason of changes in
GAAP or rules and regulations of the SEC pertaining to accounting principles or
practices;
(d) other than distributions by the Parent Corporation to its
stockholders in accordance with past practice, split, combine, or reclassify any
shares of its capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of its
securities;
(e) authorize or make any capital expenditures which individually
or in the aggregate are in excess of $25,000,000;
(f) make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability, or waive or extend the statute of
limitations in respect of any such Taxes other than in the ordinary course of
business and consistent with past practice or incident to the filing for
extensions for Tax Reports; or
(g) pay or agree to pay any amount in settlement or compromise of
any suits or claims of liability in an amount more than $10,000,000.
Section 6.5 Proxy Materials and Shareholder Approval. As soon as
practicable after the date hereof, the Parent Corporation, the Company and the
Acquisition Corporation will prepare and file the Joint Proxy Statement that
will be included in the Registration Statement containing (i) the Joint Proxy
Statement relating to the Company Proposal and the Parent Corporation Proposal
to be presented at the Company Shareholders meeting and the Parent
46
53
Corporation Stockholders meetings, respectively and (ii) a prospectus relating
to the Share Issuance to be conducted in connection with the Merger, and each of
the Parent Corporation, the Company and the Acquisition Corporation shall use
all reasonable efforts to have the Registration Statement declared effective as
promptly as practicable. The Company will convene the Company Shareholders
Meeting as promptly as practicable after the Registration Statement is declared
effective to consider and vote upon the adoption and approval of the Company
Proposal. The Parent Corporation will convene the Parent Corporation
Stockholders Meeting as promptly as practicable after the Registration Statement
is declared effective to consider and vote upon the adoption and approval of the
Parent Corporation Proposal. Subject to fiduciary obligations under applicable
law, and, in the case of the Company, subject to the further provisions of
Section 6.10 (b), the Boards of Directors of the Company and the Parent
Corporation shall recommend to their respective shareholders the approval of the
Company Proposal and the Parent Corporation Proposal, respectively. The
Registration Statement and the Joint Proxy Statement will comply as to form in
all material respects with all applicable laws, including the Securities Act and
the Securities Exchange Act.
Section 6.6 Intentionally Omitted.
Section 6.7 Consents and Approvals. Each of the parties hereto shall use
reasonable commercial efforts to obtain all consents, approvals, certificates
and other documents required in connection with, and to have removed any
impediments to, the performance by it of this Agreement, the Steag Agreement and
the consummation of the transactions contemplated hereby. Each of the parties
hereto shall make all filings, applications, statements and reports to all
Governmental Authorities and other Persons which are required to be made prior
to the Closing Date pursuant to any applicable law or contract in connection
with this Agreement and the transactions contemplated hereby.
Section 6.8 Periodic Reports. Until the Effective Time, each of the
Company and the Parent Corporation will, subject to the requirements of
applicable laws, furnish to the other party all filings to be made with the SEC
and all materials to be mailed to its respective shareholders or stockholders
and will solicit comments with respect thereto from the other party, in each
case at least 48 hours prior to the time of such filings and the time of such
mailings, unless otherwise required by law, in which case the Company and the
Parent Corporation will afford the other party such opportunities for comment as
is reasonable and practicable under the circumstances.
Section 6.9 Publicity. Prior to issuing any public announcement or
statement with respect to the transactions contemplated by this Agreement or the
Steag Agreement and prior to making any filing with any Federal or state
Governmental Entity or with any securities exchange with respect thereto, the
Parent Corporation and the Company will consult with each other and will allow
each other a reasonable opportunity to review the contents of any such public
announcement or statement and any such filing, unless otherwise required by law,
in which case the Company will afford the Parent Corporation such opportunities
for comment as is reasonable and practicable under the circumstances. The Parent
Corporation and the Company each agree to furnish to the other copies of all
other public announcements they may make concerning their respective business
and operations promptly after such public announcements are made.
47
54
Section 6.10 Acquisition Proposals.
(a) Without limitation on any of the Company's other obligations
under this Agreement (including under Article V hereof), the Company agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall use its reasonable commercial
efforts to cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage or knowingly facilitate any inquiries or the making of any Acquisition
Proposal (as defined in Exhibit A hereto), (ii) provide any nonpublic
information or data to any Person relating to or in response to an Acquisition
Proposal or any inquiry or indication of interest that could lead to an
Acquisition Proposal, or engage in any discussions or negotiations with any
Person with respect to an Acquisition Proposal, or knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal, (iii) approve,
endorse or recommend, or propose publicly to approve, endorse or recommend, any
Acquisition Proposal or (iv) approve, endorse or recommend, or propose to
approve, endorse or recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any of
the foregoing related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary,
this Section 6.10 shall not prohibit the Company or its Board of Directors (i)
to the extent applicable, from complying with Rule 14e-2 and Rule 14d-9
promulgated under the Securities Exchange Act with regard to an Acquisition
Proposal, (ii) from effecting a change in the Company Board Recommendation or
(iii) from engaging in any discussions or negotiations with, or providing any
nonpublic information to, any Person in response to an unsolicited bona fide
written Acquisition Proposal by any such Person, if and only to the extent that,
(A) in any such case referred to in Clause (ii) or (iii) above, neither the
Company nor any representative of the Company shall have violated any of the
restrictions of this Section 6.10, (B) in any such case referred to in clause
(ii) or (iii), its meeting of shareholders shall not have occurred, (C) in the
case of clause (ii) or (iii) above, it has received an unsolicited bona fide
written Acquisition Proposal from a third party (which has not been withdrawn)
and its Board of Directors concludes in good faith that such Acquisition
Proposal constitutes a Superior Proposal (as defined below), (D) in the case of
clause (ii) or (iii) above, its Board of Directors, after consultation with
outside counsel, determines in good faith that such action is required in order
for the Board of Directors to comply with its fiduciary duties under applicable
law, (E) prior to providing any information or data to any Person in connection
with an Acquisition Proposal by any such Person, its Board of Directors receives
from such Person an executed confidentiality agreement having provisions that
are customary in such agreements, as advised by counsel, and no less restrictive
than the comparable provisions contained in the confidentiality agreement
between the Company and the Parent Corporation, and at least two business days
prior to furnishing any such nonpublic information to such person, the Company
furnishes such nonpublic information to the Parent Corporation (to the extent
not furnished previously), and (F) at least two business days prior to providing
any information or data to any Person or entering into discussions or
negotiations with any Person, the Company notifies the Parent Corporation of
such inquiries, proposals or offers received by, any such information requested
from, or any such discussions or negotiations sought to be initiated or
continued with, such Person or any of its representatives indicating, in
connection
48
55
with such notice, the name of such Person and the material terms and conditions
of any inquiries, proposals or offers. The Company agrees that it will promptly
keep the Parent Corporation informed of the status and terms of any such
proposals or offers and the status and terms of any such discussions or
negotiations. The Company agrees that it will, and will cause its officers,
directors and representatives to, immediately cease and cause to be terminated
any activities, discussions or negotiations existing as of the date of this
Agreement with any parties with respect to any Acquisition Proposal. The Company
agrees that it will use reasonable commercial efforts to promptly inform its
directors, officers, key employees, agents and representatives of the
obligations undertaken in this section. Without limiting the generality of the
foregoing, the Company acknowledges and agrees that any violation of any of the
restrictions set forth in this Section 6.10 by any representative of the Company
or any of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation
S-X of the SEC), whether or not such representative is purporting to act on
behalf of the Company or any of its Significant Subsidiaries, shall be deemed to
constitute a breach of this Section 6.10 by the Company. Nothing in this section
shall (1) permit the Company to terminate this Agreement (except as specifically
provided in Article VIII hereof) or (2) affect any other obligation of the
Company under this Agreement. The Company shall not submit to the vote of its
shareholders any Acquisition Proposal (other than the Merger).
Section 6.11 No Breach, Etc. No party shall, nor shall any party permit
any of its subsidiaries to, willfully take any action that would or is
reasonably likely to result in a material breach of any provision of this
Agreement, the Steag Agreement or in any of its representations and warranties
set forth in this Agreement being untrue on and as of the Closing Date.
Section 6.12 Blue Sky Approvals. The Parent Corporation and the Company
will obtain, prior to the effective date of the Registration Statement, all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement and the Merger.
Section 6.13 Indemnification by the Surviving Corporation.
(a) Assuming consummation of the Merger, commencing as of the
Effective Time, the Surviving Corporation shall (i) indemnify, defend and hold
harmless each person who is, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer or director of
the Company against all losses, claims, damages, costs, expenses, liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) in
connection with any claim, action, suit, proceeding or investigation to the
extent based on or arising out of the fact that such person is or was a
director, officer or employee of the Company ("Indemnified Liabilities"),
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 and
(ii) indemnify, defend and hold harmless each person who is, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer, director or employee of the Company (the "Indemnified
Parties") against all Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent a corporation
is permitted under the laws of its state of incorporation to indemnify its own
directors, officers or employees, as the case may
49
56
be (and the Surviving Corporation 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), except for a claim arising or based upon the
gross negligence or willful misconduct of the Indemnified Party. Without
limiting the foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising before
or after the Effective Time), (i) the Indemnified Party may retain counsel
satisfactory to it and the Surviving Corporation, (ii) the Surviving Corporation
will pay all reasonable fees and expenses of such counsel for the Indemnified
Party promptly as statements therefor are received, and (iii) the Surviving
Corporation will use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that the Surviving Corporation shall not be liable for
any settlement of any claim effected without its prior written consent, which
consent shall not be unreasonably withheld, and if more than one Indemnified
Party is subject to a claim giving rise to Indemnification hereunder, the
Indemnified Parties as a group may retain one law firm to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct (as determined by counsel to the Indemnified Parties), a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event, such additional counsel as may be required
may be retained by the Indemnified Parties at the Surviving Corporation's
expense. Any Indemnified Party wishing to claim indemnification under this
Section 6.13, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Surviving Corporation (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 6.13, except to the extent such failure prejudices
such party), and shall, to the extent required by laws of the indemnifying
party's state of incorporation, deliver to the Surviving Corporation any
undertaking required prior to payment of expenses in advance of final
disposition.
(b) All rights to indemnification now existing in favor of any of
the current or former directors, officers and employees of the Company, whether
arising under the Company's Articles of Incorporation or By-Laws, by law, or
under indemnification agreements between the Company and any such person, in
each case as of the date of this Agreement, shall survive the Merger and the
Surviving Corporation shall cause all such rights to indemnification to continue
in full force and effect from and after consummation of the Merger in accordance
with their terms, as such terms exist on the date hereof.
(c) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Parent
Corporation shall assume the obligations set forth in paragraph (a) and (b)
above.
(d) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification of officers, directors and employees than are set forth in the
current Articles of Incorporation and By-Laws of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time, unless such modification is required by law.
50
57
(e) For six years after the Effective Time, to the extent
reasonably obtainable, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies having at least comparable coverage containing
terms that are no less advantageous, except to a de minimus extent) with respect
to matters occurring prior to the Effective Time to the extent such liability
insurance can be maintained at a cost for officers and directors of the Company
and Company Subsidiaries not greater than 1.5 times the current amount paid by
the Company annually for its existing coverage (the "Cap"); provided that if
comparable coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of the Cap, the Surviving Corporation shall only be
required to obtain as much coverage as can be obtained by paying an annual
premium equal to the Cap.
(f) The Surviving Corporation shall pay all expenses, including
reasonable attorneys' fees, that may be incurred by any indemnified party in
enforcing the indemnity and other obligations provided for in this Section 6.13.
Section 6.14 Certain Employee Agreements. Subject to Section 6.15
hereof, the Surviving Corporation shall honor, without modification, all
contracts, agreements, collective bargaining agreements and commitments of the
parties prior to the date hereof which apply to any current or former employee
or current or former director of the Company; provided, however, that the
foregoing shall not prevent the Surviving Corporation or its Subsidiaries from
enforcing such contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including, without limitation, any
reserved right to amend, modify, suspend, revoke or terminate any such contract,
agreement, collective bargaining agreement or commitment.
Section 6.15 Employee Benefit Plans.
(a) Each individual employed by the Company or any Company
Subsidiary immediately before the Effective Time who (i) remains employed by the
Surviving Corporation, Parent Corporation or any of its Subsidiaries and (ii) is
not covered by a collective bargaining agreement (each such individual, a
"Continuing Employee"), shall be provided with credit, for all purposes other
than benefit accrual, under the employee benefit plans of the Surviving
Corporation, Parent Corporation or any of its Subsidiaries providing benefits
after the Effective Time to Continuing Employees, for his or her years of
service with the Company and Company Subsidiaries, as the case may be, before
the Effective Time, to the same extent as such Continuing Employee was entitled,
before the Effective Time, to credit for such service under any comparable
plans, maintained by the Company or Company Subsidiaries, except to the extent
such credit would result in a duplication of benefits. In addition, and without
limiting the generality of the foregoing, (i) each Continuing Employee shall be
immediately eligible to participate, without any waiting time, in any and all
employee benefit plans sponsored by Surviving Corporation, Parent Corporation or
any of its Subsidiaries for the benefit of Continuing Employees (such plans,
collectively, the "New Plans") to the extent coverage under such New Plan
replaces coverage under a comparable Plan in which such Continuing Employee
participated immediately before the Effective Time (such plans, collectively,
the "Old Plans") and to roll over any amounts held under any Old Plan into the
respective New Plan in accordance with applicable law and the applicable New
Plan and Old Plan; and (ii) for purposes of each New
51
58
Plan providing medical, dental, pharmaceutical and/or vision benefits to any
Continuing Employee, the Surviving Corporation, Parent Corporation or any of its
Subsidiaries shall cause all pre-existing condition exclusions and
actively-at-work requirements of such New Plan to be waived for such employee
and his or her covered dependents, and the Surviving Corporation, Parent
Corporation or any of its Subsidiaries shall cause any eligible expenses
incurred by such employee and his or her covered dependents during the portion
of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year as if such amounts had been paid
in accordance with such New Plan. Notwithstanding the foregoing, a Continuing
Employee's service with the Company and Company Subsidiaries, as the case may be
before the Effective Time, shall not be considered for purposes of eligibility
to participate in the Parent Corporation's sabbatical plan.
(b) In lieu of any severance benefits to which any Company or
Company Subsidiary employee who shall become a Continuing Employee was entitled
(not including Xxxxx Xxxxxxx, Xxxxxxxxxxx XxXxxxxxx or Xxxxx X. Xxxxxxx), each
such Continuing Employee shall be entitled to the following severance benefits,
as applicable, provided, however that such Continuing Employee's employment is
involuntarily terminated by the Surviving Corporation, Parent Corporation or any
of its Subsidiaries without "cause," (as that term is defined below) prior to
the expiration of four (4) months after the Effective Time.
(i) Four weeks salary (which shall be calculated as the
Continuing Employee's final base salary rate, excluding any expected bonuses and
the value of any stock options or other employee benefits) continuation, plus
two weeks salary continuation for each completed year of service with the
Company or any Company Subsidiary before the Effective Time (each a "Year of
Service"); and
(ii) continuation of medical benefits comparable to those
received by ongoing employees of the Surviving Corporation, Parent Corporation
or any of its Subsidiaries for three (3) months following termination, if the
Continuing Employee has less than one (1) Year of Service; six (6) months
following termination, if the Continuing Employee has completed more than one
(1) but less than fifteen (15) Years of Service; or nine (9) months following
termination, if the Continuing Employee has completed at least fifteen (15)
Years of Service; it is provided, however, that if the insurance carriers for
the medical benefit plans of the Surviving Corporation, Parent Corporation or
any of its Subsidiaries, as the case may be, will not permit such terminated
Continuing Employee to receive benefits under such plans except under the
applicable health care continuation and notice provisions of COBRA, then the
COBRA premiums of such employee will be paid by the Surviving Corporation for
the time period based on such employee's Years of Service, as described in the
preceding clause; and
(iii) payment of salary for the number of weeks of
vacation that accrued but was unused during Continuing Employee's Years of
Service and that remained unused at the time of termination of employment.
A Continuing Employee who resigns from his or her employment shall not be
entitled to any benefits pursuant to this section, regardless of such Continuing
Employee's purported reason for
52
59
resignation.
For purposes of this section, a termination with "cause" occurs if an employee
is terminated for any of the following reasons: (i) theft, dishonesty or
falsification of any employment or any records of the Surviving Corporation,
Parent Corporation or any of its Subsidiaries (ii) conviction of a felony or any
act involving moral turpitude; (iii) insubordination or gross misconduct; (iv)
improper disclosure of the confidential or proprietary information of the
Surviving Corporation, Parent Corporation or any of its Subsidiaries or (v) any
intentional act that has a material detrimental effect on the business or
reputation of the Surviving Corporation, Parent Corporation or any of its
Subsidiaries.
Further, for purposes this section, a Continuing Employee will not be considered
to have incurred an involuntary termination of employment if such employee is
employed by the Surviving Corporation and then becomes an employee of or is
transferred to the Parent Corporation (or vice versa) prior to the expiration of
four (4) months after the Effective Time.
Notwithstanding subsections (b)(i), (ii) and (iii), if such Continuing Employee
is entitled contractually or by law to any severance benefit not listed in
subsections (b)(i), (ii) and (iii) above (each an "Additional Benefit"), or
entitled to any severance benefit at a higher level than that specified in
subsection (b)(i), (ii) and (iii) above, such Continuing Employee shall be
entitled to receive those benefits provided in subsections (b)(i), (ii) and
(iii), in addition to any Additional Benefits and any incremental increase over
the benefit levels provided for in subsections (b)(i), (ii) and (iii) to which
such Continuing Employee is entitled by contract or by law.
(c) The Company and Company Subsidiaries, as applicable, each
agrees to terminate their 401(k) plans immediately prior to Closing, unless the
Parent Corporation, in its sole and absolute discretion, agrees to sponsor and
maintain such plans by providing the Company with written notice of such
election at least three (3) days before the Effective Time. Unless the Parent
Corporation provides such contrary notice to the Company, the Parent Corporation
shall receive from the Company evidence that the 401(k) plans of the Company and
each Company Subsidiary, as applicable, have been terminated pursuant to
resolutions of each such entity's Board of Directors (the form and substance of
which resolutions shall be subject to review and approval of the Parent
Corporation), effective as of the day immediately preceding the Closing Date.
Section 6.16 Actions Regarding Antitakeover Statutes. If any fair price,
moratorium, control share acquisition or other form of antitakeover statute,
rule or regulation is or becomes applicable to the transactions contemplated by
this Agreement, the Board of Directors of each of the Company and the Parent
Corporation will grant such approvals and take such other actions as may be
required so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms and conditions set forth in this Agreement.
Without limiting the foregoing, the Company (i) will take such action as may be
required so that Subchapter F of Chapter 25 of the Pennsylvania Act shall not
prohibit any transaction contemplated by this Agreement and (ii) will take such
action as may be required under Section 2538(b) so that Section 2538 of the
Pennsylvania Act shall not apply to any transaction contemplated by this
Agreement.
53
60
Section 6.17 Defense of Orders and Injunctions. In the event any party
becomes subject to any order or injunction of a court of competent jurisdiction
which prohibits the consummation of the transactions contemplated by this
Agreement, each party will use its reasonable commercial efforts to overturn or
lift such order or injunction. The foregoing will not be deemed to require any
party to enter into any agreement, consent decree or other commitment requiring
it or any of its Subsidiaries to divest or hold separate any assets or to take
any other action that would have a Company Material Adverse Effect or Parent
Corporation Material Adverse Effect, as the case may be, on such party.
Section 6.18 Preservation of Tax Treatment.
(a) From and after the date of this Agreement (a) the Parent
Corporation and the Company and their respective Subsidiaries will use their
reasonable commercial efforts to cause the Merger to constitute a reorganization
within the meaning of Section 368(a) of the Code and (b) neither the Parent
Corporation nor the Company, nor any of their respective Subsidiaries, will
knowingly take or omit to take any action that would prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
(b) The Parent Corporation has no plan or intention to cause the
Company to issue additional shares of stock of the Company on or after the
Closing that would result in the Parent Corporation losing "control" of the
Company within the meaning of Section 368(c) of the Code. Following the Closing,
the Parent Corporation will either continue at least one significant historic
line of business of the Company or use a significant portion of the Company's
historic business assets in a business. For purposes of this representation, the
Parent Corporation will be treated (i) as holding all of the businesses and
assets of all of the members of the "qualified group" and (ii) as conducting the
business of a partnership if members of the "qualified group" own (in the
aggregate) more than a thirty three and one-third percentage (33-1/3%) interest
in the capital and general profits and losses of the partnership or own more
than a twenty percent (20%) interest in the capital and general profits and
losses of the partnership and have active and substantial management functions
as a partner with respect to the business of the partnership. The "qualified
group" is one or more chains of corporations conducted through stock ownership
with the Parent Corporation, but only if the Parent Corporation owns directly an
amount of stock meeting the control requirements of Section 368(c) of the Code
in at least one of the corporations and stock meeting the control requirements
of Section 368(c) of the Code in each of the corporations (except the Parent
Corporation) is owned directly by one of the other corporations. Except for
transfers of stock and assets described in Treas. Reg. Section 1.368-2(k)(2) and
dispositions of assets in the ordinary course of business, the Parent
Corporation has no plan or intention to liquidate the Company; merge the Company
with or into another corporation; sell, distribute or otherwise dispose of the
stock of the Company; or cause the Company to sell or otherwise dispose of any
of its assets or any of the assets acquired from the Acquisition Corporation.
(c) Except for the payment of cash in lieu of the issuance of
fractional shares provided in Section 3.2(c) of this Agreement, for purchases of
shares of the Parent Corporation on the open market as part of any current or
future general stock repurchase program of the Parent Corporation and
repurchases in the ordinary course of business of unvested shares, if any,
acquired from terminating employees, neither the Parent Corporation nor any
corporation related
54
61
to the Parent Corporation (as defined in Section 1.368-1(e)(3) of the Treasury
Regulations) shall redeem or otherwise reacquire, in connection with the Merger,
any of the shares of Parent Common Stock issued in the Merger for consideration
other than shares of the Parent Corporation.
(d) The Parent Corporation, the Acquisition Corporation and the
Company shall treat the Merger in all relevant federal, state and local tax
returns as a reorganization described in Section 368(a) of the Code (or as
similarly described under analogous provisions of state or local law). This
covenant shall survive with respect to any such return until the expiration of
the applicable statute of limitations on assessment of tax for the fiscal period
covered by said return.
Section 6.19 Accountants' Comfort Letters. Each party will use its
reasonable commercial efforts to cause to be delivered to the other party two
letters from its independent public accountants, one dated a date within two
business days before the date on which the Registration Statement becomes
effective and one dated the Closing Date, in form and substance reasonably
satisfactory to the recipient and customary in scope and substance for comfort
letters delivered by independent accountants in connection with registration
statements similar to the Registration Statement.
Section 6.20 NASDAQ Listing. The Parent Corporation will use its
reasonable commercial efforts to cause the Parent Common Stock issuable in the
Merger or otherwise pursuant to the terms of this Agreement to be approved for
listing on NASDAQ, subject to official notice of issuance, as promptly as
practicable after the date of this Agreement and in any event prior to the
Closing Date.
Section 6.21 Directors. The Parent Corporation shall cause a nominee
designated by the Company to be appointed to the Board of Directors of the
Parent Corporation, effective as of the Effective Time, to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Parent
Corporation. If the nominee designated by the Company is unable to serve at the
Effective Time, then the Company shall designate such person's successor.
ARTICLE 7
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Consummate the
Merger. The respective obligations of each party to consummate the Merger shall
be subject to the satisfaction on or prior to the Closing Date of the following
conditions, except that, to the extent permitted by applicable law, such
conditions may be waived in writing pursuant to Section 9.5 hereof by the joint
action of the parties hereto; provided, however, that the condition specified in
Section 7.1(f) may be waived only by a written instrument executed by the
parties hereto and by Steag:
(a) Shareholder Approval. The shareholders of the Company shall
have approved the Company Proposals and the stockholders of the Parent
Corporation shall have
55
62
approved the Parent Corporation Proposals in accordance with their respective
Articles of Incorporation or Certificate of Incorporation, as applicable, and
By-laws, applicable state corporate laws and the rules and listing requirements
of NASDAQ and in accordance with this Agreement.
(b) No Injunction. No temporary restraining order or permanent
injunction or other order by any federal or state court preventing consummation
of the Merger shall have been issued and be continuing in effect, and the Merger
and the other transactions contemplated hereby shall not have been prohibited
under any applicable federal or state law or regulation.
(c) Regulatory Approvals. All consents of and filings (including
modifications thereto) with all Governmental Entities required for consummation
of the Merger have been obtained, other than consents, filings, registration or
notice requirements which, if not obtained, made or complied with would not, in
the reasonable judgment of the Parent Corporation, or so far as may reasonably
be foreseen, is not likely to have, (i) a Company Material Adverse Effect,
considering the Company and Company Subsidiaries separately, (ii) a Parent
Corporation Material Adverse Effect, considering the Parent Corporation and
Parent Corporation Subsidiaries separately or (iii) a material adverse effect on
the Acquisition Corporation.
(d) Registration Statement. The Registration Statement shall have
been declared effective under the Securities Act, no stop order suspending the
effectiveness of the Registration Statement shall have been issued, no action,
suit or proceeding or investigation by the SEC to suspend the effectiveness of
the Registration Statement shall have been initiated and be continuing and all
necessary approvals under state securities laws or the Securities Act or the
Securities Exchange Act relating to the issuance or trading of the shares of
Parent Common Stock issuable pursuant to the Merger shall have been received.
(e) NASDAQ Listing. The shares of Parent Common Stock issuable
pursuant to the Merger, upon the exercise of the Company Stock Options assumed
by the Parent Corporation pursuant to Section 1.8 shall have been approved for
listing by NASDAQ upon official notice of issuance.
(f) Closing of Steag Combination. The closing of the Steag
Combination shall occur concurrently with the Closing.
Section 7.2 Conditions to Obligations of Parent Corporation and the
Acquisition Corporation to Consummate the Merger. The obligations of the Parent
Corporation and the Acquisition Corporation to consummate the Merger shall be
further subject to the satisfaction, on the Closing Date, of the following
conditions, except as may be waived by the Parent Corporation in writing
pursuant to Section 9.5 hereof:
(a) Compliance With Agreements and Covenants. The Company shall
have performed and complied with all of its covenants, obligations and
agreements contained in this Agreement to be performed and complied with by the
Company on or prior to the Closing Date.
(b) Warranties True as of Both Present Date and Closing Date. The
representations and warranties of the Company contained herein shall be true and
correct in all
56
63
material respects on and as of the date of this Agreement, and shall also be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
(c) Closing Certificate. The Parent Corporation shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Closing Date, to the effect that, to
the knowledge of such officers after due inquiry, as of the Closing Date, the
conditions applicable to the Company set forth in Section 7.2(a) and 7.2(b) have
been satisfied.
(d) Consents and Approvals. The Parent Corporation shall have
received written evidence reasonably satisfactory to it that all consents and
approvals required for the consummation of the transactions contemplated hereby
have been obtained, and all required filings have been made, including (without
limitation) those set forth on Schedule 4.3. All applicable waiting periods
under the HSR Act shall have been terminated or shall have expired.
(e) No Company Material Adverse Effect. No Company Material
Adverse Effect shall have occurred and no event shall have occurred which, in
the reasonable judgment of the Parent Corporation, is reasonably likely to have
a Company Material Adverse Effect.
(f) The Company Dissenting Shares. The Company Dissenting Shares,
if any, shall represent no more than 5% of the total number of shares of the
Company Common Stock issued and outstanding immediately prior to the Closing
Date.
(g) Actions or Proceedings. No action or proceeding by any
Governmental Authority or other Person shall have been instituted or threatened
which is reasonably likely to have a Company Material Adverse Effect, or could
enjoin, restrain or prohibit any integration of any operations of the Company
with those of the Parent Corporation or Parent Corporation's Subsidiaries.
(h) Subsidiary Director and Officer Resignations. The Parent
Corporation and the Acquisition Corporation shall have received the written
resignations of the officers and directors of all of the Company Subsidiaries.
(i) Other Closing Documents. The Parent Corporation shall have
received the executed Articles of Merger and such other agreements and
instruments as the Parent Corporation shall reasonably request, in each case in
form and substance reasonably satisfactory to the Parent Corporation.
Section 7.3 Conditions to Obligations of the Company to Consummate the
Merger. The obligations of the Company to consummate the Merger under this
Agreement shall be further subject to the satisfaction, on or before the Closing
Date, of the following conditions except as may be waived by the Company in
writing pursuant to Section 9.5 hereof:
(a) Compliance with Agreements and Covenants. The Parent
Corporation and the Acquisition Corporation shall have performed and complied
with all of their covenants, obligations and agreements contained in this
Agreement, to be performed and complied with by them on or prior to the Closing
Date.
57
64
(b) Warranties True as of Both Present Date and Closing Date. The
representations and warranties of the Parent Corporation and the Acquisition
Corporation contained herein shall be true and correct in all material respects
on and as of the date of this Agreement, and shall also be true and correct in
all material respects on and as of the Closing Date with the same force and
effect as though made by the Parent Corporation and the Acquisition Corporation
on and as of the Closing Date.
(c) Closing Certificate. The Company shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer of
the Parent Corporation, dated the Closing Date, to the effect that, to the
knowledge of such officer after due inquiry, as of the Closing Date, the
conditions applicable to the Parent Corporation set forth in Section 7.3(a) and
7.3(b) have been satisfied.
(d) Consents and Approvals. The Company shall have received
written evidence reasonably satisfactory to it that all consents and approvals
required for the consummation of the transactions contemplated hereby have been
obtained, and all required filings have been made, including (without
limitation), those set forth on Schedule 5.3(b) hereto. All applicable waiting
periods under the HSR Act shall have been terminated or shall have expired.
(e) Tax Opinion. The Company shall have received a written
opinion from Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx LLP, counsel to the Company, to
the effect that the Merger will be a reorganization under Section 368(a) of the
Code and that the Company and its shareholders who exchange their shares solely
for shares of Parent Common Stock will recognize no gain or loss for federal
income tax purposes as a result of the consummation of the Merger. In rendering
such opinion, such counsel shall be entitled to rely upon representations of
officers of the Parent Corporation, the Acquisition Corporation and the Company
reasonably satisfactory in form and substance to such counsel contained in
certificates of officers of the Parent Corporation, the Acquisition Corporation
and the Company (which certificates the Parent Corporation, the Acquisition
Corporation and the Company shall use their best efforts to make available to
counsel).
(f) No Parent Corporation Material Adverse Effect. No Parent
Corporation Material Adverse Effect shall have occurred and no event shall have
occurred which, in the reasonable judgment of the Parent Corporation, is
reasonably likely to have a Parent Corporation Material Adverse Effect.
(g) Actions or Proceedings. No action or proceeding by any
Governmental Authority or other Person shall instituted or threatened which is
reasonably likely to have a Parent Corporation Material Adverse Effect, or could
enjoin, restrain or prohibit any integration of any operations of the Parent
Corporation with those of the Company or Company Subsidiaries.
(h) Other Closing Documents. Company shall have received the
executed Articles of Merger and Certificate of Merger and such other agreements
and instruments as Company shall reasonably request, in each case in form and
substance reasonably satisfactory to
58
65
Company.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Optional Termination. This Agreement may be terminated at
any time prior to the Effective Time by action taken or authorized by the Board
of Directors of the terminating party or parties and, except as provided below,
whether before or after approval of the matters presented in connection with the
Merger by the shareholders of the Company or the stockholders of the Parent
Corporation:
(a) By mutual written consent of the Company, the Parent
Corporation and Steag;
(b) By either the Parent Corporation or the Company, if the
Effective Time shall not have occurred on or before February 28, 2001 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date;
(c) By either the Parent Corporation or the Company, if any
Governmental Entity (i) shall have issued an order, decree or ruling or taken
any other action (which the parties shall have used their reasonable commercial
efforts to resist, resolve or lift, as applicable, in accordance with Section
6.7) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable or (ii) shall have failed
to issue an order, decree or ruling or to take any other action, and such denial
of a request to issue such order, decree, ruling or take such other action shall
have become final and nonappealable (which order, decree, ruling or other action
the parties shall have used their reasonable commercial efforts to obtain, in
accordance with Section 6.7), in the case of each of (i) and (ii) which is
necessary to fulfill the conditions set forth in Article 7, as applicable;
provided, however, that the right to terminate this Agreement under this Section
8.1(c) shall not be available to any party whose failure to use their reasonable
commercial efforts has been the cause of such action or inaction;
(d) By either the Parent Corporation or the Company, if the
approvals of the shareholders of the Company or the stockholders of the Parent
Corporation contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
stockholders or shareholders (including any adjournment or postponement thereof)
at which the vote was taken; provided, however, that a party shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(d) if the
failure to obtain such approval is attributable to a failure on the part of such
party to perform any material obligation required to be performed by such party;
59
66
(e) By the Company, if the Parent Corporation shall have (i)
failed to recommend the issuance of the Parent Common Stock in the Merger and
the approval of the Parent Corporation Proposals to its stockholders or
withdrawn or modified the Parent Corporation Board Recommendation in a manner
adverse to the Company (or resolved to take any such action), whether or not
permitted by the terms hereof or (ii) materially breached its obligations under
this Agreement by reason of a failure to call the Parent Corporation
Stockholders Meeting in accordance with this Agreement or a failure to prepare
and mail to its stockholders the Joint Proxy Statement as required hereunder;
(f) By the Parent Corporation (at any time prior to the adoption
of this Agreement by the Company shareholders) (i) if a Company Triggering Event
(as defined in Exhibit A hereto) shall have occurred or (ii) the Company
materially breaches its obligations under this Agreement by reason of a failure
to call the Company Shareholders Meeting in accordance with this Agreement or
failure to prepare and mail its shareholders the Joint Proxy Statement as
required hereunder;
(g) By the Parent Corporation if (i) any of the Company's
representations and warranties shall have been inaccurate as of the date of this
Agreement or shall have become inaccurate as of a date subsequent to the date of
this Agreement (as if made on such subsequent date), such that the condition set
forth in Section 7.2(b) would not be satisfied or (ii) any of the Company's
covenants contained in this Agreement shall have been breached such that the
condition set forth in Section 7.2(a) would not be satisfied; provided, however,
that if an inaccuracy in the Company's representations and warranties arising as
of a date subsequent to this Agreement is curable by the Company by the
Termination Date and the Company is continuing to exercise all reasonable
efforts to cure such inaccuracy, then the Parent Corporation may not terminate
this Agreement under this Section 8.1(g) on account of such inaccuracy;
(h) By the Company if (i) any of the Parent Corporation's
representations and warranties shall have been inaccurate as of the date of this
Agreement or shall have become inaccurate as of a date subsequent to the date of
this Agreement (as if made on such subsequent date), such that the condition set
forth in Section 7.3(b) would not be satisfied or (ii) if any of the Parent
Corporation's covenants contained in this Agreement shall have been breached
such that the condition set forth in Section 7.3(a) would not be satisfied;
provided, however, that if an inaccuracy in the Parent Corporation's
representations and warranties arising as of a date subsequent to this Agreement
is curable by the Parent Corporation by the Termination Date and the Parent
Corporation is continuing to exercise all reasonable efforts to cure such
inaccuracy, then the Company may not terminate this Agreement under this Section
8.1(h) on account of such inaccuracy;
(i) By the Parent Corporation if, since the date of this
Agreement, there shall have occurred any Company Material Adverse Effect, or
there shall have occurred any event or circumstance that, in combination with
any other events or circumstances, could reasonably be expected to have a
Company Material Adverse Effect; or
(j) By the Company if, since the date of this Agreement, there
shall have occurred any Parent Corporation Material Adverse Effect, or there
shall have occurred any event
60
67
or circumstance that, in combination with any other events or circumstances,
could reasonably be expected to have a Parent Corporation Material Adverse
Effect.
(k) In the event of termination of this Agreement and abandonment
of the Merger pursuant to this Article 8, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except as provided in Section 8.3 hereof and
except that (i) nothing herein will relieve any party from liability for any
willful breach of this Agreement and (ii) the agreements contained in Sections
9.15 and 9.16 hereof shall survive.
Section 8.2 Automatic Termination. Upon the termination for any reason
of the Steag Agreement prior to the consummation of the Merger, this Agreement
shall automatically terminate without any further action on the part of either
party.
Section 8.3 Effect of Termination.
(a) If (A) (I) the Company or the Parent Corporation shall
terminate this Agreement pursuant to Section 8.1(d) (provided that the basis for
such termination is the failure of the Parent Corporation's stockholders to
approve the issuance of Parent Common Stock in the Merger), (II) at any time
after the date of this Agreement and before such termination, an Acquisition
Proposal with respect to the Parent Corporation shall have been publicly
announced or otherwise publicly communicated to the senior management, the Board
of Directors or the stockholders of the Parent Corporation (a "Parent
Corporation Public Proposal") (and shall not have been withdrawn at the time of
the vote by the Parent Corporation stockholders) and (III) within twelve months
of such termination the Parent Corporation or any of its Subsidiaries enters
into any definitive agreement with respect to or consummates any Acquisition
Proposal (for purposes of this clause (III), the term "Acquisition Proposal"
shall have the meaning assigned to such term in Exhibit A except that references
to "20%" therein shall be deemed to be references to "40%") or (B) the Company
shall terminate this Agreement pursuant to Section 8.1(e); then the Parent
Corporation shall promptly, but in no event later than the date of such
termination (or in the case of clause (A), if later, the date the Parent
Corporation or its Subsidiary enters into such agreement with respect to or
consummates such Acquisition Proposal), pay the Company an amount equal to
$7,110,000.
(b) If (A) (I) the Company or the Parent Corporation shall
terminate this Agreement pursuant to Section 8.1(d) (provided that the basis for
such termination is the failure of the Company's shareholders to adopt this
Agreement), (II) at any time after the date of this Agreement and before such
termination an Acquisition Proposal with respect to the Company shall have been
publicly announced or otherwise publicly communicated to the senior management,
Board of Directors or shareholders of the Company (a "Company Public Proposal")
(and shall not have been withdrawn at the time of the vote by the Company
shareholders) and (III) within twelve months of such termination the Company or
any of its Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal (for purposes of this clause (III), the
term "Acquisition Proposal" shall have the meaning assigned to such term in
Exhibit A, except that references to "20%" therein shall be deemed to be
references to "40%") or (B) the Parent Corporation shall terminate this
Agreement pursuant to Section 8.1(f); then the Company shall promptly, but in no
event later
61
68
than the date of such termination (or in the case of clause (A), if later, the
date the Company or its Subsidiary enters into such agreement with respect to or
consummates such Acquisition Proposal), pay the Parent Corporation an amount
equal to $7,110,000 (the "Termination Fee").
(c) If the Company or the Parent Corporation shall terminate this
Agreement pursuant to Section 8.1(d) and the basis for such termination is the
failure of the Parent Corporation's stockholders to approve the issuance of the
Parent Common Stock in the Merger, then the Parent Corporation shall promptly,
but in no event later than the date of such termination, pay the Company an
amount equal to one percent of Merger Consideration, payable by wire transfer of
immediately available funds; provided that no payment shall be made pursuant to
this sentence if the fee has been paid pursuant to Section 8.3(a). If the
Company or the Parent Corporation shall terminate this Agreement pursuant to
Section 8.1(d) and the basis for such termination is the failure of the
Company's shareholders to adopt this Agreement, then the Company shall promptly,
but in no event later than the date of such termination, pay the Parent
Corporation an amount equal to one percent of the Merger Consideration, payable
by wire transfer of immediately available funds; provided that no payment shall
be made pursuant to this sentence if the fee has been paid pursuant to Section
8.3(b).
(d) The parties acknowledge that the agreements contained in this
Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, none of the parties would enter
into this Agreement; accordingly, if either the Company or the Parent
Corporation fails promptly to pay any amount due pursuant to this Section 8.3,
and, in order to obtain such payment, the other party commences a suit which
results in a judgment against such party for the fee set forth in this Section
8.3, such party shall pay to the other party its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. in effect
on the date such payment was required to be made notwithstanding the provisions
of Section 9.15. The parties agree that any remedy or amount payable pursuant to
this Section 8.3 shall not preclude any other remedy or amount payable hereunder
and shall not be an exclusive remedy for any breach of any representation,
warranty, covenant or agreement contained in this Agreement.
(e) Any party wishing to terminate this Agreement under Section
8.1 shall deliver written notice to the other party, setting forth the paragraph
under Section 8.1 pursuant to which the Agreement is being terminated and,
unless obvious from the nature of the termination clause, a description of the
facts and circumstances forming the basis for such termination; provided, that
any failure to provide such additional details shall not affect the validity of
the termination. Upon the automatic termination of the Agreement under Section
8.2, the Parent Corporation shall give the Company written notice thereof. Any
such termination notice shall be delivered in accordance with Section 9.9 of
this Agreement.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations. The representations,
warranties, covenants and agreements contained in this Agreement will not
survive the Merger or the
62
69
termination of this Agreement except as otherwise provided in this Agreement and
except for the agreements contained in this Section 9.1 and in Articles I, II
and VIII and Section 6.18.
Section 9.2 Remedies. The parties agree that irreparable damage would
occur in the event that the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
will be entitled to specific performance of the terms of this Agreement, without
posting a bond or other security, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 9.3 Successors and Assigns. No party hereto may assign or
delegate any of such party's rights or obligations under or in connection with
this Agreement without the written consent of the other party hereto. Except as
otherwise expressly provided herein, all covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto or thereto will be
binding upon and enforceable against the respective successors and assigns of
such party and will be enforceable by and will inure to the benefit of the
respective successors and permitted assigns of such party.
Section 9.4 Amendment. This Agreement may be amended by the execution
and delivery of an written instrument by or on behalf of the Parent Corporation,
the Acquisition Corporation and the Company at any time before or after the
Company Shareholder Approval and the Parent Corporation Stockholder Approval;
provided that after the date of the Company Shareholder Approval, no amendment
to this Agreement will be made without the approval of stockholders of the
Company to the extent such approval is required under either the Pennsylvania
Act or the Delaware Act.
Section 9.5 Extension and Waiver. At any time prior to the Effective
Time, the parties may extend the time for performance of or waive compliance
with any of the covenants or agreements of the other parties to this Agreement
and may waive any breach of the representations or warranties of such other
parties. No agreement extending or waiving any provision of this Agreement will
be valid or binding unless it is in writing and is executed and delivered by or
on behalf of the party against which it is sought to be enforced.
Section 9.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 9.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
Section 9.8 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 9.9 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the
63
70
recipient by telecopy (receipt confirmed), one business day after the date when
sent to the recipient by reputable express courier service (charges prepaid) or
three business days after the date when mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications will be sent to the Parent Corporation and the
Company at the addresses indicated below:
If to the Parent Corporation:
XXXXXXX TECHNOLOGY, INC.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Fax: (00) 000-0000
With a copy (which will not constitute notice) to:
Xxxxxxx X. Rock, Esquire
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
If to the Company:
CFM TECHNOLOGIES, INC.
000 Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Controller
Fax: (000) 000-0000
With a copy (which will not constitute notice) to:
Xxxxxx X. Xxxxx, Esquire
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
Section 9.10 No Third Party Beneficiaries. This Agreement will not
confer any rights or remedies upon any person or entity other than the Parent
Corporation, the Acquisition Corporation and the Company and their respective
successors and permitted assigns, except that the respective beneficiaries of
the provisions of Sections 1.8, 6.10, 6.18 and 6.20 will, for all purposes, be
third party beneficiaries of the covenants and agreements contained therein and,
accordingly, will be treated as a party to this Agreement for purposes of the
rights and remedies relating to enforcement of such covenants and agreements and
will be entitled to enforce any
64
71
such rights and exercise any such remedies directly against the Parent
Corporation and the Surviving Corporation.
Section 9.11 Entire Agreement. This Agreement (including the
Confidentiality Agreement (as defined in Section 9.16, below) and the other
documents referred to herein) constitutes the entire agreement among the parties
and supersedes any prior understandings, agreements or representations by or
among the parties, written or oral, including that certain letter dated April
18, 2000, and any amendments thereto, between the Parent Corporation and the
Company, that may have related in any way to the subject matter hereof.
Section 9.12 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction will be applied against any party. The use of
the word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
Section 9.13 Submission to Jurisdiction. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Wilmington, Delaware, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties to this Agreement waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety or other security that might be required of any other party with
respect thereto.
Section 9.14 Governing Law. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
DELAWARE.
Section 9.15 Expenses. Except as set forth in Section 8.2, each party
hereto shall bear its own expenses with respect to the transactions contemplated
hereby, except that those expenses incurred in connection with printing the
Joint Proxy Statement and filing the Registration Statement, including the
filing fee relating thereto, shall be shared equally by the Parent Corporation
and the Company.
Section 9.16 Confidentiality and Return Information. Each party shall,
and shall cause its subsidiaries to, hold in strict confidence all Evaluation
Material (as defined in the Confidentiality Agreement) concerning the other
parties furnished to it in connection with the transactions contemplated by this
Agreement in accordance with the Mutual Nondisclosure Agreement, dated as of
February 25, 2000 between the Parent Corporation, the Company and Steag as it
may be amended from time to time (the "Confidentiality Agreement").
(The remainder of this page is intentionally left blank)
65
72
(Agreement and Plan of Merger Signature Page)
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
CFM TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X Xxxxxxx, President and
Chief Executive Officer
M2C ACQUISITION CORPORATION
By: /s/ Xxxx Xxxxxxx
---------------------------------
Xxxx Xxxxxxx, Chairman and
Chief Executive Officer
XXXXXXX TECHNOLOGY, INC.
By: /s/ Xxxx Xxxxxxx
---------------------------------
Xxxx Xxxxxxx, Chairman and
Chief Executive Officer
66
73
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer,
proposal, inquiry or indication of interest (other than an offer, proposal,
inquiry or indication of interest by the Parent Corporation or the Company)
contemplating or otherwise relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of transactions involving:
(a) any merger, consolidation, reorganization, share exchange,
business combination, issuance of securities, recapitalization, acquisition of
securities, tender offer, exchange offer or other similar transaction (i) in
which the party or any of its Significant Subsidiaries (as defined in Rule 1-02
of Regulation S-X of the SEC) is a constituent corporation, (ii) in which a
Person or "group" (as defined in the Securities Exchange Act) of Persons
directly or indirectly acquires beneficial or record ownership of securities
representing more than 20% of the outstanding securities of any class of voting
securities of the party or any of its Significant Subsidiaries, or (iii) in
which the party or any of its Significant Subsidiaries issues securities
representing more than 20% of the outstanding securities of any class of voting
securities of the party or any of its Significant Subsidiaries;
(b) any sale, lease, exchange, transfer, exclusive license,
acquisition or disposition of any business or businesses or assets that
constitute or account for 20% or more of the consolidated net revenues, net
income or assets of the party or any of its Significant Subsidiaries; or
(c) any liquidation or dissolution of any of the party or any of
its Significant Subsidiaries;
provided that with respect to the Parent Corporation, the transactions
contemplated pursuant to that certain Strategic Business Combination Agreement
dated June 27, 2000 between the Parent Corporation and Steag shall not be deemed
an Acquisition Proposal for purposes of Article 8 hereof.
COMPANY TRIGGERING EVENT. A "Company Triggering Event" shall mean: (i)
the failure of the board of directors of the Company to recommend that the
Company's shareholders vote to approve the Company Proposals, or the withdrawal
or modification of the Company Board Recommendation in a manner adverse to the
Parent; (ii) the Company shall have failed to include in the Proxy Statement the
Company Board Recommendation and a statement to the effect that the board of
directors of the Company has determined and believes that the Merger is in the
best interests of the Company's shareholders; (iii) the board of directors of
the Company fails to reaffirm, without qualification the Company Board
Recommendation or fails to publicly state, without qualification that the Merger
is in the best interests of the Company's shareholders,
74
within five business days after the Parent Corporation requests in writing that
such action be taken; (iv) the board of directors of the Company shall have
approved, endorsed or recommended or entered into an agreement regarding any
Acquisition Proposal; (v) a tender or exchange offer relating to securities of
the Company shall have been commenced and the Company shall not have sent to its
securityholders, within ten business days after the commencement of such tender
or exchange offer, a statement disclosing that the board of directors recommends
rejection of such tender or exchange offer; (vi) an Acquisition Proposal is
publicly announced, and the Company fails to issue a press release announcing
its opposition to such Acquisition Proposal within ten business days after such
Acquisition Proposal is announced; or (ix) the Company shall have breached any
of the covenants set forth in Section 6.10.
SUPERIOR PROPOSAL. "Superior Proposal" means with respect to the
Company, a bona fide written proposal made by a Person other than the Parent
Corporation which (y) is for a merger, reorganization, consolidation, share
exchange, business combination or similar transaction in which the Company is a
constituent corporation and as a result of which the other party thereto or its
shareholders will own 40% or more of the combined voting power of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof) or a tender offer for all of the outstanding shares of the Company and
(z) is on terms which the Board of Directors of the Company in good faith
concludes (following receipt of the advice of its financial advisors and outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the Person making the proposal,
(I) would, if consummated, result in a transaction that is more favorable to its
shareholders (in their capacities as shareholders), from a financial point of
view, than the transactions contemplated by this Agreement and (II) is
reasonably likely to be consummated.
75
EXHIBIT A-1
CERTAIN COMPANY OPTION HOLDERS
Xxxxxx Bay
Xxxxxx Xxxxxx
Xxxxx Xxxxxxx
Rudra Kar
Xxxxx Xxxxxx
Xxxx Xxxxxx
76
EXHIBIT A-2
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of June 27, 2000, by and
between Xxxxxxx Technology, Inc., a Delaware corporation ("Parent"), and
Xxxxxxxxxxx X. XxXxxxxxx ("Shareholder").
RECITALS
A. Parent, M2C Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and CFM Technologies, Inc., a
Pennsylvania corporation (the "Company"), are entering into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of Merger Sub into
the Company (the "Merger").
B. In order to induce Parent and Merger Sub to enter into the Merger
Agreement, Shareholder is entering into this Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound,
agree as follows:
CERTAIN DEFINITIONS
For purposes of this Voting Agreement:
"COMPANY COMMON STOCK" shall mean the common stock, no par
value, of the Company.
"EXPIRATION DATE" shall mean the earlier of (i) the date
upon which the Merger Agreement is validly terminated, (ii) the date upon which
the Merger becomes effective, or (iii) such earlier date as Parent may terminate
this Agreement pursuant to Section 9 hereof.
Shareholder shall be deemed to "OWN" or to have acquired
"Ownership" of a security if Shareholder: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
"PERSON" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity, or (iii) governmental
authority.
"SUBJECT SECURITIES" shall mean the securities of the
Company (including all shares of Company Common Stock and options, warrants and
other rights to
77
acquire shares of Company Common Stock) Owned by Shareholder as of the date of
this Agreement, all of which are accurately listed on the signature page hereof.
A Person shall be deemed to have a effected a "TRANSFER"
of a security if such Person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers or disposes of such
security or any interest in such security; or (ii) enters into an agreement or
commitment contemplating the possible sale of, pledge of, encumbrance of, grant
of an option with respect to, transfer of or disposition of such security or any
interest therein.
TRANSFER OF SUBJECT SECURITIES
TRANSFEREE OF SUBJECT SECURITIES TO BE BOUND BY THIS AGREEMENT.
Shareholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Shareholder shall not cause or permit any
Transfer of any of the Subject Securities to be effected unless each Person to
which any of such Subject Securities, or any interest in any of such Subject
Securities, is or may be transferred shall have: (a) executed a counterpart of
this Voting Agreement and a proxy in the form attached hereto as Exhibit A (with
such modifications as Parent may reasonably request); and (b) agreed to hold
such Subject Securities (or interest in such Subject Securities) subject to all
of the terms and provisions of this Voting Agreement.
TRANSFER OF VOTING RIGHTS. Shareholder agrees that, during the period
from the date of this Voting Agreement through the Expiration Date, Shareholder
shall ensure that: (a) none of the Subject Securities is deposited into a voting
trust; and (b) except pursuant to this Voting Agreement, no proxy is granted,
and no voting agreement or similar agreement is entered into, with respect to
any of the Subject Securities.
VOTING OF SHARES
VOTING AGREEMENT. Shareholder agrees that, during the period from the
date of this Voting Agreement through the Expiration Date:
at any meeting of shareholders of the Company, however
called, Shareholder shall (unless otherwise directed in writing by Parent) cause
the Subject Securities that are Owned by Shareholder as of the record date fixed
for such meeting to be voted in favor of the approval and adoption of the Merger
Agreement and the approval of the Merger, and in favor of each of the other
actions contemplated by the Merger Agreement; and
in the event written consents are solicited or otherwise
sought from shareholders of the Company with respect to the approval or adoption
of the Merger Agreement, with respect to the approval of the Merger or with
respect to any of the other actions contemplated by the Merger Agreement,
Shareholder shall (unless otherwise directed in writing by Parent) cause to be
executed, with respect to the Subject Securities that are Owned by Shareholder
as of the record date fixed for the consent to the proposed action, a written
consent or written consents to such proposed action.
This Voting Agreement is intended to bind Shareholder only with respect
to the specific matters set forth herein, and shall not prohibit Shareholder
from acting in accordance with his
78
fiduciary duties as an officer or director of the Company. Shareholder will
retain at all times the right to vote the Shareholder's Subject Securities, in
Shareholder's sole discretion, on all matters other than those set forth in this
Section 3.1 which are at any time or from time to time presented to the
Company's shareholders generally.
PROXY.
Contemporaneously with the execution of this Voting Agreement,
Shareholder shall deliver to Parent a proxy in the form attached to this Voting
Agreement as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "Proxy");
and (ii) Shareholder shall cause to be delivered to Parent an additional proxy
(in the form attached hereto as Exhibit A) executed on behalf of the record
owner of any outstanding shares of Company Common Stock that are owned
beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934), but not of record, by Shareholder.
WAIVER OF APPRAISAL RIGHTS
Shareholder hereby irrevocably and unconditionally waives, and agrees to
cause to be waived and to prevent the exercise of, any rights of appraisal, any
dissenters rights and any similar rights relating to the Merger or any related
transaction that Shareholder or any other Person may have by virtue of the
ownership of any outstanding shares of Company Common Stock or other security
Owned by Shareholder.
NO SOLICITATION
Shareholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Shareholder shall not, directly or
indirectly, and Shareholder shall ensure that his representatives do not,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as defined in the Merger
Agreement) or take any action that could reasonably be expected to lead to an
Acquisition Proposal; (ii) furnish any information regarding the Company or any
direct or indirect subsidiary of the Company to any Person in connection with or
in response to an Acquisition Proposal or potential Acquisition Proposal; or
(iii) engage in discussions with any Person with respect to any Acquisition
Proposal. Shareholder shall immediately cease and discontinue, and Shareholder
shall ensure that his representatives immediately cease and discontinue, any
existing discussions with any Person that relate to any Acquisition Proposal.
The restrictions and covenants in this Section 5 shall apply to Shareholder only
in his capacity as a shareholder and not to Shareholder in his capacity as a
director or officer of the Company.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder hereby represents and warrants to Parent as follows:
AUTHORIZATION, ETC. Shareholder has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Voting Agreement and
the Proxy and to perform his obligations hereunder and thereunder. This Voting
Agreement and the Proxy have been duly executed and delivered by Shareholder and
constitute legal, valid and binding obligations of Shareholder, enforceable
against Shareholder in accordance with their terms,
79
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
NO CONFLICTS OR CONSENTS
The execution and delivery of this Voting Agreement and
the Proxy by Shareholder do not, and the performance of this Voting Agreement
and the Proxy by Shareholder will not: (i) conflict with or violate any law,
rule, regulation, order, decree or judgment applicable to Shareholder or by
which he or any of his properties is or may be bound or affected; or (ii) result
in or constitute (with or without notice or lapse of time) any breach of or
default under, or give to any other Person (with or without notice or lapse of
time) any right of termination, amendment, acceleration or cancellation of, or
result (with or without notice or lapse of time) in the creation of any
encumbrance or restriction on any of the Subject Securities pursuant to any
contract to which Shareholder is a party or by which Shareholder or any of his
affiliates or properties is or may be bound or affected.
The execution and delivery of this Voting Agreement and
the Proxy by Shareholder do not, and the performance of this Voting Agreement
and the Proxy by Shareholder will not, require any consent or approval of any
Person.
TITLE TO SECURITIES. As of the date of this Voting Agreement: (a)
Shareholder holds of record (free and clear of any encumbrances or restrictions)
the number of outstanding shares of Company Common Stock set forth under the
heading "Shares Held of Record" on the signature page hereof; (b) Shareholder
holds (free and clear of any encumbrances or restrictions) the options, warrants
and other rights to acquire shares of Company Common Stock set forth under the
heading "Shares Subject to Options and Other Rights" on the signature page
hereof; (c) Shareholder Owns the additional securities of the Company set forth
under the heading "Additional Securities Beneficially Owned" on the signature
page hereof; and (d) Shareholder does not directly or indirectly own any shares
of capital stock or other securities of the Company, or any option, warrant or
other right to acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the shares and
options, warrants and other rights set forth on the signature page hereof.
ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
ADDITIONAL COVENANTS OF SHAREHOLDER
FURTHER ASSURANCES. From time to time and without additional
consideration, Shareholder shall (at Parent's expense) execute and deliver, or
cause to be executed and delivered, such additional transfers, assignments,
endorsements, proxies, consents and other instruments, and shall (at Parent's
expense) take such further actions, as Parent may reasonably request for the
purpose of carrying out and furthering the intent of this Voting Agreement.
80
LEGEND. Prior to any transfer by Shareholder of the Subject Securities,
Shareholder shall submit to the Company's transfer agent each certificate
evidencing any Subject Securities Owned by Shareholder and instruct that such
certificate be imprinted with a legend in the following form: THE SECURITY OR
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND
PROVISIONS OF THE VOTING AGREEMENT DATED AS OF JUNE 27, 2000, BETWEEN THE
XXXXXXX TECHNOLOGY, INC. AND XXXXXXXXXXX X. XXXXXXXXX, AS IT MAY BE AMENDED, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
MISCELLANEOUS
EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
NOTICES. Any notice or other communication required or permitted to be
delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received (a) upon receipt when
delivered by hand, or (b) two business days after sent by courier or express
delivery service or by facsimile, provided that in each case the notice or other
communication is sent to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given to
the other party):
IF TO SHAREHOLDER:
(At the address set forth below Shareholder's signature on the
signature page hereof)
IF TO PARENT:
Xxxxxxx Technology, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Rock, Esq.
SEVERABILITY. If any provision of this Voting Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then
81
(a) such provision or part thereof shall, with respect to such circumstances and
in such jurisdiction, be deemed amended to conform to applicable laws so as to
be valid and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder of
such provision or the validity or enforceability of any other provision of this
Voting Agreement. Each provision of this Voting Agreement is separable from
every other provision of this Voting Agreement, and each part of each provision
of this Voting Agreement is separable from every other part of such provision.
ENTIRE AGREEMENT. This Voting Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision of
this Voting Agreement shall be binding upon either party unless made in writing
and signed by both parties.
ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the interests or obligations hereunder may be
assigned or delegated by Shareholder and any attempted or purported assignment
or delegation of any of such interests or obligations shall be void. Subject to
the preceding sentence, this Voting Agreement shall be binding upon Shareholder
and his heirs, estate, executors, personal representatives, successors and
assigns, and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in Section 2 or
elsewhere in this Voting Agreement, this Voting Agreement shall be binding upon
any Person to whom any Subject Securities are transferred. Nothing in this
Voting Agreement is intended to confer on any Person (other than Parent and its
successors and assigns) any rights or remedies of any nature.
SPECIFIC PERFORMANCE. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Voting Agreement or the
Proxy was not performed in accordance with its specific terms or was otherwise
breached. Shareholder agrees that, in the event of any breach or threatened
breach by Shareholder of any covenant or obligation contained in this Voting
Agreement or in the Proxy, Parent shall be entitled (in addition to any other
remedy that may be available to it, including monetary damages) to seek and
obtain (a) a decree or order of specific performance to enforce the observance
and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Shareholder further agrees that
neither Parent nor any other Person shall be required to obtain, furnish or post
any bond or similar instrument in connection with or as a condition to obtaining
any remedy referred to in this Section 8.6, and Shareholder irrevocably waives
any right he may have to require the obtaining, furnishing or posting of any
such bond or similar instrument.
NON-EXCLUSIVITY. The rights and remedies of Parent under this Voting
Agreement are not exclusive of or limited by any other rights or remedies which
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Without limiting the generality of
the foregoing, the rights and remedies of Parent under this Voting Agreement,
and the obligations and liabilities of Shareholder under this Voting
82
Agreement, are in addition to their respective rights, remedies, obligations and
liabilities under common law requirements and under all applicable statutes,
rules and regulations. Nothing in this Voting Agreement shall limit any of
Shareholder's obligations, or the rights or remedies of Parent, under any
Affiliate Agreement between Parent and Shareholder; and nothing in any such
Affiliate Agreement shall limit any of Shareholder's obligations, or any of the
rights or remedies of Parent, under this Voting Agreement.
GOVERNING LAW; VENUE.
This Voting Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the Commonwealth
of Pennsylvania (without giving effect to principles of conflicts of laws).
Any legal action or other legal proceeding relating to
this Voting Agreement or the Proxy or the enforcement of any provision of this
Voting Agreement or the Proxy may be brought or otherwise commenced in any state
or federal court located in the County of New Castle, Delaware. Shareholder: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of New Castle, Delaware (and each
appellate court located in the State of Delaware), in connection with any such
legal proceeding; (ii) agrees that service of any process, summons, notice or
document by U.S. mail addressed to him at the address set forth in Section 8.2
shall constitute effective service of such process, summons, notice or document
for purposes of any such legal proceeding; (iii) agrees that each state and
federal court located in the County of New Castle, Delaware, shall be deemed to
be a convenient forum; and (iv) agrees not to assert (by way of motion, as a
defense or otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of New Castle, Delaware, any claim that
Shareholder is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the venue
of such proceeding is improper or that this Voting Agreement or the subject
matter of this Voting Agreement may not be enforced in or by such court. Nothing
contained in this Section 8.8(b) shall be deemed to limit or otherwise affect
the right of Parent to commence any legal proceeding or otherwise proceed
against Shareholder in any other forum or jurisdiction.
SHAREHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL
IN CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING AGREEMENT OR THE
PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS VOTING AGREEMENT OR THE PROXY.
COUNTERPARTS. This Voting Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
CAPTIONS. The captions contained in this Voting Agreement are for
convenience of reference only, shall not be deemed to be a part of this Voting
Agreement and shall not be referred to in connection with the construction or
interpretation of this Voting Agreement.
ATTORNEYS' FEES. If any legal action or other legal proceeding relating
to this Voting Agreement or the enforcement of any provision of this Voting
Agreement is brought by
83
one party against the other party, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
WAIVER. No failure on the part of Parent to exercise any power, right,
privilege or remedy under this Voting Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this Voting
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Voting Agreement, or any power, right,
privilege or remedy of Parent under this Voting Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
CONSTRUCTION.
For purposes of this Voting Agreement, whenever the
context requires: the singular number shall include the plural, and vice versa;
the masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Voting Agreement or the
Proxy.
As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
Except as otherwise indicated, all references in this
Voting Agreement to "Sections" and "Exhibits" are intended to refer to Sections
of this Voting Agreement and Exhibits to this Voting Agreement.
TERMINATION.
Notwithstanding anything herein to the contrary, this Agreement shall
terminate and have no force and effect immediately prior to the exercise by
Parent of the Company Option pursuant to the Stock Option Agreement of even date
herewith between Parent and the Company.
84
IN WITNESS WHEREOF, Parent and Shareholder have caused this Voting
Agreement to be executed as of the date first written above.
XXXXXXX TECHNOLOGY, INC.
By:
---------------------------------
Name:
Title:
SHAREHOLDER
---------------------------------
Xxxxxxxxxxx X. XxXxxxxxx
Address: 0000 Xxxx Xxxx, Xxxxxx, XX
00000
Facsimile:(000) 000-0000
SHARES HELD OF RECORD:
------------------------------------
SHARES SUBJECT TO OPTIONS AND
OTHER RIGHTS:
------------------------------------
ADDITIONAL SECURITIES BENEFICIALLY OWNED:
------------------------------------
85
Exhibit A
FORM OF IRREVOCABLE PROXY
The undersigned shareholder of CFM Technologies, Inc., a Commonwealth of
Pennsylvania corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes Xxxx Xxxxxxx and Xxxxxxx
Technology, Inc., a Delaware corporation ("Parent"), and each of them, the
attorneys and proxies of the undersigned with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
(i) all outstanding shares of capital stock of the Company owned of record by
the undersigned as of the date of this proxy, which shares are specified on the
final page of this proxy, and (ii) any and all other shares of capital stock of
the Company which the undersigned may acquire on or after the date hereof and
which are Subject Securities (as defined in the Voting Agreement between the
undersigned and Parent of even date herewith). (The shares of the capital stock
of the Company referred to in clauses (i) and (ii) of the immediately preceding
sentence are collectively referred to as the "Shares.") Upon the execution
hereof, all prior proxies given by the undersigned with respect to any of the
Shares are hereby revoked, and the undersigned agrees that no subsequent proxies
will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger, dated as
of the date hereof, among Parent, M2C Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent, and the Company (the
"Merger Agreement").
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to occur
of the valid termination of the Merger Agreement or the effective time of the
merger contemplated thereby (the "Merger") at any meeting of the shareholders of
the Company, however called, or in connection with any solicitation of written
consents from shareholders of the Company, in favor of the approval and adoption
of the Merger Agreement and the approval of the Merger, and in favor of each of
the other actions contemplated by the Merger Agreement.
The undersigned may vote the Shares on all other matters. This proxy
shall be binding upon the heirs, estate, executors, personal representatives,
successors and assigns of the undersigned (including any transferee of any of
the Shares).
If any provision of this proxy or any part of any such provision is held
under any circumstances to be invalid or unenforceable in any jurisdiction, then
(a) such provision or part thereof shall, with respect to such circumstances and
in such jurisdiction, be deemed amended to conform to applicable laws so as to
be valid and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder of
such provision or the validity or enforceability of any other provision of this
86
proxy. Each provision of this proxy is separable from every other provision of
this proxy, and each part of each provision of this proxy is separable from
every other part of such provision.
This proxy shall terminate upon the earlier of the valid termination of
the Merger Agreement or the effective time of the Merger.
Dated: _______________, 2000.
------------------------------------
(Signature)
------------------------------------
(Print Name)
NUMBER OF SHARES OF COMMON STOCK OF
THE COMPANY OWNED OF RECORD AS OF
THE DATE OF THIS PROXY:
------------------------------------
