EXHIBIT 2.0
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 18th day of September, 1999, by
and among Micro Component Technology, Inc., a Minnesota corporation ("Parent"),
MCT Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Aseco Corporation, a Delaware corporation (the
"Company").
WHEREAS, the Board of Directors of the Parent and the Company deem it advisable
and in the best interests of their respective stockholders to consummate, and
have approved, the business combination transaction provided for herein in which
Merger Sub would merge (the "Merger") with and into the Company, and the Company
would become a wholly-owned subsidiary of Parent.
WHEREAS, the parties hereto intend that (i) the issuance of the Parent Common
Stock (as defined below) to the shareholders of the Company in connection with
the Merger shall be on a tax-free basis to the shareholders of the Company and
(ii) this transaction shall qualify for federal income tax purposes as a
reorganization within the meaning of (S)(S) 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") shall be properly
executed and thereafter duly filed with the Secretary of State of Delaware as
provided in the Delaware General Corporation Law (the "Delaware Law"), as soon
as practicable on or after the Closing (as defined in Section 1.2). The Merger
shall become effective upon the filing of the Articles of Merger with the
Secretary of State of Delaware or at such other time as the parties may agree
upon in writing pursuant to applicable law (the "Effective Time").
Section 1.2 Closing. The closing of the Merger (the "Closing") will take place
as set forth in Section 6.4 hereof at the offices of Best & Xxxxxxxx LLP, 0000
X.X. Xxxx Xxxxx, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or at such
other place and time as is agreed to in writing by the parties hereto.
Section 1.3 Effects of the Merger.
(a) At the Effective Time (i) Merger Sub shall be merged with and into the
Company which shall be the surviving corporation (the "Surviving Corporation";
Merger Sub and the Company are sometimes referred to herein as the "Constituent
Corporations") and the separate existence of Merger Sub shall cease, (ii) the
Certificate of Incorporation of Merger Sub shall be the Certificate of
Incorporation of the Surviving Corporation, and (iii) the Bylaws of the Merger
Sub as in effect immediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation.
(b) Upon the effectiveness of the Merger, all of the estate, property, rights,
privileges, powers and franchises of the Constituent Corporations and all of
their property, real, personal and mixed, and all the debts due on whatever
account to either of them, as well as all stock subscriptions and other choses
in action belonging to either of them shall be transferred to and vested in the
Surviving Corporation; and all claims, demands, property and other interests
shall be the property of the Surviving Corporation, and the title to all real
estate vested in either of the Constituent Corporations shall not revert or be
in any way impaired by reason of the Merger, but shall be vested in the
Surviving Corporation all as provided in Section 251 and 259 and other
applicable provisions of Delaware Law. The Merger is intended to constitute a
tax-free reorganization under Section 368(a) of the Code. The parties hereby
adopt this Agreement as a "plan of reorganization" within the meaning of Section
368(a) of the Code and the regulations thereunder.
Section 1.4 Directors and Officers of Surviving Corporation.
(a) The directors of Merger Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
(b) The officers of the Merger Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) Each issued and outstanding share of the Company's Common Stock, $.01 par
value (the "Shares") not owned by Parent, Merger Sub or any other direct or
indirect subsidiary of Parent (other than those Shares held by stockholders of
the Company who properly exercise any dissenters' rights available under
applicable law) immediately prior to the Effective Time shall be converted into
the right to receive its pro rata share of the Shareholder Consideration (as
defined below).
(b) Each then outstanding Share owned by Parent, Merger Sub or any other direct
or indirect subsidiary of Parent shall be cancelled.
(c) Each share of the common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one share of the
common stock of the Surviving Corporation.
(d) All Shares that are owned by the Company as treasury stock or by any wholly
owned Subsidiary (as hereinafter defined) of the Company shall be cancelled and
retired for no value and shall cease to exist and no consideration shall be
delivered in exchange therefor. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or (ii) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership).
Section 2.2 Consideration. The total consideration to be paid in connection with
the Merger shall be $16,300,000, subject to any adjustment pursuant to in
Section 6.6 and the effect of the maximum and minimum prices set forth below
(the "Acquisition Consideration"). Except as provided in Section 2.3(b), the
Acquisition Consideration, shall be paid solely in shares of the Parent's Common
Stock, $.01 par value per share (the "Parent Common Stock"). The Shareholder
Consideration shall be the aggregate number of shares of Parent Common Stock,
subject to Section 2.3(b), to be issued upon conversion pursuant to Section
2.1(a), determined as follows:
(a) The Acquisition Consideration, subject to Section 6.6, shall be divided by
the average closing sale price per share of the Parent Common Stock over the
last twenty trading days prior to the day of the Closing, as reported by Nasdaq,
provided that if such average closing price is less than $3.565 per share, the
divisor shall be $3.565, and if such average closing price is more than $5.563,
the divisor shall be $5.563 as so adjusted (the "Parent Stock Price"). The
result shall be the "Total Share Consideration".
(b) The Total Share Consideration shall be divided by the actual number of
Shares outstanding immediately prior to the Closing (plus 709,152 shares to
reflect shares reserved to options (which was calculated on the treasury stock
method as of the execution of this Agreement)). The result shall be the
"Exchange Ratio".
(c) The number of shares of Parent Common Stock determined by multiplying the
Exchange Ratio by the number of issued and outstanding shares of Shares
immediately prior to the Closing shall be the "Shareholder Consideration".
Section 2.3 Payment of the Acquisition Consideration.
(a) Exchange Agent. As of the Effective Time, the Parent shall deposit with
Norwest Bank Minnesota, N.A. (the "Exchange Agent"), the Shareholder
Consideration. The Exchange Agent shall hold such shares in a separate account
for exchange pursuant to the terms of this Agreement (the "Exchange Fund").
Promptly after the Effective Time, the Exchange Agent shall mail to each holder
of record of Shares immediately prior to the Effective Time (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Shares shall pass, only upon proper delivery of
certificates for the Shares (the "Certificates") to the Exchange Agent and shall
be in customary form) and (ii) instructions for use in effecting the surrender
of the Certificates (or affidavits in lieu thereof) in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall receive in exchange therefore
a new certificate representing that number of whole shares of Parent Common
Stock determined by multiplying the number of Shares represented by such
Certificate by the Exchange Ratio, and subtracting any resulting fractional
Shares. The holder shall also receive cash in lieu of any fractional shares, and
the Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the certificate
representing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.4, each Certificate shall be deemed at any time
after the Effective Time to represent the shares of Parent Common Stock (and
cash in lieu of fractional shares) into which the Shares previously represented
by such Certificate were converted at the Effective Time. All shares of Parent
Common Stock issued upon conversion of the Shares (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares.
(b) No Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates for the Shares and the owner of such fractional share interests
will not be entitled to vote or to any rights of a stockholder of the Parent.
Each holder of Certificates who otherwise would be entitled to receive a
fractional share of Parent Common Stock shall receive, in lieu of such
fractional share interest, an amount of cash (without interest) determined by
multiplying (i) the Parent Stock Price, by (ii) the fractional share interest to
which such holder would otherwise be entitled. The Parent shall transfer to the
Exchange Agent on a timely basis the cash necessary to make payments under this
paragraph (b).
(c) Lost, Stolen or Destroyed Certificates. If any Certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
or entity that claims such Certificate to be lost, stolen or destroyed, Parent
will issue in exchange for such lost, stolen or destroyed Certificate such pro
rata share of the Shareholder Consideration deliverable in respect thereof as
determined in accordance with this Agreement; provided that Parent may require
that the owner of such lost, stolen or destroyed Certificate deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent, the Company or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
Section 2.4 Termination of Exchange Fund.
(a) Termination of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to the holders of Shares for two years after the Effective Time
shall be delivered to the Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
the Parent for the shares of the Parent Common Stock and any cash in lieu of
fractional shares to which they are entitled.
(b) No Liability. Neither the Parent nor the Company shall be liable to any
holder of Shares for any such shares of the Parent Common Stock or cash
delivered to a public official pursuant to any abandoned property, escheat or
similar Law. For the purposes of this Agreement, "Law" shall mean any federal,
state or local law, statute, ordinance, rule, regulation, order, judgment or
decree.
(c) Stock Transfer Books. At the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
of Shares thereafter on the records of the Company. From and after the Effective
Time, the holders of certificates representing Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided in this Agreement or by Law. On or after the
Effective Time, any Certificates presented to the Exchange Agent or Parent for
any reason shall be converted into shares of the Parent Common Stock and any
cash in lieu of fractional shares of the Parent Common Stock to which the
holders of the Certificates are entitled pursuant to this Agreement.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
Section 3.1 Organization; Subsidiaries. Each of the Company and its respective
Subsidiaries is a corporation or other organization duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and has all requisite corporate power and corporate
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to have such power, authority, and governmental approvals would not have
a Material Adverse Effect (as defined herein) on or of the Company and its
Subsidiaries. In this Agreement, the term "Material Adverse Effect" used in
reference to the Company means any event, change or effect, which either alone
or in the aggregate with all other such events, changes or effects, is, or is
reasonably likely to be, materially adverse to the business, financial
condition, properties, assets, capitalization, stockholders' equity, liabilities
(including contingent liabilities), results of operations, licenses or
franchises of the Company and its Subsidiaries on consolidated basis. Each of
Company and its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect. Section 3.1 of the disclosure schedule delivered by the Company to
Parent on the date hereof (the "Company Disclosure Schedule") sets forth a
complete and accurate list of all jurisdictions in which Company or its
Subsidiaries is qualified to do business as a foreign corporation and sets forth
a complete and accurate list of all of its Subsidiaries (including jurisdiction
of incorporation or formation and the capitalization of each Subsidiary). All of
the outstanding shares of capital stock of Company's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and are owned, directly
or indirectly, by the Company. Except as disclosed in Section 3.1 of the Company
Disclosure Schedule, Company does not have any Subsidiaries or, directly or
indirectly, own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
The copies of the Certificate of Incorporation and Bylaws of Company, and of the
comparable organizational documents of each of its Subsidiaries, provided to
Parent, are true and complete copies of all such documents, in each case as
amended to the date hereof and shall be as of the Effective Time. Except as
disclosed in Section 3.1, neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation, Bylaws or comparable
organizational documents.
Section 3.2 Capitalization. The authorized capital stock of Company consists of:
15,000,000 shares of common stock, no par value (the "Company Common Stock"), of
which 3,887,543 shares are issued and outstanding, and 1,000,000 shares of
preferred stock, par value $.01 per share, of which none are issued and
outstanding. All of the outstanding shares of Company Common Stock are, and
immediately prior to the Effective Time the outstanding shares of the Company
Common Stock shall be, duly authorized, validly issued, fully paid and non-
assessable and free of any preemptive rights in respect thereto. Except as set
forth on Section 3.2 of the Company Disclosure Schedule, no bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into
securities having the right to vote) ("Voting Debt") of Company are issued or
outstanding. Except as set forth above or in Section 3.2 of the Company
Disclosure Schedule, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commitments of any
character relating to the issued or unissued capital stock or Voting Debt of
Company or any of its Subsidiaries or obligating Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of the respective capital stock or Voting Debt or securities
convertible into or exchangeable for such shares or equity interests or
obligating Company or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, subscription or other right, agreement or
commitment. Company is not a party to any voting trust or other arrangement or
understanding with respect to the voting of Company Common Stock. There are no
contractual obligations of Company or its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Company or any of its
Subsidiaries.
Section 3.3 Authority. Company has the requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the Merger and of the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Company, and no other corporate proceedings on the part of Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated hereby (other than, with respect to the Merger, the adoption of
this Agreement by the stockholders of the Company as set forth in Section 7.1
(d)). The Board of Directors of Company has duly approved this Agreement,
determined that the Merger is fair to, and in the best interest of, its
stockholders and resolved to recommend that such stockholders approve this
Agreement and the Merger, and such resolutions are in full force and effect.
Duly certified, true and correct copies of such resolutions adopted will be
provided to Parent. This Agreement has been duly executed and delivered by
Company, and this Agreement constitutes a valid and binding obligation of
Company, enforceable against Company in accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except as disclosed in the
Company's filings pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") or as set forth in Section 3.4 of the Company Disclosure Schedule, and
except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), the Exchange Act and Delaware Law, neither the execution,
delivery or performance of this Agreement nor the consummation by Company of the
transactions contemplated hereby nor compliance by Company with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Company or of the
comparable organizational documents of any of its Subsidiaries, (ii) require any
filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, legislative body, administrative agency or commission or
other governmental or other regulatory authority or agency (a "Governmental
Entity"), (iii) result in a violation or breach of, or constitute (with notice
or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) or require any authorization, consent
or approval under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Company or any of its Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Company or any of its Subsidiaries or any of their properties or assets, except
in the case of (ii) or (iii) for violations, breaches or defaults which would
not, and except for failures to obtain such permits, authorizations, consents or
approvals or to make such filings which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.5 SEC Reports. The Company has furnished to Parent a true and complete
copy of each prospectus, definitive proxy statement and report filed by the
Company with the SEC since the date of the Company's year end for fiscal year
1996 (the "SEC Reports"), including the Company's Annual Report on Form 10-K,
for the fiscal year ended March 28, 1999 (the "Form 10-K"). None of the SEC
Reports (as of their respective filing dates) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein not
misleading. The consolidated balance sheet of the Company, as of March 28, 1999,
included in SEC Reports (including the related notes and schedules), presents
fairly, in all material respects, the consolidated financial position of the
Company as of its date and the related consolidated statements of operations,
cash flows and changes in stockholders' equity included in the SEC Reports
(including any related notes and schedules) present fairly, in all material
respects, the consolidated results of operations and cash flows of the Company
for the periods set forth therein, in each case, in accordance with generally
accepted accounting principles ("GAAP"), except as otherwise specified therein
(including in the related notes).
Section 3.6 Proxy Statement/Prospectus. The combined proxy statement and Form S-
4 registration statement to be prepared jointly by the parties and filed with
the Securities and Exchange Commission for the purpose of soliciting shareholder
votes for the Merger and registering shares of the Parent to be issued to the
Company's shareholders in the Merger, respectively, is referred to herein as the
"Proxy Statement/Prospectus". The information provided by the Company for
inclusion in the Proxy Statement/Prospectus shall be true and complete, shall
not contain any untrue statement of a material fact and shall not omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein not misleading.
Section 3.7 Employee Benefits. All employment contracts, all termination
agreements with executive officers and all bonus, deferred compensation,
pension, retirement, profit sharing, severance pay, stock option, stock purchase
and other material employee benefit plans (other than medical and other similar
welfare plans made generally available to all employees of the Company or a
subsidiary of the Company) to which the Company or any of its subsidiaries is a
party are listed, summarized or otherwise described or incorporated by reference
in the SEC Reports or in Section 3.7 of the Company Disclosure Schedule.
Section 3.8 Absence of Certain Changes or Events. Since March 28, 1999, (i)
Company and Company's Subsidiaries have conducted their respective businesses
only in the ordinary and usual course of such businesses and (ii) there has not
been (A) any change, or any development of which management of Company has
knowledge, which has had or is reasonably likely to have a Material Adverse
Effect; (B) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of Company other than regular
quarterly cash dividends; (C) any material change by Company in accounting
principles, practices or methods; or (D) any increase of more than $40,000 in
aggregate in the compensation payable or which could become payable by Company
and Company's Subsidiaries to their officers or key employees, or any material
amendment of any Company Benefit Plans.
Section 3.9 ERISA Compliance.
(a) Company Disclosure Schedule 3.09(a) attached hereto contains a list and
brief description of all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Pension Plans"), all "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, stock bonus, phantom stock,
retirement, vacation, severance, disability, death benefit, welfare, Christmas
bonus, hospitalization, medical or other plan, arrangement or understanding,
whether or not legally binding, providing benefits to any current or former
employee, officer or director of Company, or maintained or contributed to by
Company for the benefit of any employee, officer or director of Company
currently or within the last five years (collectively, "Benefit Plans").
(b) On or prior to the date of this Agreement, Company has delivered to Parent
true and complete copies of (i) each Benefit Plan or, in the case of any
unwritten Benefit Plans, descriptions thereof (ii) the most recent annual report
on Form 5500 filed with the IRS with respect to each Benefit Plan, if any such
report was required, (iii) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required, (iv) each
trust agreement and group annuity contract relating to any Benefit Plan, (v) the
most recent actuarial report relating to any Benefit Plan, and (vi) the most
recent IRS determination letter or opinion letter for each Benefit Plan.
(c) Except as disclosed in Company Disclosure Schedule 3.09(c) attached hereto,
all Pension Plans have been the subject of determination letters from the IRS to
the effect that such Pension Plans are qualified and exempt from federal income
taxes, and no such determination letter has been revoked nor has revocation been
threatened, nor has any such Pension Plan been amended since the date of its
most recent determination letter or application therefor in any respect that
could adversely affect its qualification or increase its costs.
(d) Except as disclosed on Company Disclosure Schedule 3.09(d) attached hereto,
no Pension Plan that Company maintains, or to which Company is or was previously
obligated to contribute, had, as of the respective last annual valuation date
for each Pension Plan, any unfunded "benefit liabilities,"(as defined in Section
4001(a)(16) of ERISA) based on actuarial assumptions which have been furnished
to Parent. None of the Pension
Plans has an "accumulated funding deficiency," (as defined in Section 412(a) of
the Code) whether or not waived. None of Company, any officer of Company or any
of the Benefit Plans which are subject to ERISA, including, without limitation,
the Pension Plans, or any trusts created thereunder, or, to the best knowledge
of the Company, any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA in Section 4975(c)
of the Code) or any other breach of fiduciary responsibility that could subject
Company or any officer of Company to a material amount of tax or penalty on
prohibited transactions or to any material liability under ERISA. Except as
disclosed on Company Disclosure Schedule 3.09(d) attached hereto, neither any of
such Pension Plans nor any of such trusts have been terminated, nor has there
been any "reportable event" (as defined in Section 4043(c) of ERISA) with
respect to which the 30-day notice requirement has not been waived and Company
is not aware of any other reportable events with respect thereto during the last
five years. Company has never had an obligation to contribute to a "multi-
employer plan" as defined in Section 3(37) of ERISA. No liability to the Pension
Benefit Guaranty Corporation (the "PBGC") has been or is expected to be incurred
with respect to any Benefit Plan by reason of a Benefit Plan termination. The
PBGC has not instituted proceedings to terminate any Benefit Plan. Except as
noted on Company Disclosure Schedule 3.09(d), there is no Benefit Plan to which
Title IV of ERISA applies which has terminated and whose "date of termination"
(as defined in Section 4048 of ERISA) occurred after September 1, 1974 or any
such Benefit Plan to which Title IV of ERISA applies which has partially
terminated. No event has occurred, and there exists no condition or set of
circumstance which presents a material risk of the termination or partial
termination of any such Benefit Plan, which could result in a liability on the
part of Company to the PBGC.
(e) With respect to any Benefit Plan that is an employee welfare benefit plan,
except as disclosed in Company Disclosure Schedule 3.09(e) attached hereto, (i)
no such Benefit Plan is a "welfare benefit fund", (as defined in Section 419(e)
of the Code), (ii) each such Benefit Plan that is a group health plan complies
in all material respects with the applicable requirements of the Code and the
Social Security Act and (iii) each such Benefit Plan, including, without
limitation, any such Plan covering retirees or other former employees, may be
amended or terminated without liability to Parent or Company on or at any time
after the Effective Date of the Merger.
(f) Each Benefit Plan and all related trust or other agreements conform in form
and operation to, and comply with, all applicable laws and regulations,
including, without limitation, ERISA and the Code, and all reports or
information relating to each such Benefit Plan required to be filed with any
Governmental Entity or disclosed to participants have been timely filed and
disclosed.
(g) Company has not announced a plan to create or amend, or noes it have any
legally binding commitment to create or amend, any Benefit Plan or to create any
new arrangement which would be a Benefit Plan.
(h) All insurance premiums with respect to any Benefit Plan, including, without
limitation, premiums to the PBGC, have been paid in full. Except as disclosed on
Company Disclosure Schedule 3.09(h) attached hereto, there are no retrospective
adjustments provided for under any insurance contracts maintained pursuant to
any Benefit Plan with regard to policy years or other periods ending on or
before the Effective Date of the Merger.
(i) No Benefit Plan, or the deduction of any contributions thereto by Company,
has been the subject of audit by the IRS or the Department of Labor, and no
litigation or asserted claims exist against Company or any Benefit Plan or
fiduciary with respect thereto, other than such benefit claims as are made in
the normal operation of a Benefit Plan. There are no known facts which could
give rise to any action, suit, grievance, arbitration or other claim in
connection with any Benefit Plan.
(j) With respect to any Benefit Plan which covers current or former employees,
officers or directors who are not residents of the United States of America, any
references in this Company Disclosure Schedule 3.09(j) to ERISA, the Code or any
other applicable law will be read to mean any applicable law of similar import
for the jurisdiction in which such individuals reside.
Section 3.10 Litigation. Section 3.10 of the Company Disclosure Schedule sets
forth a complete and accurate list and description of all suits, claims,
actions, proceedings and investigations which are pending or threatened against
the Company or any of its Subsidiaries, judicial, administrative or otherwise.
Section 3.11 Environmental Matters.
(a) As used in this Agreement:
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (i) the presence, or release
into the environment, of any Materials of Environmental Concern (as
hereinafter defined) at any location, whether or not owned or operated by
Company or its Subsidiaries or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Laws (as hereinafter
defined).
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous wastes, toxic substances, petroleum and petroleum
products.
(b) Except as set forth in Section 3.11 of the Company Disclosure Schedule,
Company and its Subsidiaries for their respective businesses as previously or
now being conducted are in material compliance with all applicable Environmental
Laws, which compliance includes, but is not limited to, the possession by
Company and its Subsidiaries of all permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. Except as set forth in Section 3.11(b) of the
Company Disclosure Schedule, neither
Company nor its Subsidiaries have received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that Company or its Subsidiaries are not in such full compliance
and, to Company's best knowledge, there are no circumstances that may prevent or
interfere with such full compliance in the future. All material permits and
other governmental authorizations currently held by Company and its Subsidiaries
pursuant to the Environmental Laws are identified in Section 3. 11 of the
Company Disclosure Schedule.
(c) Except as set forth in Section 3.11 of the Company Disclosure Schedule,
there is no Environmental Claim pending or threatened against Company or its
Subsidiaries or, to Company's best knowledge, against any person or entity whose
liability for any Environmental Claim Company or its Subsidiaries have or may
have retained or assumed either contractually or by operation of law.
(d) Except as set forth in Section 3.11 of the Company Disclosure Schedule,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release, emission,
discharge, presence or disposal of any Material of Environmental Concern, that
could form the basis of any Environmental Claim against Company or its
Subsidiaries or, to Company's best knowledge, against any person or entity whose
liability for any Environmental Claim Company or its subsidiaries have or may
have retained or assumed either contractually or by operation of law.
(e) Without in any way limiting the generality of the foregoing to the knowledge
of the Company, (i) all on-site and off-site locations where Company or its
Subsidiaries have stored, disposed or arranged for the disposal of Materials of
Environmental Concern are identified in Section 3.11 of the Company Disclosure
Schedule, (ii) to the best knowledge of Company without having made any
inquiries to third parties with respect thereto, all underground storage tanks,
and the capacity and contents of such tanks, located on property owned or leased
by Company or its Subsidiaries are identified in Section 3.11 of the Company
Disclosure Schedule, (iii) except as set forth in Section 3.11 of the Company
Disclosure Schedule, there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or leased by
Company or its Subsidiaries, and (iv) except as set forth in Section 3.11 of the
Company Disclosure Schedule, to the best knowledge of Company without having
made any inquiries to third parties with respect thereto, no polychlorinated
biphenyls (PCBIs) are used or stored at any property owned or on or within any
premises leased by Company or its Subsidiaries.
Section 3.12 Absence of Certain Practices. Neither Company nor any of its
Subsidiaries nor, to the best knowledge of Company, any director, officer,
agent, employee, or other person acting on behalf of Company or any of its
Subsidiaries, has used or received any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to, or on behalf of, government
officials or others.
Section 3.13 Intellectual Property. Section 3.13 of the Company Disclosure
Schedule contains a complete and accurate list of (i) all patents, registered
trademarks, trade names and copyrights owned by Company, used or proposed to be
used by Company or any of its Subsidiaries and all applications therefor
(indicating whether or not such patent, trademark, trade name, or copyright is
owned by Company) and (ii) all agreements relating to technology, know-how or
processes which Company or any of its Subsidiaries is licensed or authorized to
use by others. Except as set forth in Section 3.13 of the Company Disclosure
Schedule, no claims have been asserted by any person challenging or questioning
the use by Company or any of its Subsidiaries of any such patents, trademarks,
trade names, copyrights, technology, or processes (the "Intellectual Property"),
with respect to Intellectual Property by Company or its subsidiaries,
challenging or questioning said ownership, or the Company's use of any know-how
owned by or used by Company or any of its Subsidiaries or challenging or
questioning the validity or effectiveness of any such license or agreement and,
to the knowledge of Company, there exists no valid basis for any such claim,
except for such claim or claims an adverse determination of which, individually
or in the aggregate, would not have a Material Adverse Effect; and to the
knowledge of the Company, the use of such Intellectual Property by Company or
any of its Subsidiaries does not infringe on the rights of any person, except
for such infringement or infringements which, individually or in the aggregate,
would not have a Material Adverse Effect on Company. For the purposes of this
Agreement, "knowledge of the Company" shall mean the actual knowledge of any of
its directors, officers, employees, investment bankers, attorneys or
accountants, and shall include any information which any of such persons could
have discovered through reasonable investigation in the ordinary course of their
duties. Except as set forth on Section 3.13 of the Company Disclosure Schedule,
the Intellectual Property registrations and patents owned by Company or any of
its Subsidiaries, and any applications therefore, are to the knowledge of the
Company subsisting and enforceable, and none has lapsed, expired, or been
abandoned, and all such registrations, patents and applications therefore are
currently standing in the name of Company or its Subsidiaries, except where any
of the aforementioned defects in such registrations, patents or applications
would not have a Material Adverse Effect. Company and each of its Subsidiaries
owns (free and clear of any lien, encumbrance or other restriction), or is
otherwise licensed or has the right to use, all Intellectual Property used in or
necessary for the conduct of its business, except where any failure to own, be
licensed to use or have the right to use would not, individually or in the
aggregate, have a Material Adverse Effect, and the consummation of the
transactions contemplated by this Agreement will not alter or impair any such
rights.
Section 3.14 Taxes. Except as disclosed in Section 3.14 of the Company
Disclosure Schedule, the Company has filed all federal, state and local tax
returns required to be filed by it and paid all taxes due thereon.
Section 3.15 No Undisclosed Liabilities. Except as and to the extent set forth
in the audited consolidated balance sheets of Company as of March 28, 1999
included in the Company Financial Statements, none of Company or Company's
Subsidiaries had as of that date any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by GAAP
to be reflected on a consolidated balance sheet of Company and Company's
Subsidiaries (including the notes thereto) which constituted a Material Adverse
Effect. Except as and to the extent set forth in the interim balance sheets,
since March 28, 1999, neither Company, nor any of Company's Subsidiaries has
incurred any liabilities of any nature, whether or not accrued, contingent or
otherwise, which would have, individually or in the aggregate, a Material
Adverse Effect.
Section 3.16 Real Properties. Neither the Company nor its Subsidiaries own any
real property. The Company leases real estate under the leases listed on Section
3.16 of the Company Disclosure Schedule, all of which are in full force and
there exists no event of default under said leases by any party thereto.
Section 3.17 Compliance with Applicable Law. Company and Company's Subsidiaries
hold and are in compliance with all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits"), except for
failures to hold or comply with such permits, licenses, variances, exemptions,
orders and approvals which do not, individually or in the aggregate, have a
Material Adverse Effect. To the knowledge of the Company, the businesses of
Company and Company's Subsidiaries are not being conducted in violation of any
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Company or any of Company's Subsidiaries.
Section 3.18 Employee Matters. Section 3.18 of the Company Disclosure Schedule
sets forth a complete and accurate list of the titles and annual compensation
(including any bonuses) of all directors and officers of Company, and all
employees of Company or any of Company's Subsidiaries whose annual base income
exceeds $50,000 (excluding any bonuses). Except as set forth in Section 3.18 of
the Company Disclosure Schedule, none of Company or any of Company's
Subsidiaries is a party to or bound by any contract, agreement or arrangement
regarding the employment, services, consulting or severance from or termination
of employment, of any director, officer or employee (past or present) (each an
"Employment Agreement"). Company and its Subsidiaries have paid in full to, or
accrued on behalf of, all of their respective employees, wages, salaries,
commissions, bonuses and other direct compensation for all services performed by
them to the date hereof and all amounts required to be reimbursed to such
employees except those which in the aggregate total less than $35,000. Company
and its Subsidiaries are in material compliance with all applicable laws and
regulations respecting employment and employment practices; there is no unfair
labor practice complaint against Company or any of its Subsidiaries pending
before any Government Entity; there is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against or
involving Company or any of its Subsidiaries; no representation question or to
the knowledge of the Company any pending organization attempt by any collective
bargaining representative exists respecting the employees of Company or any of
its Subsidiaries. There are no collective bargaining agreements or other
employee representation agreements which exist or are currently being negotiated
by Company or any of Company's Subsidiaries.
Section 3.19 Insurance Policies. Section 3.19 of the Company Disclosure Schedule
contains a complete and accurate list of all insurance policies providing
coverage in favor of Company and Company's Subsidiaries, or relating to real
property, whether leased or owned by Company or Company's Subsidiaries,
specifying the insurer, amount of coverage and type of insurance under each and
indicating which of such policies provide for retrospective premium adjustments.
Each such policy is in full force and effect and all premiums are currently paid
or accruals provided for and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient for
compliance with all material requirements of law.
Section 3.20 Contracts.
(a) Section 3.20(a)(i) of the Company Disclosure Schedule sets forth a complete
and accurate list of all contracts, agreements and other arrangements to which
Company or any of Company's Subsidiaries is a party or by which Company, any of
Company's Subsidiaries or any of their respective assets are bound (excluding
plans referred to in Sections 3.9 and 6.5 and leases referred to in Section
3.16) pursuant to which (i) any party thereto is entitled prospectively to
receive in excess of $35,000, (ii) any party thereto has the right or option
prospectively to order products or services the consideration for which would
exceed $35,000, or (iii) payments are based on the profits or revenues of
Company or any of Company's Subsidiaries (hereinafter referred to collectively
as (the "Contracts"). Each of the Contracts is in full force and effect and
enforceable in accordance with its terms. Neither Company nor Company's
Subsidiaries have received any formal or official notice (written or oral) of
cancellation or termination of, or intent to cancel or terminate, any of the
Contracts. With respect to each Contract which by its terms will terminate
within one year of the date hereof (or unless an option to extend such Contract
is exercised), neither Company nor any of Company's Subsidiaries has received
any formal or official notice (written or oral) that any such Contract will not
be so renewed or that any such extension option will not be exercised. Except as
set forth in Section 3.20(a)(ii) of the Company Disclosure Schedule, there
exists no event of default or occurrence, condition or act on the part of
Company or any of Company's Subsidiaries or, to the best knowledge of Company,
on the part of the other parties to such Contracts which constitutes or would
constitute (with notice or lapse of time or both) a breach of or default under
any of the Contracts, or cause or permit acceleration of any obligation of
Company or any of Company's Subsidiaries thereunder, which individually or in
the aggregate would have a Material Adverse Effect. Except as set forth in
Section 3.20(a) of the Company Disclosure Statement, no consent of any other
party to the Contracts is required in connection with the execution, delivery
and performance of this Agreement or in order for the Contracts to remain in
full force and effect following the Merger.
(b) None of Company nor any of Company's Subsidiaries is a party to any
agreement which materially limits the freedom of Company or any of Company's
Subsidiaries to compete in any line of business or with any person.
Section 3.21 Billed Accounts Receivable. All notes and billed accounts
receivable of Company and Company's Subsidiaries, represent sales or services
made or rendered in the ordinary course of business and represent the legal,
valid and binding obligations of the obligors thereon. The Company has reviewed
customer receivables and has established adequate reserves to provide for
doubtful accounts of, any valid counterclaims by, and allowances to, its
customers.
Section 3.22 Disclosure. No representation, warranty or statement made by
Company in this Agreement or the Company Disclosure Schedules contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact required to be stated herein or therein, or necessary in order
to make, in light of the circumstances under which such statements were made,
not misleading.
Section 3.23 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of the Company Common Stock is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
Section 3.24 Banks; Powers of Attorney. Section 3.24 of the Company Disclosure
Schedule sets forth (a) the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which Company
or any of Company's Subsidiaries maintain safe deposit boxes or accounts of any
nature and the names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto, and (b) the names of all persons to whom
Company or any of Company's Subsidiaries have granted a power of attorney,
together with a description thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company as follows:
Section 4.1 Organization: Parent and Subsidiaries. Each of Parent, Merger Sub
and each of the respective Subsidiaries of the Parent, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a Material
Adverse Effect on or of Parent and its Subsidiaries. In this Agreement, the term
"Material Adverse Effect" used in reference to the Parent means any event,
change or effect, which either alone or in the aggregate with all other such
events, changes or effects, is, or is reasonably likely to be, materially
adverse to the business, financial condition, properties, assets,
capitalization, stockholders' equity, liabilities (including contingent
liabilities), results of operations, licenses or franchises of the Parent and
its Subsidiaries on consolidated basis. Each of Parent and Merger Sub is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect.
Section 4.2 Capitalization. The authorized capital stock of Parent consists of:
(i) 20,000,000 shares of Parent Common Stock, of which, as of the date hereof
7,476,922 shares are issued and outstanding and (ii) 1,000,000 shares of
preferred stock, of which, as of the date hereof no shares are issued and
outstanding. As of the date hereof, there are outstanding pursuant to Parent's
incentive and stock option plans, and other rights to purchase shares other than
under its ESPP (the "Parent Stock Plans") to purchase 1,396,000 shares of Parent
Common Stock, and warrants to purchase 268,307 shares of Parent Common Stock.
All issued shares of Parent Common Stock are duly authorized, validly issued,
fully paid and non-assessable and free of any preemptive rights in respect
thereto. As of the date hereof, the authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, par value $1.00 per share, all of
which are validly issued, fully paid and nonassessable and are owned directly by
Parent.
Section 4.3 Parent Authority. Parent has the requisite corporate power and
authority to execute and deliver this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and no other corporate
proceedings on the part of Parent shall be necessary to authorize this Agreement
or to consummate the transactions so contemplated other than obtaining the
requisite approval of its Shareholders. This Agreement has been duly executed
and delivered by Parent and constitutes a valid and binding obligation of Parent
enforceable against it in accordance with its terms.
Section 4.4 Merger Sub Authority. Merger Sub has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub and no -other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by Merger Sub and constitutes a valid and binding obligation of Merger
Sub, enforceable against it in accordance with its terms.
Section 4.5 Consents and Approvals; No Violations. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of the Securities Act of 1933, the Exchange Act, the HSR
Act, any applicable "Blue Sky" laws and the Minnesota Law, neither the
execution, delivery or performance of this Agreement by Parent and Merger Sub
nor the consummation by Parent and Merger Sub of the transactions contemplated
hereby nor compliance by Parent and Merger Sub with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the Articles
of Incorporation or Bylaws of Parent and Merger Sub, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental Entity,
(iii) result in a violation or breach of, or constitute (with notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) or require any authorization, consent or approval under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets, except in the case of (ii)
and (iii) for violations, breaches or defaults which would not, and except for
failures to obtain such permits, authorizations, consents or approvals or to
make such filings which would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 4.6 SEC Reports and Financial Statements. Parent has filed with the SEC,
and has heretofore furnished to the Company, true and complete copies of all
forms, reports, schedules, statements and other documents required to be filed
by it and actually filed under the Exchange Act or the Securities Act of 1933,
as amended (the "Securities Act"), (as such documents have been amended since
the time of such filing for the periods since Fiscal Year 1996, collectively,
the "Parent SEC Documents"). The Parent SEC Documents, including without
limitation any financial statements or schedules included therein, at the time
filed, (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. The
financial statements of Parent included in the Parent SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC), and fairly present (subject, in the case of the unaudited
statements, to normal year-end audit adjustments) the consolidated financial
position of Parent and its consolidated subsidiaries as at the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended.
Section 4.7 Proxy Statement/Prospectus. The information provided by Parent and
Merger Sub for inclusion in the Proxy Statement/Prospectus shall be true and
complete, shall not contain any untrue statement of a material fact and shall
not omit to state any material fact required to be stated therein or necessary
in order to make the statements made therein not misleading.
Section 4.8 Issuance of Shares. Upon issuance of Parent's shares to the
Company's shareholders pursuant to the Merger, such shares shall be duly
authorized, validly issued, fully paid, and nonassessable shares of Parent's
Common Stock.
Section 4.9 Operation of Merger Sub. Merger Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby and has not engaged in any business activities
or conducted any operations other than in connection with the transactions
contemplated hereby.
Section 4.10 Litigation. There are no suits, claims, actions, proceedings and
investigations which are pending or threatened against the Parent or any of its
Subsidiaries, judicial, administrative or otherwise.
Section 4.11 No Undisclosed Liabilities. Except as and to the extent set forth
in the audited consolidated balance sheets of Parent as of June 28, 1999
included in the Parent Financial Statements, none of Parent or Parent's
Subsidiaries had as of that date any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by GAAP
to be reflected on a consolidated balance sheet of Parent and Parent's
Subsidiaries (including the notes thereto) which constituted a Material Adverse
Effect. Since June 28, 1999, neither Parent, nor any of Parent's Subsidiaries
has incurred any liabilities of any nature, whether or not accrued, contingent
or otherwise, which would have, individually or in the aggregate, a Material
Adverse Effect.
Section 4.12 Compliance with Applicable Law. Parent and Parent's Subsidiaries
hold and are in compliance with all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Parent Permits"), except for
failures to hold or comply with such permits, licenses, variances, exemptions,
orders and approvals which do not, individually or in the aggregate, have a
Material Adverse Effect. To the knowledge of the Parent, the businesses of
Parent and Parent's Subsidiaries are not being conducted in violation of any
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Parent or any of Parent's Subsidiaries.
Section 4.13 Disclosure. No representation, warranty or statement made by Parent
or Merger Sub in this Agreement contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact required to be
stated herein or therein, or necessary in order to make, in light of the
circumstances under which such statements were made, not misleading.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Covenants of Company. Prior to the Effective Time, except as
expressly permitted by this Agreement, or to the extent that Parent in its sole
discretion shall otherwise consent in writing:
(a) Ordinary Course. Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and use their reasonable best efforts to
preserve intact their present business organizations, preserve their working
capital, keep available the services of their present officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing business
shall not be impaired in any material respect following the Merger.
(b) Dividends; Changes in Stock. The Company shall not, and shall not permit any
of its Subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) directly or indirectly repurchase, redeem or otherwise
acquire, any shares of its capital stock or capital stock of any Subsidiary.
(c) Issuance of Securities. Company shall not, and shall not permit any of its
Subsidiaries to, issue, deliver or sell, pledge, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Voting Debt or any securities convertible into or exchangeable for, or any Stock
Options and rights to acquire, any such shares or Voting Debt other than:
(i) shares of Company Common Stock issuable upon the valid exercise of
currently outstanding options (other than new options for not more than
30,000 Shares in the aggregate for new employees) under the Company's
stock option plans listed on Section 3.9 of the Company Disclosure
Schedule (the "Company Stock Option Plans");
(ii) shares of Company Common Stock issued under the Company Employee Stock
Purchase Plan (the "ESPP") on or before September 30, 1999; and
(iii) shares of Company Common Stock contractually issuable to certain
executive officers of the Company as non-cash compensation prior to the
Effective Date.
(d) Company shall not grant, issue, modify or amend any options, warrants or
other rights to acquire its equity securities including under its ESPP after
September 30, 1999.
(e) Governing Documents. Company shall not, nor shall it permit any of its
Subsidiaries to, amend their respective Certificates of Incorporation, Bylaws or
comparable organizational documents.
(f) Standstill Agreement. Except as contemplated herein, for the period from the
date hereof through the earlier of the Closing or the first anniversary of the
date of this Agreement, the Company will not, and will use its best efforts to
cause each affiliate, not to (i) purchase, acquire or own, or offer or agree to
purchase, acquire or own, directly or indirectly, any Voting Securities (as
hereinafter defined) or direct or indirect rights or options to acquire Voting
Securities (or enter into any arrangements or understandings with any third
party to do any of the foregoing), or (ii) propose to enter into, directly or
indirectly, any merger or business combination involving Parent or any of its
subsidiaries, or in any way seek to control the management, policies or Board of
Directors of Parent provided that nothing contained in this clause (ii) shall
limit the right to vote as a stockholder for any merger or business combination.
For purposes of this Agreement, the term "Voting Securities" shall mean (i) any
securities which are entitled to vote generally in the election of directors of
Parent and (ii) any securities of Parent convertible into or exchangeable for
any security described in clause (i) above.
(g) No Acquisitions or Dispositions. Company shall not, and shall not permit any
of its Subsidiaries to: (x) acquire or agree to acquire by merging or
consolidating with, or by purchasing equity interests in or a portion of the
assets of, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
Company and its Subsidiaries taken as a whole; (y) other than in the ordinary
course of business, sell, assign, lease, license, pledge, encumber or otherwise
dispose of, or agree to sell, assign, lease, license, encumber or otherwise
dispose of, any of its assets which are material, individually or in the
aggregate, to Company and its Subsidiaries taken as a whole, or any stock in any
Subsidiary.
(h) Indebtedness. Except as required to operate its business in the ordinary
course and after written notice to Parent, Company shall not, and shall not
permit any of its Subsidiaries to, (i) incur or assume any long-term debt or,
except in the ordinary course of business under lines of credit existing on the
date hereof, incur or assume any short-term debt; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business and consistent with past practice; or (iii) make any
loans, advances (other than advances to employees for travel and entertainment
in the ordinary course of business) or capital contributions to, or investments
in, any other person.
(i) Benefit Plans and Compensation. Company shall not, and shall not permit any
of its Subsidiaries to, terminate, adopt, amend or enter into any employment
agreements or employee benefit plans of the type set forth in Sections 3.7 and
3.9, except as may be required by applicable law or regulation, or pay benefits
not required by any existing plan or arrangement or increase in any manner the
compensation, stock options, or fringe benefits of any director, officer or
employee without the written approval of Parent;
(j) Other Matters. Other than as provided for herein, the Company shall not
permit any of Company's Subsidiaries to: (x) pay, discharge, settle or satisfy
or agree to pay, discharge, settle or satisfy, any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than when due in
accordance with their respective terms and other than claims, liabilities, and
obligations in an amount not in excess of $25,000 individually or $150,000 in
the aggregate, or (y) waive, release, grant or transfer any rights of value or
modify or change any existing license, lease, contract or other agreement or
arrangement which modifications or changes would have, individually or in the
aggregate, a Material Adverse Effect or (z) fail to maintain all property and
equipment useful and necessary in its business in good working order and
condition or fail to continue its maintenance programs consistent with past
practice.
(k) Affiliate Transactions. Company and its Subsidiaries shall not enter into
any contract, loan or other transaction with any of the following persons, or in
which any of the following persons have a direct or indirect impact interest:
(i) any director or officer of Company or, any Subsidiary of it;
(ii) any of the spouses, parents, siblings, children or other close
relatives of any person described in clause (i); and
(iii) any corporation, partnership, trust or other entity in which any
person described in clauses (i) or (ii) has a beneficial interest.
(l) Capital Expenditures. Except as set forth in Section 5.01(l) of the Company
Disclosure Schedule, Company shall not, and shall not permit any of Company's
Subsidiaries to, other than in the ordinary course of business and consistent
with past practice and in an amount not in excess of $50,000 in respect of any
individual project or $250,000 in the aggregate, make any capital expenditures
or commitments for capital expenditures.
(m) Tax Matters; Accounting Policies. Company shall not, and shall not permit
any of Company's Subsidiaries to, make any tax elections or settle or compromise
any income or excise tax liability or, except as required by law or applicable
accounting standards, change any accounting policies or procedures. Company
shall promptly advise Parent of any tax audit or tax adjustment or proposed or
threatened tax audit or tax adjustment with respect to Company and shall also
notify Parent of any adverse determination by any Governmental Entity with
respect to taxes.
(n) Advice of Changes; Filings. Company shall confer on a regular and frequent
basis with Parent, inform on operational matters and with respect to any
significant new contracts and promptly advise Parent orally and in writing of
any change, event or effect having, or which, insofar as can reasonably be
foreseen, could have, a Material Adverse Effect on Company and Company's
Subsidiaries taken as a whole. Company shall promptly provide Parent (or its
counsel) copies of all filings made by Company with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
(o) Other Actions. Company shall not, and shall not permit any of its
Subsidiaries to, agree or commit to take any action that would be prohibited by
this Section 5.1. Notwithstanding the fact that an action might otherwise be
permitted pursuant to this Section 5.1, Company shall not, and shall not permit
any of its Subsidiaries to, take any action that would or is reasonably likely
to result in any of Company's representations and warranties set forth in this
Agreement being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VII not being satisfied.
Section 5.2 Company's Pre-Closing Conditions. The Company shall satisfy each of
the conditions set forth below at the time specified but in no case later than
the Closing:
(a) ESPP. The Company will not make another offering or accept contributions
under the plan between September 30, 1999 and the Closing and no further rights
to purchase Shares under the ESPP will accrue between September 30, 1999 and the
Closing.
(b) The Company will rescind or modify the stock issuances and other
compensation authorized for executive officers on May 11, 1999 so that all
obligations and liabilities terminated on or before the Effective Date.
(c) Rights Plan. The Company will amend or terminate its rights plan and redeem
all rights outstanding prior to the Effective Date to the extent necessary to
permit the completion of this transaction.
(d) All options for non-employee Directors will be amended to require exercise
within six months of the Effective Date.
Section 5.3 Covenants of the Parent and Merger Sub. Prior to the effective Time,
except as expressly permitted by this Agreement, or to the extent that the
Company in its sole discretion shall otherwise consent in writing.
(a) Ordinary Course. Except as expressly noted herein, Parent and its
Subsidiaries shall carry on their respective businesses in the usual, regular
and ordinary course and in a manner which shall not materially adversely affect
the value of the Parent Common Stock issuable to the Company's stockholders as
the Shareholder Consideration.
(b) Governing Documents. Parent shall not, nor shall it permit any of its
Subsidiaries to, amend their respective Certificate of Incorporation, Bylaws or
comparable organizational documents.
(c) Dividends, Changes in Stock. Parent shall not, and shall not permit any of
its Subsidiaries to (i) declare, set aside, or pay any dividends on or make
other distributions in respect of any of its capital stock other than in the
form of Parent Common Stock, (ii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) directly or indirectly repurchase, redeem or otherwise acquire, any shares
of its capital stock or capital stock of any Subsidiary.
(d) Directors. Within 30 days following the Effective Time, Parent shall cause
Xxxxxxxxx X. Xxxxxx and another person (to be designated by the Company prior to
the Effective Date) to be appointed or elected to the Board of Directors of
Parent.
(e) NASDAQ National Market. Parent shall use its reasonable best efforts to
effect the inclusion of all shares of Parent Common Stock issuable to the
Company's shareholders on the NASDAQ National Market and shall take all actions
required under applicable federal or state securities laws in connection with
the issuance of Parent Common Stock pursuant to this Agreement.
(f) Other Actions. Parent shall not, and shall not permit any of its
Subsidiaries to, agree or commit to take any action that would be prohibited by
this Section 5.3. Notwithstanding the fact that an action might otherwise be
permitted pursuant to this Section 5.3, Parent shall not, and shall not permit
any of its Subsidiaries to, take any action that would or is reasonably likely
to result in any of Parent's representations and warranties set forth in this
Agreement being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VII not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access to Information. Upon reasonable notice and subject to
applicable law, Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel, and other
representatives of Parent, access, during normal business hours during the
period prior to the Effective Time, to all its properties (including its plants,
offices, warehouses and other facilities), books, contracts, commitments and
records and, during such period, subject to applicable law, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to Parent all
information concerning its business (including financial and operating data),
properties and personnel as Parent may reasonably request. The Company will keep
Parent advised of significant developments in Company's business and of any
significant decisions concerning the operation of their business.
Parent and the Company shall each use its best efforts to preserve the
confidentiality of any proprietary, confidential or trade secret information
obtained from the other party during the negotiations of the Merger. In the
event the Merger is not completed for any reason, Parent and the Company shall
each return to the other all of such information of the other party, together
with all copies thereof, and shall not misappropriate or disclose any of such
information to any third parties.
Section 6.2 Proxy Statement/Prospectus. As soon as practicable after the
execution of this Agreement, the parties shall prepare and file with the
Securities and Exchange Commission the Proxy Statement/Prospectus, and shall use
their reasonable efforts to have the Proxy Statement/Prospectus approved as soon
as possible thereafter.
Section 6.3 Shareholders' Meetings.
(a) The Company and Parent, acting through their respective Boards,
shall, in accordance with applicable law:
(i) as promptly as practicable, duly call, give notice of, convene and
hold special meetings of their shareholders for the purpose of causing
their shareholders to consider and vote upon a proposal to approve the
Merger (the "Special Meetings");
(ii) subject to their fiduciary duties under applicable laws as advised
by counsel, include in the Proxy Statement/Prospectus the recommendation
of their Boards that shareholders of the Company and the Parent,
respectively, vote in favor of the approval of the Merger; and
(iii) use all reasonable efforts to obtain and furnish the information
required to be included by them in the Proxy Statement/Prospectus, and,
after consultation with each other, respond promptly to any comments
made by the SEC with respect to the Proxy Statement/Prospectus and any
preliminary version thereof and to cause the Proxy Statement/Prospectus
to be mailed to shareholders as promptly as practicable.
(b) If at any time prior to the Special Meetings any event should occur
relating to Company, Parent or their officers or directors which should
be described in this Proxy Statement/Prospectus, the affected party will
promptly inform the other party thereof and, if the parties determine
that any such event should be described in an amendment of or a
supplement to the Proxy Statement/Prospectus, will cooperate with each
other in promptly preparing, filing and clearing with the SEC and
mailing such amendment or supplement.
Section 6.4 Closing. Upon the terms and subject to the conditions hereof, as
soon as practicable after shareholder approval of the Merger has been obtained,
Merger Sub and the Company will sign and deliver to the Secretary of State of
Delaware duly signed Certificates of Merger with respect the Merger, all in the
manner and as required by the Delaware Law, and the parties shall take all other
and further actions as may be required by law to make the Merger effective.
Section 6.5 Stock Option and Employee Stock Purchase Plans.
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Stock Option")
under the Company Stock Option plans including the Directors'
Option Plan, whether or not exercisable, will be assumed by
Parent. Each Company Stock Option so assumed by Parent under
this Agreement will continue to have, and be subject to, terms
and conditions substantially similar to those set forth in the
applicable Company Stock Option plan immediately prior to the
Effective Time except that (i) each Company Stock Option will
be exercisable (or will become exercisable in accordance with
its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company
Stock Option immediately prior to the Effective Time multiplied
by the Exchange Ratio and (ii) the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of
such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per share of Company
Common Stock at which said Company Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio,
rounded down to the nearest whole cent. After the Effective
Time, Parent will issue to each holder of an outstanding
Company Stock Option a notice describing the foregoing
assumption of such Company Stock Option by Parent.
(b) Parent will reserve on and after the Effective Date sufficient shares of
Parent Common Stock for issuance under this Section 6.5.
Section 6.6 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses provided
that the Parent shall pay Sixty-five Percent (65%) and Company shall pay Thirty-
five Percent (35%) of all costs and expenses for printing. The Company will use
its best efforts to not pay, incur, or become liable for, any such expenses
including, but not limited to, legal, accounting, investment banking, the
Company's share of printing costs set forth above and proxy solicitation fees
(the "Transactional Expenses") in excess of $650,000 in the aggregate (with
$150,000 payable one year after the Effective Date). If the Transactional
Expenses of the Company exceed $650,000 any excess shall reduce the Acquisition
Consideration set forth in Section 2.2.
Section 6.7 Public Announcements. Parent and the Company will consult with each
other before issuing any press release or otherwise making any public statements
and shall not issue any such press release or make any such public statement
without the consent of the other parties hereto, except as may be required by
law or by obligations pursuant to any listing agreement with NASDAQ.
Section 6.8 Notification of Certain Matters. Company shall promptly supplement
or amend the Company Disclosure Schedule with respect to any material matter
hereafter arising or discovered which, if existing or known at the date hereof,
would have been required to be disclosed in the Company Disclosure Schedule;
provided, however, that any such supplemental or amended disclosure shall not be
deemed to have been disclosed as of the date hereof.
Section 6.9 Further Assurances; Best Efforts. Subject to the terms and
conditions of this Agreement, each of Company, Parent and Merger Sub agrees to
use their best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each of Company, Parent and
Merger Sub shall take all such necessary action.
Section 6.10 Form S-8. Parent agrees to file promptly a registration statement
on Form S-8 or, if possible, an amendment to Parent's then effective
registration statement on Form S-8, for the shares of Parent Common Stock
issuable with respect to the assumed Company Stock Options and shall keep such
registration statement effective for so long as any such options remain
outstanding.
Section 6.11 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent agrees that it will indemnify
and hold harmless each current director and officer of Company (when acting
in such capacity) (each an "Indemnified Party" and, collectively, the
"Indemnified Parties"), against any costs or expenses (including, without
limitation, reasonable attorneys' fees, costs of investigation and fees of
other advisers and experts), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, including, without limitation, claims,
actions, suits, proceedings or investigations by
or on behalf of any present or former shareholder of Company, arising out
of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the
fullest extent that Parent would have been permitted under Minnesota Law
and its Articles of Incorporation or Bylaws in effect on the date hereof to
indemnify such person (and Parent shall also advance expenses as incurred
to the fullest extent permitted under applicable law; provided the person
to whom expenses are advanced provides a written affirmation of his or her
good faith belief that the standard of conduct necessary for
indemnification has been met, and an undertaking to repay such advances if
it is ultimately determined that such person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.11, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Parent shall have the right to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except
that if Parent elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between Parent and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Parent shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that
Parent shall be obligated pursuant to this paragraph (b) to pay for only
one firm of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) Parent shall not be
liable for any settlement effected without its prior written consent; and
provided, further, that Parent shall not have any obligation hereunder to
any Indemnified Party if and when a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that the indemnification of such Indemnified Party in the
manner contemplated hereby is prohibited by applicable law.
(c) The Parent shall maintain Company's existing officers' and directors'
liability insurance for a period of three (3) years after the Effective
Time; provided, however, that if the existing officers' and directors'
insurance expires, is terminated or canceled during such three-year period,
the Parent will obtain officers' and directors' liability insurance for the
remainder of such period of at least $3,000,000 containing terms and
conditions that are not materially less advantageous to the Indemnified
Parties and that is issued by an insurer having a claims-paying rating at
least as good as the rating of the issuer of Company's existing policy.
(d) The provisions of this Section 6.11 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives. The provisions of this Section 6.11 will
be effective for a period of six (6) years after the Effective Date.
ARTICLE VII CONDITIONS
Section 7.1 Conditions of Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions unless waived in writing by Parent and Merger Sub:
(a) Approvals. Other than the filing of Articles of Merger provided for by
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by any
Governmental Entity, the failure of which to obtain would have a Material
Adverse Effect on Parent and its Subsidiaries or the Surviving Corporation and
its Subsidiaries, in each case taken as a whole, shall have been filed, occurred
or been obtained.
(b) Representations and Warranties. The representations and warranties of
Company set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Time as though made on and as of the Effective Time.
(c) Performance of Obligations of Company. Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement specifically including those set forth in Section 5.2 by the earlier
of the specific deadline set forth herein or at or prior to the Effective Time.
(d) Stockholder Approval. The Company shall have distributed the proxy statement
in compliance with SEC requirements. This Agreement shall have been adopted by
the affirmative vote of the holders of at least a majority of the outstanding
shares of the Company Common Stock and the Parent Common Stock.
(e) Officer's Certificates. Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to the effect that the conditions set forth in Section
7.1 have been satisfied.
(f) Opinion. Parent shall have received an opinion from counsel to the Company
in customary form reasonably acceptable to Parent.
(g) Other Agreements.
(i) the Severance Agreement with Xxxxxxxxx X. Xxxxxx (the "CEO") shall have been
modified to effect the following changes:
A. CEO shall receive (but not before January 1, 2000) $400,000 worth of
Parent Common Stock, registered pursuant to the Securities Act of 1933, at
the Parent Stock Price, in lieu of cash. CEO shall sell such stock on the
public market within 15 days after the Effective Time, at Parent's
direction. If the net proceeds from such sale exceed $400,000, CEO shall
pay promptly such excess to Parent, and if the net proceeds are less than
$400,000, Parent shall promptly make a payment in cash to CEO equal to such
deficit.
B. CEO shall exercise all stock options assumed by Parent within 18
months after the Closing, and such options will be exercised at the rate
of at least 16.66% thereof each calendar quarter after the Closing.
Notwithstanding the foregoing, if the closing price of Parent Common
Stock is less than the Parent Stock Price for at least 75% of the trading
days in any quarter, CEO may elect to defer the portion of the options
otherwise exercisable in such quarter to the next quarter and, in
addition, may on one occasion elect to defer for one quarter regardless
of price, the options otherwise exercisable in such quarter, provided
that in no event may the exercise of any portion of the options be
deferred beyond the 18th month following the Closing.
(iii) the Severance Agreement with Xxxx X. Xxxxxx, Xx. (the "Former Chairman")
shall have been modified to effect the following changes:
A. Former Chairman shall receive (but not before January 1, 2000) Parent Common
Stock, registered pursuant to the Securities Act of 1933, at the Parent Stock
Price, in lieu of cash, equal to any amounts payable to him under the Separation
Agreement dated August 11, 1998, less any amounts previously paid to him by the
Company (the "Severance Payment"). Former Chairman shall sell such stock on the
public market within 15 days after the Effective Time, at Parent's direction. If
the net proceeds from such sale exceed Severance Payment, Former Chairman shall
pay promptly such excess to Parent, and if the net proceeds are less than
Severance payment, Parent shall promptly make a payment in cash to Former
Chairman equal to such deficit.
B. Former Chairman shall exercise all stock options assumed by Parent within six
(6) months after the Closing, and such options must be exercised at the rate of
at least 50% of such options within the first three (3) months after Closing.
(h) Delivery of Documents. The Company shall have delivered to Parent (i)
control of all of its books and records, including but not limited to all
corporate and other records or it and any predecessors including the minute
books, stock books, stock register, deeds and title documents; and (ii) such
other documents and certificates as shall be reasonably requested by Parent.
(i) No Restraints. There shall have been no order or preliminary or permanent
injunction entered in any action or proceeding before any Governmental Entity or
other action taken, nor statute, rule, regulation, legislation, interpretation,
judgment or order enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to Parent, Company or any of their Subsidiaries, or the Merger
or this Agreement by any Governmental Entity and which shall have remained in
effect or any suit, claim, action or proceeding pending before any Governmental
Entity, which, if adversely decided, would have the effect of: (i) making
illegal, materially delaying or otherwise directly or indirectly restraining or
prohibiting or making materially more costly the Merger or the consummation of
any of the other transactions contemplated by this Agreement; (ii) prohibiting
or materially limiting the ownership or operation by Parent or Company or any of
their Subsidiaries of all or any material portion of the business or assets of
Parent or Company or any of their Subsidiaries or compelling Parent or any of
its subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or Company or any of its Subsidiaries, as a
result of the Merger; (iii) imposing or confirming material limitations on the
ability of the Parent or any Subsidiary of Parent effectively to exercise full
rights of ownership of any Company Common Stock, including, without limitation,
the right to vote such Company Common Stock on all matters properly presented to
the Company's stockholders; or (iv) requiring divestiture by Parent or any
Subsidiary of Parent of any Company Common Stock.
(j) Form S-4. The Form S-4 filed by the Parent with the SEC with respect to the
Merger shall have been declared effective by the SEC and no stop order
suspending the effectiveness of the Form S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(k) Dissenting Shares. There shall not have been filed with the Company by the
holders of more than 5% of the shares of Company Common Stock before the vote on
this Agreement and the transactions contemplated hereby at the stockholders'
meeting written objection to the Merger and the intention to demand payment
contemplated by Section 262 of the Delaware Law.
(l) Delaware Anti-Takeover. The Board of Directors of the Company shall have
approved this Agreement, and the merger contemplated herein, for purposes of
Delaware Corporate Law ss. 106.
(m) Parent shall have received from its tax counsel an opinion that the merger
will qualify for federal income tax purposes as a reorganization within the
meaning of (S)(S) 368(A) of the Code, in a form reasonably acceptable to Parent.
(n) Material Adverse Changes. None of the following changes in the business of
the Company shall have occurred prior to the Effective Time:
(i) The net book value of the Company shall not have decreased by more than
$500,000 from that reflected in the balance sheet of the Company dated June 28,
1999, excluding the losses for the fiscal quarters ending in September and
December projected in the forecast provided to Parent by the Company dated June
28, 1999.
(ii) Net losses for the Company for the fiscal quarters ending in September and
December 1999 shall not exceed $600,000 and $262,500, respectively.
(iii) The Company's cash requirements remain within current working capital
financing agreement limits, and the Line of Credit with its current lender
remains in effect on its current terms until the Effective Time, and no defaults
under such Line of Credit by the Company have occurred.
(iv) The Company has gross revenue equal to $4,500,000 and $4,800,000 for the
fiscal quarters respectively ending in September and December, 1999.
Section 7.2 Conditions of Obligations of Company. The obligation of Company to
effect the Merger is subject to the satisfaction of the following conditions
unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of Parent
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent such representations
and warranties speak of an earlier date) as of the Effective Time as though made
on and as of the Effective Time.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed in all material respects all obligations required to be
performed by them by the earlier of the specific deadline set forth herein or
prior to Effective Time.
(c) Stockholder Approval. This Agreement shall have been adopted by the
affirmative vote of the holders of at least a majority of the outstanding shares
of each of the Company Common Stock and the Parent Common Stock respectively.
(d) No Restraints. here shall have been no order or preliminary or permanent
injunction entered in any action or proceeding before any Governmental Entity or
other action taken, nor statute, rule, regulation, legislation, interpretation,
judgment or order enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to Parent or Company or any of their Subsidiaries or the
Merger or this Agreement, by any Governmental Entity which shall have remained
in effect and which shall have had the effect of making illegal, materially
delaying or otherwise directly or indirectly restraining or prohibiting the
Merger, or the consummation of any of the other transactions contemplated by
this Agreement.
(e) Form S-4. The Form S-4 filed by the Parent shall have been declared
effective and no stop order suspending the effectiveness of the Form S-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC. Any and all state securities approvals for the
issuance of the Parent Common Stock pursuant to this Agreement shall have been
obtained.
(f) Officer's Certificate. The Company shall have received a certificate signed
on behalf of Parent by the chief executive officer of Parent to the effect that
the conditions set forth in Section 7.2 have been satisfied.
(g) Opinion. The Company shall have received opinion from Counsel to Parent in
customary form reasonably acceptable to the Company.
(h) Tax Opinion. Company shall have received an opinion from its tax counsel
that the merger will qualify for federal income tax purposes as a reorganization
within the meaning of ss.368(a) of the Code, in a form reasonably acceptable to
the Company.
(i) NASDAQ Listing. The Parent Common Stock issuable to the Company's
shareholders shall have been authorized for inclusion on the NASDAQ National
Market.
ARTICLE VIII TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated upon notice at any
time prior to the Effective Time, whether before or after adoption of this
Agreement and the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and Company;
(b) by Parent or Company if there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement which breach shall not have been cured, in the case
of a representation or warranty, prior to the Closing or, in the case of a
covenant or agreement, within 5 business days following receipt by the breaching
party of notice of such breach;
(c) by either Parent or Company if any permanent injunction or other order of a
court or other competent authority preventing the consummation of the Merger
shall have become final and non-appealable;
(d) by either Parent or Company if the Merger shall not have been consummated on
or before February 28, 2000, or if the Proxy Statement/Prospectus has not been
declared effective on or before January 31, 2000, provided however, that the
right to terminate this Agreement pursuant to this Section 8.1(d) 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 Merger to
have occurred on or before the aforesaid date;
(e) by Parent or Company, if the terminating party is not otherwise in breach of
this Agreement, if, in the exercise of its good faith judgment as to its
fiduciary duties under applicable corporate law, the Board of Directors of
Parent or Company determines, after consultation with the financial advisors and
counsel, and in reliance upon the written opinion of such counsel, that such
termination is required by such fiduciary duties by reason of a proposal from a
third party that either constitutes a Business Combination Transaction or may
reasonably be expected to lead to a Business Combination Transaction; provided,
that any termination of this Agreement pursuant to this Section 8.1(g) shall not
be effective until the terminating party has made payment of the full
termination fee provided for by Section 8.2(b) hereof. As used herein, the term
"Business Combination Transaction" shall mean any of the following involving the
Company or any Subsidiary or Parent or any Parent Subsidiary, as applicable: (1)
any merger, consolidation, share exchange, business combination or other similar
transaction (other than the Transactions); (2) any sale, lease, exchange,
transfer or other disposition (other than a pledge or mortgage) of 25% or more
of the assets of the Company and the Subsidiaries or Parent and the Parent
Subsidiaries, as applicable, taken as a whole, in a single transaction or series
of transactions; or (3) the acquisition by a person or entity or any "group" (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 33% or more of the shares of
Company Common Stock or Parent Common Stock, as applicable, whether by tender
offer, exchange offer or otherwise.
Section 8.2 Effect of Termination. (a) In the event of a termination of this
Agreement by either Company or Parent as provided in Section 8.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Parent, Merger Sub or Company or their respective officers or directors,
except for Sections 5.1(f), the second full paragraph of 6.1, first sentence of
6.6, 8.2(b), 8.5 and 9.2, which shall survive such termination.
(b) Termination Fee. Upon termination by a party pursuant to Section 8.1(e)
above, that party shall pay to the other party, if that other party is not
otherwise in breach of this Agreement, $1,000,000 in immediately available funds
immediately upon effectiveness of the termination.
Section 8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of this Agreement by the stockholders of the Company
but, after such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
Section 8.5 Liquidated Damages. The parties expressly agree that the damages
incurred by a non-breaching party upon breach of this Agreement by another party
would be speculative and difficult to measure. Therefore, upon the failure of
any party to proceed to completion of this transaction at the Closing, as
contemplated by this Agreement, in breach of this Agreement, the breaching party
(but not Merger Sub) shall pay to the non-breaching party (but not to Merger
Sub) $1,000,000 as liquidated damages, to compensate the non-breaching party for
expenses incurred in pursuit of the transactions contemplated by this Agreement.
Payment shall be made immediately upon such breach. The breaching party shall
not be liable to the non-breaching party for any damages, costs or expenses in
connection with such breach other than the payment required by this Section.
ARTICLE IX
MISCELLANEOUS
Section 9.0 No Solicitations. From the date hereof until the Closing, the
Company will not, and will instruct its officers, directors, employees, agents
and other representatives not to, directly or indirectly, solicit or initiate
any proposals or offers from any person relating to any acquisition or purchase
of all or a material amount of the assets off or any securities of, or any
merger, consolidation or business combination with, the Company or any of its
subsidiaries; provided, however, that the Company may furnish information to and
otherwise cooperate with, and may engage in discussions or negotiations with,
any person with respect to any of the foregoing and may waive any provision of
any confidentiality or standstill agreement to which it or any of its
representatives is a party if counsel advises the Board that failure to do so
could involve the Company's directors in a breach of their fiduciary duties and,
provided, further, that nothing herein shall prevent the Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules 14d-9
or 14e-2 promulgated under the Exchange Act with respect to any tender offer or
making such other disclosure to the Company's shareholders as, in the judgment
of the Board, on advice of counsel, is required by applicable law. Subject to
the fiduciary duties of the Board, the Company will promptly advise Parent of,
and communicate the principal terms (other than the identity of such person) of,
any such inquiry or proposal the Company may receive.
Section 9.1 Survival of Representations and Warranties. The representations and
warranties of the Parent, Merger Sub and Company shall not survive the
termination of this Agreement or the Effective Time.
Section 9.2 Brokers or Finders. Company represents and warrants to Parent that
no broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement other than Xxxxx, Xxxxxxxx & Xxxx, Inc.
Section 9.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, at the address shown in its most recent SEC
filing, with copies to Best & Xxxxxxxx LLP, 0000 X.X. Xxxx Xxxxx, 000 Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx, XX 00000-0000, Attn: Xxxxx X. Xxxxxxxx, Esq.,
Telecopy No.: (000) 000-0000; and
(b) if to Company: at the address shown in its most recent SEC filing, with
copies to Xxxxxx, Hall & Xxxxxxx, Exchange Place, 00 Xxxxx Xxxxxx, Xxxxxx, XX
00000-0000, Attn: Xxxxxx X. Xxxxxxxx, Telecopy No.: (000) 000-0000.
Section 9.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 9.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts, including facsimile
signature pages, have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
Section 9.6 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof except that the Confidentiality Agreement between the
parties dated July 22, 1999 shall continue in full force and effect in
accordance with its terms, and (b) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 9.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Minnesota without regard to any
applicable conflicts of law.
Section 9.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to Parent or to any direct or
indirect wholly owned Subsidiary of Parent. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
MICRO COMPONENT TECHNOLOGY, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxx
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Title: Vice President and Chief Financial Officer
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MCT ACQUISITION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxx
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Title: Vice President and Chief Financial Officer
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ASECO CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxx
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Name: Xxxxxxxxx X. Xxxxxx
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Title: President and CEO
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