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EXECUTED COPY
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AGREEMENT AND PLAN OF MERGER
BETWEEN
SPECIAL DEVICES, INCORPORATED
AND
SDI ACQUISITION CORP.
DATED AS OF JUNE 19, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 THE MERGER.........................................................................1
Section 1.1. The Merger.......................................................1
Section 1.2. Effective Time...................................................1
Section 1.3. Closing of the Merger............................................1
Section 1.4. Effects of the Merger............................................2
Section 1.5. Certificate of Incorporation and Bylaws..........................2
Section 1.6. Directors........................................................2
Section 1.7. Officers.........................................................2
Section 1.8. Conversion of Shares.............................................2
Section 1.9. Shares of Dissenting Holders.....................................3
Section 1.10. Exchange of Certificates........................................3
Section 1.11. Company Stock Options...........................................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................6
Section 2.1. Organization and Qualification; Subsidiaries.....................6
Section 2.2. Capitalization of the Company and its Subsidiaries...............7
Section 2.3. Authority Relative to this Agreement; Consents and Approvals.....8
Section 2.4. SEC Reports; Financial Statements................................8
Section 2.5. Information Supplied.............................................9
Section 2.6. Consents and Approvals; No Violations............................9
Section 2.7. Title to Assets..................................................9
Section 2.8. Company Products................................................10
Section 2.9. Potential Conflicts of Interest.................................10
Section 2.10. No Default.....................................................11
Section 2.11. No Undisclosed Liabilities; Absence of Changes.................11
Section 2.12. Litigation.....................................................11
Section 2.13. Compliance with Applicable Law.................................11
Section 2.14. Employee Plans.................................................12
Section 2.15. Environmental Laws and Regulations.............................13
Section 2.16. Intellectual Property; Software................................14
Section 2.17. Year 2000 Compliance...........................................14
Section 2.18. Government Contracts...........................................15
Section 2.19. Certain Business Practices.....................................15
Section 2.20. Vote Required..................................................16
Section 2.21. Labor Matters..................................................16
Section 2.22. Insurance......................................................16
Section 2.23. Suppliers and Customers........................................16
Section 2.24. Tax Matters....................................................16
Section 2.25. Brokers........................................................17
Section 2.26. Restrictions on Business Activities............................18
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Section 2.27. No Other Representations or Warranties.........................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ACQUISITION.....................................18
Section 3.1. Organization....................................................18
Section 3.2. Authority Relative to this Agreement............................19
Section 3.3. Information Supplied............................................19
Section 3.4. Consents and Approvals; No Violations...........................19
Section 3.5. No Default......................................................19
Section 3.6. Availability of Financing.......................................20
Section 3.7. No Prior Activities.............................................20
Section 3.8. No Other Representations or Warranties..........................20
ARTICLE 4 COVENANTS.........................................................................20
Section 4.1. Conduct of Business of the Company..............................20
Section 4.2. Other Potential Acquirers.......................................23
Section 4.3. Access to Information...........................................24
Section 4.4. Stockholders Meeting............................................24
Section 4.5. Additional Agreements; Reasonable Efforts.......................24
Section 4.6. Consents........................................................25
Section 4.7. Public Announcements............................................25
Section 4.8. Indemnification; Directors' and Officers' Insurance.............25
Section 4.9. Notification of Certain Matters.................................26
Section 4.10. SEC Filings....................................................26
Section 4.11. Notice of Certain Events.......................................26
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER..........................................26
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger.....26
Section 5.2. Conditions to Obligations of Acquisition........................27
Section 5.3. Conditions to Obligations of the Company........................27
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER....................................................28
Section 6.1. Termination.....................................................28
Section 6.2. Effect of Termination...........................................29
Section 6.3. Fees and Expenses...............................................29
Section 6.4. Limitation on Damages...........................................30
Section 6.5. Amendment.......................................................30
Section 6.6. Extension; Waiver...............................................30
ARTICLE 7 MISCELLANEOUS.....................................................................31
Section 7.1. Nonsurvival of Representations and Warranties...................31
Section 7.2. Entire Agreement; Assignment....................................31
Section 7.3. Validity........................................................31
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Section 7.4. Notices.........................................................31
Section 7.5. Governing Law...................................................32
Section 7.6. Construction; Interpretation....................................32
Section 7.7. Parties in Interest.............................................32
Section 7.8. Severability....................................................32
Section 7.9. Counterparts....................................................32
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TABLE OF DEFINED TERMS
Term Cross Reference in Agreement Page
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Acquisition.................................Preamble.........................................2
Acquisition Material Adverse Effect.........Section 3.1(a)..................................17
Acquisition Transactions....................Section 4.2(a)..................................22
Agreement...................................Preamble.........................................2
Bid.........................................Section 2.14(d)(i)..............................15
Business Day................................Section 1.3......................................2
Certificates................................Section 1.10(a)..................................4
Closing.....................................Section 1.3......................................2
Closing Date................................Section 1.3......................................2
Code........................................Section 2.24....................................16
Commitment..................................Section 3.6.....................................19
Company.....................................Preamble.........................................2
Company Board...............................Recitals.........................................2
Company Common Stock........................Section 1.8(a)...................................2
Company Disclosure Schedule.................Section 1.11.....................................5
Company Dissenting Shares...................Section 1.9(a)...................................3
Company Material Adverse Effect.............Section 2.1(b)...................................6
Company Permits.............................Section 2.13....................................12
Company Plan................................Section 1.11(a)..................................5
Company Securities..........................Section 2.2(a)...................................7
Company Stock Option........................Section 1.11(a)..................................5
Continuing Shareholder Shares...............Section 1.8(a)...................................2
DGCL........................................Section 1.1......................................1
Effective Time..............................Section 1.2......................................2
Employee Plans..............................Section 2.14(a).................................12
Environmental Claim.........................Section 2.12(a).................................13
Environmental Laws..........................Section 2.12(a).................................13
ERISA.......................................Section 2.14(a).................................12
Exchange Agent..............................Section 1.10(a)..................................3
Excluded Shares.............................Section 1.8(a)...................................2
Government Contract.........................Section 2.14(d)(ii).............................15
Governmental Entity.........................Section 2.6......................................9
HSR Act.....................................Section 2.6......................................9
Insurance Policies..........................Section 2.22....................................16
Intellectual Property Rights................Section 2.13....................................14
Liabilities.................................Section 2.11....................................11
Lien........................................Section 2.2(b)...................................8
Merger......................................Section 1.1......................................2
Merger Consideration........................Section 1.10(b)..................................4
Per Share Amount............................Section 1.8(a)...................................3
Potential Acquirer..........................Section 4.2(b)..................................22
Proxy Statement.............................Section 4.4(a)..................................23
SEC.........................................Section 2.04(a)..................................8
SEC Reports.................................Section 2.4(a)...................................8
Securities Act..............................Section 2.4(a)...................................8
Shares......................................Section 1.8(a)...................................2
Stockholders Meeting........................Section 4.4(a)..................................23
Subsidiary(ies).............................Section 2.1(b)...................................6
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Surviving Corporation.......................Section 1.1......................................2
Surviving Corporation Common Stock..........Section 1.8(b)...................................3
System......................................Section 2.17....................................14
Tax Return..................................Section 2.24....................................16
Taxes.......................................Section 2.24....................................16
Third Party.................................Section 6.3(a)..................................29
Third Party Acquisition.....................Section 6.3(a)..................................29
Title IV Plan...............................Section 2.14(a).................................12
U.S. Government.............................Section 2.14(d)(iii)............................15
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of the 19th day of June,
1998 (this "Agreement"), is made by and between SPECIAL DEVICES, INCORPORATED, a
Delaware corporation (the "Company"), and SDI ACQUISITION CORP., a Delaware
corporation ("Acquisition").
R E C I T A L S
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that the Merger (as defined in Section 1.1) is fair to, and in the
best interests of, its stockholders and (ii) approved and adopted this Agreement
and the transactions contemplated hereby and resolved to recommend and adoption
of this Agreement by the stockholders of the Company.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), Acquisition shall be
merged with and into the Company (the "Merger"). Following the Merger, the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"), and the separate corporate existence of Acquisition
shall cease.
SECTION 1.2. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.3), a
Certificate of Merger shall be duly executed and acknowledged by Acquisition and
the Company and thereafter delivered to the Secretary of State of the State of
Delaware for filing pursuant to the DGCL. The Merger shall become effective at
the time when the Certificate of Merger has been duly filed with the Secretary
of State of Delaware (the time the Merger becomes effective being referred to
herein as the "Effective Time").
SECTION 1.3. CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 5 (the "Closing Date"), at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP,
000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, unless another time, date
or place
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is agreed to in writing by the parties. "Business Day" means any day other than
Saturday, Sunday or a federal holiday.
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Acquisition in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Acquisition in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 1.6. DIRECTORS. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 1.7. OFFICERS. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 1.8. CONVERSION OF SHARES.
(a) At the Effective Time, each share of common stock, par value $0.01
per share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (individually a "Share" and,
collectively, the "Shares") (other than (i) Shares held by the Company or any
Subsidiaries (as defined in Section 2.1(c)) of the Company, (ii) Shares held by
Acquisition, (iii) Shares held by X.X. Xxxxxx Equity Investors I, L.P., (iv) any
Shares to remain outstanding pursuant to Section 1.8(d) and (v) Company
Dissenting Shares (as defined in Section 1.9(a)) (collectively, the "Excluded
Shares") shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be converted into and shall
become the right to receive a cash payment per Share, without interest, equal to
$37.00 (the "Per Share Amount") upon the surrender of the certificate
representing such Share.
(b) At the Effective Time, each issued and outstanding share of the
common stock, par value $0.01 per share, of Acquisition shall be converted into
one share of common stock, par value $0.01 per share, of the Surviving
Corporation (the "Surviving Corporation Common Stock").
(c) At the Effective Time, each Share held by the Company as treasury
stock or held by Acquisition, X.X. Xxxxxx Equity Investors I., L.P. or the
Company immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of Acquisition,
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the Company or the holder thereof, be canceled, retired and cease to exist, and
no consideration shall be delivered with respect thereto.
(d) Shares in the amount and held by the Persons set forth in Exhibit A
shall not be converted as provided in Section 1.8(a), but shall remain
outstanding and become an equal number of shares of Surviving Corporation Common
Stock as set forth in Section 1.8(b).
SECTION 1.9. SHARES OF DISSENTING HOLDERS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which dissenters' rights, if
any, are granted by reason of the Merger under the DGCL and who does not vote in
favor of the Merger and who otherwise complies with the DGCL ("Company
Dissenting Shares") shall not be entitled to receive any Merger Consideration
pursuant to Section 1.8(a), unless such holder fails to perfect, effectively
withdraws or loses his or her right to dissent from the Merger under the DGCL.
If any such holder so fails to perfect, effectively withdraws or loses his or
her dissenters' rights under the DGCL, each Company Dissenting Share of such
holder shall thereupon be deemed to have been converted, as of the Effective
Time, into the right to receive the Per Share Amount pursuant to Section 1.8(a).
(b) Any payments relating to Company Dissenting Shares shall be made
solely by the Surviving Corporation and no funds or other property have been or
will be provided by Acquisition or Acquisition's other direct or indirect
subsidiaries for such payment, nor shall the Company make any payment with
respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Acquisition prompt notice of any demands
received by the Company for the payment of fair value for shares, and
Acquisition shall have the right to participate in all negotiations and
proceedings with respect to such demands.
SECTION 1.10. EXCHANGE OF CERTIFICATES.
(a) A bank or trust company to be designated by Acquisition and
reasonably acceptable to the Company, shall act as the exchange agent (in such
capacity, the "Exchange Agent"), for the benefit of the holders of Shares, for
the exchange of a certificate or certificates which immediately prior to the
Effective Time represented Shares (the "Certificates") that were converted into
the right to receive the Per Share Amount pursuant to Section 1.8(a), all in
accordance with this Article 1. At the Effective Time, Acquisition shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of Shares, cash in U.S. dollars in an amount equal to the
Per Share Amount multiplied by the aggregate outstanding Shares (other than the
Excluded Shares) to be paid pursuant to Section 1.8(a).
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Certificates: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Acquisition and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for a cash payment of the proper Merger
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Consideration (as defined below) pursuant to Section 1.8(a). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Acquisition, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor by check an amount equal to the Merger
Consideration, which such holder has the right to receive pursuant to the
provisions of this Article 1, and the Certificate so surrendered shall forthwith
be canceled. No interest shall be paid or accrued on any Merger Consideration
upon the surrender of any Certificates. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company,
payment of the proper Merger Consideration may be paid 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 or other taxes required as a
result of such payment to a Person other than the registered holder of such
shares have been paid. Until surrendered and exchanged as contemplated by this
Section 1.10, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender an amount equal
to the Merger Consideration, as contemplated by this Section 1.10.
"Merger Consideration" means an amount equal to (A) the Per Share
Amount, multiplied by (B) the number of Shares represented by any Certificate or
Certificates held by the holder of Shares.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall pay, upon the making of an affidavit of that
fact by the holder thereof, the proper Merger Consideration as may be required
pursuant to this Section 1.10; provided, however, that the Surviving Corporation
may, in its discretion, require the delivery of a suitable bond and/or
indemnity.
(d) The Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
this Agreement or prior to the date hereof and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 1, except as
otherwise provided by law.
(e) Any portion of the Merger Consideration set aside for any holder of
Shares that remains undistributed to any holder of Shares for six months after
the Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any holder of Shares who has not theretofore complied with this Article 1
shall thereafter look only to the Surviving Corporation for payment of their
claim for any Merger Consideration.
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(f) Notwithstanding Section 1.11(e), neither the Surviving Corporation
nor the Company shall be liable to any holder of Shares for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Any amounts remaining unclaimed by any holder of Shares two years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any governmental
entity) shall to the extent permitted by applicable law, become the property of
the Surviving Corporation free and clear of any claim or interest of any Person
previously entitled thereto.
(h) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.10(a) to pay for shares for which
dissenters' rights have been perfected shall be returned to the Surviving
Corporation upon demand.
SECTION 1.11. COMPANY STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock reflected in Section 1.11 (a "Company Stock Option" or
collectively, "Company Stock Options") of the Company Disclosure Schedule
previously delivered by the Company to Acquisition (the "Company Disclosure
Schedule") issued pursuant to the Amended and Restated 1991 Stock Incentive Plan
of the Company (the "Company Plan") or issued outside the Company Plan via
special grants by the Company's Stock Option Committee to certain employees,
whether vested or unvested, shall be converted into and shall become the right
to receive a cash payment per Company Stock Option, without interest, determined
by multiplying (i) the excess, if any, of the Per Share Amount over the
applicable per share exercise price of such Company Stock Option (without taking
into account whether such Company Stock Option was in fact exercisable at such
time), by (ii) the number of shares of Company Common Stock underlying the
Company Stock Options, whether vested or unvested, immediately prior to the
Effective Time. At the Effective Time, all Company Stock Options (including
those options with an exercise price equal to or in excess of the Per Share
Amount) shall be canceled and be of no further force or effect except for the
right to receive cash to the extent provided in this Section 1.11. Prior to the
Effective Time, the Company shall take all actions (including, if appropriate,
amending the terms of the Company Plan) that are necessary to give effect to the
transactions contemplated by this Section 1.11.
(b) As soon as practicable after the Effective Time (but no later than
thirty (30) days following the Effective Time), the Surviving Corporation shall
establish a procedure to effect the surrender of Company Stock Options in
exchange for the cash payment to which the holder of a Company Stock Option
shall be entitled under Section 1.11(a), and, upon surrender of such Company
Stock Option, the Surviving Corporation shall pay to the holder thereof in cash
the amount, if any, to which such holder shall be entitled thereunder.
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ARTICLE 2
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquisition as follows:
SECTION 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company 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 authority to own, lease and operate its
properties and to carry on its businesses as presently conducted.
(b) The Company has heretofore delivered to Acquisition true and
complete copies of the Articles of Incorporation and By-laws, or comparable
instruments, of the Company and each of the Subsidiaries as in effect on the
date hereof. The minute books, or comparable records, of the Company and each of
the Subsidiaries heretofore have been made available to Acquisition for its
inspection and contain true and complete records of all meetings and consents in
lieu of meeting of the Board of Directors (and any committee thereof) and
stockholders of the Company and each of the Subsidiaries since the time of the
Company's organization or any such Subsidiary's organization, as the case may
be, and accurately reflect all transactions referred to in such minutes and
consents in lieu of meeting.
(c) Except as set forth in Section 2.1 of the Company Disclosure
Schedule, the Company has no equity interests in any corporations, partnerships,
limited liability companies, trusts or similar business entities. Each of the
subsidiaries listed in Section 2.1 of the Company Disclosure Schedule (each a
"Subsidiary" and, collectively, "Subsidiaries") is a corporation or a limited
partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, and has all requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not have a Company
Material Adverse Effect (as defined below). When used in connection with the
Company or its Subsidiaries, the term "Company Material Adverse Effect" means a
material adverse effect on the financial condition, properties, business or
results of operations of the Company and its Subsidiaries, taken as a whole, it
being understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Company Material
Adverse Effect: (i) a change in the market price or trading volume of the
Company Common Stock or (ii) a failure by the Company to meet internal earnings
or revenue projections or the revenue or earnings predictions of equity analysts
for any period ending (or for which earnings are released) on or after the date
of this Agreement and prior to the Effective Date.
(d) Each of the Company and its Subsidiaries is duly qualified or
licensed and in good standing to do business 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,
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except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have, individually or in the aggregate,
a Company Material Adverse Effect.
(e) The Company has heretofore delivered to Acquisition accurate and
complete copies of the Certificate of Incorporation and Bylaws, as currently in
effect, of the Company.
SECTION 2.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of: 20,000,000
shares of Company Common Stock, of which, as of June 15, 1998, 7,809,801 shares
of Company Common Stock were issued and outstanding, and 2,000,000 shares of
preferred stock, par value $0.01 per share, no shares of which are issued or
outstanding. All of the shares of Company Common Stock have been validly issued,
and are fully paid, nonassessable and free of preemptive rights. As of June 15,
1998, approximately 675,272 shares of Company Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Company Stock Options. Since May 4, 1998, no shares of
the Company's capital stock have been issued other than pursuant to Company
Stock Options already in existence on such date, and, since May 4, 1998, no
stock options have been granted. Except as set forth above, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its Subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or its
Subsidiaries, and no obligations of the Company or its Subsidiaries to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or its
Subsidiaries or other similar rights (collectively, "Company Securities"). There
are no outstanding obligations of the Company or its Subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities.
(b) Except as set forth in Section 2.2(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of each Subsidiary is owned by
the Company, directly or indirectly, free and clear of any Lien (as hereinafter
defined) or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of the Company or its Subsidiaries issued and
outstanding that are convertible into or exchangeable for, no options or other
rights to acquire from the Company or its Subsidiaries, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or other
ownership interests in, or any other securities of, any Subsidiary. There are no
outstanding contractual obligations of the Company or its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any Subsidiary. For purposes of this Agreement,
"Lien" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
(c) The Company Common Stock constitutes the only class of equity
securities of the Company registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
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SECTION 2.3. AUTHORITY RELATIVE TO THIS AGREEMENT; CONSENTS AND
APPROVALS.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Company Common Stock). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) The Company Board has duly and validly approved, and taken all
corporate actions required to be taken by the Company Board for the consummation
of the transactions contemplated hereby and resolved to recommend that the
stockholders of the Company approve and adopt this Agreement; provided, however,
that such approval and recommendation may be withdrawn, modified or amended
subject to Section 4.2 and Article 6 of this Agreement.
SECTION 2.4. SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and documents with
the Securities and Exchange Commission ("SEC") since October 31, 1995 (the "SEC
Reports"), each of which has complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. The Company has delivered to
Acquisition, in the form filed with the SEC (including any amendments thereto),
(i) its Annual Reports on Form 10-K for each of the fiscal years ended October
31, 1996 and 1997, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
December 31, 1995, and (iii) all other reports or registration statements filed
by the Company with the SEC since October 31, 1995. None of such forms, reports
or documents, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when filed,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of the Company
and its Subsidiaries included in the Annual Reports on Form 10-K referred to in
the second sentence of this Section 2.4(a) and the unaudited consolidated
interim financial statements of the Company and its Subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 1998 fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
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(b) The Company has heretofore made available to Acquisition a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the SEC, to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
SECTION 2.5. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement (as defined in Section 4.4(a)) will, at the respective times
that the Proxy Statement or any amendments or supplements thereto are filed with
the SEC and are first published or sent or given to holders of Shares, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 2.6. 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, the Exchange Act, state
securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act") and the filing and recordation of a Certificate
of Merger as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not have a Company Material
Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby will (a) conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws (or similar governing
documents) of the Company, (b) except as set forth in Section 2.6 of the Company
Disclosure Schedule, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) 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 the
Company or any of its Subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound, or (c) violate any order,
writ, injunction, decree, law, statute, Company Permit (as defined in Section
2.13), rule or regulation applicable to the Company or any of its Subsidiaries
or any of their respective properties or assets, except in the case of (b) or
(c) for violations, breaches or defaults which would not have, individually or
in the aggregate, a Company Material Adverse Effect.
SECTION 2.7. TITLE TO ASSETS. The Company and each of its Subsidiaries
has good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties, as reflected in the
most recent balance sheet, except for properties and assets that have been
disposed of in the ordinary course of business since the date of such balance
sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances
of any nature whatsoever, except (i) the lien of current taxes, payments of
which are not yet delinquent, (ii) such imperfections in title and easements and
encumbrances, if any, as are not substantial in character, amount or extent and
do not materially detract from the value, or interfere with the present use of
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the property subject thereto or affected thereby, or otherwise materially impair
the Company's business operations (in the manner presently carried on by the
Company), (iii) as disclosed in the Company SEC Reports, (iv) mortgages incurred
in the ordinary course of business, or (v) except as set forth in Section 2.7 of
the Company Disclosure Schedule and except for such matters which, singly or in
the aggregate, could not reasonably be expected to cause a Company Material
Adverse Effect. All leases under which the Company leases real or personal
property have been delivered to Acquisition and are in good standing, valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event which with notice or lapse of time
or both would become a default other than defaults under such leases which in
the aggregate will not have a Company Material Adverse Effect.
SECTION 2.8. COMPANY PRODUCTS. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, there are no statements, citations or decisions by
any Governmental Entity specifically stating that any company product is
defective or unsafe or fails to meet any standards promulgated by any such
Governmental Entity. Except as set forth in Section 2.8 of the Company
Disclosure Schedule, there have been no recalls ordered by any such Governmental
Entity with respect to any company product. Except as set forth in Section 2.8
of the Company Disclosure Schedule, to the knowledge of the Company or any of
its Subsidiaries, there is no (a) fact relating to any company product that may
impose upon the Company or any of its Subsidiaries a duty to recall any company
product or a duty to warn customers of a defect or of any hazardous substance in
any company product, (b) latent or overt design, manufacturing or other defect
in any company product, (c) company product, the reasonably foreseeable use of
which may expose any person to any hazardous substance or (d) material liability
for warranty claims or returns with respect to any company product not fully
reflected in the SEC Reports.
SECTION 2.9. POTENTIAL CONFLICTS OF INTEREST. Except as set forth in
Section 2.9 of the Company Disclosure Schedule, (a) no officer, director or
affiliate of the Company or any of its Subsidiaries, (b) no relative or spouse
(or relative of such spouse) of any such officer, director and (c) no entity
controlled by one or more of the foregoing:
(A) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of the Company or any of its
Subsidiaries;
(B) owns, directly or indirectly, in whole or in part, any
property that the Company or any of its Subsidiaries uses in the conduct of its
business;
(C) has any claim whatsoever against, or owes any amount to, the
Company or any of its Subsidiaries, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under benefit plans,
and similar matters and agreements existing on the date hereof; or
(D) is party to a transaction that is required to be disclosed
under Item 404 of Regulation S-K.
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SECTION 2.10. NO DEFAULT. Except as set forth in Section 2.10 of the
Company Disclosure Schedule, none of the Company or its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its Certificate of Incorporation or Bylaws (or similar
governing documents), (b) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound or (c) any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company, its
Subsidiaries or any of their respective properties or assets, except in the case
of (b) or (c) for violations, breaches or defaults that would not have,
individually or in the aggregate, a Company Material Adverse Effect.
SECTION 2.11. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. Except as
set forth in Section 2.11 of the Company Disclosure Schedule, as of May 4, 1998,
none of the Company or its Subsidiaries had any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of the Company and its Subsidiaries ("Liabilities")
(including the notes thereto) or which would have, individually or in the
aggregate, a Company Material Adverse Effect. Except as publicly disclosed by
the Company and except as set forth in Section 2.11 of the Company Disclosure
Schedule, since May 4, 1998, none of the Company or its Subsidiaries has
incurred any Liabilities of any nature, whether or not accrued, contingent or
otherwise, which would have, and there have been no events, changes or effects
with respect to the Company or its Subsidiaries having, individually or in the
aggregate, a Company Material Adverse Effect. Except as publicly disclosed and
except as disclosed in Section 2.11 of the Company Disclosure Schedule and
Section 4.1 of the Company Disclosure Schedule, since May 4, 1998, the Company
and its Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been any event, occurrence or
development or state of circumstances or facts as described in Sections 4.1(a)
through 4.1(r).
For the purposes of this Agreement, "publicly disclosed" means
information included in the Company's Quarterly Reports on Form 10-Q or Annual
Reports on Form 10-K.
SECTION 2.12. LITIGATION. Except as set forth in Section 2.12 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of their respective properties or
assets before any Governmental Entity that could reasonably be expected to be
adversely determined, and if adversely determined, could reasonably be expected
to have a Company Material Adverse Effect or which would prevent or
substantially delay the consummation of the transactions contemplated by this
Agreement. Except as set forth in Section 2.12, none of the Company or its
Subsidiaries is subject to any outstanding order, writ, injunction, decree or
order of any Governmental Entity that would have, individually or in the
aggregate, a Company Material Adverse Effect or would prevent or delay the
consummation of the transactions contemplated hereby.
SECTION 2.13. COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 2.13 of the Company Disclosure Schedule, the Company and its
Subsidiaries hold all permits, licenses,
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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 such permits, licenses, variances,
exemptions, orders and approvals which would not have, individually or in the
aggregate, a Company Material Adverse Effect. Except as publicly disclosed by
the Company, the Company and its Subsidiaries are in compliance with the terms
of the Company Permits, except where the failure so to comply would not have a
Company Material Adverse Effect. Except as publicly disclosed by the Company,
the businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance, injunction, writ or regulation of any
Governmental Entity except that no representation or warranty is made in this
Section 2.13 with respect to Environmental Laws (as defined in Section 2.15) and
except for violations or possible violations which do not, and, insofar as
reasonably can be foreseen, in the future will not have, individually or in the
aggregate, a Company Material Adverse Effect. Except as set forth in Section
2.13 of the Company Disclosure Schedule, no investigation or review by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor, to the best knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same, other than, in each case, those which the Company reasonably believes
will not have a Company Material Adverse Effect.
SECTION 2.14. EMPLOYEE PLANS.
(a) Section 2.14 of the Company Disclosure Schedule identifies each
employment, severance or similar contract or arrangement and each plan, policy,
fund, program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option, or other stock related rights
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements) health or medical
benefits, disability benefits, worker's compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) under which the Company or any of its Subsidiaries has or in the
future could have any liability ("Employee Plans"). There is no Employee Plan
which (i) is a multiemployer plan (within the meaning of Section 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) is a
plan, other than a multiemployer plan, subject to Title IV of ERISA (a "Title IV
Plan") or (iii) is maintained in connection with any trust described in Section
501(c)(9) of the Code.
(b) The Company has furnished to Acquisition copies of the Employee
Plans (and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof together with the most recent annual report
(Form 5500 including, if applicable, Section B thereto), the most recent
actuarial valuation report prepared in connection with any Employee Plan.
(c) No transaction prohibited by Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any employee benefit plan or arrangement
which is covered by Title I of ERISA which transaction has or can reasonably be
expected to cause the Company or any of its Subsidiaries to incur any liability
under ERISA, the Code or otherwise, excluding transactions effected pursuant to
and in compliance with a statutory or administrative exemption.
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(d) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
since its adoption; each trust created under any such Plan is exempt from tax
under Section 501(a) of the Code and has been so exempt since its creation. Each
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.
(e) Neither the Company nor any subsidiaries has any current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired, former or current employees of
the Company, except as required under applicable law.
(f) Other than as described in Section 2.14 of the Company Disclosure
Schedule, no employee or former employee of the Company or any subsidiary will
become entitled to any bonus, retirement, severance, job security or similar
benefit or enhanced such benefit (including acceleration of vesting or exercise
of an incentive award) as a result of the transactions contemplated hereby.
(g) There are no unfunded obligations under any Employee Plan which are
not fully reflected on the most recent financial statements of the Company.
SECTION 2.15. ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Except as set forth in Section 2.15 of the Company Disclosure
Schedule, (i) each of the Company and its Subsidiaries is in compliance with all
applicable federal, state and local 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)
(collectively, "Environmental Laws"), except for non-compliance that could not
reasonably be expected to be adversely determined, and if adversely determined,
could not reasonably be expected to have a Company Material Adverse Effect,
which compliance includes, but is not limited to, the possession by the Company
and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (ii) since July 1, 1992, none of the Company
or its Subsidiaries has received written notice of, or, to the best knowledge of
the Company, is the subject of, any material action, cause of action, claim,
investigation, demand or notice by any person or entity alleging liability under
or non-compliance with any Environmental Law (an "Environmental Claim"); and
(iii) to the best knowledge of the Company, there are no circumstances that are
reasonably likely to prevent or interfere with such material compliance in the
future.
(b) There are no Environmental Claims that could reasonably be expected
to be adversely determined, and if adversely determined, could reasonably be
expected to have a Company Material Adverse Effect that are pending or, to the
best knowledge of the Company, threatened against the Company or its
Subsidiaries or, to the best knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
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(c) There is no condition on, in or under any property currently or
formerly owned, leased or operated by the Company or its Subsidiaries in
violation of, or for which there is an obligation under, Environmental Laws
where such violation or obligation is reasonably likely to result in a Company
Material Adverse Effect.
SECTION 2.16. INTELLECTUAL PROPERTY; SOFTWARE.
(a) Each of the Company and its Subsidiaries owns or possesses adequate
licenses or other valid rights to use, practice, sell, license and dispose of,
without restriction, all United States and foreign patents, trademarks, trade
names, service marks, copyrights, trade secrets (the "Intellectual Property
Rights") and applications therefor that are necessary to or are used in
connection with the business of the Company and its Subsidiaries, free and clear
of any Liens, except where the failure to own or possess valid rights to use
such Intellectual Property Rights would not have a Company Material Adverse
Effect.
(b) The validity, enforceability, ownership of or the right to use,
sell, license or dispose of any Intellectual Property Rights of the Company or
its Subsidiaries is not being questioned in any pending, or to the knowledge of
the Company, threatened claim, proceeding, office action or litigation, and
except as set forth in Section 2.16(b) of the Company Disclosure Schedule, the
conduct of the business of the Company and its Subsidiaries as now conducted
does not, to the best knowledge of the Company, infringe any Intellectual
Property Rights of others except in each case where such would not have a
Company Material Adverse Effect. The consummation of the transactions completed
hereby will not result in the loss or impairment of any Company Intellectual
Property Rights.
(c) Except as set forth on Section 2.16(b) of the Company Disclosure
Schedule, and except where it would not reasonably be expected to have a Company
Material Adverse Effect, to the knowledge of the Company, no third party is
infringing upon or otherwise violating any Intellectual Property Rights of the
Company or its Subsidiaries.
SECTION 2.17. YEAR 2000 COMPLIANCE. The Company believes that its
ongoing computer system upgrading program will result in each system, comprised
of software, hardware, databases or embedded control systems (microprocessor
controlled, robotic or other device) (collectively, a "System"), that
constitutes any material part of, or is used in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company and its Subsidiaries not being materially adversely
affected by the advent of the year 2000, the advent of the twenty-first century
or the transition from the twentieth century through the year 2000 and into the
twenty-first century, and that all material Systems will operate to accurately
process date data (including but not limited to calculating, comparing and
sequencing) from, into and between year 1999 and 2000. The Company believes that
neither the Company nor any of its Subsidiaries will incur material expenses
arising from or relating to the failure of any of its Systems as a result of the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000.
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SECTION 2.18. GOVERNMENT CONTRACTS.
(a) Neither the Company, any affiliate of the Company, nor any of the
Company's directors, officers, employees, agents or consultants is (or for the
last three years has been) (i) except as set forth in Section 2.18(a) of the
Company Disclosure Schedule, under administrative, civil or criminal
investigation, indictment or information, audit or internal investigation with
respect to any alleged irregularity, misstatement or omission regarding a
Government Contract or Bid; or (ii) suspended or debarred from doing business
with the U.S. Government or any state or local government or declared
nonresponsible or ineligible for government contracting. Except as set forth in
Section 2.18(a) of the Company Disclosure Schedule, neither the Company nor any
affiliate of the Company has made a voluntary disclosure to any U.S. Government,
state or local government entity with respect to any alleged irregularity,
misstatement or omission arising under or relating to any Government Contract or
Bid. Except as set forth in Section 2.18(a) of the Company Disclosure Schedule,
the Company knows of no circumstances that would warrant the institution of
suspension or debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of the Company in the future.
(b) Neither the U.S. Government, any state or local government nor any
prime contractor, subcontractor or vendor has asserted any claim or initiated
any dispute proceeding against the Company, nor has the Company asserted any
claim or initiated any dispute proceeding, directly or indirectly, against any
such party, concerning any Government Contract or Bid. There are no facts of
which the Company is aware upon which such a claim or dispute proceeding may be
based in the future.
(c) For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) "Bid" means any quotation, bid or proposal by the Company or any
of its Affiliates which, if accepted or awarded, would lead to a contract with
the U.S. Government or any other entity, including a prime contractor or a
higher tier subcontractor to the U.S. Government, for the design, manufacture or
sale of products or the provision of services by the Company.
(ii) "Government Contract" means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, Bid, change order, arrangement
or other commitment of any kind relating to the business of the Company between
the Company and (a) the U.S. Government, (b) any prime contractor to the U.S.
Government or (c) any subcontractor with respect to any contract described in
clause (a) or (b).
(iii) "U.S. Government" means the United States government including
any and all agencies, commissions, branches, instrumentalities and departments
thereof.
SECTION 2.19. CERTAIN BUSINESS PRACTICES. None of the Company, any of
its Subsidiaries or any directors, officers, agents or employees of the Company
or any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses
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related to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
SECTION 2.20. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve and adopt this
Agreement.
SECTION 2.21. LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its Subsidiaries the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization, nor is there pending or, to the knowledge
of the Company, threatened, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its Subsidiaries.
SECTION 2.22. INSURANCE. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have complied
in all material respects with provisions of each Insurance Policy under which it
is the insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to the Company's
knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the Insurance Policies have been filed in a timely
fashion.
SECTION 2.23. SUPPLIERS AND CUSTOMERS. The documents and information
supplied by the Company to Acquisition in connection with this Agreement with
respect to the relationships and volumes of business done with significant
suppliers and customers was accurate in all material respects. During the last
twelve months, the Company has received no notices of termination or written
threats of termination from any of the five largest suppliers or the five
largest customers of the Company and its Subsidiaries.
SECTION 2.24. TAX MATTERS. Except as set forth in Section 2.24 of the
Company Disclosure Schedule:
(a) All federal, state, local and foreign Tax Returns (as defined below)
required to be filed by or on behalf of any of the Company or its Subsidiaries
have been timely filed and all such Tax Returns are true and complete in all
material respects. All material Taxes (as defined below) owed by the Company or
its Subsidiaries for each taxable period have been paid. "Tax Return" means any
return, report or information statement required to be filed with respect to
Taxes. "Taxes" means all federal, state, local and foreign taxes, including,
without limitation, income,
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profits, franchise, employment, transfer, withholding, property, excise, sales
and use taxes (including interest and penalties thereon and additions thereto).
(b) No audit examination, deficiency assessment, refund litigation or
other administrative or court proceeding with respect to any Tax Returns or
Taxes of the Company or its Subsidiaries is pending or, to the knowledge of the
Company, threatened. There are no material unpaid Tax deficiency assessments or
adjustments concerning any Tax Return or any Tax liability of the Company or its
Subsidiaries.
(c) There are no outstanding agreements or waivers to extend the period
of limitations for the filing of any Tax Return of the Company or its
Subsidiaries or the assessment or collection of any Tax from the Company or its
Subsidiaries and no power of attorney relating to any Tax matters is currently
in force. There are no closing agreements pursuant to Section 7121 of the
Internal Revenue Code of 1986, as amended (the "Code"), currently in force with
respect to the Company or any of its Subsidiaries.
(d) Each of the Company and its Subsidiaries has withheld and timely
deposited or paid all material Taxes required to have been withheld and
deposited or paid in connection with amounts paid or owing to any independent
contractor, stockholder or other third party.
(e) Neither the Company nor its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by any of them.
(f) No property owned by the Company or its Subsidiaries is property
that Acquisition or the Company or its Subsidiaries is or will be required to
treat as being owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, is tax-exempt
use property within the meaning of Section 168(h)(1) of the Code or tax-exempt
bond financed property within the meaning of Section 168(g) of the Code.
(g) Neither the Company nor its Subsidiaries is now, or during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, was, a
United States real property holding corporation within the meaning of Section
897 of the Code.
(h) Neither the Company nor any of its Subsidiaries is a party to, bound
by or subject to any obligations to indemnify or reimburse any other person
(excluding the Company or any of its Subsidiaries) for Taxes.
(i) Neither the Company nor any of its Subsidiaries has agreed to or is
required to make any adjustments under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
SECTION 2.25. BROKERS. No broker, finder or investment banker (other
than Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation (the "Financial
Advisor") pursuant to an arrangement that has been disclosed to Acquisition
prior to the date hereof) is entitled to any brokerage,
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finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company.
SECTION 2.26. RESTRICTIONS ON BUSINESS ACTIVITIES. There is no judgment,
injunction, order or decree binding upon the Company or any of its Subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted.
SECTION 2.27. NO OTHER REPRESENTATIONS OR WARRANTIES. No representations
or warranties have been made by or on behalf of the Company or any of its
Subsidiaries in connection with the Merger and the transactions contemplated by
this Agreement other than those expressly set forth in this Article 2. Without
limiting the generality of the foregoing, no representations or warranties are
being made with respect to financial projections or the future financial
performance or prospects of the Company, its Subsidiaries or their respective
businesses.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION
Acquisition hereby represents and warrants to the Company as follows:
SECTION 3.1. ORGANIZATION.
(a) Acquisition is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Material Adverse Effect (as defined below) on Acquisition. When used in
connection with Acquisition, the term "Acquisition Material Adverse Effect"
means any change or effect that is or is reasonably likely to be materially
adverse to the business, assets, results of operations or condition (financial
or otherwise) of Acquisition and its subsidiaries, taken as a whole, other than
any change or effect arising out of general economic conditions unrelated to any
businesses in which Acquisition or any of its subsidiaries is engaged.
(b) Acquisition has heretofore delivered to the Company accurate and
complete copies of the Certificate of Incorporation and Bylaws, as currently in
effect, of Acquisition. Each of Acquisition and its subsidiaries is duly
qualified or licensed and in good standing to do business 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
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have an Acquisition Material Adverse Effect.
SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Acquisition has all
necessary power and authority to execute and deliver this Agreement and to
consummate the transactions
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contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized, and no other proceedings on the part of Acquisition is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Acquisition
and constitutes a valid, legal and binding agreement of Acquisition, enforceable
against Acquisition in accordance with its terms.
SECTION 3.3. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Acquisition for inclusion or incorporation by reference in the
Proxy Statement (as defined in Section 4.4(a)) will, at the respective times
that the Proxy Statement or any amendments or supplements thereto are filed with
the SEC and are first published or sent or given to holders of shares of Company
Common Stock, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
SECTION 3.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth
and accuracy of the Company's representations and warranties contained in
Section 2.6, except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act and the
filing and recordation of a Certificate of Merger as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution and delivery by
Acquisition of this Agreement or the consummation by Acquisition of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have an Acquisition Material Adverse Effect or have a
material adverse affect on the ability of Acquisition to consummate the Merger.
Neither the execution, delivery and performance of this Agreement by Acquisition
nor the consummation by Acquisition of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or Bylaws (or similar governing
documents) of Acquisition or any of its subsidiaries, (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) 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 Acquisition or any of its subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (c) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Acquisition or any of its subsidiaries
or any of its respective properties or assets, except in the case of (b) or (c)
for violations, breaches or defaults which would not have an Acquisition
Material Adverse Effect or have a material adverse effect on the ability of
Acquisition to consummate the Merger.
SECTION 3.5. NO DEFAULT. Acquisition is not in default or violation (and
no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (a)
its certificate or articles of incorporation or Bylaws (or similar governing
documents), (b) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Acquisition is now a party
or by which it or any of its respective properties or assets may be bound or (c)
any order, writ, injunction, decree,
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law, statute, rule or regulation applicable to Acquisition or any of its
respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults that would not have an Acquisition Material
Adverse Effect or have a material adverse effect on the ability of Acquisition
to consummate the Merger.
SECTION 3.6. AVAILABILITY OF FINANCING. Acquisition has received valid
and enforceable commitments from Bankers Trust Company and Bankers Trust
Corporation (the "Commitments"), copies of which have been delivered to the
Company, to provide an aggregate of $203,000,000, including approximately
$10,500,000 to cover fees and expenses, of the funds necessary to purchase
shares of Company Common Stock in the Merger, which Commitments are conditioned
only upon the satisfaction of Acquisition's conditions contained herein.
SECTION 3.7. NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization, the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability or engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person or entity.
SECTION 3.8. NO OTHER REPRESENTATIONS OR WARRANTIES. No representations
or warranties are made by or on behalf of Acquisition in connection with the
transactions contemplated by this Agreement other than those expressly set forth
in this Article 3. Without limiting the generality of the foregoing, no
representations or warranties are being made with respect to financial
projections or the future financial performance or prospects of Acquisition or
its business.
ARTICLE 4
COVENANTS
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement, during the period from the date hereof to the Effective Time,
the Company will not, and will not permit any of its Subsidiaries to conduct
their operations otherwise than in the ordinary course of business consistent
with past practice. Without limiting the generality of the foregoing, and except
as otherwise expressly provided in this Agreement, prior to the Effective Time,
the Company will not, without the prior written consent of Acquisition, and will
not permit any of its Subsidiaries to:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as contemplated herein) the terms of the
Company Plan or authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
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issuance or sale of shares of Company Common Stock pursuant to the exercise of
Company Stock Options;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) or make any direct or indirect
redemption, retirement or purchase in respect of its capital stock, or redeem or
otherwise acquire any Company Securities or any securities of its Subsidiaries;
(d) except for short-term bank borrowings in the ordinary course of
business, incur any indebtedness for borrowed money;
(e) reduce its cash or short-term investment or their equivalent, other
than to meet cash needs arising in the ordinary course of business, consistent
with past practices;
(f) waive any material right under any contract or other agreement of
the type required to be set forth on any Section hereto;
(g) materially change any of its business policies, including
advertising, investment, marketing, pricing, purchasing, production, personnel,
sales, returns, budget or product acquisition policies;
(h) make any loan or advance to any of its stockholders, officers,
directors, employees, consultants, agents or other representatives (other than
travel advances made in the ordinary course of business), or make any other loan
or advance otherwise than in the ordinary course of business;
(i) terminate or fail to renew any contract or other agreement, the
termination of which or failure to renew would have a Company Material Adverse
Effect;
(j) (i) incur or assume any long-term or short-term debt or issue any
debt securities, except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and its
Subsidiaries taken as a whole and except for indebtedness not exceeding
$10,000,000 in the aggregate; (ii) except as described in Section 4.1 of the
Company Disclosure Schedule, 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
consistent with past practice and in amounts not material to the Company and its
Subsidiaries taken as a whole and except for obligations of its Subsidiaries;
(iii) except for investments not exceeding $5,000,000 in the aggregate, make any
loans, advances or capital contributions to, or investments in, any other person
(other than to its Subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past practice and
in amounts not material to the maker of such loan or advance); (iv) except as
described in Section 4.1 of the Company Disclosure Schedule, pledge or otherwise
encumber shares of capital stock of the Company or its Subsidiaries; or (v)
except as described in Section 4.1, mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon except for Liens securing indebtedness not exceeding $10,000,000 in
the aggregate;
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(k) except as may be required by law or as contemplated by this
Agreement, enter into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any manner, or
(except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, except as required under
existing agreements and except for the payment of bonuses and severance payments
in the ordinary course of business generally consistent with past practice)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan and arrangement
as in effect as of the date hereof (including, without limitation, the granting
of stock appreciation rights or performance units);
(l) except as described in Section 4.1 of the Company Disclosure
Schedule or with the consent of Acquisition acquire, sell, lease or dispose of
any assets outside the ordinary course of business or any assets which have a
value in excess of $1,000,000;
(m) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(n) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein (except for transactions having an
aggregate value not exceeding $5,000,000 in the aggregate); (ii) authorize or
make any new capital expenditure or expenditures which, individually, is in
excess of $1,000,000 or, in the aggregate, are in excess of $5,000,000;
provided, however, that none of the foregoing shall limit any capital
expenditure already included in the Company's 1998 capital expenditure budget
previously provided to Acquisition; or (iii) enter into or amend any contract,
agreement, commitment or arrangement providing for the taking of any action that
would be prohibited hereunder;
(o) make any tax election or settle or compromise any income tax
liability material to the Company and its Subsidiaries taken as a whole;
(p) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
Subsidiaries at May 4, 1998 or incurred in the ordinary course of business
consistent with past practice;
(q) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
(r) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(r) or any action which would make any
of the representations or
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warranties of the Company contained in this Agreement untrue or incorrect as of
the date when made.
SECTION 4.2. OTHER POTENTIAL ACQUIRERS.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its Subsidiaries (including officers, directors, representatives and agents
of the Company and its Subsidiaries) to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with or provide
information to any corporation, partnership, person or other entity or group
except Acquisition concerning any merger, sale of assets, sale of or tender
offer for its common stock or similar actions (any such transactions being
referred to herein as "Acquisition Transactions") provided, however, that
nothing herein shall prevent the Board of Directors of the Company from taking
and disclosing to the Company's stockholders a position contemplated by Rules
14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender
offer.
(b) Notwithstanding the provisions of paragraph (a) above, the Company
may, in response to an unsolicited written proposal with respect to an
Acquisition Transaction, furnish information to a financially capable
corporation, partnership, person or other entity or group (a "Potential
Acquirer") pursuant to appropriate confidentiality agreements and may
participate in discussions and negotiate with such Potential Acquirer concerning
any inquiry or proposal to acquire the Company in an Acquisition Transaction or
negotiate with such Potential Acquirer if (i) the Company shall have given not
less than two (2) business days' advance written notice to Acquisition of the
Company's intention to do so and (ii) the Company Board is advised by one or
more of its independent financial advisors that providing information to the
Potential Acquirer is likely to lead to an Acquisition Transaction on terms that
would yield a higher value to the Company's stockholders than the Merger and is
in furtherance of the best interests of the Company's stockholders.
(c) In the event the Company shall determine to provide any information
or negotiate as described in paragraph (b) above, or shall receive any request,
inquiry proposals or offer of the type referred to in paragraph (b) above, it
shall (i) immediately provide Acquisition with a copy of all information being
provided to the third party, (ii) promptly inform Acquisition that information
is to be provided, that negotiations are to take place or that an offer has been
received and (iii) if a request, inquiry, proposal or offer has been received,
furnish to Acquisition a description of the material terms thereof and, unless
the Company Board concluded that such disclosure is inconsistent with its
fiduciary duties under applicable law, furnish to Acquisition the identity of
the person receiving such information or the proponent of such offer, if
applicable.
(d) The Company agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company
is a party, unless the Company Board shall have determined in good faith, that
failing to release such third party or waive such provisions would constitute a
breach of the fiduciary duties of the Company Board under applicable law.
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SECTION 4.3. ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time, the Company will
provide to Acquisition and its authorized representatives reasonable access to
all employees, plants, offices, warehouses and other facilities and to all books
and records of the Company and its Subsidiaries, will permit Acquisition to make
such inspections as Acquisition may reasonably require and will cause the
Company's officers and those of its subsidiaries to furnish Acquisition with
such financial and operating data and other information with respect to the
business and properties of the Company and its Subsidiaries as Acquisition may
from time to time reasonably request.
(b) Acquisition will hold and will cause its consultants and advisors to
hold in confidence all documents and information concerning the Company and its
Subsidiaries furnished to Acquisition in connection with the transactions
contemplated by this Agreement pursuant to the terms of that certain
Confidentiality Agreement entered into between the Company and X.X. Xxxxxx &
Company dated March 1, 1998.
SECTION 4.4. STOCKHOLDERS MEETING.
(a) The Company shall, as promptly as practicable, take, in accordance
with applicable law and its articles of incorporation and by-laws, all action
necessary to convene a meeting of holders of shares of Company Common Stock (the
"Stockholders Meeting") to consider and vote upon the approval of this
Agreement. The Company shall promptly prepare and file with the SEC a proxy
statement for the solicitation of a vote of holders of shares of Company Common
Stock approving the Merger (the "Proxy Statement"), which shall include the
recommendation of the Company Board that stockholders of the Company vote in
favor of the approval and adoption of this Agreement and the written opinion of
the Financial Advisor that the cash consideration to be received by the
stockholders of the Company, other than those set forth on Exhibit A, pursuant
to the Merger is fair to such stockholders from a financial point of view. The
Company shall use all reasonable efforts to have the Proxy Statement cleared by
the SEC as promptly as practicable after such filing, and promptly thereafter
mail the Proxy Statement to the stockholders of the Company. The Company shall
also use its best efforts to obtain all necessary state securities law or "blue
sky" permits and approvals required in connection with the Merger and to
consummate the other transactions contemplated by this Agreement and will pay
all expenses incident thereto.
SECTION 4.5. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions herein provided, each party agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Proxy Statement, any filings
that may be required under the HSR Act and any amendments thereto; (b) the
taking of all action reasonably necessary, proper or advisable to secure any
necessary consents under existing debt obligations of the Company and its
Subsidiaries or to amend the notes, indentures or agreements relating thereto to
the extent required by such notes, indentures or agreements or redeem or
repurchase such debt obligations; (c) contesting any legal proceeding relating
to the Merger and (d) the execution of any additional instruments necessary to
consummate the transactions contemplated hereby. Subject to the terms
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and conditions of this Agreement, Acquisition agrees to use all reasonable
efforts to cause the Effective Time to occur as soon as practicable after the
shareholder vote with respect to the Merger. In case at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take all
such necessary action.
SECTION 4.6. CONSENTS. Acquisition and the Company each will use all
commercially reasonable efforts to obtain consents and/or waivers of all third
parties and Governmental Entities necessary, proper or advisable for the
consummation of the transactions contemplated by this Agreement.
SECTION 4.7. PUBLIC ANNOUNCEMENTS. Acquisition and the Company, as the
case may be, will consult with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with the Nasdaq Stock Market, as determined by Acquisition or the Company, as
the case may be.
SECTION 4.8. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) Acquisition agrees that all rights to indemnification or exculpation
now existing in favor of the directors, officers, employees and agents of the
Company and its Subsidiaries as provided in their respective charters or bylaws
(or other similar governing instruments) or otherwise in effect as of the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect. To the maximum
extent permitted by the DGCL, such indemnification shall be mandatory rather
than permissive and the Surviving Corporation shall advance expenses in
connection with such indemnification (subject to the Surviving Corporation's
receipt of an undertaking by the indemnified party to return such advanced
expenses to the Surviving Corporation if it is determined by a final,
non-appealable order of a court of competent jurisdiction that such indemnified
party is not entitled to retain such advanced expenses).
(b) Acquisition shall cause the Surviving Corporation to maintain in
effect for not less than five (5) years from the Effective Time the policies of
the directors' and officers' liability and fiduciary insurance most recently
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof so long
as such substitution does not result in gaps or lapses in coverage) with respect
to matters occurring prior to the Effective Time; provided, however, that in
satisfying its obligation under this Section, the Surviving Corporation shall
not be obligated to pay premiums in excess of 150% of the amount per annum
incurred by the Company in the twelve months ended at the Effective Time with
respect to such insurance, which amount has been disclosed to Acquisition.
(c) In the event the Surviving Corporation or its successor (i) is
consolidated with or merges into another person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any
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other person in a single transaction or a series of related transactions, then
in each such case Acquisition shall make or cause the successor or transferee of
the Surviving Corporation agree to comply in all material respects with the
terms of this Section 4.8.
SECTION 4.9. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Acquisition and Acquisition shall give prompt notice to the
Company concerning, (a) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty of the notifying party contained in this Agreement to be untrue or
inaccurate in any material respect as if made at the Effective Time and (b) any
material failure of the notifying party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 4.9
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 4.10. SEC FILINGS. Each of Acquisition and the Company shall
promptly provide the other party (or its counsel) with copies of all filings
made by the other party or any of its subsidiaries with the SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 4.11. NOTICE OF CERTAIN EVENTS. The Company shall promptly
notify Acquisition, and Acquisition shall promptly notify the Company, of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) with respect only to the Company, any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge,
threatened which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.9 or which relate to the
consummation of the transactions contemplated by this Agreement.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger is subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States
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governmental authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any waiting period applicable to the Merger and the other
transactions described in the recitals to this Agreement under the HSR Act shall
have terminated or expired, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby shall
have been either filed or received; and
SECTION 5.2. CONDITIONS TO OBLIGATIONS OF ACQUISITION. The obligation of
Acquisition to effect the Merger are also subject to the satisfaction or waiver
by Acquisition prior to the Effective Time of the following conditions:
(a) The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date it being understood that representations and warranties shall
be deemed to be true and correct unless the respects in which the
representations and warranties (without giving effect to any "materiality"
limitations or references to "material adverse effect" set forth therein) are
untrue or incorrect in the aggregate is likely to have a Company Material
Adverse Effect.
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
SECTION 5.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company prior to the Effective Time of the following conditions:
(a) The representations and warranties of Acquisition set forth in this
Agreement shall be true and correct in all materials respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date it being understood that representations and warranties shall
be deemed to be true and correct unless the respects in which the
representations and warranties (without giving effect to any "materiality"
limitations or references to "material adverse effect" set forth therein) are
untrue or incorrect in the aggregate is likely to have an Material Adverse
Effect on Acquisition
(b) Acquisition shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
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ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Acquisition and the Company;
(b) by Acquisition or the Company if (i) any court of competent
jurisdiction in the United States or other United States governmental authority
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by October 31, 1998 (unless otherwise
extended by the parties); provided that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that the Effective
Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Acquisition set forth in this
Agreement, or any representation or warranty of Acquisition shall have become
untrue, in either case if the respects in which the representations and
warranties made by Acquisition are inaccurate would in the aggregate have an
Acquisition Material Adverse Effect or materially adversely affect (or delay)
the consummation of the Merger, (ii) there shall have been a breach on the part
of Acquisition of any of their respective covenants or agreements hereunder
having an Acquisition Material Adverse Effect or materially adversely affecting
(or materially delaying) the consummation of the Merger, and Acquisition has not
cured such breach prior to ten (10) days following notice by the Company
thereof, provided that the Company has not breached any of its obligations
hereunder in a manner that proximately contributed to such breach by
Acquisition, (iii) the Company Board by a majority vote shall have determined in
its good faith judgment that it must do so in the exercise of its fiduciary
duties under the DGCL, provided that such termination under this clause (iii)
shall not be effective until payment of the fee required by Section 6.3(a) or
(iv) the Company shall have convened a meeting of its stockholders to vote upon
the merger and shall have failed to obtain the requisite vote of the
stockholders;
(d) by Acquisition if (i) the Company Board withdraws or modifies in
a manner materially adverse to Acquisition the approval or recommendation of the
Merger or shall have recommended a Third Party Acquisition (as defined below),
(ii) a Third Party Acquisition occurs, (iii) there shall have been a breach of
any representation or warranty on the part of Company set forth in this
Agreement, or any representation or warranty of the Company shall have become
untrue, in either case if the respects in which the representations and
warranties made by the Company are inaccurate would in the aggregate have a
Company Material Adverse Effect or materially adversely affect (or delay) the
consummation of the Merger, (iv) there shall have been a breach on the part of
the Company of its covenants or agreements hereunder having, individually or in
the aggregate, a Company Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Merger, and, with
respect to clauses (iii) and (iv)
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above, the Company has not cured such breach prior to ten (10) days following
notice by Acquisition thereof, provided that, with respect to clauses (iii) and
(iv) above, Acquisition has not breached any of its respective obligations
hereunder in a manner that proximately contributed to such breach by the Company
or (v) Acquisition shall have discovered that any information supplied to it by
the Company (excluding, for such purposes, any projections or forecasts or other
forward looking information supplied by the Company), at the time provided to
Acquisition, contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and such misstatement
or omission would have a Company Material Adverse Effect.
SECTION 6.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement by either Acquisition or the Company as provided in Section 6.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party or its affiliates, directors, officers or
stockholders except (a) with respect to Sections 4.3(b), 6.2, 6.3 and 6.4 and
(b) to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 6.3. FEES AND EXPENSES.
(a) In the event that this Agreement shall be terminated pursuant to
Sections 6.1(c)(iii) or 6.1(d) and, within twelve (12) months thereafter, or
Section 6.1(c)(iv) and, within six (6) months thereafter, the Company enters
into an agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, then Acquisition would suffer direct and substantial
damages, which damages cannot be determined with reasonable certainty. To
compensate Acquisition for such damages, the Company shall pay to Acquisition
the amount of $6,000,000 as liquidated damages. It is specifically agreed that
the amount to be paid pursuant to this Section 6.3(a) represents liquidated
damages and not a penalty.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Acquisition or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of 50% or more of the
total assets of the Company and its Subsidiaries, taken as a whole; or (iii) the
acquisition by a Third Party of shares of Company Common Stock resulting in such
person holding at least 50% or more of the outstanding shares of Company Common
Stock.
(b) Upon the termination of this Agreement pursuant to Sections 6.1(d)
or 6.1(c)(iv) (unless such termination is also covered by Section 6.3(a)), the
Company shall reimburse Acquisition and its affiliates (not later than ten (10)
Business Days after submission of statements therefor) for all documented
out-of-pocket fees and expenses, not to exceed $750,000, reasonably incurred by
any of them or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, filing fees, printing and mailing costs, fees payable to
investment bankers, counsel to any of the foregoing, and accountants).
Acquisition has provided the Company with an estimate of the amount of such fees
and expenses and, if Acquisition shall have submitted a request for
reimbursement hereunder, will provide the Company in due course with invoices or
other reasonable evidence of such
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expenses upon request. The Company shall in any event pay the amount requested
(not to exceed $200,000), within ten (10) Business Days of such request, subject
to the Company's right to demand a return of any portion as to which invoices
are not received in due course. Nothing in this Section 6.3(b) shall relieve any
party from any liability for breach of this Agreement.
(c) Upon the termination of this Agreement pursuant to Sections
6.1(c)(i) or (ii) Acquisition shall reimburse the Company and its affiliates
(not later than ten (10) Business Days after submission of statements therefor)
for all documented out-of-pocket fees and expenses, not to exceed $750,000,
reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). The Company has provided Acquisition with an estimate of the
amount of such fees and expenses and, if the Company shall have submitted a
request for reimbursement hereunder, will provide Acquisition in due course with
invoices or other reasonable evidence of such expenses upon request. Acquisition
shall in any event pay the amount requested (not to exceed $200,000) within ten
(10) Business Days of such request, subject to Acquisition's right to demand a
return of any portion as to which invoices are not received in due course.
Nothing in this Section 6.3(c) shall relieve any party from any liability for
breach of this Agreement.
(d) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 6.4. LIMITATION ON DAMAGES In the event of a breach of this
Agreement by any party hereto, the breaching party shall be liable, in
accordance with the provisions of this Agreement, for the consequences of such
breach (in addition to all documented out-of-pocket fees and expenses
reimbursable under Sections 6.3(b) or (c)); provided that, no breaching party
shall be liable for more than $15,000,000.
SECTION 6.5. AMENDMENT. This Agreement may be amended by action taken by
the Company and Acquisition at any time before or after approval of the Merger
by the stockholders of the Company (if required by applicable law) but, after
any such approval, no amendment shall be made which requires the approval of
such stockholders under applicable law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties.
SECTION 6.6. EXTENSION; WAIVER. At any time prior to the Effective Time,
each party may (a) extend the time for the performance of any of the obligations
or other acts of the other party or parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of such rights.
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ARTICLE 7
MISCELLANEOUS
SECTION 7.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
SECTION 7.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided,
however, that Acquisition may assign any or all of its rights and obligations
under this Agreement to any wholly owned subsidiary of Acquisition, but no such
assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
SECTION 7.3. VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 7.4. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Acquisition: SDI Acquisition Corp.
c/o X.X. Xxxxxx & Company
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
with a copy to: Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
if to the Company to: Special Devices, Incorporated
00000 Xxxx Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: The President
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with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
000 X. Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Strong, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
SECTION 7.6. CONSTRUCTION; INTERPRETATION. The headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement. Article, section, exhibit,
Section, annex, party, preamble and recital references are to this Agreement
unless otherwise stated. No party, nor its respective counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions hereof,
and all provisions of this Agreement shall be construed according to their fair
meaning, and not strictly for or against any party.
SECTION 7.7. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party and its successors and permitted
assigns, and except as provided in Section 7.2, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 7.8. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
SPECIAL DEVICES, INCORPORATED,
a Delaware corporation
By: /s/ XXXXXX X. XXXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Title: President and CEO
-------------------------------
SDI ACQUISITION CORP., a Delaware
corporation
By: /s/ XXXXXX XXXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxxx
--------------------------------
Title: President
-------------------------------
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EXHIBIT A
Xxxxxx Xxxxxxxx 728,875 shares
Xxxxxx X. Xxxxxxx 66,250 shares
34
