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AGREEMENT AND PLAN OF MERGER
AMONG
X. X. XXXXX CO.
XXXXX USA, INC.
VSI ACQUISITION CO.
AND
VARITRONIC SYSTEMS, INC.
DATED AS OF FEBRUARY 27, 1996
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 27, 1996,
among X. X. XXXXX CO., a Wisconsin corporation (the "Purchaser"), VSI
ACQUISITION CO., a Minnesota corporation (the "Sub") and a wholly-owned
subsidiary of XXXXX USA, INC., a Wisconsin corporation ("BUSA"), which is
wholly-owned by the Purchaser, and VARITRONIC SYSTEMS, INC., a Minnesota
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Purchaser,
BUSA, the Sub and the Company have each determined that it is advisable and in
the best interest of each such respective Company and its stockholders, on the
terms and subject to the conditions of this Agreement, (a) for the Sub to
commence a cash tender offer to purchase all outstanding shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock") and (b)
following the consummation of the cash tender offer, to merge the Sub into the
Company; and
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving that Offer (as hereafter defined) and the Merger (as
hereafter defined) and recommending that the holders of the Common Stock accept
the Offer;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.01 hereof, as promptly as
practicable (but in any event within five business days of the date of this
Agreement), the Purchaser and BUSA shall cause the Sub to commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) an offer to purchase all outstanding shares of Common
Stock at a price of $17.50 per share, net to the seller in cash which shall
remain open for at least twenty (20) business days (the "Offer") and, subject
to the conditions of the Offer, shall use its best efforts to consummate the
Offer. The obligations of the Purchaser, BUSA and the Sub to consummate the
Offer, to accept for payment and to pay for any shares of Common Stock tendered
shall be subject only to those conditions set forth in Exhibit A hereto.
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(b) Neither the Purchaser, BUSA nor the Sub will,
without the prior written consent of the Board of Directors of the Company,
decrease the amount or change the form of the consideration payable in the
Offer, decrease the number of shares of Common Stock sought pursuant to the
Offer, change the conditions to the Offer, impose additional conditions or
terms to the Offer, amend or waive the condition that there be validly tendered
and not properly withdrawn prior to the expiration of the Offer a number of
shares of Common Stock which when added to the number of shares of Common Stock
owned by the Purchaser and its affiliates constitutes at least a two-thirds of
the then outstanding shares of Common Stock on a fully diluted basis, or amend
any term of the Offer in any manner adverse to holders of shares of Common
Stock. Assuming the prior satisfaction or waiver of the conditions to the
Offer, the Purchaser covenants and agrees to accept for payment and pay for, in
accordance with the terms of the Offer, shares of Common Stock tendered
pursuant to the Offer as soon as permitted to do so under applicable law,
provided that the Purchaser, BUSA, and the Sub shall have the right, upon
consultation with the Company, to extend the Offer (if without such extension
the Purchaser would be unable to consummate the Offer) to a date not later than
the 30th business day following the commencement of the Offer or for such
longer period as may be required by law.
(c) Notwithstanding anything to the contrary in this
Agreement, the Purchaser, BUSA, and the Sub further agree that, subject to the
terms and conditions of this Agreement, in the event that the conditions to the
Offer set forth in paragraphs (a) or (b) of Exhibit A hereto shall occur or
exist (and shall not have been waived), the Sub shall, at the Company's
request, extend the Offer to a date not later than the 40th business day
following the commencement of the Offer; provided, however, if the conditions
set forth in paragraph (d) shall not have been satisfied solely due to the
Company's breach of the condition described therein, the Purchaser, BUSA, and
the Sub shall, if reasonably requested by the Company, extend the Offer for
five business days to enable the Company to cure such breach.
(d) As soon as practicable on or before the date of
commencement of the Offer, but not later than three (3) business days after the
Execution of this Agreement, the Purchaser, BUSA, and the Sub shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain the offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's common stockholders, shall not
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 were made, not
misleading, except that no representation is made by the Purchaser, BUSA, or
the Sub with respect to information supplied by
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the Company in writing for inclusion in the Offer Documents. The Purchaser,
BUSA, the Sub and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it
shall have become false or misleading in any material respect and the
Purchaser, BUSA, and the Sub each further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and
disseminated to the Company's common stockholders, in each case as and to the
extent required by applicable federal securities laws. The Purchaser, BUSA,
and the Sub agree to provide the Company and its counsel in writing with any
comments the Purchaser, BUSA, the Sub or their counsel may receive from the SEC
or its Staff with respect to the Offer Documents promptly after the receipt of
such comments.
SECTION 1.02 Company Actions. The Company hereby consents to
the Offer and represents that (a) its Board of Directors or a duly authorized
committee thereof (at a meeting duly called and held) has (i) determined that
the Offer and the Merger (as hereinafter defined) taken together, are fair to
the common stockholders of the Company and (ii) resolved, subject to its
fiduciary duties under applicable laws as advised by counsel, to recommend
acceptance of the Offer and approval and adoption of this Agreement by the
common stockholders of the Company, and (b) Brown, Gibbons, Lang & Company,
L.P. has advised the Company's Board of Directors that the $17.50 per share of
Common Stock cash consideration to be received by the Company's common
stockholders in the Offer and the Merger, taken together, is fair to such
stockholders from a financial point of view (other than the Purchaser and its
affiliates). The Company hereby agrees to file with the SEC as soon as
practicable after the commencement of the Offer a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") containing the recommendations described in the
first sentence of this Section 1.02. The Company, the Purchaser, BUSA, and the
Sub each agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and disseminated to the Company's common stockholders in each case and
to the extent required by applicable federal securities laws. The Company
agrees to provide the Purchaser, BUSA, and the Sub and their counsel, in
writing, with any comments the Company or its counsel may receive from the SEC
or its Staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments. Notwithstanding anything contained in this Section 1.02, if the
Board of Directors of the Company determines in the exercise of its fiduciary
duties to withdraw, modify or amend its recommendation, such withdrawal,
modification or amendment shall not constitute a breach of this Agreement. The
Company hereby consents to the inclusion in the Offer of the recommendation
referred to in the first sentence of this Section 1.02. In connection with the
Offer, the Company will promptly furnish the Purchaser with mailing labels,
security position listings and any available listing or
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computer file containing the names and addresses of the record holders of the
shares of Common Stock as of a recent date and will furnish the Purchaser with
such information and assistance as the Purchaser or its agents may reasonably
request in communicating the Offer to the common stockholders of the Company.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the documents constituting the Offer and any other
documents necessary to consummate the Merger, the Purchaser, BUSA, and the Sub
and each of their affiliates and associates shall hold in confidence the
information contained in any of such labels, listings and files, will use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated, will deliver to the Company the information and all
copies of such information then in their possession and in the possession of
their legal, accounting and financial advisors.
SECTION 1.03 Directors. (a) Promptly upon the purchase by the
Purchaser or any of its affiliates of such number of shares of Common Stock
which, when added to the number of shares of Common Stock beneficially owned by
the Purchaser and its affiliates, represents at least two-thirds of the
outstanding shares of Common Stock and from time to time thereafter, the
Purchaser shall be entitled to designate such number of directors, rounded up
to the next whole number but in no event more than one less than the total
number of directors, on the Board of Directors of the Company as will give the
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
the number of directors on the Board of Directors of the Company and the
percentage that such number of shares of Common Stock so owned bears to the
number of shares of Common Stock outstanding, and the Company shall, upon
request by the Purchaser, promptly, at the Company's election, either increase
the size of the Board of Directors of the Company or exercise its best efforts
to secure the resignations of such number of directors as is necessary to
enable the Purchaser's designees to be elected to the Board of Directors of the
Company and shall cause the Purchaser's designees to be so elected.
(b) The Company's obligations to appoint designees to
its Board of Directors shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03 and shall include in the Schedule 14D-9
such information with respect to the Company and its officers and directors as
is required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 1.03. The Purchaser will supply to the Company, in writing, and
be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
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ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the
Minnesota Business Corporations Act (the "Minnesota Law"), the Sub shall be
merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Article VII hereof. Following the Merger, the Company shall continue
as the surviving corporation (the "Surviving Corporation"), and the separate
corporate existence of the Sub shall cease.
SECTION 2.02 Effective Time. The Merger shall be consummated
by filing with the Minnesota Secretary of State a certificate of merger or
certificate of ownership and merger in such form as is required by, and
executed in accordance with, the relevant provisions of the Minnesota Law (the
time of such filing or such other time as may be set forth in the certificate
of merger or certificate of ownership and merger being the "Effective Time").
SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the Minnesota Law. As of the Effective Time, the Company
shall be a wholly-owned subsidiary of the Purchaser.
SECTION 2.04 Articles of Incorporation and By-Laws. The
Articles of Incorporation and the By-Laws of the Company shall be the Articles
of Incorporation and By-Laws of the Surviving Corporation.
SECTION 2.05 Directors and Officers. The directors of the Sub
at the Effective Time shall become the directors of the Surviving Corporation
until their successors are duly elected and qualified. The officers of the
Company at the Effective Time shall become the officers of the Surviving
Corporation until their successors are duly appointed and qualified.
SECTION 2.06 Conversion of Shares. (a) Each share of Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares of Common Stock owned by the Purchaser or any affiliate of the
Purchaser or held in the treasury of the Company, and Dissenting Shares, as
defined in Section 3.01 hereof) shall, as of the Effective Time, and by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive $17.50 net to the holder in cash or any
higher price paid per share of Common Stock pursuant to the Offer (the "Merger
Consideration"), payable to the holder thereof, without interest thereon, upon
the surrender of the certificate formerly representing such share of Common
Stock. At and after the Effective Time, each holder of a certificate or
certificates that represented issued and outstanding shares of Common Stock
immediately prior to the Effective Time shall cease to have any rights as a
stockholder of the Company, except for the
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right to surrender such certificate or certificates in exchange for the Merger
Consideration or to perfect the right to receive payment for such shares
pursuant to Section 302A.471 of the Minnesota Law and Section 3.01 hereof if
such holder has validly exercised and not withdrawn such right to receive
payment for such shares.
(b) Each share of Common Stock held by the Purchaser
or any of its affiliates or held in the Company's treasury or by a subsidiary
of the Company shall, as of the Effective Time, and by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
and be canceled and be retired without payment of any consideration therefor.
(c) The Purchaser, BUSA, and the Sub acknowledge that
each share of Common Stock outstanding immediately prior to the date hereof
which was awarded as restricted stock pursuant to the Stock Option Plans (as
defined in Section 2.07 hereof) as of the date of acquisition of shares of
Common Stock pursuant to the Offer, will become fully vested and free of any
and all restrictions to which such shares of Common Stock are otherwise
subject.
SECTION 2.07 Stock Options. Prior to the purchase of shares of
Common Stock pursuant to the Offer, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Option Plans) shall adopt
such resolutions or take such other actions as are necessary to adjust the
terms of all outstanding stock options to purchase Common Stock ("Options")
heretofore granted to employees and directors under any stock option plan,
program or arrangement of the Company (all such stock option plans, employee
stock purchase plans, programs and arrangements shall be collectively referred
to as the "Stock Option Plans") to provide for the cancellation of such Options
as set forth in this Section 2.07. As of the date of the acquisition of shares
of Common Stock pursuant to the Offer, each Option then outstanding, whether or
not then fully exercisable, shall be canceled in exchange for a payment from
the Company (subject to any applicable withholding taxes) equal to the product
of (x) the total number of shares of Common Stock subject to such Option and
(y) the excess of the consideration paid in the Offer over the exercise price
per share of Common Stock subject to such Option, payable in cash on the date
of acquisition of the shares of Common Stock pursuant to the Offer. The
Purchaser shall make available to the Company on the date of payment for the
shares of Common Stock pursuant to the Offer, in the form of a loan payable on
the earlier of (i) the Effective Time, and (ii) May 31, 1996, bearing interest
per annum at the prime rate of the Firstar Bank Milwaukee, N.A., cash (except
for cash payments to be made pursuant to the penultimate sentence of this
Section 2.07) in an aggregate amount necessary to make the payments pursuant to
the preceding sentence. Except as provided herein, or as otherwise agreed to
by the parties (i) the Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any subsidiary, shall be deleted as of the Effective Time, and
(ii) the Company shall ensure
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that following the Effective Time no holder of an Option or any participant in
any Stock Option Plan or other plans, programs or arrangements shall have any
right thereunder to acquire equity securities of the Company, the Surviving
Corporation or any subsidiary thereof. Notwithstanding any provision of this
Section 2.07 to the contrary, any Option granted to an officer of the Company
listed on Schedule 2.07 within six months and one day of the date such Option
would otherwise be canceled pursuant to this Section 2.07 shall be canceled and
the payments provided for in this Section 2.07 shall be made six months and one
day following the date of such grant. At the Effective Time, pursuant to an
escrow agreement to be entered into by the parties hereto, the Purchaser shall
deposit or cause to be deposited with an escrow agent reasonably acceptable to
the Company, to be selected by the Purchaser, cash in an aggregate amount
necessary to make the payments pursuant to the preceding sentence. Except as
may be set forth on Schedule 2.07(b), or as contemplated by Section 7.01(a)
hereof, no consent of any stockholder of the Company is or may be required in
connection with the transactions contemplated by this Section 2.07.
SECTION 2.08 Conversion of Sub Common Stock. Each share of
common stock, par value $.01 per share, of the Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
SECTION 2.09 Stockholders' Meeting. If approval by the
Company's stockholders is required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in
accordance with applicable law:
(a) duly call, give notice of, convene and hold an
annual or special meeting (the "Stockholders' Meeting") of its stockholders as
soon as practicable following the expiration of the Offer for the purpose of
considering and taking action on this Agreement;
(b) subject to its fiduciary duties under applicable
laws as advised by counsel, include in the Proxy Statement (as hereinafter
defined) the recommendation of the Board of Directors that stockholders of the
Company vote in favor of the approval and adoption of this Agreement; and
(c) use its best efforts (i) to obtain and furnish the
information required to be included by it in the Proxy Statement, and, after
consultation with the Purchaser, respond promptly to any comments made by the
SEC with respect to the Proxy Statement and any preliminary version thereof and
cause the Proxy Statement to be mailed to its stockholders at the earliest
practicable time following the expiration of the Offer, and (ii) subject to
fiduciary duties of the Board of Directors under applicable law as advised by
counsel, to obtain the necessary approvals of the Merger and this Agreement by
its stockholders. The Purchaser agrees that, at the Stockholders' Meeting, all
of the shares of Common Stock
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acquired pursuant to the Offer or otherwise by the Purchaser, the Sub or any
other affiliate of the Purchaser will be voted in favor of the Merger and this
Agreement.
SECTION 2.10 Merger Without Meeting of Stockholders.
Notwithstanding the foregoing, if, following the completion of the Offer, the
Merger may be consummated under Minnesota Law without a vote of the Company's
stockholders, the parties hereto agree to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the acquisition of shares of Common Stock pursuant to the Offer, but in no
event later than thirty days thereafter.
SECTION 2.11 Closing. Upon the terms and subject to the
conditions hereof, as soon as practicable after consummation of the Offer, and
if required by law, after the vote of the stockholders of the Company in favor
of the adoption of this Agreement has been obtained, the Company (or the
Purchaser or the Sub, if appropriate) shall execute in the manner required by
the Minnesota Law and deliver to the Secretary of State of the State of
Minnesota the duly executed certificate of merger or certificate of ownership
and merger, and the parties shall take all such other and further actions as
may be required by law to make the Merger effective. Prior to the filing
referred to in this Section, a closing (the "Closing") will be held at the
offices of the Company (or such other place as the parties may agree) for the
purpose of confirming all the foregoing.
ARTICLE III.
DISSENTING SHARES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, in the event that appraisal rights are
available in connection with the Merger pursuant to the Minnesota Law, shares
of Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who did not vote in favor of
the Merger and comply with all of the relevant provisions of Section 302A.473
of the Minnesota Law (the "Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the Merger Consideration, unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal under the Minnesota Law. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's shares of Common Stock shall thereupon be deemed
to have been converted into and to have become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration without any
interest thereon.
SECTION 3.02 Exchange of Certificates. (a) The Purchaser
shall deposit or cause to be deposited in trust with an exchange agent
reasonably acceptable to the Company to be selected by the Purchaser (the
"Exchange Agent") at the Effective Time cash
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in an aggregate amount necessary to make the payments pursuant to Section 2.06
hereof to holders (other than the Purchaser, BUSA, or the Sub or any of their
respective affiliates) of shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time (such amounts being
hereinafter referred to as the "Exchange Fund"), and to make the appropriate
cash payments, if any, to holders of Dissenting Shares. The Exchange Agent
shall, pursuant to irrevocable instructions, make the payments provided for in
the preceding sentence out of the Exchange Fund. The Exchange Agent shall
invest portions of the Exchange Fund as the Purchaser directs, provided that
all such investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations receiving the highest rating
from either Xxxxx'x Investors Services, Inc. or Standard & Poor's Corporation,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $50 million. The
Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement. If for any reason (including, without limitation, losses
sustained by such investments) the Exchange Fund is inadequate to pay the
amount holders of Common Stock shall be entitled to hereunder, the Surviving
Corporation shall be liable for the payment thereof.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Common Stock (the
"Certificates") a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificate
or payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be paid in exchange therefor
cash in an amount equal to the product of the number of shares of Common Stock
formerly represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.02, each Certificate (other than Certificates
representing shares of Common Stock owned by the Purchaser or any affiliate of
the Purchaser, and Dissenting Shares) shall represent for all purposes the
right to receive the Merger Consideration in
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cash multiplied by the number of shares of Common Stock evidenced by such
Certificate, without any interest thereon.
(c) After the Effective Time, there shall be no
transfers of shares of Common Stock which were outstanding immediately prior to
the Effective Time on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in this
Article III. As of the Effective Time, the stock ledger of the Company shall
be closed.
(d) Any portion of the Exchange Fund (including the
proceeds of any investments thereof) that remains unclaimed by the stockholders
of the Company for six months after the Effective Time shall be repaid to the
Surviving Corporation. Any stockholders of the Company who have not
theretofore complied with Section 3.01 hereof shall thereafter look only to the
Surviving Corporation for payment of their claim for the Merger Consideration,
without any interest thereon.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser and the Sub
as follows:
SECTION 4.01 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has all requisite corporate power and
authority to carry on its business as it is now being conducted. The Company
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be in good standing or so qualified would not have
a Material Adverse Effect.
SECTION 4.02 Capitalization. The authorized capital stock of
the Company consists of 10,000,000 shares of Common Stock, par value $.01 per
share, of which, as of February 26, 1996, 2,319,495 shares were issued and
outstanding and (b) 1,000,000 shares of Preferred Stock, par value $.01, none
of which are outstanding. All of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid and nonassessable and free of preemptive rights. As of February 26, 1996,
193,500 shares of Common Stock were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of all outstanding
Options and the employee Stock purchase plan. Except as set forth above and
for the Option provided in Section 9.09(d) and Exhibit B, there are not as of
the date hereof, and at the Effective Time there will not be,
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any outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character obligating the Company to
issue any additional shares of Common Stock or any other shares of capital
stock of the Company or any other securities convertible into or evidencing the
right to subscribe for any such shares.
SECTION 4.03 Corporate Power and Authority. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, if required, the approval and adoption of this Agreement by the
Company's stockholders). This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of each of the Purchaser, BUSA, and the Sub, this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms.
SECTION 4.04 Reports. (a) Since January 1, 1995, the Company
has filed all required forms, reports and documents with the SEC required to be
filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which have complied as of their respective
filing dates in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, and the rules promulgated thereunder (collectively, the "SEC Reports").
None of the SEC Reports, including without limitation any financial statements
or schedules included therein, at the time filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related
consolidated statements of net earnings and of changes in financial position
(including the related notes thereto) of the Company included in the SEC
Reports fairly present the consolidated financial position of the Company and
its subsidiaries as of their respective dates, and the results of consolidated
operations and changes in consolidated financial position for the periods
presented therein, all in conformity with generally accepted accounting
principles applied on a consistent basis (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments), except as
otherwise noted therein, and except that the quarterly financial statements do
not contain all of the footnote disclosures required by generally accepted
accounting principles.
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SECTION 4.05 Offer Documents; Proxy Statement; Other
Information. The Schedule 14D-9 and if required for the consummation of the
Merger under applicable law, a Proxy Statement will comply in all material
respects with the applicable federal securities laws, except that no
representation is made by the Company with respect to information supplied by
the Purchaser or any affiliate of the Purchaser, in writing, for inclusion in
the Schedule 14D-9 or the Proxy Statement or any amendments or supplements
thereto. The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with
the SEC, shall not 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
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by the Purchaser or the Sub in writing for
inclusion in the Schedule 14D-9. None of the information relating to the
Company and its subsidiaries supplied in writing by the Company for inclusion
in the Offer Documents or the Proxy Statement, including any amendments or
supplements to either of the foregoing, or any schedules required to be filed
with the SEC in connection therewith, will, at the respective times the Offer
Documents or Proxy Statement or any amendments or supplements thereto are filed
with the SEC or mailed to the stockholders of the Company, as the case may be,
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 were made, not
misleading. The letter to stockholders, notice of meeting, proxy statement and
form of proxy, or the information statement, as the case may be, to be
distributed to stockholders in connection with the Merger, are collectively
referred to herein as the "Proxy Statement".
SECTION 4.06 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in a breach of any provision of the certificate of incorporation or
by-laws of the Company; (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) in connection with the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) pursuant to the applicable requirements of the Securities Act and
the Exchange Act, (C) the filing of the certificate of merger or certificate of
ownership and merger pursuant to the Minnesota Law, (D) pursuant to any
applicable state securities, "Blue Sky" or takeover laws, including Chapter 80B
of the Minnesota Statutes (E) any consents, approvals, authorizations or
permits, filings or notifications required to be given or made to any foreign
jurisdiction, or (F) except where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect or a material adverse effect on
the consummation of the transactions contemplated hereby; or (iii)
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violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, except for violations which would not in the
aggregate have a Material Adverse Effect or a material adverse effect on the
consummation of the transactions contemplated hereby.
SECTION 4.07 Brokerage Fees and Commissions. Except for those
fees and expenses payable to Brown, Gibbons, Lang & Company, L.P., the Company
hereby represents and warrants to the Purchaser with respect to the Company,
that no person or entity is entitled to receive from the Company, or any of its
subsidiaries any investment banking, brokerage or finder's fee in connection
with this Agreement or the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company.
SECTION 4.08 Events Subsequent to August 1, 1995. Except as
described on Schedule 4.08, or related to transactions involving the Purchaser
or the Purchaser's affiliates since August 1, 1995, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without limiting the
foregoing, since that date:
(i) The Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, for more than
$200,000 in the aggregate, other than for a fair consideration in the
ordinary course of business;
(ii) the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either requiring payment by the Company of more
than $250,000 or other than in the ordinary course of business
(except for the renewal of the lease for the Company's corporate
headquarters and product purchase orders and agreements in the ordinary
course of business and in amounts and on terms consistent with past
practices);
(iii) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $500,000 to which the Company is a party
or by which it is bound;
(iv) the Company has not imposed any security interest
upon any of its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$500,000 or outside the ordinary course of business;
(vi) the Company has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized
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lease obligation involving more than $250,000 in the aggregate (other
than agreements with Norwest Equipment Finance);
(vii) the Company has not granted any license or
sublicense of any rights under or with respect to any intellectual
property;
(viii) the Company has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the ordinary course of business;
(ix) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the ordinary course of business, except as disclosed on Schedule 6.08;
(x) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees outside the ordinary course of business, except
as disclosed on Schedule 6.08.
SECTION 4.09 Intellectual Property. The Company owns or has
the right to use pursuant to license, sublicense, agreement, or permission all
intellectual property necessary for the operation of the business of the
Company as presently conducted (excluding property for which the loss of
ownership or right to use would result in a loss of not more than $100,000
annually) and there is no pending or threatened challenge to the Company's
ownership or right to use any of the foregoing.
SECTION 4.10 Litigation. Except litigation relating to the
Purchaser and BUSA or as disclosed on Schedule 4.10, there is no action, order,
writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending or threatened and the Company
does not have any knowledge of an event that reasonably can be expected to
result in pending or threatened material litigation.
SECTION 4.11 Contracts. Except as disclosed on Schedule 4.11
all contracts involving more than $100,000 to which the Company is a party are
valid and binding and in full force and effect and there are no defaults
thereunder or events which with notice or the passage of time would constitute
a default by the Company or by any other party thereto, except for such
defaults and events as to which requisite waivers or consents have been
obtained; and neither the execution of this Agreement nor the effectuation of
this plan of merger will constitute a default under or breach of any such
contract.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND SUB
The Purchaser and the Sub represent and warrant to the Company
as follows:
Section 5.01 Organization and Qualification. Each of the
Purchaser, BUSA, and the Sub 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 carry on its business as
it is now being conducted. Each of the Purchaser, BUSA, and the Sub is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be in good standing or so qualified would not in the aggregate have
a material adverse effect on the financial condition or results of operations
of the Purchaser and its subsidiaries taken as a whole. The Sub is a
corporation wholly owned by BUSA that was recently formed for the purpose of
engaging in the transactions described in this Agreement and has not engaged in
any activity other than those incidents to the foregoing.
SECTION 5.02 Corporate Power and Authority. Each of the
Purchaser, BUSA, and the Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by the Purchaser, BUSA, and
the Sub of this Agreement and the consummation by the Purchaser, BUSA, and the
Sub of the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of the Purchaser, BUSA, and the Sub, and the
stockholder of the Sub, and no other corporate proceedings on the part of the
Purchaser, BUSA, or the Sub are necessary to authorize this Agreement, or
commence the Offer or to consummate the transactions so contemplated by this
Agreement (including the Offer). This Agreement has been duly and validly
executed and delivered by each of the Purchaser, BUSA, and the Sub and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, this Agreement constitutes the legal, valid and binding obligation of
each of the Purchaser, BUSA, and the Sub, enforceable against each of the
Purchaser, BUSA, and the Sub in accordance with its terms.
SECTION 5.03 Offer Documents; Proxy Statement. The Offer
Documents and the Offer will comply in all material respects with applicable
federal securities laws, except that no representation is made by the Purchaser
with respect to information supplied by the Company, in writing, or inclusion
in the Offer Documents or any amendments or supplements thereto. None of the
information supplied by the Purchaser and its affiliates, in writing, for
inclusion in the Proxy Statement or any amendments or supplements thereto will,
at the respective times the Proxy Statement or any
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17
amendments or supplements thereto are filed with the SEC, at the time that the
Proxy Statement or any amendment or supplement thereto is mailed to the
Company's stockholders, or, at the time of the Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 5.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser and the Sub nor the
consummation by the Purchaser or the Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or by-laws (or other similar governing
documents) of the Purchaser, BUSA, or the Sub; (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
applicable requirements of the HSR Act, (B) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, (C) the filing of the
certificate of merger or certificate of ownership and merger pursuant to the
Minnesota Law, (D) pursuant to any applicable state securities, "Blue Sky" or
takeover laws, (E) any consents, approvals, authorizations or permits, filings
or notifications required to be given or made to any foreign jurisdiction, or
(F) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate have
any material adverse effect on the financial condition or results of operations
of the Purchaser and its subsidiaries taken as a whole or a material adverse
effect on the consummation of the transactions contemplated hereby; or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser, except for violations which would not have in the
aggregate any material adverse effect on the financial condition or results of
operations of the Purchaser and its subsidiaries taken as a whole or a material
adverse effect on the consummation of the transactions contemplated hereby.
SECTION 5.05 Financing. The Purchaser, BUSA, and the Sub have
and will have immediately prior to the consummation of the Offer, and at the
Closing, sufficient funds necessary to timely consummate the Offer and the
Merger and the other transactions contemplated hereby including the payment of
related fees and expenses.
SECTION 5.06 Financial Statements. The Purchaser has delivered
to the Company copies of the audited consolidated and unaudited consolidating
balance sheets of X. X. Xxxxx Co., a Wisconsin corporation, as of July 31, 1995
and 1994 and the related audited consolidated statements of income,
stockholders' equity and cash flows for the fiscal years then ended (including
the related notes thereto) (the "Xxxxx Financial Statements"). The Xxxxx
Financial Statements fairly present the consolidated financial position of
Xxxxx as of their respective dates, and the results of
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consolidated operations and changes in consolidated financial position for the
periods therein, all in conformity with generally accepted accounting
principles.
SECTION 5.07 Conduct of Business. Since January 31, 1996,
Xxxxx and its subsidiaries have conducted, and from the date of this Agreement
until the Effective Time each of Xxxxx and its subsidiaries will conduct, their
operations in the ordinary and usual course of business and consistent with
past practice (and Xxxxx will not pay any extraordinary dividends or make any
other extraordinary payments or transfers to any affiliate that is not a
subsidiary), except for transactions contemplated by this Agreement and the
financing thereof.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or as set forth in Schedule 6.01, during the
period from the date of this Agreement to the Effective Time, the Company and
its subsidiaries will each conduct its operations according to its ordinary and
usual course of business and consistent with past practice. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement or as set forth in Schedule 6.01, prior to the Effective Time,
neither the Company nor any of it subsidiaries, as the case may be, will,
without the prior written consent of the Purchaser, (i) issue, sell, pledge or
encumber, or authorize or propose the issuance, sale, pledge or encumbrance of
(A) any shares of capital stock of any class (including the shares of Common
Stock), or securities convertible into any such shares, or any rights, warrants
or options to acquire any such shares or other convertible securities, or grant
or accelerate any right to convert or exchange any securities of the Company or
any of its subsidiaries for such shares, other than shares of Common Stock
issuable upon exercise of currently outstanding Options, or (B) any other
securities in respect of, in lieu of or in substitution for shares of Common
Stock outstanding on the date hereof; (ii) redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any of its
outstanding securities (including the shares of Common Stock); (iii) split,
combine or reclassify any shares of its capital stock or declare or pay any
dividend or distribution on any shares of capital stock of the Company; (iv)
except pursuant to agreements or arrangements in effect on the date hereof
which have been disclosed to the Purchaser, authorize any capital expenditure
in excess of $500,000 in the aggregate, make any acquisition or disposition of
a material amount of assets (other than inventory) or securities, enter into or
amend or terminate any contract, material to the business of the Company and
its subsidiaries taken as a whole, or release or relinquish any contact rights
or claims, material to the business of the Company and its subsidiaries taken
as a whole; (v) pledge or encumber any material assets of the Company except in
the ordinary course of business; (vi) incur any
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long-term debt for borrowed money or short-term debt for borrowed money in an
aggregate amount in excess of $100,000.00 except for debt incurred in the
ordinary course of business (including, without limitation, to fund working
capital needs; (vii) propose or adopt any amendments to the Articles of
Incorporation or By-Laws of the Company; (viii) adopt a plan of complete or
partial liquidation or resolutions providing for the complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries; (ix) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except wholly owned subsidiaries of the Company in the
ordinary course of business and consistent with past practice; (x) make any
loans, advances or capital contributions to, or investments in, any other
person (other than loans or advances to subsidiaries and customer loans or
advances to employees in accordance with past practices); (xi) except as
required by applicable laws, adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
severance, termination, employment or other employee benefit plan, agreement,
trust, fund, policy or other arrangement for the benefit or welfare of any
employee or director or former employee or director or, except as required by
applicable laws, increase the compensation or fringe benefits of any employee
or pay any employee or pay any benefit not required by any existing plan,
arrangement or agreement; (xii) make any tax election or settle or compromise
any federal, state, local or foreign income tax liability, except in the
ordinary course of business and consistent with past practice; or (xiii) agree
in writing or otherwise to take any of the foregoing actions. Following the
date of this Agreement, the Company will review its financing documents to
determine if the consent of any third party is required in connection with the
transactions contemplated hereby. If following such review, the Company
becomes actually aware that any such consent is required, it will so notify the
Purchaser, and the parties hereto shall use their respective best efforts to
secure such consent; provided, however, that for this purpose "best efforts"
shall not require the Company or the Purchaser to make any payment in order to
secure any such consents.
SECTION 6.02 No Solicitation. Neither the Company nor any of
its subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, shall, directly or indirectly,
encourage, solicit, initiate or, except as is required in the exercise of the
fiduciary duties of the Company's directors and officers under applicable laws
upon advice of counsel to the Company, participate in any way in discussions or
negotiations with, or knowingly provide any information to, any corporation,
partnership, person or other entity or group (other than the Purchaser or any
affiliate or an associate of the Purchaser) concerning any merger, sale of
substantially all the assets, sale of shares of capital stock or similar
transactions involving the Company or any material subsidiary or division of
the Company; provided, however, that nothing contained in this Section 6.02
shall prohibit the Company or its Board of Directors from (i)
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taking and disclosing to the Company's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e- 2(a)
promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders which, in the judgment of the Board of Directors with
the advice of counsel, may be required under applicable law or (iii) providing
information to, or participating in discussions or negotiations with, any party
that has actually made, and which the Board of Directors believes in good faith
would be capable of effecting an acquisition of the Company on terms that are
superior, from a financial point of view, to the Offer and the Merger. The
Company will promptly communicate to the Purchaser if it is furnishing
information to or engaging in negotiations with any third party with respect to
the acquisition of the Company or any of its assets or subsidiaries.
SECTION 6.03 Access to Information. (a) Between the date of
this Agreement and the Effective Time, the Company will, upon reasonable notice
to Xxxxxxx X. Good or his designee, allow the Purchaser and its authorized
representatives reasonable access in a manner reasonably acceptable to Mr. Good
or his designee during regular business hours to its plants, offices,
warehouses, other facilities and books and records concerning (i) any change
to, termination of, or refusal to extend any agreement with any distributor or
supplier since August 1, 1995, (ii) any change in the Company's right to use,
or ownership of, its intellectual property, or (iii) its inventory. The
Company will also make its employees available for interviews with the
Purchaser, with Company personnel present for reasonable purposes in a manner
reasonably acceptable to Mr. Good or his designee.
(b) Except as otherwise required by law, Purchaser or its
agents will not, and will cause its authorized representatives not to, disclose
any information to third parties obtained pursuant to this Section 6.03 except
its attorneys, financial advisors and lenders and then only for purposes
related to the consummation of the transactions contemplated by this Agreement.
Upon any termination of this Agreement, Purchaser will collect and deliver to
the Company all documents obtained by it or any of its authorized
representatives then in their possession and any copies thereof.
SECTION 6.04 Notification of Certain Matters. Each of the
Company and the Purchaser shall give prompt notice to the other party of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
SECTION 6.05 Best Efforts. Subject to the terms and conditions
herein provided, and with respect to the Company, to the fiduciary duties of
the Board of Directors of the Company under applicable laws, each of the
parties hereto agrees to (i) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act with respect
to the Offer and Merger and (ii) use its best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, in the case of the
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Purchaser, BUSA, and the Sub, the filings required under Minnesota Statutes
Chapter 80B, as amended, with respect to the Offer and Merger. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
SECTION 6.06 Indemnification and Insurance. (a) The Surviving
Corporation and the Purchaser agree that the Surviving Corporation will at all
times exercise the powers granted to it by its Articles of Incorporation, its
By-laws, and by applicable law to indemnify to the fullest extent possible
present or former directors, officers, employees and agents of the Company
against claims made against them arising from their service in such capacities.
The Surviving Corporation and the Purchaser agree that until six years from the
Effective Time, the Articles of Incorporation and By-laws of the Surviving
Corporation shall not be amended to reduce or limit the rights of indemnity
afforded to the present and former directors and officers of the Company, or
the ability of the Surviving Corporation to indemnify them, nor to hinder,
delay or make more difficult the exercise of such rights of indemnity or the
ability to indemnify.
(b) The Purchaser will honor and guarantee the
Surviving Corporation's performance of all contracts, agreements and
commitments of the Company or any of its subsidiaries which indemnify any
current or former employee or current or former director of the Company or any
of its subsidiaries, as disclosed on Schedule 6.06(b).
(c) Should any claim or claims be asserted or made
against any present or former director, officer, employee or agent of the
Company, arising from his services as such, within six years from the Effective
Time, the provisions of this Section 6.06 respecting the Articles of
Incorporation and the By-laws of the Surviving Corporation shall continue in
effect until the final disposition of all such claims.
(d) Any indemnified party wishing to claim
indemnification under this Section, upon learning of any such action, suit,
claim, proceeding or investigation, shall promptly notify the Purchaser and the
Surviving Corporation thereof and the Purchaser and the Surviving Corporation
shall cooperate in the defense of any such matter; provided, however, that any
failure so to notify the Purchaser and the Surviving Corporation of any
obligation to indemnify such indemnified party or of any other obligation
imposed by this Section shall not affect such obligations unless such failure
to so notify materially prejudices the rights of the Purchaser and the
Surviving Corporation to defend any such action, suit, claim, proceeding or
investigation. The indemnified parties as a group shall retain only one
counsel in each jurisdiction to represent them with respect to any single
action; provided, however, in the event that there is, under applicable
standards of professional conduct, a conflict between the positions of any two
or more indemnified parties, the Purchaser and such indemnified
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22
parties may retain, at the expense of the Purchaser and the Surviving
Corporation, as the case may be, such number of additional counsel as are
necessary to eliminate all conflicts of the type referred to above.
(e) In the event any claim is made against present or
former directors, officers or employees of the Company that is covered or
potentially covered by insurance, the Surviving Corporation and the Purchaser
shall do nothing that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final disposition of that
claim.
SECTION 6.07 Company Indebtedness. Prior to the Effective
Time, the Company shall cooperate with the Purchaser in taking such actions as
are reasonably appropriate or necessary in connection with the redemption,
prepayment, modification, satisfaction or elimination of any outstanding
long-term indebtedness of the Company or any of its subsidiaries with respect
to which a consent is required to be obtained to effectuate the Merger and the
transactions contemplated by this Agreement and has not been so obtained
(provided that prior to consummation of the Merger, the Company shall not be
required to actually redeem, prepay, modify, satisfy or eliminate any such
outstanding long-term indebtedness, make any payment or undertake any
obligation in order to secure any such consents or take any steps which would
irrevocably lead to any of the foregoing).
SECTION 6.08 Benefit Plans. (a) Schedule 6.08(a) includes all
employee benefit plans, programs, policies and agreements which provide
compensation or other benefits upon a termination of employment, voluntary or
involuntary, for the 17 highest paid employees of the Company or its
subsidiaries or which include a "change of control" provision, and a complete
and correct copy (or model form) of each such plan, program, policy and
agreement has been provided to Purchaser. Schedule 6.08(a) also sets forth the
annual compensation and average annual compensation, as the case may be, as of
the date of this Agreement for purposes of calculating the amount payable for
each of the 17 highest paid employees of the Company or its subsidiaries and
any other employee covered by a change of control provision under any of the
plans, programs, policies and agreements listed on Schedule 6.08(a).
(b) The Purchaser will honor and cause the Surviving
Corporation to honor and perform its obligations under each of the plans,
programs, policies and agreements set forth on Schedule 6.08(b), but only to
the extent consistent with the terms and conditions of any such plan, program,
policy or agreement (or model form thereof) disclosed to the Purchaser. The
Company believes the method of calculation provided to the Purchaser under
certain of such plans, programs, policies or agreements is correct and proper.
(c) If any salaried or non-union hourly employee of
the Company or any of its subsidiaries is or becomes a participant in any
written employee benefit plan or program of the Purchaser or
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any member of its controlled group within the meaning of Section 414(b) or (c)
of the Internal Revenue Code of 1986, as amended (the "Code"), such employee
shall be credited under such plan or program with all service prior to the
Effective Time with the Company and its subsidiaries (and any predecessor
employer) to the extent credit was given by the Company and its subsidiaries
for purposes of eligibility for all purposes and vesting under such plan or
program.
(d) The Purchaser and the Sub acknowledge that
consummation of the Offer will constitute a change of control of the Company
(to the extent such concept is relevant) for purposes of any and all of the
agreements and plans specified on Schedule 6.08(a).
(e) The Purchaser and the Sub agree to the amendment
of the compensation and benefit plans and programs set forth below in this
Section 6.08(e) to permit the acceleration of payment thereunder on or after
the later of the date of the acquisition of shares of Common Stock pursuant to
the Offer or five business days after the participant's termination of
employment for any reason (other than his or her retirement at or after age 65,
death or disability); provided, however, that such termination occurs within
two years after such acquisition of Common Stock and that no payments shall be
accelerated or made to the extent they could constitute non-deductible excess
parachute payments within the meaning of Section 280G(b)(1) and (2)(A) of the
Code. The Company has not entered into, adopted or amended after July 31, 1995
any employee benefit plan, program, policy or agreement, or any other agreement
or arrangement with respect to any employee or director of the Company or any
of its subsidiaries, except as listed on Schedule 6.08.
SECTION 6.09 Extension of Acquisition Options. The Company
will use its best efforts to obtain an extension of the options to purchase the
companies identified on Schedule 6.01 to a date subsequent to the Effective
Time. If the Company is unable to obtain such extensions, it will consult with
Purchaser before exercising either of those acquisition options set forth on
Schedule 6.01.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, at or prior to the
Effective Time, of the following conditions:
(a) this Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company owning at least
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two-thirds of the Company's outstanding Common Stock in accordance with
applicable law, if such vote is required by applicable law;
(b) no statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered, promulgated or enforced
by any United States court or governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
however, that the parties shall use their best efforts to have any such order,
decree or injunction vacated or reversed;
(c) any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated; and
(d) the Sub shall have purchased all shares of Common
Stock validly tendered and not withdrawn pursuant to the Offer; provided,
however, that this condition shall not be applicable to the obligations of the
Purchaser, BUSA or the Sub in violation of the terms of this Agreement or the
Offer if the Sub fails to purchase shares of Common Stock tendered pursuant to
the Offer.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the stockholders of the Company, but prior to the Effective
Time:
(a) by mutual written consent duly authorized by the
Boards of Directors of the Company (excluding any representative of the
Purchaser or an affiliate of the Purchaser), the Purchaser and the Sub;
(b) by either the Purchaser or the Company, if the
Effective Time shall not have occurred on or before December 31, 1996 (provided
that the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Effective
Time to occur on or before such date);
(c) by either the Purchaser or the Company, if any
court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling, or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
non-appealable; provided, however, that the parties shall use their best
efforts to have any such order, decree, ruling or injunction vacated or
reversed;
- 23 -
25
(d) by the Purchaser, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions
set forth in Exhibit A hereto, the Sub shall have (A) failed to commence the
Offer as provided in Section 1.01 hereof within 20 days following the date of
this Agreement; (B) terminated the Offer or the Offer shall have expired
without the purchase of shares of Common Stock thereunder at any time after the
latest date, if any, to which the Offer shall have been extended pursuant to
Section 1.01(c) hereof or (C) failed to pay for shares of Common Stock pursuant
to the Offer by the 40th business day following such commencement, unless such
failure to commence, termination or failure to pay for shares of Common Stock
shall have been caused by or resulted from the failure of the Sub or the
Purchaser to perform in any respect its material covenants and agreements
contained in this Agreement or Offer; or (ii) prior to the purchase of shares
of Common Stock pursuant to the Offer, the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger, or shall
have recommended another offer, or shall have resolved to do any of the
foregoing; provided, however, the Purchaser shall have no right to terminate
this Agreement and abandon the Merger if the Company withdraws or modifies its
recommendation of the Offer, this Agreement or the Merger, by reason of taking
and disclosing to the Company's stockholders a position contemplated by Rule
14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to another
proposal, and if within ten days of taking and disclosing to its stockholders
the aforementioned position, the Company publicly reconfirms its recommendation
of the Offer, this Agreement or the Merger and takes and discloses to the
Company's stockholders a recommendation to reject such other proposal as
contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(e) by the Company, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions
set forth in Exhibit A hereto or otherwise, the Sub shall have (A) failed to
commence the Offer as provided in Section 1.01 hereof within 20 days following
the date of this Agreement, (B) terminated the Offer or the Offer shall have
expired without the purchase of shares of Common Stock thereunder at any time
after the latest date, if any, to which the Offer shall have been extended
pursuant to Section 1.01(c) hereof or (C) failed to pay for shares of Common
Stock pursuant to the Offer by the 40th business day following such
commencement, unless such failure to commence, termination or failure to pay
for shares of Common Stock shall have been caused by or resulted from the
occurrence or existence of the condition described in paragraph (D) of Exhibit
A hereto, or (ii) prior to the purchase of shares of Common Stock pursuant to
the Offer, (A) a corporation, partnership, person or other entity or group
shall have made a bona fide proposal that the Board of Directors of the Company
believes, in good faith after consultation with its legal and financial
advisors, is more favorable to the Company and its stockholders than the Offer
and the Merger, (B) the Sub does not make, within ten days of the Sub receiving
notice of such third party proposal, an offer which the
- 24 -
26
Board of Directors believes, in good faith after consultation with its legal
and financial advisors, is at least as favorable to the Company's stockholders
as such third party proposal, it being understood that the Company shall remain
obligated to pay the fees to the Purchaser pursuant to Section 9.09 hereof.
SECTION 8.02 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.01 hereof,
this Agreement, except for the provisions of this Section 8.02 and Sections
6.03(b) and 9.09 hereof, shall forthwith become void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Nothing in this Section 8.02 shall relieve any party to this
Agreement of liability for breach of this Agreement.
SECTION 8.03 Amendment. To the extent permitted by applicable
law, this Agreement may be amended by action taken by or on behalf of the
Boards of the Company (excluding any representative of the Purchaser or an
affiliate of the Purchaser), the Purchaser and the Sub at any time before or
after adoption of this Agreement by the stockholders of the Company; provided,
however, that, after any such stockholder approval, no amendment shall be made
which decreases the Merger Consideration or which adversely affects the rights
of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken by or on behalf of the
respective Boards of Directors of the Company (excluding any representatives or
directors appointed by or elected on behalf of the Purchaser or an affiliate of
the Purchaser), the Purchaser or the Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance 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.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties.
The representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
- 25 -
27
SECTION 9.02 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 or any of them with respect to the
subject matter hereof except the Confidentiality Agreement, dated February 2,
1996, between the Company and the Purchaser and (b) shall not be assigned by
operation of law or otherwise, provided that the Purchaser or the Sub may
assign any of their rights and obligations to any wholly-owned, direct or
indirect subsidiary of the Purchaser, but no such assignment shall relieve the
Purchaser or the Sub of its obligations hereunder. It is understood and agreed
that either the Purchaser, or any wholly-owned subsidiary of the Purchaser, may
purchase shares of Common Stock under the Offer.
SECTION 9.03 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 9.04 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by cable, telegram, telecopier
or telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to the Purchaser, BUSA or the Sub:
X.X. Xxxxx Co.
0000 X. Xxxx Xxxx Xxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. XxXxxx
with a copy to:
Xxxxxxx & Xxxxx
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
if to the Company:
Varitronic Systems, Inc.
300 Interchange North
000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xx. Xxxxx X. Drill
- 26 -
28
with a copy to:
Best & Xxxxxxxx
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota
regardless of the laws that might otherwise govern under principles of
conflicts of laws applicable thereto.
SECTION 9.06 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement except for all of Articles II and III and Section 6.06.
SECTION 9.08 Counterparts. This Agreement may be executed in
counterparts, manually or by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.09. Expenses. (a) All costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses. Notwithstanding the foregoing, the
Purchaser shall cause the Surviving Corporation to pay any and all taxes on the
transfer of real property to the Purchaser or the Surviving Corporation imposed
by any governmental authority. The Purchaser and the Surviving Corporation
shall indemnify and hold the stockholders of the Company harmless from and
against any and all liabilities arising out of or related to the payment of
such taxes.
(b) The Purchaser acknowledges and agrees that the
Company has disclosed that it is indebted for fees and expenses (including fees
and expenses of its counsel and investment advisors) incurred by it in
connection with the transactions contemplated by this Agreement as set forth in
Schedule 9.09. To the best knowledge of the Company, the fees and expenses
listed in Schedule 9.09 represent the only significant fees and expenses
incurred by the Company in connection with the transactions contemplated by
this Agreement. It is understood that certain of such fees and expenses may be
paid by the Company prior to the
- 27 -
29
execution of this Agreement, and the Purchaser agrees to refrain from taking
any action which would interfere with the payment of the foregoing fees and
expenses by the Company.
(c) If this agreement or the transactions contemplated
hereby are terminated or abandoned (unless at such time the Purchaser or the
Sub shall be in breach in any material respect of any of its obligations or
representations and warranties hereunder) and prior to or contemporaneously
with such termination or abandonment, any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act)
other than the Purchaser or any of its subsidiaries or affiliates
(collectively, "Person"), shall have acquired or beneficially owns (and failed
to tender such shares) (as defined in Rule 13d-3 promulgated under the Exchange
Act) at least 33.34% of the then outstanding shares of Common Stock, then the
Company shall promptly (and in any event within 2 days of receipt by the
Company of written notice from the Purchaser) pay the Purchaser the sum of (x)
one million dollars and (y) all actual, documented out-of-pocket expenses
relating to the Offer and the Merger in an amount up to seven hundred and fifty
thousand dollars.
(d) The Company grants to the Sub an irrevocable
option (the "Option") as set forth in Exhibit B to purchase the number of
shares of Common Stock of the Company equal to 19.9% of those outstanding as of
the date hereof at a purchase price of $17.50 per share on the terms and
conditions of Exhibit B hereto.
SECTION 9.10 Certain Definitions. For purposes of this
Agreement:
(a) "Subsidiary" shall mean, when used with reference to
an entity, any corporation, a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity.
(b) "Material Adverse Effect" shall mean any material
adverse change in the financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
SECTION 9.11 Performance by Sub. The Purchaser hereby agrees
to cause the Sub to comply with its obligations hereunder and under the Offer
and to cause the Sub to consummate the Merger as contemplated herein.
SECTION 9.12 Publicity. So long as this Agreement is in
effect, each of the Purchaser and the Sub, on the one hand, and the Company, on
the other hand, promptly shall consult and cooperate with the other prior to
issuing any press release or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national
- 28 -
30
securities exchange and except to allow internal communications with employees.
- 29 -
31
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
X.X. XXXXX CO.
By:/s/ Xxxxxxxxx X. Xxxxxx
------------------------------
Xxxxxxxxx X. Xxxxxx
Chief Executive Officer
XXXXX USA, INC.
By:/s/ Xxxxxxxxx X. Xxxxxx
------------------------------
Xxxxxxxxx X. Xxxxxx
President
VSI ACQUISITION CO.
By:/s/ Xxxxxxxxx X. Xxxxxx
------------------------------
Xxxxxxxxx X. Xxxxxx
President
VARITRONIC SYSTEMS, INC.
By:/s/ Xxxxx X. Xxxxxxxxxxxx
------------------------------
Xxxxx X. Xxxxxxxxxxxx
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32
EXHIBIT A
The capitalized terms used in this Exhibit A have the meanings
set forth in the attached Agreement, except that the term "Merger Agreement"
shall be deemed to refer to the attached Agreement.
Notwithstanding any other provisions of the Offer, the Purchaser
shall not be required to accept for payment, purchase or pay for any shares of
Common Stock tendered, and may terminate or, subject to the terms of the Merger
Agreement, amend the Offer and may postpone the acceptance for payment of and
payment for shares of Common Stock, if (A) on or prior to the time at which the
Offer shall have expired (i) the number of shares of Common Stock validly
tendered and not withdrawn immediately prior to the expiration of the Offer,
when added to the shares of Common Stock then beneficially owned by the
Purchaser and its affiliates, shall not constitute two-thirds of the shares of
Common Stock outstanding on a fully diluted basis or (ii) any applicable
waiting periods under the HSR Act shall not have expired or been terminated, or
(B) at any time on or after February 28, 1996 and before the time of acceptance
for payment for any such shares of Common Stock any of the following conditions
exist or shall occur and remain in effect:
(a) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) a commencement of a war, armed
hostilities or other national or international calamity directly
or indirectly involving the United States, (iv) any material
limitation (whether or not mandatory) by any governmental
authority on, or any other event which might materially and
adversely affect the extension of credit by lending
institutions, or (v) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(b) there shall have been any statute, rule or
regulation enacted, promulgated, entered or enforced or deemed
applicable, or any decree, order or injunction entered or
enforced by any government or governmental authority in the
United States or by any court in the United States that (i)
restrains or prohibits the making or consummation of the Offer
or the consummation of the Merger, (ii) prohibits or restricts
the ownership or operation by the Purchaser (or any of its
affiliates or subsidiaries) of any portion of its or the
Company's business or assets which is material to the business
of all such entities taken as a whole or (iii) imposes material
limitations on the ability of the Purchaser effectively to
acquire or to hold or to exercise full
A-1
33
rights of ownership of the shares of Common Stock, including,
without limitation, the right to vote the shares of Common Stock
purchased by the Purchaser on all matters properly presented to
the stockholders of the Company; provided, however, that the
Purchaser and the Sub shall have used their best efforts to have
any such decree, order or injunction vacated or reversed,
including, without limitation, by proffering their willingness
to accept an order embodying any arrangement required to be made
by the Purchaser or the Sub pursuant to Section 6.05(iii) of the
Merger Agreement (and notwithstanding anything in this
subsection (b) to the contrary, no terms, conditions or
provisions of an order embodying such an arrangement shall
constitute a basis for the Purchaser asserting nonfulfillment of
the conditions contained in this subsection (b)); or
(c) the Merger Agreement shall have been terminated in
accordance with its terms; or
(d) (i) the Company shall have breached or failed to
perform any of its covenants or agreements which breach or
failure to perform is material to the obligations of the Company
under the Merger Agreement taken as a whole, (ii) any of the
representations and warranties of the Company set forth in the
Merger Agreement shall not have been true in any respect which
is material to the Company and its subsidiaries taken as a
whole, in each case, when made or (iii) a Material Adverse
Effect has occurred, provided that the aggregate effect under
(i), (ii), and (iii) shall be in excess of $500,000; or
(e) the Board of Directors of the Company shall have
publicly withdrawn or modified in any material respect adverse
to the Purchaser its recommendation of the Offer; provided,
however, the Purchaser shall have no right to terminate the
Offer or not accept for payment or pay for any shares of Common
Stock if the Company withdraws or modifies its recommendation of
the Offer and the Merger, by reason of taking and disclosing to
the Company's stockholders a position contemplated by Rule 14e-
2(a)(2) or (3) promulgated under the Exchange Act with respect
to another proposal, and if within ten days of taking and
disclosing to its stockholders the aforementioned position, the
Company publicly reconfirms its recommendation of the Offer and
Merger and takes and discloses to the Company's stockholders a
recommendation to reject such other proposal as contemplated by
Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(f) the Purchaser and the Company shall have agreed
that the Purchaser shall terminate the Offer,
A-2
34
which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payments.
Subject to the terms and provisions of the Merger Agreement the
foregoing conditions are for the sole benefit of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to any
such condition and may be waived by the Purchaser in whole or in part, at any
time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
A-3
35
EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of February 27, 1996 by and among X.X. Xxxxx
Co., a Wisconsin corporation ("Xxxxx"), and Varitronic Systems, Inc., a
Minnesota corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company, Xxxxx, Xxxxx USA, Inc., a Wisconsin corporation and VSI Acquisition
Co., a Minnesota corporation ("Sub"), are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, upon the terms and subject to the conditions
thereof, for the merger of the Company with and into the Sub (the "Merger").
WHEREAS, as a condition to Xxxxx'x willingness to enter into the Merger
Agreement, Xxxxx has requested that the Company agree, and the Company has so
agreed, to grant to Xxxxx an option with respect to certain shares of the
Company's common stock, par value $.01 ("Common Stock"), on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, to induce Xxxxx to enter into the Merger Agreement, and in
consideration of the mutual covenants and agreements set forth herein and in
the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Xxxxx an irrevocable
option (the "Company Option") to purchase the number of shares of Common Stock
equal to 19.9% of shares of Common Stock outstanding as of the date hereof,
subject to adjustment as provided in Section 11 (such shares being referred to
herein as the "Company Shares"), of the Company (the "Company Common Stock") in
the manner set forth below at a price (the "Exercise Price") per Company Share
of $17.50 payable in cash. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be exercised by
Xxxxx, in whole or in part, at any time or from time to time until the Company
Option expires. In the event Xxxxx wishes to exercise the Company Option,
Xxxxx shall deliver to the Company a written notice (an "Exercise Notice")
specifying the total number of Company Shares it wishes to purchase. Each
closing of a purchase of Company Shares (a "Closing") shall occur at a place,
on a date and at a time designated by Xxxxx in an Exercise Notice delivered at
least two business days prior to the date of
36
the Closing. The Company Option shall terminate upon the earlier of the Merger
pursuant to the Merger Agreement or December 31, 1996. Notwithstanding the
foregoing, the Company Option may not be exercised if Xxxxx is in material
breach of any of its material representations or warranties, or in material
breach of any of its covenants or agreements, contained in this Agreement or in
the Merger Agreement. Upon the giving by Xxxxx to the Company of the Exercise
Notice and the tender of the applicable aggregate Exercise Price, Xxxxx shall
be deemed to be the holder of record of the Company Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Company Shares shall not
then be actually delivered to Xxxxx.
3. Conditions to Closing. The obligation of the Company to issue
the Company Shares to Xxxxx hereunder is subject to the conditions, which may
be waived by the Company in its sole discretion, that (i) all waiting periods,
if any, under the HSR Act, applicable to the issuance of the Company Shares
hereunder shall have been terminated; (ii) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with,
any federal state or local administrative agency or commission or other federal
state or local governmental authority, if any, required in connection with the
issuance of the Company Shares hereunder shall have been obtained or made, as
the case may be, and (iii) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will deliver to Xxxxx
or its designee a single certificate in definitive form representing the number
of the Company Shares designated by Xxxxx in its Exercise Notice, such
certificate to be registered in the name of Xxxxx and to bear the legend set
forth in Section 12, and (b) Xxxxx will deliver to the Company the aggregate
purchase price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. The Company
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 4 in the name of
Xxxxx or its designee.
5. Representations and Warranties of the Company. The Company
represents and warrants to Xxxxx that (a) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the corporate power and authority to enter into this
Agreement, and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other
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37
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or any of the transactions contemplated hereby, (c) this
Agreement has been duly executed and delivered by the Company, constitutes a
valid and binding obligation of the Company and, assuming this Agreement
constitutes a valid and binding obligation of Xxxxx, is enforceable against the
Company in accordance with its terms, (d) the Company has taken all necessary
corporate action to authorize and reserve for issuance and to permit it to
issue, upon exercise of the Company Option, and at all times from the date
hereof through the expiration of the Company Option will have reserved,
authorized and unissued Company Shares equal to the number of Shares equal to
19.9% of the outstanding Shares of Common Stock dated hereof, such amount being
subject to adjustment as provided in Section 11, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, (e) upon delivery of the Company
Shares to Xxxxx upon the exercise of the Company Option, Xxxxx will acquire the
Company Shares free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever, (f) the execution and delivery of
this Agreement by the Company does not, and the consummation by the Company of
the transactions contemplated hereby will not, violate, conflict with, or
result in a breach of any provision of, or constitute a default (with or
without notice or lapse of time, or both) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination, cancellation, or acceleration of any obligation or the loss of a
material benefit under or the creation of a lien, pledge, security interest or
other encumbrance on assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation") of
the Company or any of its subsidiaries.
6. Representations and Warranties of Xxxxx. Xxxxx represents and
warrants to the Company that (a) Xxxxx is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Xxxxx and the consummation by Xxxxx of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Xxxxx and no other corporate proceedings on the part of Xxxxx are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Xxxxx and constitutes a
valid and binding obligation of Xxxxx, and, assuming this Agreement constitutes
a valid and binding obligation of Company, is enforceable against Xxxxx in
accordance with its terms.
7. Xxxxx Put. At the request of Xxxxx by written notice, the
Company shall repurchase from Xxxxx the number of
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38
Shares specified in the put notice (the "Put") at $17.50 per share, provided
that the Put is limited to Company Shares acquired by Xxxxx pursuant to the
Company Option. Payment shall be made by the Company to Xxxxx in two business
days.
8. Voting of Shares. Xxxxx shall vote any shares of capital stock
acquired by such party pursuant to this Agreement, or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act")) as it sees fit.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date,
Xxxxx shall not, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Company Shares
acquired pursuant to this Agreement, other than (i) pursuant to Section 7, (ii)
in accordance with Section 9(b) or Section 10 or (iii) an assignment to an
affiliate of Xxxxx or to carry out the Merger or the Offer pursuant to the
Merger Agreement.
(b) Permitted Sales. Xxxxx shall be permitted to sell any
Company Shares beneficially owned by it pursuant to the Option if such sale is
made pursuant to a tender offer, exchange offer, merger, or similar
transaction.
10. Registration Rights. Xxxxx may by written notice (the
"Registration Notice") to the Company request the Company to register under the
Securities Act all or any part of the Company Shares beneficially owned by
Xxxxx (the "Registrable Securities") pursuant to a bona fide firm commitment
underwritten public offering (a "Permitted Offering"). The Registration Notice
shall include a certificate executed by Xxxxx and its proposed managing
underwriter (the "Manager"), stating that (i) they have a good faith intention
to commence promptly a Permitted Offering and (ii) the Manager in good faith
belies that, based on the then prevailing market conditions, it will be able to
sell the Registrable Securities at a per share price equal to at least 80% of
the then fair market value of such shares. The Company (and/or any person
designated by the Company) shall thereupon have the option exercisable by
written notice delivered to Xxxxx within 10 business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of
the Registrable Securities proposed to be so sold for cash at a price (the
"Option Price") of $17.50 per Share. Any such purchase of Registrable
Securities by the Company (or its designee) hereunder shall take place at a
closing to be held at the principal executive offices of the Company or at the
offices of its counsel at any reasonable date and time designated by the
Company and/or such designee in such notice within 20 business days after
delivery of such notice. Any payment for the shares to be purchased shall be
made by delivery at the
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39
time of such closing of the Option Price in immediately available funds.
If the Company does not elect to exercise its rights pursuant to this Section
10 with respect to all Registrable Securities, it shall use its best efforts to
effect, as promptly as practicable, the registration under the Securities Act
of the unpurchased Registrable Securities proposed to be so sold; provided,
however, that (i) neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder and (ii) the Company will not
be required to file any such registration statement during any period of time
(not to exceed 40 days after such request in the case of clause (A) below or 90
days in the case of clauses (B) and (C) below) when (A) the Company is in
possession of material non-public information which it reasonably believes
would be determined to be disclosed at such time and, in the opinion of counsel
to the Company, such information would have to be disclosed if a registration
statement were filed at that time; (B) the Company is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Company determines, in its
reasonable judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving the Company or any of its
affiliates. The Company shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue-Sky laws of such jurisdictions as Xxxxx
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Company shall not be
required to qualify to do business in, or consent to general service of process
in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to the
condition that Xxxxx shall provide the Company with such information with
respect to such holder's Registrable Securities, the plans for the distribution
thereof and such other information with respect to such holder as, in the
reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all material facts required
to be disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall be effected at the
Company's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to Xxxxx, and the Company shall provide to the
underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the
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parties agree (i) to indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form and substance
customary for transactions of such type with the Manager and the other
underwriters participating in such offering and (iii) to take all further
actions which shall be reasonably necessary to effect such registration and
sale (including, if the Manager deems it necessary, participating in road-show
presentations).
The Company shall be entitled to include (at its expense) additional shares
of its common stock in a registration effected pursuant to this Section 10 only
if and to the extent the Manager determines that such inclusion will not
adversely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization. Without limitation
to any restriction on the Company contained in this Agreement or in the Merger
Agreement, in the event of any change in Company Common Stock by reason of
stock dividends, splitups, mergers (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, or the sale of Common Stock or
the grant of any option to anyone other than Xxxxx, the type and number of
shares or securities subject to the Company Option, and the purchase price per
share provided in Section 1, shall be adjusted appropriately to restore to
Xxxxx its rights hereunder, including the right to purchase from the Company
(or its successors) shares of Company Common Stock representing 19.9% of the
outstanding Company Common Stock for the aggregate Exercise Price calculated as
of the date of this Agreement as provided in Section 1.
12. Restrictive Legends. Each certificate representing shares of
Company Common Stock issued to Xxxxx pursuant to the Option, shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF FEBRUARY 27, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Xxxxx shall have delivered
to the Company a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such legend is not required for
purposes of the Securities Act; and (ii) the reference
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to the provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such reference.
In addition, such certificates shall bear any other legend as may be required
by law. Certificates representing shares sold in a registered public offering
pursuant to Section 10 shall not be required to bear the legend set forth in
this Section 12.
13. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation
of law, or with the written consent of the other party. Nothing contained in
this Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement. Any Shares sold
by Xxxxx in compliance with the provisions of Section 10 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement.
14. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate or
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
15. Entire Agreement. This Agreement, the Confidentiality Agreement
and the Merger Agreement (including the exhibits and schedules thereto)
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
16. Further Assurances. Each party will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary or in order to consummate the transactions contemplated hereby.
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17. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law,
the intent of the parties hereto with respect to such provision and the
economic effects thereof. If for any reason any such court or regulatory
agency determines that Xxxxx is not permitted to acquire the full number of
shares of Company Common Stock provided in Section 1 hereof (as the same may be
adjusted), it is the express intention of the Company to allow Xxxxx to acquire
or to require the Company to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
18. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (i) delivered personally, or (ii)
sent by reputable overnight courier service, or (iii) telecopies (which is
confirmed), or (iv) five days after being mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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A. If to Xxxxx, to:
X.X. Xxxxx Co.
0000 Xxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxx
with a copy to:
Xxxxxxx & Xxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
B. If to the Company, to:
Varitronic Systems, Inc.
000 Xxxxxxxxxxx Xxxxx
000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Good
with a copy to:
Best & Xxxxxxxx
4000 First Bank Place
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
19. Governing Law; Choice of Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota
applicable to agreements made and to be performed within such State.
20. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of
which, taken together, shall constitute one and the same instrument.
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22. Expenses. Except as otherwise expressly provided herein or in
the Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
23. Amendments; Waiver. This Agreement may be amended by the
parties hereto and the terms and conditions hereof may be waived only by an
instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
24. Extension of Time Periods. The time periods for exercise of
certain rights under the Agreement shall be extended to the extent necessary to
avoid any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
25. Replacement of Company Option. Upon receipt by the Company of
evidence reasonably satisfactory to it on the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, the Company will execute and deliver a new
Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
X.X. XXXXX CO.
By: /s/ Xxxxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxxxx X. Xxxxxx
---------------------
Title: President
--------------------
VARITRONIC SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxxx
--------------------------
Xxxxx X. Xxxxxxxxxxxx
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