Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of April 25, 2002 by and among Franklin Electric Co., Inc.,
an Indiana corporation ("Acquiror"), FEI Corporation, a Maine corporation
and a wholly-owned subsidiary of Acquiror ("Merger Subsidiary"), and
Intelligent Controls, Inc., a Maine corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Acquiror, Merger Subsidiary and
the Company each have determined that it is in the best interests of their
respective shareholders for Acquiror to acquire the Company upon the terms
and subject to the conditions of this Agreement;
WHEREAS, the Boards of Directors of Acquiror, Merger Subsidiary and
the Company have approved the merger of Merger Subsidiary with and into the
Company (the "Merger") upon the terms and subject to the conditions of this
Agreement so that the Company will become a wholly-owned subsidiary of
Acquiror; and
WHEREAS, Acquiror, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section
1.3), Merger Subsidiary shall be merged with and into the Company, in
accordance with the Maine Business Corporation Act (the "MBCA"), and the
separate corporate existence of Merger Subsidiary shall cease and the
Company shall continue as the surviving corporation (as such, the
"Surviving Corporation") with all the rights, privileges, immunities,
powers and franchises, and subject to all the restrictions, disabilities
and duties, of a corporation organized under the MBCA. The Merger shall
have the effects set forth in the MBCA.
SECTION 1.2 Closing. The closing of the Merger (the "Closing")
shall take place at 9:00 a.m. on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of the conditions (excluding conditions that, by their terms, cannot
be satisfied until the Closing Date) set forth in Article VI, unless
another time or date is agreed to by the parties. The Closing shall be
held at the offices of Schiff Hardin & Waite, 6600 Sears Tower, Chicago,
Illinois 60606, or such other location as the parties shall agree. The
date on which the Closing occurs is referred to in this Agreement as the
"Closing Date."
SECTION 1.3 Effective Time. The parties hereto will file with the
Secretary of State of the State of Maine (the "Maine Secretary of State")
on the Closing Date (or on such other date as Acquiror and the Company may
agree) articles of merger or other appropriate documents,
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mutually satisfactory in form and substance to Acquiror and the Company and
executed in accordance with the relevant provisions of the MBCA, and make
all other filings or recordings required under the MBCA, in connection with
the Merger. The Merger shall become effective upon the filing of the
articles of merger with the Maine Secretary of State, or at such later time
as is specified in the articles of merger (the "Effective Time").
SECTION 1.4 Certificate of Incorporation. The articles of
incorporation of the Merger Subsidiary at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until thereafter
amended in accordance with its terms and as provided by applicable law.
SECTION 1.5 By-Laws. The by-laws of the Merger Subsidiary at the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by applicable law, the articles of
incorporation or the by-laws of the Surviving Corporation.
SECTION 1.6 Directors. The directors of the Merger Subsidiary at
the Effective Time shall be the directors of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the
articles of incorporation or by-laws of the Surviving Corporation, or as
otherwise provided by applicable law.
SECTION 1.7 Officers. The officers set forth on Exhibit A to this
Agreement shall be the officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the articles
of incorporation or by-laws of the Surviving Corporation, or as otherwise
provided by applicable law.
SECTION 1.8 Effect of Merger on Merger Subsidiary Capital Stock.
Each share of capital stock of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of common stock, no par value,
of the Surviving Corporation.
SECTION 1.9 Conversion of Common Stock.
(a) Outstanding Common Stock. Subject to the other
provisions of this Section 1.9, each share of common stock, no par
value, of the Company (the "Common Stock") issued and outstanding
immediately prior to the Effective Time (other than treasury shares
to be cancelled in accordance with Section 1.9(b), and Dissenting
Shares (as defined in Section 1.12), and subject to settlement of the
restricted stock note in accordance with Section 5.5) shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive $3.95 in cash,
without interest (the "Merger Consideration").
(b) Treasury Shares. Each share of Common Stock issued and
outstanding immediately prior to the Effective Time which is then
held as a treasury share by the Company immediately prior to the
Effective Time shall, by virtue of the Merger and without any action
on the part of the Company, be cancelled and retired and cease to
exist, without any conversion thereof.
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SECTION 1.10 Exchange of Certificates and Related Matters.
(a) Paying Agent. At the Effective Time, Acquiror shall
cause the Surviving Corporation to deposit with a paying agent to be
designated by Acquiror and the Company prior to the Effective Time
("Paying Agent"), for the benefit of the holders of shares of Common
Stock, cash in an aggregate amount equal to the aggregate Merger
Consideration (such amount being sometimes referred to in this
Agreement as the "Payment Fund").
(b) Letter of Transmittal. Promptly after the Effective Time
(but in no event more than five business days thereafter), the
Surviving Corporation shall require the Paying Agent to mail to each
record holder of certificates (the "Certificates") that immediately
prior to the Effective Time represented shares of Common Stock, a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title shall pass, only upon proper
delivery of Certificates to the Paying Agent and shall be
substantially in such form as has been agreed to by the Company and
Acquiror prior to Closing) and instructions for use in surrendering
such Certificates and receiving the Merger Consideration to which
such holder shall be entitled therefor pursuant to Section 1.9. The
Surviving Corporation also shall require the Paying Agent to have
such letter of transmittal and instructions available at its offices
immediately after the Effective Date in order to accommodate record
holders of Certificates desiring to receive the Merger Consideration
at the earliest possible date.
(c) Exchange Procedures. Upon surrender to the Paying Agent
for cancellation of Certificates, together with a letter of
transmittal in accordance with Section 1.10(b) and such other
customary documents as may be required by the instructions to the
letter of transmittal, and acceptance thereof by the Paying Agent,
the holder of such Certificates shall be entitled to receive in
exchange therefor the amount of cash into which the number of shares
of Common Stock previously represented by such Certificates shall
have been converted pursuant to Section 1.9(a). The Paying Agent
shall accept such Certificates upon compliance with such reasonable
terms and conditions as the Paying Agent may impose to effect an
orderly exchange in accordance with normal exchange practices. If the
Merger Consideration (or any portion thereof) is to be delivered to
any person other than the person in whose name the Certificates
surrendered in exchange therefor is registered on the record books of
the Company, it shall be a condition to such exchange that the
Certificates so surrendered shall be properly endorsed or otherwise
be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other taxes
required by reason of the payment of such consideration to a person
other than the record holder of the Certificates surrendered, or
shall establish to the satisfaction of the Paying Agent that such tax
has been paid or is not applicable. After the Effective Time, there
shall be no further transfer on the records of the Company or its
transfer agent of any shares of Common Stock and if any Certificates
are presented to the Company for transfer, they shall be cancelled
against delivery of the Merger Consideration as provided above. Until
surrendered as contemplated by this Section 1.10(b), Certificates
(other than Certificates representing treasury shares of Common Stock
to be cancelled in accordance with Section 1.9(b)),
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shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger
Consideration, without any interest thereon.
(d) No Further Ownership Rights in Shares. The Merger
Consideration paid upon the surrender for exchange of Certificates
representing shares of Common Stock in accordance with the terms of
this Article I shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Common Stock
previously represented by such Certificates.
(e) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the holders of the Certificates
representing shares of Common Stock for 120 days after the Effective
Time shall be delivered to Acquiror, upon demand, and any holders of
shares of Common Stock who have not theretofore complied with this
Article I shall thereafter look only to Acquiror and only as general
creditors thereof for payment, without interest, of their claim for
any Merger Consideration with respect to their shares of Common
Stock.
(f) No Liability. None of Acquiror, the Surviving
Corporation or the Paying Agent shall be liable to any person in
respect of any cash, shares, dividends or distributions payable from
the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any
Certificates representing shares of Common Stock shall not have been
surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat
to or become the property of any Governmental Entity (as defined in
Section 2.4)), any such cash, shares, dividends or distributions
payable in respect of such Certificates shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation free and clear of all claims or interest of any person
previously entitled thereto.
SECTION 1.11 Stock Options. The Company shall take all necessary
and appropriate action to provide that immediately prior to the Effective
Time each outstanding option to purchase Common Stock (each, a "Stock
Option") granted under or pursuant to any stock option plan of the Company
or any agreement entered into by the Company with any employee or director
of the Company or any Subsidiary (as defined in Section 2.3) thereof,
shall:
(a) to the extent vested and exercisable, be deemed
cancelled, with holders of a Stock Option entitled to receive from
the Company in consideration for the cancellation of such Stock
Option an amount in cash (less applicable withholding taxes) equal to
the product of (i) the number of shares of Common Stock previously
subject to such Stock Option, and (ii) the excess, if any, of the
Merger Consideration over the exercise price per share of Common
Stock previously subject to exercise under such Stock Option, and/or
(b) to the extent not vested and exercisable, be deemed
cancelled without any consideration payable to holders of a Stock
Option.
The Company shall take all necessary and appropriate actions to
provide that as of the Effective Time (i) no holder of Stock Options will
have any right to receive shares of common
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stock of the Surviving Corporation upon exercise of any such Stock Option,
and (ii) the Company shall pay, or have made arrangements to pay, to each
holder under Section 1.11(a) the amount contemplated by Section 1.11(a),
and each holder, whether or not entitled to payment under Section 1.11(a),
shall have delivered to the Company a release on terms mutually acceptable
to the Company and Acquiror.
SECTION 1.12 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Common Stock outstanding immediately
prior to the Effective Time and held by a holder who has met all applicable
conditions for the exercise of dissenters' rights under Section 909 of the
MBCA, shall not be converted into or represent the right to receive the
Merger Consideration ("Dissenting Shares"). Shareholders holding
Dissenting Shares shall be entitled to receive payment of the fair value of
such shares of Common Stock in accordance with the provisions of Section
909 of the MBCA, except that all Dissenting Shares held by shareholders who
have withdrawn or forfeited their right to dissent under Section 909 of the
MBCA shall thereupon be deemed to have been converted into, as of the
Effective Time, the right to receive, without any interest thereon, the
Merger Consideration, upon surrender, in the manner provided in Section
1.10(b), of the Certificate or Certificates that formerly evidenced such
shares of Common Stock. The Company shall give Acquiror prompt notice of
any demands under Section 909 of the MBCA, withdrawals of such demands, and
any other instruments received by the Company, and Acquiror shall have the
right to participate in all negotiations and proceedings with respect to
such demands. Prior to the Effective Time, the Company shall not, except
with the prior written consent of Acquiror, make any payment with respect
to any demands under Section 909 of the MBCA, or settle or offer to settle,
any such demands.
SECTION 1.13 Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that
any deeds, bills of sale, assignments or assurances or any other acts or
things are necessary, desirable or proper (a) to vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation its right, title and
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of either of the Company or Merger Subsidiary, or (b)
otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees shall
be authorized to execute and deliver, in the name and on behalf of either
the Company or Acquiror, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of such corporations, all such
other acts and things as may be necessary, desirable or proper to vest,
perfect or confirm the Surviving Corporation's right, title and interest
in, to and under any of the rights, privileges, powers, franchises,
properties or assets of such corporations and otherwise to carry out the
purposes of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger
Subsidiary, except as set forth in the specifically referenced sections of
the disclosure schedule delivered on or prior to the date hereof by the
Company (the "Disclosure Schedule") as follows:
SECTION 2.1 Organization, Standing and Corporate Power. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of
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Maine and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The Company is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature
of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed or in good standing has not had, and would
not have, individually or in the aggregate, a Material Adverse Effect. As
used in this Agreement, the term "Material Adverse Effect" means with
respect to the Company a material adverse effect on the business, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or working capital of the Company and its Subsidiaries (as
defined in Section 2.3) taken as a whole. The Company has delivered to
Acquiror complete and correct copies of its Articles of Incorporation and
Bylaws, as amended to the date of this Agreement.
SECTION 2.2 Capital Structure. The authorized capital stock of the
Company consists of 8,000,000 shares of Common Stock. At the close of
business on April 15, 2002, (a) 4,739,399 shares of Common Stock were
issued and outstanding (exclusive of treasury shares), (b) 321,724 shares
of Common Stock were held by the Company as treasury stock, (c) 420,000
shares of Common Stock were reserved for issuance upon the exercise of
Stock Options, which amount is sufficient to cover the exercise of all
outstanding Stock Options irrespective of vesting conditions, and (d)
410,000 shares of Common Stock (the "Restricted Shares") were issued
pursuant to a promissory note from the holder of the Restricted Shares.
All outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable and have not been issued in
violation of any shareholder rights under applicable law (including,
without limitation, all applicable federal and state securities laws), and
are not subject to preemptive rights. No bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which the shareholders of the Company may vote are issued or outstanding.
Except as set forth above or in Section 2.2 of the Disclosure Schedule, the
Company does not have any outstanding option, warrant, subscription or
other right, agreement, obligation or commitment which either obligates the
Company to issue, sell or transfer, repurchase, redeem or otherwise acquire
or vote any shares of capital stock of the Company, or which restricts the
transfer of Common Stock. Section 2.2 of the Disclosure Schedule sets forth
the following information with respect to each Stock Option outstanding on
the date hereof (i) the name of the recipient, (ii) the number of shares of
Common Stock subject to such Stock Option, (iii) the applicable exercise
price for each Stock Option, and (iv) the projected number of shares of
Common Stock purchasable thereunder as of June 15, 2002 (assuming the due
exercise thereof on that date, consistent with the applicable vesting
conditions, if any).
SECTION 2.3 Subsidiaries. (a) Section 2.3(a) of the Disclosure
Schedule sets forth the name of each Subsidiary (as defined below) of the
Company and the state or jurisdiction of its incorporation. Each Subsidiary
is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and all necessary government
approvals to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing or in good standing has not had, and would not have,
individually or in the aggregate, a Material Adverse Effect. Each
Subsidiary is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature
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of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed or in good standing has not had, and would
not have, individually or in the aggregate, a Material Adverse Effect. As
used herein, "Subsidiary" means any corporation, partnership, joint venture
or other legal entity of which the Company (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, 50% or
more of the capital stock or other equity interests, the holders of which
are generally entitled to vote with respect to matters to be voted on in
such corporation, partnership, joint venture or other legal entity. Except
as disclosed in the Filed SEC Documents (as defined in Section 2.6), the
Company and its Subsidiaries are not subject to any material joint venture,
joint operating or similar arrangement or any material shareholders
agreement relating thereto.
(b) Section 2.3(b) of the Disclosure Schedule sets forth, as to
each Subsidiary, its authorized capital stock and the number of its issued
and outstanding shares of capital stock. The Company is, directly or
indirectly, the record and beneficial owner of all of the outstanding
shares of capital stock of each of the Subsidiaries, and no capital stock
of any Subsidiary is or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into
or exchangeable or exercisable for, shares of any capital stock of any
Subsidiary. There are no contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may be bound to
issue, sell, transfer, repurchase, redeem, or otherwise acquire or vote any
shares of capital stock of any Subsidiary or securities convertible into or
exchangeable or exercisable for any such shares. All of such shares so
owned by the Company are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any shareholder
rights under applicable law (including, without limitation, all applicable
federal and state securities laws) and are owned by it free and clear of
all liens, claims, encumbrances, restraints on alienation, or any other
restrictions with respect to the transferability or assignability thereof
(other than restrictions on transfer imposed by federal or state securities
laws or those imposed as a matter of law by the jurisdiction of
incorporation).
(c) Except as set forth on Section 2.3(c) of the Disclosure
Schedule, neither Subsidiary has conducted any business since January 1,
1999.
SECTION 2.4 Authority; Noncontravention. The Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. 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, subject, in the case of the
Merger, to the approval of the Company's shareholders at a duly convened
meeting as set forth in Section 4.2. The Board of Directors of the Company
has determined that the Merger is advisable and fair to and in the best
interests of the Company and its shareholders and has approved the Merger
and this Agreement and has resolved to recommend the Merger to the
Company's shareholders for their approval. This Agreement has been duly
executed and delivered by the Company and, assuming this Agreement has been
duly executed and delivered by Acquiror and Merger Subsidiary, constitutes
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except that the enforcement thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to
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creditor's rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
Except as disclosed in Section 2.4 of the Disclosure Schedule, the
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions hereof will not, (i) conflict with or violate any of the
provisions of the Articles of Incorporation or Bylaws of the Company, (ii)
subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with
or without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or loss of a
benefit under, or require the consent of any person under, any loan
agreement, note, indenture or other agreement, permit, concession,
franchise, lease, contract, license or similar instrument, obligation or
undertaking to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their assets is
bound or affected, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule or
regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect, subject, in the case of
clauses (ii) and (iii), to those conflicts, breaches, defaults and similar
matters, which, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect, and would
not materially and adversely affect the Company's ability to consummate the
transactions contemplated by this Agreement. No consent, approval or
authorization of, or declaration or filing with, or notice to, any
governmental agency or regulatory body, court, agency, commission,
division, department, public body or other authority (a "Governmental
Entity") is required by or with respect to the Company or any Subsidiary in
connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for (A) the filing with the SEC of a preliminary and a definitive
proxy statement (the "Proxy Statement"), relating to the approval by the
Company's shareholders of the Merger and (B) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (C) the filing of the
certificate of merger with the Maine Secretary of State and appropriate
documents with the relevant authorities of other jurisdictions in which the
Company is qualified to do business, and (D) such other consents,
approvals, authorizations, filings or notices as are set forth in Section
2.4 of the Disclosure Schedule.
SECTION 2.5 SEC Documents. Since January 1, 1999, the Company has
timely filed all required reports, schedules, forms, statements and other
documents required to be filed by it with the SEC (such reports, schedules,
forms, statements and other documents are hereinafter referred to as the
"SEC Documents"). As of their respective dates, and in all material
respects, the SEC Documents complied with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the
SEC Documents as of such dates contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the SEC Documents comply as
to form in all
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material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim
financial statements, as permitted by Rule 10-01 of Regulation S-X) and
fairly present, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof and
the consolidated results of their operations, cash flows and shareholders'
equity for the periods then ended (subject, in the case of unaudited
interim financial statements, to normal recurring adjustments).
SECTION 1.2 Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed prior to March 31, 2002 (the "Filed
SEC Documents"), or in Section 2.6 of the Disclosure Schedule or as
otherwise contemplated or permitted by this Agreement, since the date of
the most recent audited financial statements included in the Filed SEC
Documents, the Company and its Subsidiaries have conducted their business
only in the ordinary course (which conduct has not had, and would not
reasonably be expected to have, a Material Adverse Effect), and except as
otherwise expressly permitted by this Agreement, there has not been:
(a) any event, effect or change which has had or which would
reasonably be expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to any of the Company's outstanding capital stock;
(c) any split, combination or reclassification of any of its
outstanding capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock,
(d) (i) any granting by the Company or any of its
Subsidiaries to any director, officer or other employee of the
Company or any of its Subsidiaries of any increase in compensation,
except in the case of employees in the ordinary course of business
consistent with prior practice, or as was required under employment
agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents, (ii) any
granting by the Company or any of its Subsidiaries to any director,
officer or other employee of any increase in severance or termination
pay, except as was required under any employment, severance or
termination agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC Documents,
(iii) any entry by the Company or any of its Subsidiaries into any
employment, severance, change of control, termination or similar
agreement with any officer, director or other employee;
(e) any change in the method of accounting or policy used by
the Company or any of its Subsidiaries, except as disclosed in the
financial statements included in the Filed SEC Documents; and
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(f) any loss or material interference with the Company's
business or assets from fire, accident, flood or other casualty
(whether or not covered by insurance) that has had or would
reasonably be expected to have a Material Adverse Effect; or
(g) any material increase in indebtedness.
SECTION 2.7 Absence of Undisclosed Liabilities. Except as reflected
in the most recent financial statements contained in the Filed SEC
Documents or as described in Section 2.7 of the Disclosure Schedule and
except as has been incurred after December 31, 2001 in the ordinary course
of business (which has not had, and would not reasonably be expected to
have, a Material Adverse Effect) or in connection with the transactions
contemplated by this Agreement, the Company and its Subsidiaries (a) do not
have any liabilities or obligations (whether direct or indirect, contingent
or otherwise) and (b) have not entered into any material oral or written
agreement or other transaction which has had or would reasonably be
expected to have a Material Adverse Effect.
SECTION 2.8 Benefit Plans.
(a) Definitions.
(i) Plan. The term "Plan" includes (A) each employee
benefit plan, as defined in Section 3(3) of ERISA (other than a
Multiemployer Plan and including terminated Plans) which
currently or since December 31, 1996, is or has been maintained
for employees of the Company or of any Control Group member or
to which the Company or any Control Group member makes or was
required to make contributions and (B) each nonqualified
employee benefit plan, or deferred compensation, bonus,
severance, stock option, restricted stock, performance share,
phantom stock or incentive plan, employment agreement,
severance agreement or other employee benefit or fringe benefit
program, agreement arrangement or policy.
(ii) Qualified Plan. The term "Qualified Plan" means
any Plan which is an employee pension benefit plan as defined
in Section 3(2) of ERISA and which is intended to meet the
qualification requirements of the Code.
(iii) Title IV Plan. The term "Title IV Plan" means any
Qualified Plan that is a defined benefit plan (as defined in
Section 3(35) of ERISA) and is subject to Title IV of ERISA.
(iv) Multiemployer Plan. The term "Multiemployer Plan"
means any employee benefit plan that is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA and to which the
Company or any Control Group member has or had any obligation
to contribute.
(v) Control Group. The term "Control Group" means a
controlled group of corporations of which the Company is a
member within the meaning of Section 414(b) of the Code, any
group of corporations or entities under common control with the
Company within the meaning of Section 414(c) of the Code or any
affiliated service group of which the Company is a member
within the meaning of Section 414(m) of the Code.
10
(vi) Code. The term "Code" means the Internal Revenue
Code of 1986, as amended.
(vii) ERISA. The term "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended.
(b) Plans Listed; Control Group. All Plans are listed on
Section 2.8(b) of the Disclosure Schedule. Neither the Company nor
any other member of the Control Group maintains or contributes to, or
has ever maintained or contributed to a Title IV Plan or a
Multiemployer Plan. No Subsidiary of the Company has any employees
who participate in any of the Plans, and (except for the Control
Group consisting of the Company and its Subsidiaries) the Company is
not otherwise a member of any Control Group.
(c) Operations of Plans.
(i) Each Plan has been administered in compliance with
its terms and with all filing, reporting, disclosure and other
requirements of all applicable statutes (including but not
limited to ERISA and the Code), regulations and interpretations
thereunder, except for any failure to so comply that,
individually or together with all other such failures, has not
had and is not reasonably expected to have a Material Adverse
Effect.
(ii) To the Company's knowledge and in all material
respects, all oral or written communications with respect to
each Plan currently and in the past reflect and have reflected
the documents and operations of the Plan.
(iii) To the Company's knowledge, neither the Company nor
any of its Subsidiaries, nor any of their respective employees
or directors, nor any fiduciary, has engaged in any
transaction, including the execution and delivery of this
Agreement, in violation of Section 406(a) or (b) or Section 407
of ERISA or which is a "prohibited transaction" (as defined in
Section 4975(c)(l) of the Code) for which no exemption exists
under Section 408(b) and (e), of ERISA or Section 4975(d) of
the Code or for which no administrative exemption has been
granted under Section 408(a) of ERISA.
(iv) Each Qualified Plan (together with its related
funding instrument) is qualified and tax exempt under Sections
401 and 501 of the Code and is the subject of a favorable
Internal Revenue Service determination with respect to such
qualification and exemption. Nothing has occurred since the
date of such determination that will adversely affect such
determination or the qualified and tax exempt status of such
Qualified Plan.
(v) No matter is pending relating to any Plan before
any court or Governmental Entity.
11
(vi) No Plan is currently the subject of a submission
under the Internal Revenue Service Employee Plans Compliance
Resolution System or any similar system, nor under any United
States Department of Labor amnesty program, and the Company
does not anticipate any such submission of any such Plan.
(vii) Every fiduciary and official of each Plan is bonded
to the extent required by Section 412 of ERISA, if applicable,
and no civil or criminal action with respect to any Plan,
pursuant to any federal or state law, is pending or (to the
Company's knowledge) is threatened, against (A) the Company or
any Subsidiary thereof, or (B) against any officer, director or
employee thereof or any fiduciary of any Plan.
(viii) To the Company's knowledge, no Plan fiduciary or
any other person has, or has had, any liability to any Plan
participant or beneficiary or any other person under any
provisions of ERISA or any other applicable law by reason of
any action or failure to act in connection with any Plan,
including, but not limited to, any liability by any reason of
any payment of, or failure to pay, benefits or any other
amounts or by reason of any credit or failure to give credit
for any benefits or rights.
(ix) Set forth on Section 2.8(c)(ix) of the Disclosure
Schedule is a list of all Plans to which the Company or any
other member of the Control Group is a party or by which any of
them is bound and under which, as a result of the consummation
of the transactions contemplated by this Agreement or any other
transaction or transactions contemplated by the Company, any
current or former director, officer, employee or other agent of
the Company or any other member of the Control Group or any
other party claiming through such a person shall or may acquire
rights to compensation, incentive pay, severance pay,
unemployment compensation or any other rights with respect to
any Plan (including, without limitation, the creation, increase
or extension of new or existing rights), become entitled to a
distribution or payment with respect to any Plan at a date
earlier than if such transaction had not occurred, or otherwise
receive or become vested in rights or benefits with respect to
any Plan.
(x) Except as set forth on Section 2.8(c)(x) of the
Disclosure Schedule, neither the Company nor any member of the
Control Group has any obligations, or liabilities with respect
to, retiree health and life benefits under any Plan except for
benefits for continued group health coverage required to be
provided under Section 4980B of the Code and Sections 601
through 609 of ERISA or applicable state law.
(xi) No Plan provides for payment of any amount which,
considered in the aggregate with amounts payable pursuant to
all other Plans, would exceed the amount deductible for federal
income tax purposes by virtue of Sections 280G or 162 (m) of
the Code.
(d) Plan Documents and Records.
12
(i) Complete and correct copies of all current and
prior documents, including all amendments thereto, with respect
to each Plan, have been delivered to Acquiror. These documents
include, but are not limited to, the following: Plan
documents, trust agreements, insurance contracts, annuity
contracts, summary plan descriptions, filings with any
Governmental Entity, investment manager and investment adviser
contracts, and actuarial reports, audit reports, financial
statements, and annual reports (Form 5500) for the most recent
three plan years ending prior to the Closing Date.
(ii) As of the Closing Date, the participant or
beneficiary records with respect to each Plan shall be in
custody of the persons listed on Section 2.8(d)(ii) of the
Disclosure Schedule. To the Company's knowledge and in all
material respects, all such records accurately set forth the
history of each participant and beneficiary in connection with
each Plan and accurately state the benefits earned and owed to
each such person under each such Plan as of the date hereof.
(e) Finances. All contributions payable to each Plan for all
benefits earned and other liabilities accrued through December 31,
2001 determined in accordance with the terms and conditions of such
Plan, ERISA and the Code, have been paid or otherwise provided for,
and to the extent unpaid are reflected in the balance sheet of the
Company as of December 31, 2001.
SECTION 2.9 Taxes. Except as disclosed in Section 2.9 of the
Disclosure Schedule:
(a) Each of the Company and its Subsidiaries has filed all
tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired. All tax returns filed by the Company
and each of its Subsidiaries are complete and accurate in all
material respects. The Company and each of its Subsidiaries has paid
(or the Company has paid on the Subsidiaries' behalf) all taxes shown
as due on such returns and all taxes required to be paid. The most
recent financial statements contained in the SEC Documents reflect an
adequate reserve for all taxes payable by the Company and the
Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(b) The Company has received no notice that any deficiencies
for any taxes have been proposed, asserted or assessed against the
Company or any of its Subsidiaries by any Governmental Entity.
Except as set forth on Section 2.9 of the Disclosure Schedule, no
requests for waivers of the time to assess any such taxes have been
granted or are pending. The Federal income tax returns of the Company
and each of its Subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue
Service, or the statute of limitations on assessment or collection of
any Federal income taxes due from the Company or the any of its
Subsidiaries has expired, through such taxable years as are set forth
in Section 2.9 of the Disclosure Schedule.
(c) As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, premium,
franchise, sales, excise, employment, payroll,
13
withholding and other taxes, tariffs or governmental charges of any
nature whatsoever and any interest, penalties, additional amounts and
additions to taxes relating thereto.
(d) Neither the Company nor any of its Subsidiaries has made
any election, filed any consent or entered into any agreement with
respect to taxes that is not reflected on the federal income tax
returns of the Company and its Subsidiaries for the three years ended
December 31, 2001 (copies of which returns have been provided to
Acquiror for review prior to the date of this Agreement) and that
would reasonably be expected to be material to the Company and the
Subsidiaries taken as a whole.
SECTION 2.10 Compliance with Applicable Laws. Except as disclosed
in Section 2.10 of the Disclosure Schedule:
(a) The business of the Company and each of the Subsidiaries
is being, and has been since December 31, 1996, conducted in
compliance in all material respects with all applicable federal,
state, local and foreign laws, statutes, ordinances, rules and
regulations, decrees, judgments and orders of any Governmental
Entity, and all material notices, reports, documents and other
information required to be filed thereunder within the last three
years were properly filed and were in compliance in all material
respects with such laws. The assets, properties, facilities and
operations of the Company and each of the Subsidiaries are in
compliance in all material respects with all applicable laws
relating to public and worker health and safety.
(b) The Company, and each of the Subsidiaries, has all
material licenses, permits, authorizations, franchises, and rights
issued or issuable by any Governmental Entity ("Licenses") which are
necessary for it to own, lease or operate its properties and assets
and to conduct its business as now conducted. The business of the
Company and each of the Subsidiaries has been and is being conducted
in compliance in all material respects with all such Licenses. All
such Licenses are in full force and effect, and there is no
proceeding or investigation pending or, to the knowledge of the
Company, threatened which would reasonably be expected to lead to the
revocation, amendment, failure to renew, limitation, suspension or
restriction of any such License.
SECTION 2.11 Product Liability. Except as set forth in Section 2.11
of the Disclosure Schedule, in connection with the conduct of the Company's
business: (a) to the Company's knowledge, there are no events, conditions,
circumstances, activities, practices, incident, actions, omissions or plans
which might reasonably be expected to give rise to any material liability
or obligation or otherwise form the basis of any material claim based on or
related to any product that was or allegedly was designed, formulated,
manufactured, processed, serviced, distributed or sold by the Company or
any of its affiliates or any service provided or allegedly provided by or
on behalf of the Company or any affiliates, and (b) to the Company's
knowledge, all products, including the packaging and advertising related
thereto, which were sold or designated, formulated, manufactured, processed
and placed in the stream of commerce by the Company or any of its
affiliates or any services provided by the Company or any of its affiliates
materially complied with applicable Company Agreements (as defined in
Section 2.16 below), applicable laws, including orders from any
Governmental Entity, or applicable industry standards, and there have not
been and there are no material defects or deficiencies in such services or
products.
14
SECTION 2.12 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Company directly with Acquiror, without the intervention of any person on
behalf of the Company in such manner as to give rise to any valid claim by
any person against the Company, Acquiror or any Subsidiary for a finder's
fee, brokerage commission, or similar payment.
SECTION 2.13 Environmental. Except as set forth in Section 2.13 of
the Disclosure Schedule:
(a) The operations and properties of the Company and the
Subsidiaries (i) are in compliance in all material respects with all
applicable Environmental Laws (as defined) and (ii) have not
generated, used, stored, transported, manufactured, released or
disposed of any Hazardous Materials (as defined) on or off the
Company's premises in violation of Environmental Laws. No material
expenditure relative to the Company's premises will be required to
comply with Environmental Laws in connection with the operation or
continued operation of the business of the Company and the
Subsidiaries after the Effective Date in a manner consistent with the
current operation thereof by the Company and the Subsidiaries. To
the knowledge of the Company and the Subsidiaries, no material
expenditure will be required to remediate, clean up, abate or remove
any Hazardous Materials on any real property currently operated or
leased, or formerly owned, operated or leased by the Company or the
Subsidiaries.
(b) There are no actions, complaints, citations,
investigations or proceedings pending or, to the knowledge of the
Company, threatened against the Company or the Subsidiaries alleging
the violation of or seeking to impose liability or responsibility for
environmental cleanup costs pursuant to any Environmental Law or
Environmental Permit (as defined below);
(c) The Company has provided Acquiror with copies of all
environmental audits, assessments, studies, reports, analyses,
investigation results or similar environmentally-related documents of
any real property currently or formerly owned, operated or leased by
the Company or any of its Subsidiaries and copies of all
Environmental Permits required for the operations of the Company, in
all cases limited to those within the possession, custody or control
of the Company or its Subsidiaries.
(d) The Company has provided Acquiror with copies of all
requests for information (and responses thereto), notices of
violation, complaints, claims or other documents or correspondence
related to or referring to any actual or alleged violations of
Environmental Laws or responsibility for environmental cleanup costs,
including but not limited to the Federal Comprehensive Environmental,
Response, Compensation and Liability Act ("CERCLA") and similar state
laws, at (i) any real property currently or formerly owned, operated
or leased by the Company or any Subsidiaries, or (ii) at CERCLA or
similar state sites at which the Company or any Subsidiaries are
named as potentially responsible parties, or for which the Company or
any Subsidiaries have received a CERCLA Section 122(c), Section
104(e) or similar notice or request for information, in all cases
limited to those within the possession, custody or control of the
Company or its Subsidiaries.
15
(e) The Company and Subsidiaries possess, and have maintained
in full force and effect, all Environmental Permits required for the
operation of their respective businesses, and in all material
respects are in compliance with the provisions of all such
Environmental Permits. Section 2.11(e) of the Disclosure Schedule
contains a list of all Environmental Permits. No modification,
revocation, reissuance, alteration, transfer or amendment of any
material Environmental Permit or any review by, or approval of, any
third party of any Environmental Permit is required in connection
with the execution or delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(f) The Company and the Subsidiaries have not contractually
created or otherwise assumed any liabilities or obligations or
indemnifications of any third party under any Environmental Laws,
including related to any real property currently or formerly owned,
operated or leased by the Company or any Subsidiaries.
(g) As used in this Section 2.13, each of the following terms
shall have the following meanings: (i) "Environmental Law" means any
applicable federal, state, local, or foreign law, statute, code,
ordinance, rule, regulation or other requirement (including common
law) relating to the environment (including air, soil, surface water,
groundwater, drinking water, plant life and animal life), or public
or employee health and safety; (ii) "Environmental Permit" means any
governmental permit, consent, approval, authorization, license,
variance, notice, registration, identification number or permission
required under or issued pursuant to any applicable Environmental Law
or order, writ, injunction or decree; and (iii) "Hazardous Materials"
means any hazardous, toxic or dangerous substances, materials and
wastes, including but not limited to naturally occurring or man-made
petroleum or other hydrocarbons, flammable explosives, asbestos
containing materials, radioactive materials, radioactive wastes,
polychlorinated biphenyls, pesticides, herbicides and any other
pollutants or contaminants (including materials with hazardous
constituents), sewage, sludge, industrial and/or mining slag,
tailings, solvent, including any other substances, materials or
wastes regulated under Environmental Law.
SECTION 2.14 Litigation. Except as set forth in the Filed SEC
Documents or in Section 2.14 of the Disclosure Schedule:
(a) there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Entity against the Company or
any of its Subsidiaries, any of its or their properties, assets or
business, (or, to the knowledge of the Company, any of its or their
current or former directors or officers, as such), that have had or
would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending
or, to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries, any of its or their properties, assets or
business (or, to the knowledge of the Company, any of its or their
current or former directors or officers, as such), that have had or
would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; and
16
(c) there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending
or, to the knowledge or the Company, threatened against the Company
or any of its Subsidiaries, any of its or their properties, assets or
business (or, to the knowledge of the Company, any of its or their
current or former directors or officers, as such), relating to the
transactions contemplated by this Agreement.
SECTION 2.15 Labor Relations. Except as set forth in Section 2.15
of the Disclosure Schedule:
(a) Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary and
there are no known organizational campaigns, petitions or other
unionization activities seeking recognition of a collective
bargaining unit.
(b) There are no strikes, slowdowns, work stoppages or labor
relations controversies pending or, to the knowledge of the Company,
threatened between the Company or any Subsidiary and any of their
respective employees, and neither the Company nor any Subsidiary has
experienced any such strike, slowdown, work stoppage or material
controversy within the past three years.
SECTION 2.16 Contracts. Except as set forth in the Filed SEC
Documents or as set forth in Section 2.16 of the Disclosure Schedule, there
are no agreements, contracts or other instruments to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their assets is bound or affected that are material
to the business, financial condition or results of operations of the
Company or its Subsidiaries taken as a whole ("Company Agreements").
Neither the Company or any of its Subsidiaries nor, to the knowledge of the
Company, any other party is in breach of or default under any Company
Agreements which are currently in effect, except for such breaches and
defaults which have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set
forth in the Filed SEC Documents or as set forth in Section 2.16 of the
Disclosure Schedule, neither the Company nor any Subsidiary is a party to
or bound by any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the manner in
which, or the localities in which, the Company or any Subsidiary is
entitled to conduct all or any material portion of its business.
SECTION 2.17 Intellectual Property.
(a) Except as set forth on Section 2.17(a) of the Disclosure
Schedule, the Company owns, or has license to use, all inventions,
improvements, patents, utility models, designs, trade names, trade
dress, trade secrets, trademarks, service marks, copyrights and other
proprietary rights (including all grants, registrations or
applications therefor), used in the Company's business or necessary
for the conduct of the Company's business (collectively,
"Intellectual Property") as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are
owned by the Company, or to which the
17
Company holds an exclusive license to use, are listed in Section
2.17(b) of the Disclosure Schedule. All patents, patent
applications, trademarks, trademark applications and registrations
and registered copyrights that are material to the Company's business
and are otherwise licensed from third parties are listed in Section
2.17(b) of the Disclosure Schedule.
(c) All licenses or other agreements under which (i) the
Company is granted rights in Intellectual Property by others (other
than licenses for "Office Software"), or (ii) the Company has granted
rights to others in Intellectual Property owned or licensed by the
Company, are listed in Section 2.17(c) of the Disclosure Schedule.
All said licenses or other agreements are in full force and effect,
and to the Company's knowledge there is no material default by any
party thereto. True and complete copies of all such licenses or
other agreements, and any amendments thereto, have been provided to
Acquiror. "Office Software" means any third party computer software
that is licensed for use on desktop or laptop "PC-class" computers or
related local area network servers other than by a written agreement
executed by the licensee, including software licensed by shrink wrap
or click wrap licenses, the Microsoft Windows class of operating
system software, and Microsoft Office or similar office productivity
software (including individual programs contained therein). To the
Company's knowledge there is no material default with respect to any
license for the Office Software that is used in the Company's
business.
(d) Except as set forth on Section 2.17(d) of the Disclosure
Schedule, the Company is the owner of record of any application,
registration or grant for each item of Intellectual Property set
forth on Section 2.17(b) of the Disclosure Schedule, and has properly
executed and recorded all documents necessary to perfect its title to
such Intellectual Property. The Company has filed all documents and
paid all taxes, fees, and other financial obligations required to
maintain in force and effect all such Intellectual Property until
Closing.
(e) Except as set forth on Section 2.17(e) of the Disclosure
Schedule, neither the conduct of the Company's business, nor any of
the products sold or services provided by the Company in connection
therewith, infringes upon or is inconsistent with the rights of any
other person or entity. Except as set forth on Section 2.17(e) of
the Disclosure Schedule, to the Company's knowledge neither the
conduct of any other person's or entity's business, nor the nature of
any of the products it sells or services it provides, infringes upon
the Company's rights in respect of any Intellectual Property.
(f) Except as set forth on Section 2.17(f) of the Disclosure
Schedule, the Company owns all computer software that has been
developed by or for the Company and that is used in the Company's
business or is necessary for the conduct of the Company's business as
presently conducted or contemplated ("Company Software"). Section
2.17(f) of the Disclosure Schedule sets forth a list of all material
Company Software.
(g) The Company has taken reasonable and prudent steps,
consistent with good business practices, to require employees and
agents with access to the Intellectual Property to maintain the
confidentiality of non-public information relating to the
18
Intellectual Property, including the source code of Company Software,
and to appropriately restrict the use of thereof. The source code of
Company Software is complete and correct and constitutes all of the
source code that is necessary for the conduct of the Company's
business as presently conducted or contemplated. The Company owns
all inventions and developments relating to the Company's present or
contemplated business that were conceived or created by its employees
and other persons having access to valuable non-public information of
the Company, including the source code of Company Software, during
the course of their work for the Company. Section 2.17(g) of the
Disclosure Schedule contains a description of the Company's practices
in this regard.
SECTION 2.18 Real Estate. The Company and its Subsidiaries do not
own any real estate. The Company and its Subsidiaries do not lease any
real estate other than the premises identified in the Filed SEC Documents
or as set forth in Section 2.18 of the Disclosure Schedule as being so
leased.
SECTION 2.19 Anti-Takeover Provisions. The Board of Directors of
the Company has taken all necessary action to ensure that no "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation, including Section 910 of the MBCA (each, a "Takeover
Statute"), or any applicable anti-takeover provision in the Company's
articles of incorporation or by-laws is or will become applicable to the
Merger. To the knowledge of the Company, no other state takeover statute
is or will become applicable to the Merger.
SECTION 2.20 Voting Requirements. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Shareholders Meeting (as defined in Section 4.2) is the only
vote of the holders of any class of the Company's capital stock necessary
to approve Merger and the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUBSIDIARY
Acquiror and Merger Subsidiary represent and warrant to the Company
as follows:
SECTION 3.1 Organization and Standing. Acquiror is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Indiana.
SECTION 3.2 Merger Subsidiary. Merger Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maine. The authorized capital stock of Merger Subsidiary consists
of 100 shares of common stock, no par value, all of which are validly
issued and outstanding. All of the issued and outstanding capital stock of
Merger Subsidiary is, and immediately prior to the Effective Time will be,
owned by Acquiror. Merger Subsidiary has not conducted any business prior
to the date hereof and has no, and immediately prior to the Effective Time
will have no, assets, liabilities or obligations of any nature other than
incident to its formation and pursuant to this Agreement.
19
SECTION 3.3 Authority; Noncontravention. Each of Acquiror and
Merger Subsidiary has all requisite corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Acquiror and Merger Subsidiary
and the consummation by Acquiror and Merger Subsidiary of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Acquiror and Merger Subsidiary. This Agreement has
been duly executed and delivered by and, assuming this Agreement has been
duly executed and delivered by the Company, constitutes a valid and binding
obligation of each of Acquiror and Merger Subsidiary, enforceable against
each in accordance with its terms except that the enforcement thereof may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditor's rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not (i) conflict with
or violate any of the provisions of the articles of incorporation or by-
laws of Acquiror or Merger Subsidiary, (ii) subject to the governmental
filings and other matters referred to in the following sentence, conflict
with, result in a breach of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of a benefit under, or require
the consent of any person under, any indenture, or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to
which Acquiror or any of its subsidiaries (including Merger Subsidiary) is
a party or by which Acquiror or any of its subsidiaries (including Merger
Subsidiary) or any of their assets is bound or affected, or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the
United States or any political subdivision thereof or therein, or any
order, writ, judgment, injunction, decree, determination or award currently
in effect, subject, in the case of clauses (ii) and (iii), to those
conflicts, breaches, defaults and similar matters, which, individually or
in the aggregate, would not materially and adversely affect Acquiror's or
Merger Subsidiary's ability to consummate the transactions contemplated
hereby. No consent, approval or authorization of, or declaration or filing
with, or notice to, any Governmental Entity is required by or with respect
to Acquiror or Merger Subsidiary in connection with the execution and
delivery of this Agreement by Acquiror and Merger Subsidiary or the
consummation by Acquiror and Merger Subsidiary of any of the transactions
contemplated hereby, except for (A) the filing of the certificate of merger
with the Maine Secretary of State, and appropriate documents with the
relevant authorities of the other states in which the Company is qualified
to do business, and (B) such other consents, approvals, authorizations,
filings or notices as are set forth in Section 2.4 of the Disclosure
Schedule.
SECTION 3.4 Financing. Acquiror has, and will have at the Closing,
sufficient funds to pay the aggregate Merger Consideration.
SECTION 3.5 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Acquiror
directly with the Company, without the intervention of any person on behalf
of Acquiror in such manner as to give rise to any valid claim by any person
against Acquiror, the Company or any Subsidiary for a finder's fee,
brokerage commission, or similar payment.
20
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Preparation of Proxy Statement.
(a) Proxy Statement. As soon as practicable following the
date of this Agreement, the Company shall prepare and file with the
SEC a proxy statement that describes the pending Merger and related
actions (including any amendments or supplements thereto, the "Proxy
Statement"). The Company will use its reasonable efforts to cause
the Proxy Statement to be mailed to the Company's shareholders as
promptly as practicable. Acquiror shall have a reasonable
opportunity to review and comment on drafts of the Proxy Statement,
and agrees to provide such information about Acquiror as may
reasonably be necessary or appropriate for inclusion in the Proxy
Statement and any amendment or supplement thereto.
(b) Company Information. The Company agrees that none of the
information supplied or to be supplied by the Company specifically
for inclusion or incorporation by reference in the Proxy Statement
will, at the date it is first mailed to the Company's shareholders or
at the time of the Shareholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all
material respect with the requirements of the Exchange Act and the
rules and regulations thereunder. If, to the knowledge of the
Company, any information contained in the Proxy Statement is or
becomes inaccurate, the Company shall promptly amend the Proxy
Statement or otherwise provide supplemental information to
shareholders, in compliance with the Exchange Act.
(c) Acquiror Information. Acquiror agrees that none of the
information supplied or to be supplied by Acquiror specifically for
inclusion or incorporation by reference in the Proxy Statement will,
at the date it is first mailed to the Company's shareholders or at
the time of the Shareholders Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading. If, to the knowledge of Acquiror, any information
concerning Acquiror that is contained in the Proxy Statement is or
becomes inaccurate, Acquiror shall promptly notify the Company of
such inaccuracy.
SECTION 4.2 Meeting of Shareholders. The Company will take all
action necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws to convene a meeting of its shareholders (the
"Shareholders Meeting") to consider and vote upon the approval of this
Agreement and the Merger. The Company's Board of Directors will recommend
to its shareholders approval of this Agreement and the Merger. The Company
will use its reasonable efforts to hold the Shareholders Meeting as soon as
practicable after the date hereof. Notwithstanding anything in this
Agreement to the contrary, the Company reserves the right to obtain the
approval of this Agreement and the Merger by means of a written consent
procedure in lieu of a vote at the Shareholders Meeting.
21
SECTION 4.3 Access to Information; Confidentiality. Upon reasonable
notice, the Company shall, and shall cause its Subsidiaries to, afford to
Acquiror and to the officers, employees, accountants, counsel, financial
advisors, financing sources and other representatives of Acquiror
reasonable access during normal business hours during the period prior to
the Effective Time to all its properties, books, contracts, commitments,
personnel and records. During such period, the Company shall furnish
promptly to, upon request, a copy of (a) each SEC Document filed by it
during such period, and (b) all correspondence or written communication
with any Governmental Entity which relates to the transactions contemplated
hereby or which is otherwise material to the financial condition or
operations of the Company and its Subsidiaries taken as a whole. Except as
required by law, Acquiror will hold, and will cause its respective
directors, officers, partners, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information obtained from the Company in confidence to the extent required
by, and in accordance with, the provisions of the Nondisclosure Agreement,
dated January 30, 2002, between Acquiror and the Company (the
"Nondisclosure Agreement").
SECTION 4.4 Reasonable Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the
parties agrees to use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement.
SECTION 4.5 Public Announcements. Acquiror and the Company will
consult with each other before issuing, and shall provide each other a
reasonable opportunity to review and comment upon, any press release or
public statement with respect to this Agreement or the transactions
contemplated hereby, except to the extent disclosure prior to such
consultation, review and comment may be required by applicable law, court
process or obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 4.6 Acquisition Proposals. The Company shall not, nor shall
it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the
Company or any of its Subsidiaries to, directly or indirectly, (a) solicit,
initiate or encourage the submission of any Acquisition Proposal (as
defined below), (b) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect
to, or take any other action to facilitate any inquiries or the making of
any proposal that constitutes, an Acquisition Proposal or (c) enter into
any understanding, commitment or agreement with respect to an Acquisition
Proposal. The Company shall promptly advise Acquiror orally and in writing
of the receipt by it (or by any of the other entities or persons referred
to above) after the date hereof of any Acquisition Proposal or any inquiry
which could reasonably lead to an Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of
the person or entity making any such Acquisition Proposal. For purposes of
this Agreement, "Acquisition Proposal" means any bona fide proposal with
respect to a merger, consolidation, share exchange, tender offer, or
similar transaction involving the Company or any Subsidiary or any purchase
of all or any significant portion of the assets or capital stock of the
Company or any Subsidiary or any other business
22
combination (including without limitation the acquisition of an equity
interest therein) involving the Company other than the transactions
contemplated by this Agreement.
SECTION 4.7 Filings; Other Action. As promptly as practicable after
the date of this Agreement, the Company and Acquiror shall cooperate in all
reasonable respects with each other in (a) determining if other filings are
required to be made prior to the Effective Time with, or if other material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from, any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement and (b)
timely making all such filings and timely seeking all such consents,
approvals, permits, notices or authorizations. In connection with the
foregoing, the Company will provide Acquiror, and Acquiror will provide the
Company, with copies of correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party or any of
its representatives, on the one hand, and any Governmental Entity or
members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. Each of Acquiror and
the Company acknowledge that certain actions may be necessary with respect
to the foregoing in making notifications and obtaining clearances,
consents, approvals, waivers or similar third party actions which are
material to the consummation of the transactions contemplated hereby, and
each of Acquiror and the Company agree to take such action as is reasonably
necessary to complete such notifications and obtain such clearances,
approvals, waivers or third party actions.
SECTION 4.8 Indemnification. (a) From and after the Effective Time,
the Surviving Corporation will indemnify and hold harmless each present and
former director and officer of the Company and its Subsidiaries, determined
as of the Effective Time (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time,
to the fullest extent that the Company or such Subsidiary would have been
permitted under applicable law and the articles of incorporation or by-laws
of the Company or such Subsidiary in effect on the date hereof to indemnify
such person (and the Surviving Corporation shall also advance expenses as
incurred to the fullest extent permitted under applicable law, provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification).
(b) For a period of three (3) years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in all material respects to the
Indemnified Parties) with respect to claims arising from facts or events
which occurred before the Effective Time; provided, however, that the
Surviving Corporation shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 150% of the
premiums paid as of the date hereof by the Company for such insurance.
23
(c) The provisions of this Section 4.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his personal representatives, and shall be binding on all successors
and assigns of the Surviving Corporation.
SECTION 4.9 Fiduciary Obligations. Notwithstanding any provision of
this Agreement, if, prior to the Shareholders Meeting, any person (other
than Acquiror or any of its affiliates) makes a written unsolicited
Acquisition Proposal and (a) the Board of Directors of the Company
determines reasonably and in good faith, after due investigation and after
consultation with and based upon the advice of an outside financial
advisor, that such Acquisition Proposal is or could reasonably be expected
to lead to a Superior Proposal (as defined in Section 7.1(c)(ii) below),
(b) the Board of Directors of the Company determines reasonably and in good
faith, after due investigation and after consultation with and based upon
the advice of Company counsel, that the failure to take action would cause
the Board of Directors of the Company to violate its fiduciary duties to
stockholders under applicable law and (c) the Company provides at least two
business days' notice to Acquiror, then, the Board of Directors of the
Company may (i) withdraw, modify or change its approval or recommendation
in favor of this Agreement or the Merger, (ii) furnish non-public
information to the person making the Acquisition Proposal pursuant to a
customary confidentiality agreement and (iii) participate in discussions or
negotiations regarding the Acquisition Proposal.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
OR IN CONTEMPLATION OF THE MERGER
SECTION 5.1 Conduct of Business by the Company. Except as
contemplated by this Agreement or as set forth in Section 5.1 of the
Disclosure Schedule, during the period from the date of this Agreement to
the Effective Time, the Company shall, and shall cause its Subsidiaries to,
act and carry on their respective businesses in the ordinary course of
business and, to the extent consistent therewith, use reasonable efforts to
preserve intact their current business organizations, keep in full force
and effect their Licenses, keep available the services of their current key
officers, employees and agents, and preserve the goodwill of regulators or
those engaged in material business relationships with them. Without
limiting the generality of the foregoing, during the period from the date
of this Agreement to the Effective Time, the Company shall not, and shall
not permit any of the Subsidiaries to, without the prior consent of
Acquiror:
(a) adopt or propose any change to its articles of
incorporation or by-laws;
(b) (i) declare, set aside or pay any dividends on, or make
any other distributions with respect to, any of the Company's
outstanding capital stock, (ii) split, combine or reclassify any of
its outstanding capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock or (iii) purchase, redeem or
otherwise acquire any shares of capital stock or other securities of,
or other ownership interests of the Company, other than the Stock
Options to be purchased as contemplated by Section 1.11 above and the
Restricted Shares to be settled as contemplated by Section 5.5 below;
24
(c) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible
securities, other than upon the exercise of Stock Options outstanding
on the date of this Agreement;
(d) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
or acquire any material assets or make any investment in any person
or enter into any reorganization;
(e) take any action that, if taken prior to the date of this
Agreement, would have been required to be disclosed in Section 2.6 of
the Disclosure Schedule or that would otherwise cause any of the
representations and warranties contained in Article II not to be true
and correct in all material respects at any time;
(f) sell, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets that are
material to the Company and its Subsidiaries taken as a whole, except
in the ordinary course of business;
(g) incur any indebtedness for borrowed money or guarantee or
otherwise become responsible for any such indebtedness of another
person, other than indebtedness owing to or guarantees of
indebtedness owing to the Company or any direct or indirect wholly-
owned Subsidiary of the Company or enter into any agreement for
indebtedness or make any loans or advances to any other person, other
than to the Company, or to any direct or indirect wholly-owned
Subsidiary of the Company and other than routine advances in the
ordinary course of business to employees or agents;
(h) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its Subsidiaries taken as a whole;
(i) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in
accordance with their terms of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included
in the Filed SEC Documents or incurred since the date of such
financial statements in the ordinary course of business consistent
with past practice;
(j) except in the ordinary course of business, modify, amend
or terminate, or waive, release or assign any material rights or
claims under any material agreement, permit, concession, franchise,
license or similar instrument to which the Company or any Subsidiary
is a party;
(k) authorize any of, or commit or agree to take any of the
foregoing actions;
(l) make any capital expenditures other than as contemplated
by the Company's annual budget;
25
(m) except with regard to transaction-contingent compensation
to key officers and employees in an amount not to exceed the amount
set forth in Section 2.6(d) of the Disclosure Schedule, (i) enter
into, adopt or amend or increase the amount or accelerate the payment
or vesting of any benefit or amount payable under, any Plan, or
increase in any manner, the compensation or fringe benefits, or
otherwise extend, expand or enhance the engagement, employment or any
related rights, of any director, officer or other employee of the
Company or any of its Subsidiaries, except for normal increases in
the ordinary course of business consistent with past practice that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company or any of its Subsidiaries; (ii)
enter into or amend any employment, severance or special pay
arrangement with respect to the termination of employment with any
director or officer or other employee other than in the ordinary
course of business consistent with past practice; or (iii) deposit
into any trust (including any "rabbi trust") amounts in respect of
any employee benefit obligations or obligations to directors;
(n) make any changes in accounting methods, except as
required by law, rule, regulation, the SEC or GAAP; or
(o) enter into any agreement or arrangement with any
affiliate (other than wholly owned Subsidiaries). As used in this
Agreement, the term "affiliate," shall mean, as to any person, any
other person which directly or indirectly controls, or in under
common control with, or is controlled by, such person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract
or otherwise).
SECTION 5.2 Management of the Company and Subsidiaries. The Company
shall, from the date of this Agreement through the Effective Time, cause
its management and that of the Subsidiaries to consult on a regular basis
and in good faith with the employees and representatives of Acquiror
concerning the management of the Company and its business.
SECTION 5.3 Other Actions. The Company and Acquiror shall not, and
shall not permit any of their respective subsidiaries to, take or omit to
take any action that would, or that would reasonably be expected to, result
in (a) any of the representations and warranties of such party set forth in
this Agreement becoming untrue in any material respect at any time or (b)
any of the conditions of the Merger set forth in Article VI not being
satisfied.
SECTION 5.4 Notification. The Company shall give prompt notice to
Acquiror and Acquiror shall give prompt notice to the Company of (a) the
occurrence, or non-occurrence of any event whose occurrence or non-
occurrence would reasonably be expected to cause (i) any representation or
warranty contained in this Agreement which is qualified as to materiality
or Material Adverse Effect to be untrue or inaccurate at any time from the
date hereof to the Effective Time, (ii) any other representation or
warranty made contained in this Agreement to be untrue or inaccurate at any
time from the date hereof to the Effective Time, or (iii) any condition set
forth in Article VI to be unsatisfied at any time from the date hereof to
the Effective Time, and (b) any failure of the Company, or Acquiror, as the
case may be, to comply with or satisfy in
26
any material respect any material covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.4 shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice or the right of such party to terminate this Agreement.
SECTION 5.5 Settlement of Promissory Note for Restricted Shares.
Immediately prior to the Closing, the promissory note of Roger Brooks in
the original principal amount of $1,332,500 shall be repaid by surrender
and cancellation of the 410,000 Restricted Shares at a price equal to the
Merger Consideration, and interest on the note shall be forgiven by the
Company to the extent of any remaining amount due thereon.
SECTION 5.6 Continuity of Benefits. The Company and Acquiror agree
that individuals who are employed by the Company as of the Closing Date
shall become employees of the Surviving Corporation following the Closing
Date. From and after the Closing Date through December 31, 2003, Acquiror
agrees to maintain compensation levels and employee benefits (other than
stock options) which, in the aggregate, are at least comparable to those
presently in effect, subject in each case for the Surviving Corporation's
continuing right to hire and fire individual employees and to the Surviving
Corporation's right to amend or terminate the Sales/Marketing bonus plan
and Executive/Senior Management bonus plan listed on Section 2.8 of the
Disclosure Schedule (the "Bonus Plans") for years after 2002. Acquiror
agrees that the Surviving Corporation agrees during 2002 to maintain the
current base salary of all employees, to retain the annual salary review
date schedule for each employee, and to confirm the Bonus Plans. In
addition, Acquiror shall maintain the Company's practices with respect to
the sharing of costs (on a percentage basis) with employees of the life and
medical insurance programs listed on Section 2.8 of the Disclosure Schedule
through December 31, 2003.
SECTION 5.7 Facilities. It is Acquiror's present intention to
maintain the Company's facilities at their present locations following the
Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by an affirmative vote of the
holders of the requisite number of shares present, in person or by
proxy, and entitled to vote on the Merger at the Shareholders
Meeting.
(b) Governmental and Regulatory Consents. The Company and
Acquiror shall have made all such filings, and obtained such
authorizations, consents, or approvals required by any Governmental
Entity to consummate the transactions contemplated hereby; provided,
however that such authorizations, consents or approvals shall impose
no conditions that would reasonably be expected to have a Material
Adverse Effect.
27
(c) No Proceedings. No proceeding shall have been commenced
and be continuing, seeking to restrain or enjoin the consummation of
the Merger.
SECTION 6.2 Conditions to Obligations of Acquiror. The obligations
of Acquiror to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true
and correct in all material respects on the date hereof and (except
to the extent specifically given as of an earlier date or except as
otherwise contemplated or permitted by this Agreement) on and as of
the Closing Date as though made on the Closing Date, and the Company
shall have delivered to Acquiror a certificate dated as of the
Closing Date signed by an executive officer to the effect set forth
in this Section 6.2(a).
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have delivered to Acquiror a
certificate dated as of the Closing Date signed by an executive
officer to the effect set forth in this Section 6.2(b).
(c) Third-Party Approvals and Consents. All authorizations,
approvals and consents of any third party required to be obtained by
the Company which, if not obtained, would have a Material Adverse
Effect, shall have been obtained and shall be in full force and
effect.
(d) Related Agreements. The Company shall have been repaid
all outstanding amounts owing under the promissory note executed by
Roger E. Brooks, and the Company and Mr. Brooks shall have terminated
the Restricted Stock Agreement dated as of May 1, 1998, in accordance
with Section 5.5 above. The Company and the parties to each of the
Investment Agreement dated as of March 26, 1998, as amended as of May
1, 1998, and the Stockholders Agreement dated as of May 1, 1998, in
each case as amended to date, shall have terminated such Agreements
on terms acceptable to Acquiror.
(e) No Material Adverse Effect. Since the date of this
Agreement, no event, effect or change shall have occurred which has
had or which would reasonably be expected to have a Material Adverse
Effect, and Acquiror shall have received a certificate signed by the
Chief Executive Officer or Chief Financial Officer of the Company to
such effect.
SECTION 6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Acquiror contained in this Agreement shall be true and
correct in all material respects on the date hereof and (except to
the extent specifically given as of an earlier date or except as
otherwise contemplated or permitted by this Agreement) on and as of
the Closing Date as though made on the Closing Date, and Acquiror
shall have delivered to the Company a certificate dated as of the
Closing Date, signed by an executive officer and to the effect set
forth in this Section 6.3(a)
28
(b) Performance of Obligations of Acquiror. Acquiror shall
have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing
Date, and Acquiror shall have delivered to the Company a certificate
dated as of the Closing Date, signed by an executive officer and to
the effect set forth in this Section 6.3(b).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the
shareholders of the Company:
(a) by mutual written consent of Acquiror and the Company;
(b) by either Acquiror or the Company:
(i) if, upon a vote at a duly held Shareholders
Meeting, this Agreement and the Merger shall fail to receive
the requisite vote for approval and adoption by the
shareholders of the Company at the Shareholders Meeting;
(ii) if the Merger shall not have been consummated on or
before June 30, 2002; provided, that either party may terminate
this Agreement on or after such earlier date on which it can be
reasonably determined that it will be impossible to consummate
the Merger by June 30, 2002; and provided, further, that the
party seeking to terminate this Agreement pursuant to this
Section 7.1(b)(ii) shall not have breached in any material
respect its obligations under this Agreement in any manner that
shall have caused or contributed to the failure to consummate
the Merger by June 30, 2002; or
(iii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action, or there
shall be enacted any law having the effect of, permanently
enjoining, restraining or otherwise prohibiting, or making
illegal the Merger and such order, decree, ruling or other
action shall have become final and nonappealable, provided the
party seeking to terminate this Agreement under this Section
7.1(b)(iii) shall have used reasonable efforts to remove or
overturn such order, decree, ruling or other action; or
(c) by the Company:
(i) upon a material breach of any representation or
warranty of Acquiror or if Acquiror fails to comply in any
material respect with any of its covenants or agreements, or if
any representation or warranty of Acquiror shall be or become
untrue in any material respect, which breach or non-compliance
is not curable or, if curable, is not cured by Acquiror within
30 days after written notice of such breach or non-compliance
from the Company; or
29
(ii) if, prior to the Shareholders Meeting, the Board of
Directors of the Company shall have withdrawn, or modified or
changed in a manner adverse to Acquiror or Merger Subsidiary,
its approval or recommendation in favor of this Agreement or
the Merger in order to approve and permit the Company to
execute a definitive agreement providing for a bona fide
Acquisition Proposal made by a third party on terms that a
majority of the members of the Board of Directors of the
Company reasonably determines in good faith (based upon the
advice of an outside financial advisor) is more favorable to
the Company and its stockholders than the transactions
contemplated by this Agreement, and for which financing, to the
extent required, is then committed or which, in the reasonable
good faith judgment of the Board of Directors of the Company,
is reasonably capable of being obtained (such an Acquisition
Proposal is referred to herein as a "Superior Proposal");
provided, that (A) at least five (5) business days prior to
terminating this Agreement pursuant to this Section 7.1(c)(ii),
the Company has provided Acquiror with written notice advising
Acquiror that the Board of Directors of the Company has
received a Superior Proposal that it intends to approve,
specifying the material terms and conditions of the Superior
Proposal and identifying the person making the Superior
Proposal, (B) Acquiror may offer such adjustments in the terms
and conditions of this Agreement as Acquiror deems appropriate
and (C) at the end of the five-business day period the Board of
Directors of the Company continues reasonably and in good faith
to believe that the Acquisition Proposal is a Superior
Proposal; provided, further, that simultaneously with any
termination of this Agreement pursuant to this Section
7.1(c)(ii), the Company shall pay to Acquiror the Termination
Payment (as defined in Section 7.2(b) below) specified in
Section 7.2(b); and provided, further, that the Company may not
terminate this Agreement pursuant to this Section 7.1(c)(ii) if
the Company is in material breach of this Agreement; or
(d) by Acquiror:
(i) upon a material breach of any representation, or
warranty of the Company or if the Company fails to comply in
any material respect with any of this covenants or agreements,
or if any representation or warranty of the Company shall be or
become untrue in any material respect, which breach or non-
compliance is not curable or, if curable, is not cured by the
Company within 30 days after written notice of such breach or
non-compliance from Acquiror; or
(ii) if, prior to the Shareholders Meeting, (A) the
Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Acquiror or Merger
Subsidiary, its approval or recommendation in favor of this
Agreement or the Merger, or shall have approved or recommended
an Acquisition Proposal, or shall have executed a definitive
agreement providing for an Acquisition Proposal, or (B) a
tender offer or exchange offer for any outstanding shares of
the Company's common stock, is commenced, and the Board of
Directors of the Company, within ten days after such tender
offer or exchange offer is so commenced, either fails to
recommend against acceptance of such
30
tender offer or exchange offer by its stockholders or takes no
position with respect to the acceptance of such tender offer or
exchange offer by its stockholders.
SECTION 7.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
the Company or Acquiror as provided in Section 7.1, except as
provided below in Section 7.2(b), this Agreement shall forthwith
become void and have no effect, without any liability or obligation
on the part of Acquiror or the Company, other than the last sentence
of Section 4.3 and Sections 7.2 and 10.2. Unless there has been a
valid termination of this Agreement, nothing contained in this
Section shall relieve any party from any liability resulting from any
material breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
(b) The Company shall pay Acquiror $1,000,000 in cash as
liquidated damages and not as a penalty (the "Termination Payment")
if this Agreement is terminated pursuant to Section 7.1(b)(i),
Section 7.1(c)(ii) or Section 7.1(d)(ii). The Termination Payment
shall be paid in same-day funds by wire transfer to an account
designated by Acquiror within ten days after the event giving rise to
the Termination Payment, except as provided in Section 7.1(c)(ii).
Notwithstanding anything in this Agreement to the contrary, the
Termination Payment, if payable, shall be paid only once and shall be
Acquiror's sole and exclusive remedy hereunder for the termination of
the Agreement under the circumstances in which the Termination
Payment is paid, and upon such delivery of the Termination Payment to
Acquiror, no person shall have any further claim or rights against
the Company under this Agreement with respect thereto; provided,
however, that this sentence shall not apply to and shall in no way
restrict the right of Acquiror to assert a counterclaim in response
to any action brought by the Company against Acquiror with respect to
such events. The Company shall reimburse Acquiror for all costs
incurred in connection with the collection of the Termination Payment
under this Agreement.
SECTION 7.3 Amendment. Subject to the applicable provisions of the
MBCA, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered
by duly authorized officers of Acquiror and the Company; provided, however,
that after approval of the Merger by the shareholders of the Company, no
amendment shall be made which reduces the amount of the Merger
Consideration payable in the Merger or adversely affects the rights of the
Company's shareholders hereunder without the approval of such shareholders.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in
this Agreement or in any document delivered pursuant to this Agreement or
(c) subject to Section 7.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of the Company
(if an extension or waiver of the Company) or (in all other cases)
Acquiror. The failure
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of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights, except
that an amendment, waiver or extension by Acquiror shall be deemed to
include and be binding on Merger Subsidiary.
SECTION 7.5 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.1, an
amendment of this Agreement pursuant to Section 7.3 or an extension or
waiver pursuant to Section 7.4 shall, in order to be effective, require in
the case of Acquiror or the Company, action by its Board of Directors or
the duly authorized designee of its Board of Directors.
ARTICLE VIII
SURVIVAL OF PROVISIONS
SECTION 8.1 Survival. The representations and warranties
respectively made by the Company, Acquiror in this Agreement, or in any
certificate, respectively, delivered by the Company, Acquiror pursuant to
Section 6.2 or Section 6.3 hereof, will terminate upon the Closing and be
of no further force or effect.
ARTICLE IX
NOTICES
SECTION 9.1 Notices. Any notice or communication given pursuant to
this Agreement must be in writing and will be deemed to have been duly
given if mailed (by registered or certified mail, postage prepaid, return
receipt requested), or, if transmitted by telecopy, or if delivered by
courier, as follows:
If to the Company, to:
Intelligent Controls, Inc.
74 Industrial Park Road
Saco, Maine 04072
Attention: Roger E. Brooks
Telecopy: (207) 286-1439
with a copy to:
Verrill & Dana, LLP
One Portland Square
Portland, Maine 04112
Attention: Gregory S. Fryer, Esq.
Telecopy: (207) 774-7499
If to Acquiror or Merger Subsidiary, to:
Franklin Electric Co., Inc.
400 E. Spring Street
Bluffton, Indiana 46714
Attention: Gregg C. Sengstack
Telecopy: (260) 827-5633
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with copies to:
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Attention: Robert J. Regan, Esq.
Telecopy: (312) 258-5600
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 9.1 will, whether
sent by mail, telecopy, or courier, be deemed given upon the first business
day after actual delivery to the addressed destination to which such notice
or other communication is sent (as evidenced by the return receipt or
shipping invoice signed by a representative of such party or by telecopy
confirmation). Any party from time to time may change its address for the
purpose of notices to that party by giving a similar notice specifying a
new address, but no such notice will be deemed to have been given until it
is actually received by the party sought to be charged with the contents
thereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Entire Agreement. This Agreement and the Nondisclosure
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior
communications, agreements, understandings, representations, and warranties
whether oral or written between the parties hereto. There are no oral or
written agreements, understandings, representations, or warranties between
the parties hereto with respect to the subject hereof other than those set
forth in this Agreement and the Nondisclosure Agreement. In the event of
any conflict between the terms of this Agreement and the terms of the
Nondisclosure Agreement, the terms of this Agreement shall control.
SECTION 10.2 Expenses. Except as otherwise provided in this
Agreement, the Company and Acquiror each will pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
Notwithstanding anything in this Agreement to the contrary, the Company
covenants and agrees that, assuming the Closing Date occurs on or before
June 30, 2002, the fees and expenses of the Company incurred in connection
with this Agreement and the Merger (including, but not limited to, legal,
accounting and printing fees and expenses) shall not exceed $150,000 in the
aggregate, and all such fees and expenses shall have been accrued or paid
as of the Effective Time.
SECTION 10.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of
which will constitute one and the same instrument and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
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SECTION 10.4 No Third-Party Beneficiary. Except as otherwise
specifically provided in Section 4.8, this Agreement is not intended and
may not be construed to create any rights in any parties other than the
Company and Acquiror and their respective successors or assigns, and it is
not the intention of the parties to confer third-party beneficiary rights
upon any other person.
SECTION 10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maine (without regard
to the principles of conflicts of law) applicable to a contract executed
and to be performed in such State.
SECTION 10.6 Assignment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties without the prior written consent of the other parties, such
consent not to be unreasonably withheld and any such assignment that is not
consented to shall be null and void, except that Acquiror shall have the
right to assign this Agreement to any Subsidiary or affiliate. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by, the parties and their respective
successors and assigns.
SECTION 10.7 Enforcement of this Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
terms or provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that each of the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States of America or any state having jurisdiction, such remedy being in
addition to any other remedy to which any party may be entitled at law or
in equity.
SECTION 10.8 Headings, Gender, etc. The headings used in this
Agreement have been inserted for convenience and do not constitute matter
to be construed or interpreted in connection with this Agreement. Unless
the context of this Agreement otherwise requires, (a) words of any gender
are deemed to include each other gender; (b) words using the singular or
plural number also include the plural or singular number, respectively; (c)
the terms "hereof," "herein," "hereby," "hereto," and derivative or similar
words refer to this entire Agreement; (d) the terms "Article" or "Section"
refer to the specified Article or Section of this Agreement; (e) all
references to "dollars" or "$" refer to currency of the United States of
America; (f) the term "person" shall include any natural person,
corporation, limited liability company, general partnership, limited
partnership, or other entity, enterprise, authority or business
organization; and (g) the term "or" is disjunctive but not necessarily
exclusive.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Acquiror, Merger Subsidiary
and the Company effective as of the date first written above.
FRANKLIN ELECTRIC CO., INC.
By: /s/ Jess B. Ford
----------------------------
Name: Jess B. Ford
Title: Senior Vice President
FEI CORPORATION
By: /s/ Jess B. Ford
----------------------------
Name: Jess B. Ford
Title: President
INTELLIGENT CONTROLS, INC.
By: /s/ Roger E. Brooks
----------------------------
Name: Roger E. Brooks
Title: President and Chief
Executive Officer
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Exhibit A
Officers of Surviving Corporation
NAME TITLE
- ---- -----
Jess B. Ford Chairman
Roger E. Brooks President and Chief Executive Officer
Gregg C. Sengstack Chief Financial Officer, Treasurer and Secretary
Andrew B. Clement Controller and Assistant Treasurer
Enrique Sales Vice President Sales & Marketing
Dean Richards Vice President Manufacturing
36