EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
between
National-Oilwell, Inc.
and
Varco International, Inc.
August 11, 2004
TABLE OF CONTENTS
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Page
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ARTICLE I. THE MERGER.............................................................................................1
Section 1.01 The Merger.............................................................................1
Section 1.02 Effective Time of the Merger...........................................................1
Section 1.03 Closing 1
Section 1.04 Effects of the Merger..................................................................2
Section 1.05 Certificate of Incorporation; and Bylaws...............................................2
ARTICLE II. conversion of securities..............................................................................2
Section 2.01 Conversion of Capital Stock............................................................2
Section 2.02 Exchange of Certificates...............................................................3
Section 2.03 Associated Rights......................................................................5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................6
Section 3.01 Organization of the Company............................................................6
Section 3.02 Company Capital Structure..............................................................6
Section 3.03 Authority; No Conflict; Required Filings and Consents..................................7
Section 3.04 SEC Filings; Financial Statements......................................................8
Section 3.05 No Undisclosed Liabilities.............................................................9
Section 3.06 Absence of Certain Changes or Events...................................................9
Section 3.07 Taxes..................................................................................9
Section 3.08 Properties............................................................................11
Section 3.09 Intellectual Property.................................................................11
Section 3.10 Agreements, Contracts and Commitments.................................................11
Section 3.11 Litigation............................................................................12
Section 3.12 Environmental Matters.................................................................12
Section 3.13 Employee Benefit Plans................................................................13
Section 3.14 Compliance With Laws..................................................................14
Section 3.15 Tax Matters...........................................................................14
Section 3.16 Registration Statement; Proxy Statement/Prospectus....................................14
Section 3.17 Labor Matters.........................................................................15
Section 3.18 Insurance.............................................................................15
Section 3.19 No Existing Discussions...............................................................15
Section 3.20 Opinion of Financial Advisor..........................................................15
Section 3.21 Anti-Takeover Laws....................................................................15
Section 3.22 Company Rights Plan...................................................................16
Section 3.23 Sarbanes-Oxley Act....................................................................16
Section 3.24 Brokers or Finders....................................................................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT.............................................................16
Section 4.01 Organization of Parent................................................................17
Section 4.02 Parent Capital Structure..............................................................17
Section 4.03 Authority; No Conflict; Required Filings and Consents.................................18
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Section 4.04 SEC Filings; Financial Statements.....................................................19
Section 4.05 No Undisclosed Liabilities............................................................19
Section 4.06 Absence of Certain Changes or Events..................................................19
Section 4.07 Taxes.................................................................................20
Section 4.08 Properties............................................................................21
Section 4.09 Intellectual Property.................................................................21
Section 4.10 Agreements, Contracts and Commitments.................................................22
Section 4.11 Litigation............................................................................22
Section 4.12 Environmental Matters.................................................................23
Section 4.13 Employee Benefit Plans................................................................23
Section 4.14 Compliance With Laws..................................................................24
Section 4.15 Tax Matters...........................................................................24
Section 4.16 Registration Statement; Proxy Statement/Prospectus....................................24
Section 4.17 Labor Matters.........................................................................25
Section 4.18 Insurance.............................................................................25
Section 4.19 No Existing Discussions...............................................................25
Section 4.20 Opinion of Financial Advisor..........................................................25
Section 4.21 Anti-Takeover Laws....................................................................25
Section 4.22 Rights Plan...........................................................................26
Section 4.23 Sarbanes-Oxley Act....................................................................26
Section 4.24 Brokers or Finders....................................................................26
ARTICLE V. CONDUCT OF BUSINESS...................................................................................26
Section 5.01 Covenants of the Company..............................................................26
Section 5.02 Covenants of Parent...................................................................29
Section 5.03 Cooperation...........................................................................31
ARTICLE VI. ADDITIONAL AGREEMENTS................................................................................31
Section 6.01 No Solicitation.......................................................................31
Section 6.02 Proxy Statement/Prospectus; Registration Statement....................................34
Section 6.03 Access to Information.................................................................34
Section 6.04 Stockholders Meetings.................................................................35
Section 6.05 Appropriate Actions; Consents; Filings................................................35
Section 6.06 Public Disclosure.....................................................................37
Section 6.07 Rule 145..............................................................................37
Section 6.08 Section 16 Matters....................................................................37
Section 6.09 NYSE Listing..........................................................................38
Section 6.10 Stock Plans...........................................................................38
Section 6.11 Indemnification.......................................................................40
Section 6.12 Letter of the Company's Accountants...................................................41
Section 6.13 Letter of Parent's Accountants........................................................41
Section 6.14 Governance Matters....................................................................41
Section 6.15 State Takeover Statutes...............................................................42
Section 6.16 Tax-Free Reorganization Treatment.....................................................42
ARTICLE VII. CONDITIONS TO MERGER................................................................................42
Section 7.01 Conditions to Each Party's Obligation To Effect the Merger............................42
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Section 7.02 Additional Conditions to Obligations of the Company...................................43
Section 7.03 Additional Conditions to Obligations of Parent........................................44
ARTICLE VIII. TERMINATION AND AMENDMENT..........................................................................45
Section 8.01 Termination...........................................................................45
Section 8.02 Effect of Termination.................................................................46
Section 8.03 Fees and Expenses.....................................................................47
Section 8.04 Amendment.............................................................................49
Section 8.05 Extension; Waiver.....................................................................49
ARTICLE IX. MISCELLANEOUS........................................................................................49
Section 9.01 Nonsurvival of Representations, Warranties and Agreements.............................49
Section 9.02 Notices...............................................................................49
Section 9.03 Definitions...........................................................................50
Section 9.04 Interpretation........................................................................54
Section 9.05 Counterparts..........................................................................55
Section 9.06 Entire Agreement; No Third Party Beneficiaries........................................55
Section 9.07 Governing Law.........................................................................55
Section 9.08 Assignment............................................................................55
Section 9.09 Enforcement; Waiver of Jury Trial.....................................................55
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Schedule 1 - List of Corporate Executive Officers
Exhibit A........................ Certificate of Merger
Exhibit B........................ Form of Affiliate Agreement
Exhibit C........................ Parent Tax Matters Certificate
Exhibit D........................ Company Tax Matters Certificate
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of August 11,
2004, by and between National-Oilwell, Inc., a Delaware corporation ("Parent"),
and Varco International, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent and the Company
have approved the merger of the Company into Parent on the terms and subject to
the conditions set forth in this Agreement, whereby each issued share of common
stock, par value $0.01 per share, of the Company ("Company Common Stock") not
owned by Parent or the Company shall be converted into shares of common stock,
par value $0.01 per share, of Parent ("Parent Common Stock") as set forth in
this Agreement;
WHEREAS, in order to effectuate the foregoing, the Company, upon the
terms and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL"), will merge with and into Parent,
with Parent surviving the merger (the "Merger"); and
WHEREAS, for Federal income tax purposes, the Company and Parent intend
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the applicable provisions of the DGCL,
at the Effective Time, the Company shall merge with and into Parent, the
separate corporate existence of the Company shall cease and Parent shall
continue as the surviving corporation. Parent, as the surviving corporation
after the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
Section 1.02 Effective Time of the Merger. As early as practicable on
the Closing Date, the parties shall cause the Merger to be consummated by filing
with the Secretary of State of the State of Delaware a certificate of merger or
other appropriate documents (in any such case, the "Certificate of Merger")
substantially in the form as set forth in Exhibit A to be executed and, as
applicable, acknowledged in accordance with, the provisions of Section 251 of
the DGCL. At or prior to consummation of the Merger, the parties shall make all
other filings, recordings or publications required under the DGCL in connection
with the Merger. The Merger shall become effective at 4:00 p.m., Houston time,
on the date of the filing of the Certificate of Merger with the Delaware
Secretary of State in accordance with the DGCL, or at such other time as the
parties may agree and specify in such filings in accordance with applicable Law
(the time the Merger becomes effective being the "Effective Time").
Section 1.03 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., Houston time, on a date to be specified by the Company
and Parent, which shall be no later than the second Business Day after
satisfaction of the latest to occur of the conditions set forth
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in Sections 7.01, 7.02(a) and 7.02(b) (other than the delivery of the officers'
certificate referred to therein) and 7.03(a) and 7.03(b) (other than the
delivery of the officers' certificate referred to therein) (provided that the
other closing conditions set forth in Article VII have been met or waived as
provided in Article VII at or prior to the Closing) (the "Closing Date"), at the
corporate offices of the Company at the address indicated in Section 9.02 unless
another date, place or time is agreed to in writing by the Company and Parent.
Section 1.04 Effects of the Merger. At the Effective Time, the effect
of the Merger shall be as provided by applicable Law, including the DGCL.
Without limiting the generality of the foregoing and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Parent will vest in the Surviving Corporation, and all of the
debts, Liabilities and duties of the Company and Parent will become the debts,
Liabilities and duties of the Surviving Corporation.
Section 1.05 Certificate of Incorporation; and Bylaws. Effective at the
Effective Time, and subject to the terms and conditions of this Agreement the
Parent Amended and Restated Certificate of Incorporation shall, without any
further action of Parent or its stockholders, be amended to (i) change the name
of Parent to "National Oilwell Varco, Inc." and (ii) increase the number of
authorized shares of Parent Common Stock to Five Hundred and Ten Million and One
(510,000,001) shares, and Parent shall file the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with applicable
provisions of the DGCL. At the Effective time, the Parent Amended and Restated
Certificate of Incorporation, as contemplated by this Section 1.05, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable Law. The by-laws of
Parent, as in effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company or Parent:
(a) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent or any Subsidiary of
Parent shall be canceled and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered in exchange therefor.
(b) Exchange Ratio for Company Common Stock. Subject to
Section 2.02, each issued and outstanding share of Company Common Stock (other
than shares to be canceled in accordance with Section 2.01(a)) shall be
converted into 0.8363 of a share (the "Exchange Ratio") of Parent Common Stock.
All such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive
certificates representing the shares of Parent Common Stock and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance with
Section 2.02,
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without interest. Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common Stock
or Company Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares, or
any similar event shall have occurred, or any Company Rights are exercised, then
the Exchange Ratio contemplated shall be correspondingly adjusted to provide to
Parent and the holders of Company Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
Section 2.02 Exchange of Certificates. The procedures for exchanging
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock for certificates representing shares
of Parent Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent. At the Effective Time, Parent shall make
available to a bank or trust company designated by Parent and the Company (the
"Exchange Agent"), in trust for the benefit of the holders of certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, for exchange in accordance with this Section 2.02, through
the Exchange Agent, certificates representing the shares of Parent Common Stock
and an estimated amount of cash in lieu of fractional shares (such certificates
representing shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, and cash in lieu of fractional shares being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
2.01 upon conversion of outstanding shares of Company Common Stock. The Exchange
Agent shall invest any cash included in the Exchange Fund as directed by Parent.
Any interest and other income resulting from such investments shall be the
property of, and be paid to, Parent.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, Parent shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted pursuant to Section 2.01 into shares
of Parent Common Stock (i) a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as the Company and Parent may
reasonably specify and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock (plus cash in lieu of fractional shares, if any, of Parent Common Stock as
provided below). Upon surrender of a Certificate to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock into which the holder's shares of Company Common
Stock were converted pursuant to Section 2.01(b) and a check representing cash
in lieu of fractional shares which the holder has the right to receive pursuant
to Section 2.02(e), and the Certificate so surrendered shall immediately be
canceled. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock determined in
accordance with Section 2.01(b) and a check representing cash in lieu of
fractional shares which the holder is entitled to receive pursuant to Section
2.02(e) may be issued to a transferee if the Certificate
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representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender, a certificate representing shares of Parent Common
Stock into which the holders of shares of Company Common Stock were converted
pursuant to Section 2.01(b) and a check representing cash in lieu of any
fractional shares of Parent Common Stock as contemplated by Section 2.02(e).
(c) Treatment of Unexchanged Shares. No dividends or other
distributions declared or made with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the certificates representing shares of Parent
Common Stock represented thereby that the holder would be entitled to upon
surrender of such Certificate and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to subsection (e) below, until the
holder of such Certificate shall surrender such Certificate in accordance with
this Section 2.02. Subject to the effect of applicable Laws, following surrender
of any such Certificate, there shall be paid to the holder of the Certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to subsection (e) below and the amount of dividends
or other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock. For purposes of determining quorums at meetings of stockholders of
Parent and the stockholders of Parent entitled to notice of, and to vote at,
meetings of stockholders, holders of unsurrendered Certificates shall be
considered record holders of the shares of Parent Common Stock represented
thereby.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof and any cash paid pursuant to
subsection (c) or (e) of this Section 2.02 shall be deemed to have been issued
or paid in full satisfaction of all rights pertaining to the shares of Company
Common Stock represented thereby. Notwithstanding the foregoing, the Surviving
Corporation is obligated to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on shares of Company Common Stock in accordance with the
terms of this Agreement (to the extent permitted under Section 5.01) prior to
the date hereof and which remain unpaid at the Effective Time. From and after
the Effective Time, there shall be no further registration of transfers on the
stock transfer books of the Company of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Section 2.02.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued in the Merger or upon
the surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock converted pursuant to the Merger
who would otherwise
4
have been entitled to receive a fraction of a share of Parent Common Stock
(after taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional amount multiplied by the average of the last reported sales prices of
Parent Common Stock, as reported on the New York Stock Exchange ("NYSE"), on
each of the ten trading days immediately preceding the date of the Effective
Time.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for 180 days
after the Effective Time shall be delivered to Parent or otherwise on the
instruction of the Surviving Corporation, and any holders of Certificates who
have not previously complied with this Section 2.02 shall thereafter look only
to Parent for the certificates representing shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock to which such holders are
entitled pursuant to Sections 2.01 and 2.02. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for five years after
the Effective Time (or such earlier date immediately prior to such time as the
Exchange Fund would otherwise escheat or become the property of any public
official or government) shall, to the extent permitted by Law, become the
property of the Surviving Corporation free and clear of any claims or interest
of any holders of Certificates previously entitled thereto.
(g) No Liability. None of Parent, the Exchange Agent or any
party hereto shall be liable to any former holder of shares of Company Common
Stock for any portion of the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
(h) Withholding Rights. Each of the Exchange Agent and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any former holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign Tax Law. To
the extent that amounts are so withheld by the Exchange Agent or Parent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Exchange Agent or Parent.
(i) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it on account of the alleged loss, theft or destruction of such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the certificate representing the shares of Parent Common
Stock and any cash in lieu of fractional shares, and unpaid dividends and
distributions on the certificate deliverable in respect thereof pursuant to this
Agreement.
Section 2.03 Associated Rights. References in this Agreement to Company
Common Stock shall include, unless the context requires otherwise, the
associated Preferred Share Purchase Rights ("Company Rights") issued pursuant to
the Rights Agreement, dated as of November 29, 2000, as amended (the "Rights
Agreement"), between the Company and ChaseMellon Shareholders Services, L.L.C.,
a New Jersey limited liability company, as Rights Agent.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure letter delivered by the Company to Parent on or before the
date of this Agreement (the "Company Disclosure Letter"). The Company Disclosure
Letter shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III and the disclosure in any
paragraph shall qualify other paragraphs in this Article III only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
Section 3.01 Organization of the Company. Each of the Company and its
Subsidiaries is a corporation or unincorporated entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, has all requisite corporate or entity power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation or organization in each
jurisdiction in which the failure to be so qualified would reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Company SEC Reports filed prior to the date hereof, neither the Company nor any
of its Subsidiaries directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by the
Company or its Subsidiaries and comprising less than five percent (5%) of the
outstanding stock of such company.
Section 3.02 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
200,000,000 shares of Company Common Stock and 5,000,000 shares of Preferred
Stock, par value $.01 per share ("Company Preferred Stock"), of which 2,000,000
shares have been designated as "Series A Participating Preferred Stock". As of
August 9, 2004, (i) 97,283,455 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no shares of Company Preferred Stock were issued and outstanding, and (iii)
3,071,380 shares of Company Common Stock and no shares of Company Preferred
Stock were held in the treasury of the Company or by Subsidiaries of the
Company. The Company Disclosure Letter shows the number of shares of Company
Common Stock reserved for future issuance pursuant to warrants, stock options
and other stock awards, and restricted stock awards granted and outstanding as
of August 9, 2004 under the 2003 Equity Participation Plan, the Amended and
Restated Stock Option Plan for Key Employees of Tuboscope Vetco International
Corporation, the Stock Option Plan for Non-Employee Directors, the 1990 Stock
Option Plan and the 1994 Directors' Stock Option Plan, in each case, as amended
(collectively, the "Company Stock Plans"). Except for the issuance of shares of
Company Common Stock in connection with Company Stock Plans (including the
exercise of warrants, stock options or other stock awards thereunder), or
pursuant to the Varco International, Inc. Employee Stock Purchase Plan (the
"Company Stock Purchase Plan"), or except as set forth in the Company Disclosure
Letter, no change in such capitalization has occurred between August 9, 2004 and
the date of this Agreement. All shares of Company Common Stock subject to
issuance as specified above are duly authorized and, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem
6
or otherwise acquire any shares of Company Common Stock or the capital stock of
any Subsidiary or to provide funds to or make any material investment (in the
form of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of obligations of Subsidiaries entered into
in the ordinary course of business. The Company has not repurchased any
outstanding shares of Company Common Stock since July 3, 2004. All of the
outstanding shares of capital stock of each of the Company's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in the case of foreign
Subsidiaries) are owned by the Company or another Subsidiary of the Company free
and clear of all Liens, agreements or limitations on the Company's voting
rights.
(b) As of the date hereof, except as set forth in this Section
3.02 or as reserved for future grants of securities under the Company Stock
Plans and Company Stock Purchase Plan, and except for Company Rights issued and
issuable pursuant to the Rights Agreement and 2,000,000 shares of Series A
Participating Preferred Stock of the Company reserved for issuance upon the
exercise of Company Rights, there are no equity securities of any class of the
Company or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. As of the date hereof,
except as set forth in this Section 3.02, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to which
the Company or any of its Subsidiaries is a party or by which it is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement. To the
best knowledge of the Company, there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of capital stock
of the Company.
Section 3.03 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement by the
Company have been duly authorized by all necessary corporate action on the part
of the Company, subject only to the approval of this Agreement and the Merger by
the Company's stockholders under the DGCL. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception"). On or prior to the
date hereof, the Board of Directors of the Company has unanimously adopted
resolutions that have (i) approved and declared advisable this Agreement and the
Merger, (ii) directed that this Agreement and the Merger be submitted to the
Company's stockholders for adoption at a meeting of such stockholders and (iii)
recommended that the stockholders of the Company adopt this Agreement and the
Merger (with respect to subclause (iii), the "Company Recommendation"), and such
resolutions, as of the date of this Agreement, have not been subsequently
rescinded, modified or withdrawn in any way. The Company stockholder vote
required for the adoption of this Agreement and the Merger shall be a majority
of the shares of Company Common Stock outstanding on the record date for the
Company Stockholders' Meeting (the "Company Stockholder Approval").
7
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or by-laws of the Company, (ii)
except as set forth in the Company Disclosure Letter, result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation, give rise to any obligation to make an offer to purchase any
debt instrument or give rise to any loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
or (iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, Law or ordinance applicable to the Company or any of
its Subsidiaries or any of its or their properties or assets, except in the case
of (ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the pre-merger notification report under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of
the Certificate of Merger with the Delaware Secretary of State, (iii) the filing
of the Joint Proxy Statement with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities Laws and the Laws of any foreign country and the European
Union, and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Company Material Adverse Effect.
Section 3.04 SEC Filings; Financial Statements.
(a) The Company has filed and made available to Parent all
forms, reports and documents required to be filed by the Company with the SEC
since January 1, 2001 other than registration statements on Form S-8
(collectively, the "Company SEC Reports"). Company SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Company SEC Reports or necessary
in order to make the statements in such Company SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of the Company's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in Company SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the
8
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
presented the consolidated financial position of the Company and its
Subsidiaries as of the dates and the consolidated results of their operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of the Company as of December 31, 2003 is referred to
herein as the "Company Balance Sheet." For each period covered by the Company
SEC Reports, the books and records of the Company and its Subsidiaries have
been, and are being, maintained, in all material respects, in accordance with
generally accepted accounting principles, consistently applied, and all other
legal and accounting requirements.
Section 3.05 No Undisclosed Liabilities. Except as disclosed in Company
SEC Reports filed prior to the date hereof, and except for normal or recurring
Liabilities incurred since December 31, 2003 in the ordinary course of business
consistent with past practices, the Company and its Subsidiaries do not have any
Liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are reasonably likely to have a Company Material Adverse
Effect.
Section 3.06 Absence of Certain Changes or Events. Except as disclosed
in Company SEC Reports filed prior to the date hereof, since the date of the
Company Balance Sheet, the Company and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice. Since the date of the Company Balance Sheet, there has not been (i)
any material adverse change in the financial condition, results of operations,
business or properties of the Company and its Subsidiaries, taken as a whole, or
any development or combination of developments of which the management of the
Company is aware that, individually or in the aggregate, has had, or is
reasonably likely to have, a Company Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to the
Company or any of its Subsidiaries having a Company Material Adverse Effect;
(iii) except as disclosed in Company SEC Reports filed prior to the date hereof,
any material change by the Company in its accounting methods, principles or
practices to which Parent has not previously consented in writing; (iv) except
as disclosed in Company SEC Reports filed prior to the date hereof, any
revaluation by the Company of any of its assets having a Company Material
Adverse Effect; or (v) except as disclosed in Company SEC Reports filed prior to
the date hereof, any material elections with respect to Taxes by the Company or
any Subsidiary of the Company or settlement or compromise by the Company or any
Subsidiary of the Company of any material Tax Liability or refund.
Section 3.07 Taxes.
(a) The Company and each of its Subsidiaries have timely filed
with the appropriate Tax authorities all Tax Returns required to be filed by
them (taking into account extensions), except for any such returns which are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. All such Tax Returns are complete and correct in all respects,
except for any such omissions or errors which are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
(b) The Company and each of its Subsidiaries have paid (or the
Company has paid on its Subsidiaries' behalf) all Taxes shown as due on all Tax
Returns described in Section 3.07(a) herein or otherwise due by the Company and
each of its Subsidiaries, except to the extent that
9
such taxes otherwise due are not reasonable likely, individually or in the
aggregate, to have a Company Material Adverse Effect. The Company's most recent
consolidated financial statements reflect an adequate reserve for all Taxes
(excluding any reserve for deferred Taxes established to reflect differences
between book and Tax income) payable by the Company and its Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements, except to the extent that any such Taxes are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
(c) Neither the Internal Revenue Service (the "IRS") nor any
other Tax authority has asserted any claim for Taxes, or to the knowledge of the
executive officers of the Company, is threatening to assert any claims for
Taxes, which claims, individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect. No deficiencies for any Taxes (other
than those which are not reasonably likely, individually or in the aggregate, to
have a Company Material Adverse Effect) have been proposed, asserted or assessed
against the Company or any of its Subsidiaries that have not been fully paid or
adequately provided for in the appropriate financial statements of the Company
and its Subsidiaries, no requests for waivers of the time to assess any Taxes
are pending, and, except as disclosed in the Company Disclosure Letter, none of
the Company or any of its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) The Company and each of its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by Law to be withheld or
collected.
(e) There are no Liens for Taxes upon the assets of the
Company or any of its Subsidiaries (other than Liens for current Taxes that are
not yet due and payable or Liens for Taxes that are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in the Company's most recent consolidated financial statements), except
for Liens which are not reasonably likely, individually or in the aggregate, to
have a Company Material Adverse Effect.
(f) Neither the Company nor any of its Subsidiaries has
liability for the Taxes of any person other than the Company and its
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise, except, in each case, where such
liabilities are not reasonably likely, individually or in the aggregate, to have
a Company Material Adverse Effect.
(g) Neither the Company nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any Tax sharing, Tax allocation or
Tax indemnity agreement or similar arrangements, other than with respect to any
such agreement or arrangement among the Company and any of its Subsidiaries.
(h) Neither the Company nor any of its Subsidiaries has
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997, and neither the
stock of the Company nor the stock of any of its Subsidiaries has been
distributed in a transaction satisfying the requirements of Section 355 of the
Code since April 16, 1997.
10
Section 3.08 Properties.
(a) The Company has provided to Parent a true and complete
list of all real property leased by the Company or its Subsidiaries pursuant to
material leases (collectively "Company Material Leases"). The Company is not in
default under any such Company Material Leases, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a Company Material Adverse Effect.
(b) The Company has provided to Parent a true and complete
list of all real property that the Company or any of its Subsidiaries owns. With
respect to each such item of real property, except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect: (a) the Company or the identified Subsidiary has good
and clear record and marketable title to such property, free and clear of any
security interest, easement, covenant or other restriction, except for security
interests, easements, covenants and other restrictions which do not materially
impair the current uses or occupancy of such property; and (b) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in each
case of material defects.
Section 3.09 Intellectual Property. The Company owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications for such
trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, databases and tangible or intangible
proprietary information or material (collectively, the "Company Intellectual
Property") that are necessary to conduct the business of the Company as
currently conducted, subject to such exceptions that would not be reasonably
likely to have a Company Material Adverse Effect. Subject to such exceptions
that would not be reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect, (i) none of the Company Intellectual Property
is the subject of any pending or threatened action, suit, claim, investigation,
arbitration or other proceeding, (ii) no person, entity or Governmental Entity
has given written notice to the Company or its Subsidiaries claiming (A) that
any of the Company Intellectual Property is invalid, (B) that the use of any the
Company Intellectual Property is infringing or has infringed any domestic or
foreign patent, trademark, service mark, trade name, or copyright, or (C) that
the Company or its Subsidiaries has misappropriated or improperly used or
disclosed any trade secret, confidential information or know-how, and (iii) the
Company has no knowledge of any third party rights or conduct that infringes or
conflicts with the Company Intellectual Property.
Section 3.10 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 3.10(a) of the Company
Disclosure Letter, as of the date hereof, there is no contract, agreement or
understanding that is material to the business, properties, assets, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, that is required to be filed as an exhibit to any Company SEC Report
filed with the SEC subsequent to December 31, 2003 that is not filed as required
by the Securities Act or the Exchange Act, as the case may be (any such
contract, agreement or understanding whether or not entered into as of the date
hereof, a "Company Material Contract"). Except as would not individually or in
the aggregate have a Company Material Adverse Effect, each Company Material
Contract is a valid and binding obligation of the Company or one of its
Subsidiaries and is in full force and effect and enforceable against the Company
or one of its Subsidiaries and, to the
11
knowledge of the Company, the other party or parties thereto, in each case in
accordance with its terms, other than any Company Material Contract which is by
its terms no longer in force or effect and except as enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and is subject to
general principles of equity. The Company is not in violation or breach of or in
default under any Company Material Contract, nor to the Company's knowledge is
any other party to any such Company Material Contract, except to the extent any
such violation, breach or default would not individually or in the aggregate
have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.10(b) of the Company
Disclosure Letter and for documents filed or listed as exhibits to the Company
SEC Reports filed with the SEC subsequent to December 31, 2003 and prior to the
date hereof, as of the date hereof, neither the Company nor any of its
Subsidiaries is a party to or bound by any (a) contract, agreement or
arrangement (including any lease of real property) (i) materially restricting
the ability of the Company or any of its Subsidiaries (or after the Merger,
Parent or any of its Subsidiaries) to compete in or conduct any line of business
or to engage in business in any significant geographic area, (ii) relating to
indebtedness for borrowed money providing for payment or repayment in excess of
$20.0 million, (iii) relating to any material joint venture, partnership,
strategic alliance or similar arrangement, (iv) requiring the Company or any of
its Subsidiaries to register for resale under the Securities Act any securities
of the Company or any of its Subsidiaries, (v) relating to the disposition or
acquisition of material assets not in the ordinary course of business, or (vi)
providing for performance guarantees or contingent payments by the Company or
any of its Subsidiaries, in each case involving more than $15.0 million over the
term of the relevant contract, or (b) financial derivatives master agreements,
confirmation, or futures account opening agreements and/or brokerage statements
evidencing financial hedging or other trading activities.
Section 3.11 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against the Company or any of its Subsidiaries
pending or as to which the Company or any of its Subsidiaries has received any
written notice of assertion, which, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect or a material
adverse effect on the ability of the Company to consummate the transactions
contemplated by this Agreement.
Section 3.12 Environmental Matters. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect: (i) the Company and its Subsidiaries comply, and within
all applicable statute of limitation periods have complied, with all applicable
Environmental Laws; (ii) neither the Company nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (iii) neither the Company nor any of its Subsidiaries are
subject to liability for any release of, or any exposure of any person or
property to, any Hazardous Substance; (iv) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (v) neither the Company nor
any of its Subsidiaries is subject to any orders, decrees or injunctions issued
by, or other arrangements with, any Governmental Entity or is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances; (vi) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to cause the Company or any of its
Subsidiaries to become subject to any claims, liability, investigations or
costs, or to restrictions on the ownership, use or transfer of any property of
the
12
Company or any of its Subsidiaries, pursuant to any Environmental Law; and (vii)
the Company and its Subsidiaries have all of the Environmental Permits necessary
for the conduct and operation of the business as now being conducted, and all
such permits are in good standing.
Section 3.13 Employee Benefit Plans.
(a) The Company has listed in Section 3.13 of the Company
Disclosure Letter all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
programs and agreements, and all unexpired employment and severance agreements,
written or otherwise, for the benefit of, or relating to, any current or former
employee of the Company or any Subsidiary of the Company or any trade or
business (whether or not incorporated) which is a member of a group that
includes, or which is under common control with, the Company or any Subsidiary
of the Company, within the meaning of Section 414(b), (c), (m) or (o) of the
Code, and all other employee benefit plans under which the Company or any
Subsidiary of the Company has or may have any liability or obligation,
including, without limitation, any foreign plans (together, the "Company
Employee Plans").
(b) With respect to each Company Employee Plan, the Company
has made available to Parent (if applicable), a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the IRS, (ii) such Company
Employee Plan (or, if unwritten, a written description of the material terms
thereof), (iii) each trust agreement and group annuity contract, if any,
relating to such Company Employee Plan, (iv) the most recent actuarial report or
valuation relating to such Company Employee Plan, and (v) the most recent
summary plan description (and any summaries of material modifications) relating
to such Company Employee Plan.
(c) With respect to the Company Employee Plans, individually
and in the aggregate, no event has occurred, and, to the knowledge of the
Company, there exists no condition or set of circumstances, in connection with
which the Company or any Subsidiary of the Company could be subject to any
liability that is reasonably likely to have a Company Material Adverse Effect
under ERISA, the Code or any other applicable Law.
(d) With respect to the Company Employee Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly reflected in accordance with generally accepted accounting principles,
on the financial statements of the Company, which obligations are reasonably
likely to have a Company Material Adverse Effect.
(e) Except as disclosed in Company SEC Reports filed prior to
the date of this Agreement, or except as set forth in the Company Disclosure
Letter or as provided for in this Agreement, neither the Company nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any officer or
other employee of the Company or any of its Subsidiaries, the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated by
this Agreement, (ii) agreement with any officer or employee of the Company or
any Subsidiary of the Company providing any term of employment or compensation
guarantee extending for a period longer than one year from the date hereof and
for the payment of compensation in excess of $100,000 per annum, or (iii)
agreement or
13
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan or incentive plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
(f) Section 3.13(f) of the Company Disclosure Letter contains
a true and complete schedule of all benefits and awards provided to officers,
directors or employees of the Company or any of its Subsidiaries, including
stock options and restricted stock awards, that are not disclosed in the Company
SEC Reports and that will increase in value (other than as a result of changes
in the trading value of the Parent Common Stock or the Company Common Stock), or
accelerate in vesting or time of payment, as a result of the Merger or any of
the other transactions contemplated in this Agreement.
(g) Except as set forth in Section 3.13(g) of the Company
Disclosure Letter, or otherwise in the ordinary course of business consistent
with past practice (and not in connection with, or in anticipation of or
otherwise related to, the Merger and the transactions contemplated hereby),
since January 1, 2004, neither the Company nor any Subsidiary has entered into
any new, or modified or amended any existing employment agreement or Company
Employee Plan.
(h) The assumption and conversion of Company Stock Options
pursuant to Section 6.10(a) will not require the consent of any holder of any
option or award granted under any Company Stock Plan.
Section 3.14 Compliance With Laws. The Company and each of its
Subsidiaries has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state or local Law with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which, individually or in
the aggregate, have not had and are not reasonably likely to have a Company
Material Adverse Effect.
Section 3.15 Tax Matters. Neither the Company nor any of its Affiliates
has taken or agreed to take any action which would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code.
Section 3.16 Registration Statement; Proxy Statement/Prospectus. The
information to be supplied in writing by the Company for inclusion in the
registration statement on Form S-4 pursuant to which shares of Parent Common
Stock issued in the Merger will be registered under the Securities Act (the
"Registration Statement"), shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information supplied in writing by the Company for inclusion in
the joint proxy statement/prospectus to be sent to the Company's stockholders
and Parent's stockholders in connection with the meeting of the Company's
stockholders to consider this Agreement and the Merger (the "Company
Stockholders' Meeting") and in connection with the meeting of Parent's
stockholders (the "Parent Stockholders' Meeting") to consider this Agreement and
the Merger (the "Joint Proxy Statement") shall not, on the date the Joint Proxy
Statement is first mailed to the Company's stockholders and Parent's
stockholders, at the time of the Company Stockholders'
14
Meeting and the Parent Stockholders' Meeting and at the Effective Time, contain
any statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements made
in the Joint Proxy Statement not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders'
Meeting or the Parent Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its Affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement, the Company shall
promptly inform Parent.
Section 3.17 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is any such contract or agreement presently being
negotiated, nor is there, nor has there been in the last five years, a
representation question respecting any of the employees of the Company or its
Subsidiaries, and, to the best knowledge of the executive officers of the
Company, there are no campaigns being conducted to solicit cards from employees
of the Company or its Subsidiaries to authorize representation by any labor
organization, nor is the Company or its Subsidiaries a party to, or bound by,
any consent decree with, or citation by, any governmental agency relating to
employees or employment practices. Nor, as of the date hereof, is the Company or
any of its Subsidiaries the subject of any material proceeding asserting that
the Company or any of its Subsidiaries has committed an unfair labor practice or
is seeking to compel it to bargain with any labor union or labor organization
nor, as of the date of this Agreement, is there pending or, to the knowledge of
the executive officers of the Company, threatened, any material labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving the Company or
any of its Subsidiaries.
Section 3.18 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect.
Section 3.19 No Existing Discussions. As of the date hereof, the
Company is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal.
Section 3.20 Opinion of Financial Advisor. The financial advisor of the
Company, Citigroup Global Markets Inc., has delivered to the Company an opinion,
dated the date of this Agreement, to the effect that the Exchange Ratio is fair
to the holders of Company Common Stock from a financial point of view.
Section 3.21 Anti-Takeover Laws. The restrictions contained in Section
203 of the DGCL with respect to a "business combination" (as defined in DGCL
Section 203) have been rendered inapplicable to the authorization, execution,
delivery and performance of the Agreement by the Company or the consummation of
the Merger by the Company. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is
15
applicable to the Company or (solely by reason of the Company's participation
therein) the Merger or the other transactions contemplated by this Agreement.
Section 3.22 Company Rights Plan. The Company has taken all action
necessary to (i) render the Company Rights issued pursuant to the terms of the
Rights Agreement inapplicable to, or not exercisable as a result of, the Merger,
the execution and delivery of this Agreement or the transactions contemplated by
this Agreement and (ii) amend the definition of "Acquiring Person" in Section
1.1 of the Rights Agreement to delete "(i)" in the first sentence thereof, to
delete the entirety of clause (ii) of the first sentence thereof and to delete
the second sentence thereof.
Section 3.23 Sarbanes-Oxley Act. The Company and each of its officers
and directors are in compliance with, and have complied, in all material
respects with (A) the applicable provisions of the Sarbanes-Oxley Act of 2002
and the related rules and regulations promulgated under such Act (the
"Sarbanes-Oxley Act") and the Exchange Act and (B) the applicable listing and
corporate governance rules and regulations of The New York Stock Exchange. The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) under the Exchange Act); such disclosure
controls and procedures are designed to provide that information relating to the
Company, including its consolidated Subsidiaries, required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's principal executive officer and
its principal financial officer to allow timely decisions regarding required
disclosure, and such disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms. The Company's
principal executive officer and its principal financial officer have disclosed,
based on their most recent evaluation, to the Company's auditors and the audit
committee of the Board of Directors of the Company (x) all significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report financial
data and have identified for the Company's auditors any material weaknesses in
internal controls and (y) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal controls.
Section 3.24 Brokers or Finders. The Company represents, as to itself,
its Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except Citigroup Global Markets
Inc. whose fees and expenses will be paid by the Company in accordance with the
Company's agreements with such firm.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that the statements
contained in this Article IV are true and correct except as set forth herein and
in the disclosure letter delivered by Parent to the Company on or before the
date of this Agreement (the "Parent Disclosure Letter"). The Parent Disclosure
Letter shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify other paragraphs in this Article IV only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
16
Section 4.01 Organization of Parent. Each of Parent and its
Subsidiaries is a corporation or unincorporated entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, has all requisite corporate or entity power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation or organization in each
jurisdiction in which the failure to be so qualified would reasonably be
expected to have a Parent Material Adverse Effect. Except as set forth in the
Parent SEC Reports filed prior to the date hereof, neither Parent nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
Parent or its Subsidiaries and comprising less than five percent (5%) of the
outstanding stock of such company.
Section 4.02 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of
150,000,000 shares of Parent Common Stock, 10,000,000 shares of Preferred Stock,
$.01 par value ("Parent Preferred Stock") and one share of Special Voting Stock.
As of August 9, 2004, (i) 85,891,223 shares of Parent Common Stock were issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) no shares of Parent Preferred Stock were issued and outstanding, (iii) no
shares of Special Voting Stock were issued and outstanding and (iv) no shares of
Parent Common Stock and no shares of Parent Preferred Stock were held in the
treasury of Parent or by Subsidiaries of Parent. The Parent Disclosure Letter
shows the number of shares of Parent Common Stock reserved for future issuance
pursuant to warrants, stock options and other stock awards, and restricted stock
awards granted and outstanding as of August 9, 2004 under Parent's Stock Award
and Long Term Incentive Plan, the Dreco Stock Option Plan and the IRI Stock
Option Plan (collectively, the "Parent Stock Plans"). Except for the issuance of
shares of Parent Common Stock in connection with the Parent Stock Plans
(including the exercise of warrants, stock options or other stock awards
thereunder), or except as set forth in the Parent Disclosure Letter, no change
in such capitalization has occurred between August 9, 2004 and the date of this
Agreement. All shares of Parent Common Stock subject to issuance as specified
above are duly authorized and, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall be
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Parent Common Stock or the capital
stock of any Subsidiary or to provide funds to or make any material investment
(in the form of a loan, capital contribution or otherwise) in any such
Subsidiary or any other entity other than guarantees of obligations of
Subsidiaries entered into in the ordinary course of business. Parent has not
repurchased any outstanding shares of Parent Common Stock since July 3, 2004.
All of the outstanding shares of capital stock of each of Parent's Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in the case of foreign
Subsidiaries) are owned by Parent or another Subsidiary of Parent free and clear
of all Liens, agreements or limitations on Parent's voting rights.
(b) As of the date hereof, except as set forth in this Section
4.02 or as reserved for future grants of securities under the Parent Stock
Plans, there are no equity securities of any class of Parent or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. As of the date hereof, except as set forth in this
Section 4.02, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Parent or any of its
Subsidiaries is a party or by which it is bound obligating
17
Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Parent or any
of its Subsidiaries or obligating Parent or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. To the best knowledge of Parent,
there are no voting trusts, proxies or other voting agreements or understandings
with respect to the shares of capital stock of Parent.
Section 4.03 Authority; No Conflict; Required Filings and Consents.
(a) Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by Parent have
been duly authorized by all necessary corporate action on the part of Parent,
subject only to the approval of this Agreement and the Merger by Parent's
stockholders under the DGCL. This Agreement has been duly executed and delivered
by Parent and constitutes the valid and binding obligation of Parent,
enforceable in accordance with its terms, subject to the Bankruptcy and Equity
Exception. On or prior to the date hereof, the Board of Directors of Parent has
unanimously adopted resolutions that have (i) approved and declared advisable
this Agreement and the Merger, (ii) directed that this Agreement and the Merger
be submitted to Parent's stockholders for adoption at a meeting of such
stockholders and (iii) recommended that the stockholders of Parent adopt this
Agreement and the Merger (with respect to subclause (iii), the "Parent
Recommendation"), and such resolutions, as of the date of this Agreement, have
not been subsequently rescinded, modified or withdrawn in any way. The Parent
stockholder vote required for the adoption of this Agreement and the Merger
shall be a majority of the shares of Parent Common Stock outstanding on the
record date for the Parent Stockholders' Meeting (the "Parent Stockholder
Approval").
(b) The execution and delivery of this Agreement by Parent
does not, and the consummation of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation or breach of, any provision of the
certificate of incorporation or by-laws of Parent, (ii) except as set forth in
the Parent Disclosure Letter, result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation,
give rise to any obligation to make an offer to purchase any debt instrument or
give rise to any loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound, or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, Law or ordinance applicable to Parent or any of its Subsidiaries or any
of its or their properties or assets, except in the case of (ii) and (iii) for
any such conflicts, violations, defaults, terminations, cancellations or
accelerations which are not, individually or in the aggregate, reasonably likely
to have a Parent Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of the Registration Statement with the
SEC in accordance with the Securities Act, (iii) the filing of the Certificate
of Merger with the Delaware Secretary of State, (iv) the filing of the Joint
Proxy Statement with the SEC in accordance with the
18
Exchange Act, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities Laws and the Laws of any foreign country and the European
Union, and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Parent Material Adverse Effect.
Section 4.04 SEC Filings; Financial Statements.
(a) Parent has filed and made available to the Company all
forms, reports and documents required to be filed by Parent with the SEC since
January 1, 2001 other than registration statements on Form S-8 (collectively,
the "Parent SEC Reports"). The Parent SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such Parent SEC Reports or necessary in order to make the statements in such
Parent SEC Reports, in the light of the circumstances under which they were
made, not misleading. None of Parent's Subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Parent SEC Reports complied as
to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of Parent and its Subsidiaries as of the dates and the consolidated results of
their operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. The audited balance sheet of Parent as of December 31, 2003 is
referred to herein as the "Parent Balance Sheet." For each period covered by the
Parent SEC Reports, the books and records of Parent and its Subsidiaries have
been, and are being, maintained, in all material respects, in accordance with
generally accepted accounting principles, consistently applied, and all other
legal and accounting requirements.
Section 4.05 No Undisclosed Liabilities. Except as disclosed in the
Parent SEC Reports filed prior to the date hereof, and except for normal or
recurring Liabilities incurred since December 31, 2003 in the ordinary course of
business consistent with past practices, Parent and its Subsidiaries do not have
any Liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles), and whether due or to become due, which
individually or in the aggregate are reasonably likely to have a Parent Material
Adverse Effect.
Section 4.06 Absence of Certain Changes or Events(i) . Except as
disclosed in the Parent SEC Reports filed prior to the date hereof, since the
date of the Parent Balance Sheet, Parent and its Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice. Since the date of the Parent Balance Sheet, there has not been
(i) any material adverse change in the financial condition, results of
operations, business or properties of Parent and its Subsidiaries, taken as a
whole, or any development or combination of developments of which the management
of Parent is aware that, individually or in the aggregate, has had, or is
19
reasonably likely to have, a Parent Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to Parent
or any of its Subsidiaries having a Parent Material Adverse Effect; (iii) except
as disclosed in the Parent SEC Reports filed prior to the date hereof, any
material change by Parent in its accounting methods, principles or practices to
which the Company has not previously consented in writing; (iv) except as
disclosed in the Parent SEC Reports filed prior to the date hereof, any
revaluation by Parent of any of its assets having a Parent Material Adverse
Effect; or (v) except as disclosed in the Parent SEC Reports filed prior to the
date hereof, any material elections with respect to Taxes by Parent or any
Subsidiary of Parent or settlement or compromise by Parent or any Subsidiary of
Parent of any material Tax Liability or refund.
Section 4.07 Taxes.
(a) Parent and each of its Subsidiaries have timely filed with
the appropriate Tax authorities all Tax Returns required to be filed by them
(taking into account extensions), except for any such returns which are not
reasonably likely, individually or in the aggregate, to have a Parent Material
Adverse Effect. All such Tax Returns are complete and correct in all respects,
except for any such omissions or errors which are not reasonably likely,
individually or in the aggregate, to have a Parent Material Adverse Effect.
(b) Parent and each of its Subsidiaries have paid (or Parent
has paid on its Subsidiaries' behalf) all Taxes shown as due on all Tax Returns
described in Section 4.07(a) herein or otherwise due by Parent and each of its
Subsidiaries, except to the extent that such taxes otherwise due are not
reasonable likely, individually or in the aggregate, to have a Parent Material
Adverse Effect. Parent's most recent consolidated financial statements reflect
an adequate reserve for all Taxes (excluding any reserve for deferred Taxes
established to reflect differences between book and Tax income) payable by
Parent and its Subsidiaries for all taxable periods and portions thereof through
the date of such financial statements, except to the extent that any such Taxes
are not reasonably likely, individually or in the aggregate, to have a Parent
Material Adverse Effect.
(c) Neither the IRS nor any other Tax authority has asserted
any claim for Taxes, or to the knowledge of the executive officers of Parent, is
threatening to assert any claims for Taxes, which claims, individually or in the
aggregate, are reasonably likely to have a Parent Material Adverse Effect. No
deficiencies for any Taxes (other than those which are not reasonably likely,
individually or in the aggregate, to have a Parent Material Adverse Effect) have
been proposed, asserted or assessed against Parent or any of its Subsidiaries
that have not been fully paid or adequately provided for in the appropriate
financial statements of Parent and its Subsidiaries, no requests for waivers of
the time to assess any Taxes are pending, and, except as disclosed in the Parent
Disclosure Letter, none of Parent or any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(d) Parent and each of its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by Law to be withheld or
collected.
(e) There are no Liens for Taxes upon the assets of Parent or
any of its Subsidiaries (other than Liens for current Taxes that are not yet due
and payable or Liens for Taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves
20
have been provided in Parent's most recent consolidated financial statements),
except for Liens which are not reasonably likely, individually or in the
aggregate, to have a Parent Material Adverse Effect.
(f) Neither Parent nor any of its Subsidiaries has liability
for the Taxes of any person other than Parent and its Subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise, except, in each case, where such liabilities are not reasonably
likely, individually or in the aggregate, to have a Parent Material Adverse
Effect.
(g) Neither Parent nor any of its Subsidiaries is a party to,
is bound by or has any obligation under any Tax sharing, Tax allocation or Tax
indemnity agreement or similar arrangements, other than with respect to any such
agreement or arrangement among Parent and any of its Subsidiaries.
(h) Neither Parent nor any of its Subsidiaries has distributed
the stock of any corporation in a transaction satisfying the requirements of
Section 355 of the Code since April 16, 1997, and neither the stock of Parent
nor the stock of any of its Subsidiaries has been distributed in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997.
Section 4.08 Properties.
(a) Parent has provided to the Company a true and complete
list of all real property leased by Parent or its Subsidiaries pursuant to
material leases (collectively "Parent Material Leases"). Parent is not in
default under any such Parent Material Leases, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a Parent Material Adverse Effect.
(b) Parent has provided to the Company a true and complete
list of all real property that Parent or any of its Subsidiaries owns. With
respect to each such item of real property, except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Parent
Material Adverse Effect: (a) Parent or the identified Subsidiary has good and
clear record and marketable title to such property, free and clear of any
security interest, easement, covenant or other restriction, except for security
interests, easements, covenants and other restrictions which do not materially
impair the current uses or occupancy of such property; and (b) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in each
case of material defects.
Section 4.09 Intellectual Property. Parent owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications for such
trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, databases and tangible or intangible
proprietary information or material (collectively, the "Parent Intellectual
Property") that are necessary to conduct the business of Parent as currently
conducted, subject to such exceptions that would not be reasonably likely to
have a Parent Material Adverse Effect. Subject to such exceptions that would not
be reasonably likely, individually or in the aggregate, to have a Parent
Material Adverse Effect, (i) none of the Parent Intellectual Property is the
subject of any pending or threatened action, suit, claim, investigation,
arbitration or other proceeding, (ii) no person, entity or Governmental Entity
has given written notice to Parent or its Subsidiaries claiming (A) that any of
21
the Parent Intellectual Property is invalid, (B) that the use of any Parent
Intellectual Property is infringing or has infringed any domestic or foreign
patent, trademark, service mark, trade name, or copyright, or (C) that Parent or
its Subsidiaries has misappropriated or improperly used or disclosed any trade
secret, confidential information or know-how, and (iii) Parent has no knowledge
of any third party rights or conduct that infringes or conflicts with the Parent
Intellectual Property.
Section 4.10 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 4.10(a) of Parent
Disclosure Letter, as of the date hereof, there is no contract, agreement or
understanding that is material to the business, properties, assets, financial
condition or results of operations of Parent and its Subsidiaries, taken as a
whole, that is required to be filed as an exhibit to any Parent SEC Report filed
with the SEC subsequent to December 31, 2003 that is not filed as required by
the Securities Act or the Exchange Act, as the case may be (any such contract,
agreement or understanding whether or not entered into as of the date hereof, a
"Parent Material Contract"). Except as would not individually or in the
aggregate have a Parent Material Adverse Effect, each Parent Material Contract
is a valid and binding obligation of Parent or one of its Subsidiaries and is in
full force and effect and enforceable against Parent or one of its Subsidiaries
and, to the knowledge of Parent, the other party or parties thereto, in each
case in accordance with its terms, other than any Parent Material Contract which
is by its terms no longer in force or effect and except as enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and is subject to
general principles of equity. Parent is not in violation or breach of or in
default under any Parent Material Contract, nor to Parent's knowledge is any
other party to any such Parent Material Contract, except to the extent any such
violation, breach or default would not individually or in the aggregate have a
Parent Material Adverse Effect.
(b) Except as set forth in Section 4.10(b) of Parent
Disclosure Letter and for documents filed or listed as exhibits to Parent SEC
Reports filed with the SEC subsequent to December 31, 2003 and prior to the date
hereof, as of the date hereof, neither Parent nor any of its Subsidiaries is a
party to or bound by any (a) contract, agreement or arrangement (including any
lease of real property) (i) materially restricting the ability of Parent or any
of its Subsidiaries (or after the Merger, the Company or any of its
Subsidiaries) to compete in or conduct any line of business or to engage in
business in any significant geographic area, (ii) relating to indebtedness for
borrowed money providing for payment or repayment in excess of $20.0 million,
(iii) relating to any material joint venture, partnership, strategic alliance or
similar arrangement, (iv) requiring Parent or any of its Subsidiaries to
register for resale under the Securities Act any securities of Parent or any of
its Subsidiaries, (v) relating to the disposition or acquisition of material
assets not in the ordinary course of business, or (vi) providing for performance
guarantees or contingent payments by Parent or any of its Subsidiaries, in each
case involving more than $15.0 million over the term of the relevant contract,
or (b) financial derivatives master agreements, confirmation, or futures account
opening agreements and/or brokerage statements evidencing financial hedging or
other trading activities.
Section 4.11 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Parent or any of its Subsidiaries pending
or as to which Parent or any of its Subsidiaries has received any written notice
of assertion, which, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect or a material adverse effect on the
ability of Parent to consummate the transactions contemplated by this Agreement.
22
Section 4.12 Environmental Matters. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Parent
Material Adverse Effect: (i) Parent and its Subsidiaries comply, and within all
applicable statute of limitation periods have complied, with all applicable
Environmental Laws; (ii) neither Parent nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (iii) neither Parent nor any of its Subsidiaries are subject to
liability for any release of, or any exposure of any person or property to, any
Hazardous Substance; (iv) neither Parent nor any of its Subsidiaries has
received any notice, demand, letter, claim or request for information alleging
that Parent or any of its Subsidiaries may be in violation of or liable under
any Environmental Law; (v) neither Parent nor any of its Subsidiaries is subject
to any orders, decrees or injunctions issued by, or other arrangements with, any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; (vi) there are no circumstances or conditions involving
Parent or any of its Subsidiaries that could reasonably be expected to cause
Parent or any of its Subsidiaries to become subject to any claims, liability,
investigations or costs, or to restrictions on the ownership, use or transfer of
any property of Parent or any of its Subsidiaries, pursuant to any Environmental
Law; and (vii) Parent and its Subsidiaries have all of the Environmental Permits
necessary for the conduct and operation of the business as now being conducted,
and all such permits are in good standing.
Section 4.13 Employee Benefit Plans.
(a) Parent has listed in Section 4.13 of the Parent Disclosure
Letter all employee benefit plans (as defined in Section 3(3) of ERISA) and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
programs and agreements, and all unexpired employment and severance agreements,
written or otherwise, for the benefit of, or relating to, any current or former
employee of Parent or any Subsidiary of Parent or any trade or business (whether
or not incorporated) which is a member of a group that includes, or which is
under common control with, Parent or any Subsidiary of Parent, within the
meaning of Section 414(b), (c), (m) or (o) of the Code, and all other employee
benefit plans under which Parent or any Subsidiary of Parent has or may have any
liability or obligation, including, without limitation, any foreign plans
(together, the "Parent Employee Plans").
(b) With respect to each Parent Employee Plan, Parent has made
available to the Company (if applicable), a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the IRS, (ii) such Parent
Employee Plan (or, if unwritten, a written description of the material terms
thereof), (iii) each trust agreement and group annuity contract, if any,
relating to such Parent Employee Plan, (iv) the most recent actuarial report or
valuation relating to such Parent Employee Plan, and (v) the most recent summary
plan description (and any summaries of material modifications) relating to such
Parent Employee Plan.
(c) With respect to the Parent Employee Plans, individually
and in the aggregate, no event has occurred, and, to the knowledge of Parent,
there exists no condition or set of circumstances, in connection with which
Parent or any Subsidiary of Parent could be subject to any liability that is
reasonably likely to have a Parent Material Adverse Effect under ERISA, the Code
or any other applicable Law.
(d) With respect to the Parent Employee Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by
23
reserves, or otherwise properly reflected in accordance with generally accepted
accounting principles, on the financial statements of Parent, which obligations
are reasonably likely to have a Parent Material Adverse Effect.
(e) Except as disclosed in Parent SEC Reports filed prior to
the date of this Agreement, or except as set forth in the Parent Disclosure
Letter or as provided for in this Agreement, neither Parent nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any officer or
other employee of Parent or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Parent of the nature contemplated by this Agreement,
(ii) agreement with any officer or employee of Parent or any Subsidiary of
Parent providing any term of employment or compensation guarantee extending for
a period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan or incentive plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(f) Section 4.13(f) of the Parent Disclosure Letter contains a
true and complete schedule of all benefits and awards provided to officers,
directors or employees of Parent or any of its Subsidiaries, including stock
options and restricted stock awards, that are not disclosed in the Parent SEC
Reports and that will increase in value (other than as a result of changes in
the trading value of the Parent Common Stock or the Company Common Stock), or
accelerate in vesting or time of payment, as a result of the Merger or any of
the other transactions contemplated in this Agreement.
(g) Except as set forth in Section 4.13(g) of the Parent
Disclosure Letter, or otherwise in the ordinary course of business consistent
with past practice (and not in connection with, or in anticipation of or
otherwise related to, the Merger and the transactions contemplated hereby),
since January 1, 2004, neither the Parent nor any Subsidiary has entered into
any new, or modified or amended any existing employment agreement or Parent
Employee Plan.
Section 4.14 Compliance With Laws. Parent and each of its Subsidiaries
has complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state or local Law with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which, individually or in the aggregate,
have not had and are not reasonably likely to have a Parent Material Adverse
Effect.
Section 4.15 Tax Matters. Neither Parent nor any of its Affiliates has
taken or agreed to take any action which would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code.
Section 4.16 Registration Statement; Proxy Statement/Prospectus. The
information in the Registration Statement (except for information supplied in
writing by the Company for inclusion in the Registration Statement, as to which
Parent makes no representation) shall not at the time the Registration Statement
is declared effective by the SEC contain any untrue statement of a material fact
or omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the
24
circumstances under which they were made, not misleading. The information
supplied in writing by Parent for inclusion in the Joint Proxy Statement shall
not, on the date the Joint Proxy Statement is first mailed to Parent's
stockholders or the Company's stockholders, at the time of the Parent
Stockholders' Meeting and the Company Stockholders' Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Joint Proxy Statement not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the Parent
Stockholders' Meeting or the Company Stockholders' Meeting which has become
false or misleading. If at any time prior to the Effective Time any event
relating to Parent or any of its Affiliates, officers or directors should be
discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, Parent
shall promptly inform the Company.
Section 4.17 Labor Matters. Neither Parent nor any of its Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is any such contract or agreement presently being negotiated,
nor is there, nor has there been in the last five years, a representation
question respecting any of the employees of Parent or its Subsidiaries, and, to
the best knowledge of the executive officers of Parent, there are no campaigns
being conducted to solicit cards from employees of Parent or its Subsidiaries to
authorize representation by any labor organization, nor is Parent or its
Subsidiaries a party to, or bound by, any consent decree with, or citation by,
any governmental agency relating to employees or employment practices. Nor, as
of the date hereof, is Parent or any of its Subsidiaries the subject of any
material proceeding asserting that Parent or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor, as of the date of this Agreement, is
there pending or, to the knowledge of the executive officers of Parent,
threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving Parent or any of its Subsidiaries.
Section 4.18 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Parent or any of its Subsidiaries are
with reputable insurance carriers and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect.
Section 4.19 No Existing Discussions. As of the date hereof, Parent is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal.
Section 4.20 Opinion of Financial Advisor. The financial advisor of
Parent, Goldman, Sachs & Co., has delivered to Parent an opinion, dated the date
of this Agreement, to the effect that the Exchange Ratio is fair to Parent from
a financial point of view.
Section 4.21 Anti-Takeover Laws. The restrictions contained in Section
203 of the DGCL with respect to a "business combination" (as defined in DGCL
Section 203) have been rendered inapplicable to the authorization, execution,
delivery and performance of the Agreement by Parent or the consummation of the
Merger by Parent. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is applicable
to Parent or (solely
25
by reason of Parent's participation therein) the Merger or the other
transactions contemplated by this Agreement.
Section 4.22 Rights Plan. Neither Parent nor any of its Subsidiaries
has adopted a stockholder rights plan or "poison pill."
Section 4.23 Sarbanes-Oxley Act. Parent and each of its officers and
directors are in compliance with, and have complied, in all material respects
with (A) the applicable provisions of the Sarbanes-Oxley Act and the Exchange
Act and (B) the applicable listing and corporate governance rules and
regulations of The New York Stock Exchange. Parent has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15(e)
under the Exchange Act); such disclosure controls and procedures are designed to
provide that information relating to Parent, including its consolidated
Subsidiaries, required to be disclosed by Parent in the reports that it files or
submits under the Exchange Act is accumulated and communicated to Parent's
principal executive officer and its principal financial officer to allow timely
decisions regarding required disclosure, and such disclosure controls and
procedures are effective to ensure that information required to be disclosed by
Parent in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. Parent's principal executive officer and its principal
financial officer have disclosed, based on their most recent evaluation, to
Parent's auditors and the audit committee of the Board of Directors of Parent
(x) all significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect Parent's ability to record, process, summarize and
report financial data and have identified for Parent's auditors any material
weaknesses in internal controls and (y) any fraud, whether or not material, that
involves management or other employees who have a significant role in Parent's
internal controls.
Section 4.24 Brokers or Finders. Parent represents, as to itself, its
Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except Goldman, Sachs & Co.
whose fees and expenses will be paid by Parent in accordance with Parent's
agreements with such firm.
ARTICLE V.
CONDUCT OF BUSINESS
Section 5.01 Covenants of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees as to itself and its
respective Subsidiaries (except to the extent that Parent shall otherwise
consent in writing, which consent shall not be unreasonably withheld or
delayed), to carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, to pay
or perform its other obligations when due, and, to the extent consistent with
such business, use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others having
material business dealings with it. The Company shall promptly notify the other
party of any material event or occurrence not in the ordinary course of business
of the Company. Except as expressly contemplated by this Agreement or as set
forth in Section 5.01 of the Company Disclosure
26
Letter, the Company shall not (and shall not permit any of its respective
Subsidiaries to), without the written consent of Parent (which consent shall not
be unreasonably withheld or delayed):
(a) Accelerate, amend or change the period of exercisability
or vesting of warrants, options, stock purchase rights, restricted stock or
other stock awards granted under the Company Stock Plans or the Company Stock
Purchase Plan, or authorize cash payments in exchange for any warrants, options,
stock purchase rights, restricted stock or other stock awards granted under the
Company Stock Plans or the Company Stock Purchase Plan, except as required by
the terms of such plans or any related agreements in effect as of the date of
this Agreement;
(b) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants at a price not greater than the then
current fair market value in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to such
party;
(c) Grant, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock (including
Company Common Stock held in treasury) or securities convertible into shares of
its capital stock, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than (i) the issuance of shares of
Company Common Stock pursuant to the exercise of options, warrants, convertible
securities, stock purchase rights, restricted stock or other stock awards
outstanding on the date of this Agreement, or granted, issued or awarded after
the date of this Agreement in accordance with this subsection (c), or pursuant
to the Company Stock Purchase Plan, (ii) the issuance of Company Rights in
respect of shares of Company Common Stock issued not in contravention of this
Agreement, (iii) if the Closing shall not have occurred prior to January 1,
2005, grants of stock options pursuant to Company Stock Plans ("Company Stock
Options") to acquire up to an aggregate of 110% of the aggregate number of
shares of Company Common Stock underlying Company Stock Options granted in 2004,
with an exercise price per share of Company Common Stock no less than the fair
market value of a share of Company Common Stock as of the date of grant and (iv)
the issuance of stock purchase rights pursuant to the Company Stock Purchase
Plan;
(d) Acquire or agree to acquire by merging or consolidating
with, or by purchasing an equity interest in or any of the assets of, or by any
other manner, any business or any corporation, partnership or other business
organization or division, or otherwise acquire or agree to acquire any assets
(other than inventory and other items in the ordinary course of business),
except for all such acquisitions involving aggregate consideration of not more
than $50 million;
(e) Except for transactions among the Company and its
Subsidiaries, redeem, purchase, acquire or offer to purchase or acquire any
shares of its capital stock or any options, warrants or rights to acquire any of
its capital stock or any security convertible into or exchangeable for its
capital stock other than in connection with the exercise of outstanding Company
Stock Options pursuant to the terms of the Company Stock Plans and the relevant
written agreements evidencing the grant of such Company Stock Options;
27
(f) Sell, lease, license or otherwise dispose of any of its
properties or assets, other than (i) sales or dispositions of assets in the
ordinary course of business or as may be required by applicable Law, (ii) sales
of inventory and other current assets, (iii) sales or dispositions of assets in
one or a series of related transactions having an aggregate value of $25 million
or less or (iv) divestitures pursuant to Section 6.05;
(g) (i) Increase or agree to increase the compensation or
benefits payable or to become payable to the officers or employees of the
Company or any of its Subsidiaries, except (A) for increases in salary or wages
of such officers or employees in the ordinary course of business in accordance
with past practices (including bonuses), (B) pursuant to contractual
arrangements in effect on the date of this Agreement, (C) in connection with the
assumption by such officer or employee of material new or additional
responsibilities or (D) to respond to offers of employment made by third
parties; (ii) grant any additional severance or termination pay to, or enter
into any employment or severance agreements with, any employees or officers,
other than (A) payments or agreements paid to or entered into with employees
(other than officers) in the ordinary course of business in accordance with past
practices or (B) pursuant to contractual arrangements in effect on the date of
this Agreement, (iii) establish, adopt, enter into or materially and adversely
amend any collective bargaining agreement (other than as required by Law), or
(iv) establish, adopt, enter into, amend or terminate any Company Employee Plan
or any other bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees of the Company or any of its
Subsidiaries (except as expressly permitted by (i) or (ii) of this Section
5.01(g));
(h) Amend or propose to amend its charter or by-laws, except
as contemplated by this Agreement;
(i) Incur any indebtedness for borrowed money other than (i)
borrowings pursuant to credit agreements in effect as of the date hereof or
replacement credit agreements on substantially similar terms as the Company's
credit agreements in effect as of the date hereof and having aggregate borrowing
capacity not to exceed 150% of the Company's borrowing capacity under its
existing credit agreements and (ii) seller financings in connection with
acquisitions permitted by this Section 5.01;
(j) Enter into any agreement or arrangement that limits or
otherwise restricts the Company or any of its Subsidiaries or any of their
respective affiliates or any successor thereto from engaging or competing in any
line of business or in any geographic area;
(k) Change any method or principle of financial accounting in
a manner that is inconsistent with past practice, except to the extent required
by GAAP as advised by the Company's regular independent accountants, make or
change any material tax election, or settle or compromise any material Tax
Liability or refund;
(l) Make or commit to make any capital expenditures other than
in the ordinary course of business;
(m) Take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger in Article VII not
being satisfied;
28
(n) Take, or agree in writing or otherwise to take, any of the
actions described in paragraphs (a) through (m) above;
(o) Amend, modify or terminate the Rights Agreement or redeem
any Company Rights issued pursuant to the Rights Agreement except to the extent
required by a court of competent jurisdiction; or
(p) Take any action to exempt or make not subject to (1) the
Rights Agreement, (2) the provisions of Section 203 of the DGCL or (3) any other
state takeover statute or state Law that purports to limit or restrict business
combinations or the ability to acquire or vote shares, any person (other than
Parent and its Subsidiaries) or any action taken thereby, which person or action
would have otherwise been subject to the restrictive provisions thereof and not
exempt therefrom.
Nothing contained in this Agreement shall give to Parent, directly or
indirectly, rights to control or direct the Company's operations prior to the
Effective Time. Prior to the Effective Time, the Company shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its operations.
Section 5.02 Covenants of Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Parent agrees as to itself and its respective
Subsidiaries (except to the extent that the Company shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed), to carry
on its business in the usual, regular and ordinary course in substantially the
same manner as previously conducted, to pay its debts and Taxes when due subject
to good faith disputes over such debts or Taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use all
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, and others having material business dealings
with it. Parent shall promptly notify the other party of any material event or
occurrence not in the ordinary course of business of Parent. Except as expressly
contemplated by this Agreement or as set forth in Section 5.02 of the Parent
Disclosure Letter, Parent shall not (and shall not permit any of its respective
Subsidiaries to), without the written consent of the Company (which consent
shall not be unreasonably withheld or delayed):
(a) Accelerate, amend or change the period of exercisability
or vesting of warrants, options, stock purchase rights, restricted stock or
other stock awards granted under the Parent Stock Plans or authorize cash
payments in exchange for any warrants, options, stock purchase rights,
restricted stock or other stock awards granted under the Parent Stock Plans,
except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants at a price not greater than the then
current fair market value in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to such
party;
29
(c) Grant, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock (including Parent
Common Stock held in treasury) or securities convertible into shares of its
capital stock, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than (i) the issuance of shares of
Parent Common Stock pursuant to the exercise of options, warrants, convertible
securities, stock purchase rights, restricted stock or other stock awards
outstanding on the date of this Agreement, or granted, issued or awarded after
the date of this Agreement in accordance with this subsection (c), or pursuant
to Parent's Employee Stock Purchase Plan and (ii) if the Closing shall not have
occurred prior to January 1, 2005, grants of stock options pursuant to the
Parent Stock Plans ("Parent Stock Options") to acquire up to an aggregate of
110% of the aggregate number of shares of Parent Common Stock underlying Parent
Stock Options granted in 2004, with an exercise price per share of Parent Common
Stock no less than the fair market value of a share of Parent Common Stock as of
the date of grant;
(d) Acquire or agree to acquire by merging or consolidating
with, or by purchasing an equity interest in or any of the assets of, or by any
other manner, any business or any corporation, partnership or other business
organization or division, or otherwise acquire or agree to acquire any assets
(other than inventory and other items in the ordinary course of business),
except for all such acquisitions involving aggregate consideration of not more
than $50 million;
(e) Except for transactions among Parent and its Subsidiaries,
redeem, purchase, acquire or offer to purchase or acquire any shares of its
capital stock or any options, warrants or rights to acquire any of its capital
stock or any security convertible into or exchangeable for its capital stock
other than in connection with the exercise of outstanding Parent Stock Options
pursuant to the terms of the Parent Stock Plans and the relevant written
agreements evidencing the grant of such Parent Stock Options;
(f) Sell, lease, license or otherwise dispose of any of its
properties or assets, other than (i) sales or dispositions of assets in the
ordinary course of business or as may be required by applicable Law, (ii) sales
of inventory and other current assets, (iii) sales or dispositions of assets in
one or a series of related transactions having an aggregate value of $25 million
or less or (iv) divestitures pursuant to Section 6.05;
(g) (i) Increase or agree to increase the compensation or
benefits payable or to become payable to the officers or employees of Parent or
any of its Subsidiaries, except (A) for increases in salary or wages of such
officers or employees in the ordinary course of business in accordance with past
practices (including bonuses), (B) pursuant to contractual arrangements in
effect on the date of this Agreement, (C) in connection with the assumption by
such officer or employee of material new or additional responsibilities or (D)
to respond to offers of employment made by third parties; (ii) grant any
additional severance or termination pay to, or enter into any employment or
severance agreements with, any employees or officers, other than (A) payments or
agreements paid to or entered into with employees (other than officers) in the
ordinary course of business in accordance with past practices, (B) severance
agreements for up to 14 individuals providing for the payment of severance of up
to the equivalent of 24 months base salary (and no other benefit) or (C)
pursuant to contractual arrangements in effect on the date of this Agreement,
(iii) establish, adopt, enter into or materially and adversely amend any
collective bargaining agreement (other than as required by Law), or (iv)
establish, adopt, enter into, amend or terminate any Parent Employee Plan or any
other bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or
30
other plan, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees of Parent or any of its Subsidiaries (except as expressly
permitted by (i) or (ii) of this Section 5.02(g));
(h) Amend or propose to amend its charter or by-laws, except
as contemplated by this Agreement;
(i) Incur any indebtedness for borrowed money other than (i)
borrowings pursuant to credit agreements in effect as of the date hereof or
replacement credit agreements on substantially similar terms as Parent's credit
agreements in effect as of the date hereof and having aggregate borrowing
capacity not to exceed 150% of Parent's borrowing capacity under its existing
credit agreements and (ii) seller financings in connection with acquisitions
permitted by this Section 5.02;
(j) Enter into any agreement or arrangement that limits or
otherwise restricts Parent or any of its Subsidiaries or any of their respective
affiliates or any successor thereto from engaging or competing in any line of
business or in any geographic area;
(k) Change any method or principle of financial accounting in
a manner that is inconsistent with past practice, except to the extent required
by GAAP as advised by Parent's regular independent accountants, make or change
any material tax election, or settle or compromise any material Tax Liability or
refund;
(l) Make or commit to make any capital expenditures other than
in the ordinary course of business;
(m) Take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger in Article VII not
being satisfied; or
(n) Take, or agree in writing or otherwise to take, any of the
actions described in paragraphs (a) through (m) above.
Nothing contained in this Agreement shall give the Company, directly or
indirectly, rights to control or direct Parent's operations prior to the
Effective Time. Prior to the Effective Time, Parent shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision of its operations.
Section 5.03 Cooperation. Subject to compliance with applicable Law,
from the date hereof until the Effective Time, each of the Company and Parent
shall confer on a regular and frequent basis with one or more representatives of
the other party to report on the general status of ongoing operations.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 No Solicitation.
(a) Neither the Company, Parent nor any of their respective
Subsidiaries nor any of the officers, directors or employees of the Company,
Parent or their Subsidiaries shall, and each of the Company and Parent shall use
all reasonable best efforts to cause its and its Subsidiaries'
31
attorneys, accountants, investment bankers, financial advisors and other agents
(collectively, "Representatives") not to, and on becoming aware of it will use
its best efforts to stop any such person from continuing to, directly or
indirectly, (i) solicit, initiate or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Acquisition Proposal
involving such party or any of its Subsidiaries, (ii) engage in any negotiations
or discussions concerning, or provide any non-public information of such party
to any person relating to, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or could reasonably be expected
to lead to, any Acquisition Proposal (other than informing persons of the
existence of the provisions contained in this Section 6.01), or (iii) enter into
any agreement, arrangement or understanding (other than a confidentiality
agreement entered into in accordance with this Section 6.01(a)) contemplating or
relating to any Acquisition Proposal or requiring such party to abandon,
terminate or fail to consummate the Merger or any other transaction contemplated
by this Agreement; provided, however, that, prior to receipt of the Company
Stockholder Approval (in the case of the Company) or Parent Stockholder Approval
(in the case of Parent), nothing contained in this Agreement shall prevent the
Company or Parent, or their respective Boards of Directors, from (A) furnishing
non-public information to, or entering into discussions or negotiations with,
any person in connection with an unsolicited bona fide written Acquisition
Proposal by such person, if and only to the extent that (1) such Acquisition
Proposal was made after the date of this Agreement and shall not have been
withdrawn, (2) such Acquisition Proposal was not solicited, initiated,
encouraged or facilitated after the date of this Agreement in breach of, and did
not otherwise result from a breach of, this Section 6.01(a), (3) the Board of
Directors of such party determines in good faith by affirmative vote of a
majority of all of its members, after consultation with its outside counsel and
financial advisors, that such Acquisition Proposal is, or is reasonably likely
to lead to, a Superior Proposal, (4) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person,
such Board of Directors receives from such person an executed confidentiality
agreement with terms no less favorable to such party than those contained in the
Confidentiality Agreement dated July 13, 2004 between the Company and Parent
(the "Confidentiality Agreement"), and (5) prior to furnishing such non-public
information or providing access to the properties, books or records of such
party, such party has complied with the provisions of Section 6.01(b); or (B)
complying with Rule 14e-2 or Rule 14a-9 promulgated under the Exchange Act with
regard to an Acquisition Proposal; provided that, with respect to this clause
(B), any Change of Recommendation is made in compliance with Section 6.01(e).
Each party agrees that, in the event that it receives a Superior Proposal, for
the three Business Day period commencing on the date on which it delivers notice
of such Superior Proposal to the other party in accordance with Section 6.01(b),
it shall offer to negotiate with, and cause its respective financial and legal
advisors to negotiate with, the other party to attempt to make such adjustments
in the terms and conditions of this Agreement as would enable such party to
proceed with the transactions contemplated herein.
(b) The Company and Parent shall each notify the other party
promptly after receipt (and in any event within one Business Day) by the Company
or Parent (or their Representatives), as applicable, of any Acquisition
Proposal, any discussions or negotiations that are reasonably likely to lead to
an Acquisition Proposal, or any request for nonpublic information or access to
the properties, books or records of such party relating to or which could
reasonably be expected to lead to an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. Such party shall (i) continue to keep the other party hereto informed,
on a prompt basis (and in any event within one Business Day) of the status of
any material developments (including any changes or adjustments made to or
proposed to be made to the terms of
32
any such Acquisition Proposal), (ii) provide to the other party promptly (and in
any event within one Business Day) after receipt or delivery thereof with copies
of the Acquisition Proposal (including any amendments or supplements thereto)
and all such other material and information provided in writing by the person
making such Acquisition Proposal; provided that neither party shall be required
to disclose its internal analyses relating to any such Acquisition Proposal, and
(iii) provide to the other party a list of, and copies of, the information
provided to the person making such inquiry, proposal, offer or request
concurrently with delivery to such person and immediately provide the other
party hereto with access to all information to which the person making such
inquiry, proposal, offer or request was provided access (except for any such
information previously provided to the other party).
(c) Each party will immediately cease and cause to be
terminated all existing activities, discussions or negotiations by it, its
Subsidiaries and their Representatives with any person other than the other
party hereto conducted heretofore with respect to any Acquisition Proposal. Each
party also agrees, if it has not already done so, to promptly request each
person, if any, that has heretofore executed a confidentiality agreement within
12 months prior to the date hereof in connection with any Acquisition Proposal
to return or destroy all confidential information heretofore furnished to such
person by or on behalf of it or its Subsidiaries. Neither party shall agree to
modify, amend or terminate, or waive, assign or release any material rights or
claims, or grant any consent under, any confidentiality agreement relating to
any Acquisition Proposal or otherwise under any standstill or similar agreement
or fail to fully enforce any such agreement upon the request of the other party
hereto, provided, however, that either party may grant a consent or waiver
under, or otherwise fail to enforce, such agreement in order to permit a person
to make a private unsolicited Acquisition Proposal provided that such party has
otherwise complied with this Section 6.01; and provided, further, that upon any
grant of waiver or consent, the other party is promptly notified of such waiver
or consent.
(d) Each party will take such action as is necessary to inform
promptly its Representatives of the provisions of this Section 6.01.
(e) Neither the Board of Directors of the Company or Parent
nor any committee thereof shall (i) in the case of the Company, withdraw or
modify in a manner adverse to Parent, or publicly propose to withdraw or modify
in a manner adverse to Parent, the Company Recommendation, (ii) in the case of
Parent, withdraw or modify in a manner adverse to the Company, or publicly
propose to withdraw or modify in a manner adverse to the Company, the Parent
Recommendation, (iii) approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Acquisition Proposal
or (iv) approve or recommend, or publicly propose to approve or recommend, any
Acquisition Proposal. Notwithstanding the foregoing provisions of Section
6.01(a) and this Section 6.01(e), if, prior to receipt of the Company
Stockholder Approval (in the case of the Company) or the Parent Stockholder
Approval (in the case of Parent), (w) such party's Board of Directors shall have
determined in good faith by affirmative vote of a majority of its members, after
consultation with outside counsel, that the actions described in clauses (A)
and/or (B) below are required for the purpose of fulfilling its fiduciary duties
under applicable Law, (x) such party's Board of Directors has notified the other
party in writing of the determination described in clause (w) above, (y) at
least three Business Days following receipt by the other party of the notice
received in clause (x) above, and taking into account any revised proposal made
by the other party since receipt of the notice referred to in clause (x) above,
such party's Board of Directors maintains its determination described in clause
(w) above, and (z) such party is in compliance with this Section 6.01, such
party's Board of Directors may (A) in the case of the Company, withdraw or
modify the Company Recommendation or, in the case of Parent, withdraw or
33
modify the Parent Recommendation (in either case, a "Change of Recommendation")
and/or (B) upon termination of this Agreement in accordance with Section 8.01(i)
or Section 8.01(j), as applicable, and concurrent payment of the termination fee
in accordance with Section 8.03, approve and enter into an agreement relating to
an Acquisition Transaction that constitutes a Superior Proposal. Nothing in this
Section 6.01 will permit either party to terminate this Agreement except as
specifically provided in Article VIII or effect any other obligation of the
parties under this Agreement.
Section 6.02 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practical after the date of this Agreement,
the Company and Parent shall prepare and file with the SEC the Joint Proxy
Statement, and Parent shall prepare and file with the SEC the Registration
Statement, in which the Joint Proxy Statement will be included as a prospectus.
The Company and Parent shall use all reasonable efforts to cause the
Registration Statement to become effective as soon after such filing as
practical. The Joint Proxy Statement, and any amendment or supplement thereto,
shall include (i) the Parent Recommendation, and (ii) the Company
Recommendation, in each case, subject to Section 6.01(e). The parties shall
notify each other promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Joint Proxy Statement or the Registration Statement or for additional
information and shall supply each other with copies of all correspondence
between such or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Joint Proxy Statement, the
Registration Statement or the Merger. If, at any time prior to the receipt of
the Company Stockholder Approval or Parent Stockholder Approval, any event
occurs with respect to the Company, Parent or any of their respective
Subsidiaries, or any change occurs with respect to other information supplied by
a party for inclusion in the Joint Proxy Statement or the Registration
Statement, which is required to be described in an amendment of, or a supplement
to, the Joint Proxy Statement or the Registration Statement, such party shall
promptly notify the other party of such event, and the Company and Parent shall
cooperate in the prompt filing with the SEC of any necessary amendment or
supplement to the Joint Proxy Statement and the Registration Statement and, as
required by Law, in disseminating the information contained in such amendment or
supplement to the Company's or Parent's stockholders.
(b) The Company and Parent shall make all necessary filings
with respect to the Merger under the Securities Act, the Exchange Act,
applicable state blue sky Laws and the rules and regulations thereunder.
Section 6.03 Access to Information. Upon reasonable notice, Parent and
the Company shall each (and shall cause each of their respective Subsidiaries
to) afford to the Representatives of the other, reasonable access, during normal
business hours during the period prior to the Effective Time, to its properties,
books, contracts, commitments and records and, during such period, each of
Parent and the Company shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities Laws and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. Unless otherwise required by Law, the
parties will hold any information obtained pursuant to this Section 6.03 in
confidence in accordance with the Confidentiality Agreement. No information or
knowledge obtained in any investigation pursuant to this Section 6.03 shall
affect or be deemed to modify any representation or warranty contained in this
34
Agreement or the conditions to the obligations of the parties to consummate the
Merger. Notwithstanding the foregoing or Section 6.05, neither the Company nor
Parent shall be required to provide any information which it reasonably believes
it may not provide to the other party by reason of contractual or legal
restrictions, including applicable Laws, or which it believes is competitively
sensitive information. In addition, the Company and Parent may designate any
competitively sensitive information provided to the other under this Agreement
as "outside counsel only" and such information shall be given only to outside
counsel of the recipient. Each party will use reasonable efforts to minimize any
disruption to the businesses of the other party and its Subsidiaries which may
result from the requests for access, data and information hereunder.
Section 6.04 Stockholders Meetings.
(a) The Company shall, as promptly as practicable after the
date hereof, take all actions necessary in accordance with federal securities
laws, the DGCL and its certificate of incorporation and by-laws to call, give
notice of, convene and hold the Company Stockholders' Meeting to be held on the
earliest practicable date determined in consultation with Parent for the purpose
of voting upon this Agreement and the Merger. Subject to Section 6.01(a) and
Section 6.01(e), the Company shall use all reasonable efforts to solicit from
stockholders of the Company proxies in favor of the adoption of this Agreement
and the Merger.
(b) Parent shall, as promptly as practicable after the date
hereof, take all actions necessary in accordance with federal securities laws,
the DGCL and its certificate of incorporation and by-laws to call, give notice
of, convene and hold the Parent Stockholder' Meeting to be held on the earliest
practicable date determined in consultation with the Company for the purpose of
voting upon this Agreement and the Merger. Subject to Section 6.01(a) and
Section 6.01(e), Parent shall use all reasonable efforts to solicit proxies from
stockholders of Parent in favor of the adoption of this Agreement and the
Merger.
(c) The Company and Parent shall coordinate and cooperate with
respect to the timing of such meetings and shall use their reasonable efforts to
hold such meetings on the same day and as soon as practicable after the date
hereof.
(d) Each of the Company and Parent may also submit additional
routine proposals to its stockholders at the Company Stockholders' Meeting and
Parent Stockholders' Meeting, as applicable, separate from the proposals
referred to in Section 6.04(a) and (b), provided that each party shall consult
with the other party as to the submission of such proposals. The approval by a
party's stockholders of such additional proposals shall not be a condition to
the closing of the Merger under this Agreement.
Section 6.05 Appropriate Actions; Consents; Filings.
(a) The Company and Parent shall each use their reasonable
best efforts to (i) take, or cause to be taken, all appropriate action, and do,
or cause to be done, all things necessary and proper under applicable Law to
consummate and make effective the transactions contemplated hereby as promptly
as practicable, (ii) obtain from any Governmental Entity or any other third
party any consents, licenses, permits, waivers, approvals, authorizations, or
orders required to be obtained or made by the Company or Parent or any of their
Subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the Merger, and (iii) as promptly as
35
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities Laws, (B) the HSR Act and any related governmental request
thereunder, and (C) any other applicable Law. The Company and Parent shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. Subject to Section 6.03,
Parent and the Company shall use their reasonable best efforts to furnish to
each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Joint Proxy Statement and the
Registration Statement) in connection with the transactions contemplated by this
Agreement.
(b) The Company and Parent agree, and shall cause each of
their respective Subsidiaries, to cooperate and to use their reasonable best
efforts to obtain any government clearances or approvals required for Closing
under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the
Federal Trade Commission Act, as amended, and any other Federal, state or
foreign Law or, decree designed to prohibit, restrict or regulate actions for
the purpose or effect of monopolization or restraint of trade (collectively
"Antitrust Laws"), to obtain the expiration of any applicable waiting period
under any Antitrust Laws, to respond to any government requests for information
under any Antitrust Law, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that restricts, prevents or
prohibits the consummation of the Merger or any other transactions contemplated
by this Agreement under any Antitrust Law. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any Antitrust Law.
Notwithstanding anything to the contrary in this Section 6.05, neither the
Company nor Parent nor any of their Subsidiaries shall be required (i) to divest
or hold separate any of their respective businesses, product lines or assets, or
to take or agree to take any other action or agree to any limitation, that would
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or prospects of either Parent and its
Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a
whole, or (ii) to agree to or effect any divestiture, hold separate any business
or take any other action that is not conditioned on the consummation of the
Merger.
(c) Each of Parent and the Company shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their reasonable efforts to
obtain any third party consents related to or required in connection with the
Merger that are (i) necessary to consummate the transactions contemplated
hereby, (ii) disclosed or required to be disclosed in the Parent Disclosure
Letter or the Company Disclosure Letter, as the case may be, or (iii) required
to prevent a Parent Material Adverse Effect or a Company Material Adverse Effect
from occurring prior to or after the Effective Time. If any party shall fail to
obtain any consent from a third person described in this subsection (c), such
party will use its reasonable efforts, and will take any such actions reasonably
requested by the other party hereto, to limit the adverse affect upon the
Company and Parent, their respective Subsidiaries, and
36
their respective businesses resulting, or that could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent.
(d) Each of the Company and Parent will give prompt notice to
the other of (i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the Merger,
(ii) any notice or other communication from any Governmental Entity in
connection with the Merger, (iii) any actions, suits, claims, investigations or
proceedings commenced or threatened in writing against, relating to or involving
or otherwise affecting the Company, Parent or their respective Subsidiaries that
relate to the consummation of the Merger and (iv) if there has been a material
change in its current or future business, financial condition or results of
operations or any event or condition that might reasonably be expected to cause
or result in any of its representations or warranties contained herein to be
untrue or inaccurate in any material respect or to materially delay or impede
the ability of either the Company or Parent, respectively, to consummate the
transactions contemplated by this Agreement or to fulfill their respective
obligations set forth herein.
Section 6.06 Public Disclosure. The Company and Parent shall agree on
the form and content of the initial joint press release regarding the
transactions contemplated hereby, and thereafter shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Law or the rules and regulations of the NYSE.
Section 6.07 Rule 145. Prior to the filing of the Joint Proxy Statement
with the SEC, the Company will provide to Parent a list of those persons who
are, in the Company's reasonable judgment, "affiliates" of the Company within
the meaning of Rule 145 promulgated under the Securities Act ("Rule 145"). The
Company shall provide such information and documents as Parent shall reasonably
request for purposes of reviewing such list and shall notify Parent in writing
regarding any change in the identity of its "affiliates" for purposes of Rule
145 prior to the Closing Date. The Company shall use its reasonable efforts to
deliver or cause to be delivered to Parent by the Effective Time from each
person identified as an "affiliate" for purposes of Rule 145, an executed
affiliate agreement, in substantially the form attached hereto as Exhibit B, by
which each such person agrees to comply with the applicable requirements of Rule
145 (an "Affiliate Agreement"). Parent will not be required to maintain the
effectiveness of the Registration Statement for the purpose of resales by
stockholders of the Company who may be affiliates of the Company pursuant to
Rule 145 and shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by such affiliates of the
Company pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Affiliate Agreements (provided that such
legends or stop transfer instructions shall be removed, two years after the
Closing Date, upon the request of any stockholder that is not then an Affiliate
of Parent).
Section 6.08 Section 16 Matters. Prior to the Effective Time: (i) the
Board of Directors of Parent, or an appropriate committee of non-employee
directors thereof, shall adopt a resolution consistent with the interpretive
guidance of the SEC so that the acquisition by any officer or director of the
Company who may become a covered person of Parent for purposes of Section 16
(together with the rules and regulations thereunder, "Section 16") of the
Exchange Act, of shares of Parent Common Stock or options to purchase shares of
Parent Common Stock pursuant to this Agreement and the Merger shall be an exempt
transaction for purposes of Section 16; and (ii) the
37
Board of Directors of the Company, or an appropriate committee of non-employee
directors thereof, shall adopt a resolution consistent with the interpretive
guidance of the SEC so that the disposition by any officer or director of the
Company, who is a covered person of the Company, for purposes of Section 16 of
shares of Company Common Stock or options to purchase shares of Company Common
Stock pursuant to this Agreement and the Merger shall be an exempt transaction
for purposes of Section 16.
Section 6.09 NYSE Listing. Parent shall use its reasonable best efforts
to cause the shares of Parent Common Stock to be issued (i) in the Merger, (ii)
upon the exercise of the outstanding Company Stock Options, as assumed and
converted, pursuant to Section 6.10(a) and (iii) pursuant to the New Stock
Purchase Rights as set forth in Section 6.10(b), to be approved for listing on
the NYSE, subject to official notice of issuance, prior to the Closing Date.
Section 6.10 Stock Plans.
(a) (i) At the Effective Time, each Company Stock Option,
whether vested or unvested, outstanding immediately prior to the Effective Time
shall be assumed by Parent and converted into an option to purchase shares of
Parent Common Stock in accordance with this Section 6.10(a). Each Company Stock
Option as so assumed and converted shall continue to have, and be subject to,
the same terms and conditions as set forth in the applicable Company Stock Plan
and any agreements thereunder immediately prior to the Effective Time, except
that, as of the Effective Time, (i) each Company Stock Option as so assumed and
converted shall be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were subject to such Company Stock Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounded down to the nearest whole number
of shares of Parent Common Stock, and (ii) the per share exercise price for the
shares of Parent Common Stock subject to such Company Stock Option as so assumed
and converted shall be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock of such Company Stock Option immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. It is intended that Company Stock Options assumed and converted into
options to acquire Parent Common Stock in accordance with the foregoing shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent such Company Stock Options qualified as
incentive stock options immediately prior to the Effective Time and that the
assumption and conversion be consistent with Section 424(a) of the Code and the
treasury regulations thereunder, and, if reasonably practicable, the provisions
of this Section 6.10 shall be applied consistent with such intent.
(ii) As soon as practicable after the Effective Time,
Parent shall deliver to the participants in Company Stock Plans appropriate
notice setting forth such participants' rights pursuant thereto and the grants
pursuant to Company Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 6.10 after
giving effect to the Merger).
(iii) The Board of Directors of the Company (or
appropriate committee thereof) shall, prior to or as of the Effective Time, take
all necessary actions, if any, pursuant to and in accordance with the terms of
the Company Stock Plans and the instruments evidencing Company Stock Options, to
provide for the assumption and conversion of Company Stock Options into options
to acquire Parent Common Stock in accordance with this Section 6.10 without the
consent of the holders of the Company Stock Options.
38
(b) Prior to the Effective Time, the Company's Board of
Directors (or, if appropriate, any committee thereof) and Parent's Board of
Directors (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide that, effective at
the Effective Time, each right to purchase shares of Company Common Stock
outstanding immediately prior to the Effective Time (a "Company Stock Purchase
Right") under the Company Stock Purchase Plan shall be assumed by Parent and
shall continue in effect on the same terms and conditions as in effect
immediately prior to the Effective Time (subject to the adjustments in this
Section 6.10(b)), and each such Company Stock Purchase Right shall be converted
automatically into a right to purchase shares of Parent Common Stock (a "New
Stock Purchase Right"). Each New Stock Purchase Right shall entitle the holder
thereof to purchase the number of shares of Parent Common Stock determined under
the terms and conditions of the Company Stock Purchase Plan, as provided for
herein, at the per share exercise price determined as provided below. Effective
at the Effective Time, Parent shall assume the Company Stock Purchase Plan,
shall amend the Company Stock Purchase Plan to substitute references to Parent
Common Stock for references to Company Common Stock therein and shall continue
the Company Stock Purchase Plan with respect to the New Stock Purchase Rights;
provided, however, that Parent shall reserve the right to terminate the Company
Stock Purchase Plan upon the exercise or other termination of all New Stock
Purchase Rights in accordance with the terms of the Company Stock Purchase Plan.
The per share exercise price for a New Stock Purchase Right shall be determined
under the terms of the Company Stock Purchase Plan, provided that the fair
market value of the "Stock" (as defined in the Company Stock Purchase Plan) on
any day prior to the Closing Date shall equal the per share fair market value of
Company Common Stock on such date, divided by the Exchange Ratio, rounded up to
the nearest whole cent; provided, further, that the fair market value of the
"Stock" (as defined in the Company Stock Purchase Plan) on any date on or after
the Closing Date shall mean the fair market value of Parent Common Stock on such
date. The adjustment provided herein with respect to any Company Stock Purchase
Right shall be, and is intended to be, effective in a manner which is consistent
with Sections 423 and 424(a) of the Code and the treasury regulations
thereunder, and shall provide that the excess (if any) of the aggregate fair
market value of the shares of Parent Common Stock over the aggregate exercise
price for the New Stock Purchase Right (resulting from the assumption and
conversion of such Company Stock Purchase Right immediately after the Effective
Time) shall be no greater than the excess (if any) of the aggregate fair market
value of the shares of Company Common Stock over the aggregate exercise price
for such Company Stock Purchase Right (immediately prior to the Effective Time),
and shall provide that such New Stock Purchase Right shall not give the holder
more favorable benefits than such holder had with respect to the Company Stock
Purchase Right. At the Effective Time, the number of shares of Parent Common
Stock subject to a New Stock Purchase Right resulting from the assumption and
conversion of a Company Stock Purchase Right shall be determined under the terms
of the Company Stock Purchase Plan (as so amended); provided, however, that the
maximum number of shares of Parent Common Stock subject to such New Stock
Purchase Right shall equal the maximum number of shares of Company Common Stock
subject to the Company Stock Purchase Right, multiplied by the Exchange Ratio,
rounded down to the nearest whole share. Except as provided in this Section
6.10(b), after the Effective Time, each New Stock Purchase Right shall be
exercisable upon the same terms and conditions as were applicable to the related
Company Stock Purchase Right immediately prior to the Effective Time (except
that with regard to such New Stock Purchase Right, any references to the Company
shall be deemed, as appropriate, to mean Parent). Parent shall take all action
necessary, on or prior to the Effective Time, to authorize and reserve a number
of shares of Parent Common Stock sufficient for issuance upon the exercise of
New Stock Purchase Rights as contemplated by this Section.
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(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery under Company Stock Plans and the Company Stock Purchase Plan in
accordance with this Section 6.10. As soon as practicable after the Effective
Time, Parent shall file a registration statement on Form S-8 (or any successor
or other appropriate forms), or another appropriate form with respect to the
shares of Parent Common Stock subject to the Company Stock Options and New Stock
Purchase Rights, and shall use all reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
Section 6.11 Indemnification.
(a) From and after the Effective Time, Parent agrees that it
will indemnify and hold harmless each present and former director and officer of
the Company and its Subsidiaries (the "Indemnified Parties"), against any costs
or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, Liabilities or amounts paid in settlement (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 any act or omission in their capacity as a director or
officer occurring at or prior to the Effective Time (including for acts and
omissions occurring in connection with the approval of this Agreement ant the
consummation of the transactions contemplated hereby), whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent
permitted under Delaware Law (and Parent shall also advance expenses as incurred
to the fullest extent permitted under applicable Law, provided that, if required
by Law, the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification).
(b) For six years from the Effective Time, Parent shall cause
to be maintained in effect for the benefit of the Company's current directors
and officers an insurance and indemnification policy that provides coverage for
acts or omissions occurring prior to the Effective Time (the "D&O Insurance")
covering each such person currently covered by the officers' and directors'
liability insurance policies of the Company on terms with respect to coverage
and in amounts no less favorable than those of the Company's policies in effect
on the date hereof with the same or comparable quality insurance carriers;
provided, however, that Parent shall not be required to pay an annual premium
for the D&O Insurance in excess of 300% of the premium for the 2004 fiscal year
(the "Maximum Premium"); provided, further, if such D&O Insurance coverage
cannot be obtained at all, or can only be obtained at an annual premium in
excess of the Maximum Premium, Parent shall obtain the most advantageous
policies of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Premium.
(c) The provisions of this Section 6.11 are intended to be in
addition to the rights otherwise available to the current and former officers
and directors of the Company by Law, charter, by-law or agreement. Parent agrees
to honor all indemnification agreements entered into by the Company or any of
its Subsidiaries. In the event that Parent or its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all its properties and assets to any
person, then, and in each such case, Parent shall cause proper provisions to be
made so that the successors and assigns of Parent assume the obligations set
forth in this Section 6.11. The obligations of Parent under this Section 6.11
shall not be terminated or modified in such a manner as to adversely affect any
indemnitee to whom this Section 6.11 applies
40
without the express written consent of such affected indemnitee (it being
expressly agreed that the indemnitees to whom this Section 6.11 applies shall be
third party beneficiaries of this Section 6.11).
Section 6.12 Letter of the Company's Accountants. The Company shall use
its reasonable efforts to cause to be delivered to Parent a letter of Ernst &
Young LLP, the Company's independent auditors, dated a date within two Business
Days before the date on which the Registration Statement shall become effective
and addressed to Parent, in form reasonably satisfactory to Parent and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement. In connection with Parent's efforts to obtain such letter, if
requested by Ernst & Young LLP, the Company shall provide a representation
letter to Ernst & Young LLP complying with SAS 72, if then required.
Section 6.13 Letter of Parent's Accountants. Parent shall use its
reasonable efforts to cause to be delivered to the Company a letter of Ernst &
Young LLP, Parent's independent auditors, dated a date within two Business Days
before the date on which the Registration Statement shall become effective and
addressed to the Company, in form reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement. In connection with the Company's efforts to obtain such
letter, if requested by Ernst & Young LLP, Parent shall provide a representation
letter to Ernst & Young LLP complying with the SAS 72, if then required.
Section 6.14 Governance Matters.
(a) As of the Effective Time, Parent shall take all requisite
action such that (i) the Board of Directors of Parent shall consist of 10
members, including John F. Lauletta (who shall be Chairman), Merrill A. Miller,
Jr., four members named by the Company prior to the mailing of the Joint Proxy
Statement (together with John F. Lauletta, the "Company Designated Directors")
and four members named by Parent prior to the mailing of the Joint Proxy
Statement (together with Merrill A. Miller, Jr., the "Parent Designated
Directors") until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be, and
(ii) John F. Lauletta, one Company Designated Director and one Parent Designated
Director shall be placed in the class with a term expiring in 2005, Merrill A.
Miller, Jr., one Company Designated Director and one Parent Designated Director
shall be placed in the class with a term expiring in 2006 and two Company
Designated Directors and two Parent Designated Directors shall be placed in the
class with a term expiring in 2007. If any Company Designated Director or Parent
Designated Director shall be unable to serve as a director at the Effective
Time, the party which designated such individual shall designate another
individual, reasonably acceptable to the other party, to serve in such
individual's place. All designated directors other than Messrs. Lauletta and
Miller shall qualify as independent members of the Parent's Board of Directors
as determined in accordance with the rules of the NYSE.
(b) As of the Effective Time, Parent shall take all requisite
action such that the executive positions of Chairman of the Board, Chief
Executive Officer, and Chief Operating Officer of Parent shall be as set forth
on Schedule 1 hereto until the earlier of the resignation or removal. If any
officer set forth on or designated in accordance with Schedule 1 ceases to be a
full-time employee of either Parent or the Company, as applicable, at or before
the Effective Time, Parent and the Company will agree in writing upon another
person to serve in such person's stead.
41
(c) The Company and Parent agree that the Company Designated
Directors, the Parent Designated Directors and the individuals set forth on
Schedule 1 hereto shall be third party beneficiaries of this Section 6.14.
Section 6.15 State Takeover Statutes. If any state takeover statute or
state Law that purports to limit or restrict business combinations or the
ability to acquire or vote shares is or may become applicable to the Merger or
the other transactions contemplated by this Agreement, each of the Company and
its Board of Directors and the Parent and its Board of Directors will grant such
approvals and take such other actions as are necessary so that such transactions
may be consummated as promptly and practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of such statute or Law on
this Agreement and such transactions.
Section 6.16 Tax-Free Reorganization Treatment.
(a) The Company and Parent shall use their reasonable best
efforts, and shall cause their respective Subsidiaries to use their reasonable
best efforts, to take or cause to be taken any action necessary for the Merger
to qualify as a reorganization within the meaning of Section 368(a) of the Code.
Neither the Company nor Parent shall, nor shall they permit any of their
respective Subsidiaries to, take or cause to be taken any action that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(b) This Agreement is intended to constitute, and the parties
hereto hereby adopt this Agreement as, a "plan of reorganization" within the
meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). Each of the
Company and Parent shall report the Merger as a reorganization within the
meaning of Section 368(a) of the Code, unless otherwise required pursuant to a
"determination" within the meaning of Section 1313(a) of the Code.
(c) The parties hereto shall cooperate and use their
reasonable efforts in order for the Company to obtain the opinion of Latham &
Watkins LLP described in Section 7.02(c) and for Parent to obtain the opinion of
Vinson & Elkins L.L.P. described in Section 7.03(c). In connection therewith,
Parent and the Company shall deliver to Latham & Watkins LLP and Vinson & Elkins
L.L.P. representation letters, dated and executed as of the dates of such
opinions, in substantially the form attached to this Agreement as Exhibit C and
Exhibit D respectively.
ARTICLE VII.
CONDITIONS TO MERGER
Section 7.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction or waiver prior to the Closing Date
of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval and
Parent Stockholder Approval shall have been obtained.
(b) Regulatory Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) Approvals. Other than the filings provided for by Section
1.02 and Section 7.01(b), all authorizations, consents, orders or approvals of,
or declarations or filings with, or
42
expirations of waiting periods imposed by, any Governmental Entity the failure
of which to file, obtain or occur is reasonably likely to have a Company
Material Adverse Effect or a Parent Material Adverse Effect shall have been
filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity or federal, state
or foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Order or statute, rule, regulation which is
in effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(f) NYSE. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(g) Litigation. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity, in each case that has a
reasonable likelihood of success, (i) challenging the acquisition by Parent of
any Company Common Stock, seeking to restrain or prohibit the consummation of
the Merger or any other transaction contemplated hereby or seeking to obtain
from the Company or Parent any damages that are material in relation to the
Company or Parent, (ii) seeking to prohibit or limit the ownership or operation
by the Company, Parent or any of their respective subsidiaries of any portion of
the business or assets of the Company, Parent or any of their respective
Subsidiaries, or to compel the Company, Parent or any of their respective
Subsidiaries to dispose of or hold separate any portion of the business or
assets of the Company, Parent or any of their respective Subsidiaries, as a
result of the Merger or any other transaction contemplated hereby, and, in each
case, if such business or assets relate to the Company or any of its
Subsidiaries, such business or assets are material to the financial condition,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole, and if such business or assets relate to Parent or any of its
Subsidiaries, such business or assets are material to the financial condition,
results of operations or prospects of Parent and its Subsidiaries, taken as a
whole, (iii) seeking to impose limitations on the ability of Parent to acquire
or hold, or exercise full rights of ownership of, any shares of Company Common
Stock, including the right to vote the Company Common Stock purchased by it on
all matters properly presented to the stockholders of the Company, (iv) seeking
to prohibit Parent or any of its Subsidiaries from effectively controlling in
any material respect the business or operations of the Company and its
Subsidiaries or (v) which otherwise is reasonably likely to have a Company
Material Adverse Effect or a Parent Material Adverse Effect.
Section 7.02 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived in writing
exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement (except for the representations
and warranties contained in Sections 4.02 and 4.03(a)) shall be true and correct
(without giving effect to any limitation as to "materiality" or "Parent Material
Adverse Effect" set forth therein) at and as of the date of this Agreement and
at and as of the Closing Date as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date), except where the failure of such representations and warranties to be
true and correct (without giving effect to any limitation
43
as to "materiality" or "Parent Material Adverse Effect" set forth therein),
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect and the representations and
warranties of Parent contained in Sections 4.02 and 4.03(a) shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date). The Company shall have received a certificate signed on behalf of Parent
by an executive officer of Parent to such effect.
(b) Performance of Obligations of Parent. Parent 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 received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
(c) Tax Opinion. The Company shall have received a written
opinion from Latham & Watkins LLP, counsel to the Company, to the effect that,
for federal income Tax purposes, the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
Latham & Watkins LLP shall receive and may rely upon representations contained
in certificates of Parent and the Company substantially in the forms of Exhibits
C and D attached hereto. The opinion referred to in this Section 7.02(c) shall
not be waivable after receipt of the Company Stockholder Approval, unless
further approval from the Company's stockholders is obtained with appropriate
disclosure.
(d) Absence of Parent Material Adverse Effect. Since the date
of this Agreement, there shall not have been any state of facts, event, change,
effect, development, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Parent Material
Adverse Effect.
Section 7.03 Additional Conditions to Obligations of Parent. The
obligation of Parent to effect the Merger is subject to the satisfaction of each
of the following conditions, any of which may be waived, in writing, exclusively
by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (except for the
representations and warranties contained in Sections 3.02 and 3.03(a)) shall be
true and correct (without giving effect to any limitation as to "materiality" or
"Company Material Adverse Effect" set forth therein) at and as of the date of
this Agreement and at and as of the Closing Date as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such earlier date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any limitation as to
"materiality" or "Company Material Adverse Effect" set forth therein),
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect and the representations and
warranties of the Company contained in Sections 3.02 and 3.03(a) shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date). Parent shall have received a certificate signed on behalf of Parent by an
executive officer of the Company to such effect.
(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
44
Agreement at or prior to the Closing Date; and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(c) Tax Opinion. Parent shall have received a written opinion
from Vinson & Elkins L.L.P., counsel to Parent, to the effect that, for federal
income Tax purposes, the Merger will be qualify as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, Vinson &
Elkins L.L.P. shall receive and may rely upon representations contained in
certificates of Parent and the Company substantially in the forms of Exhibits C
and D attached hereto. The opinion referred to in this Section 7.03(c) shall not
be waivable after receipt of the Parent Stockholder Approval, unless further
approval from Parent's stockholders is obtained with appropriate disclosure.
(d) Absence of Company Material Adverse Effect. Since the date
of this Agreement, there shall not have been any state of facts, event, change,
effect, development, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect.
ARTICLE VIII.
TERMINATION AND AMENDMENT
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(j),
by written notice by the terminating party to the other party), whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company or the stockholders of Parent:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger is not
consummated on or before March 15, 2005; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or results in, the failure of the Merger to occur on or before
such date;
(c) by either the Company or Parent if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action, in
each case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger;
(d) by either the Company or Parent, if, (i) at the Company
Stockholders' Meeting (including any adjournment or postponement thereof), the
Company Stockholder Approval shall not have been obtained; or (ii) at the Parent
Stockholders' Meeting (including any adjournment or postponement thereof), the
Parent Stockholder Approval shall not have been obtained;
(e) by the Company, if (i) the Board of Directors of Parent
shall have withdrawn or modified the Parent Recommendation; or (ii) the Board of
Directors of Parent shall have recommended to the stockholders of Parent an
Acquisition Transaction;
45
(f) by Parent, if (i) the Board of Directors of the Company
shall have withdrawn or modified the Company Recommendation; or (ii) the Board
of Directors of the Company shall have recommended to the stockholders of the
Company an Acquisition Transaction;
(g) by the Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement, which breach (i) causes the conditions set forth in Sections
7.02(a) or 7.02(b) not to be satisfied, and (ii) shall not have been cured
within 20 Business Days following receipt by Parent of written notice of such
breach;
(h) by Parent, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, which breach (i) causes the conditions set forth in
Sections 7.03(a) or 7.03(b) not to be satisfied, and (ii) shall not have been
cured within 20 Business Days following receipt by the Company of written notice
of such breach;
(i) by Parent, if, prior to receipt of the Parent Stockholder
Approval, (i) Parent receives an Acquisition Proposal that is a Superior
Proposal, (ii) the Board of Directors of Parent by affirmative vote of a
majority of all of its members resolves to accept such Superior Proposal, (iii)
Parent shall have given the Company three Business Days' prior written notice of
its intention to terminate pursuant to this provision, (iv) such Acquisition
Proposal continues to constitute a Superior Proposal after taking into account
any revised proposal made by the Company during such three Business Day period
and (v) the Board of Directors of Parent concludes in good faith by affirmative
vote of a majority of all of its members, following receipt of advice of its
outside legal counsel, that the failure to accept such Superior Proposal would
result in a breach of its fiduciary duties under applicable Law; provided,
however, that such termination shall not be effective until such time as payment
of the Parent Termination Fee required by Section 8.03(c)(i) shall have been
made by Parent; provided, further, that Parent's right to terminate this
Agreement under this Section 8.01(i) shall not be available if Parent breached
Section 6.01 in any material respect in connection with such Superior Proposal;
or
(j) by the Company, if, prior to receipt of the Company
Stockholder Approval, (i) the Company receives an Acquisition Proposal that is a
Superior Proposal, (ii) the Board of Directors of the Company by affirmative
vote of a majority of all of its members resolves to accept such Superior
Proposal, (iii) the Company shall have given Parent three Business Days' prior
written notice of its intention to terminate pursuant to this provision, (iv)
such Acquisition Proposal continues to constitute a Superior Proposal after
taking into account any revised proposal made by Parent during such three
Business Day period and (v) the Board of Directors of the Company concludes in
good faith by affirmative vote of a majority of all of its members, following
receipt of advice of its outside legal counsel, that the failure to accept such
Superior Proposal would result in a breach of its fiduciary duties under
applicable Law; provided, however, that such termination shall not be effective
until such time as payment of the Company Termination Fee required by Section
8.03(e)(i) shall have been made by the Company; provided, further, that the
Company's right to terminate this Agreement under this Section 8.01(j) shall not
be available if the Company breached Section 6.01 in any material respect in
connection with such Superior Proposal.
Section 8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of the Company or
Parent or their respective officers, directors,
46
stockholders or Affiliates, except as set forth in Sections 6.03, 8.02, 8.03 and
9.06; provided that the provisions of the Confidentiality Agreement and Sections
6.03, 8.02, 8.03, 9.06, 9.07, 9.08 and 9.09 of this Agreement shall remain in
full force and effect and survive any termination of this Agreement. Nothing in
this Section 8.02 shall relieve any party from liability for any knowing or
willful misrepresentation or inaccuracy in any of its representations or
warranties contained in this Agreement or any knowing or willful breach of any
of its covenants or agreements contained in this Agreement.
Section 8.03 Fees and Expenses.
(a) Except as set forth in this Section 8.03, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated, except that each of the Company and Parent
will bear and pay one-half of the costs and expenses incurred in connection with
the filing, printing and mailing of the Joint Proxy Statement (including SEC
filing fees) or with any other filings required to be made with a Governmental
Entity in connection with this Agreement.
(b) Parent shall pay the Company up to $5,000,000 as
reimbursement for expenses of the Company actually incurred relating to the
transactions contemplated by this Agreement prior to termination (including, but
not limited to, reasonable fees and expenses of the Company's Representatives,
but excluding any discretionary fees paid to such Representatives), upon the
termination of this Agreement by the Company pursuant to Section 8.01(g).
(c) Upon the earlier to occur of the events described in (i)
or all the events described in (ii) below:
(i) the termination of this Agreement pursuant to (A)
Section 8.01(e) or (B) Section 8.01(i); or
(ii) if (1) after the date of this Agreement, any
person has made an Acquisition Proposal that has been publicly
disclosed or any person publicly announces an intention to make an
Acquisition Proposal, in each case, involving Parent which has not been
publicly withdrawn, (2) this Agreement is terminated pursuant to
Section 8.01(d)(ii), and (3) (A) within 12 months after the date of
such termination, Parent enters into an agreement for any Acquisition
Transaction and such Acquisition Transaction is consummated (whether
before or after such 12 month period) or (B) within 12 months after the
date of such termination, any Acquisition Transaction involving Parent
is consummated (for the purposes of this Section 8.03(c)(ii)(3), the
term "Acquisition Transaction" shall have the meaning assigned to such
term in Section 9.03, except that all references to "20%" shall be
changed to "50%");
Parent shall pay to the Company a fee of $75,000,000 (the "Parent Termination
Fee").
Parent's payment of the Parent Termination Fee pursuant to this
subsection shall be the sole and exclusive remedy of the Company against Parent
and any of its Subsidiaries and their respective Representatives with respect to
the occurrences giving rise to such payment. Notwithstanding the foregoing
sentence, nothing in this Section 8.03(c) shall relieve Parent from
47
liability for any knowing or willful misrepresentation or inaccuracy in any of
its representations or warranties contained in this Agreement or any knowing or
willful breach of any of its covenants or agreements contained in this
Agreement.
(d) The Company shall pay Parent up to $5,000,000 as
reimbursement for expenses of Parent actually incurred relating to the
transactions contemplated by this Agreement prior to termination (including, but
not limited to, reasonable fees and expenses of Parent's Representatives, but
excluding any discretionary fees paid to such Representatives), upon the
termination of this Agreement by Parent pursuant to Section 8.01(h).
(e) Upon the earlier to occur of the events described in (i)
or all the events described in (ii) below:
(i) the termination of this Agreement pursuant to (A)
Section 8.01(f) or (B) Section 8.01(j); or
(ii) if (1) after the date of this Agreement, any
person has made an Acquisition Proposal that has been publicly
disclosed or any person publicly announces an intention to make an
Acquisition Proposal, in each case, involving the Company which has not
been publicly withdrawn, (2) this Agreement is terminated pursuant to
Section 8.01(d)(i), and (3) (A) within 12 months after the date of such
termination, the Company enters into an agreement for any Acquisition
Transaction and such Acquisition Transaction is thereafter consummated
(whether before or after such 12 month period) or (B) within 12 months
after the date of such termination, any Acquisition Transaction
involving the Company is consummated (for the purposes of this Section
8.03(e)(ii)(3), the term "Acquisition Transaction" shall have the
meaning assigned to such term in Section 9.03, except that all
references to "20%" shall be changed to "50%");
the Company shall pay to Parent a fee of $75,000,000 (the "Company Termination
Fee").
The Company's payment of the Company Termination Fee pursuant to this
subsection shall be the sole and exclusive remedy of Parent against the Company
and any of its Subsidiaries and their respective Representatives with respect to
the occurrences giving rise to such payment. Notwithstanding the foregoing
sentence, nothing in this Section 8.03(e) shall relieve the Company from
liability for any knowing or willful misrepresentation or inaccuracy in any of
its representations or warranties contained in this Agreement or any knowing or
willful breach of any of its covenants or agreements contained in this
Agreement.
(f) The expenses and fees, if applicable, payable pursuant to
Sections 8.03(b), 8.03(c)(i)(A), 8.03(c)(ii), 8.03(d), 8.03(e)(i)(A) or
8.03(e)(ii) shall be paid within one Business Day after the first to occur of
all of the events described in Sections 8.03(b), 8.03(c)(i)(A), 8.03(c)(ii),
8.03(d), 8.03(e)(i)(A) or 8.03(e)(ii). The fees, if applicable, payable pursuant
to Sections 8.03(c)(i)(B) and 8.03(e)(i)(B) shall be paid concurrently with the
termination of this Agreement. To the extent any expenses and fees shall become
payable to a party hereunder, such expense and fees shall be paid by transfer of
same-day funds to an account designated by the receiving party.
48
(g) The parties each agree that the agreements contained in
Section 8.03 are integral parts of the transaction contemplated by this
Agreement and that, without these agreements, neither the Company nor Parent
would enter into this Agreement. Accordingly, if a party fails to promptly pay
the other party an amount due under this Section 8.03, such failing party shall
pay the costs and expenses of such other party (including reasonable legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or legal action, taken to collect payment, together with interest on the amount
of the payment at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
Section 8.04 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company or the stockholders of Parent,
but, after any such approval, no amendment shall be made which by Law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.05 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE IX.
MISCELLANEOUS
Section 9.01 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
Section 9.02 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent, to
National-Oilwell, Inc.
10000 Richmond Avenue
Houston, Texas 77042
Attn: General Counsel
Telecopy: (713) 346-7995
49
with a copy to:
Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002
Attn: James R. Prince, Esq.
Thomas P. Mason, Esq.
Telecopy: (713) 758-2346
(b) if to the Company, to
Varco International, Inc.
2000 W. Sam Houston Parkway South
Suite 1700
Houston, Texas 77042
Attn: Vice President, Secretary and General Counsel
Telecopy: (281) 953-2404
with a copy to:
Latham & Watkins LLP
650 Town Center Drive, Suite 2000
Costa Mesa, CA 92626-1925
Attn: Patrick T. Seaver, Esq.
R. Scott Shean, Esq.
Telecopy: (714) 755-8290
Section 9.03 Definitions. (a) For purposes of this Agreement:
"Acquisition Proposal" means any contract, offer or proposal (whether
or not in writing and whether or not delivered to the stockholders of the
Company or Parent, as the case may be) with respect to a potential or proposed
Acquisition Transaction.
"Acquisition Transaction" with respect to either the Company or Parent,
means any (a) merger, consolidation, business combination, or similar
transaction involving such party or its Subsidiaries (which Subsidiaries
collectively represent 20% or more of the consolidated revenues, net income or
assets of such party and its Subsidiaries), (b) sale, lease or other disposition
directly or indirectly by merger, consolidation, business combination, share
exchange, joint venture, or otherwise of any business or assets of such party or
its Subsidiaries representing 20% or more of the consolidated revenues, net
income or assets of such party and its Subsidiaries, (c) issuance, sale, or
other disposition of (including by way of merger, consolidation, business
combination, share exchange, joint venture, or any similar transaction)
securities (or options, rights or warrants to purchase, or securities
convertible into or exchangeable for, such securities) representing 20% or more
of the voting power of such party, (d) transaction in which any Person shall
acquire beneficial ownership, or the right to acquire beneficial ownership or
any group shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 20% or more of the outstanding
50
voting capital stock of such party or (e) any combination of the foregoing (in
each case, other than the Merger).
An "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"Business Day" means any day, other than (i) a Saturday or a Sunday or
(ii) a day on which banking and savings and loan institutions are authorized or
required by Law to be closed.
"Company Material Adverse Effect" means a Material Adverse Effect on
the Company.
"Environmental Law" means any federal, state, local or foreign Law,
order, decree, permit, authorization, opinion, common law or agency requirement
relating to: (A) the protection, preservation, investigation, remediation or
restoration of environmental quality, health and safety, or natural resources,
or (B) noise, odor, wetlands, pollution, contamination or any injury or threat
of injury to persons or property.
"Environmental Permits" means any material permit, license,
authorization or approval required under applicable Environmental Law.
"Hazardous Substance" means: (A) any substance that is listed,
classified or regulated pursuant to or that could result in liability under any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
"knowledge" of a person, means, with respect to any matter in question,
the actual knowledge of any executive officer of such person after inquiry of
their respective direct reports.
"Law" means any statute, law (including common law), ordinance, rule or
regulation.
"Liabilities" mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Liens" means any mortgage, deed of trust, deed to secure debt, title
retention agreement, pledge, lien, encumbrance, security interest, conditional
or installment sale agreement, charge or other claims of third parties of any
kind.
"Material Adverse Effect" on a person means a material adverse effect
on (i) the business, assets, liabilities or obligations, financial condition or
results of operations of such person and its Subsidiaries, taken as a whole,
(ii) the ability of such person to perform its obligations under this Agreement
or (iii) the ability of such person to consummate the Merger and the other
transactions to be performed or consummated by such person hereunder, other than
in the case of (i), (ii) or (iii) any state of facts, event, change, effect,
development, condition or occurrence relating to (A) the economy in general in
the U.S., or in any other country in which such person or any of its
51
subsidiaries has significant operations or sales, which events, changes,
effects, developments, conditions or occurrences do not disproportionately
affect such person relative to the other participants in the oil field services
industry, (B) the oilfield services industry in general in the U.S., or in any
other country in which such person or any of its subsidiaries has significant
operations or sales, which events, changes, effects, developments, conditions or
occurrences do not disproportionately affect such person relative to the other
participants in the oilfield services industry, or (C) any change in such
person's stock price or trading volume, in and of itself (for the avoidance of
doubt this clause (C) shall not preclude either party from asserting that the
underlying cause of any such change in stock price or trading volume is a
Material Adverse Effect).
"Parent Material Adverse Effect" means a Material Adverse Effect on
Parent.
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
"Superior Proposal" with respect to either the Company or Parent, means
any bona fide written proposal made by a third party to acquire substantially
all the equity securities or assets of such person (including substantially all
of the assets of such person's Subsidiaries), pursuant to a tender or exchange
offer, a merger, a consolidation, a liquidation or dissolution, a
recapitalization, a sale of all or substantially all of its and its
Subsidiaries' assets or otherwise, on terms which the Board of Directors of such
person determines in good faith by affirmative vote of a majority of all of its
members, after consultation with such person's outside legal counsel and
financial advisors and after taking into account all material legal, financial,
strategic, regulatory and other aspects of such proposal and the party making
such proposal, (i) to be more favorable from a financial point of view to the
holders of such person's Common Stock than the Merger, taking into account all
the terms and conditions of this Agreement (including any proposal by the other
party to this Agreement to amend the terms of the Merger) and (ii) is reasonably
likely to be consummated.
"Tax" or, collectively, "Taxes," means any and all federal, state,
local or foreign gross receipts, income, profits, sales, use, value added, ad
valorem, transfer, gains, franchise, withholding, payroll, recapture,
employment, excise, unemployment, social security, license, occupation, business
organization, stamp, environmental, property, severance, premium, custom duties,
capital stock, disability, registration, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement, including any schedule or attachment
thereto, and including any amendment thereof, relating to Taxes or filed or to
be filed with any Tax authority.
52
(b) The following are defined elsewhere in this Agreement, as indicated
below:
<Table>
Affiliate.................................................................... Section 9.03
Affiliate Agreement........................................................... Section 6.07
Agreement..................................................................... Preamble
Antitrust Laws................................................................ Section 6.05(b)
Bankruptcy and Equity Exception............................................... Section 3.03(a)
Certificate of Merger......................................................... Section 1.02
Certificates.................................................................. Section 2.02(b)
Change of Recommendation...................................................... Section 6.01(e)
Closing....................................................................... Section 1.03
Closing Date.................................................................. Section 1.03
Code.......................................................................... Preamble
Company....................................................................... Preamble
Company Balance Sheet......................................................... Section 3.04(b)
Company Common Stock.......................................................... Preamble
Company Designated Directors.................................................. Section 6.14(a)
Company Disclosure Letter..................................................... Article III
Company Employee Plans........................................................ Section 3.13(a)
Company Material Contract..................................................... Section 3.10(a)
Company Material Leases....................................................... Section 3.08(a)
Company Intellectual Property................................................. Section 3.09
Company Preferred Stock....................................................... Section 3.02(a)
Company Recommendation........................................................ Section 3.03(a)
Company Rights................................................................ Section 2.03
Company SEC Reports........................................................... Section 3.04(a)
Company Stock Options......................................................... Section 5.01(c)
Company Stock Plans........................................................... Section 3.02(a)
Company Stock Purchase Plan................................................... Section 3.02(a)
Company Stock Purchase Right.................................................. Section 6.10(b)
Company Stockholder Approval.................................................. Section 3.03(a)
Company Stockholders' Meeting................................................. Section 3.16
Company Termination Fee....................................................... Section 8.03(e)
Confidentiality Agreement..................................................... Section 6.01(a)
Costs......................................................................... Section 6.11(a)
D&O Insurance................................................................. Section 6.11(b)
DGCL.......................................................................... Preamble
Effective Time................................................................ Section 1.02
ERISA......................................................................... Section 3.13(a)
Exchange Act.................................................................. Section 3.03(c)
Exchange Agent................................................................ Section 2.02(a)
Exchange Fund................................................................. Section 2.02(a)
Exchange Ratio................................................................ Section 2.01(b)
Governmental Entity........................................................... Section 3.03(c)
HSR Act....................................................................... Section 3.03(c)
Indemnified Parties........................................................... Section 6.11(a)
IRS........................................................................... Section 3.07(c)
</Table>
53
<Table>
Joint Proxy Statement......................................................... Section 3.16
Maximum Premium .............................................................. Section 6.11(b)
Merger........................................................................ Preamble
New Stock Purchase Right...................................................... Section 6.10(b)
NYSE.......................................................................... Section 2.02(e)
Order......................................................................... Section 6.05(b)
Parent........................................................................ Preamble
Parent Balance Sheet.......................................................... Section 4.04(b)
Parent Common Stock........................................................... Preamble
Parent Designated Directors................................................... Section 6.14(a)
Parent Disclosure Letter...................................................... Article IV
Parent Employee Plans......................................................... Section 4.13(a)
Parent Intellectual Property.................................................. Section 4.09
Parent Material Contract...................................................... Section 4.10(a)
Parent Material Leases........................................................ Section 4.08(a)
Parent Preferred Stock........................................................ Section 4.02(a)
Parent Recommendation......................................................... Section 4.03(a)
Parent SEC Reports............................................................ Section 4.04(a)
Parent Stockholder Approval................................................... Section 4.03(a)
Parent Stockholders' Meeting.................................................. Section 3.16
Parent Stock Options.......................................................... Section 5.02(c)
Parent Stock Plans............................................................ Section 4.02(a)
Parent Termination Fee........................................................ Section 8.03(c)
Registration Statement........................................................ Section 3.16
Representatives............................................................... Section 6.01(a)
Rights Agreement.............................................................. Section 2.03
Rule 145...................................................................... Section 6.07
Sarbanes-Oxley Act............................................................ Section 3.23
SEC........................................................................... Section 3.03(c)
Section 16.................................................................... Section 6.08
Securities Act................................................................ Section 3.04(a)
Surviving Corporation......................................................... Section 1.01
</Table>
Section 9.04 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
August 11, 2004.
54
Section 9.05 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 9.06 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.11 and Section
6.14 are not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder; provided that the Confidentiality Agreement
shall remain in full force and effect until the Effective Time. Each party
hereto agrees that, except for the representations and warranties contained in
this Agreement, neither Parent nor the Company makes any other representations
or warranties, and each hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other representatives, with respect to the
execution and delivery of this Agreement, the documents and the instruments
referred to herein, or the transactions contemplated hereby or thereby,
notwithstanding the delivery or disclosure to the other or the other's
representatives of any documentation or other information with respect to any
one or more of the foregoing.
Section 9.07 Governing Law. This Agreement shall be governed and
construed in accordance with the Laws of the State of Delaware, without regard
to the Laws that might be applicable under conflicts of Laws principles.
Section 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other parties. 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 9.09 Enforcement; Waiver of Jury Trial.
(a) The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to the fullest extent
permitted by Law to an injunction or injunctions to prevent or restrain
breaches, violations, defaults or threatened breaches, violations or defaults of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in the Court of Chancery of Delaware in the State of Delaware, this
being in addition to any other remedy to which they are entitled at Law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of the state court located in the State of Delaware,
and that the Court of Chancery shall be the exclusive jurisdiction in the event
any dispute arises out of this Agreement or the Merger, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or the Merger in any court other than the
Court of Chancery of Delaware in the State of Delaware. Each of the parties
agrees that a final non-appealable judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner permitted by Law.
55
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.09(b).
56
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
NATIONAL-OILWELL, INC.
By: /s/ Merrill A. Miller
-----------------------------------
Name: Merrill A. Miller, Jr.
Title: Chairman of the Board and
Chief Executive Officer
VARCO INTERNATIONAL, INC.
By: /s/ John F. Lauletta
-----------------------------------
Name: John F. Lauletta
Title: Chairman of the Board and
Chief Executive Officer
EXECUTION COPY
SCHEDULE I
List of Corporate Executive Officers
<Table>
<Caption>
Name: Title:
- ---- -----
John F. Lauletta Chairman
Merrill A. Miller, Jr. President and Chief Executive Officer
Joseph C. Winkler Chief Operating Officer
</Table>