Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COMMUNICATIONS INSTRUMENTS, INC.,
RF ACQUISITION CORP.
AND
CORCOM, INC.
March 10, 1998
TABLE OF CONTENTS
Page
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ARTICLE I--THE MERGER................................................... 1
SECTION 1.01 The Merger.......................................... 1
SECTION 1.02 Effective Time; Closing............................. 2
SECTION 1.03 Effects of the Merger............................... 2
SECTION 1.04 Articles of Incorporation and By-Laws of the
Surviving Corporation........................ 2
SECTION 1.05 Directors........................................... 2
SECTION 1.06 Officers............................................ 2
SECTION 1.07 Conversion of Common Shares......................... 2
SECTION 1.08 Conversion of the Merger Sub Shares................. 3
SECTION 1.09 Company Option Plans................................ 3
SECTION 1.10 Shareholders' Meeting; Proxy Statement.............. 3
SECTION 1.11 Closing............................................. 4
ARTICLE II--DISSENTING SHARES; PAYMENT FOR SHARES....................... 4
SECTION 2.01 Dissenting Shares................................... 4
SECTION 2.02 Payment for Common Shares........................... 4
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 6
SECTION 3.01 Organization and Qualification; Subsidiaries........ 6
SECTION 3.02 Charter and By-Laws................................. 6
SECTION 3.03 Capitalization...................................... 6
SECTION 3.04 Authority Relative to this Agreement................ 7
SECTION 3.05 No Conflict; Required Filings and Consents.......... 7
SECTION 3.06 SEC Reports and Financial Statements................ 8
SECTION 3.07 Information......................................... 8
SECTION 3.08 State Takeover Statutes; Required Vote.............. 9
SECTION 3.09 Brokers............................................. 9
SECTION 3.10 Material Adverse Effect............................. 9
SECTION 3.11 Litigation.......................................... 9
SECTION 3.12 Absence of Certain Changes or Events................ 9
SECTION 3.13 Employee Benefit Plans..............................10
SECTION 3.14 Material Contracts and Other Agreements.............12
SECTION 3.15 Real Estate Leases..................................13
SECTION 3.16 Real Property.......................................13
SECTION 3.17 Compliance with Laws................................14
SECTION 3.18 Proprietary Rights..................................14
SECTION 3.19 No Undisclosed Liabilities..........................15
SECTION 3.20 Title to Personal Property..........................15
SECTION 3.21 Labor Relations.....................................15
SECTION 3.22 Taxes and Tax Returns...............................15
SECTION 3.23 Environmental Matters...............................16
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SECTION 3.24 Accounts Receivable.................................18
SECTION 3.25 Inventory...........................................18
SECTION 3.26 Product and Service Warranty........................18
SECTION 3.27 Opinion of Financial Advisor........................18
SECTION 3.28 Effective Time......................................18
ARTICLE IV--REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE MERGER SUB...................................19
SECTION 4.01 Organization and Qualification......................19
SECTION 4.02 Authority Relative to this Agreement................19
SECTION 4.03 No Conflict; Required Filings and Consents..........19
SECTION 4.04 Information.........................................20
SECTION 4.05 Ownership of Securities.............................20
SECTION 4.06 Financing...........................................20
SECTION 4.07 Equity Investment...................................20
ARTICLE V--COVENANTS....................................................21
SECTION 5.01 Conduct of Business of the Company..................21
SECTION 5.02 Access to Information...............................23
SECTION 5.03 Reasonable Best Efforts.............................23
SECTION 5.04 Consents............................................23
SECTION 5.05 Public Announcements................................24
SECTION 5.06 Indemnification.....................................24
SECTION 5.07 Notification of Certain Matters.....................24
SECTION 5.08 State Takeover Laws.................................25
SECTION 5.09 No Solicitation.....................................25
SECTION 5.10 Break-Up Fee; Expense Reimbursement.................26
ARTICLE VI--CONDITIONS TO CONSUMMATION OF THE MERGER....................26
SECTION 6.01 Conditions to Parties' Obligations..................26
SECTION 6.02 Conditions to the Parent's and the Merger Sub's
Obligation to Effect the Merger..............27
SECTION 6.03 Conditions to the Company's Obligation to
Effect the Merger............................28
SECTION 6.04 Satisfaction or Waiver of Conditions................28
ARTICLE VII--TERMINATION; AMENDMENTS; WAIVER............................29
SECTION 7.01 Termination.........................................29
SECTION 7.02 Effect of Termination...............................29
SECTION 7.03 Expense Reimbursement for Company...................30
SECTION 7.04 Amendment...........................................30
SECTION 7.05 Extension; Waiver...................................30
ARTICLE VIII--DEFINITIONS...............................................30
ARTICLE IX--MISCELLANEOUS...............................................33
SECTION 9.01 Non-Survival of Representations and Warranties......33
SECTION 9.02 Entire Agreement; Assignment........................33
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SECTION 9.03 Validity............................................33
SECTION 9.04 Notices.............................................33
SECTION 9.05 Governing Law.......................................34
SECTION 9.06 Descriptive Headings................................34
SECTION 9.07 Counterparts........................................34
SECTION 9.08 Parties in Interest.................................35
SECTION 9.09 Certain Definitions.................................35
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
March 10, 1998, is made by and among Communications Instruments, Inc., a North
Carolina corporation (the "Parent"), RF Acquisition Corp., an Illinois
corporation and a wholly-owned subsidiary of the Parent (the "Merger Sub"), and
Corcom, Inc., an Illinois corporation (the "Company"). Cross-references to the
defined terms used in this Agreement are set forth in Article VIII below.
WHEREAS, the Merger Sub is a corporation duly organized and validly
existing under the laws of the State of Illinois having authorized capital
shares consisting of 1,000 shares of common stock, $.01 par value per share
("Merger Sub Shares"), all of which are of one class and all of which are
entitled to vote, and all of which are issued and outstanding and owned by the
Parent.
WHEREAS, the Company is a corporation duly organized and validly
existing under the laws of the State of Illinois and having authorized capital
shares consisting of 10,000,000 shares of common stock, no par value per share
("Common Shares"), all of which are of one class and all of which are entitled
to vote, and of which 3,823,243 shares are issued and outstanding.
WHEREAS, the Parent desires to purchase all outstanding Common Shares
through the merger of the Merger Sub with and into the Company (the "Merger"),
with the Company surviving the Merger and the Merger Sub ceasing to exist (the
Company and the Merger Sub being hereinafter sometimes referred to as the
"Constituent Corporations" and the Company, following the effectiveness of the
Merger, being hereinafter sometimes referred to as the "Surviving Corporation"),
all upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Parent, the Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the Business Corporation Act of 1983 of the
State of Illinois (the "Illinois Act"), at the Effective Time (as defined in
Section 1.02) the Merger Sub shall be merged with and into the Company.
Following the Merger, the separate corporate existence of the Merger Sub shall
cease and the Company shall continue as the Surviving Corporation.
SECTION 1.02 Effective Time; Closing. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the Company
and the Merger Sub shall execute in the manner required by the Illinois Act and
deliver to the Secretary of State of the State of Illinois a duly executed and
verified Articles of Merger in accordance with Section 5/11.25 of the Illinois
Act, and the parties shall take such other and further actions as may be
required by law to make the Merger effective. The Merger shall become effective
when a certificate of merger (the "Certificate of Merger") is issued by the
Secretary of State of the State of Illinois. When used in this Agreement, the
term "Effective Time" shall mean the date and time at which the Certificate of
Merger is issued.
SECTION 1.03 Effects of the Merger. The Merger shall have the effects set
forth in Section 5/11.50 of the Illinois Act.
SECTION 1.04 Articles of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Articles of Incorporation of the Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 5.06 of this Agreement, the By-
Laws of the Merger Sub in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law.
SECTION 1.05 Directors. Subject to applicable law, the directors of the
Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 1.06 Officers. To the extent permitted under applicable law, the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 1.07 Conversion of Common Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each Common Share issued and outstanding immediately prior to the Effective Time
(other than any Common Shares held by the Parent, the Merger Sub, any wholly-
owned subsidiary of the Parent or the Merger Sub, in the treasury of the Company
or by any wholly-owned subsidiary of the Company, which Common Shares, by virtue
of the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto, and other than Dissenting Shares (as defined in Section 2.01))
shall be converted into the right to receive in cash an amount equal to the
Merger Price (as defined below), payable to the holder thereof, without interest
thereon, upon surrender of the certificate formerly representing such Common
Share. The "Merger Price" shall be an amount per Common Share equal to $13.00.
The "Aggregate Common Share Merger Price" shall be an amount equal to the Merger
Price multiplied by the number of Common Shares outstanding as of the Effective
Time. The "Aggregate Merger Price"
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shall be an amount equal to the sum of the Aggregate Common Share Merger Price
and the Option Payment (as defined in Section 1.09).
SECTION 1.08 Conversion of the Merger Sub Shares. At the Effective Time,
each Merger Sub Share issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid and
non-assessable share of common stock, no par value per share, of the Surviving
Corporation.
SECTION 1.09 Company Option Plans. The Company shall cause each
outstanding option to purchase Common Shares (each, an "Option") to be
cancelled, as of the Effective Time, at which time the Company will pay each
holder of an Option (whether or not such Option is then vested or exercisable)
an amount determined by multiplying (i) the excess, if any, of the Merger Price
over the applicable exercise price of such Option by (ii) the number of Common
Shares such holder could have purchased if such holder had exercised such Option
in full immediately prior to such time (without giving effect to any
antidilutive changes in the number of such Common Shares arising from the Merger
and assuming any unvested Options have vested) (the sum of all such payments,
the "Option Payment"). Prior to the Effective Time, the Company shall obtain
all consents necessary to give effect to the transaction described in the
foregoing sentence.
SECTION 1.10 Shareholders' Meeting; Proxy Statement.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Board, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting
of its shareholders (a "Shareholders' Meeting") as soon as reasonably
practicable following the date hereof for the purpose of considering and
taking action upon this Agreement;
(ii) prepare and file with the Securities and Exchange Commission
(the "SEC") a preliminary proxy statement relating to the Merger and this
Agreement and use its reasonable best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with the Parent, to respond
promptly to any comments made by the SEC with respect to the preliminary
proxy statement and cause a definitive proxy statement (the "Proxy
Statement") to be mailed to its shareholders and (y) to obtain the
necessary approvals of the Merger and this Agreement by its shareholders;
and
(iii) include in the Proxy Statement the recommendation of the
Board that shareholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
(b) The Parent agrees that it will vote, or cause to be voted, all of
the Common Shares then owned by it, the Merger Sub or any of its other
subsidiaries in favor of the approval of the Merger and the adoption of this
Agreement.
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SECTION 1.11 Closing. The closing of the Merger contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis in
Chicago, Illinois as soon as practicable after the satisfaction or waiver of all
of the conditions to the Merger contained in Article VI or at such other time
and place as the Parent, the Merger Sub and the Company shall agree.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 2.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Common Shares outstanding immediately prior to the
Effective Time and held by a holder who has demanded and perfected his or her
appraisal rights in accordance with Section 5/11.65 of the Illinois Act and who
has not effectively withdrawn or lost his right to such appraisal, if such
Section 5/11.65 provides for dissenters' rights for such Common Shares in the
Merger (a "Dissenting Share"), shall not be converted into the right to receive
the Merger Price as provided in Section 1.07, unless and until such holder fails
to perfect or withdraws or otherwise loses his right to appraisal and payment
under the Illinois Act, but the holder thereof shall only be entitled to such
rights as are granted by the Illinois Act and shall not be entitled to vote or
to exercise any other rights of a shareholder of the Company except as provided
in the Illinois Act. Each holder of Dissenting Shares who becomes entitled to
payment therefor pursuant to the Illinois Act shall receive such payment from
the Surviving Corporation in accordance with the Illinois Act. If, after the
Effective Time, any such holder fails to perfect or withdraws or loses his right
to dissent, such Dissenting Shares shall thereupon be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Price, if any, to which such holder is entitled, without interest or dividends
thereon. The Company shall give the Parent prompt notice of any demands received
by the Company for appraisal of Common Shares and, prior to the Effective Time,
the Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of the Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
SECTION 2.02 Payment for Common Shares.
(a) From and after the Effective Time, a bank or trust company as shall
be mutually acceptable to the Parent and the Company shall act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Price in respect of
certificates (the "Certificates") that, prior to the Effective Time, represented
Common Shares entitled to payment of the Merger Price pursuant to Section 1.07.
At the Effective Time, the Parent or the Merger Sub shall deposit, or cause to
be deposited, in trust with the Paying Agent the Aggregate Common Share Merger
Price to which holders of Common Shares shall be entitled at the Effective Time
pursuant to Section 1.07.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates that immediately prior to the Effective Time
represented Common Shares (other than Certificates representing Dissenting
Shares and Certificates representing Common Shares held by the Parent or the
Merger Sub, any wholly-owned subsidiary of the Parent or the Merger Sub, in the
treasury of the Company or by any wholly-owned subsidiary of the Company)
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a form of letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent and instructions for use
in surrendering such Certificates and receiving the Merger Price in respect
thereof. Upon the surrender of each such Certificate, the Paying Agent shall pay
the holder of such Certificate the Merger Price multiplied by the number of
Common Shares formerly represented by such Certificate, in consideration
therefor, and such Certificate shall forthwith be cancelled. Until so
surrendered, each such Certificate (other than Certificates representing
Dissenting Shares and Certificates representing Common Shares held by the Parent
or the Merger Sub, any wholly owned subsidiary of the Parent or the Merger Sub,
in the treasury of the Company or by any wholly-owned subsidiary of the Company)
shall represent solely the right to receive the Aggregate Common Share Merger
Price relating thereto. No interest or dividends shall be paid or accrued on the
Merger Price. If the Merger Price (or any portion thereof) is to be delivered to
any person other than the person in whose name the Certificate formerly
representing Common Shares surrendered therefor is registered, it shall be a
condition to such right to receive such Merger Price that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person surrendering such Common Shares shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
the Merger Price to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Common Share
may surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Aggregate Common Share Merger Price relating thereto,
without any interest or dividends thereon.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the Aggregate Common Share Merger Price
relating thereto, as provided in this Article II, subject to applicable law in
the case of Dissenting Shares.
(e) 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 the Surviving Corporation,
the posting by such person of a bond, in such reasonable amount as the Surviving
Corporation may direct, as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Price as provided in
Section 1.07.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub that
except as set forth in the Company Disclosure Statement which it has delivered
to the Parent and the Merger Sub simultaneous with its execution of this
Agreement (the "Company Disclosure Statement"):
SECTION 3.01 Organization and Qualification; Subsidiaries. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois. Each of the Company's subsidiaries (the
"Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
and each of the Subsidiaries has the requisite corporate power and authority to
own, operate or lease its properties and to carry on its business as it is now
being conducted, and is duly qualified or licensed to do business, and is in
good standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary.
SECTION 3.02 Charter and By-Laws. The Company has heretofore made
available to the Parent and the Merger Sub a complete and correct copy of the
charter and the by-laws or comparable organizational documents, each as amended
to the date hereof, of the Company and each of the Subsidiaries.
SECTION 3.03 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 Common Shares. As of the close of business on March 6,
1998 (the "Reference Date"), the Company had issued and outstanding 3,823,243
Common Shares and 142,000 options to purchase Common Shares. Since the Reference
Date, the Company has not issued any shares of capital stock except pursuant to
the exercise of Options outstanding as of such date. All the outstanding Common
Shares are, and all Common Shares which may be issued pursuant to the exercise
of outstanding Options will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and nonassessable.
There are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and outstanding. Except
as set forth above and except for the transactions contemplated by this
Agreement, there are no existing options, warrants, calls, subscriptions or
other rights, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of the Company or any of its
Subsidiaries, obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or any
of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, and neither the Company nor any of its Subsidiaries
is obligated to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment. Except as
contemplated by this Agreement and except for the Company's obligations in
respect of the Options under the Corcom, Inc. 1985 Key Employees' Incentive
Stock Option Plan, the Corcom, Inc. 1988 Key Employees' Incentive Stock Option
Plan, the Corcom, Inc. 1991 Directors' Stock Option Plan, and the Corcom, Inc.
1994 Directors' Stock Option Plan (collectively, the "Option Plans"), there are
no outstanding contractual
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obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Common Shares or the capital stock of the Company or any
of its Subsidiaries. Each of the outstanding shares of capital stock of each of
the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and such shares of the Subsidiaries as are owned by the Company
or any of its Subsidiaries are owned in each case free and clear of any lien,
claim, option, charge, security interest, limitation, encumbrance and
restriction of any kind (any of the foregoing being a "Lien").
SECTION 3.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Board and no other corporate proceedings on the part of the
Company are necessary to authorize or approve this Agreement or to consummate
the transactions contemplated hereby (other than, with respect to the Merger,
the approval and adoption of the Merger and this Agreement by the affirmative
vote of the holders of two-thirds of the Common Shares then outstanding, to the
extent required by applicable law). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by the Parent and the
Merger Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or compliance by the Company with any of the provisions hereof will (i) conflict
with or violate the Articles of Incorporation or By-Laws of the Company or
comparable organizational documents of any of the Subsidiaries, (ii) conflict
with or violate any statute, ordinance, rule, regulation, order, judgment or
decree applicable to the Company or any of the Subsidiaries, or by which any of
them or any of their respective properties or assets may be bound or affected,
or (iii) result in a violation or breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or re sult in any loss of any material benefit, or the creation
of any Lien on any of the properties or assets of the Company or any of the
Subsidiaries (any of the foregoing referred to in clause (ii) or this clause
(iii) being a "Violation") pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their respective
properties may be bound or affected.
(b) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or compliance by the Company with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing being a "Consent"),
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any government or subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (a "Governmental Entity"),
except for (i) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the issuance of the
Certificate of Merger by the Secretary of State of the State of Illinois, (iii)
such filings, authorizations, orders and approvals as may be required by state
takeover laws (the "State Takeover Approvals"), and (iv) compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (v) consents the failure of which to obtain or make would not have a
Material Adverse Effect on the Company (as defined in Section 3.10 below), or
materially adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
SECTION 3.06 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements required to be filed by
the Company with the SEC since January 1, 1995 (the "SEC Reports"). As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations of the SEC promulgated
thereunder applicable, as the case may be, to such SEC Reports, and none of the
SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) The consolidated financial statements (including, in each case,
any notes thereto) of the Company included in the SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to any
other adjustments described therein and normal year-end audit adjustments). The
books and records of the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and other applicable legal and accounting
requirements.
SECTION 3.07 Information. None of the information set forth in the
Company Disclosure Statement or supplied by the Company in writing specifically
for inclusion or incorporation by reference in (i) the Proxy Statement or (ii)
any other document to be filed with the SEC or any other Governmental Entity in
connection with the transactions contemplated by this Agreement (the "Other
Filings") will, at the respective times filed with the SEC or other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to shareholders, at the time of the
Shareholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which
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they were made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representation is made by the Company
pursuant to this Section 3.07 with respect to statements made therein based on
information supplied by the Parent or the Merger Sub in writing specifically for
inclusion in the Proxy Statement.
SECTION 3.08 State Takeover Statutes; Required Vote. The Board has taken
all action so that prior to the execution hereof, the Board has approved the
Merger pursuant to Sections 5/7.85 and 5/11.75 of the Illinois Act. As of the
date hereof, no other state takeover statutes, including without limitation, any
business combination act, are applicable to the Merger, this Agreement and the
transactions contemplated hereby. The affirmative vote of the holders of not
less than two-thirds of the outstanding Common Shares is required to approve the
transactions contemplated by this Agreement. No other vote of the shareholders
of the Company is required by law, the Articles of Incorporation or By-Laws of
the Company or otherwise for the Company to consummate the Merger and the
transactions contemplated hereby.
SECTION 3.09 Brokers. Except for the Company's retention of ABN AMRO
Incorporated, none of the Company, any of the Subsidiaries, or any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
SECTION 3.10 Material Adverse Effect. There have been no events,
conditions, developments or states of fact which singly or in the aggregate
since December 31, 1996 have had or are reasonably expected to have a Material
Adverse Effect on the Company that were not disclosed in the Company Disclosure
Statement or in any of the reports filed with the SEC as described in Section
3.06. Since December 31, 1997, the Company has not taken any action or agreed to
take any action that the Company is prohibited from taking after the date hereof
by Section 5.01. The term "Material Adverse Effect on the Company", as used in
this Agreement, means any change in or effect on the business, assets,
operations, financial condition, results of operations, customer relations,
supplier relations, or business prospects of the Company or any of the
Subsidiaries that is, or is reasonably expected to be, materially adverse to the
Company and the Subsidiaries taken as a whole.
SECTION 3.11 Litigation. Except as may be disclosed in the SEC Reports
(as defined in Section 3.06(a) hereof) or the Company Disclosure Statement,
there are no actions, proceedings or investigations pending or, to the best of
the Company's knowledge, threatened against the Company or the Subsidiaries
before any court or governmental or regulatory authority or body. Neither the
Company nor the Subsidiaries nor any of their assets is subject to any order,
judgment, injunction or decree.
SECTION 3.12 Absence of Certain Changes or Events. Since December 31,
1997, except as set forth in the SEC Reports (as defined in Section 3.06(a)
hereof) or the Company Disclosure Statement, (a) neither the Company nor any
Subsidiary has incurred any indebtedness for money borrowed except in the
ordinary and usual conduct of the Company's business; (b) neither the Company
nor any Subsidiary has assumed, guaranteed, endorsed or otherwise became
responsible
9
for the obligations of any other individual, firm or corporation, other than any
obligation relating to existing co-insurance programs and the endorsement of
checks for collection in the ordinary and usual course of business; (c) there
has been no creation or assumption by the Company or any Subsidiary of any Lien
on any asset; (d) there has been no loan, advance or capital contribution to or
investment in any person by the Company or any Subsidiary except in the ordinary
and usual conduct of the Company's business; (e) neither the Company nor any
Subsidiary has entered into any contract, lease, commitment or transaction with
any officer, director or any affiliate (as defined in Rule 405 of the SEC
promulgated under the Securities Act) of the Company or any Subsidiary (other
than pursuant to consulting or employment agreements or other employee benefit
arrangements); (f) there has been no transaction or commitment made, or any
contract or agreement entered into, by the Company or any Subsidiary relating to
its assets or business (including the acquisition or disposition of any assets)
or any relinquishment by the Company or any Subsidiary of any contract or other
right, which in either case is material to the Company and the Subsidiaries
taken as a whole (other than transactions, commitments and relinquishments
contemplated by this Agreement and other than sales of inventory in the ordinary
and usual course of business and other than investments of a capital nature in
the ordinary and usual course of business); (g) neither the Company nor any
Subsidiary has purchased or leased any real property; (h) neither the Company
nor any Subsidiary has leased any equipment or property other than in the
ordinary and usual course of business; (i) there has been no change in any
method of accounting or accounting practice by the Company or the Subsidiaries;
(j) there has been no grant (whether or not in writing and whether formal or
informal) of any severance or termination pay to any current or former officer
or employee of the Company or any Subsidiary, any employment, bonus, profit
sharing, pension, retirement, deferred compensation, fringe benefit, or other
similar agreement with or plan or program for (or, except as required by law,
any amendment, formal or informal, to any such existing agreement with or plan
or program for) any current or former officer, director, employee or consultant
of the Company or any Subsidiary, any increase in benefits payable under any
existing severance or termination pay policies, employment agreements, or
deferred compensation or fringe benefit plan or program or any increase in
compensation, bonus or other benefits payable, or to become payable, to
officers, directors, employees or consultants of the Company or any Subsidiary
other than increases in benefits to non-officer employees of the Company in the
ordinary course of business in accordance with past practices; (k) there has
been no repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other ownership
interest of the Company or any Subsidiary; (l) there has been no declaration or
payment of any dividend on, or other distribution with respect to, any capital
stock of the Company or any Subsidiary; and (m) neither the Company nor any
Subsidiary has entered into any other transaction other than in the ordinary
course of business.
SECTION 3.13 Employee Benefit Plans.
(a) The Company Disclosure Statement sets forth a true and complete
list of all Plans (as defined below) maintained or sponsored by the Company or
any Subsidiary, contributed to by the Company or any Subsidiary, to which the
Company or any Subsidiary is obligated to contribute or with respect to which
the Company or any Subsidiary has any liability or potential liability,
including all Plans contributed to, maintained or sponsored by any member of the
controlled group of companies, within the meaning of Sections 414(b) and 414(c)
of the Internal Revenue Code of 1986, as amended (the "Code"), of which the
Company and/or any Subsidiary is
10
or, during the last three years, ever was a member (the "Company Controlled
Group") (to the extent that the Company or any Subsidiary has any liability or
potential liability with respect to such Plans). For purposes of this Agreement,
the term "Plans" shall mean: (i) employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded, (ii) employment agreements, and (iii)
personnel policies or fringe benefit plans, policies, programs and arrangements,
whether or not subject to ERISA, whether or not funded, and whether or not
covering employees residing in the United States, including without limitation,
stock bonus, stock option, stock appreciation right, stock purchase, "phantom
stock," deferred compensation, pension, profit sharing, savings, severance,
bonus, vacation, incentive, travel, and health, disability and welfare plans.
Neither the Company nor any Subsidiary has any commitment, whether formal or
informal, to create any additional employee benefit plans, or to modify any
existing Plan except as may be required to conform to changes in applicable law.
(b) Neither the Company nor any Subsidiary has within the last five
years participated in, contributed to or been obligated to contribute to any
"multiemployer plan", as such term is defined in Section 3(37) of ERISA
("Multiemployer Plan"), nor does the Company or any Subsidiary have any other
liability or potential liability with respect to any Multiemployer Plan or with
respect to any employee benefit plan of the type described in Section 4063 and
4064 of ERISA or in Section 413(c) of the Code (and regulations promulgated
thereunder).
(c) Neither the Company nor any Subsidiary maintains, contributes to,
has any obligation to contribute to or has any other liability or potential
liability with respect to any Plan that is a defined benefit pension plan or
that is subject to the funding requirements of Section 412 of the Code and
Section 302 of ERISA. There has been no complete or partial termination of any
Plan which could result in any material liability to the Company or any
Subsidiary.
(d) Neither the Company nor any Subsidiary maintains or has any
obligation to contribute to (or has any other liability or potential liability
with respect to) any Plan which provides health, life insurance, accident or
other "welfare-type" benefits to current or future retirees, current or future
former employees, current or future former independent contractors, or the
spouses, dependents or beneficiaries thereof, other than in accordance with
Section 4980B of the Code, Sections 601 et seq. of ERISA, and/or other
applicable continuation coverage law.
(e) None of the Plans obligates the Company or the Subsidiaries to
pay separation, severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or solely as a result
of a "change in control", as such term is defined in Section 280G of the Code.
(f) With respect to each Plan, all required payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or as
of the Effective Time shall have been made or properly accrued. No Plan has any
unfunded liabilities.
(g) Each Plan and all related trusts, insurance contracts and funds
have been maintained, funded, and administered in material compliance in all
respects with all applicable laws and regulations, including but not limited to
ERISA and the Code. Neither the Company nor any Subsidiary has incurred, or
expects to incur, any liability to the Internal Revenue Service ("IRS"),
11
the Department of Labor, any other governmental (whether of the United States or
otherwise) agency, or any person with respect to any Plan currently or
previously maintained by members of the Company Controlled Group that has not
been satisfied in full, and no condition exists that presents a risk to the
Company and/or the Subsidiaries or any other member of the Company Controlled
Group of incurring such a liability (other than liability for routine benefit
claims). None of the Company, any Subsidiary, any trustee or administrator of
any Plan, or other person has engaged in any transaction with respect to the
Plans which could subject the Company, any Subsidiary, or any trustee or
administrator of the Plans, or any party dealing with any Plan, to any tax or
penalty (civil or otherwise) imposed by ERISA, the Code or other applicable law.
No actions, investigations, suits or claims with respect to the Plans (other
than routine claims for benefits) or any fiduciary or other person dealing with
such Plans are pending or threatened and the Company has no knowledge of any
facts which could give rise to or be expected to give rise to any such actions,
investigations, suits or claims.
(h) No prohibited transaction within the meaning of Section 4975 of
the Code or Section 406 of ERISA has occurred with respect to any Plan, other
than a transaction which is exempt under Section 408 of ERISA or for which no
excise tax is assessed under Section 4975 of ERISA.
(i) All Plans which are intended to be qualified under Section 401(a)
of the Code have received a favorable determination letter from the IRS.
(j) No underfunded defined benefit plan has been, during the five
years preceding the Effective Time, transferred out of the Company Controlled
Group.
(k) With respect to each Plan, and upon the request of the Parent,
the Company has provided the Parent with true, complete and correct copies, to
the extent applicable, of all documents pursuant to which the Plans are
maintained, funded and administered.
SECTION 3.14 Material Contracts and Other Agreements. The Company
Disclosure Statement sets forth a complete and accurate list of the following
contracts and commitments to which the Company or any Subsidiary is a party or
by which any of their respective properties are bound: (a) collective bargaining
agreements and contracts with any labor union; (b) employment or consulting
agreements or any agreements providing for severance, termination or similar
payments; (c) leases, whether as lessor or lessee, involving personal property
with annual rental payments in excess of $50,000; (d) loan agreements,
mortgages, indentures, instruments or other evidence of indebtedness or
commitments (other than letters of credit issued in the ordinary course of
business pursuant to existing credit agreements in respect of inventory
purchases) in each case involving indebtedness (or available credit) for
borrowed money or money lent to others; (e) guaranty or suretyship, performance
bond, indemnification or contribution agreements; (f) written contracts with
customers or suppliers that require aggregate payments to or from the Company or
its Subsidiaries of more than $50,000 in any one-year period, other than
contracts issued in the ordinary and usual course of business or terminable with
30 days or less notice without premium or penalty; (g) joint venture,
partnership, or other agreements evidencing an ownership interest or a
participation in or sharing of profits; (h) agreements, contracts or commitments
limiting the freedom of the Company or any of the Subsidiaries to engage in any
line of business or compete
12
with any other corporation, partnership, joint venture, company or individual,
(i) contracts that are terminable, or under which payments by the Company or any
Subsidiary may be accelerated, upon a change in control of the Company, (j)
written contracts with distributors of the Company's or any of the Subsidiaries'
products, and (k) any other agreements material to the Company and its
Subsidiaries taken as a whole. The Company has furnished or made available
accurate and complete copies of the foregoing contracts and agreements to the
Parent. The termination of any oral agreement or understanding to which the
Company or a Subsidiary is a party of the type described in Sections 3.14(f) and
3.14(j) above would not, to the Company's knowledge, have a Material Adverse
Effect on the Company. Each such oral agreement or understanding is terminable
by the Company or a Subsidiary, as the case may be, without premium or penalty.
As to each contract and commitment referred to above (i) there exists no breach
or default, and no event has occurred which with notice or passage of time would
constitute such a breach or default or permit termination, notification or
acceleration, on the part of the Company or any Subsidiary or, to the best
knowledge of the Company, on the part of any third party and (ii) as of the
Effective Time, no third party consent, approval or authorization shall be
required for the consummation of the Transactions. This Section 3.14 does not
relate to real property, such items being the subject of Section 3.15.
SECTION 3.15 Real Estate Leases. The Company Disclosure Statement sets
forth a list of (a) all leases and subleases under which the Company or the
Subsidiaries is lessor or lessee of any real property together with all
amendments, supplements, nondisturbance agreements and other agreements
pertaining thereto; (b) all options held by the Company or the Subsidiaries or
contractual obligations on the part of the Company or the Subsidiaries to
purchase or acquire any interest in real property; and (c) all options granted
by the Company or the Subsidiaries or contractual obligations on the part of the
Company or the Subsidiaries to sell or dispose of any interest in real property.
Except as set forth in the Company Disclosure Statement, as to such leases,
subleases and other agreements referred to above, (i) there exists no breach or
default, and no event has occurred which with notice or passage of time would
constitute such a breach or default or permit termination, notification or
acceleration, on the part of the Company or any Subsidiary, or on the part of
any other party thereto, and (ii) as of the Effective Time, no material third
party consent, approval or authorization shall be required for the consummation
of the Merger. To the Company's knowledge, there are no Liens on any of the
leasehold interests set forth on the Company Disclosure Statement hereof except
for (i) Liens reflected in the balance sheet included in the Company's Form 10-K
for the period ended December 31, 1996, (ii) Liens of record consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of real property which do not materially detract from the
value of, or materially impair the use of, such property by the Company or the
Subsidiaries in the operation of their respective businesses, (iii) Liens for
current Taxes (as defined in Section 3.22(a)), assessments or governmental
charges or levies on property not yet delinquent or being contested in good
faith and for which appropriate reserves have been established in accordance
with GAAP (which contested levies are described on the Company Disclosure
Statement), and (iv) Liens imposed by law, such as materialman's, mechanic's,
carrier's, workers' and repairmen's Liens securing obligations not yet
delinquent or being contested in good faith and for which appropriate reserves
have been established in accordance with GAAP or securing obligations not being
paid in the ordinary course of business in accordance with customary and
commercially reasonable practice. (collectively, "Permitted Liens").
13
SECTION 3.16 Real Property. The Company Disclosure Statement lists all
real property owned by the Company and the Subsidiaries. Each of the Company and
the Subsidiaries has good and marketable title in fee simple to its respective
real properties set forth on the Company Disclosure Statement, in each case, to
the Company's knowledge, free and clear of all Liens, except for Permitted
Liens.
SECTION 3.17 Compliance with Laws. The Company and the Subsidiaries have
substantially complied and, to the Company's knowledge, are in substantial
compliance with applicable federal, state or local statutes, laws and
regulations including, without limitation, any applicable building, zoning,
health, sanitation, safety, labor relations or other law, ordinance or
regulation. Neither the Company nor any Subsidiary has (a) failed to obtain any
license, permit, franchise or other governmental authorization which is
necessary to the operations of the business of the Company and the Subsidiaries,
taken as a whole, or (b) received any notice of any alleged violation or breach
of any law or regulation or of any license, permit, franchise or authorization.
SECTION 3.18 Proprietary Rights. The Company Disclosure Statement
contains a complete and accurate list of all patents and patent applications;
all trademarks, service marks, trade dress, trade names, internet domain names
and corporate names; all registered copyrights and all material unregistered
copyrights; all registrations, applications and renewals for any of the
foregoing; owned by the Company or the Subsidiaries or in which any of them has
any rights and all contracts, agreements and licenses relating to any of the
foregoing. All right, title and interest in and to each of the foregoing is
owned by the party identified on the Company Disclosure Statement, free and
clear of any Liens or royalty obligations except as set forth on the Company
Disclosure Statement. The Company and each Subsidiary owns all right, title and
interest in and to, or has a valid and enforceable license to use, free and
clear of all Liens, all patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice),
trademarks, trade names, service marks, internet domain names, copyrights, mask
works, and registrations, applications and renewals for any of the foregoing,
trade secrets and confidential information (including, but not limited to know-
how and formulas), computer software and other material intellectual property
rights necessary for the conduct of their respective businesses as now being
conducted (collectively, the "Proprietary Rights"). To the Company's knowledge,
neither the Company nor any Subsidiary has infringed or is infringing on any
Proprietary Rights belonging to any other person, firm or corporation. Neither
the Company nor any of the Subsidiaries has granted any licenses with respect to
any of their respective Proprietary Rights. Neither the Company nor any of the
Subsidiaries has received any notice, nor does the Company or any of the
Subsidiaries have any knowledge of any infringement or misappropriation by or
misuse or conflict with respect to the use of its corporate name or any of its
Proprietary Rights or of any facts which indicate a likelihood of any of the
foregoing. The validity of the Proprietary Rights and the Company's or any
Subsidiary's title thereto is not being questioned in any suit, action,
investigation, legal, administrative or other proceeding to which the Company or
any Subsidiary has been notified that it is a party or, to the Company's
knowledge, to which any other person is a party nor, to the Company's knowledge,
is any such suit, action, investigation, legal, administrative or other
proceeding threatened. None of the computer software, computer firmware,
computer hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are used or
relied on by Company or by any of its Subsidiaries in the conduct of their
respective businesses will malfunction, will cease to function,
14
will generate incorrect data or will produce incorrect results when processing,
providing or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries, except where
such malfunctions would not have a Material Adverse Effect on the Company. The
consummation of the Merger will not adversely affect the Company's or any
Subsidiary's title and interest in and to the Proprietary Rights.
SECTION 3.19 No Undisclosed Liabilities. There is no liability or
obligation of the Company or any Subsidiary of any nature, whether absolute,
accrued, contingent or otherwise other than: (a) the liabilities and obligations
reflected on the September 30, 1997 consolidated balance sheet contained in the
SEC Reports (the "September Balance Sheet"); (b) all liabilities and obligations
of the Company and the Subsidiaries incurred since September 30, 1997 in the
ordinary and usual course of business; and (c) any liabilities and obligations
relating to contracts not yet required to be performed.
SECTION 3.20 Title to Personal Property. Each of the Company and the
Subsidiaries has good title to or a valid and enforceable leasehold interest in,
or a contractual or common law right to use, all personal property material to
the operation of its business, free and clear of all Liens other than Permitted
Liens.
SECTION 3.21 Labor Relations. There is (a) no unfair labor practice
complaint, grievance or arbitration pending or, to the best knowledge of the
Company, threatened against the Company or any Subsidiary, (b) no strike, labor
dispute, slowdown or stoppage pending or, to the best knowledge of the Company,
threatened against the Company or any Subsidiary and (c) to the best knowledge
of the Company, no labor union organizing campaign in progress with respect to
any employees of the Company or the Subsidiaries.
SECTION 3.22 Taxes and Tax Returns. Except as set forth in the Company
Disclosure Statement:
(a) all United States federal and state income and other Tax returns
and reports required to be filed by the Company and the Subsidiaries on or
before the Effective Time (including extensions to the due date for such
returns) with respect to the business or assets of the Company and the
Subsidiaries have been or will be duly filed and all federal, state, local and
foreign taxes of any kind ("Taxes") have been paid or will be paid when due,
except such Taxes as are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established;
(b) neither the Company nor the Subsidiaries has been notified in
writing by any taxing authority, or otherwise has any knowledge, of any pending
actions, suits, claims or assessments for any Tax deficiency;
(c) all U.S. federal and state income tax returns referred to in
Section 3.22(a) above filed through the year ended December 31, 1994 have been
examined and closed, or the periods during which any tax due with respect to
such returns may be assessed have expired without extension or waiver;
15
(d) no consent has been or will be filed with respect to the Company
or the Subsidiaries relating to Section 341(f) of the Internal Revenue Code;
(e) neither the Company nor the Subsidiaries is a party to any Tax
indemnity or Tax sharing agreement;
(f) there are no liens for Taxes (other than for Taxes not yet due) on
any assets of the Company or the Subsidiaries;
(g) neither the Company nor any of the Subsidiaries will be required
(i) as a result of a change in method of accounting or a taxable period ending
on or prior to the Effective Time, to include any adjustment under Section
481(c) of the Code (or any similar or corresponding provision of federal, state,
local or foreign income Tax law) in taxable income for any taxable period ending
after the Effective Time or (ii) as a result of any "closing agreement," as
described in Section 7121 of the Code (or any corresponding provision of state,
local or foreign income Tax law), to include any item of income in or exclude
any item of deduction from any taxable period ending after the Effective Time;
(h) neither the Company nor any of the Subsidiaries has been a member
of an affiliated group (as defined in Section 1504 of the Code) other than one
of which the Company was the common the Parent, or filed or been included in a
combined, consolidated or unitary income Tax Return, other than one filed by the
Company; and
(i) neither the Company nor any of the Subsidiaries has made any
payments, or is or will become obligated (under any contract entered into on or
before the Effective Time) to make any payments, that will be non-deductible
under Section 280G of the Code (or any corresponding provision of state, local
or foreign income Tax law).
SECTION 3.23 Environmental Matters.
(a) Compliance Generally. The Company and the Subsidiaries have
complied in all material respects with and are in material compliance with all
Environmental and Safety Requirements (as defined in Section 3.23(j)).
(b) Permits. The Company and the Subsidiaries have obtained and
complied in all material respects with, and are in material compliance with, all
permits, licenses and other authorizations that are required pursuant to
Environmental and Safety Requirements for the occupation of its facilities and
the operation of their business, and such permits, licenses and other
authorizations may be relied upon for continued lawful conduct of the business
and operations of the Company and its Subsidiaries immediately after the
Effective Time without transfer, reissuance, or other approval or action by any
governmental entity or other person.
(c) Claims. Except as set forth in the Company Disclosure Statement,
the Company and the Subsidiaries have not received any claim, complaint,
citation, report or other notice regarding any liabilities or potential
liabilities (whether accrued, absolute, contingent,
16
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, arising under Environmental and Safety Requirements.
(d) Storage Tanks, Asbestos, PCBs. Except as set forth in the Company
Disclosure Statement, no above-ground or underground storage tank, asbestos in
any form or condition, or polychlorinated biphenyls (PCBs) exists at any
property owned, used, leased or occupied or formerly owned, used, leased or
occupied in connection with the business or operation of the Company and its
Subsidiaries.
(e) Certain Environmental Liabilities. Except as set forth in the
Company Disclosure Statement, the Company and the Subsidiaries have not stored,
disposed of, arranged for or permitted the disposal of, transported, handled or
released any substance, including without limitation any hazardous substance,
pollutant, contaminant or waste, or owned or operated any facility or property,
so as to give rise to liabilities of the Company and its Subsidiaries pursuant
to the Environmental and Safety Requirements, including without limitation any
liability for response costs, corrective action, natural resources damages,
personal injury, property damage or attorneys fees.
(f) Operations. Except as set forth in the Company Disclosure
Statement, no facts, events or conditions relating to the past or present
facilities, properties or operations of the Company and the Subsidiaries will
prevent, hinder or limit continued compliance with Environ mental and Safety
Requirements, give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental and Safety Requirements, including any Environmental
and Safety Requirement relating to onsite or offsite releases or threatened
releases of hazardous or otherwise regulated materials, substances or wastes,
personal injury, property damage or natural resources damage.
(g) Transaction-Triggered Requirements. Except as set forth in the
Company Disclosure Statement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated herein imposes
any obligations for site investigation or cleanup, or notification to or consent
of governmental entity or any other person, pursuant to any "transaction-
triggered" Environmental and Safety Requirement.
(h) Liability for Others. Except as set forth in the Company
Disclosure Statement, the Company and the Subsidiaries have not, either
expressly or by operation of law, assumed or undertaken any liability or
corrective or remedial obligation of any other person relating to Environmental
and Safety Requirements.
(i) Environmental Liens. Except as set forth in the Company
Disclosure Statement, no Environmental Lien (as defined below) has attached to
any property owned, leased or operated by the Company and the Subsidiaries
arising out of any action or omission of the Company and the Subsidiaries or, to
the Company's knowledge, any other person.
(j) "Environmental and Safety Requirements" means all legal
requirements, and all obligations under any contract, concerning public health
and safety, worker health and safety,
17
or pollution or protection of the environment, including all those relating to
the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
(k) "Environmental Lien" means any Lien, either recorded or
unrecorded, in favor of any governmental entity and relating to any liability
arising under Environmental and Safety Requirements.
SECTION 3.24 Accounts Receivable. All of the notes and accounts
receivable of the Company and the Subsidiaries reflected on the face of the
September Balance Sheet were, and all notes and accounts receivable of the
Company and the Subsidiaries as of the Effective Time will be, good and valid
receivables and, to the best knowledge of the Company, collectible after the
Effective Time at the aggregate amount recorded therefor on the books and
records of the Company as of the Effective Time, net of a reasonable allowance
for doubtful accounts.
SECTION 3.25 Inventory. All inventory of the Company and the Subsidiaries
reflected on the face of the September Balance Sheet was, and all inventory of
the Company and the Subsidiaries as of the Effective Time will be, in accordance
with the Company's past custom and practice, merchantable and fit for the
purpose for which it was procured or manufactured and is and as of the Effective
Time will be, to the best knowledge of the Company, useable for the purpose for
which such inventory was acquired or produced by the Company.
SECTION 3.26 Product and Service Warranty. Each product sold or delivered
and each service rendered by the Company and the Subsidiaries with respect to
any such product has been in conformity with all material applicable contractual
commitments and all material express and implied warranties of the Company and
the Subsidiaries. No product sold or delivered or service rendered by the
Company or the Subsidiaries with respect to any such product is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions with respect thereto. Prior to the date hereof, the Company and the
Subsidiaries have delivered to the Parent copies of the standard terms and
conditions of sale for products delivered and services rendered by the Company
and the Subsidiaries with respect thereto (containing all applicable guaranty,
warranty and indemnity provisions).
SECTION 3.27 Opinion of Financial Advisor. The Company has received the
opinion of ABN AMRO Incorporated, dated the date hereof, to the effect that, as
of such date, the Merger Consideration to be received in the Merger by the
Company's shareholders is fair to the Company's shareholders from a financial
point of view, a copy of which opinion has been delivered to the Parent and the
Merger Sub.
SECTION 3.28 Effective Time. The representations and warranties of the
Company and the Subsidiaries contained in this Article 3 and elsewhere in this
Agreement and all information contained in any exhibit, schedule, or attachment
hereto or in any certificate or other writing delivered by, or on behalf of the
Company to the Parent shall be true and correct on the date of the
18
Closing as though then made, except as affected by the transactions expressly
disclosed in writing to the Parent by the Company prior to the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE MERGER SUB
The Parent and the Merger Sub represent and warrant to the Company as
follows:
SECTION 4.01 Organization and Qualification. The Parent is a corporation
duly organized, validly existing and in good standing under the laws of North
Carolina and each material subsidiary of the Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. The Parent and each of its subsidiaries (including the Merger Sub) has
the requisite corporate power and authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary. The term "Material Adverse Effect on the Parent", as used in this
Agreement, means any change in or effect on the business, assets, operations,
financial condition, results of operations, customer relations, supplier
relations, or business prospects of the Parent or any of its subsidiaries that
is, or is reasonably expected to be, materially adverse to the Parent and its
subsidiaries taken as a whole.
SECTION 4.02 Authority Relative to this Agreement. Each of the Parent and
the Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Parent and the Merger Sub
and the consummation by the Parent and the Merger Sub of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Boards of Directors of the Parent and the Merger Sub and by the Parent as
shareholder of the Merger Sub and no other corporate proceedings on the part of
the Parent or the Merger Sub are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of the Parent and the Merger Sub
and, assuming the due and valid authorization, execution and delivery by the
Company, constitutes a valid and binding obligation of each of the Parent and
the Merger Sub enforceable against each of them in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditor's rights generally and (ii) is subject to general principles of equity.
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by the Parent
or the Merger Sub, the consummation by the Parent or the Merger Sub of the
transactions contemplated
19
hereby or compliance by the Parent or the Merger Sub with any of the provisions
hereof will (i) conflict with or violate the organizational documents of the
Parent or the Merger Sub, (ii) conflict with or violate any statute, ordinance,
rule, regulation, order, judgment or decree applicable to the Parent or the
Merger Sub, or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a Violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Parent or the Merger Sub, or any of their subsidiaries, is a party
or by which any of their respective properties or assets may be bound or
affected.
(b) None of the execution and delivery of this Agreement by the
Parent and the Merger Sub, the consummation by the Parent and the Merger Sub of
the transactions contemplated hereby or compliance by the Parent and the Merger
Sub with any of the provisions hereof will require any Consent of any
Governmental Entity, except for (i) compliance with any applicable requirements
of the Exchange Act, (ii) the issuance of the Certificate of Merger by the
Secretary of State of the State of Illinois, (iii) such filings, authorizations,
orders and approvals as may be required to obtain the State Takeover Approvals,
(iv) compliance with the HSR Act, and (v) Consents the failure of which to
obtain or make would not have a Material Adverse Effect on the Parent or
materially adversely affect the ability of the Parent or the Merger Sub to
consummate the transactions contemplated hereby.
SECTION 4.04 Information. None of the information supplied or to be
supplied by the Parent and the Merger Sub in writing specifically for inclusion
in (i) the Proxy Statement or (ii) the Other Filings will, at the respective
times filed with the SEC or such other Governmental Entity and, in addition, in
the case of the Proxy Statement, at the date it or any amendment or supplement
is mailed to shareholders, at the time of the Shareholders' Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.05 Ownership of Securities. Neither the Parent or any of its
affiliates was at the time the Board approved the Merger, an "Interested
Shareholder" as defined in Section 5/7.85 of the Illinois Act.
SECTION 4.06 Financing. In connection with the transactions contemplated
in this Agreement, Bank of America has issued a commitment letter to the Parent
to provide funds sufficient to pay the Merger Price, a true and correct copy of
which has been delivered to the Company two business days prior to the execution
of this Agreement.
SECTION 4.07 Equity Investment. At the Closing, the Parent will have
received at least a $30.0 million equity investment from CII Technologies, Inc.,
its sole stockholder ("CIIT"), including, for purposes of this calculation, all
amounts previously received from CIIT.
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ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business of the Company. Except as contemplated
by this Agreement or with the prior written consent of the Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of the Subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its reasonable efforts, and will cause each of the Subsidiaries to use its
reasonable efforts, to preserve intact the business organization of the Company
and each of the Subsidiaries, to keep available the services of its and their
present officers and key employees, and to preserve the good will of those
having business relationships with it. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement, the Company
will not, and will not permit any of the Subsidiaries to, prior to the Effective
Time, without the prior written consent of the Parent:
(a) adopt any amendment to its charter or By-Laws or comparable
organizational documents;
(b) except for issuances of capital stock of the Subsidiaries to the
Company or a wholly-owned Subsidiary, issue, reissue, pledge or sell, or
authorize the issuance, reissuance, pledge or sale of (i) additional shares of
capital stock of any class, or securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any convertible securities
or capital stock, other than the issuance of Common Shares, in accordance with
the terms of the instruments governing such issuance on the date hereof,
pursuant to the exercise of Options outstanding on the date hereof, or (ii) any
other securities in respect of, in lieu of, or in substitution for, Common
Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between any of the
Company and any of its wholly-owned Subsidiaries;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) except for increases in salary and wages granted to officers and
hourly employees of the Company or the Subsidiaries in conjunction with
promotions or other changes in job status or normal compensation reviews in the
ordinary course of business consistent with past practice, increase the
compensation or fringe benefits payable or to become payable to its directors,
officers or employees (whether from the Company or any of the Subsidiaries), or
pay or award any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units pursuant to
the Option Plans or otherwise) or grant any additional severance or termination
pay to (other than as required by existing agreements or policies described in
the Company Disclosure Statement), or enter into any employment or severance
agreement with, any director, officer or other employee of
21
the Company or any of the Subsidiaries or establish, adopt, enter into, amend or
waive any performance or vesting criteria under any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, savings, welfare, deferred compensation, employment,
termination, severance or other employee benefit plan, agreement, trust, fund,
policy or arrangement for the benefit or welfare of any directors, officers or
current or former employees (any of the foregoing being an "Employee Benefit
Arrangement"), except in each case to the extent required by applicable law or
regulation; provided, however, that nothing herein will be deemed to prohibit
the payment of benefits as they become payable; provided, further, however, that
the Company may enter into severance agreements, in the form heretofore agreed
upon with Parent, with each of Michael Raleigh, Fernando Pena, Oswald Hoffman,
Gary Baltimore, Joseph Ritter and Sheryl Bishop.
(f) except as set forth in the Company Disclosure Schedule, acquire,
sell, lease or dispose of any assets or securities which are material to the
Company and the Subsidiaries, or enter into any commitment to do any of the
foregoing or enter into any material commitment or transaction outside the
ordinary course of business consistent with past practice other than
transactions between a wholly owned Subsidiary and the Company or another wholly
owned Subsidiary;
(g) except as set forth in the Company Disclosure Schedule (i) incur,
assume or pre-pay any long-term debt or incur or assume any short-term debt,
except that the Company and the Subsidiaries may incur or pre-pay debt in the
ordinary course of business in amounts and for purposes consistent with past
practice under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary course
of business consistent with past practice, or (iii) make any loans, advances or
capital contributions to, or investments in, any other person except in the
ordinary course of business consistent with past practice and except for loans,
advances, capital contributions or investments between any wholly owned
subsidiary of the Company and the Company or another wholly owned Subsidiary; or
(h) settle or compromise any suit or claim or threatened suit or
claim material to the transactions contemplated hereby or material to the
Company and its Subsidiaries, taken as a whole;
(i) other than in the ordinary course of business consistent with
past practice, (i) modify, amend or terminate any material contract, (ii) waive,
release, relinquish or assign any contract (or any of the Company's rights
thereunder), right or claim, or (iii) cancel or forgive any indebtedness owed to
the Company or any of the Subsidiaries; provided, however, that the Company may
not under any circumstance waive or release any of its rights under any
confidentiality agreement to which it is a party;
(j) make any Tax election not required by law or settle or compromise
any Tax liability, in either case that is material to the Company and the
Subsidiaries; or
(k) agree in writing or otherwise to take any of the foregoing
actions prohibited under Section 5.01 or any action which would cause any
representation or warranty in this
22
Agreement to be or become untrue or incorrect in any material respect as of the
date when made or deemed made.
SECTION 5.02 Access to Information. From the date of this Agreement
until the Effective Time, the Company will, and will cause the Subsidiaries, and
each of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give the
Parent and the Merger Sub and their respective officers, employees, counsel,
advisors and representatives (collectively, the "Parent Representatives") full
access, during normal business hours, to the offices and other facilities and to
the books and records of the Company and the Subsidiaries and will cause the
Company Representatives and the Subsidiaries to furnish the Parent, the Merger
Sub and the Parent Representatives to the extent available with such financial
and operating data and such other information with respect to the business and
operations of the Company and the Subsidiaries as the Parent and the Merger Sub
may from time to time request. In addition, the Parent will comply with the
terms of the Confidentiality Agreement (as hereinafter defined).
SECTION 5.03 Reasonable Best Efforts. Subject to the terms and
conditions herein provided and to applicable legal requirements, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, and to assist and cooperate
with the other parties hereto in doing, as promptly as practicable, all things
necessary, proper or advisable under applicable laws and regulations to ensure
that the conditions set forth in Article VI are satisfied and to consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.04 Consents.
(a) Each of the parties will use its reasonable best efforts to
obtain as promptly as practicable all Consents of any Governmental Entity or any
other person required in connection with, and waivers of any Violations that may
be caused by, the consummation of the transactions contemplated by this
Agreement.
(b) In furtherance and not in limitation of the foregoing, each of
the parties shall use its reasonable best efforts to resolve such objections, if
any, as may be asserted with respect to the transactions contemplated by this
Agreement under any antitrust, competition or trade regulatory laws, rules or
regulations of any domestic or foreign government or governmental authority
("Antitrust Laws").
(c) Any party hereto shall promptly inform the others of any material
communication from the United States Federal Trade Commission, the Department of
Justice or any other domestic or foreign government or governmental or
multinational authority regarding any of the transactions contemplated by this
Agreement. If any party or any affiliate thereof receives a request for
additional information or documentary material from any such government or
authority with respect to the transactions contemplated by this Agreement, then
such party will endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. The Parent will advise the
Company promptly in respect of any understandings, undertakings or agreements
(oral
23
or written) which the Parent proposes to make or enter into with the Federal
Trade Commission, the Department of Justice or any other domestic or foreign
government or governmental or multinational authority in connection with the
transactions contemplated by this Agreement.
SECTION 5.05 Public Announcements. So long as this Agreement is in
effect, but only until the Effective Time, the Parent, the Merger Sub and the
Company agree to use best efforts to consult with each other before issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Agreement.
SECTION 5.06 Indemnification.
(a) The Parent agrees that all rights to indemnification now existing
in favor of any director or officer of the Company and the Subsidiaries (the
"Indemnified Parties"), as provided in their respective charters or by-laws or,
to the extent set forth in the Company Disclosure Statement, as provided in an
agreement between an Indemnified Party and the Company or one of its
Subsidiaries, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time; provided
that in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. Without
limitation of the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter, including, without limitation, the transactions
contemplated by this Agreement, occurring prior to, and including, the Effective
Time, the Parent will pay as incurred such Indemnified Party's legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith. The Parent shall pay all expenses, including attorney's
fees, that may be incurred by any Indemnified Party in enforcing the indemnity
and other obligations provided for in this Section 5.06 subject to the
limitations of the Illinois Act.
(b) The Parent agrees that the Company, and from and after the
Effective Time, the Surviving Corporation shall cause to be maintained in effect
for not less than six years from the Effective Time the current policies of the
director's and officer's liability insurance maintained by the Company and
during such six-year period shall notify the directors in writing covered
thereby of payment by the Surviving Corporation of the premiums associated with
such liability insurance ten business days prior to the date such premium
payments are due; provided that the Surviving Corporation may substitute
therefor other policies not materially less advantageous to the beneficiaries of
the current policies and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time.
SECTION 5.07 Notification of Certain Matters. The Parent and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (ii)
to cause any material covenant, condition or agreement under this Agreement not
to be complied with or satisfied in all material respects and (b) any failure of
the Company or the Parent, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that no such notification
24
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder. Prior to the Effective Time, the Parent
shall promptly notify the Company of (i) any material developments which are
likely to result in the Parent not having sufficient funds to pay the Merger
Price and (ii) any material changes agreed to by the Parent to the commitment
letter described in Section 4.06.
SECTION 5.08 State Takeover Laws. The Company shall, upon the request of
the Parent, take all reasonable steps to assist in any challenge by the Parent
to the validity or applicability to the transactions contemplated by this
Agreement, including the Merger, of any state takeover law.
SECTION 5.09 No Solicitation. (a) The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of the
Subsidiaries or any of its or the Subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
facilitate or encourage any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving the Company
or the Subsidiaries or acquisition of any capital stock or any material portion
of the assets (except for acquisitions of assets in the ordinary course of
business consistent with past practice) of the Company or any of the
Subsidiaries (an "Acquisition Transaction") or negotiate or otherwise engage in
substantive discussions with any person (other than the Merger Sub, the Parent
or their respective directors, officers, employees, agents and representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by this Agreement;
provided that the Company may, in response to a Favorable Third Party Proposal
(as defined below) furnish information to, and negotiate or otherwise engage in
substantive discussions with, the party making such Favorable Third Party
Proposal if the Board or Directors of the Company determines in good faith by a
majority vote, that failing to take such action would constitute a breach of the
fiduciary duties of the Board.
For purposes of this Agreement a "Favorable Third Party Proposal"
shall mean a written proposal from a credible third party regarding the
acquisition of substantially all the capital stock of the Company, a merger,
consolidation or other business combination with the Company or a sale of
substantially all the assets of the Company, which proposal (i) is not subject
to any financing or regulatory uncertainty greater than the financing and
regulatory uncertainties to which the transaction contemplated by this Agreement
is subject, (ii) is, in the written opinion of a nationally recognized
investment bank, more favorable to the Company's shareholders from a financial
point of view than the transactions contemplated hereby, and (iii) was not
solicited by or on behalf of the Company in violation of this Section 5.09.
(b) Upon executing this Agreement, the Company shall immediately
advise the Parent in writing regarding the identity of any other persons or
entities with whom the Company has had direct or indirect contact since
September 30, 1997 regarding a possible Acquisition Transaction. The Company
shall immediately advise the Parent in writing of the receipt, directly or
indirectly, of any inquiries or proposals relating to an Acquisition Transaction
and any actions taken pursuant to Section 5.09(a) and furnish to the Parent
either a copy of any such proposal or a written summary of any such proposal.
25
SECTION 5.10 Break-Up Fee; Expense Reimbursement.
-----------------------------------
(a) If (i) on or before June 30, 1998 (the "Termination Date"), a
third party or group of related third parties become the beneficial owners of
50% or more of the outstanding voting securities of the Company (by a tender
offer, exchange offer, stock issuance or otherwise), including any such
transaction in which any of Werner E. Neuman, James A. Steinback or Carolyn A.
Berry (each, a "Controlling Shareholder") or their affiliates participate, or
(ii) the Merger is not consummated for any of the following reasons: (A) the
Company's Board of Directors authorizes or recommends, or the Company enters
into an agreement or agreement in principle or closes, an Acquisition
Transaction (other than the Merger) or the Company's Board of Directors fails to
recommend, or adversely modifies or withdraws its recommendation, to the
Company's shareholders that they vote to approve the Merger as a result of
Section 7.01(d), or takes any action to abandon or terminate this Agreement in
accordance with Section 7.01(d), (B) a Controlling Shareholder or the Company
fails to call a Shareholders' Meeting, or (C) the shareholders of the Company
approve an Acquisition Transaction (other than the Merger), then the Company
will promptly, but in no event later than three business days after the first of
such events to occur, pay $2,000,000 to the Parent, plus an amount not to exceed
$500,000 for the transaction expenses incurred by the Merger Sub and the Parent.
(b) The parties agree that the payment of the fees and expenses
required pursuant to and in the manner set forth in this Section 5.10 is a
material inducement to the Parent and the Merger Sub to enter into this
Agreement and is intended to compensate the Parent and the Merger Sub for the
opportunity costs and risks of entering into this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Parties' Obligations. The respective obligations
of each party to effect the Transactions shall be subject to the fulfillment at
or prior to the Effective Time of the following conditions:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of the outstanding Common Shares of the
Company entitled to vote thereon.
(b) Any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.
(c) No (i) order issued by any United States federal or state or
foreign governmental or regulatory authority or body and no statute, rule,
regulation or executive order promulgated or enacted by any United States
federal or state or foreign government or governmental authority shall be in
effect which, or (ii) action, suit, or proceeding shall be pending before any
court or quasi judicial or administrative agency of any federal, state, local,
or foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge which, would (A) prevent
26
consummation of any of the Transactions or (B) cause any of the Transactions to
be rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect).
SECTION 6.02 Conditions to the Parent's and the Merger Sub's Obligation to
Effect the Merger. The obligations of the Parent and the Merger Sub to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following additional conditions:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects as if made on
and as of the Effective Time.
(b) The Company shall have performed in all material respects each
covenant and complied with each agreement to be performed and complied with by
them hereunder.
(c) At the time of Closing, holders of no more than 5% of the
outstanding Common Shares shall have dissented and preserved their rights to
seek appraisal.
(d) The Company shall have furnished to the Parent a certificate dated
as of the Effective Time in which the Company shall certify that an appropriate
inquiry has been made of the principal executive officers of the Company having
principal responsibilities for the matters as to which representations and
warranties have been made by the Company in this Agreement and for the
performance of the covenants of the Company set forth in this Agreement, and
after completion of such inquiry, the Company has no reason to believe that the
conditions set forth in Section 6.02(a) and Section 6.02(b) have not been
fulfilled. The parties hereto acknowledge and agree that, absent fraud, the
officer(s) of the Company executing the certificate described above on behalf of
the Company shall have no personal liability in respect of such certificate.
(e) Mr. Werner E. Neuman and the Company shall have entered into a
Consulting and Noncompetition Agreement effective January 1, 1999 in the form
heretofore agreed among Mr. Neuman, the Company and the Parent, and such
agreement shall be in full force and effect.
(f) The Parent shall have obtained the debt financing in the amount
identified in the commitment letter referenced in Section 4.06 above on terms
and conditions which are substantially similar to the Parent and its affiliates
than the terms and conditions set forth on such commitment letter.
(g) The Parent shall have received from the Company's counsel,
D'Ancona & Pflaum, an opinion, addressed to the Parent and its senior lenders,
dated as of the Effective Time, subject to customary qualifications and
exceptions, to the effect that (i) this Agreement and all other agreements
entered into by the Company or Controlling Shareholders in connection with the
Transactions have been duly authorized by the Board of Directors of the Company
(in case of the Company) and are valid, binding and enforceable in accordance
with their respective terms and (ii) the Articles of Merger have been filed in
accordance with applicable law and upon filing of the Articles of Merger in
Illinois, the Merger has been duly consummated and is effective under Illinois
law.
27
(h) The fees and expenses of legal counsel, investment bankers and
accountants (including any representatives of legal counsel, investment bankers
or accountants) incurred in connection with this Agreement and the consummation
of the transactions contemplated hereby and paid or payable by the Company
(whether before or after the Closing) shall not have exceeded $1,250,000 in the
aggregate.
SECTION 6.03 Conditions to the Company's Obligation to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) All representations and warranties of the Parent and the Merger
Sub in this Agreement shall be true and correct in all material respects as if
made on and as of the Effective Time.
(b) Each of the Parent and the Merger Sub shall have performed in all
material respects each covenant and complied with each agreement to be performed
and complied with by it hereunder (including, without limitation, deposit of the
Aggregate Common Share Merger Price with the Paying Agent).
(c) The Company will have received from the Parent's counsel, Kirkland
& Ellis, an opinion, addressed to the Company, dated as of the Effective Time,
subject to customary qualifications and exceptions, to the effect that (i) this
Agreement and all other agreements entered into by the Parent or the Merger Sub
in connection with the Transactions have been duly authorized by the Board of
Directors of the Parent or the Merger Sub, as the case may be, and are valid,
binding and enforceable in accordance with their respective terms.
(d) Each of the Parent and the Merger Sub shall have furnished to the
Company a certificate dated as of the Effective Time in which the Parent or the
Merger Sub, as the case may be, shall certify that an appropriate inquiry has
been made of its executive officers having principal responsibilities for the
matters as to which representations and warranties have been made by the Parent
or the Merger Sub, as the case may be, in this Agreement and for the performance
of the covenants of the Parent or the Merger Sub, as the case may be, set forth
in this Agreement, and after completion of such inquiry, the Parent or the
Merger Sub, as the case may be, has no reason to believe that the conditions set
forth in Section 6.03(a) and Section 6.03(b) have not been fulfilled. The
parties hereto acknowledge and agree that, absent fraud, the officer(s) of the
Parent or the Merger Sub, as the case may be, executing the certificate
described above on behalf of the Parent or the Merger Sub, as the case may be,
shall have no personal liability in respect of such certificate.
SECTION 6.04 Satisfaction or Waiver of Conditions. The conditions set forth
in this Article VI shall be deemed to have been satisfied for purposes of this
Agreement if, as and when (a) the conditions in Section 6.01 have been satisfied
or waived by the Parent, the Merger Sub and the Company in writing; (b) the
conditions in Section 6.02 shall have been satisfied or waived by the Parent and
the Merger Sub in writing; and (c) the conditions in Section 6.03 shall have
been satisfied or waived by the Company in writing.
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ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
SECTION 7.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company (with
any termination by the Parent also being an effective termination by the Merger
Sub):
(a) by the mutual written consent of the Boards of Directors (or duly
authorized committees thereof) of the Parent, the Merger Sub and the Company;
(b) by any party if (i) the Company's shareholders fail to approve
this Agreement at the Shareholders' Meeting or (ii) the Merger shall not have
been consummated on or before the Termination Date; provided that if any
condition to this Agreement shall fail to be satisfied by reason of the
existence of an injunction or order of any court or governmental or regulatory
body, then at the request of any party the deadline date referred to above shall
be extended for a reasonable period of time, not in excess of 30 days, to permit
the parties to have such injunction vacated or order reversed;
(c) by the Company, in the event of a material breach by the Parent or
the Merger Sub of any representation, warranty or agreement of the Parent or the
Merger Sub contained in this Agreement, in each case which has not been cured or
is not curable by the earlier of (i) the Termination Date or (ii) the 30th day
after notice of such breach was given to the Parent or the Merger Sub (as the
case may be);
(d) by the Company, if the Company receives a firm proposal with
respect to an Acquisition Transaction which its Board of Directors determines,
in the exercise of its fiduciary duties as advised by counsel, contains terms
that are more favorable to the Company and its constituents, taken as a whole,
than the Merger;
(e) by the Parent, in the event of a material breach by the Company of
any representation, warranty or agreement of the Company contained in this
Agreement which has not been cured or is not curable by the earlier of (i) the
Termination Date or (ii) the 30th day after notice of such breach was given to
the Company;
(f) by the Parent upon the occurrence of any event described in
5.10(a)(i) or 5.10(a)(ii); or
(g) by either party if the conditions to be satisfied by the other
party pursuant to Article VI hereof shall not have been satisfied (or waived)
prior to the Termination Date.
SECTION 7.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or shareholders, other than the provisions of Section
5.10 with respect to the payment of the breakup fee and expense
29
reimbursement as described therein, the last sentence of Section 5.02, which in
each case shall survive any such termination. Nothing contained in this Section
7.02 shall relieve any party from liability for any breach of the
Confidentiality Agreement.
SECTION 7.03 Expense Reimbursement for Company. In the event this
Agreement is terminated by the Company pursuant to Section 7.01(c) hereof,
Parent shall promptly pay to the Company an amount equal to the actual out-of-
pocket fees and expenses reasonably incurred by the Company in connection with
the Merger and the transactions contemplated by this Agreement.
SECTION 7.04 Amendment. This Agreement may be amended by the
Company, the Parent and the Merger Sub at any time before or after any approval
of this Agreement by the shareholders of the Company but, after any such
approval, no amendment shall be made which decreases the Merger Price or which
adversely affects the rights of the Company's shareholders hereunder without the
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 7.05 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any other
party or in any document, certificate or writing delivered pursuant hereto by
any other party or (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
DEFINITIONS
"Acquisition Transaction" has the meaning set forth in Section 5.09.
-----------------------
"affiliate" has the meaning set forth in Section 9.09(a).
---------
"Agreement" has the meaning set forth in the preamble.
---------
"Antitrust Laws" has the meaning set forth in Section 5.04(b).
--------------
"Certificates" has the meaning set forth in Section 2.02(a).
------------
"Closing Invoice Amount" has the meaning set forth in Section 1.07.
----------------------
"Code" has the meaning set forth in Section 3.13(a).
----
"Common Shares" has the meaning set forth in the preamble.
-------------
"Company" has the meaning set forth in the preamble.
-------
30
"Company Controlled Group" has the meaning set forth in Section 3.13(a).
------------------------
"Company Disclosure Statement" has the meaning set forth in Article III.
----------------------------
"Company Representatives" has the meaning set forth in Section 5.02.
-----------------------
"Confidentiality Agreement" has the meaning set forth in Section 9.02(a).
-------------------------
"Consent" has the meaning set forth in Section 3.05(b).
-------
"Constituent Corporations" has the meaning set forth in the preamble.
------------------------
"control" has the meaning set forth in Section 9.09(a).
-------
"Controlling Shareholder" has the meaning set forth in Section 5.10(a).
-----------------------
"Dissenting Shares" has the meaning set forth in Section 2.01.
-----------------
"Effective Time" has the meaning set forth in Section 1.02.
--------------
"Employee Benefit Arrangement" has the meaning set forth in Section
----------------------------
5.01(e).
"Environment and Safety Requirements" has the meaning set forth in
-----------------------------------
Section 3.23(j).
"Environmental Lien" has the meaning set forth in Section 3.23(k).
------------------
"ERISA" has the meaning set forth in Section 3.13(a).
-----
"Exchange Act" has the meaning set forth in Section 3.05(b).
------------
"Favorable Third Party Proposal" has the meaning set forth in Section
------------------------------
5.09(a).
"GAAP" has the meaning set forth in Section 3.06(b).
----
"Governmental Entity" has the meaning set forth in Section 3.05(b).
-------------------
"HSR" has the meaning set forth in Section 3.05(b).
---
"Illinois Act" has the meaning set forth in Section 1.01.
------------
"Indemnified Parties" has the meaning set forth in Section 5.06(a).
-------------------
"IRS" has the meaning set forth in Section 3.13(g).
---
"Lien" has the meaning set forth in Section 3.03.
----
31
"Material Adverse Effect on the Company" has the meaning set forth in
--------------------------------------
Section 3.10.
"Material Adverse Effect on the Parent" has the meaning set forth in
-------------------------------------
Section 4.01.
"Merger" has the meaning set forth in the preamble.
------
"Merger Price" has the meaning set forth in Section 1.07.
------------
"Merger Sub" has the meaning set forth in the preamble.
----------
"Merger Sub Shares" has the meaning set forth in the preamble.
-----------------
"Multiemployer Plan" has the meaning set forth in Section 3.13(b).
------------------
"Option" has the meaning set forth in Section 1.09.
------
"Option Plans" has the meaning set forth in Section 3.03.
------------
"Other Filings" has the meaning set forth in Section 3.07.
-------------
"Parent" has the meaning set forth in the preamble.
------
"Parent Representatives" has the meaning set forth in Section 5.02.
----------------------
"Paying Agent" has the meaning set forth in Section 2.02(a).
------------
"Permitted Liens" has the meaning set forth in Section 3.15.
---------------
"Person" has the meaning set forth in Section 9.09(b).
------
"Plans" has the meaning set forth in Section 3.13(a).
-----
"Proprietary Rights" has the meaning set forth in Section 3.18.
------------------
"Proxy Statement" has the meaning set forth in Section 1.10(a)(ii).
---------------
"SEC" has the meaning set forth in Section 1.10(a)(ii).
---
"SEC Reports" has the meaning set forth in Section 3.06(a).
-----------
"Securities Act" has the meaning set forth in Section 3.06(a).
--------------
"September Balance Sheet" has the meaning set forth in Section 3.19.
-----------------------
"Shareholders' Meeting" has the meaning set forth in Section 1.10(a)(i).
---------------------
32
"Subsidiaries" has the meaning set forth in Section 3.01.
"Surviving Corporation" has the meaning set forth in the preamble.
"Taxes" has the meaning set forth in Section 3.22(a).
"Termination Date" has the meaning set forth in Section 5.10(a).
"Violation" has the meaning set forth in Section 3.05(a).
"Voting Debt" has the meaning set forth in Section 3.03.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 2.02, the last sentence of Section 5.03, Section 5.06 and the last
sentence Section 5.02 shall survive the Effective Time indefinitely (except to
the extent a shorter period of time is explicitly specified therein).
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) and the letter agreement dated January 6, 1998 (the
"Confidentiality Agreement"), constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party (except that the Parent may assign its rights and the Merger Sub may
assign its rights, interest and obligations to any affiliate or direct or
indirect subsidiary of the Parent without the consent of the Company). 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 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
33
If to the Parent or the Merger Sub:
----------------------------------
c/o CII Technologies, Inc.
1396 Charlotte Hwy.
Fairview, NC 28730
Attention: President
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Attention: Sanford E. Perl
If to the Company:
-----------------
Corcom, Inc.
844 East Rockland Road
Libertyville, IL 60048
Attention: Werner E. Neuman
with a copy to:
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, IL 60602
Attention: Walter Roth
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
SECTION 9.06 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
34
SECTION 9.08 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except with respect
to Sections 1.09, 5.06 and 5.07, nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.09 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any person, shall mean any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term "Subsidiary" or "subsidiaries" means, with respect to
the Parent, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which the Parent, the Company or such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
* * * *
35
IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its respective officer thereunto
duly authorized, all as of the day and year first above written.
COMMUNICATIONS INSTRUMENTS, INC.
By:______________________________
Name:____________________________
Title:___________________________
RF ACQUISITION CORP.
By:______________________________
Name:____________________________
Title:___________________________
CORCOM, INC.
By:______________________________
Name:____________________________
Title:___________________________