EXHIBIT 2.1
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NS ACQUISITION CORP.
AND
NATIONAL SERVICE INDUSTRIES, INC.
DATED AS OF APRIL 1, 2003
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AGREEMENT AND PLAN OF MERGER
Table of Contents
Page
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ARTICLE I. THE MERGER..................................................... 2
Section 1.1. The Merger....................................................... 2
Section 1.2. Effective Time; Closing.......................................... 2
Section 1.3. Effect of the Merger............................................. 2
Section 1.4. Conversion of Company Common Stock............................... 2
Section 1.5. Changes in Shares................................................ 3
Section 1.6. Dissenting Shares................................................ 3
Section 1.7. Stock Options.................................................... 4
Section 1.8. Restricted Stock................................................. 4
Section 1.9. Employee Stock Purchase Plan..................................... 4
Section 1.10. Surrender of Shares of Company Common Stock; Stock Transfer Books 5
ARTICLE II. THE SURVIVING CORPORATION...................................... 7
Section 2.1. Certificate of Incorporation..................................... 7
Section 2.2. Bylaws........................................................... 7
Section 2.3. Directors and Officers........................................... 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 7
Section 3.1. Organization and Standing........................................ 7
Section 3.2. Capitalization................................................... 8
Section 3.3. Authority for Agreement.......................................... 9
Section 3.4. No Conflict...................................................... 10
Section 3.5. Required Filings and Consents.................................... 11
Section 3.6. Permits; Compliance.............................................. 11
Section 3.7. SEC Filings, Financial Statements................................ 11
Section 3.8. Absence of Certain Changes or Events............................. 12
Section 3.9. Taxes............................................................ 12
Section 3.10. Assets........................................................... 15
Section 3.11. Change of Control Arrangements................................... 15
Section 3.12. Litigation....................................................... 16
Section 3.13. Material Contracts............................................... 16
Section 3.14. Information Supplied............................................. 17
Section 3.15. Employee Benefit Plans........................................... 17
Section 3.16. Labor and Employment Matters..................................... 19
Section 3.17. Environmental Compliance and Disclosure.......................... 20
Section 3.18. Intellectual Property............................................ 21
Section 3.19. Brokers.......................................................... 22
Section 3.20. Insurance Policies............................................... 22
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER..................... 23
Section 4.1. Organization and Standing........................................ 23
Section 4.2. Authority for Agreement.......................................... 23
Section 4.3. No Conflict...................................................... 23
Section 4.4. Required Filings and Consents.................................... 23
Section 4.5. Information Supplied............................................. 24
Section 4.6. Brokers.......................................................... 24
Section 4.7. No Prior Activities; Financing................................... 24
Section 4.8. Ownership of Company Common Stock................................ 25
ARTICLE V. COVENANTS...................................................... 25
Section 5.1. Conduct of the Business Pending the Merger....................... 25
Section 5.2. Access to Information; Confidentiality........................... 27
Section 5.3. Notification of Certain Matters.................................. 27
Section 5.4. Further Assurances............................................... 27
Section 5.5. No Solicitation of Transactions.................................. 28
Section 5.6. Stockholder Litigation........................................... 30
Section 5.7. Indemnification, Exculpation and Insurance....................... 30
Section 5.8. Public Announcements............................................. 31
Section 5.9. Company Stockholders' Meeting.................................... 31
Section 5.10. Proxy Statement.................................................. 32
Section 5.11. Director Resignations............................................ 32
Section 5.12. No Acquisition of Company Common Stock........................... 33
Section 5.13. Employee Matters................................................. 33
Section 5.14. Rights Agreement................................................. 34
Section 5.15. Commitment Letters............................................... 34
ARTICLE VI. CONDITIONS.................................................. 35
Section 6.1. Conditions to the Obligation of Each Party....................... 35
Section 6.2. Conditions to Obligations of Buyer to Effect the Merger.......... 35
Section 6.3. Conditions to Obligations of the Company to Effect the Merger.... 36
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER........................... 37
Section 7.1. Termination...................................................... 37
Section 7.2. Effect of Termination............................................ 38
Section 7.4. Amendments....................................................... 40
Section 7.5. Waiver........................................................... 40
ARTICLE VIII. GENERAL PROVISIONS.......................................... 40
Section 8.1. No Third Party Beneficiaries..................................... 40
Section 8.2. Entire Agreement................................................. 40
Section 8.3. Succession and Assignment........................................ 40
Section 8.4. Counterparts..................................................... 41
Section 8.5. Headings......................................................... 41
Section 8.6. Governing Law.................................................... 41
Section 8.7. Severability..................................................... 41
Section 8.8. Specific Performance............................................. 41
Section 8.9. Construction..................................................... 41
Section 8.10. Non-Survival of Representations and Warranties and Agreements.... 41
Section 8.11. Certain Definitions.............................................. 42
Section 8.12. Fees and Expenses................................................ 43
Section 8.13. Notices.......................................................... 43
Section 8.14. Consent to Jurisdiction; Waiver of Trial by Jury................. 43
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 1,
2003, by and between NS ACQUISITION CORP., a Delaware corporation ("Buyer"), and
NATIONAL SERVICE INDUSTRIES, INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effect the acquisition of
the Company by the stockholders of Buyer;
WHEREAS, in furtherance of the foregoing, upon the terms and subject to
the conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), Buyer will merge with and into the Company (the
"Merger") in accordance with the provisions of the DGCL, with the Company as the
surviving corporation;
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger and this Agreement are fair to, and in the best interests of,
the Company and the holders of the common stock, par value $1.00 per share, of
the Company (the "Company Common Stock");
WHEREAS, the Board of Directors of Buyer has approved this Agreement and
the Merger, upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has unanimously approved
this Agreement and the Merger, and the transactions contemplated hereby, which
approval was based in part on the opinion of SunTrust Robinson Humphrey (the
"Financial Advisor"), financial advisor to the Board of Directors of the
Company, that, as of the date of such opinion and based on the assumptions,
qualifications and limitations contained therein, the consideration to be
received by the Company's stockholders for their shares of Company Common Stock
in the Merger is fair, from a financial point of view, to those stockholders;
WHEREAS, the Board of Directors of the Company has declared the Merger
advisable and, subject to the terms and conditions of this Agreement, has
unanimously resolved to recommend that the holders of the Company Common Stock
approve the Merger, this Agreement and the transactions contemplated hereby; and
WHEREAS, simultaneously with the execution of this Agreement and as a
condition and inducement to the willingness of Buyer to enter into this
Agreement, King & Spalding LLP has issued an opinion to the Company, as required
under the Tax Disaffiliation Agreement (as hereinafter defined), to the effect
that the Merger, this Agreement and the transactions contemplated hereby will
not cause Section 355(e) or 355(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), to apply to the Company's spin-off of Acuity Brands, Inc.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the DGCL, at the Effective Time (as
hereinafter defined), Buyer shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Buyer shall cease and
the Company shall continue as the surviving corporation following the Merger
(the "Surviving Corporation"). The corporate existence of the Company, with all
its purposes, rights, privileges, franchises, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the State of Delaware.
Section 1.2. Effective Time; Closing. As promptly as practicable (and in
any event within five (5) business days) after the satisfaction or waiver of the
conditions set forth in Article VI hereof, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware and by making all
other filings or recordings required under the DGCL in connection with the
Merger, in such form as is required by, and executed in accordance with the
relevant provisions of, the DGCL. The Merger shall become effective at such time
as the Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware, or at such other time as shall be specified in the
Certificate of Merger (the date and time the Merger becomes effective, the
"Effective Time"). On the date of such filing (the "Closing Date"), a closing
(the "Closing") shall be held at 10:00 a.m., Eastern Standard Time, at the
offices of King & Spalding LLP, 191 Peachtree Street, Atlanta, Georgia 30303, or
at such other time and location as the parties hereto shall otherwise agree.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Buyer shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Buyer shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
Section 1.4. Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, the Company or
the holders of any capital stock of Buyer or the Company, the capital stock of
the Company and Buyer shall be converted as follows:
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(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares cancelled
pursuant to Section 1.4(b) and Dissenting Shares (as hereinafter defined),
if any) (together with the associated preferred stock purchase rights)
shall be canceled and converted into the right to receive an amount in
cash equal to TEN DOLLARS ($10.00) payable, without interest, to the
holder of such share of Company Common Stock, upon surrender of the
certificate that formerly evidenced such share of Company Common Stock in
the manner provided in Section 1.10 (the "Merger Consideration");
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is owned by Buyer and each
share of Company Common Stock that is owned by the Company as treasury
stock shall be canceled and retired and cease to exist and no payment or
distribution shall be made with respect thereto;
(c) All shares of the Company Common Stock converted pursuant to
Section 1.4(a) shall no longer be outstanding and shall automatically be
canceled and retired and cease to exist, and each holder of a certificate
("Certificate") representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration in accordance with this Agreement; and
(d) Each share of common stock, par value $.0001 per share, of Buyer
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $.0001 per share, of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
Section 1.5. Changes in Shares. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Company Common Stock shall have
been changed into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination, exchange of shares or similar transaction, the Merger Consideration
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction.
Section 1.6. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock that are issued and outstanding immediately
prior to the Effective Time and which are held by holders of Company
Common Stock (the "Company Stockholders") who have demanded and perfected
their demands for appraisal of such shares of Company Common Stock in the
time and manner provided in Section 262 of the DGCL and, as of the
Effective Time, have neither effectively withdrawn nor lost their rights
to such appraisal and payment under the DGCL (the "Dissenting Shares")
shall not be converted as described in Section 1.4(a), but shall, by
virtue of the Merger, be entitled to only such rights as are granted by
Section 262 of the DGCL; provided,
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however, that if such holder shall have failed to perfect or shall have
effectively withdrawn or lost his, her or its right to appraisal and
payment under the DGCL, such holder's shares of Company Common Stock shall
thereupon be deemed to have been converted, at the Effective Time, as
described in Section 1.4(a), into the right to receive the Merger
Consideration set forth in such provisions, without any interest thereon.
(b) The Company shall give Buyer prompt notice of any demands for
appraisal pursuant to Section 262 of the DGCL received by the Company or
withdrawals of such demands, and Buyer shall have the right to participate
in and direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Buyer or as otherwise required by applicable law, make any payment with
respect to any such demands for appraisal or offer to settle or settle any
such demands.
Section 1.7. Stock Options. Prior to the Effective Time, the Company shall
use its commercially reasonable efforts to provide that each option granted
under any stock option or compensation plan or arrangement to acquire Company
Common Stock (each, a "Company Option") which is outstanding immediately prior
to the Effective Time, whether or not then exercisable, shall be cancelled,
effective as of the Effective Time, in exchange for a single lump sum cash
payment equal to the product of (i) the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time and (ii)
the excess, if any, of the Merger Consideration over the exercise price per
share of such Company Option; provided, however, if the exercise price per share
of any such Company Option is equal to or greater than the Merger Consideration,
such Company Option shall be cancelled in exchange for such cash payment, if
any, as shall be reasonably agreed to by the parties hereto. From and after the
Effective Time, the Surviving Corporation shall take or cause to be taken any
and all actions reasonably necessary to give effect to the treatment of Company
Options pursuant to this Section 1.7. The holders of the Company Options shall
be entitled to enforce this Section 1.7 against the Surviving Corporation.
Section 1.8. Restricted Stock. Prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any committee thereof) shall take
all actions necessary and appropriate to provide that, at the Effective Time,
each share of restricted Company Common Stock granted under any compensation
plan or arrangement which is outstanding immediately prior to the Effective Time
which was theretofore unvested shall become fully vested and shall be canceled
and converted into the right to receive the Merger Consideration pursuant to
Section 1.4(a). Each share of unissued restricted Company Common Stock
underlying a performance-based award granted under any stock option or
compensation plan or arrangement (each, a "Company Restricted Stock Award")
which is outstanding immediately prior to the Effective Time shall be issued in
amounts reflecting full satisfaction of any performance criteria and shall be
deemed fully vested, effective as of the Effective Time, and shall be canceled
and converted into the right to receive the Merger Consideration pursuant to
Section 1.4(a).
Section 1.9. Employee Stock Purchase Plan. Prior to the Effective Time,
the Company shall take all actions necessary and appropriate to provide that the
Company's Employee Stock
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Purchase Plan (the "ESPP") shall be terminated and purchases under the ESPP
shall be terminated effective on or prior to the Effective Time.
Section 1.10. Surrender of Shares of Company Common Stock; Stock Transfer
Books.
(a) Prior to the Effective Time, Buyer shall designate EquiServe,
L.P. (or if EquiServe, L.P. is otherwise unwilling or unable to serve on
terms reasonably acceptable to Buyer, another bank or trust company
reasonably acceptable to the Company) to act as agent (the "Paying Agent")
for the holders of shares of Company Common Stock to receive the funds
necessary to make the payments to such holders pursuant to Section 1.4
upon surrender of their Certificates. Buyer will, as of the Effective
Time, deposit with the Paying Agent the aggregate Merger Consideration to
be paid in respect of the shares of Company Common Stock (the "Fund"). The
Fund shall be invested by the Paying Agent as directed by Buyer. Any net
profit resulting from, or interest or income produced by, such
investments, shall be payable to the Surviving Corporation. Buyer shall
replace any monies lost through any investment made pursuant to this
Section 1.10(a). The Paying Agent shall make the payments provided in
Section 1.4.
(b) Within ten (10) days after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the
Effective Time, a holder of record of shares of Company Common Stock
entitled to receive the Merger Consideration pursuant to Section 1.4 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 (which letter of transmittal and instructions shall
be subject to the reasonable approval of the Company prior to the
Effective Time) in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such
other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration for each share of Company Common Stock
formerly evidenced by such Certificate, and such Certificate shall then be
canceled. Until so surrendered, each such Certificate shall, at and after
the Effective Time, represent for all purposes, only the right to receive
such Merger Consideration. No interest shall accrue or be paid to any
beneficial owner of shares of Company Common Stock or any holder of any
Certificate with respect to the Merger Consideration payable upon the
surrender of any Certificate. If payment of the Merger Consideration is to
be made to a person other than the person in whose name the surrendered
Certificate is registered on the stock transfer books of the Company, it
shall be a condition of payment that the Certificate so surrendered shall
be endorsed in blank or to the Paying Agent or otherwise be in proper form
for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable. If any Certificate shall have been lost, stolen or destroyed,
upon making of an affidavit of that fact by the person claiming such
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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 applicable Merger Consideration such holder
is entitled to receive pursuant to Section 1.4.
(c) At any time following twelve (12) months after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying
Agent to deliver to it any portion of the Fund which had been made
available to the Paying Agent and not disbursed to holders of shares of
Company Common Stock (including, without limitation, all interest and
other income received by the Paying Agent in respect of all amounts held
in the Fund or other funds made available to it), and thereafter each such
holder shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws), and only
as general creditors thereof, with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by such
holder. If any Certificates representing shares of Company Common Stock
shall not have been surrendered prior to two (2) years after the Effective
Time (or immediately prior to such earlier date on which the Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as hereinafter defined)),
any such cash, shares, dividends or distributions payable in respect of
such Certificate shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a share of Company Common Stock for any Merger
Consideration delivered in respect of such share of Company Common Stock
to a public official pursuant to any abandoned property, escheat or other
similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company.
From and after the Effective Time, the holders of shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except
as otherwise provided herein or by applicable law, and all cash paid
pursuant to this Article I upon the surrender or exchange of Certificates
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented
by such Certificate.
(e) The Surviving Corporation and the Paying Agent, as the case may
be, shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock and Company Options such amounts that the Surviving
Corporation or the Paying Agent is required to deduct and withhold with
respect to the making of such payment under the Code, the rules and
regulations promulgated thereunder or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation or the Paying Agent, such amounts shall be treated
for all purposes of this Agreement as
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having been paid to the holder of the shares of Company Common Stock and
Company Options in respect of which such deduction and withholding was
made by the Surviving Corporation or the Paying Agent.
ARTICLE II.
THE SURVIVING CORPORATION
Section 2.1. Certificate of Incorporation. The Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended to read in its entirety as set forth in Exhibit 2.1
attached hereto and as so amended shall be the Certificate of Incorporation of
the Surviving Corporation, until the same shall thereafter be altered, amended
or repealed in accordance with applicable law or such Certificate of
Incorporation.
Section 2.2. Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be amended to read in its entirety as set
forth in Exhibit 2.2 attached hereto and as so amended shall be the Bylaws of
the Surviving Corporation, until the same shall thereafter be altered, amended
or repealed in accordance with applicable law, the Certificate of Incorporation
of the Surviving Corporation or such Bylaws.
Section 2.3. Directors and Officers. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Buyer at the Effective Time shall be the
directors of the Surviving Corporation, and (ii) the officers of Buyer at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Letter delivered by the
Company to the other parties hereto concurrently with the execution of this
Agreement (the "Company Disclosure Letter"), the Company represents and warrants
to each of the other parties hereto, as of the date hereof (or, if made as of a
specified date, as of such date), as follows:
Section 3.1. Organization and Standing. Each of the Company and each
Subsidiary (as hereinafter defined) (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has full corporate power and authority and all necessary
government approvals to own, lease and operate its properties and assets and to
conduct its business as presently conducted and (iii) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse
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Effect (as hereinafter defined). The Company has furnished or made available to
Buyer true and complete copies of its certificate of incorporation (including
any certificates of designations attached thereto, the "Company Certificate of
Incorporation") and bylaws (the "Company Bylaws") and the certificate of
incorporation and bylaws (or equivalent organizational documents) of each
Subsidiary, each as amended to date. Such certificate of incorporation, bylaws
or equivalent organizational documents are in full force and effect, and neither
the Company nor any Subsidiary is in material violation of any provision of its
certificate of incorporation, bylaws or equivalent organizational documents.
Section 3.2. Capitalization. The authorized capital stock of the Company
consists of 120,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, no par value per share (the "Preferred Stock"). As of March 31,
2003, (i) 11,195,973 shares of Company Common Stock are issued and outstanding
(including 678,299 shares of unvested restricted Company Common Stock), all of
which are validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 3,282,527 shares of Company Common Stock are held in the treasury
of the Company, (iii) 1,201,084 Company Options are outstanding pursuant to the
Company's incentive compensation plans, each such option entitling the holder
thereof to purchase one share of Company Common Stock, (iv) 46,414 shares of
Company Common Stock are issuable pursuant to outstanding Company Restricted
Stock Awards, (v) 854,398 shares of Company Common Stock are authorized and
reserved for future issuance pursuant to such incentive compensation plans, (vi)
approximately 4,425 shares are subject to outstanding purchase rights under the
ESPP (assuming the purchase of shares of Company Common Stock under the ESPP
based on the closing price per share of Company Common Stock on March 3, 2003),
and (vii) no shares of Preferred Stock are issued or outstanding. Section 3.2 of
the Company Disclosure Letter sets forth a correct and complete list, as of
March 31, 2003, of the outstanding Company Options with the exercise price and
of the outstanding Company Restricted Stock Awards. Except as set forth above or
in Section 3.2 of the Company Disclosure Letter, as of March 31, 2003, there are
no options, warrants, convertible securities, subscriptions, stock appreciation
rights, phantom stock plans or stock equivalents or other rights, agreements,
arrangements or commitments (contingent or otherwise) of any character issued or
authorized by the Company relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or options, warrants, convertible
securities, subscriptions or other equity interests in, the Company or any
Subsidiary. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. Except as set forth in Section
3.2 of the Company Disclosure Letter, there are no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any shares of Company Stock or any capital stock of any Subsidiary or to
pay any dividend or make any other distribution in respect thereof or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any person. Section 3.2 of the Company Disclosure Letter sets
forth a correct and complete list of each corporation, association, subsidiary,
partnership, limited liability company or other entity of which the Company
controls, directly or indirectly, 50% or more of the outstanding equity
interests (each a "Subsidiary" and collectively, the "Subsidiaries"). Except as
set forth in Section 3.2 of the Company Disclosure Letter, the Company owns
beneficially and of record all of the
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issued and outstanding capital stock of each Subsidiary. Each outstanding share
of capital stock of each Subsidiary that is a corporation is duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights, and
each such share owned by the Company or another Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever.
Section 3.3. Authority for Agreement.
(a) The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and, subject
to obtaining necessary stockholder approval, to consummate the Merger and
the other transactions contemplated by this Agreement. The execution,
delivery and performance by the Company of this Agreement, and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement, other
than, with respect to the Merger, the approval and adoption of this
Agreement by the Company Stockholders and the filing and recordation of
appropriate merger documents as required by the DGCL. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Buyer, constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms. Based, in part, on the representation of Buyer
in Section 4.8, the affirmative vote of holders of a majority of the
outstanding shares of Company Common Stock entitled to vote at a duly
called and held meeting of stockholders is the only vote of the Company's
Stockholders necessary to approve this Agreement, the Merger and the other
transactions contemplated by this Agreement.
(b) At a meeting duly called and held on April 1, 2003, the Board of
Directors of the Company unanimously (i) determined that this Agreement
and the other transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the Company and the Company
Stockholders, (ii) approved, authorized and adopted this Agreement, the
Merger and the other transactions contemplated hereby, and (iii) declared
this Agreement advisable and resolved to recommend approval and adoption
of this Agreement and the Merger by the Company Stockholders. Based, in
part, on the representation of Buyer in Section 4.8, the actions taken by
the Board of Directors of the Company constitute all necessary approval of
the Merger, this Agreement and the other transactions contemplated hereby
by the Board of Directors of the Company under the provisions of the
Rights Agreement (as hereinafter defined), Articles Twelfth and Thirteenth
of the Company Certificate of Incorporation, and Section 203 of the DGCL.
Section 203 of the DGCL will not apply with respect to or as a result of
this Agreement and the transactions contemplated hereby, including the
Merger, without any further action on the part of the Company's Board of
Directors or stockholders. Other than Section 203 of the DGCL, no other
state antitakeover or similar statute is applicable to the Company in
connection with the Merger, this Agreement or
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any of the transactions contemplated hereby. For purposes of this
Agreement, the "Rights Agreement" shall mean that certain Amended and
Restated Rights Agreement, dated December 17, 1997, as amended, by and
between the Company and EquiServe, L.P. (as successor-in-interest to First
Chicago Trust Company of New York). Except for the Rights Agreement,
neither the Company nor any Subsidiary has any rights plan, "poison pill"
or similar arrangement.
(c) The Rights Agreement has been amended so that: (i) Buyer is
exempt from the definition of "Acquiring Person" contained in the Rights
Agreement, and no "Stock Acquisition Date" or "Distribution Date" or
"Triggering Event" (as such terms are defined in the Rights Agreement)
will occur as a result of the execution of this Agreement or the
consummation of the Merger and the other transactions contemplated hereby;
and (ii) the Rights Agreement will terminate and the Rights (as defined in
the Rights Agreement) will expire at the Effective Time. The Rights
Agreement, as so amended, has not been further amended or modified. True
and complete copies of the Rights Agreement and of all amendments thereto
through the date hereof have been previously provided to Buyer.
(d) The Financial Advisor has delivered to the Board of Directors of
the Company its written opinion, dated as of the date of this Agreement,
that, as of such date and based on the assumptions, qualifications and
limitations contained therein, the Merger Consideration to be received by
the Company Stockholders in the Merger is fair to such holders from a
financial point of view. A copy of such opinion is attached to the Company
Disclosure Letter.
Section 3.4. No Conflict. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) based, in part, on the representation of Buyer in
Section 4.8, conflict with or violate the Company Certificate of Incorporation
or Company Bylaws or equivalent organizational documents of any of the
Subsidiaries, (ii) subject to Section 3.5, conflict with or violate in any
material respect any United States federal, state or local or any foreign
statute, law, rule, regulation, ordinance, code, order, judgment, decree or any
other requirement or rule of law (a "Law") applicable to the Company or any of
the Subsidiaries or by which any property or asset of the Company or any of the
Subsidiaries is bound or affected, or (iii) except as set forth in Section 3.4
of the Company Disclosure Letter, result in a breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, result in triggering any payment or other obligations, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any of the Subsidiaries 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 property or
asset of any of them is bound or affected, except, in the case of clause (iii)
above, for any such conflicts, violations, breaches, defaults or other
occurrences which would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
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Section 3.5. Required Filings and Consents. The execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state or local or
any foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), except (i) for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) filing
and recordation of appropriate merger documents as required by the DGCL, and
(iii) for those required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act").
Section 3.6. Permits; Compliance. The Company and each Subsidiary is in
possession of all authorizations, licenses, permits, certificates, approvals and
clearances of any Governmental Entity necessary for the Company and each such
Subsidiary to own, lease and operate its properties or to carry on its
respective businesses substantially as it is being conducted as of the date
hereof, except where such non-possession would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect (the
"Company Permits"), and all such Company Permits are valid and in full force and
effect. Except as set forth in Section 3.6 of the Company Disclosure Letter,
with respect to the textile rental and envelope businesses, each of the Company
and the Subsidiaries (i) has been operated at all times since September 1, 2001
in material compliance with all Laws applicable to the Company or any of the
Subsidiaries or by which any property, business or asset of the Company or any
of the Subsidiaries is bound or affected and (ii) is not in default or violation
of any Material Contracts to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries or any property or
asset of the Company or any of the Subsidiaries is bound or affected, except in
the cases of clause (ii), for any defaults or violations which would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.7. SEC Filings, Financial Statements.
(a) The Company has filed all forms, reports, statements and
documents required to be filed with the United States Securities and
Exchange Commission (the "SEC") since September 1, 2001 (collectively, the
"Company SEC Reports"), under the Securities Act, the Exchange Act or the
Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"). As of
their respective dates, the Company SEC Reports complied in all material
respects with the requirements of the Securities Act, the Exchange Act or
the Sarbanes-Oxley Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder. None of the Company SEC Reports
contained when filed any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
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(b) All of the financial statements included in the Company SEC
Reports, in each case, including any related notes thereto, as filed with
the SEC (collectively, the "Company Financial Statements") have been
prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as may be permitted by Form 10-Q of the SEC and
subject, in the case of the unaudited statements, to normal, recurring
audit adjustments which would not reasonably be expected to, individually
or in the aggregate, have a Company Material Adverse Effect) and fairly
present the consolidated financial position of the Company and the
Subsidiaries at the respective date thereof and the consolidated results
of its operations and changes in cash flows for the periods indicated.
(c) Except as set forth in Section 3.7(c) of the Company Disclosure
Letter, there are no liabilities of the Company or any of the Subsidiaries
of any kind whatsoever, whether or not accrued and whether or not
contingent or absolute, other than (i) liabilities disclosed or provided
for in the consolidated balance sheet of the Company and the Subsidiaries
at February 28, 2003, including the notes thereto, (ii) liabilities
disclosed in the Company SEC Reports filed prior to the date hereof, (iii)
liabilities incurred on behalf of the Company in connection with this
Agreement and the contemplated Merger, and (iv) liabilities incurred in
the ordinary course of business consistent with past practice since
February 28, 2003, none of which would reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.8. Absence of Certain Changes or Events. Except as contemplated
by this Agreement, as set forth in the Company SEC Reports filed prior to the
date hereof or in Section 3.8 of the Company Disclosure Letter, since August 31,
2002, the Company and the Subsidiaries have conducted their respective
businesses only in the ordinary course and consistent with prior practice and
there has not been (i) any event or occurrence of any condition that has had, or
would reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect, (ii) any declaration, setting aside or payment
of any dividend or any other distribution with respect to any of the capital
stock of the Company or any Subsidiary except for quarterly dividends consistent
with past practice, (iii) any material change in accounting methods, principles
or practices employed by the Company, or (iv) any action of the type described
in Sections 5.1(b) or 5.1(c) which, had such action been taken after the date of
this Agreement, would be in violation of any such Section.
Section 3.9. Taxes.
(a) The Company and each of the Subsidiaries have duly and timely
filed with the appropriate taxing authorities all Tax Returns (as
hereinafter defined) required to be filed by any of them through the date
hereof. All such Tax Returns are true, correct and complete in all
material respects. All Taxes (as hereinafter defined) of the Company and
the Subsidiaries which are (i) shown as due on such Tax Returns, (ii)
otherwise due and payable or (iii) claimed or asserted by any taxing
authority to be due, have been paid, except for those Taxes being
contested in good faith and for which adequate reserves have been
established in the financial statements included in the Company SEC
Reports
-12-
filed prior to the date hereof in accordance with GAAP. The unpaid Taxes
of the Company and its Subsidiaries for the current taxable period did
not, as of the most recent Company Financial Statements, exceed the
reserve for Tax liability set forth on the face of the balance sheet in
the most recent Company Financial Statements.
(b) Except as set forth in Section 3.9 of the Company Disclosure
Letter and except for matters which are the responsibility of Acuity
Brands, Inc. pursuant to the Tax Disaffiliation Agreement, there are no
pending or, to the knowledge of the Company, threatened audits,
investigations, disputes or claims or other actions for or relating to any
liability for Taxes with respect to the Company or any of the
Subsidiaries, and neither the Company nor any Subsidiary knows of any
proposed or threatened Tax claims or assessments which, if upheld, would
reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect. The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. Except pursuant to the Tax
Disaffiliation Agreement or as set forth in Section 3.9 of the Company
Disclosure Letter, no power of attorney granted by the Company with
respect to any Taxes is currently in force.
(c) There is no pending claim by an authority in a jurisdiction
where any of the Company and the Subsidiaries does not file Tax Returns
and in which it is required to file Tax Returns that it is subject to
taxation by that jurisdiction. Neither the Company nor any of the
Subsidiaries has or has had a "permanent establishment" in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States of America and such foreign country. Section 3.9 of the
Company Disclosure Letter sets forth each state in which the Company and
each Subsidiary is or may be subject to any Tax.
(d) The Company and each Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(e) There are no material liens for any Taxes upon the assets of the
Company or any of the Subsidiaries, other than statutory liens for Taxes
not yet due and payable and liens for real estate Taxes contested in good
faith.
(f) Neither the Company nor any Subsidiary has been a United States
real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Except for the Tax Disaffiliation Agreement,
neither the Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement. Neither the Company nor any Subsidiary (i) has been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company) or
(ii) has any liability for the Taxes of any person (other than any of the
Company and its Subsidiaries) under Treasury Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
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(g) All elections with respect to Taxes which would reasonably be
expected to, individually or in the aggregate, have a Company Material
Adverse Effect on Taxes payable by the Company or any of the Subsidiaries
(either directly to a Governmental Entity or pursuant to the Tax
Disaffiliation Agreement) with respect to periods after the date hereof
are set forth in Section 3.9 of the Company Disclosure Letter. Except as
set forth in Section 3.9 of the Company Disclosure Letter, neither the
Company nor any of the Subsidiaries has: (i) consented at any time under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2)
of the Code apply to any disposition of any of its assets; (ii) agreed, or
is required by virtue of the transactions contemplated by this Agreement
or otherwise, to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise which would
reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect on Taxes payable by the Company or any of
the Subsidiaries (either directly to a Governmental Entity or pursuant to
the Tax Disaffiliation Agreement); (iii) made an election, or is required,
to treat any of its assets as owned by another person pursuant to the
provisions of former Section 168(f) of the Code or as tax-exempt bond
financed property or tax-exempt use property within the meaning of Section
168 of the Code; (iv) acquired and does not own any assets that directly
or indirectly secure any debt the interest on which is tax exempt under
Section 103(a) of the Code; (v) made or will not make a consent dividend
election under Section 565 of the Code; or (vi) made any of the foregoing
elections or is required to apply any of the foregoing rules under any
comparable foreign, state or local Tax provision.
(h) Except as set forth in Section 3.9 of the Company Disclosure
Letter, neither the Company nor any of the Subsidiaries (i) is subject to
any joint venture, partnership, or other arrangement or contract which is
treated as a partnership for Tax purposes, or (ii) is a shareholder of a
"controlled foreign corporation" as defined in Section 957 of the Code (or
any similar provision of state, local or foreign law).
(i) The Company has timely provided or caused to be provided, or has
received waivers of, all required notices to Acuity Brands, Inc. under
that certain Tax Disaffiliation Agreement dated as of November 30, 2001
(the "Tax Disaffiliation Agreement") between the Company and Acuity
Brands, Inc. The Company has timely made all payments required to be made
by the Company under the Tax Disaffiliation Agreement.
(j) At no time during the period beginning on August 30, 1999 and
ending on November 30, 2002, was there any agreement, understanding or
arrangement, nor were there any Substantial Negotiations (as defined
below), regarding the Merger or any Similar Acquisition (as defined
below). The Distributions (as such term is defined in the Tax
Disaffiliation Agreement) were motivated, in whole or substantial part, by
corporate business purposes other than a business purpose to facilitate
any person's acquisition of the stock of the Company. The Distributions
would have occurred at approximately the same time and in similar form
regardless of the Merger or any Similar Acquisition.
(k) For purposes of this Agreement, (i) "Tax" (and, with correlative
meaning,
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"Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever, together with
any interest or penalty or addition thereto, whether disputed or not,
imposed by any Governmental Entity, (ii) "Tax Return" means any return,
report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax, (iii) "Substantial Negotiations" means, with respect to a
transaction involving the acquisition of stock of the Company, discussions
of significant economic terms (such as price) by one or more officers,
directors or Controlling Shareholders (as such term is defined in Treasury
Reg. Section 1.355-1(h)(3)) of the Company, or another person or persons
with the implicit or explicit permission of one or more officers,
directors or Controlling Shareholders of the Company, with the acquirer of
such stock of the Company or a person or persons with the implicit or
explicit permission of the acquirer, and (iv) "Similar Acquisition" means,
with reference to the Merger, a potential transaction that, if
consummated, would effect a direct or indirect combination of all or a
significant portion of the same business operations as the combination
that would have been effected by the Merger (even if the timing or the
terms of the potential acquisition are different); provided, however, that
an acquisition is not considered similar to the Merger if the ultimate
owners of Buyer are substantially different from the ultimate owners of
the business operations with which the Company would have been combined in
such other potential acquisition.
Section 3.10. Assets. Except as set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 2002 (the "Company 10-K") or
in Section 3.10 of the Company Disclosure Letter, the Company and each of the
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, all of their real and personal properties and assets reflected in the
Company 10-K or acquired after August 31, 2002 (other than assets disposed of
since August 31, 2002 in the ordinary course of business consistent with past
practice), in each case free and clear of all title defects, liens, encumbrances
and restrictions, except for (i) liens, encumbrances or restrictions which
secure indebtedness which are properly reflected in the Company 10-K; (ii) liens
for Taxes accrued but not yet payable; (iii) liens arising as a matter of law in
the ordinary course of business with respect to obligations incurred after
August 31, 2002, provided that the obligations secured by such liens are not
delinquent; and (iv) defects, liens, encumbrances and restrictions that are not
reasonably expected to, individually or in the aggregate, materially detract
from the value of the assets subject thereto or materially impact the operation
of the Company or any Subsidiary. Each of the Company and the Subsidiaries has
complied in all material respects with the terms of all real and personal
property leases to which it is a party, and all such leases are in full force
and effect.
Section 3.11. Change of Control Arrangements. Except as set forth in
Section 3.11 of the Company Disclosure Letter, neither the execution and
delivery of this Agreement nor the consummation of the Merger or the other
transactions contemplated by this Agreement, will (either alone or in
conjunction with any other event, including termination of employment at or
following the Effective Time) result in, cause the accelerated vesting or
delivery of, or increase
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the amount or value of, any severance, termination or other payment or benefit
to any director, officer, employee or consultant of the Company or any
Subsidiary. Prior to the Effective Time and as contemplated by Section 5.13(d),
the Company will have taken action with respect to the Company Benefit Plans and
Benefit Agreements to provide reasonable assurances that (i) no amount paid or
payable by the Company in connection with the Merger or the other transactions
contemplated by this Agreement will be an "excess parachute payment" within the
meaning of Section 280G of the Code, and (ii) no director, officer, employee or
consultant will be subject to the excise tax under Section 4999 of the Code.
Section 3.12. Litigation. Except for such matters set forth in the Company
SEC Reports filed prior to the date hereof or in Section 3.12 of the Company
Disclosure Letter, there are no claims, suits, actions, investigations,
indictments or information, or administrative, arbitration or other proceedings
("Litigation") pending or, to the knowledge of the Company, threatened against
the Company or any of the Subsidiaries which would be reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Neither the Company nor any of the Subsidiaries is subject to any outstanding
order, writ, injunction, decree or arbitration ruling, award or other finding
which has had or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.13. Material Contracts. Except as set forth in Section 3.13 of
the Company Disclosure Letter or as filed prior to the date hereof as an exhibit
to the Company SEC Reports, neither the Company nor any Subsidiary is a party to
or bound by, and none of their respective properties or assets are bound by or
subject to, any written or oral contract, agreement or arrangement which (i) is
a "material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC), (ii) involves annual expenditures by the Company in excess of
$2,000,000, (iii) contains any non-compete or exclusivity provisions with
respect to the business of or geographic area with respect to the Company or any
Subsidiary, or restricts the conduct of the business of the Company or any
Subsidiary, or the geographic area in which the Company or any Subsidiary may
conduct business, in each case in any material respect, (iv) is a contract,
agreement or arrangement with the Company or any Subsidiary on the one hand, and
any officer, director or other affiliate on the other hand, or (v) is a
contract, agreement or arrangement under which the Company or any Subsidiary has
(a) incurred any indebtedness that is currently owing or (b) given any guarantee
in respect of indebtedness, in each case having an aggregate principal amount in
excess of $2,000,000.
Contracts, agreements and arrangements described in clauses (i) through
(v) above, whether or not set forth in Section 3.13 of the Company Disclosure
Letter or filed as an exhibit to the Company SEC Reports, are referred to herein
individually as a "Material Contract" and collectively as the "Material
Contracts." Each Material Contract is valid and binding on the Company and each
Subsidiary party thereto and, to the Company's knowledge, each other party
thereto, and in full force and effect, and the Company and each Subsidiary has
in all material respects performed all obligations required to be performed by
it prior to the date hereof under each Material Contract and, to the Company's
knowledge, each other party to each Material Contract has in all material
respects performed all obligations required to be performed by it under such
Material Contract. Except as set forth in Section 3.13 of the Company Disclosure
Letter, neither the Company nor any Subsidiary has received notice of any
violation or default under (or any condition which with the passage of time or
the giving of notice would cause such a violation of or default
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under) any Material Contract.
Section 3.14. Information Supplied. The proxy statement to be mailed to
the Company Stockholders in connection with the meeting (the "Stockholders'
Meeting") to be called to consider the Merger (the "Proxy Statement"), at the
date such document is first published, sent or delivered to Company
Stockholders, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement will comply as to form and
substance in all material respects with the requirements of the Exchange Act and
the applicable rules and regulations of the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Buyer for inclusion or incorporation by reference in the foregoing
document.
Section 3.15. Employee Benefit Plans.
(a) All bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, thrift, savings, stock bonus, restricted stock,
cafeteria, paid time off, perquisite, fringe benefit, vacation, severance,
disability, death benefit, hospitalization, medical, welfare benefit or
other plan, arrangement or understanding maintained, contributed to or
required to be maintained or contributed to by the Company or any of the
Subsidiaries providing benefits to any current or former employee,
officer, consultant or director of the Company or any of the Subsidiaries
(such plans and arrangements, except for any Multiemployer Pension Plan
(as hereinafter defined), are hereinafter referred to as the "Company
Benefit Plans"), and all employment, consulting, deferred compensation,
indemnification, severance or termination agreements or similar
arrangements or understandings between the Company or any of the
Subsidiaries and any current or former employee, officer, consultant or
director of the Company or any of the Subsidiaries which are currently in
effect (collectively, the "Benefit Agreements") are listed in Section 3.15
of the Company Disclosure Letter. Section 3.15 of the Company Disclosure
Letter indicates which of the Company Benefit Plans are "employee pension
benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to
herein as "Pension Plans"), and "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) (together with the Pension Plans, the
"ERISA Plans"). The Company has provided to, or made available for review
by, Buyer true and complete copies of (i) each Company Benefit Plan and
Benefit Agreement (or, in the case of any unwritten Company Benefit Plan
or Benefit Agreement, a description thereof), (ii) the two most recent
annual reports on Form 5500 filed with the Internal Revenue Service with
respect to each Company Benefit Plan (if any such report was required),
(iii) the most recent summary plan description for each Company Benefit
Plan for which such summary plan description is required and (iv) each
trust agreement and insurance or group annuity contract relating to any
Company Benefit Plan.
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(b) Except as set forth in Section 3.15 of the Company Disclosure
Letter, the ERISA Plans have been maintained and administered in all
material respects in compliance with the requirements of ERISA, and the
Code, and any ERISA Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter and continues to
satisfy the requirements for such qualification. The Company has provided
to Buyer a true and complete copy of the most recent determination letter
received with respect to each Pension Plan, as well as a true and complete
copy of each pending application for a determination letter, if any.
Section 3.15 of the Company Disclosure Letter lists any ERISA Plan which
is covered by Title IV of ERISA or Section 412 of the Code. Neither any
ERISA Plan, nor the Company nor any Subsidiary has incurred any material
liability or penalty under Section 4975 of the Code or Section 502(i) or
Section 502(l) of ERISA or engaged in any transaction that is reasonably
likely to result in any such material liability or penalty. There is no
pending or anticipated Litigation against or otherwise involving any of
the Company Benefit Plans or Benefit Agreements, and no Litigation
(excluding claims for benefits incurred in the ordinary course of Company
Benefit Plan activities) has been brought against or with respect to any
such Company Benefit Plan or Benefit Agreement which would reasonably be
expected to, individually or in the aggregate, have a Company Material
Adverse Effect.
(c) Section 3.15 of the Company Disclosure Letter lists each pension
plan which is a "multiemployer plan", within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Pension Plan"), and neither the
Company nor any Subsidiary has incurred any withdrawal liability under
Title IV of ERISA to any such Multiemployer Pension Plan. All
contributions and premiums and benefit payments required to be made under
the terms of any Company Benefit Plan as of the date hereof have been
timely made.
(d) Except as set forth in Section 3.15 of the Company Disclosure
Letter, all material reports, returns and similar documents with respect
to all Company Benefit Plans required to be filed with any Governmental
Entity or distributed to any Company Benefit Plan participant have been
duly and timely filed or distributed, and neither the Company nor any
Subsidiary has received notice of, and to the knowledge of the Company,
there are no investigations by any Governmental Entity with respect to any
Company Benefit Plan.
(e) The Company and the Subsidiaries, with respect to each Company
Benefit Plan that is a "group health plan" (as such term is defined in
Section 5000(b)(1) of the Code), comply in all material respects with the
applicable requirements of Section 4980B(f) of the Code. Neither the
Company nor any Subsidiary has any obligations for retiree health or life
insurance benefits under any Company Benefit Plan or Benefit Agreement,
except as set forth in Section 3.15 of the Company Disclosure Letter.
(f) With respect to each ERISA Plan required to be set forth in
Section 3.15
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of the Company Disclosure Letter that is subject to Title IV or Part 3 of
Title I of ERISA or Section 412 of the Code (other than a Multiemployer
Pension Plan), (i) no reportable event (within the meaning of Section 4043
of ERISA, other than an event for which the reporting requirements have
been waived by regulations) has occurred, (ii) there was not an
accumulated funding deficiency (within the meaning of Section 302 of ERISA
or Section 412 of the Code), whether or not waived, as of the most
recently ended plan year of such ERISA Plan, (iii) the aggregate amount of
actuarial accrued liabilities (within the meaning of section 412 of the
Code) under all such ERISA Plans on a combined basis as of the most recent
plan year end, determined based on the actuarial value of assets and the
actuarial accrued liabilities that are used in conjunction with
determining the funding requirements for such ERISA Plans as reported in
such ERISA Plans' actuarial reports for such plan year, does not exceed
the aggregate actuarial value of the assets of such ERISA Plans, (iv)
neither the Company, any Subsidiary nor any ERISA Affiliate is required to
provide security under Section 401(a)(29) of the Code, (v) all premiums
(and interest, charges and penalties for late payment, if applicable) have
been paid when due to the Pension Benefit Guaranty Corporation ("PBGC"),
and (vi) no filing has been made by the Company, any Subsidiary or any
ERISA Affiliate with the PBGC and no proceeding has been commenced by the
PBGC to terminate any ERISA Plan and, to the knowledge of the Company, no
condition exists which could constitute grounds for the termination of any
such ERISA Plan by the PBGC.
(g) Except for the Subsidiaries, there are no other entities which
are considered one employer with the Company or a Subsidiary under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
Section 3.16. Labor and Employment Matters. Except as set forth in Section
3.16 of the Company Disclosure Letter, neither the Company nor any of the
Subsidiaries is a party to, or bound by, any collective bargaining agreement or
other contracts, arrangements, agreements or understandings with a labor union
or labor organization that was certified by the National Labor Relations Board
("NLRB"). Except as would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, there is no existing, pending
or, to the knowledge of the Company, threatened (i) unfair labor practice charge
or complaint, labor dispute, labor arbitration proceeding or any other matter
before the NLRB or any other comparable state agency against or involving the
Company or any of the Subsidiaries, (ii) activity or proceeding by a labor union
or representative thereof to organize any employees of the Company or any of the
Subsidiaries, (iii) certification or decertification question relating to
collective bargaining units at the premises of the Company or any of the
Subsidiaries or (iv) lockout, strike, organized slowdown, work stoppage or work
interruption with respect to such employees. To the knowledge of the Company,
none of the Company, any of the Subsidiaries or any of their respective
representatives or employees has committed an unfair labor practice in
connection with the operation of the respective businesses of the Company or any
of the Subsidiaries, which would reasonably be expected to, individually or in
the aggregate, have a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance with all applicable Laws respecting labor,
employment, fair employment practices, terms and conditions of employment,
workers' compensation, occupational safety, plant closings and wages and hours,
except where such failure would not reasonably be expected to, individually or
in the aggregate,
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have a Company Material Adverse Effect. Except as set forth in Section 3.16 of
the Company Disclosure Letter, there are no material controversies pending or,
to the knowledge of the Company, threatened between the Company, its
Subsidiaries and any of its current or former employees which have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity. The Company and its
Subsidiaries have properly accrued on its books and records all unpaid but
accrued wages, salaries and other paid time-off.
Section 3.17. Environmental Compliance and Disclosure. Except as set forth
in the Company SEC Reports filed prior to the date hereof or in Section 3.17 of
the Company Disclosure Letter:
(a) Except where the failure to so possess, notify or comply would
not reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect, each of the Company and the Subsidiaries,
and their respective operations and facilities, to the knowledge of the
Company, (i) have, and maintain in full force and effect, all permits,
licenses and authorizations required by applicable Environmental Laws;
(ii) have filed all notices required by applicable Environmental Laws; and
(iii) are in compliance with the requirements of all applicable
Environmental Laws;
(b) Neither the Company nor any Subsidiary has received any request
for information or any notice of actual or threatened material liability
under the Federal Comprehensive Environmental Response, Compensation and
Liability Act, 42 USC 9601 et seq. ("CERCLA") or any similar state, local
or foreign statute or ordinance, or any other Environmental Laws, from any
Governmental Entity or any other person and, to the knowledge of the
Company, there are no facts or circumstances which could form the basis
for the assertion of any claim against the Company or any Subsidiary under
any Environmental Laws including, without limitation, CERCLA or any
similar local, state or foreign Law with respect to any on-site or
off-site location, except where such claim would not reasonably be
expected to, individually or in the aggregate, have a Company Material
Adverse Effect.
(c) Except as would not reasonably be expected to, individually or
in the aggregate, have a Company Material Adverse Effect, neither the
Company nor any Subsidiary (i) has entered into or agreed to any consent
decree or order or is subject to any judgment, decree or judicial order
relating to compliance with Environmental Laws or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of
Hazardous Materials, and no investigation, Litigation or other proceeding
is pending or, to the knowledge of the Company, threatened with respect
thereto, (ii) has a contractual indemnification obligation or
indemnification obligation under Law in connection with any claim pending
or, to the knowledge of the Company, threatened by any third-party
indemnitee for any liability under any Environmental Law or relating to
any Hazardous Materials, or (iii) has entered into any agreement with any
person pursuant to which the Company has assumed responsibility for, or
otherwise agreed to contribute to the investigation, assessment or
remediation of conditions resulting from a release of
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Hazardous Materials into the indoor or outdoor environment related to the
handling of Hazardous Materials.
(d) None of the real property currently nor, to the knowledge of the
Company, formerly owned or leased by the Company or any Subsidiary is
listed or, to the knowledge of the Company, proposed for listing on the
"National Priorities List" under CERCLA, or any similar state list of
sites requiring investigation or cleanup.
(e) Except as would not reasonably be expected to, individually or
in the aggregate, have a Company Material Adverse Effect, to the knowledge
of the Company, no Hazardous Material has been released (as defined by
CERCLA or any other Environmental Law) into the air, soil or groundwater
as a result of the textile rental and envelope operations of the Company
or any Subsidiary, or at, from, under or on any facility currently or
formerly owned or operated by the Company or any Subsidiary that has
resulted, or that could reasonably be expected to result, in any
remediation obligation to either the Company or any Subsidiary.
As used in this Section 3.17, the term "Environmental Laws" means any and
all past and present federal, state, local or foreign laws (including common
law), statutes, codes, ordinances, rules, regulations or other legal obligations
applicable to protection of human health and the environment, including without
limitation, CERCLA, the Clean Air Act (42 USC Sections 7401 et seq.), the
Resource Conservation and Recovery Act (42 USC Sections 6901 et seq.), the Clean
Water Act (33 USC Sections 1251 et seq.), the Occupational Safety and Health Act
(29 U.S.C. Sections 651 et seq.), the Toxic Substance Control Act (15 USC
Sections 2601 et seq.), and the Safe Drinking Water Act (42 USC Sections 300f et
seq.).
As used in this Section 3.17, the term "Hazardous Materials" means any
waste, pollutant, hazardous substance, hazardous waste, special waste,
controlled waste, petroleum or petroleum-derived waste or breakdown products,
chlorinated solvent or chlorinated solvent-derived waste or breakdown products,
asbestos-containing materials or polychlorinated biphenyls, or any other
material, whether liquid, solid or gas, which is regulated under any
Environmental Law.
Section 3.18. Intellectual Property.
(a) The Company or a Subsidiary owns, or possesses valid rights to
use, all patents, patent applications, trademarks, service marks, trade
names, domain names, copyrights, mask works, trade secrets and other
confidential business and technical information (collectively,
"Intellectual Property") material to the conduct of the business of the
Company and the Subsidiaries as presently conducted, except where the
failure to own or to have such rights to use such Intellectual Property
would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect. To the knowledge of the Company,
the Company has not interfered with, infringed upon or misappropriated any
Intellectual Property rights of any other person, and the Company has not
received any notice of any conflict with or violation or infringement of,
any asserted rights of any other person with respect to any such
Intellectual Property owned or licensed by the Company or any Subsidiary,
except for conflicts or violations which, if
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determined adversely to the Company, would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
To the knowledge of the Company, no other person has interfered with,
infringed upon or misappropriated any material Intellectual Property
rights of the Company.
(b) The Company and the Subsidiaries own, or possess valid rights
to, all computer software programs that are material to the conduct of the
business of the Company and the Subsidiaries as presently conducted,
except where the failure to own such computer software programs or have
such rights would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) All of the Company's licenses to use Intellectual Property of
third parties are in full force and effect, and, to the knowledge of the
Company, no party is in breach or default thereunder, except as would not
reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.19. Brokers. Except pursuant to the Financial Advisor's
engagement letter with the Company, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement, the Merger or the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has provided to Buyer true and complete copies of the engagement letters
of the Financial Advisor and any other financial advisors employed by the
Company in connection with the transactions contemplated by this Agreement. All
fees and expenses under such engagement letters will be paid by the Company. The
Company's good faith estimates of the fees and expenses of any accountant,
broker, financial advisor, consultant, counsel or other person retained by the
Company or any Subsidiary in connection with this Agreement or the transactions
contemplated hereby incurred or to be incurred by the Company or any Subsidiary
have been previously provided to Buyer in writing, identified by category of
advisor.
Section 3.20. Insurance Policies. The Company has delivered to Buyer prior
to the date hereof a complete and accurate list of all insurance policies in
force naming the Company, any of its Subsidiaries or employees thereof as an
insured or beneficiary or as a loss payable payee or for which the Company or
any Subsidiary has paid or is obligated to pay all or part of the premiums. All
such insurance policies are in full force and effect, all premiums due and
payable thereon have been paid, and neither the Company nor any Subsidiary has
received notice of any pending or threatened cancellation or premium increase
(retroactive or otherwise) with respect thereto, except as noted on such list.
Each of the Company and the Subsidiaries is in compliance with all conditions
contained in such insurance policies, except where the failure to so comply
would not reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
Section 4.1. Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has full corporate power and authority to own, lease and operate
its properties and assets and to conduct its business as presently conducted.
Section 4.2. Authority for Agreement. Buyer has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution, delivery and performance by Buyer
of this Agreement, and the consummation by Buyer of the Merger and the other
transactions contemplated by this Agreement, have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the Merger or
the other transactions contemplated by this Agreement, other than, with respect
to the Merger, the filing and recordation of appropriate merger documents as
required by the DGCL. This Agreement has been duly executed and delivered by
Buyer and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms.
Section 4.3. No Conflict. The execution and delivery of this Agreement by
Buyer does not, and the performance of this Agreement by Buyer and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the certificate of
incorporation or bylaws of Buyer, (ii) conflict with or violate in any material
respect any Law applicable to Buyer or by which any property or asset of Buyer
is bound or affected, or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Buyer pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer is a party or by which Buyer or any property or asset
of Buyer is bound or affected, except in the case of clause (iii) for any such
conflicts, violations, breaches, defaults or other occurrences which would not
reasonably be expected to, individually or in the aggregate, prevent or
materially delay the performance by Buyer of its obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 4.4. Required Filings and Consents. The execution and delivery of
this Agreement by Buyer does not, and the performance of this Agreement by Buyer
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Exchange Act, (ii) for filing and recordation of
appropriate merger documents as required by the DGCL, and (iii) for those
required by the HSR Act.
-23-
Section 4.5. Information Supplied. None of the information supplied or to
be supplied by Buyer for inclusion or incorporation by reference in the Proxy
Statement will, at the date such document is first published, sent or delivered
to Company Stockholders, 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. Notwithstanding the foregoing, no representation
or warranty is made by Buyer with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference in the foregoing document.
Section 4.6. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission payable by Buyer in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Buyer.
Section 4.7. No Prior Activities; Financing.
(a) Buyer was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. Except for obligations or
liabilities incurred in connection with its organization and the
transactions contemplated by this Agreement, Buyer has no material
obligations or liabilities and has not engaged in any business activities
of any type or kind whatsoever.
(b) Buyer has received commitment letters in the form attached
hereto as Schedule 4.7(b) (the "Debt Commitment Letters"), which have been
executed by the lenders specified therein and presented to Buyer for
signature. Upon execution by Buyer, each of the Debt Commitment Letters
will be in full force and effect subject to the terms and conditions set
forth therein, all commitment fees required to be paid thereunder will
have been paid in full or will be duly paid in full when due, and no event
has occurred which (with or without notice, lapse of time or both) would
constitute a default thereunder on the part of Buyer. The funds to be made
available under the Debt Commitment Letters will be sufficient (together
with the funds described in Section 4.7(c)), to enable Buyer to pay the
aggregate Merger Consideration for the shares of the Company Common Stock
pursuant to the Merger and to pay all of its fees and expenses related to
the transactions contemplated by this Agreement.
(c) Buyer has delivered to the Company a commitment letter in the
form attached hereto as Schedule 4.7(c) (the "Equity Commitment Letter"),
which has been executed by Buyer and the other parties specified therein
(the "Buyer Affiliates"). Upon its execution by the Company, the Equity
Commitment Letter will be in full force and effect subject to the terms
and conditions set forth therein, enforceable against the parties thereto
in accordance with its terms. The Equity Commitment Letter provides for,
subject to the terms and conditions set forth therein and in this
Agreement, (i) the contribution to Buyer of $20 million in cash, which
amount consists of the proceeds of a loan to be secured on a first
priority basis by the assets (the "Buyer Assets") described in
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the Equity Commitment Letter, and (ii) from and after the Effective Time,
the pledge for the benefit of the Surviving Corporation of the Buyer
Affiliates' right, title and interest in and to the Buyer Assets (subject
to the rights of the lender under the loan described in clause (i) above),
when and as necessary, in the Surviving Corporation's determination, to
satisfy the obligations of the Surviving Corporation.
Section 4.8. Ownership of Company Common Stock. Neither Buyer nor
any of its "affiliates" or "associates" "own" (as such terms are defined in
Section 203 of the DGCL) any shares of Company Common Stock.
ARTICLE V.
COVENANTS
Section 5.1. Conduct of the Business Pending the Merger.
(a) The Company covenants and agrees that between the date of this
Agreement and the Effective Time unless Buyer shall otherwise agree in
writing, (i) the business of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business and in a manner
consistent with prior practice, (ii) the Company and the Subsidiaries
shall use commercially reasonable efforts to preserve intact their
business organizations, to keep available the services of their current
officers and employees and to preserve the current relationships of the
Company and the Subsidiaries with customers, suppliers and other persons
with which the Company or the Subsidiaries have business relations, and
(iii) the Company and the Subsidiaries will comply in all material
respects with all applicable Laws and regulations wherever their business
is conducted, including, without limitation, the timely filing of all
reports, forms or other documents with the SEC required pursuant to the
Securities Act, the Exchange Act or the Sarbanes-Oxley Act.
(b) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, unless Buyer shall otherwise agree in
writing, the Company shall not, nor shall the Company permit any of the
Subsidiaries to, (i) declare or pay any dividends on or make other
distributions (whether in cash, stock or property) in respect of any of
their capital stock, except for quarterly dividends consistent with past
practice and for dividends by a wholly owned Subsidiary to the Company or
another wholly owned Subsidiary; (ii) split, combine or reclassify any of
their capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares
of their capital stock; (iii) repurchase or otherwise acquire any shares
of their capital stock; (iv) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of their capital
stock or any securities convertible into any such shares of their capital
stock, or any rights, warrants or options to acquire any such shares or
convertible securities or any stock appreciation rights, phantom stock
plans or stock equivalents, other than the (A) issuance of shares of
Company Common Stock upon the exercise of Company Options outstanding as
of the date of this Agreement and the issuance of restricted shares of
Company Common Stock pursuant to outstanding Company Restricted Stock
Awards and (B) issuance of shares of Company Common Stock pursuant to
purchase rights outstanding as of the date of this
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Agreement under the ESPP and (C) acquisitions of Company Common Stock by
Company Benefit Plans that are 401(k) plans; or (v) take any action that
would, or could reasonably be expected to, result in any of the conditions
set forth in Article VI not being satisfied.
(c) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, unless Buyer shall otherwise agree in
writing or as otherwise contemplated by this Agreement, the Company shall
not, nor shall the Company permit any of the Subsidiaries to, (i) amend
its certificate of incorporation (including any certificate of
designations attached thereto) or bylaws or other equivalent
organizational documents; (ii) create, assume or incur any indebtedness
for borrowed money or guaranty any such indebtedness of another person,
other than trade payables incurred in the ordinary course of business
consistent with past practice; (iii) make any loans or advances to any
other person other than loans or advances between any Subsidiaries of the
Company or between the Company and any of the Subsidiaries; (iv) mortgage
or pledge any of its assets or properties (other than in the ordinary
course of business consistent with past practice); (v) merge or
consolidate with any other entity in any transaction or acquire any
business or assets (other than assets acquired in the ordinary course of
business consistent with past practice); (vi) sell any business or assets
(other than inventory sold in the ordinary course of business consistent
with past practice) in a single transaction or series of transactions in
which the aggregate consideration is $500,000 or greater; (vii) change its
accounting policies except as required by GAAP; (viii) except as
contemplated by this Agreement with respect to any Benefit Agreement, make
any change in employment terms for any of its directors, officers,
employees or consultants which would create material additional Company
liability; (ix) except as contemplated by this Agreement with respect to
any Benefit Agreement, alter, amend or enter into any agreement which
would create any material obligations (including entering into any
agreements with respect to any aspiration achievement incentive awards)
with respect to compensation, severance, benefits, change of control
payments or any other payments to employees, officers, directors,
affiliates or consultants of the Company or the Subsidiaries; (x) except
as required by Law or required for a merger of any Company Benefit Plans
or as contemplated by this Agreement, make any material change to the
Company Benefit Plans; (xi) amend or cancel or agree to the amendment or
cancellation of any Material Contract; (xii) pay, loan or advance (other
than the payment of compensation, directors' fees or reimbursement of
expenses in the ordinary course of business consistent with past practice)
any amount to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible) to, or enter into any agreement
with, any of its officers or directors or any "affiliate" or "associate"
of any of its officers or directors; (xiii) form or commence the
operations of any business or any corporation, partnership, joint venture,
business association or other business organization or division thereof;
(xiv) make any material tax election or settle or compensate any tax
liability involving amounts in excess of $100,000 in the aggregate; (xv)
make any capital expenditures which are in excess of $250,000; (xvi) enter
into any agreements providing for payments (other than in the ordinary
course of business
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consistent with past practice) which are in excess of $250,000; (xvii)
pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), or
litigation (whether or not commenced prior to the date of this Agreement),
or modify the terms of any existing settlement agreement or arrangement
(other than in amounts not exceeding, net of expected insurance recovery,
an aggregate of $500,000); (xviii) enter into, modify or extend any
collective bargaining agreement or other contract, arrangement, agreement
or understanding with a labor union or labor organization; (xix) cancel
any material indebtedness, or waive or assign any material claims or
material rights; (xx) except as contemplated by Section 3.3(c), amend the
Rights Agreement or take any action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the
Rights to facilitate an Acquisition Proposal (as hereinafter defined); or
(xxi) authorize, or commit, resolve or agree to take, any of the foregoing
actions.
Section 5.2. Access to Information; Confidentiality. From the date hereof
to the Effective Time, the Company shall, and shall cause the officers,
directors, employees, auditors, attorneys, financial advisors, lenders and other
agents (collectively, the "Representatives") of the Company to, afford the
Representatives of Buyer reasonable access at all reasonable times to the
officers, employees, agents, properties, offices and other facilities, books and
records of the Company and the Subsidiaries, and shall furnish Buyer with all
financial, operating and other data and information as Buyer, through its
Representatives, may reasonably request. Notwithstanding the foregoing, any
investigation shall be conducted in such a manner so as not unreasonably
interfere with the business and operations of the Company and the Subsidiaries.
The Company shall provide the Representatives of Buyer reasonably adequate
office space at the Company's facilities from which to conduct such
investigation. Buyer will remain subject to the terms of a confidentiality
agreement with the Company dated December 20, 2002, as amended (the
"Confidentiality Agreement").
Section 5.3. Notification of Certain Matters. The Company shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Company, of
(i) the occurrence, or nonoccurrence, of any event which would be likely to
cause any representation or warranty contained in this Agreement to be
materially untrue or materially inaccurate and (ii) any failure by such party to
materially comply with or materially satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.4. Further Assurances.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under Law to make effective the
Merger and the other transactions contemplated by this Agreement,
including, without limitation, using all commercially reasonable efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of each Governmental Entity and parties to
contracts with the
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Company and the Subsidiaries as are necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement and to
fulfill the conditions set forth in Article VI. If at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers of each party to this
Agreement and the Surviving Corporation shall use all commercially
reasonable efforts to take all such action.
(b) In connection with, and without limiting the foregoing, the
Company shall (i) take all actions necessary to ensure that no state
antitakeover statute or similar statute or regulation is or becomes
operative with respect to this Agreement, the Merger or any other
transactions contemplated by this Agreement and (ii) if any state
antitakeover statute or similar statute or regulation is or becomes
operative with respect to this Agreement, the Merger or any other
transaction contemplated by this Agreement, take all actions necessary to
ensure that this Agreement, the Merger and any other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the
other transactions contemplated by this Agreement.
Section 5.5. No Solicitation of Transactions.
(a) Subject to the provisions of Section 5.8 and this Section 5.5,
neither the Company nor any Subsidiary shall, directly or indirectly, take
(and the Company shall not authorize or permit its Representatives to
take) any action to (i) encourage (including by way of furnishing
non-public information), solicit, initiate or facilitate any Acquisition
Proposal (as hereinafter defined), (ii) unless this Agreement shall be
terminated by the Company pursuant to Section 7.1(i) hereof, enter into
any agreement, arrangement or understanding with respect to any
Acquisition Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by this Agreement or (iii)
participate in any way in discussions or negotiations with, or furnish any
information to, any person (other than Buyer and its Representatives) in
connection with, or take any other action to facilitate any inquiries or
the making of any proposal that constitutes, or would reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that, at
any time prior to obtaining the Company Stockholders' approval of this
Agreement and, so long as neither the Company nor any Subsidiary nor any
of their Representatives shall have breached any of the provisions of this
Section 5.5(a), the Company may, in response to an Acquisition Proposal
that the Company's Board, after consultation with the Financial Advisor,
determines could reasonably lead to a Superior Proposal and subject to the
Company's compliance with Section 5.5(b), (A) furnish information with
respect to the Company and the Subsidiaries to the person making such
Acquisition Proposal pursuant to a customary confidentiality agreement the
terms of which are no more favorable to the other party to such
confidentiality agreement than those in place with Buyer, (B) participate
in discussions or negotiations with respect to such Acquisition Proposal,
and (C) terminate this Agreement pursuant to Section 7.1(i) hereof and
enter into an agreement, arrangement or understanding with respect to such
Acquisition
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Proposal. For so long as this Agreement shall not have been terminated in
accordance with its terms, the Company's Board of Directors shall not
redeem the Rights or waive or amend any provision of the Rights Agreement,
in any such case to permit or facilitate the consummation of any
Acquisition Proposal.
(b) The Company shall, as promptly as practicable (and in no event
later than 48 hours after receipt thereof), advise Buyer of any inquiry
received by it relating to any Acquisition Proposal and of the material
terms of any proposal or inquiry (other than the identity of the person
making the same) that it may receive in respect of any such Acquisition
Proposal, or of any information requested from it or of any negotiations
or discussions being sought to be initiated with it, shall furnish to
Buyer a copy of any such proposal or inquiry, if it is in writing, or an
oral summary of any such proposal or inquiry, if it is not in writing, and
shall keep Buyer fully informed on a prompt basis with respect to any
developments with respect to the foregoing.
(c) Neither the Company's Board of Directors nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Buyer, the approval or recommendation by
the Company's Board or such committee of the approval of this Agreement,
(ii) other than the Merger, approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal, or (iii) other than the
Merger, cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal (other than a confidentiality agreement described in
Section 5.5(b)). Nothing contained in this Section 5.5(c) shall prohibit
the Company or the Company's Board of Directors from (A) taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or
Rule 14e-2 promulgated under the Exchange Act, (B) making any disclosure
required by Rule 14a-9 promulgated under the Exchange Act or (C)
notwithstanding anything to the contrary contained herein, in the event
that the Company's Board of Directors determines in good faith that such
action would be in the best interests of the Company Stockholders,
withdrawing or modifying its recommendation (a "Subsequent Determination")
of this Agreement no earlier than three (3) business days following the
day of delivery of written notice to Buyer of its intention to do so;
provided that the Company continues to comply with all other provisions of
this Agreement; and provided, further, that, during such three business
day period, the Company, if requested by Buyer, negotiates in good faith
with Buyer to make such adjustments to the terms and conditions of this
Agreement, if any, as would enable the Company's Board of Directors to
recommend this Agreement on such adjusted terms.
(d) For purposes of this Agreement, "Acquisition Proposal" means any
offer or proposal concerning any (i) merger, consolidation, business
combination or similar transaction involving the Company or any
Subsidiary, (ii) sale, lease or other disposition directly or indirectly
by merger, consolidation, business combination, share exchange, joint
venture or otherwise of assets of the Company or any Subsidiary
representing 50% or more of the consolidated assets of the Company and the
Subsidiaries, (iii) issuance, sale or other disposition of (including by
way of merger, consolidation, business combination, share exchange, joint
venture or any similar transaction) securities (or
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options, rights or warrants to purchase, or securities convertible into or
exchangeable for such securities) representing 50% or more of the voting
power of the Company, (iv) transaction in which any person shall acquire
beneficial ownership, or the right to acquire beneficial ownership or any
group shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of 50% or more of the outstanding voting
capital stock of the Company or (v) any combination of the foregoing
(other than the Merger).
(e) For purposes of this Agreement, "Superior Proposal" means any
bona fide Acquisition Proposal made by a third party which, in the good
faith judgment of the Company's Board of Directors, taking into account
the various legal, financial and regulatory aspects of the proposal and
the person making such proposal (i) if accepted, is reasonably likely to
be consummated, and (ii) if consummated would, based upon advice of the
Financial Advisor, result in a transaction that is more favorable to the
Company's stockholders, from a financial point of view, than the
transactions contemplated by this Agreement.
Section 5.6. Stockholder Litigation. The Company shall give Buyer the
reasonable opportunity to participate in the defense or settlement of any
stockholder Litigation against the Company and/or its directors relating to the
transactions contemplated by this Agreement or the Merger, and no such
settlement shall be agreed to by the Company without Buyer's prior written
consent, which consent shall not be unreasonably withheld or delayed.
Section 5.7. Indemnification, Exculpation and Insurance.
(a) Notwithstanding anything to the contrary herein, it is
understood and agreed that all rights (the "Indemnification Rights") to
indemnification and exculpation by the Company now existing in favor of
each present and former director and officer of the Company or the
Subsidiaries (the "Indemnified Parties") as provided in the Company
Certificate of Incorporation or the Company Bylaws, in each case as in
effect on the date of this Agreement, or pursuant to any other agreements
in effect on the date hereof, shall survive the Merger, and the Surviving
Corporation shall (i) continue the Indemnification Rights in full force
and effect for a period of at least six (6) years from the Effective Time
and (ii) perform, in a timely manner, all of its obligations with respect
to the Indemnification Rights. Any claims for indemnification hereunder as
to which the Surviving Corporation has received written notice prior to
the sixth anniversary of the Effective Time shall survive, whether or not
such claims shall have been finally adjudicated or settled.
(b) Prior to the Effective Time, the Company shall purchase and
pre-pay in full "tail" directors' and officers' liability insurance
providing for coverage with respect to matters occurring prior to the
Effective Time for six (6) years from the Effective Time, which coverage
is reasonably equivalent in scope and amount to the Company directors' and
officers' liability insurance policies in place on the date of this
Agreement; provided, however, that the Company shall not, without Buyer's
prior written consent, pay or agree to pay an aggregate premium for such
insurance in excess of $1,700,000.
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(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision shall
be made so that the successors and assigns of the Surviving Corporation
shall assume the obligations set forth in this Section 5.7.
Section 5.8. Public Announcements. Buyer and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with a national
securities exchange or trading system to which Buyer or the Company is a party.
Notwithstanding anything contained in this Agreement to the contrary, any press
release or other public statement issued by the Company shall be permitted to
state that the Board of Directors of the Company is permitted to receive and
consider Acquisition Proposals in accordance with and subject to the terms of
this Agreement. Such press release or statement shall not be deemed to be a
violation of the Company's or the Company's Board of Director's obligations
under this Agreement and any Acquisition Proposals received in response thereto
shall be considered "unsolicited" by the Company for all purposes under this
Agreement and may be reviewed and considered by the Board of Directors of the
Company in accordance with and subject to the terms of this Agreement.
Section 5.9. Company Stockholders' Meeting.
(a) The Company shall cause the date of the Stockholders' Meeting to
be set for a date as soon as practicable (in no event later than
forty-five (45) days from the date on which the Proxy Statement is cleared
by the SEC) for the purpose of voting on the approval and adoption of this
Agreement and the Merger. The Company shall take all action necessary in
accordance with applicable Law and the Company Certificate of
Incorporation and Company Bylaws to duly call, give notice of, and convene
the Stockholders' Meeting. Unless the Board of Directors shall have made a
Subsequent Determination, the Company shall solicit from holders of shares
of Company Common Stock entitled to vote at the Stockholders' Meeting
proxies in favor of such approval and shall take all other action
necessary to secure the vote or consent of such holders required by the
DGCL or this Agreement to effect the Merger.
(b) Unless required by applicable Law or by a court of competent
jurisdiction, without the consent of Buyer, the Company shall not (i)
postpone or reschedule the date of the Stockholders' Meeting once it has
been fixed by the Board of Directors as set forth in the preceding
paragraph or (ii) adjourn the Stockholders' Meeting without taking a vote
with respect to the Merger. In the event that following the taking of a
vote with respect to the Merger at the Stockholders' Meeting, additional
time is required to count the proxies and ballots submitted at the
Stockholders' Meeting, the Stockholders' Meeting may be adjourned solely
for the purpose of counting such proxies and ballots and announcing the
final results of the voting on the Merger. In the event that the Company
postpones, reschedules or adjourns the Stockholders' Meeting in a manner
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permitted by the preceding sentences, the Company shall convene or
reconvene, as the case may be, the Stockholders' Meeting as soon as
practicable thereafter.
(c) Notwithstanding anything contained in this Agreement to the
contrary, the Company may, if it receives an unsolicited Acquisition
Proposal, delay the holding of the Stockholders' Meeting or the mailing of
the Proxy Statement, in each case for such time as is necessary for the
Board of Directors of the Company to consider such Acquisition Proposal
and to determine the effect, if any, on its recommendation of the Merger
and this Agreement; provided, that, any such delay shall not extend beyond
the earlier of (i) twenty (20) business days or (ii) the latest date as
would permit the Closing to occur by the Outside Date.
Section 5.10. Proxy Statement. The Company will as promptly as practicable
following the execution of this Agreement (in no event later than fourteen (14)
days thereafter) prepare and file the Proxy Statement with the SEC, in form and
substance reasonably acceptable to Buyer, and will use all commercially
reasonable efforts to respond to the comments of the SEC and to cause the Proxy
Statement to be mailed to the Company Stockholders at the earliest practical
time. Buyer and the Company shall furnish all information concerning it as the
other may reasonably request in connection with such actions. Each party to this
Agreement will notify the other parties and the Board of Directors of the
Company promptly of the receipt of the comments of the SEC, if any, and of any
request by the SEC for amendments or supplements to the Proxy Statement or for
additional information with respect thereto, and will supply the other parties
with copies of all correspondence between such party or its Representatives, on
the one hand, and the SEC or members of its staff, on the other hand, with
respect to the Proxy Statement or the Merger. If (A) at any time prior to the
Stockholders' Meeting, any event should occur relating to the Company or any of
its Subsidiaries which should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the Company will promptly inform Buyer and (B) if at
any time prior to the Stockholders' Meeting, any event should occur relating to
Buyer or any of its associates or affiliates, or relating to the plans of any
such persons for the Company after the Effective Time that should be set forth
in an amendment of, or a supplement to, the Proxy Statement, Buyer will promptly
inform the Company, and in the case of (A) or (B) the Company and Buyer, will,
upon learning of such event, promptly prepare, and the Company shall file and,
if required, mail such amendment or supplement to the Company Stockholders;
provided, prior to such filing or mailing, the Company and Buyer shall consult
with each other with respect to such amendment or supplement and shall
incorporate the other's comments thereon. The Proxy Statement shall (subject to
Section 5.5(c)) include the recommendation of the Company's Board of Directors
that the Company Stockholders vote to approve the Merger, this Agreement and the
transactions contemplated hereby and that the Company's Board has determined
that the Merger is advisable.
Section 5.11. Director Resignations. The Company shall cause to be
delivered to Buyer resignations of all the directors of the Subsidiaries to be
effective upon the consummation of the Merger or at such earlier time as may be
agreed by the parties hereto. The Company shall cause such directors, prior to
resignation, to appoint new directors nominated by Buyer to fill such vacancies.
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Section 5.12. No Acquisition of Company Common Stock. Prior to the
Effective Time, neither Buyer nor any of its "affiliates" or "associates" shall
become the "owner" (as such terms are defined in Section 203 of the DGCL) of any
shares of Company Common Stock.
Section 5.13. Employee Matters.
(a) Subject to the terms of any applicable collective bargaining
agreement, for a period of not less than one (1) year following the
Effective Time, the Surviving Corporation shall provide all individuals
who are employees of the Company and the Subsidiaries (including employees
who are not actively at work on account of illness, disability or leave of
absence) immediately prior to the Effective Time (the "Affected
Employees") with compensation and benefits which are substantially
comparable in the aggregate to the compensation and benefits provided to
such Affected Employees as of the date of this Agreement; provided that
neither Buyer nor the Surviving Corporation shall have any obligation to
issue, or adopt any plans or arrangements providing for the issuance of,
shares of capital stock, warrants, options or other rights in respect of
any shares of capital stock of any entity or any securities convertible or
exchangeable into such shares pursuant to any such plans or arrangements;
provided, further, that no plans or arrangements of the Company or any of
the Subsidiaries providing for such issuance shall be taken into account
in determining whether employee benefits are substantially comparable in
the aggregate. With respect to each employee benefit plan, program or
policy of the Surviving Corporation or Buyer or any of its affiliates,
each Affected Employee shall be given credit under such plan for all
service with the Company or any Subsidiary prior to the Effective Time for
all purposes under such plan. Such prior service shall also apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements or the application of any preexisting condition limitations.
Subject to the terms and conditions of this Agreement, with respect to any
severance protection agreement or arrangement, or employment letter or
agreement, providing for compensation or benefits to an employee of the
Company after termination of employment, the Surviving Corporation shall
confirm in writing that it shall pay and perform all of the obligations of
the Company pursuant to such agreements and arrangements.
(b) With respect to the ESPP, the Company shall take all actions
necessary to provide that (i) the ESPP shall be terminated on a date
following the date of this Agreement and no offerings shall be permitted
after such date, and (ii) each participant's accumulated payroll
deductions may be returned to the participant or may be used to purchase
shares of Company Common Stock prior to the Effective Time in accordance
with the terms of the ESPP.
(c) Nothing contained in this Section 5.13 or elsewhere in this
Agreement shall be construed to prevent the termination of employment of
any individual Affected Employee (subject to the Affected Employee's right
to receive any compensation or benefits to which he or she is entitled)
or, subject to Section 5.13, any change in the employee benefits available
to any individual Affected Employee or the amendment or termination of any
particular Company Benefit Plan or Benefit Agreement to the extent
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permitted by its terms as in effect immediately prior to the Effective
Time.
(d) The Company shall enter into Employment Agreements, to be
effective as of the Effective Time, with Carol Morgan, Gene Laminack, J.
Randolph Zook and Richard LeBer in substantially the form attached hereto
as Exhibit 5.13(d). The Company shall enter into agreements with Brock A.
Hattox and Chester J. Popkowski, effective immediately after the Effective
Time, in form and substance as reasonably agreeable to the parties hereto.
(e) The Company shall use its commercially reasonable efforts to
obtain the surrender of each Company Option by the holders thereof on or
prior to the Effective Time for treatment or payment in accordance with
Section 1.7.
(f) Prior to the Effective Time, the Company shall take all action
necessary and proper to merge the National Service Industries Pension Plan
A for Employees Covered by a Collective Bargaining Agreement and the
Pension Plan Covering Certain Hourly Employees of National Linen Service,
and if the Company deems it desirable, the National Service Industries
Pension Plan B with and into the Pension Plan of AECO Products Division of
National Service Industries, Inc. (the "AECO Pension Plan"), in accordance
with the requirements of ERISA and the Code, with the AECO Pension Plan
being the surviving plan.
Section 5.14. Rights Agreement. The Company shall take all further actions
(in addition to that referred to in Section 3.3(c)), if any, necessary in order
to render the Rights Agreement inapplicable to the Merger and the other
transactions contemplated by this Agreement.
Section 5.15. Commitment Letters. Buyer shall execute the Debt Commitment
Letters immediately following the execution and delivery of this Agreement by
the Company. Buyer shall use commercially reasonable efforts to obtain the
financing as set forth in the Debt Commitment Letters and the Equity Commitment
Letter (collectively, the "Commitment Letters") and to satisfy the conditions
set forth in the Commitment Letters or the related financing agreements. Buyer
shall provide prompt written notice to the Company of any lender's or other
party's refusal or stated intent to refuse to provide the financing described in
the Commitment Letters and, in each case, the stated reasons therefor. In any
such event, Buyer shall use commercially reasonable efforts to find substitute
financing for such financing as promptly as possible; provided, that any such
substitute financing shall be on terms and conditions no less favorable to Buyer
than the terms and conditions of the financing so substituted.
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ARTICLE VI.
CONDITIONS
Section 6.1. Conditions to the Obligation of Each Party. The respective
obligations of Buyer and the Company to effect the Merger are subject to the
satisfaction of the following conditions, unless waived in writing by all
parties:
(a) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the Company Stockholders;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect;
(c) There shall not be overtly threatened, instituted or pending any
action, proceeding, application or counterclaim by any Governmental Entity
before any court or governmental regulatory or administrative agency,
authority or tribunal which challenges or seeks to challenge, restrain or
prohibit the consummation of the Merger; and
(d) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained or made (including the expiration or termination of any
applicable waiting period under the HSR Act).
Section 6.2. Conditions to Obligations of Buyer to Effect the Merger. The
obligations of Buyer to effect the Merger are further subject to satisfaction or
waiver at or prior to the Closing of the following conditions:
(a) The representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in
all respects as of the date of this Agreement and as of the Closing Date,
except to the extent any such representation or warranty is expressly made
as of a specific date, in which case such representation or warranty shall
have been true and correct in all respects as of such date;
(b) The representations and warranties of the Company in this
Agreement that are not qualified by materiality shall be true and correct
in all material respects as of the date of this Agreement and as of the
Closing Date, except to the extent any such representation or warranty is
expressly made as of a specific date, in which case such representation or
warranty shall have been true and correct in all respects as of such date;
(c) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement;
(d) The Company shall have delivered to Buyer a certificate to the
effect that each of the conditions specified in (a), (b) and (c) above is
satisfied in all respects;
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(e) Since the date of this Agreement, there shall not have occurred
any Company Material Adverse Effect or any event or development that would
reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect;
(f) Buyer shall have received the proceeds of the financing pursuant
to the Commitment Letters;
(g) The total number of Dissenting Shares shall not exceed ten
percent (10%) of the outstanding shares of Company Common Stock at the
Effective Time;
(h) The Company shall have received an opinion of King & Spalding
LLP, in form and substance reasonably satisfactory to Buyer, to the effect
that the opinions contained in the tax opinion rendered by King & Spalding
LLP to the Company on April 1, 2003 remain the opinions of King & Spalding
LLP as of the Effective Time;
(i) The Company shall have obtained the surrender of each Company
Option by the holders thereof for treatment or payment in accordance with
Section 1.7;
(j) There shall not have been entered by the United States Court of
Appeals for the Second Circuit any judgment or order in the litigation
matter referred to in Section 6.2(j) of the Company Disclosure Letter that
results in the Company being required to pay amounts in excess of
$1,000,000;
(k) There shall not have been entered by any court a final,
nonappealable judgment or order against the Company requiring payment by
the Company of amounts in excess of $1,000,000 that are not covered by
insurance; provided that Section 6.2(j) above shall govern any judgment or
order entered in the litigation matter referred to in Section 6.2(j) of
the Company Disclosure Letter;
(l) The Tax Disaffiliation Agreement shall have been amended by the
parties thereto to clarify the obligations of the Company under Section
2.03 of the Tax Disaffiliation Agreement on such terms and conditions as
shall be reasonably acceptable to Buyer; and
(m) The Company and Brock A. Hattox and the Company and Chester
J. Popkowski shall have entered into the agreements referred to in
Section 5.13(d).
Section 6.3. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Buyer in this Agreement
that are qualified by materiality shall be true and correct in all
respects as of the date of this Agreement and as of the Closing Date;
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(b) The representations and warranties of Buyer in this Agreement
that are not qualified by materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing
Date;
(c) Buyer shall have performed in all material respects all
obligations required to be performed by it under this Agreement;
(d) Buyer shall have delivered to the Company a certificate to the
effect that each of the conditions specified in (a), (b) and (c) above is
satisfied in all respects; and
(e) The Board of Directors of the Company shall have received a
solvency opinion from a nationally-recognized financial advisor, in form
and substance reasonably satisfactory to the Board, which opinion shall be
as of the Effective Time.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Closing, whether before
or after approval of matters presented in connection with the Merger by the
Company Stockholders:
(a) By mutual written consent of duly authorized representatives of
Buyer and the Company;
(b) By Buyer or the Company if any court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree, ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) By Buyer or the Company if the Merger shall not have been
consummated on or before September 30, 2003 (the "Outside Date");
provided, however, that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the primary cause of,
or resulted in, the failure to consummate the Merger on or before such
date;
(d) By Buyer if the Board of Directors of the Company (i) shall have
withdrawn or shall have modified in a manner adverse to Buyer its approval
or recommendation of the Merger or this Agreement, (ii) causes the Company
to enter into an agreement with respect to an Acquisition Proposal, (iii)
shall have endorsed, approved or recommended any Acquisition Proposal,
(iv) shall have redeemed the Rights, or waived or amended any provision of
the Rights Agreement, in any such case to permit or facilitate the
consummation of any Acquisition Proposal, or (v) shall have resolved to do
any of the foregoing;
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(e) By Buyer if (i) a tender offer or exchange offer that, if
successful, would result in any person or group becoming a beneficial
owner of 50% or more of the outstanding shares of Company Common Stock is
commenced (other than by Buyer or an affiliate of Buyer) and the Company's
Board fails within ten (10) days of commencement of such tender offer to
recommend that the Company Stockholders not tender their shares in such
tender or exchange offer or (ii) for any reason the Company fails to call
and hold the Stockholders' Meeting by the Outside Date;
(f) By the Company or Buyer, if this Agreement and the Merger shall
fail to be approved and adopted by the Company Stockholders at the
Stockholders' Meeting by reason of the failure to obtain the required vote
at such meeting;
(g) By Buyer if (i) any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment and shall not have been waived
by Buyer or (ii) the Company shall breach in any material respect any of
its representations, warranties, covenants or other obligations hereunder
and, within ten (10) days after written notice of such breach to the
Company from Buyer, such breach shall not have been cured in all material
respects or waived by Buyer; provided that, (A) Section 7.1(e)(ii) shall
govern any failure by the Company to call and hold the Stockholders'
Meeting by the Outside Date and (B) Section 7.1(j) shall govern any
willful and knowing (as described therein) breach by the Company of its
covenants or obligations under Article V;
(h) By the Company, if (i) any of the conditions set forth in
Section 6.3 shall have become incapable of fulfillment and shall not have
been waived by the Company or (ii) Buyer shall breach in any material
respect any of its representations, warranties or obligations hereunder
and, within ten (10) days after written notice of such breach to Buyer
from the Company, such breach shall not have been cured in all material
respects or waived by the Company;
(i) By the Company if the Board of Directors of the Company shall
have withdrawn or shall have modified in a manner adverse to Buyer its
approval or recommendation of the Merger or this Agreement upon the
Company entering into an agreement relating to a Superior Proposal;
provided that the Company's right to terminate this Agreement under this
Section 7.1(i) shall not be available if the Company is then in breach of
Section 5.5; or
(j) By Buyer if the Company shall, with the prior knowledge of any
of the Knowledge Officers (as defined hereinafter), willfully and
knowingly breach in any material respect any of its covenants or
obligations under Article V; provided that, Section 7.1(e)(ii) shall
govern any failure by the Company to call and hold (whether or not
willfully and knowingly) the Stockholders' Meeting by the Outside Date.
Section 7.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1 hereof, this Agreement shall forthwith be terminated and have
no further effect except as
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specifically provided herein and, except as provided in this Section 7.2
and in Section 8.12, there shall be no liability on the part of any party
hereto.
(b) If (i) Buyer exercises its right to terminate this Agreement
under Section 7.1(d) or (ii) the Company exercises its right to terminate
this Agreement under Section 7.1(i), then the Company shall pay to Buyer
(within five (5) business days of Buyer's demand thereof), in same-day
funds, the sum of (A) all reasonable documented fees and expenses
(including, without limitation, reasonable fees and expenses of counsel,
accountants, investment bankers, experts and consultants) incurred by
Buyer in connection with or related to the authorization, preparation,
negotiation, financing, execution and performance of this Agreement and
the transactions contemplated hereby (the "Expenses") up to a maximum
amount of $3,000,000 and (B) $4,000,000 (the "Termination Fee").
(c) If Buyer exercises its right to terminate this Agreement under
Section 7.1(e) or 7.1(j), then the Company shall pay to Buyer (within five
(5) business days of Buyer's demand thereof), in same-day funds, the
Expenses, up to a maximum amount of $3,000,000; provided that no such
amount shall be payable if the Expenses shall have become payable or have
been paid in accordance with Section 7.2(b) of this Agreement. If (i)
Buyer exercises its right to terminate this Agreement under Section 7.1(e)
or 7.1(j), and (ii) within twelve (12) months after termination of this
Agreement, the Company shall enter into any definitive agreement relating
to, or consummate, an Acquisition Proposal which was publicly announced
prior to such termination, then, immediately prior to, and as a condition
of, consummation of such transaction, the Company shall pay to Buyer, in
same-day funds, the Termination Fee; provided that no such amount shall be
payable if the Termination Fee shall have become payable or have been paid
in accordance with Section 7.2(b) of this Agreement.
(d) If (i) (A) Buyer exercises its right to terminate this Agreement
under Section 7.1(f) or 7.1(g)(ii) or (B) the Company exercises its right
to terminate this Agreement under Section 7.1(f), and (ii) within twelve
(12) months after termination of this Agreement, the Company shall enter
into any definitive agreement relating to, or consummate, an Acquisition
Proposal which was publicly announced prior to such termination, then,
immediately prior to, and as a condition of, consummation of such
transaction, the Company shall pay to Buyer, in same-day funds, the sum of
(x) the Expenses up to a maximum amount of $3,000,000 and (y) the
Termination Fee; provided that no such amount shall be payable if the
Expenses or the Termination Fee shall have become payable or have been
paid in accordance with Section 7.2(b) or 7.2(c) of this Agreement.
Section 7.3. Interest and Costs; Other Remedies. The Company acknowledges
that the agreements contained in Section 7.2 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Buyer would not enter into this Agreement; accordingly, if the Company fails to
pay in a timely manner any of the amounts due pursuant to Section 7.2, and, in
order to obtain such payment, Buyer makes a claim that results in a judgment
against the Company, the Company shall pay to Buyer its reasonable fees and
expenses
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(including reasonable attorneys' fees and expenses) in connection with such
suit, together with interest on the amounts set forth in Section 7.2 at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made. The parties agree that the payment of the Expenses and the Termination
Fee pursuant to Section 7.2 shall be the exclusive monetary remedies of Buyer
upon any breach of this Agreement by the Company of any of its representations,
warranties, covenants and obligations under this Agreement.
Section 7.4. Amendments. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of the Merger by the Company Stockholders, no
amendment shall be made that requires further approval by the Company
Stockholders without such approval having been obtained.
Section 7.5. Waiver. At any time prior to the Effective Time, whether
before or after the Stockholders' Meeting, any party hereto may (i) extend the
time for the performance of any of the covenants, obligations or other acts of
any other party hereto or (ii) waive any inaccuracy of any representations or
warranties or compliance with any of the agreements, covenants or conditions of
any other party or with any conditions to its own obligations. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party by its
duly authorized officer. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights. The waiver of any such right with respect to particular
facts and other circumstances shall not be deemed a waiver with respect to any
other facts and circumstances and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.1. No Third Party Beneficiaries. Other than the provisions of
Article I and Sections 5.7 and 5.13 hereof, nothing in this Agreement shall
confer any rights or remedies upon any person other than the parties hereto.
Section 8.2. Entire Agreement. This Agreement constitutes the entire
Agreement among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof. The
parties hereby agree that for purposes of this Agreement (including, but not
limited to, conditions to Closing) neither party has made to the other any
representations, warranties or covenants or other disclosures other than those
contained in this Agreement or the Company Disclosure Letter. No amendment,
modification or alteration of the terms or provisions of this Agreement or the
Company Disclosure Letter shall be binding unless the same shall be in writing
and duly executed by the parties hereto.
Section 8.3. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors. No party may
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assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties.
Section 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 8.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law thereof.
Section 8.7. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
Section 8.8. Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, subject to Section 7.3, each of
the parties agrees that the other party shall be entitled to seek an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
Section 8.9. Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.10. Non-Survival of Representations and Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be,
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except that (i) the agreements set forth in Article I and this Article VIII and
Sections 5.4, 5.7, and 5.13 shall survive the Effective Time indefinitely and
(ii) the agreements set forth in Sections 5.2 and 7.2 and in this Article VIII
shall survive the termination of this Agreement indefinitely.
Section 8.11. Certain Definitions.
(a) For purposes of this Agreement, unless otherwise set forth
herein, the terms "associate" and "affiliate" shall have the same meaning
as set forth in Rule l2b-2 promulgated under the Exchange Act, and the
term "person" shall mean any individual, corporation, partnership (general
or limited), limited liability company, limited liability partnership,
trust, joint venture, joint-stock company, syndicate, association, entity,
unincorporated organization or government or any political subdivision,
agency or instrumentality thereof.
(b) For purposes of this Agreement, the phrase "Company Material
Adverse Effect" shall mean, with respect to the Company, any change, event
or effect that (i) is materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities of
the Company and the Subsidiaries taken as a whole or (ii) prevents or
materially delays the performance by the Company of any of its obligations
under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement; provided, however, that, in
either case, none of the following shall be deemed in and of themselves,
either or alone or in combination, to constitute a Company Material
Adverse Effect: (A) any change in the market price or trading volume of
the Company Common Stock (it being understood that any changes, events or
effects giving rise or contributing to such change may otherwise
constitute a Company Material Adverse Effect); (B) any failure by the
Company to meet internal projections or forecasts or published revenue or
earnings projections (it being understood that any changes, events or
effects giving rise or contributing to such failure may otherwise
constitute a Company Material Adverse Effect); (C) any change, event or
effect in the United States economy or securities markets as a whole; (D)
any change, event or effect generally affecting the textile rental or
envelopes industries that does not have a materially disproportionate
effect on the Company relative to most other industry participants; (E)
any change, event or effect relating to or resulting from the announcement
or pendency of the Merger or compliance by the Company with the terms and
conditions of this Agreement; (F) any change, event or effect relating to
or resulting from changes in generally accepted accounting requirements or
principles; and (G) any change, event or effect relating to or resulting
from changes in applicable Laws, rules, or regulations or interpretations
thereof.
(c) For purposes of this Agreement, the phrases "to the knowledge of
the Company," "known to the Company," "with the knowledge of any of the
Knowledge Officers" and similar formulations shall mean the actual
knowledge of the officers of the Company listed in Section 8.11(c) of the
Company Disclosure Letter (the "Knowledge Officers").
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Section 8.12. Fees and Expenses. Except as provided in Section 7.2, all
costs and expenses incurred by the parties hereto in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses; provided that, Buyer and the Company shall each pay
one-half of the filing fees required under the HSR Act.
Section 8.13. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
nationally-recognized overnight courier service, or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses, or at such other address for a party as shall be
specified in a notice given in accordance with this Section 8.13:
If to Buyer: NS Acquisition Corp.
c/o California Investment Fund, LLC
550 West C Street, Suite 1000
San Diego, California 92101
Attention: Michael R. Kelly
with a copy to: Latham & Watkins LLP
12636 High Bluff Drive
Suite 300
San Diego, California 92130
Attention: Scott N. Wolfe, Esq.
If to the Company: National Service Industries, Inc.
1420 Peachtree Street
Atlanta, Georgia 30309
Attention: Carol Ellis Morgan, Esq.
with a copy to: King & Spalding LLP
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
Section 8.14. Consent to Jurisdiction; Waiver of Trial by Jury.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United
States of America, sitting in Delaware, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties
hereby irrevocably and unconditionally (i) agrees not to commence any such
action or proceeding except in such courts, (ii) agrees that any claim in
respect of any such action or proceeding may be heard and determined in
such Delaware State court or, to the extent permitted by law, in such
Federal court, (iii) waives, to the fullest extent it may legally and
effectively do so, any
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objection which it may now or hereafter have to the laying of venue of any
such action or proceeding in any such Delaware State or Federal court, and
(iv) waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such Delaware State or Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in
Section 8.13. Nothing in this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES
AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.14(B).
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IN WITNESS WHEREOF, the Company and Buyer have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
NATIONAL SERVICE INDUSTRIES, INC.
By: /s/ Brock A. Hattox
--------------------------------------
Name: Brock A. Hattox
--------------------------------------
Title: Chairman, Chief Executive Officer
--------------------------------------
and President
NS ACQUISITION CORP.
By: /s/ Michael R. Kelly
--------------------------------------
Name: Michael R. Kelly
--------------------------------------
Title: President and CEO
--------------------------------------