EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
SMTEK International, Inc.,
Cardinal Acquisition, Inc.
and
CTS Corporation
Dated as of November 16, 2004
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER................................................................................ 1
Section 1.1 The Merger........................................................................... 1
Section 1.2 Closing.............................................................................. 2
Section 1.3 Effective Time....................................................................... 2
Section 1.4 Effects of the Merger................................................................ 2
Section 1.5 Certificate of Incorporation and By-laws............................................. 2
Section 1.6 Directors and Officers of the Surviving Corporation.................................. 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
SURRENDER OF CERTIFICATES AND PAYMENT..................................................... 3
Section 2.1 Effect on Capital Stock.............................................................. 3
(a) Merger Sub's Common Stock............................................................ 3
(b) Cancellation of Treasury Stock and Owned Stock....................................... 3
(c) Conversion of Company Common Stock................................................... 3
Section 2.2 Exchange of Certificates............................................................. 4
(a) Exchange Agent....................................................................... 4
(b) Exchange Procedures.................................................................. 4
(c) Dividends; Other Distributions....................................................... 5
(d) No Further Ownership Rights in Company Common Stock.................................. 5
(e) No Fractional Shares................................................................. 6
(f) Termination of Exchange Fund......................................................... 6
(g) No Liability......................................................................... 6
(h) Investment of Exchange Fund.......................................................... 6
(i) Lost Certificates.................................................................... 6
Section 2.3 Certain Adjustments.................................................................. 7
Section 2.4 Dissenters' Rights................................................................... 7
Section 2.5 Further Assurances................................................................... 7
Section 2.6 Withholding Rights................................................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES............................................................ 8
Section 3.1 Representations and Warranties of Company............................................ 8
(a) Organization, Standing and Corporate Power........................................... 8
(b) Subsidiaries......................................................................... 8
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(c) Capital Structure.................................................................... 9
(d) Authority; Noncontravention.......................................................... 9
(e) SEC Reports and Financial Statements; Undisclosed Liabilities; Internal
Controls............................................................................. 10
(f) Information Supplied................................................................. 12
(g) Absence of Certain Changes or Events................................................. 12
(h) Compliance with Applicable Laws; Litigation.......................................... 12
(i) Employee Benefit Plans............................................................... 13
(j) Taxes................................................................................ 17
(k) Environmental Matters................................................................ 18
(l) Real Property; Assets................................................................ 21
(m) Intellectual Property................................................................ 22
(n) Labor Agreements and Employee Issues................................................. 23
(o) Certain Contracts.................................................................... 23
(p) Insurance............................................................................ 24
(q) Acquisitions and Divestitures........................................................ 24
(r) Affiliate Transactions............................................................... 24
(s) Voting Requirement................................................................... 25
(t) State Takeover Statutes.............................................................. 25
(u) Opinion of Financial Advisor......................................................... 25
(v) Brokers.............................................................................. 25
Section 3.2 Representations and Warranties of Parent and Merger Sub.............................. 25
(a) Organization, Standing and Corporate Power........................................... 26
(b) Authority; Noncontravention.......................................................... 26
(c) SEC Reports and Financial Statements; Undisclosed Liabilities; Internal
Controls............................................................................. 27
(d) Information Supplied................................................................. 28
(e) Compliance with Applicable Laws; Litigation.......................................... 28
(f) Available Funds...................................................................... 29
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS................................................. 29
Section 4.1 Conduct of Business.................................................................. 29
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(continued)
PAGE
(a) Conduct of Business by the Company................................................... 29
(b) Other Actions........................................................................ 31
(c) Advice of Changes.................................................................... 31
Section 4.2 No Solicitation by the Company....................................................... 32
(a) Company Takeover Proposal............................................................ 32
(b) Definitions.......................................................................... 32
(c) Actions by the Company............................................................... 33
(d) Notice of Company Takeover Proposal.................................................. 34
(e) Rule 14e-2(a), Rule 14d-9 and Other Applicable Law................................... 34
(f) Return or Destruction of Confidential Information.................................... 34
ARTICLE V ADDITIONAL AGREEMENTS..................................................................... 34
Section 5.1 Preparation of the Form S-4 Proxy Statement; Stockholders Meeting.................. 34
(a) Form S-4 Proxy Statement............................................................. 34
(b) Stockholders Meeting................................................................. 35
Section 5.2 Letters of the Company's Accountants................................................. 35
Section 5.3 Letters of Parent's Accountants...................................................... 35
Section 5.4 Access to Information; Confidentiality............................................... 36
Section 5.5 Reasonable Best Efforts; Cooperation................................................. 36
(a) Reasonable Best Efforts.............................................................. 36
(b) No Takeover Statutes Apply........................................................... 36
(c) Significant Developments............................................................. 37
(d) Stockholders Agreement............................................................... 37
Section 5.6 Stock Options, Warrants and Restricted Stock......................................... 37
Section 5.7 Indemnification...................................................................... 37
(a) Rights Assumed by Surviving Corporation.............................................. 37
(b) Successors and Assigns of Surviving Corporation...................................... 37
(c) Continuing Coverage.................................................................. 37
(d) Intended Beneficiaries............................................................... 38
Section 5.8 Public Announcements................................................................. 38
Section 5.9 Affiliates........................................................................... 38
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(continued)
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Section 5.10 NYSE Listing......................................................................... 38
Section 5.11 Stockholder Litigation............................................................... 38
Section 5.12 Standstill Agreements; Confidentiality Agreements.................................... 39
Section 5.13 Transition........................................................................... 39
Section 5.14 Section 16(b)........................................................................ 39
Section 5.15 Employee Benefit Matters............................................................. 40
(a) Company Benefit Plans................................................................ 40
(b) Affected Employees................................................................... 40
(c) New Plans............................................................................ 40
ARTICLE VI CONDITIONS PRECEDENT...................................................................... 41
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger........................... 41
(a) Stockholder Approval................................................................. 41
(b) Governmental and Regulatory Approvals................................................ 41
(c) No Injunctions or Restraints......................................................... 41
(d) Form S-4............................................................................. 41
(e) NYSE Listing......................................................................... 41
Section 6.2 Conditions to Obligations of Parent and Merger Sub................................... 42
(a) Representations and Warranties....................................................... 42
(b) Performance of Obligations of the Company............................................ 42
(c) Officer's Certificate................................................................ 42
Section 6.3 Conditions to Obligations of the Company............................................. 42
(a) Representations and Warranties....................................................... 42
(b) Performance of Obligations of Parent and Merger Sub.................................. 42
(c) Officer's Certificate................................................................ 42
Section 6.4 Frustration of Closing Conditions.................................................... 42
ARTICLE VII TERMINATION............................................................................... 43
Section 7.1 Termination.......................................................................... 43
(a) Termination by Mutual Consent........................................................ 43
(b) Termination by Parent or the Company................................................. 43
(c) Termination by Parent................................................................ 43
(d) Termination by the Company........................................................... 44
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(continued)
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Section 7.2 Effect of Termination................................................................ 44
Section 7.3 Fees and Expenses.................................................................... 44
(a) Division of Fees and Expenses........................................................ 44
(b) Event of Termination................................................................. 44
(c) Failure to Pay Transaction Fee....................................................... 45
ARTICLE VIII GENERAL PROVISIONS........................................................................ 45
Section 8.1 Nonsurvival of Representations and Warranties........................................ 45
Section 8.2 Notices.............................................................................. 45
Section 8.3 Interpretation....................................................................... 47
Section 8.4 Counterparts......................................................................... 48
Section 8.5 Entire Agreement; No Third-Party Beneficiaries....................................... 48
Section 8.6 Governing Law........................................................................ 48
Section 8.7 Assignment........................................................................... 48
Section 8.8 Consent to Jurisdiction.............................................................. 48
Section 8.9 Specific Enforcement................................................................. 49
Section 8.10 Amendment............................................................................ 49
Section 8.11 Extension; Waiver.................................................................... 49
Section 8.12 Severability......................................................................... 49
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EXHIBITS
Exhibit A....................................................................................................... A-1
TABLE OF DEFINED TERMS
TERM PAGE
- ---- ----
ACQUISITION AGREEMENT........................................................................................... 33
ADJUSTMENT EVENT................................................................................................ 7
AFFILIATE....................................................................................................... 47
AGREEMENT....................................................................................................... 1
BUSINESS DAY.................................................................................................... 2
CASH CONSIDERATION.............................................................................................. 3
CASH ELECTION................................................................................................... 3
CERTIFICATE OF MERGER........................................................................................... 2
CLOSING......................................................................................................... 2
CLOSING DATE.................................................................................................... 2
CLOSING VWAP.................................................................................................... 3
CODE............................................................................................................ 8
COMPANY......................................................................................................... 1
COMPANY ADVERSE RECOMMENDATION CHANGE........................................................................... 33
COMPANY BENEFIT PLANS........................................................................................... 13
COMPANY CERTIFICATE............................................................................................. 3
COMPANY COMMON STOCK............................................................................................ 1
COMPANY CONTRACT................................................................................................ 24
COMPANY DISCLOSURE LETTER....................................................................................... 8
COMPANY ENTITIES................................................................................................ 8
COMPANY SEC DOCUMENTS........................................................................................... 11
COMPANY STOCK OPTIONS........................................................................................... 9
COMPANY STOCK PLANS............................................................................................. 9
COMPANY SUBSIDIARIES............................................................................................ 8
COMPANY SUBSIDIARY.............................................................................................. 8
COMPANY TAKEOVER PROPOSAL....................................................................................... 33
COMPANY WARRANTS................................................................................................ 9
CONFIDENTIALITY AGREEMENT....................................................................................... 36
DGCL............................................................................................................ 1
DISSENTING SHARES............................................................................................... 7
DISSENTING STOCKHOLDER.......................................................................................... 7
EFFECTIVE TIME.................................................................................................. 2
EMPLOYEE........................................................................................................ 17
ENVIRONMENT..................................................................................................... 20
ENVIRONMENTAL CLAIM............................................................................................. 20
ENVIRONMENTAL CONDITION......................................................................................... 21
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TERM PAGE
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ENVIRONMENTAL LAWS.............................................................................................. 20
ENVIRONMENTAL PERMIT............................................................................................ 21
ERISA........................................................................................................... 14
ERISA AFFILIATE................................................................................................. 14
EXCHANGE ACT.................................................................................................... 8
EXCHANGE AGENT.................................................................................................. 4
EXCHANGE FUND................................................................................................... 4
EXCHANGE RATIO.................................................................................................. 3
FOREIGN PLAN.................................................................................................... 13
FORM S-4........................................................................................................ 12
GAAP............................................................................................................ 11
GOVERNMENTAL ENTITY............................................................................................. 10
HAZARDOUS SUBSTANCE............................................................................................. 20
INDEMNIFIED PARTIES............................................................................................. 38
INTELLECTUAL PROPERTY........................................................................................... 22
KNOWLEDGE....................................................................................................... 47
LAW............................................................................................................. 21
LEASED REAL PROPERTY............................................................................................ 21
LEASES.......................................................................................................... 21
LIENS........................................................................................................... 47
MATERIAL ADVERSE CHANGE......................................................................................... 47
MATERIAL ADVERSE EFFECT......................................................................................... 47
MAXIMUM EXCHANGE RATIO.......................................................................................... 4
MERGER.......................................................................................................... 1
MERGER CONSIDERATION............................................................................................ 3
MERGER SUB...................................................................................................... 1
MERGER SUB COMMON STOCK......................................................................................... 3
MULTIEMPLOYER PLAN.............................................................................................. 16
MULTIPLE EMPLOYER PLAN.......................................................................................... 16
NOTICE OF ADVERSE RECOMMENDATION................................................................................ 33
NYSE............................................................................................................ 4
OWNED REAL PROPERTY............................................................................................. 21
PARENT.......................................................................................................... 1
PARENT COMMON STOCK............................................................................................. 3
PARENT SEC DOCUMENTS............................................................................................ 27
PBGC............................................................................................................ 15
PCBS............................................................................................................ 20
PERMITS......................................................................................................... 13
PERSON.......................................................................................................... 47
POST-CLOSING TAX PERIOD......................................................................................... 17
POST-SIGNING VWAP............................................................................................... 4
PRE-CLOSING TAX PERIOD.......................................................................................... 17
PREFERRED STOCK................................................................................................. 9
PROXY STATEMENT................................................................................................. 10
RECENT SEC REPORTS.............................................................................................. 18
RELEASE......................................................................................................... 20
REPRESENTATIVES................................................................................................. 32
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TERM PAGE
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RESTRAINTS...................................................................................................... 41
SEC............................................................................................................. 10
SECURITIES ACT.................................................................................................. 11
STOCK CONSIDERATION............................................................................................. 3
STOCK VALUE..................................................................................................... 3
STOCKHOLDER APPROVAL............................................................................................ 25
STOCKHOLDERS AGREEMENT.......................................................................................... 1
STOCKHOLDERS MEETING............................................................................................ 35
SUBSIDIARY...................................................................................................... 48
SUPERIOR PROPOSAL............................................................................................... 32
SURVIVING CORPORATION........................................................................................... 2
TAKEOVER STATUTE................................................................................................ 25
TAX............................................................................................................. 18
TAX RETURN...................................................................................................... 18
TAXES........................................................................................................... 18
TERMINATION DATE................................................................................................ 43
TERMINATION FEE................................................................................................. 45
TRADING DAY..................................................................................................... 4
TRANSFEREE...................................................................................................... 4
WARRANT AGREEMENTS.............................................................................................. 9
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
November 16, 2004, by and among CTS Corporation, an Indiana corporation
("PARENT"), Cardinal Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Parent ("MERGER SUB"), and SMTEK International, Inc., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company and
Parent have each determined that a business combination between Parent and the
Company is in the best interests of their respective companies and stockholders
and accordingly have agreed to effect the merger of Merger Sub with and into the
Company (the "MERGER"), upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), whereby the separate corporate existence of
Merger Sub shall cease and each issued and outstanding share of common stock,
par value $0.01 per share, of the Company ("COMPANY COMMON STOCK"), other than
Dissenting Shares and any shares of Company Common Stock owned by Parent or any
direct or indirect subsidiary of Parent or held in the treasury of the Company,
will be converted into the right to receive the Merger Consideration as provided
in Section 2.1 of this Agreement;
WHEREAS, the Board of Directors of the Company has determined
that the Merger is advisable and fair to and in the best interests of the
Company and its stockholders;
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger; and
WHEREAS, as a material inducement for Parent and Merger Sub to
enter into this Agreement, concurrently with the execution and delivery of this
Agreement, certain stockholders of the Company have entered into a stockholders
agreement with Parent (the "STOCKHOLDERS AGREEMENT"), which includes, among
other things, an irrevocable proxy granting to Parent the right to vote all of
the Company Common Stock of such Company stockholders in favor of the adoption
and approval of this Agreement and the Merger.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and upon the terms and subject to
the conditions set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. In accordance with the DGCL, Merger
Sub will be merged with and into the Company at the Effective Time and the
separate corporate existence of
1
Merger Sub will thereupon cease. Following the Effective Time, the Company will
be the surviving corporation (the "SURVIVING CORPORATION").
Section 1.2 Closing. The closing of the Merger (the "CLOSING")
will take place at a time and on a date to be specified by the parties, which is
to be no later than the second Business Day after satisfaction or waiver
(subject to applicable Law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article
VI, unless another time or date is agreed to by the parties to this Agreement.
The Closing will be held at the offices of Jones Day, 901 Lakeside Avenue,
Cleveland, Ohio 44114, or such other location to which the parties to this
Agreement agree in writing. The date on which the Closing occurs is hereinafter
referred to as the "CLOSING DATE." "BUSINESS DAY" means any day other than
Saturday, Sunday or any federal holiday.
Section 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall (i) file a certificate of merger (the "CERTIFICATE OF MERGER") in such
form as is required by, and executed in accordance with, the relevant provisions
of the DGCL and the terms of this Agreement and (ii) make all other filings or
recordings required under the DGCL. The Merger will 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 subsequent date or time as the Company, Parent
and Merger Sub agree and specify in the Certificate of Merger (the date and time
the Merger becomes effective is hereinafter referred to as the "EFFECTIVE
TIME").
Section 1.4 Effects of the Merger. The Merger will have the
effects set forth in 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 Merger Sub will be vested
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub will become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.5 Certificate of Incorporation and By-laws. The
certificate of incorporation of the Company will be the certificate of
incorporation of the Surviving Corporation and will be amended as of the
Effective Time to read in its entirety like the certificate of incorporation of
Merger Sub except that Article First of such certificate of incorporation will
read in its entirety as follows: "The name of the Corporation is SMTEK
International, Inc." until thereafter changed or amended as provided therein or
by applicable Law. The bylaws of Merger Sub, as in effect immediately before the
Effective Time, will be the bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein, by the certificate of
incorporation or by applicable Law.
Section 1.6 Directors and Officers of the Surviving
Corporation. The directors of Merger Sub immediately prior to the Effective Time
will be the directors of the Surviving Corporation, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of Merger Sub
immediately prior to the Effective Time will be the officers of the Surviving
Corporation, until the earlier of their death, resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES AND PAYMENT
Section 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company, Parent or Merger Sub:
(a) Merger Sub's Common Stock. Each share of Merger Sub's
common stock, par value $0.01 per share ("MERGER SUB COMMON STOCK"), outstanding
immediately prior to the Effective Time will be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Owned Stock. Each share
of Company Common Stock that is owned by Parent or any direct or indirect
subsidiary of Parent immediately prior to the Effective Time and any Company
Common Stock held in the treasury of the Company immediately prior to the
Effective Time will automatically be canceled and retired and will cease to
exist, and no consideration will be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section
2.2(e), each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b) and Dissenting Shares
that are owned by Dissenting Stockholders that have properly exercised appraisal
rights pursuant to Section 262 of the DGCL) will be converted into the right to
receive (i) a number of fully paid, non-assessable shares of common stock, no
par value, of Parent ("PARENT COMMON STOCK") equal to the Exchange Ratio (the
"STOCK CONSIDERATION"), and (ii) $10.725 in cash without interest from Parent
(the "CASH CONSIDERATION" and, together with the Stock Consideration, the
"MERGER CONSIDERATION"). The "EXCHANGE RATIO" shall be equal to the Stock Value
divided by the Closing VWAP; provided, however, that the Exchange Ratio shall be
less than the Maximum Exchange Ratio. If the Exchange Ratio would have been
equal to or greater than the Maximum Exchange Ratio but for the proviso in the
previous sentence, then the Company may, in its sole discretion, require that,
in lieu of the Stock Consideration, Parent make a cash payment in an amount
equal to the Stock Value (as calculated below) in addition to the Cash
Consideration (the "CASH ELECTION"), and the term Merger Consideration shall
include this cash payment as opposed to the Stock Consideration. All Company
Common Stock converted into the right to receive the Merger Consideration
pursuant to this Section 2.1(c) shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
that immediately prior to the Effective Time represented such Company Common
Stock ("COMPANY CERTIFICATE") shall thereafter cease to have any rights with
respect to such Company Common Stock, except the right to receive the Merger
Consideration to be issued in consideration therefor and any dividends or other
distributions to which holders of Company Common Stock become entitled in
accordance with this Article II upon the surrender of such Company Certificate.
"STOCK VALUE" means the sum of (x) $3.575 plus (y) 0.25 multiplied by the
Post-Signing VWAP minus (z) 0.25 multiplied by $13.4329; provided, however, that
the Stock Value shall not be less than $3.475 or greater than $4.275. "CLOSING
VWAP" means the volume weighted average price of Parent Common Stock for the 20
consecutive Trading Days in the period ending on the Trading Day immediately
prior to the Closing Date, as reported by Bloomberg, Inc. "MAXIMUM EXCHANGE
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RATIO" means 0.199 multiplied by a fraction, the numerator of which is the total
number of shares of Parent Common Stock outstanding immediately prior to the
Effective Time and the denominator of which is the total number of shares of
Company Common Stock outstanding immediately prior to the Effective Time.
"POST-SIGNING VWAP" means the volume weighted average price of Parent Common
Stock for the 20 consecutive Trading Days in the period beginning on the Trading
Day immediately following the date of this Agreement, as reported by Bloomberg,
Inc. "TRADING DAY" means a day on which the New York Stock Exchange, Inc.
("NYSE") is open for trading and on which the Parent Common Stock was traded.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent will
designate a national bank or trust company to act as agent of Parent for
purposes of, among other things, mailing and receiving transmittal letters and
distributing the Merger Consideration to the Company stockholders (the "EXCHANGE
AGENT"). As of the Effective Time, Parent and the Exchange Agent shall enter
into an agreement which will provide that Parent shall deposit with the Exchange
Agent as of the Effective Time, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, cash and certificates representing the shares of Parent
Common Stock (such cash and shares of Parent Common Stock, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time, and any cash proceeds thereof being hereinafter referred to as
the "EXCHANGE FUND") issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock.
(b) Exchange Procedures.
(i) As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each holder of record
of a Company Certificate whose shares of Company Common Stock were
converted into the right to receive Merger Consideration (A) a letter
of transmittal (which will specify that delivery will be effected, and
risk of loss and title to the Company Certificates will pass, only upon
proper delivery of the Company Certificates to the Exchange Agent and
will be in such form and have such other provisions as Parent and the
Company may specify consistent with this Agreement) and (B)
instructions for use in effecting the surrender of the Company
Certificates in exchange for the Merger Consideration.
(ii) After the Effective Time, and upon surrender in
accordance with Section 2.2(b)(i) of a Company Certificate for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Company
Certificate will be entitled to receive in exchange therefor the Merger
Consideration that such holder has the right to receive therefor
pursuant to the provisions of this Article II, certain dividends or
other distributions, if any, in accordance with Section 2.2(c) and cash
in lieu of any fractional share of Parent Common Stock in accordance
with Section 2.2(e), and the Company Certificate so surrendered will
forthwith be canceled. In the event of a transfer of ownership of
shares of Company Common Stock that are not registered in the transfer
records of the Company, payment may be issued to a person other than
the person in whose name the Certificate so surrendered is registered
(the "Transferee") if
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such Company Certificate is properly endorsed or otherwise in proper
form for transfer and the Transferee pays any transfer or other taxes
required by reason of such payment to a person other than the
registered holder of such Company Certificate or establishes to the
satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section
2.2(b), each Company Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the Merger Consideration that the holder thereof has the
right to receive in respect of such Company Certificate pursuant to the
provisions of this Article II, certain dividends or other
distributions, if any, in accordance with Section 2.2(c) and cash in
lieu of any fractional share of Parent Common Stock in accordance with
Section 2.2(e). No interest will be paid or will accrue on any cash
payable to holders of Company Certificates pursuant to the provisions
of this Article II.
(c) Dividends; Other Distributions. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby, and, in the case of Company Certificates representing Company Common
Stock, no cash payment in lieu of fractional shares will be paid to any such
holder pursuant to Section 2.2(e), and all such dividends, other distributions
and cash in lieu of fractional shares of Parent Common Stock will be paid by
Parent to the Exchange Agent and will be included in the Exchange Fund, in each
case until the surrender of such Company Certificate in accordance with this
Article II. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Company Certificate, there will be paid to the
holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and, in the case of Company Certificates representing
Company Common Stock, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued and all Cash Consideration paid upon the
surrender for exchange of Company Certificates in accordance with the terms of
this Article II (including any cash paid pursuant to Section 2.2(c) and Section
2.2(e)) will be deemed to have been issued or paid, as the case may be, in full
satisfaction of all rights pertaining to the shares of Company Common Stock,
theretofore represented by such Company Certificates, subject, however, to
Parent's obligation to pay any dividends or make any other distributions with a
record date prior to the Effective Time that may have been declared or made by
the Company on such shares of Company Common Stock that remain unpaid at the
Effective Time, and there will be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Company Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they will be canceled and
exchanged as provided in this Article II, except as otherwise provided by Law.
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(e) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock will be issued upon the surrender for
exchange of Company Certificates, no dividend or distribution of Parent
will relate to such fractional share interests and such fractional
share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Parent.
(ii) In lieu of the issuance of fractional shares,
the Exchange Agent shall sell such number of whole shares of Parent
Common Stock in the open market in order to pay each holder of Company
Common Stock entitled to receive a fractional share of Parent Common
Stock an amount in cash equal to the product obtained by multiplying
(A) the fractional share interest to which such former holder (after
taking into account all shares of Company Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) the
Closing VWAP.
(iii) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Company
Certificates formerly representing Company Common Stock with respect to
any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Company Certificates formerly
representing Company Common Stock subject to and in accordance with the
terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of the Company Certificates for
six months after the Effective Time will be delivered to Parent, upon demand,
and any holders of the Company Certificates who have not theretofore complied
with this Article II may thereafter look only to Parent for payment of their
claim for Stock Consideration, Cash Consideration, any dividends or
distributions with respect to Parent Common Stock and any cash in lieu of
fractional shares of Parent Common Stock.
(g) No Liability. None of Parent, the Surviving Corporation or
the Exchange Agent will be liable to any person in respect of any shares of
Parent Common Stock, any dividends or distributions with respect thereto, any
cash in lieu of fractional shares of Parent Common Stock or any cash from the
Exchange Fund, in each case, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments will be
paid to Parent.
(i) Lost Certificates. If any Company Certificate has been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Company 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 Company
Certificate, the Exchange Agent shall issue, in exchange for such lost, stolen
or destroyed Company Certificate the Merger Consideration and, if applicable,
any unpaid dividends and
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distributions on shares of Parent Common Stock deliverable in respect thereof
and any cash in lieu of fractional shares, in each case, due to such person
pursuant to this Agreement.
Section 2.3 Certain Adjustments. If after the date of this
Agreement and at or prior to the Effective Time, the outstanding shares of
Parent Common Stock or Company Common Stock are changed into a different number
of shares by reason of any reclassification, recapitalization, split-up, stock
split, subdivision, combination or exchange of shares, or any dividend payable
in stock or other securities is declared thereon or rights issued in respect
thereof with a record date within such period, or any similar event occurs (any
such action, an "ADJUSTMENT EVENT"), each of the Exchange Ratio, Stock
Consideration and the Cash Consideration will be adjusted accordingly, without
duplication, to provide to the holders of Company Common Stock the same economic
effect and percentage ownership of Parent Common Stock as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up, stock
split, subdivision, combination, exchange or dividend or similar event.
Section 2.4 Dissenters' Rights. Shares of Company Common Stock
that have not been voted for adoption of this Agreement and with respect to
which appraisal has been properly demanded in accordance with Section 262 of the
DGCL ("DISSENTING SHARES") will not be converted into the right to receive the
Merger Consideration at or after the Effective Time unless and until the holder
of such shares (a "DISSENTING STOCKHOLDER") withdraws his demand for such
appraisal (in accordance with Section 262(k) of the DGCL) or becomes ineligible
for such appraisal. If a holder of Dissenting Shares withdraws (in accordance
with Section 262(k) of the DGCL) his, her or its demand for such appraisal or
becomes ineligible for such appraisal, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, each of such holder's
Dissenting Shares will cease to be a Dissenting Share and will be converted into
and represent the right to receive the Merger Consideration, without interest
thereon. The Company shall give Parent prompt notice of any demands for
appraisal, attempted withdrawals of such demands and any other instruments
received by the Company relating to stockholders' rights of appraisal. Parent
and the Company shall cooperate in conducting all negotiations and proceedings
with respect to demand for appraisal under the DGCL; provided, however, that
Parent shall control all financial settlements with respect to such negotiations
and proceedings. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisals of
Dissenting Shares, compromise or offer to settle or settle any such demands or
approve any withdrawal of any such demands.
Section 2.5 Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of the Company or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
Section 2.6 Withholding Rights. The Surviving Corporation,
Parent or the Exchange Agent, as the case may be, shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any person such amounts, if any, as it is required to deduct and withhold
with respect to the making of such payment under the
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Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld by
the Surviving Corporation, Parent or the Exchange Agent, as the case may be,
such amounts withheld shall be treated for purposes of this Agreement as having
been paid to such person in respect of which such deduction and withholding was
made by the Surviving Corporation, Parent or the Exchange Agent, as the case may
be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Company. Except
as set forth (i) on the disclosure letter delivered by the Company to Parent
prior to the execution of this Agreement (the "COMPANY DISCLOSURE LETTER"), or
(ii) in the Company SEC Documents (as defined below) filed prior to the date of
this Agreement, the Company hereby represents and warrants to Parent and Merger
Sub as follows:
(a) Organization, Standing and Corporate Power. The Company
and each of the Company Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
that recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted. The Company and
each of the Company Subsidiaries is duly qualified or licensed to do business
and is in good standing (with respect to jurisdictions that recognize such
concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing, individually or in the
aggregate, would not reasonably be expected to have or result in a material
adverse effect on the Company. The Company has made available to Parent prior to
the execution of this Agreement complete and correct copies of its Certificate
of Incorporation and By-laws, each as amended to date.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure
Letter, sets forth all the subsidiaries of the Company (each a "COMPANY
SUBSIDIARY," collectively, the "COMPANY SUBSIDIARIES," and together with the
Company, the "COMPANY ENTITIES"), specifying those that are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")). All outstanding shares
of capital stock of, or other equity interests in, each Company Subsidiary (i)
have been validly issued and are fully paid and nonassessable, (ii) are free and
clear of all Liens and (iii) are free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). All outstanding shares of capital stock (or
equivalent equity interests of entities other than corporations) of each of the
Company Subsidiaries (excluding SMTEK International (Thailand) Limited) are
beneficially owned, directly or indirectly, by the Company. The Company owns
4,999,992 shares of capital stock of SMTEK International (Thailand) Limited,
constituting at least 99% of all outstanding shares of capital stock or other
equity interests of SMTEK International (Thailand) Limited. The Company does
not, directly or indirectly, own more than 20% but less than 100% of the capital
stock or other equity interest in any person.
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(c) Capital Structure. The authorized capital stock of the
Company consists entirely of 20,000,000 shares of Company Common Stock and
1,000,000 shares of Preferred Stock, par value $1.00 per share ("PREFERRED
STOCK"), of which 250,000 shares have been designated as Series A Preferred
Stock. At the close of business on November 15, 2004: (i) 2,700,745 shares of
Company Common Stock were issued and outstanding, no shares of restricted stock
were issued and outstanding and no shares of Company Common Stock were held in
the treasury of the Company; (ii) no shares of Series A Preferred Stock were
issued or outstanding, (iii) 308,710 shares of Company Common Stock were subject
to outstanding employee or director stock options to purchase Company Common
Stock or other common stock awards granted under the Amended and Restated 1996
Stock Incentive Plan, effective June 10, 1996, 60,305 shares of Company Common
Stock were subject to outstanding employee or director stock options to purchase
Company Common Stock or other common stock awards granted under the Amended and
Restated 1998 Non-Employee Directors Stock Plan, and 258,814 shares of company
Common Stock were subject to outstanding employee or director stock options to
purchase Company Common Stock or other common stock awards granted under the
2003 Equity Incentive Plan, effective November 13, 2003, (such stock plans,
collectively, the "COMPANY STOCK PLANS" and such stock options, collectively,
the "COMPANY STOCK OPTIONS"), and (iv) 15,000 shares of Company Common Stock
were subject to outstanding warrants (the "COMPANY WARRANTS") to purchase
Company Common Stock under a warrant agreement (the "WARRANT AGREEMENTS").
Section 3.1(c) of the Company Disclosure Letter sets forth the holders of all
outstanding Company Stock Options, restricted stock, performance shares or
units, deferred shares, stock units and other stock awards and the number,
exercise prices, vesting schedules, performance targets, expiration dates and
other forfeiture provisions of each grant to such holders. All outstanding
shares of capital stock of the Company are, and all shares that may be issued
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of preemptive rights.
Except as set forth in this Section 3.1(c), (i) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or other voting
securities of the Company or any Company Subsidiary, (B) any securities
convertible into or exchangeable or exercisable for shares of capital stock or
voting securities of the Company or any Company Subsidiary, or (C) any warrants,
calls, options or other rights to acquire from the Company or any Company
Subsidiary, and no obligation of the Company or any Company Subsidiary to issue,
any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company or any Company Subsidiary and (ii) there are no outstanding obligations
of the Company or any Company Subsidiary to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Neither the Company nor any Company
Subsidiary is a party to any voting agreement with respect to the voting of any
such securities. There are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues, earnings or financial
performance of the Company or any Company Subsidiary or assets or calculated in
accordance therewith.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement, and, subject to the
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
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the Company, subject, in the case of the Merger, to the Stockholder Approval.
This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws generally affecting the rights of creditors and
subject to general equity principles. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
(i) conflict with the certificate of incorporation or by-laws (or comparable
organizational documents) of any of the Company Entities, (ii) result in any
breach, violation or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or creation or
acceleration of any obligation or right of a third party or loss of a benefit
under, or result in the creation of any Lien upon any of the properties or
assets of any of the Company Entities under, any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or other authorization applicable to any of the
Company Entities or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, conflict with or violate any judgment, order, decree or Law applicable
to any of the Company Entities or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that, individually or in the aggregate, would
not reasonably be expected to have or result in a material adverse effect on the
Company and that would not prevent or materially delay consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any federal, state or local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental United States or foreign self-regulatory agency,
commission or authority or any arbitral tribunal (each, a "GOVERNMENTAL ENTITY")
or any third party is required by the Company in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby, except for: (i) the filing with the
Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating
to the Stockholders Meeting (such proxy statement, as amended or supplemented
from time to time, the "PROXY STATEMENT") and (B) such reports under Section
13(a), 13(d), 15(d) or 16(a) or such other applicable sections of the Exchange
Act, as may be required in connection with this Agreement and the transactions
contemplated hereby, including but not limited to a filing on Form 8-K
announcing the transactions contemplated by this Agreement; (ii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware;
(iii) the consents, approvals, orders or authorizations set forth on Section
3.1(d) of the Company Disclosure Letter; and (iv) such consents, approvals,
orders or authorizations the failure of which to be made or obtained,
individually or in the aggregate, would not reasonably be expected to have or
result in a material adverse effect on the Company and would not prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
(e) SEC Reports and Financial Statements; Undisclosed
Liabilities; Internal Controls.
(i) The Company has timely filed all required
reports, schedules, forms, statements and other documents (including
exhibits and all other information
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incorporated therein) under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Exchange Act, with the SEC since January 1,
2001 (as such reports, schedules, forms, statements and documents have
been amended since the time of their filing, collectively, the "COMPANY
SEC DOCUMENTS"). As of their respective dates, or if amended prior to
the date of this Agreement, as of the date of the last such amendment,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and none of the Company SEC
Documents when filed, or as so amended, contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(ii) The financial statements of the Company included
in the Company SEC Documents comply as to form, as of their respective
date of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto), and fairly present in all
material respects the consolidated financial position of the Company
and its subsidiaries as of the dates thereof and the consolidated
statements of income, cash flows and stockholders' equity for the
periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). No Company Subsidiary is
required to make any filings with the SEC. Except (A) as reflected in
such financial statements or in the notes thereto or (B) for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that, individually or in
the aggregate, would reasonably be expected to have or result in a
material adverse effect on the Company.
(iii) The records, systems, controls, data and
information of the Company and the Company Subsidiaries are recorded,
stored, maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not) that
are under the exclusive ownership and direct control of the Company or
the Company Subsidiaries or their accountants (including all means of
access thereto and therefrom) except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to have a
material adverse effect on the Company's system of internal controls
described in the following sentence. As and to the extent described in
the Company SEC Documents, the Company and the Company Subsidiaries
have devised and maintain a system of internal controls and procedures
sufficient to provide reasonable assurances regarding the reliability
of financial reporting and the preparation of financial statements in
accordance with GAAP. The Company (A) has designed disclosure controls
and procedures to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to the
management of the Company by others within those entities, (B) has
disclosed within the Company SEC Documents any change in the Company's
internal control over financial
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reporting that has materially affected or is reasonably likely to
materially affect the Company's internal control over financial
reporting, and (C) has disclosed, based on its most recent evaluation
prior to the date hereof, to the Company's auditors and the audit
committee of the Company's Board of Directors (1) any significant
deficiencies and material weaknesses in the design or operation of
internal controls which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial
information and (2) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company's internal control over financial reporting. The Company has
made available to Parent a summary of any such disclosure made by
management to the Company's auditors or audit committee of the
Company's Board of Directors since January 1, 2003.
(f) Information Supplied. The information supplied or to be
supplied by the Company in writing and designated specifically for inclusion or
incorporation by reference in the registration statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (the "FORM S-4") will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated or necessary to
make the statements, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will, at the date it is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Since June 25, 2004,
(i) each of the Company Entities has conducted its respective operations only in
the ordinary course consistent with past practice, (ii) there has not been a
material adverse change relating to the Company, (iii) none of the Company
Entities has taken action that if taken after the date of this Agreement would
constitute a violation of Section 4.1(a), (iv) except in connection with or as
expressly permitted in this Agreement, no Company Entity has incurred nor will
there have arisen any liabilities (direct, contingent or otherwise) material to
the Company Entities, taken as a whole, and (v) no Company Entity has engaged in
any material transaction or entered into any material agreement or commitments
outside the ordinary course of business (except for the transactions
contemplated by this Agreement).
(h) Compliance with Applicable Laws; Litigation.
(i) The operations of the Company Entities have not
been and are not being conducted in violation of any Law (including,
but not limited to, the Sarbanes-Oxley Act of 2002 and the USA PATRIOT
Act of 2001) or any Permit, except where such violations, individually
or in the aggregate, would not reasonably be expected to have or result
in a material adverse effect on the Company. None of the Company
Entities has received any written notice, or has knowledge of any
claim, alleging any such violation.
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(ii) The Company Entities hold all licenses, permits,
variances, consents, authorizations, waivers, grants, franchises,
concessions, exemptions, orders, registrations and approvals of
Governmental Entities or other persons necessary for the conduct of
their respective businesses as currently conducted ("PERMITS"), except
where the failure to hold such Permits, individually or in the
aggregate, would not reasonably be expected to have or result in a
material adverse effect on the Company. None of the Company Entities
has received written notice that any Permit will be terminated or
modified or cannot be renewed in the ordinary course of business, and
the Company has no knowledge of any reasonable basis for any such
termination, modification or nonrenewal, except for such terminations,
modifications or nonrenewals as, individually or in the aggregate,
would not reasonably be expected to have or result in a material
adverse effect on the Company. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not violate any Permit, or result in any
termination, modification or nonrenewals thereof, except for such
violations, terminations, modifications or nonrenewals thereof as,
individually or in the aggregate, would not reasonably be expected to
have or result in a material adverse effect on the Company.
(iii) No action, demand, requirement or investigation
by any Governmental Entity and no suit, action or proceeding by any
person, in each case, with respect to the Company or any Company
Subsidiary or any of their respective properties is pending or, to the
knowledge of the Company, threatened.
(i) Employee Benefit Plans.
(i) Section 3.1(i)(i) of the Company Disclosure
Letter sets forth a true and complete list of (A) each United States
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, employment, disability, death benefit,
hospitalization, medical insurance, life insurance, welfare, severance
or other material employee benefit plan, agreement, arrangement or
understanding maintained by the Company or any Company Subsidiary or to
which the Company or any Company Subsidiary contributes or is obligated
to contribute, and (B) each change of control agreement providing
benefits to any current or former employee, officer or director of the
Company or any Company Subsidiary, to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary
is bound (collectively, the "COMPANY BENEFIT PLANS"). For purposes of
this Agreement, the term "FOREIGN PLAN" refers to each plan, agreement,
arrangement or understanding that is subject to or governed by the Laws
of any jurisdiction other than the United States and that would have
been treated as a Company Benefit Plan had it been a United States
plan, agreement, arrangement or understanding. Section 3.1(i)(i) of the
Company Disclosure Letter sets forth a true and correct list of the
Foreign Plans. Neither the Company nor any Company Subsidiary has any
material liability with respect to any plan, agreement, arrangement or
understanding of the type described in this paragraph other than the
Company Benefit Plans and the Foreign Plans.
(ii) Each Company Benefit Plan has been administered
in accordance with its terms, all applicable Laws, including the
Employee Retirement Income Security
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Act of 1974, as amended ("ERISA"), and the Code, and the terms of all
applicable collective bargaining agreements, except for any failures so
to administer any Company Benefit Plan that, individually or in the
aggregate, would not reasonably be expected to have or result in a
material adverse effect on the Company. The Company and all Company
Benefit Plans are in compliance with the applicable provisions of
ERISA, the Code and all other applicable Laws and the terms of all
applicable collective bargaining agreements, except for any failures to
be in such compliance that, individually or in the aggregate, would not
reasonably be expected to have or result in a material adverse effect
on the Company. Each Company Benefit Plan that is intended to be
qualified under Section 401(a), 401(k) or 4975(e)(7) of the Code has
received a favorable determination letter from the IRS as to its
qualified status and, to the knowledge of the Company, there exists no
facts or circumstances that have caused or could reasonably be expected
to cause a failure to be so qualified under Section 401(a), 401(k) or
4975(e)(7) of the Code, except for any such failure that, individually
or in the aggregate, would not reasonably be expected to have or result
in a material adverse effect on the Company. All contributions to, and
payments from, the Company Benefit Plans that are required to have been
made in accordance with such Company Benefit Plans, ERISA or the Code
have been timely made other than any failures that, individually or in
the aggregate, would not reasonably be expected to have or result in a
material adverse effect on the Company. All trusts providing funding
for Company Benefit Plans that are intended to comply with Section
501(c)(9) of the Code are exempt from federal income taxation and,
together with any other welfare benefit funds (as defined in Section
419(e)(1) of the Code) maintained in connection with any of the Company
Benefit Plans, have been operated and administered in compliance with
all applicable requirements such that neither the Company, any Company
Subsidiary, any Company Benefit Plan nor such trust or fund is subject
to any material taxes, penalties or other liabilities imposed as a
consequence of failure to comply with such requirements. No welfare
benefit fund (as defined in Section 419(e)(1) of the Code) maintained
in connection with any of the Company Benefit Plans has provided any
"disqualified benefit" (as defined in Section 4976(b)(1) of the Code)
for which the Company or any Company Subsidiary has or had any
liability for the excise tax imposed by Section 4976 of the Code which
will not be fully satisfied prior to Closing.
(iii) Neither the Company nor any trade or business,
whether or not incorporated, which, together with the Company, would be
deemed to be a "single employer" within the meaning of Section 4001(b)
of ERISA (an "ERISA AFFILIATE") has incurred any material liability
under Title IV of ERISA (other than for premiums pursuant to Section
4007 of ERISA which have been timely paid) or Section 4971 of the Code
that will not be fully satisfied prior to the Closing, and no condition
exists that presents a risk to the Company or any ERISA Affiliate of
the Company of incurring any such liability. No Company Benefit Plan
has or has incurred an accumulated funding deficiency within the
meaning of Section 302 of ERISA or Section 412 of the Code, nor has any
waiver of the minimum funding standards of Section 302 of ERISA and
Section 412 of the Code been requested of or granted by the Internal
Revenue Service with respect to any Company Benefit Plan, nor has any
lien in favor of any Company Benefit Plan arisen under Section 412(n)
of the Code or Section 302(f) of ERISA. Neither the Company nor any
ERISA Affiliate has been required to provide security to
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any defined benefit pension plan pursuant to Section 401(a)(29) of the
Code. With respect to each Company Benefit Plan that is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code,
the actuarial present value of all accrued benefits under such Company
Benefit Plan (whether or not vested), based upon the actuarial
assumptions used for funding purposes in the most recent actuarial
report prepared for such Company Benefit Plan does not exceed the fair
market value of the assets of such Company Benefit Plan by a material
amount. With respect to each Company Benefit Plan that is subject to
Title IV of ERISA, there has been no "reportable event" within the
meaning of Section 4043 of ERISA and the regulations and
interpretations thereunder which has not been fully and accurately
reported in a timely fashion (other than reportable events with respect
to which the 30-day notice requirement has been waived), as required,
or which, whether or not reported, would constitute grounds for the
Pension Benefit Guaranty Corporation (the "PBGC") to institute
termination proceedings with respect to such Company Benefit Plan.
(iv) No Company Benefit Plan provides medical or life
insurance benefits (whether or not insured) with respect to current or
former employees or officers or directors after retirement or other
termination of service, other than any such coverage required by Law,
and with respect to any Company Benefit Plan set forth on Section
3.1(i)(iv) of the Company Disclosure Letter, the Company and the
Company Subsidiaries have reserved all rights necessary to amend or
terminate each of such plans without the consent of any other person.
(v) The consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with another
event, (A) entitle any current or former employee, officer or director
of the Company or the Company Subsidiaries to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, or (B) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee,
officer or director.
(vi) Neither the Company nor any Company Subsidiary
is a party to any agreement, contract or arrangement (including this
Agreement) that could result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of
Section 280G of the Code. No Company Benefit Plan provides for the
reimbursement of excise taxes under Section 4999 of the Code or any
income taxes under the Code. The disallowance of a deduction under
Section 162(m) of the Code for employee remuneration will not apply to
any amount paid or payable by the Company or any Company Subsidiary
under any Company Benefit Plan.
(vii) With respect to each Company Benefit Plan, the
Company has delivered or made available to Parent a true and complete
copy of: (A) each writing constituting a part of such Company Benefit
Plan, including, without limitation, all Company Benefit Plan documents
and trust agreements; (B) the most recent Annual Report (Form 5500
Series) and accompanying schedule, if any; (C) the most recent annual
financial report, if any; (D) the most recent actuarial report, if any;
and (E) the most recent determination letter from the Internal Revenue
Service, if any. Except as specifically provided in the foregoing
documents delivered or made available to Parent, there are no
amendments to any Company Benefit Plan that have been adopted or
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approved nor has the Company or any Company Subsidiary undertaken to
make any such amendments or to adopt or approve any new Company Benefit
Plan.
(viii) No Company Benefit Plan is a multiemployer
plan (as defined in Section 4001(a)(3) of ERISA) (a "MULTIEMPLOYER
PLAN") or a plan that has two or more contributing sponsors at least
two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "MULTIPLE EMPLOYER PLAN"). None of the Company, the
Company Subsidiaries nor any of their respective ERISA Affiliates has,
at any time during the last six years, contributed to or been obligated
to contribute to any Multiemployer Plan or Multiple Employer Plan. None
of the Company, the Company Subsidiaries nor any of their respective
ERISA Affiliates has incurred any material withdrawal liability under a
Multiemployer Plan that will not be fully satisfied prior to Closing.
None of the Company, the Company Subsidiaries nor any of their
respective ERISA Affiliates would incur any material withdrawal
liability (within the meaning of Part 1 of Subtitle E of Title IV of
ERISA) if the Company, the Company Subsidiaries or any of their
respective ERISA Affiliates withdrew (within the meaning of Part 1 of
Subtitle E of Title IV of ERISA) on the Closing Date from each
Multiemployer Plan to which the Company, the Company Subsidiaries or
any of their respective ERISA Affiliates has an obligation to
contribute on the date of this Agreement. To the knowledge of the
Company, no Multiemployer Plan to which the Company, the Company
Subsidiaries or any of their respective ERISA Affiliates contributes is
in reorganization (within the meaning of Section 4241 of ERISA) or is
reasonably likely to commence reorganization.
(ix) There are no pending or, to the knowledge of the
Company, threatened claims (other than claims for benefits in the
ordinary course), lawsuits or arbitrations that have been asserted or
instituted, or to the Company's knowledge, no set of circumstances
exists that may reasonably give rise to a claim or lawsuit, against the
Company Benefit Plans, any fiduciaries thereof with respect to their
duties to the Company Benefit Plans or the assets of any of the trusts
under any of the Company Benefit Plans that could reasonably be
expected to result in any material liability of the Company or any
Company Subsidiaries to the PBGC, the United States Department of
Treasury, the United States Department of Labor, any Multiemployer
Plan, any Company Benefit Plan or any participant in a Company Benefit
Plan.
(x) There have been no prohibited transactions or
breaches of any of the duties imposed on "fiduciaries" (within the
meaning of Section 3(21) of ERISA) by ERISA with respect to the Company
Benefit Plans that would result in a material liability or excise tax
under ERISA or the Code being imposed on the Company or any of the
Company Subsidiaries.
(xi) With respect to any insurance policy that has,
or does, provide funding for benefits under any Company Benefit Plan,
no insurance company issuing any such policy is, to the knowledge of
the Company, in receivership, conservatorship, liquidation or similar
proceeding and, to the knowledge of the Company, no such proceedings
with respect to any such insurer are imminent.
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(xii) With respect to each Foreign Plan: (A) all
amounts required to be reserved under each book reserved Foreign Plan
have been so reserved in accordance with reasonable accounting
practices prevailing in the country where such Foreign Plan is
established; (B) each Foreign Plan required to be registered with a
Governmental Entity has been registered, has been maintained in good
standing with the appropriate Governmental Entities, and has been
maintained and operated in accordance with its terms and applicable
Law, except for any failures to do so that, individually or in the
aggregate, would not reasonably be expected to have or result in a
material adverse effect on the Company; (C) the fair market value of
the assets of each funded Foreign Plan that is a defined benefit
pension plan (or termination indemnity plan), and the liability of each
insurer for each Foreign Plan that is a defined benefit pension plan
(or termination indemnity plan) and is funded through insurance or the
book reserve established for each Foreign Plan that is a defined
benefit pension plan (or termination indemnity plan) that utilizes book
reserves, together with any accrued contributions, are not materially
less than the amount necessary to procure or provide for the liability
for accrued benefits with respect to those current and former employees
of the Company and the Company Subsidiaries that participate in such
Foreign Plan according to the reasonable actuarial or other applicable
assumptions and valuations most recently used to determine employer
contributions to, or the funded status or book reserve of, such Foreign
Plans; (D) each Foreign Plan complies with all applicable Laws, except
for any failures to do so that, individually or in the aggregate, would
not reasonably be expected to have or result in a material adverse
effect on the Company; (E) all contributions required to have been made
to such Foreign Plan have been timely made; and (F) there are no
actions, suits or claims pending or, to the knowledge of the Company,
threatened.
(xiii) For purposes of this Section 3.1(i), the term
"EMPLOYEE" will be considered to include individuals rendering personal
services to the Company or any Company Subsidiary as independent
contractors.
(j) Taxes. (i) The Company and each Company Subsidiary has
filed all Tax Returns required to be filed, and all such returns are materially
complete and accurate; (ii) the Company and each Company Subsidiary has paid all
Taxes due; (iii) there are no pending, or, to the knowledge of the Company
threatened, audits, examinations, investigations or other proceedings in respect
of Taxes relating to the Company or any Company Subsidiary; (iv) there are no
Liens for Taxes upon the assets of the Company or any of the Company
Subsidiaries, other than Liens for Taxes not yet due and Liens for Taxes that
are being contested in good faith by appropriate proceedings; (v) neither the
Company nor any of the Company Subsidiaries has any liability for Taxes of any
person (other than the Company and the Company Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any comparable provision of Law as a transferee
or successor, by contract, or otherwise); (vi) neither the Company nor any
Company Subsidiary is a party to any agreement relating to the allocation or
sharing of Taxes; (vii) neither the Company nor any Company Subsidiary will be
required to include any adjustment in taxable income for any Tax period ending
after the Closing Date (a "POST-CLOSING TAX PERIOD") under Section 481(c) of the
Code (or any comparable provision of Law) as a result of a change in method of
accounting for any Tax period (or portion thereof) ending prior to the Closing
Date (a "PRE-CLOSING TAX PERIOD") or pursuant to the provisions of any agreement
entered into with any taxing authority with regard to the Tax liability of the
Company or any Company Subsidiary for
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any Pre-Closing Tax Period; (viii) the financial statements included in the
Company SEC Documents reflect an adequate reserve for all Taxes for which the
Company or any Company Subsidiary may be liable for all taxable periods and
portions thereof through the date hereof; (ix) no person has granted any
extension or waiver of the statute of limitations period applicable to any Tax
of the Company or any Company Subsidiary or any affiliated, combined or unitary
group of which the Company or any Company Subsidiary is or was a member, which
period (after giving effect to such extension or waiver), extension or waiver
has not yet expired; (x) neither the Company nor any Company Subsidiary has
distributed stock of another person or has had its stock distributed by another
person, in a transaction that was purported or intended to be governed in whole
or in part by Section 355 of the Code; (xi) neither the Company nor any Company
Subsidiary has participated in any transaction that has been identified by the
Internal Revenue Service in published guidance as a reportable transaction; and
(xii) the consolidated federal income Tax Returns of the Company have been
examined, or the statute of limitations has closed, with respect to all taxable
years through and including June 30, 2002. As used in this Agreement, "TAX" or
"TAXES" includes all federal, state or local or foreign net and gross income,
alternative or add-on minimum, environmental, gross receipts, ad valorem, value
added, goods and services, capital stock, profits, license, single business,
employment, severance, stamp, unemployment, customs, property, sales, excise,
use, occupation, service, transfer, payroll, franchise, withholding and other
taxes or similar governmental duties, charges, fees, levies or other
assessments, including any interest, penalties or additions with respect
thereto. As used herein, "TAX RETURN" shall mean any return, report, statement
or information required to be filed with any Governmental Entity with respect to
Taxes.
(k) Environmental Matters.
(i) Except as disclosed in the Company SEC Reports
filed since June 25, 2004 (the "RECENT SEC REPORTS") or on Section
3.1(k) of the Company Disclosure Letter, or where noncompliance,
individually or in the aggregate, will not have or result in a material
adverse effect on the Company, the Company Entities are and have been
for the past five years in compliance with all applicable Environmental
Laws and Environmental Permits.
(ii) Except as disclosed in the Recent SEC Reports or
on Section 3.1(k)(ii) of the Company Disclosure Letter, there are no
written (or, to the knowledge of the Company, other) Environmental
Claims pending or, to the knowledge of the Company, threatened, against
the Company or any Company Subsidiary and, to the knowledge of the
Company, there are no existing conditions, circumstances or facts which
would reasonably be expected to give rise to an Environmental Claim
that would reasonably be expected to have or result in a material
adverse effect on the Company.
(iii) The Company has set forth on Section
3.1(k)(iii) of the Company Disclosure Letter all material information,
including such studies, reports, correspondence, notices of violation,
requests for information, audits, analyses and test results and any
other documents, in the possession, custody or control of or otherwise
known and available to the Company Entities relating to (A) the Company
Entities' compliance or noncompliance with Environmental Laws and
Environmental Permits for the past five years, or (B) Environmental
Conditions on, under or about any of the properties or assets owned,
leased, or operated by any of the Company Entities at the
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present time or for which any of the Company Entities would reasonably
be expected to be responsible or liable.
(iv) Except as disclosed in the Recent SEC Reports or
on Section 3.1(k)(iv) of the Company Disclosure Letter, no Hazardous
Substance (as defined below) has been generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped
or disposed of from, currently or previously owned, leased or operated
properties in violation of applicable Environmental Laws or
Environmental Permits that, individually or in the aggregate, would
reasonably be expected to have or result in a material adverse effect
on the Company and there have been no Releases of any Hazardous
Substance in, on, under, from or affecting any currently or previously
owned, leased or operated properties that, individually or in the
aggregate, would reasonably be expected to have or result in a material
adverse effect on the Company.
(v) Except as disclosed in the Recent SEC Reports or
on Section 3.1(k)(v) of the Company Disclosure Letter, none of the
Company or the Company Subsidiaries has received from any Governmental
Entity or other third party any written (or, to the knowledge of the
Company, other) notice that any of them or any of their predecessors is
or may be a potentially responsible party in respect of, or may
otherwise bear liability for, any actual or threatened Release of
Hazardous Substance at any site or facility that is, has been or could
reasonably be expected to be listed on the National Priorities List,
the Comprehensive Environmental Response, Compensation and Liability
Information System, the National Corrective Action Priority System or
any similar or analogous federal, state, provincial, territorial,
municipal, county, local or other domestic or foreign list, schedule,
inventory or database of Hazardous Substance sites or facilities.
(vi) To the knowledge of the Company, neither this
Agreement nor the transactions contemplated hereby will result in any
requirement for environmental disclosure, investigation, cleanup,
removal or remedial action, or notification to or consent of any
Governmental Entity or third party, with respect to any property owned,
leased or operated by the Company or any Company Subsidiary, pursuant
to any Environmental Law, including, without limitation, any so-called
"property transfer law."
(vii) Except as disclosed in the Recent SEC Reports
or on Section 3.1(k)(vii) of the Company Disclosure Letter, none of the
Company or the Company Subsidiaries has assumed, undertaken or
otherwise become subject to any liability of any other person relating
to or arising from Environmental Laws.
(viii) Except as disclosed in the Recent SEC Reports
or on Section 3.1(k)(viii) of the Company Disclosure Letter, to the
knowledge of the Company, there are no currently proposed revisions to
Environmental Laws by any Governmental Entity or upcoming requirements
pursuant to Environmental Laws which, individually or in the aggregate,
would reasonably be expected to result in a material adverse effect on
the Company.
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(ix) Except as disclosed in the Recent SEC Reports or
on Section 3.1(k)(ix) of the Company Disclosure Letter, there exist no
Environmental Conditions relating to any currently or previously owned,
leased or operated properties which, individually or in the aggregate,
would reasonably be expected to result in a material adverse effect on
the Company.
(x) As used in this Agreement:
(A) the term "ENVIRONMENT" means soil,
surface waters, ground water, land, stream sediment, surface
and subsurface strata, ambient air, indoor air or indoor air
quality;
(B) the term "ENVIRONMENTAL CLAIM" means any
written or other claim, demand, suit, action, proceeding,
order, investigation or notice to any of the Company Entities
by any person alleging any potential liability (including,
without limitation, potential liability for investigatory
costs, risk assessment costs, cleanup costs, removal costs,
remedial costs, operation and maintenance costs, governmental
response costs, natural resource damages, or penalties)
arising out of, based on, or resulting from (1) alleged
noncompliance with any Environmental Law or Environmental
Permit, (2) alleged injury or damage arising from exposure to
Hazardous Substances, or (3) the presence, Release or
threatened Release into the Environment, of any Hazardous
Substance at or from any location, whether or not owned,
leased or operated by the Company or any Company Subsidiary;
(C) the term "ENVIRONMENTAL LAWS" means all
Laws relating to (1) pollution or protection of the
Environment, (2) emissions, discharges, Releases or threatened
Releases of Hazardous Substances, (3) threats to human health
or ecological resources arising from exposure to Hazardous
Substances, or (4) the manufacture, generation, processing,
distribution, use, sale, treatment, receipt, storage,
disposal, transport or handling of Hazardous Substances, and
includes, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource
Conversation and Recovery Act, the Clean Air Act, the Clean
Water Act, the Water Pollution Control Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act
and any similar foreign, state or local Laws;
(D) the term "HAZARDOUS SUBSTANCE" means (1)
chemicals, pollutants, contaminants, hazardous wastes, toxic
substances, toxic mold, radiation and radioactive materials,
(2) any substance that is or contains asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls
("PCBS"), petroleum or petroleum-derived substances or wastes,
leaded paints, or radon gas or related materials, (3) any
substance that requires removal or remediation under any
Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder, or (4)
any substance that is regulated under any Environmental Law;
(E) the term "RELEASE" means any releasing,
disposing, discharging, injecting, spilling, leaking, pumping,
dumping, emitting, escaping,
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emptying, migration, placing and the like, or otherwise
entering into the Environment (including, but not limited to,
the abandonment or discarding of barrels, containers, and
other closed receptacles containing any Hazardous Substances
and any condition that results in exposure of a person to a
Hazardous Substance);
(F) the term "LAW" means any foreign,
federal, state or local law, statute, code, ordinance,
regulation, rule, principle of common law or other legally
enforceable obligation imposed by a court or other
Governmental Entity;
(G) the term "ENVIRONMENTAL PERMIT" means
all Permits and the timely submission of applications for
Permits, as required under Environmental Laws; and
(H) the term "ENVIRONMENTAL CONDITION" means
any contamination, damage, injury or other condition related
to Hazardous Substances and includes, without limitation, any
present or former Hazardous Substance treatment, storage,
disposal or recycling units, underground storage tanks,
wastewater treatment or management systems, wetlands, sumps,
lagoons, impoundments, landfills, ponds, incinerators, wells,
asbestos containing materials, lead paint or PCB-containing
articles.
(l) Real Property; Assets.
(i) Section 3.1(l)(i) of the Company Disclosure
Letter contains a true and complete list and brief description of each
parcel of real property owned by the Company and the Company
Subsidiaries (the "OWNED REAL PROPERTY"). The Company or a Company
Subsidiary has good and marketable fee simple title to all such Owned
Real Property.
(ii) Section 3.1(l)(ii) of the Company Disclosure
Letter contains a true and complete list and brief description of all
real property leased by the Company and the Company Subsidiaries, all
of which are hereinafter referred to as the "LEASED REAL PROPERTY." The
Owned Real Property and Leased Real Property constitute all of the real
property occupied or used by the Company and the Company Subsidiaries
in connection with the operation of their respective businesses as
currently conducted. The Company or a Company Subsidiary has a valid
leasehold interest in or valid rights to all Leased Real Property. The
Company has made available to Parent true and complete copies of all
leases of the Leased Real Property (the "LEASES"). No option, extension
or renewal has been exercised under any Lease except options,
extensions or renewals whose exercise has been evidenced by a written
document, a true and complete copy of which has been made available to
Parent with the corresponding Lease. Each of the Company and the
Company Subsidiaries has complied in all material respects with the
terms of all Leases to which it is a party and under which it is in
occupancy, and all such Leases are in full force and effect. To the
knowledge of the Company, the lessors under the Leases to which the
Company or a Company Subsidiary is a party have complied in all
material respects with the terms of their respective Leases. Each of
the Company and the Company Subsidiaries enjoys peaceful and
undisturbed possession under all such Leases,
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except where a failure to do so, individually or in the aggregate,
would not reasonably be expected to have or result in a material
adverse effect on the Company.
(iii) None of the Owned Real Property or Leased Real
Property is subject to any Liens (whether absolute, accrued, contingent
or otherwise).
(iv) The Company has good and valid title to all
properties, assets and rights relating to or used or held for use in
connection with the business of the Company and such properties, assets
and rights comprise all of the assets required for the conduct of the
business of the Company as now being conducted. All such properties,
assets and rights are in all material respects adequate for the
purposes for which such assets are currently used or held for use, and
are in reasonably good repair and operating condition (subject to
normal wear and tear).
(m) Intellectual Property.
(i) The term "INTELLECTUAL PROPERTY" means all of the
following that is owned by, issued or licensed to Company or the
Company Subsidiaries which is used in and material to the business of
the Company or the Company Subsidiaries, including, without limitation,
(A) all patents, trademarks, trade names, trade dress, assumed names,
service marks, logos, copyrights registered with the U.S. Copyright
Office or its foreign equivalents, Internet domain names and corporate
names together with all applications, registrations, renewals and all
goodwill associated therewith; (B) all trade secrets and confidential
information (including, without limitation, customer lists, know-how,
formulae, manufacturing and production processes, research, financial
business information and marketing plans) owned or used by the Company
or the Company Subsidiaries; (C) information technologies (including,
without limitation, software programs, data and related documentation);
and (D) other intellectual property rights and all copies and tangible
embodiments of any of the foregoing in whatever form or medium. Section
3.1(m)(i) of the Company Disclosure Letter sets forth a complete and
accurate list of all Intellectual Property set forth in Clause (A) of
this Section 3.1(m)(i).
(ii) (A) the Company or the Company Subsidiaries own
and possess all right, title and interest in and to, or have a valid
and enforceable license to use, the Intellectual Property necessary for
the operation of their respective businesses as currently conducted;
(B) no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Intellectual Property
has been made, is currently outstanding or is threatened, and, to the
knowledge of the Company, there are no grounds for the same; (C)
neither the Company nor any of the Company Subsidiaries has received
any written notices of, or is aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or other
conflict with, any third party with respect to the Intellectual
Property; (D) to the knowledge of the Company, neither the Company nor
the Company Subsidiaries nor the conduct of their respective businesses
has infringed, misappropriated or otherwise conflicted with any
intellectual property rights or other rights of any third parties and
neither the Company nor any of the Company Subsidiaries is aware of any
infringement, misappropriation or conflict which will occur as a result
of the continued operation of the Company's and the Company
Subsidiaries' respective businesses as currently conducted. The Company
has delivered
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to Parent prior to the date of this Agreement complete and correct
copies of all licenses to use Intellectual Property.
(iii) (A) The transactions contemplated by this
Agreement will have no material adverse effect on the right, title and
interest of the Company and the Company Subsidiaries in and to the
Intellectual Property; and (B) the Company or each of the Company
Subsidiaries, as the case may be, has, consistent with reasonable
business judgment, taken appropriate action to maintain and protect the
Intellectual Property and, until the Effective Time, shall continue to
maintain and protect the Intellectual Property so as to not materially
adversely affect the validity or enforceability of the Intellectual
Property.
(n) Labor Agreements and Employee Issues. Section 3.1(n) of
the Company Disclosure Letter sets forth a true and complete list of each
collective bargaining agreement or other labor agreement with any union or labor
organization to which the Company or any of the Company Subsidiaries is a party.
The Company and Company Subsidiaries have provided true and complete copies of
all collective bargaining agreements or other agreements identified in Section
3.1(n) of the Company Disclosure Letter. The Company and Company Subsidiaries
are in material compliance with each of the collective bargaining agreements or
other agreements identified in Section 3.1(n) of the Company Disclosure Letter.
The Company is unaware of any effort, activity or proceeding of any labor
organization (or representative thereof) to organize any of its or their
employees that are not specifically identified in Section 3.1(n) of the Company
Disclosure Letter. The Company and the Company Subsidiaries are not, and have
not since January 1, 2003, been subject to any pending, or to the knowledge of
the Company, threatened (i) unfair labor practice charges and/or complaint, (ii)
grievance proceeding or arbitration proceeding arising under any collective
bargaining agreement or other labor agreement identified in Section 3.1(n) of
the Company Disclosure Letter, (iii) claim, suit, action or governmental
investigation relating to employees, including but not limited to,
discrimination, wrongful discharge, or violation of any state and/or federal
statute relating to employment practices, (iv) strike, lockout or dispute,
slowdown or work stoppage or (v) claim, suit, action or governmental
investigation, in respect of which any director, officer, employee or agent of
the Company or any of the Company Subsidiaries is or may be entitled to claim
indemnification from the Company or any Company Subsidiary, except for the
foregoing which, in the case of Clauses (i), (ii), (iii) and (iv), would not,
individually or in the aggregate, reasonably be expected to have or result in a
material adverse effect on the Company. Neither the Company nor the Company
Subsidiaries is a party to, or is otherwise bound by, any consent decree with
any Governmental Entity relating to employees or employment practices of the
Company or Company Subsidiaries.
(o) Certain Contracts. Except as expressly permitted by
Section 4.1(a), neither the Company nor any Company Subsidiary is a party to or
bound by any contract, arrangement, commitment or understanding (i) with respect
to the employment of any directors, executive officers or key employees, or with
any consultants involving the payment of $50,000 or more per annum, (ii) which
is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) that has not been filed as an exhibit to or
incorporated by reference in the Company SEC Reports, (iii) which materially
limits the ability of the Company or any Company Subsidiary to compete in any
line of business, in any geographic area or with any person, or which requires
referrals of any business or requires the Company or any of its
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affiliates to make available investment opportunities to any person on a
priority, equal or exclusive basis, (iv) with or to a labor union or guild
(including any collective bargaining agreement), (v) any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement, (vi) which
would reasonably be expected to prohibit or delay the consummation of any of the
transactions contemplated by this Agreement, (vii) for the distribution or
resale of the products of the Company or any Company Subsidiary, (viii) with
respect to indebtedness for borrowed money, including letters of credit,
guaranties, indentures, swaps and similar agreements, in excess of $100,000, and
(ix) with respect to capital expenditures or commitments, except as set forth on
Section 4.1(a)(v) of the Company Disclosure Letter. The Company has previously
made available to Parent complete and accurate copies of all Company Contracts.
Each contract, arrangement, commitment or understanding of the type described in
this Section 3.1(o), whether or not set forth on Section 3.1(o) of the Company
Disclosure Letter, is referred to herein as a "COMPANY CONTRACT," and neither
the Company nor any Company Subsidiary knows of, or has received written notice
of, any violation of the above by any of the other parties thereto. All
contracts, agreements, arrangements or understandings of any kind between any
affiliate of the Company (other than any wholly owned Company Subsidiary), on
the one hand, and the Company or any Subsidiary of Company, on the other hand,
are on terms no less favorable to the Company or to such Company Subsidiary than
would be obtained with an unaffiliated third party on an arm's-length basis.
(p) Insurance. The Company has delivered to Parent prior to
the date of this Agreement complete and accurate copies of all insurance
policies that are owned by the Company or any of the Company Subsidiaries or
which names the Company or any of the Company Subsidiaries as an insured (or
loss payee), including those which pertain to the Company's or any of the
Company Subsidiaries' assets, employees or operations. All such insurance
policies are in full force and effect, are in such amounts and cover such losses
and risks as are consistent with industry practice and, in the reasonable
judgment of senior management of the Company, are adequate to protect the
properties and businesses of the Company and the Company Subsidiaries and all
premiums due thereunder have been paid. Neither the Company nor any of the
Company Subsidiaries has received notice of cancellation of any such insurance
policies.
(q) Acquisitions and Divestitures. Set forth on Section 3.1(q)
of the Company Disclosure Letter is a brief description of each acquisition and
divestiture of a business or product line made by the Company or any Company
Subsidiary since January 1, 2001.
(r) Affiliate Transactions. Other than compensation and
benefits received in the ordinary course of business as an employee or director
of the Company or the Company Subsidiaries, no director, officer or other
affiliate (as hereinafter defined) of the Company or any "associate" (as
hereinafter defined) of any director, officer or other affiliate of the Company,
directly or indirectly, has any interest in: (i) any contract, arrangement or
understanding with, or relating to the business or operations of the Company or
any Company Subsidiary; (ii) any loan, arrangement, understanding, agreement or
contract for or relating to indebtedness of the Company or any Company
Subsidiary; or (iii) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the business or operations
of the Company or
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any Company Subsidiary. For purposes of this Section 3.1(r), the terms
"affiliate" and "associate" shall have the same meaning as set forth in Rule
12b-2 promulgated under the Securities Exchange Act; provided, however, that for
purposes of this Section 3.1(r), the term "associate" shall not include any
corporation or organization of which any person is a beneficial owner of ten
percent or more of any class of securities of such corporation or organization
unless such person holds ten percent or more of such securities as of the date
hereof.
(s) Voting Requirement. The affirmative vote at the
Stockholders Meeting of at least a majority of the votes entitled to be cast by
the holders of outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
adopt and approve this Agreement and the Merger and the transactions
contemplated hereby (the "STOCKHOLDER APPROVAL").
(t) State Takeover Statutes. The Board of Directors of the
Company has taken all necessary action so that no "fair price," "moratorium,"
"control share acquisition" or other anti-takeover Law (each, a "TAKEOVER
STATUTE") (including the interested stockholder provisions codified in Section
203 of the DGCL) or any anti-takeover provision in the Company's Certificate of
Incorporation or By-laws is applicable to this Agreement, the Merger, the
Stockholders Agreement and the transactions contemplated by this Agreement and
the Stockholders Agreement. No other Takeover Statute is applicable to this
Agreement, the Merger, the Stockholders Agreement or the other transactions
contemplated by this Agreement or the Stockholders Agreement. The Board of
Directors of the Company has (i) duly and validly approved this Agreement, (ii)
determined that the transactions contemplated by this Agreement are advisable
and in the best interests of the Company and its stockholders, (iii) unanimously
resolved to recommend to such stockholders that they vote in favor of the Merger
and (iv) taken all corporate action required to be taken by the Board of
Directors of the Company for the consummation of the transactions contemplated
by this Agreement.
(u) Opinion of Financial Advisor. The Company has received the
opinion of Duff & Phelps, LLC, dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair from a financial point
of view to holders of shares of Company Common Stock, a signed copy of which
opinion will be made available to Parent promptly after the date of this
Agreement.
(v) Brokers. Except for Duff & Phelps, LLC and Duff & Phelps
Securities, LLC, no broker, investment banker, financial advisor or other person
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
furnished to Parent true and complete copies of all agreements under which any
fees, commissions or expenses are payable and all indemnification and other
agreements related to the engagement of the persons to whom such fees,
commissions or expenses are payable.
Section 3.2 Representations and Warranties of Parent and
Merger Sub. Except as set forth in the Parent SEC Documents (as defined below)
filed prior to the date of this Agreement, each of Parent and Merger Sub hereby
represents and warrants to the Company as follows:
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(a) Organization, Standing and Corporate Power. Each of Parent
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate authority to carry on its business as now being conducted.
Each of Parent and Merger Sub is duly qualified or licensed to do business and
is in good standing (with respect to jurisdictions that recognize such concept)
in each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so qualified
or licensed or to be in good standing, individually or in the aggregate, would
not reasonably be expected to prevent or materially delay the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement.
(b) Authority; Noncontravention. Each of Parent and Merger Sub
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, respectively. This Agreement has been duly executed and delivered by each
of Parent and Merger Sub, and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation of
Parent and Merger Sub enforceable against Parent and Merger Sub in accordance
with its terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting the rights of creditors and subject to general equity principles. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, (i) conflict with the Articles of Incorporation or
By-laws of Parent, (ii) conflict with the Certificate of Incorporation or
By-laws of Merger Sub, (iii) result in any breach, violation or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or creation or acceleration of any obligation or loss
of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Merger Sub under any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Parent,
Merger Sub or their respective properties or assets, or (iv) subject to the
governmental filings and other matters referred to in the following sentence,
conflict with or violate any judgment, order, decree or Law applicable to
Parent, Merger Sub or their respective properties or assets, other than, in the
case of clauses (iii) and (iv), any such conflicts, violations, defaults,
rights, losses or Liens that, individually or in the aggregate, would not
reasonably be expected to have or result in a material adverse effect on Parent
or Merger Sub and that would not prevent or materially delay consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Entity or third party is required by Parent or
Merger Sub in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, except for (i) the filing with the SEC of the
Form S-4; (ii) the filing of the Certificate of Merger with the Secretary of the
State of Delaware; and (iii) such consents, approvals, orders or authorizations
the failure of which to be made or obtained, individually or in the aggregate,
would not reasonably be expected to have or result in a material adverse effect
on Parent or Merger Sub and
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would not prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(c) SEC Reports and Financial Statements; Undisclosed
Liabilities; Internal Controls.
(i) Parent has timely filed all required reports,
schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) under the Securities
Act and the Exchange Act, with the SEC since January 1, 2001 (as such
reports, schedules, forms, statements and documents have been amended
since the time of their filing, collectively, the "PARENT SEC
DOCUMENTS"). As of their respective dates, or if amended prior to the
date of this Agreement, as of the date of the last such amendment, the
Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent SEC
Documents when filed, or as so amended, contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(ii) The financial statements of the Parent included
in the Parent SEC Documents comply as to form, as of their respective
date of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present
in all material respects the consolidated financial position of Parent
and its subsidiaries as of the dates thereof and the consolidated
statements of income, cash flows and stockholders' equity for the
periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). No Parent subsidiary is
required to make any filings with the SEC. Except (A) as reflected in
such financial statements or in the notes thereto or (B) for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither Parent nor any Parent
subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that, individually or in
the aggregate, would reasonably be expected to have or result in a
material adverse effect on Parent.
(iii) The records, systems, controls, data and
information of the Parent and the Parent subsidiaries are recorded,
stored, maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not) that
are under the exclusive ownership and direct control of the Parent or
the Parent subsidiaries or their accountants (including all means of
access thereto and therefrom) except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to have a
material adverse effect on the system of internal accounting controls
described in the following sentence. As and to the extent described in
the Parent SEC Documents, the Parent and the Parent subsidiaries have
devised and maintain a system of internal accounting controls
sufficient to provide reasonable assurances
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regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP. Parent (A) has designed
disclosure controls and procedures to ensure that material information
relating to Parent, including its consolidated subsidiaries, is made
known to the management of Parent by others within those entities, and
(B) has disclosed, based on its most recent evaluation prior to the
date hereof, to the Parent's auditors and the audit committee of the
Parent's Board of Directors (1) any significant deficiencies in the
design or operation of internal controls which could adversely affect
in any material respect the Parent's ability to record, process,
summarize and report financial data and has identified for the Parent's
auditors any material weaknesses in internal controls and (2) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Parent's internal
controls.
(d) Information Supplied. None of the information supplied or
to be supplied by Parent or Merger Sub in writing and designated specifically
for inclusion or incorporation by reference in (i) the Form S-4 will, at the
time the Form S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated or necessary to make the statements, in light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations thereunder, except that no representation or warranty is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically for
inclusion or incorporation by reference in the Form S-4.
(e) Compliance with Applicable Laws; Litigation.
(i) The operations of the Parent and its subsidiaries
(collectively, the "PARENT ENTITIES") have not been and are not being
conducted in violation of any Law (including, but not limited to, the
Sarbanes-Oxley Act of 2002 and the USA PATRIOT Act of 2001) or any
Permit, except where such violations, individually or in the aggregate,
would not reasonably be expected to have or result in a material
adverse effect on the Parent. None of the Parent Entities has received
any written notice, or has knowledge of any claim, alleging any such
violation.
(ii) The Parent Entities hold all Permits necessary
for the conduct of their respective businesses as currently conducted,
except where the failure to hold such Permits, individually or in the
aggregate, would not reasonably be expected to have or result in a
material adverse effect on the Parent. None of the Parent Entities has
received written notice that any Permit will be terminated or modified
or cannot be renewed in the ordinary course of business, and the Parent
has no knowledge of any reasonable basis for any such termination,
modification or nonrenewal, except for such terminations, modifications
or nonrenewals as, individually or in the aggregate, would not
reasonably be expected to have or result in a material adverse effect
on the Parent. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not violate any Permit, or result in any termination,
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modification or nonrenewals thereof, except for such violations,
terminations, modifications or nonrenewals thereof as, individually or
in the aggregate, would not reasonably be expected to have or result in
a material adverse effect on the Parent.
(iii) No action, demand, requirement or investigation
by any Governmental Entity and no suit, action or proceeding by any
person, in each case, with respect to any Parent Entity or any of their
respective properties is pending or, to the knowledge of the Parent,
threatened.
(f) Available Funds. Parent and Merger Subsidiary have
available to them, or, as of the Effective Time will have available to them, all
funds necessary for the payment of the aggregate Cash Consideration and have
funds available to them to satisfy all their obligations under this Agreement
which are required to be complied with prior to the Closing.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business.
(a) Conduct of Business by the Company. Except as set forth on
Section 4.1(a) of the Company Disclosure Letter, except as otherwise
contemplated by this Agreement or except as consented to in writing by Parent,
during the period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause the Company Subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
in compliance with all applicable Laws and, to the extent consistent therewith,
use all reasonable best efforts to preserve intact their current business
organizations, keep available the services of their current officers and other
key employees and preserve their relationships with customers, suppliers,
distributors and other persons having business dealings with them. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, the Company shall not and shall not permit
any Company Subsidiary to, except as set forth on Section 4.1(a) of the Company
Disclosure Letter, except as otherwise contemplated by this Agreement or except
as consented to in writing by Parent:
(i) (A) other than dividends and distributions by a
direct or indirect wholly owned Company Subsidiary to its parent,
declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (B) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock, except for issuances of
Company Common Stock upon the exercise of the Company Stock Options
under the Company Stock Plans or in connection with other awards under
the Company Stock Plans, in each case, outstanding as of the date of
this Agreement, and in accordance with their present terms or (C)
except pursuant to agreements entered into with respect to the Company
Stock Plans that are in effect as of the close of business on the date
of this Agreement, purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of the Company Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
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(ii) issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any shares of its capital stock, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, other than the issuance of shares
of Company Common Stock upon the exercise of the Company Stock Options
under the Company Stock Plans or in connection with other awards under
the Company Stock Plans, in each case, outstanding as of the date of
this Agreement, and in accordance with their present terms;
(iii) (A) amend its certificate of incorporation or
by-laws (or other comparable organizational documents) or (B) merge or
consolidate with any person;
(iv) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets involving more than $150,000 in the aggregate
other than dispositions of inventory in the ordinary course of business
consistent with past practice;
(v) enter into commitments for capital expenditures
except in accordance with the Company's capital expenditure plan set
forth on Section 4.1(a)(v) of the Company Disclosure Letter, including
with respect to timing and amount;
(vi) incur any long-term indebtedness (whether
evidenced by a note or other instrument, pursuant to a financing lease,
sale-leaseback transaction, or otherwise) other than indebtedness under
the Company's existing line of credit with Wells Fargo, or (B) incur
short-term indebtedness other than under lines of credit existing on
the date of this Agreement;
(vii) except as set forth on Section 4.1(a)(vii) of
the Company Disclosure Letter (A) grant any increase in the
compensation or benefits payable or to become payable by the Company or
any Company Subsidiary to any current or former director, officer or,
other than in the ordinary course of business consistent with past
practice, employee or consultant; (B) adopt, enter into, amend or
otherwise increase, reprice or accelerate the payment or vesting of the
amounts, benefits or rights payable or accrued or to become payable or
accrued under any Company Benefit Plan or Foreign Plan; (C) enter into
or amend any employment, bonus, severance, change in control, retention
agreement or any similar agreement with any director, officer or, other
than in the ordinary course of business consistent with past practice,
employee or consultant or any collective bargaining agreement or, grant
any severance, bonus, termination, or retention pay to any officer,
director or, other than in the ordinary course of business consistent
with past practice, employee or consultant of the Company or any
Company Subsidiaries; or (D) pay or award any pension, retirement,
allowance or other non-equity incentive awards, or other employee or
director benefit not required by any outstanding Company Benefit Plan
or Foreign Plan;
(viii) change the accounting principles used by it
unless required by GAAP (or, if applicable with respect to foreign
subsidiaries, the relevant foreign generally accepted accounting
principles);
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(ix) acquire by merging or consolidating with, by
purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire any material amount of assets of any other person
(other than the purchase of assets from suppliers or vendors in the
ordinary course of business consistent with past practice);
(x) except in the ordinary course of business
consistent with past practice, make or rescind any express or deemed
election or settle or compromise any claim or action relating to Taxes,
or change any of its methods of accounting or of reporting income or
deductions for Tax purposes;
(xi) satisfy any claims or liabilities, other than
satisfaction in the ordinary course of business consistent with past
practice;
(xii) make any loans, advances or capital
contributions to, or investments in, any other person, except for
loans, advances, capital contributions or investments between any
wholly owned Company Subsidiary and the Company or another wholly owned
Company Subsidiary and except for employee advances for expenses in the
ordinary course of business consistent with past practice;
(xiii) other than in the ordinary course of business
consistent with past practice, (A) modify, amend or terminate any
contract, (B) waive, release, relinquish or assign any contract (or any
of the Company's or any Company Subsidiary's rights thereunder), right
or claim, or (C) cancel or forgive any indebtedness owed to the Company
or any Company Subsidiary; provided, however, that, subject to Section
5.12, the Company may not under any circumstance waive or release any
of its rights under any confidentiality and/or standstill agreement to
which it is a party; or
(xiv) authorize, or commit or agree to take, any of
the foregoing actions.
(b) Other Actions. Except as required by Law, the Company,
Parent and Merger Sub shall not, and, in the case of the Company, shall not
permit any Company Subsidiary to, voluntarily take any action that would
reasonably be expected to result in any of the conditions to the Merger set
forth in Article VI not being satisfied.
(c) Advice of Changes. Each of the Company, Parent and Merger
Sub shall promptly advise the other parties to this Agreement orally and in
writing to the extent it has knowledge of any change or event having, or which,
insofar as can reasonably be foreseen would reasonably be expected to have a
material adverse effect on such party or on the truth of their respective
representations and warranties or the ability of the conditions set forth in
Article VI to be satisfied; provided, however, that no such notification will
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
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Section 4.2 No Solicitation by the Company.
(a) Company Takeover Proposal. The Company shall, and shall
cause the Company Subsidiaries, and its and their officers, directors,
employees, financial advisors, attorneys, accountants and other advisors,
investment bankers, representatives and agents retained by the Company or any of
the Company Subsidiaries (collectively, "REPRESENTATIVES") to, immediately cease
and cause to be terminated immediately all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to, or that
could reasonably be expected to lead to, any Company Takeover Proposal. From and
after the date of this Agreement, the Company shall not, nor shall it permit any
of the Company Subsidiaries to, nor shall it authorize or permit any of its or
the Company Subsidiaries' Representatives to, directly or indirectly, (i)
solicit, initiate or encourage (including by way of furnishing information), or
take any other action designed to facilitate, any inquiries or the making of any
proposal that constitutes, or would be reasonably likely to lead to, a Company
Takeover Proposal, (ii) enter into any agreement, arrangement or understanding
with respect to any Company Takeover 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) initiate or participate in any way in any discussions or negotiations
regarding, or furnish or disclose to any person (other than a party to this
Agreement) any information with respect to, or take any other action to
facilitate or in furtherance of any inquiries or the making of any proposal that
constitutes, or could reasonably be expected to lead to, any Company Takeover
Proposal; provided, however, that, at any time prior to obtaining the
Stockholder Approval, in response to an unsolicited bona fide written Company
Takeover Proposal that the Board of Directors of the Company determines in good
faith (after consultation with outside counsel and a financial advisor of
nationally recognized reputation) constitutes or would reasonably be expected to
lead to a Superior Proposal, and which Company Takeover Proposal was made after
the date hereof and did not otherwise result from a breach of this Section 4.2,
the Company may, if and only to the extent that its Board of Directors
determines in good faith (after consulting with outside legal counsel) that it
is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under the DGCL, and subject to compliance with
Section 4.2(c), (i) furnish information with respect to the Company and the
Company Subsidiaries to the person making such Company Takeover Proposal (and
its representatives) pursuant to a customary confidentiality agreement not less
restrictive of such person than the Confidentiality Agreement; provided,
however, that all such information has previously been provided to Parent or is
provided to Parent prior to or substantially concurrent with the time it is
provided to such person, and (ii) participate in discussions or negotiations
with the person making such Company Takeover Proposal (and its representatives)
regarding such Company Takeover Proposal.
(b) Definitions. As used herein, (i) "SUPERIOR PROPOSAL" means
a bona fide written proposal from any person to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, all of the
combined voting power of the Company then outstanding or all or substantially
all of the assets of the Company (A) that the Board of Directors of the Company
determines in its good faith judgment (after consulting with and receipt of
written advice from a nationally recognized investment banking firm), taking
into account all legal, financial and regulatory and other aspects of the
proposal and the person making the proposal (including any break-up fees,
expense
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reimbursement provisions and conditions to consummation), would be more
favorable to the stockholders of the Company than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions proposed
by Parent in response to such Company Takeover Proposal) and is reasonably
likely to receive all required governmental approvals on a timely basis and
otherwise reasonably capable of being consummated on the terms proposed, and (B)
for which financing, to the extent required, is than committed and (ii) "COMPANY
TAKEOVER PROPOSAL" means any inquiry, proposal or offer from any person relating
to any (A) direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or the assets of the
Company and the Company Subsidiaries, taken as a whole, (B) direct or indirect
acquisition or purchase of 15% or more of any class of equity securities of the
Company or any of the Company Subsidiaries, (C) any tender offer or exchange
offer that if consummated would result in any person beneficially owning 15% or
more of any class of equity securities of the Company or any of the Company
Subsidiaries, or (D) any merger, consolidation, business combination, asset
purchase, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of the Company Subsidiaries, other than the
transactions contemplated by this Agreement.
(c) Actions by the Company. Neither the Board of Directors of
the Company nor any committee thereof shall (i) (A) withdraw (or modify in a
manner adverse to Parent), or publicly propose to withdraw (or modify in a
manner adverse to Parent), the approval, recommendation or declaration of
advisability by such Board of Directors or any such committee thereof of this
Agreement, the Merger or the other transactions contemplated by this Agreement
or (B) recommend, adopt or approve, or propose publicly to recommend, adopt or
approve, any Company Takeover Proposal (any action described in this clause (i)
being referred to as a "COMPANY ADVERSE RECOMMENDATION CHANGE") or (ii) approve
or recommend, or propose to approve or recommend, or allow the Company or any of
the Company Subsidiaries to execute or enter into, any letter of intent,
memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture agreement, partnership
agreement or other similar agreement constituting or related to, or that is
intended to or would reasonably be expected to lead to, any Company Takeover
Proposal (other than a confidentiality agreement, referred to in Section 4.2(a))
(an "ACQUISITION AGREEMENT"). Notwithstanding the foregoing, in the event that
the Board of Directors of the Company receives a Company Takeover Proposal that
the Board of Directors of the Company determines in good faith (after
consultation with outside counsel and a financial advisor of nationally
recognized reputation) to be a Superior Proposal, and which Company Takeover
Proposal was made after the date hereof and did not otherwise result from a
breach of this Section 4.2, the Board of Directors of the Company may, if and
only to the extent that the Board of Directors of the Company determines in good
faith (after consulting with outside legal counsel) that it is required to do so
in order to comply with its fiduciary duties to the stockholders of the Company
under the DGCL, make a Company Adverse Recommendation Change, if the Company
provides written notice (a "NOTICE OF ADVERSE RECOMMENDATION") advising Parent
that the Board of Directors of the Company intends to take such action and
specifying the reasons therefor, including the terms and conditions of any
Superior Proposal that is the basis of the proposed action by the Board of
Directors (it being understood and agreed that any amendment to the financial
terms or any other material term of such Superior Proposal shall require a new
Notice of Adverse Recommendation).
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(d) Notice of Company Takeover Proposal. From and after the
date of this Agreement, the Company shall promptly (but in any event within one
calendar day) advise Parent and Merger Sub in writing of the receipt, directly
or indirectly, of any inquiries, requests, discussions, negotiations or
proposals relating to a Company Takeover Proposal, or any request for nonpublic
information relating to any of the Company Entities by any person that informs
the Company or its Representatives that such person is considering making, or
has made, a Company Takeover Proposal, or an inquiry from a person seeking to
have discussions or negotiations relating to a possible Company Takeover
Proposal. Such notice shall be made orally and confirmed in writing, and shall
indicate the specific terms and conditions thereof and the identity of the other
party or parties involved and promptly furnish to Parent and Merger Sub a copy
of any such written inquiry, request or proposal and copies of any information
provided to or by any third party relating thereto, including copies of any
subsequent material documentation or correspondence relating thereto.
(e) Rule 14e-2(a), Rule 14d-9 and Other Applicable Law.
Nothing contained in this Section 4.2 shall prohibit the Company from (i) taking
and disclosing to its stockholders a position contemplated by Rule 14e-2 (a) or
Rule 14d-9 promulgated under the Exchange Act or (ii) making any disclosure to
the stockholders of the Company if, in the good faith judgment of the Board of
Directors (after consultation with outside counsel), such disclosure would be
required under applicable Law; provided, however, that compliance with such
rules and Laws shall not in any way limit or modify the effect that any action
taken pursuant to such rules and Laws has under any other provision of this
Agreement.
(f) Return or Destruction of Confidential Information. The
Company agrees that immediately following the execution of this Agreement it
shall request each person which has heretofore executed a confidentiality
agreement in connection with such person's consideration of acquiring the
Company to return or destroy all confidential information heretofore furnished
to such person by or on the Company's behalf.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of the Form S-4 Proxy Statement; Stockholders Meeting.
(a) Form S-4 Proxy Statement. As soon as practicable following
the date of this Agreement, the Company and Parent shall prepare and file with
the SEC the Proxy Statement and Parent shall prepare and file with the SEC the
Form S-4, in which the Proxy Statement will be included as a prospectus. Each of
the Company and Parent shall use reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company shall use all reasonable best efforts to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the issuance of Parent Common Stock in the
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Merger and the Company shall furnish all information concerning the Company and
the holders of the Company Common Stock as may be reasonably requested in
connection with any such action. No filing of, or amendment or supplement to,
the Form S-4 will be made by Parent, and no filing of, or amendment or
supplement to the Proxy Statement will be made by the Company, in each case,
without providing the other party and its respective counsel the reasonable
opportunity to review and comment thereon. Parent will advise the Company,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers or directors, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to the Form S-4 or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information must be promptly
filed with the SEC and, to the extent required by Law, disseminated to the
stockholders of the Company.
(b) Stockholders Meeting. The Company shall, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its stockholders (the "STOCKHOLDERS MEETING") in
accordance with Law, the Company's Certificate of Incorporation and the
Company's By-laws for the purpose of obtaining the Stockholder Approval and
shall, (i) through the Board of Directors of the Company, except as otherwise
permitted by Section 4.2(c), recommend to its stockholders the approval and
adoption of this Agreement, the Merger and the other transactions contemplated
hereby and include in the Proxy Statement such recommendation and (ii) use its
reasonable best efforts to solicit and obtain such adoption. Without limiting
the generality of the foregoing, subject to its rights under Section 4.2(c), the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1(b) shall not be affected by any Company Adverse Recommendation
Change or the commencement, public proposal, public disclosure or communication
to the Company or its stockholders of any Company Takeover Proposal.
Section 5.2 Letters of the Company's Accountants. The Company
shall use its reasonable best efforts to cause to be delivered to Parent two
letters from the Company's independent accountants, one dated a date within two
Business Days before the date on which the Form S-4 will become effective and
one dated a date within two Business Days before the Closing Date, each
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
Section 5.3 Letters of Parent's Accountants. Parent shall use
its reasonable best efforts to cause to be delivered to the Company two letters
from Parent's independent accountants, one dated a date within two Business Days
before the date on which the Form S-4 will become effective and one dated a date
within two Business Days before the Closing Date,
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each addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4.
Section 5.4 Access to Information; Confidentiality. To the
extent permitted by applicable Law and subject to the Agreement, dated September
2, 2004, between the Company and Parent (the "CONFIDENTIALITY AGREEMENT"), the
Company shall, and shall cause the Company Subsidiaries to, afford to Parent and
Merger Sub and their Representatives, full access, during normal business hours
during the period prior to the Effective Time, to all of the Company Entities
properties, books, contracts, commitments, personnel and records and all other
information concerning their business, properties and personnel as Parent or
Merger Sub may reasonably request. Parent and Merger Sub shall hold, and shall
cause its respective Representatives and affiliates to hold, any nonpublic
information in accordance with the terms of the Confidentiality Agreement.
Section 5.5 Reasonable Best Efforts; Cooperation.
(a) Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement and to obtain satisfaction or waiver
of the conditions precedent to the Merger, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b) No Takeover Statutes Apply. In connection with and without
limiting the foregoing, the Company, Parent and Merger Sub shall (i) take all
action necessary to ensure that no Takeover Statute or similar Law is or becomes
applicable to the Merger, this Agreement or any of the other transactions
contemplated hereby and (ii) if any Takeover Statute or similar Law becomes
applicable to the Merger, this Agreement or any of the other transactions
contemplated hereby, take all action necessary to ensure that the Merger and the
other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Law on the Merger and the other transactions
contemplated by this Agreement. Nothing in this Agreement will be deemed to
require Parent to agree to, or proffer to, divest or hold separate any assets or
any portion of any business of Parent, the Company or any of their respective
subsidiaries if the Board of Directors of Parent determines that so doing would
materially impair the benefit intended to be obtained by Parent in the Merger.
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(c) Significant Developments. The Company shall consult and
cooperate with Parent with respect to significant developments in its business
and shall give reasonable consideration to the Parent's views with respect
thereto.
(d) Stockholders Agreement. The Company shall use reasonable
best efforts to cause The Gene Haas Trust DTD 3-9-99 to deliver to Parent a duly
executed counterpart to the Stockholders Agreement promptly following the date
of this Agreement.
Section 5.6 Stock Options, Warrants and Restricted Stock. The
parties hereto intend that neither Parent, Merger Subsidiary nor Surviving
Corporation shall assume any Company Stock Options or Company Warrants in
connection with the transactions contemplated by this Agreement. Prior to the
Effective Time, in accordance with the terms of the Company Stock Plans and the
Warrant Agreements, each outstanding Company Stock Option and Company Warrant
will fully accelerate and vest and will be deemed exercisable and converted into
the right to receive an amount in cash equal to the excess of (a) the sum of (i)
the Stock Value plus (ii) the Cash Consideration over (b) the per share exercise
price of such Company Stock Option and Company Warrant, as applicable. The
Company shall obtain any consents required of holders of Company Stock Options
and Company Warrants, as applicable, to effectuate the foregoing. Except as
provided in this Agreement or as otherwise agreed to by the parties in writing,
the Company shall cause the Company Stock Plans and Warrant Agreements to
terminate as of the Effective Time and the Company shall ensure that following
the Effective Time no person, including any holder of Company Stock Options or
Company Warrants or any participant in the Company Stock Plans, shall have any
right to acquire any equity securities of the Company, the Surviving Corporation
or any subsidiary thereof.
Section 5.7 Indemnification.
(a) Rights Assumed by Surviving Corporation. Parent agrees
that all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company and the Company
Subsidiaries as provided in their respective certificates of incorporation or
by-laws (or comparable organizational documents) will be assumed by the
Surviving Corporation without further action, as of the Effective Time, and will
survive the Merger and will continue in full force and effect in accordance with
their terms and such rights will not be amended, or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company, unless such
modification is required by Law.
(b) Successors and Assigns of Surviving Corporation. In the
event that the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will be made so that
the successors and assigns of the Surviving Corporation assume the obligations
set forth in this Section 5.7.
(c) Continuing Coverage. For six years after the Effective
Time, the Surviving Corporation shall maintain in effect directors' and
officers' liability insurance
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covering acts or omissions occurring prior to the Effective Time with respect to
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent) (the "INDEMNIFIED PARTIES") on terms with respect to such
coverage and amount no less favorable than those of such current insurance
coverage; provided, however, that in no event will Parent be required to expend
in any one year an amount in excess of 200% of the annual premiums currently
paid by the Company for such insurance; and provided, further, that, if the
annual premiums of such insurance coverage exceed such amount, Parent will be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(d) Intended Beneficiaries. The provisions of this Section 5.7
are (i) intended to be for the benefit of, and will be enforceable by, each
Indemnified Party, his or her heirs and his or her representatives and (ii) in
addition to, and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
Section 5.8 Public Announcements. Parent and the Company shall
consult with each other before holding any press conferences, analysts calls or
other meetings or discussions and before issuing any press release or other
public announcements with respect to the transactions contemplated by this
Agreement, including the Merger. The parties will provide each other the
opportunity to review and comment upon any press release or other public
announcement or statement with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
other public announcement or statement prior to such consultation, except as may
be required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree that
the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon prior
to the issuance thereof.
Section 5.9 Affiliates. The Company shall deliver to Parent at
least 45 days prior to the Closing Date a letter identifying all persons who
are, at the time this Agreement is submitted for adoption by the stockholders of
the Company, "affiliates" of the Company for purposes of Rule 145 of the rules
and regulations promulgated under the Securities Act. The Company shall use
reasonable efforts to cause each such person to deliver to Parent at least 30
days prior to the Closing Date a written agreement substantially in the form
attached as Exhibit A hereto.
Section 5.10 NYSE Listing. Parent shall use its reasonable
best efforts to cause the Parent Common Stock issuable to the Company's
stockholders as contemplated by this Agreement to be approved for listing on the
NYSE, subject to official notice of issuance, as promptly as practicable after
the date of this Agreement, and in any event prior to the Closing Date.
Section 5.11 Stockholder Litigation. The parties to this
Agreement shall cooperate and consult with one another, to the fullest extent
possible, in connection with any stockholder litigation against any of them or
any of their respective directors or officers with respect to the transactions
contemplated by this Agreement. In furtherance of and without in any way
limiting the foregoing, each of the parties shall use its respective reasonable
best efforts to prevail in such litigation so as to permit the consummation of
the transactions contemplated by this Agreement in the manner contemplated by
this Agreement. Notwithstanding the foregoing,
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the Company agrees that it will not compromise or settle any litigation
commenced against it or its directors or officers relating to this Agreement or
the transactions contemplated hereby (including the Merger) without Parent's
prior written consent, which shall not be unreasonably withheld.
Section 5.12 Standstill Agreements; Confidentiality
Agreements. During the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
the Company Subsidiaries is a party, other than (a) the Confidentiality
Agreement, pursuant to its terms or by written agreement of the parties thereto,
(b) confidentiality agreements under which the Company does not provide any
confidential information to third parties or (c) standstill agreements that do
not relate to the equity securities of the Company or any of the Company
Subsidiaries. During such period, the Company shall enforce, to the fullest
extent permitted under applicable Law, the provisions of any such agreement,
including by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court of the
United States of America or of any state having jurisdiction.
Section 5.13 Transition. In order to facilitate an orderly
transition of the management of the business of the Company and the Company
Subsidiaries to Parent and in order to facilitate the integration of the
operations of the Company and Parent and its subsidiaries and to permit the
coordination of their related operations on a timely basis, and in an effort to
accelerate to the earliest time possible following the Effective Time the
realization of synergies, operating efficiencies and other benefits expected to
the realized by Parent and the Company as a result of the Merger, the Company
shall and shall cause the Company Subsidiaries to consult with Parent on all
strategic and operational matters to the extent such consultation is not in
violation of applicable Law, including Laws regarding the exchange of
information and other Laws regarding competition. The Company shall and shall
cause the Company Subsidiaries to make available to Parent at the facilities of
the Company and the Company Subsidiaries, where determined by Parent to be
appropriate and necessary, office space in order to assist it in observing all
operations and reviewing all matters concerning the Company's affairs. Without
in any way limiting the provisions of Section 5.5, Parent, its subsidiaries,
officers, employees, counsel, financial advisors and other representatives
shall, upon reasonable written notice to the Company, be entitled to review the
operations and visit the facilities of the Company and the Company Subsidiaries
at all times as may be deemed reasonably necessary by Parent in order to
accomplish the foregoing arrangements. Notwithstanding the foregoing, nothing
contained in this Agreement shall give Parent, directly or indirectly, the right
to control or direct the Company's operations prior to the Effective Time. Prior
to the Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its and the
Company Subsidiaries' respective operations.
Section 5.14 Section 16(b). Parent and the Company shall take
all steps reasonably necessary to cause the transactions contemplated hereby and
any other dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who is a
director or officer of the Company to be exempt under Rule 16b-3 under the
Exchange Act.
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Section 5.15 Employee Benefit Matters.
(a) Company Benefit Plans. The Company shall adopt such
amendments to the Company Benefit Plans as are reasonably requested by Parent
and as may be necessary to ensure that Company Benefit Plans cover only
employees and former employees (and their dependents and beneficiaries) of the
Company and the Company Subsidiaries following the consummation of the
transactions contemplated by this Agreement. With respect to any Company Common
Stock held by any Company Benefit Plan as of the date of this Agreement or
thereafter, the Company shall take all actions necessary or appropriate
(including such actions as are reasonably requested by Parent) to ensure that
all participant voting procedures contained in the Company Benefit Plans
relating to such shares, and all applicable provisions of ERISA, are complied
with in full.
(b) Affected Employees. Parent and Merger Subsidiary agree
that they shall cause the Surviving Corporation to honor all employee
compensation and Company Benefit Plans in accordance with their terms as in
effect immediately before the Effective Time, subject to any amendment or
termination thereof as may be permitted by such terms. For a period of not less
than 12 months following the Effective Time, Parent and Merger Subsidiary shall
provide, or shall cause to be provided, to those individuals who were employees
of the Company and the Company Subsidiaries immediately before the Effective
Time (the "AFFECTED EMPLOYEES") compensation and employee benefits no less
favorable in the aggregate than those provided to the Affected Employees
immediately before the Effective Time.
(c) New Plans. For all purposes under the employee benefit
plans of Parent and Merger Subsidiary and their affiliates providing benefits to
any Affected Employees after the Effective Time (the "NEW PLANS"), each Affected
Employee shall receive credit for his or her service with the Company, the
Company Subsidiaries and their affiliates before the Effective Time for purposes
of eligibility, vesting and benefit accrual (other than benefit accrual under a
New Plan that is a defined benefit plan, as defined in Section 3(35) of ERISA)
to the same extent as such Affected Employee was entitled, before the Effective
Time, to credit for such service under any similar or comparable Company Benefit
Plan. In addition, and without limiting the generality of the foregoing:
(i) At and after the Effective Time, each Affected
Employee immediately shall be eligible to participate, without any
waiting period, in any and all New Plans to the extent coverage under
such New Plan replaces coverage under a similar or comparable Company
Benefit Plan in which such Affected Employee participated immediately
before the Effective Time (such plans, collectively, the "OLD PLANS");
and
(ii) For purposes of each New Plan providing medical,
dental, pharmaceutical and/or vision benefits to any Affected Employee,
Parent and Merger Subsidiary shall cause all pre-existing condition
limitations and exclusions and all actively-at-work requirements of
such New Plan to be waived for such Affected Employee and his or her
covered dependents (but only to the extent that such limitations,
exclusions and requirements would have been waived (or inapplicable)
under the comparable Old Plans), and Parent and Merger Subsidiary shall
cause any eligible expenses incurred by such employee and his or her
covered dependents during the portion of the plan year of the Old Plan
ending on the date such employee's participation
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in the corresponding New Plan begins to be taken into account under
such New Plan for purposes of satisfying all deductible, coinsurance
and maximum out-of-pocket requirements applicable to such employee and
his or her covered dependants for the applicable plan year as if such
amounts had been paid in accordance with such New Plan.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Stockholder Approval must have
been obtained.
(b) Governmental and Regulatory Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental Entity
required of Parent, Merger Sub, the Company or any Company Subsidiary to
consummate the Merger and the other transactions contemplated hereby, the
failure of which to be obtained or taken is reasonably expected to have or
result in, individually or in the aggregate, a material adverse effect on the
Surviving Corporation and its subsidiaries, taken as a whole, must have been
obtained in form and substance reasonably satisfactory to Parent.
(c) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"RESTRAINTS") is in effect preventing the consummation of the Merger or
prohibiting or limiting the ownership or operation by Parent, Merger Sub, the
Company or any of their respective subsidiaries of any material portion of the
business or assets of Parent, Merger Sub or the Company and their respective
subsidiaries taken as a whole, or compelling the Company, Parent or Merger Sub
and their respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of the Company, Parent or Merger Sub and their
respective subsidiaries, taken as a whole, as a result of the Merger or any of
the other transactions contemplated by this Agreement or which otherwise is
reasonably likely to have or result in, individually or in the aggregate, a
material adverse effect on the Company or Parent, as applicable; provided,
however, that each of the parties shall have used its reasonable best efforts to
prevent the entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(d) Form S-4. The Form S-4 must have become effective under
the Securities Act and will not be the subject of any stop order or proceedings
seeking a stop order.
(e) NYSE Listing. The shares of Parent Common Stock issuable
to the Company's stockholders as contemplated by this Agreement must have been
approved for listing on the NYSE, subject to official notice of issuance.
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Section 6.2 Conditions to Obligations of Parent and Merger
Sub. The obligation of Parent to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 3.1(c) must be true and correct
in all respects both when made and as of the Closing Date as though made on and
as of the Closing Date, and all other representations and warranties of the
Company set forth herein must be true and correct in all respects (without
giving effect to any materiality or material adverse effect qualifications
contained therein) both when made and at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such other
representations and warranties to be so true and correct would not reasonably be
expected to have or result in, individually or in the aggregate, a material
adverse effect on the Company.
(b) Performance of Obligations of the Company. The Company
must have performed in all material respects all of its obligations required to
be performed by it under this Agreement at or prior to the Closing Date.
(c) Officer's Certificate. The Company must have furnished
Parent with a certificate dated the Closing Date signed on its behalf by an
executive officer to the effect that the conditions set forth in Sections
6.2(a), 6.2(b) and 6.2(c) have been satisfied.
Section 6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth herein must be true and correct in
all respects (without giving effect to any materiality or material adverse
effect qualifications contained therein) both when made and at and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date), except where the
failure of such representations and warranties to be so true and correct would
not have or result in, individually or in the aggregate, a material adverse
effect on Parent and Merger Sub.
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub must have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
(c) Officer's Certificate. Each of Parent and Merger Sub must
have furnished the Company with a certificate dated the Closing Date signed on
its behalf by an executive officer to the effect that the conditions set forth
in Sections 6.3(a) and 6.3(b) have been satisfied.
Section 6.4 Frustration of Closing Conditions. Neither Parent
or Merger Sub nor the Company may rely on the failure of any condition set forth
in Sections 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure
was caused by such party's failure to comply with its obligations to consummate
the Merger and the other transactions contemplated by this Agreement, as
required by and subject to Section 5.5.
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ARTICLE VII
TERMINATION
Section 7.1 Termination.
(a) Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after the
Stockholder Approval, by mutual written consent of Parent, Merger Sub and the
Company.
(b) Termination by Parent or the Company. This Agreement may
be terminated at any time prior to the Effective Time, whether before or after
the Stockholder Approval, by either Parent or the Company:
(i) if the Merger has not been consummated by April
29, 2005 or such later date, if any, as Parent and the Company agree
upon in writing (the "TERMINATION DATE"); provided, however, that the
right to terminate this Agreement pursuant to this Section 7.1(b)(i) is
not available to any party whose breach of any provision of this
Agreement results in or causes the failure of the Merger to be
consummated by such time;
(ii) if the Stockholders Meeting (including any
adjournment or postponement thereof) has concluded and the Stockholder
Approval was not obtained; or
(iii) if any Restraint having any of the effects set
forth in Section 6.1(c) is in effect and has become final and
nonappealable; provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(b)(iii) is not available to any
party whose breach of any provision of this Agreement results in or
causes such Restraint.
(c) Termination by Parent. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the Stockholder
Approval, by Parent:
(i) if the Company (A) has breached or failed to
perform any of its covenants or other agreements contained in this
Agreement to be complied with by the Company such that the closing
condition set forth in Section 6.2(b) would not be satisfied or (B)
there exists a breach of any representation or warranty of the Company
contained in this Agreement such that the closing condition set forth
in Section 6.2(a) would not be satisfied, and in the case of both (A)
and (B), such breach or failure to perform (1) is not cured within 30
days after receipt of written notice thereof or (2) is incapable of
being cured by the Company by the Termination Date;
(ii) if (A) the Board of Directors of the Company or
any committee thereof has made a Company Adverse Recommendation Change,
(B) a tender or exchange offer relating to securities of the Company
shall have been commenced by a person unaffiliated with the Company,
Parent and Merger Sub, and the Company's Board of Directors shall not
have sent to its securityholders pursuant to Rule 14e-2 promulgated
under the Securities Act, within ten (10) Business Days after such
tender offer is first published, sent or given, a statement disclosing
that the Company recommends rejection
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of such tender or exchange offer, or (C) the Company has breached the
provisions of Section 4.2 or Section 5.1(b); or
(iii) if the Company has made the Cash Election.
(d) Termination by the Company. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after the
Stockholder Approval, by the Company:
(i) if either Parent or Merger Sub (A) has breached
or failed to perform any of its covenants or other agreements contained
in this Agreement to be complied with by Parent or Merger Sub such that
the closing condition set forth in Section 6.3(b) would not be
satisfied, or (B) there exists a breach of any representation or
warranty of Parent or Merger Sub contained in this Agreement such that
the closing condition set forth in Section 6.3(a) would not be
satisfied, and, in the case of both (A) and (B) such breach or failure
to perform (1) is not cured within 30 days after receipt of written
notice thereof or (2) is incapable of being cured by Parent by the
Termination Date; or
(ii) if the Exchange Ratio would have been equal to
or greater than the Maximum Exchange Ratio but for the proviso of the
second sentence of Section 2.1(c) hereof; provided, however, that the
right to terminate this Agreement pursuant to this Section 7.1(d)(ii)
is not available to the Company if it has made the Cash Election.
Section 7.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section 7.1,
this Agreement will forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Merger Sub or the Company, other
than the provisions of Section 5.4 (last sentence), Section 5.8, this Section
7.2, Section 7.3, and Article VIII, which provisions survive such termination;
provided, however, that nothing herein will relieve any party from any liability
for any willful and material breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
Section 7.3 Fees and Expenses.
(a) Division of Fees and Expenses. Except as provided in this
Section 7.3, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that each of Parent and the Company will bear and pay one-half of the
costs and expenses incurred in connection with the filing, printing and mailing
of the Form S-4 and the Proxy Statement (including SEC filing fees).
(b) Event of Termination. In the event that this Agreement (i)
is terminated pursuant to Section 7.1(c)(ii), (ii) is terminated at any time
that this Agreement is terminable pursuant to Section 7.1(c)(ii), or (iii) is
terminated pursuant to Section 7.1(b)(i) (other than because of the failure of
the conditions set forth in Section 6.1(d) or Section 6.1(e)), Section
7.1(b)(ii) or Section 7.1(c)(i) and (A) prior to such termination, a third party
shall have publicly announced an intention (whether or not conditional) to make
a Company Takeover Proposal and
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(B) within 12 months of such termination the Company or any of the Company
Subsidiaries enters into a definitive agreement with respect to, or consummates,
any Company Takeover Proposal, then the Company shall (1) in the case of
termination pursuant to clause (i) or (ii) of this Section 7.3(b), promptly, but
in no event later than two Business Days after the date of such termination, or
(2) in the case of termination pursuant to clause (iii) of this Section 7.3(b),
upon the earlier to occur of the execution of such definitive agreement and such
consummation, pay Parent a non-refundable fee equal to $900,000 (the
"TERMINATION FEE"), payable by wire transfer of same day funds to an account
designated in writing to the Company by Parent. In the event that this Agreement
(x) is terminated pursuant to Section 7.1(d)(ii), (y) is terminated at any time
that this Agreement is terminable pursuant to Section 7.1(d)(ii), or (z) is
terminated by the Company pursuant to Section 7.1(b)(i) as a result of the
failure of the satisfaction of a condition precedent in Section 6.1(d) or
Section 6.1(e), then Parent shall promptly, but in no event later than two
Business Days after the date of such termination, pay the Company the
Termination Fee, payable by wire transfer of same day funds to an account
designated in writing to Parent by the Company. In the event that this Agreement
is terminated pursuant to Section 7.1(c)(iii) and is not then otherwise
terminable by Parent, then Parent shall promptly, but in no event later than two
Business Days after the date of such termination, pay the Company a
non-refundable fee equal to $3,500,000, payable by wire transfer of same day
funds to an account designated in writing to Parent by the Company.
(c) Failure to Pay Transaction Fee. The parties hereto
acknowledge that the agreements contained in this Section 7.3 are an integral
part of the transactions contemplated by this Agreement, and that, without these
agreements, the parties would not enter into this Agreement; accordingly, if the
a party hereto fails to pay promptly the Transaction Fee due pursuant to this
Section 7.3, and, in order to obtain such payment, another party hereto
commences a suit that results in a judgment against the a party for the
Termination Fee, the party owing the Termination Fee shall pay to the other
party such party's costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the Termination Fee.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations and Warranties.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement will survive
the Effective Time, except the covenants and agreements contained in Articles II
and VIII and in Sections 5.6, 5.7 and 5.15, each of which will survive in
accordance with its terms.
Section 8.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement must be in writing and will be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
a nationally recognized overnight courier service (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as is specified by like notice):
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if to the Company, to:
SMTEK International, Inc.
200 Science Drive
Moorpark, California 93021
Telecopy No.: (805) 532-1608
Attention: President
with a copy to:
Perkins Coie LLP
1620 26th Street
Santa Monica, CA 90404-4013
Telecopy No.: (310) 788-3399
Attention: David J. Katz
if to Parent, to:
CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514
Telecopy No.: (574) 294-6151
Attention: General Counsel
with a copy to:
Jones Day
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopy No.: (216) 579-0212
Attention: Lyle G. Ganske
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if to Merger Sub, to:
Cardinal Acquisition, Inc.
c/o CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514
Telecopy No.: (574) 294-6151
Attention: General Counsel
with a copy to:
Jones Day
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopy No.: (216) 579-0212
Attention: Lyle G. Ganske
Section 8.3 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference is to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents, table of defined terms and headings contained in this
Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement will have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. For
purposes of this Agreement, (a) "PERSON" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity (including its permitted successors
and assigns), (b) "KNOWLEDGE" of any person that is not an individual means the
knowledge after due inquiry of such person's executive officers and employees
with direct responsibility for the subject matter to which such knowledge
relates, (c) "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract or otherwise, (d) "LIENS" means all pledges,
claims, liens, options, charges, easements, restrictions, covenants, conditions
of record, encroachments, encumbrances and security interests of any kind or
nature whatsoever, (e) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE effect"
means, when used in connection
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with the Company or Parent, any change, effect, event, occurrence or state of
facts that is, or would reasonably be expected to be, materially adverse to the
business, financial condition, results of operations or prospects of such party
and its subsidiaries taken as a whole, and the terms "material" and "materially"
have correlative meanings, provided, however, that for purposes of this
definition, in no event shall any of the following, alone or in combination, be
deemed to constitute, nor shall any of the following be taken into account in
determining whether there has been or will be, a material adverse effect on such
entity: (i) a decrease in such entity's stock price or the failure to meet or
exceed Wall Street research analysts' earnings or other estimates or projections
(excluding the underlying change, effect, event, occurrence or state of facts
giving rise to such decrease or failure), (ii) any change event, violation,
inaccuracy, circumstance or effect that results from (A) the public announcement
or pendency of the transactions contemplated hereby, (B) changes affecting the
electronic manufacturing services industry generally, or (C) changes generally
affecting the United States economy or Thailand economy, and (f) a "SUBSIDIARY"
of any person means another person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interest of which)
is owned directly or indirectly by such first person.
Section 8.4 Counterparts. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement and will become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Section 5.7, are not intended to confer
upon any person other than the parties any rights or remedies.
Section 8.6 Governing Law. This Agreement is to be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned, in whole
or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other party. Any assignment in
violation of this Section 8.7 will be void and of no effect. Subject to the
preceding two sentences, this Agreement is binding upon, inures to the benefit
of, and is enforceable by, the parties and their respective successors and
assigns.
Section 8.8 Consent to Jurisdiction. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions
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contemplated by this Agreement in any court other than a federal court sitting
in the State of Delaware or a Delaware state court.
Section 8.9 Specific Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. The parties accordingly agree that the parties will be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
federal court located in the State of Delaware or a Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 8.10 Amendment. This Agreement may be amended by the
parties at any time before or after the Stockholder Approval; provided, however,
that, after the Stockholder Approval, there is not to be made any amendment that
by Law requires further approval by the stockholders of the Company without
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
Section 8.11 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 8.10, waive compliance by the other parties with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver will be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise will not constitute a waiver of such rights.
Section 8.12 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(SIGNATURES ARE ON THE FOLLOWING PAGE.)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be signed by their respective officers thereunto
duly authorized, all as of the date first written above.
SMTEK INTERNATIONAL, INC.
By: /s/ Kirk A. Waldron
-------------------------------------
Name: Kirk A. Waldron
Title: Interim President,
Senior Vice President and
Chief Financial Officer
CTS CORPORATION
By: /s/ Donald K. Schwanz
-------------------------------------
Name: Donald K. Schwanz
Title: President and
Chief Executive Officer
CARDINAL ACQUISITION, INC.
By: /s/ Donald K. Schwanz
-------------------------------------
Name: Donald K. Schwanz
Title: President
EXHIBIT A
FORM OF COMPANY AFFILIATE LETTER
CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514
SMTEK International, Inc.
200 Science Drive
Moonpark, California 93021
Cardinal Acquisition, Inc.
c/o CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
November 16, 2004 (the "MERGER AGREEMENT"), by and among SMTEK International,
Inc., a Delaware corporation (the "COMPANY"), Cardinal Acquisition, Inc., a
Delaware corporation ("MERGER SUB") and CTS Corporation, an Indiana Corporation
("PARENT"), Merger Sub will merge with and into the Company (the "MERGER"), with
the Company as the surviving corporation. As a result of the Merger, the
undersigned may receive shares of common stock, no par value per share, of
Parent ("PARENT COMMON STOCK") in exchange for shares owned by the undersigned
of common stock, par value $0.01 per share, of the Company (the "COMPANY COMMON
STOCK").
The undersigned acknowledges that the undersigned may be deemed an
"AFFILIATE" of the Company within the meaning of Rule 145 ("RULE 145")
promulgated under the Securities Act of 1933 (the "SECURITIES ACT") by the
Securities and Exchange Commission (the "SEC"), although nothing contained
herein should be construed as an admission of such fact. If in fact the
undersigned is an affiliate of the Company under the Securities Act, the
undersigned's ability to sell, assign or transfer Parent Common Stock received
by the undersigned in exchange for any shares of the Company Common Stock in
connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act. The undersigned understands that Parent is under no
obligation to register the sale, assignment, transfer or other disposition of
Parent Common Stock to be received by the undersigned in the Merger or to take
any other action necessary in order to make compliance with an exemption from
such registration available.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign, transfer or otherwise dispose of any of
Parent Common Stock received by the undersigned in exchange for shares of the
Company Common Stock in connection with the Merger except (i) pursuant to an
effective registration statement under the Securities Act, (ii) in conformity
with the volume and other limitations of Rule 145 promulgated under the
Securities
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Act or (iii) in a transaction which, in the opinion of counsel of Parent or as
described in a "no-action" or interpretive letter from the Staff of the SEC
specifically issued with respect to a transaction to be engaged in by the
undersigned, is not required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of the
shares of Parent Common Stock pursuant to Rule 145, the undersigned will supply
Parent with evidence of compliance with such Rule, in the form of a letter in
the form of Annex I hereto or the opinion of counsel or no-action letter
referred to above. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any shares of Parent Common Stock
disposed of by the undersigned, but that (provided such transfer is not
prohibited by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Parent shall cause the transfer agent to effectuate the
transfer of the shares of Parent Common Stock sold as indicated in such letter.
The undersigned acknowledges and agrees that the legend set forth below
will be placed on certificates representing the shares of Parent Common Stock
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legend will be removed by delivery of substitute
certificates upon evidence of compliance with Rule 145 under the Securities Act
and, if requested by Parent, receipt of an opinion in form and substance
reasonably satisfactory to Parent from counsel reasonably satisfactory to Parent
to the effect that such legend is no longer required for purposes of the
Securities Act.
There will be placed on the certificates for Parent Common Stock issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate are issued, in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The shares have not been acquired by the holder with a
view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act of 1933. The shares may not be
sold, assigned, transferred or otherwise disposed of except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the sale, assignment, transfer or other disposition of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement to
Parent's obligations to consummate the Merger.
Very truly yours,
____________________________________
Name:
Dated: _____________, 2005
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