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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
GLASSTECH HOLDING CO.
GLASSTECH SUB CO.
AND
GLASSTECH, INC.
DATED JUNE 5, 1997
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TABLE OF CONTENTS
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Page
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1. The Merger............................................................................................. 1
1.1 The Merger.................................................................................... 1
1.2 Consummation of the Merger.................................................................... 1
1.3 Effects of the Merger......................................................................... 1
1.4 Certificate of Incorporation and Bylaws....................................................... 1
1.5 Directors and Officers........................................................................ 2
1.6 Conversion of Shares.......................................................................... 2
1.7 Conversion of Common Stock of the Sub......................................................... 2
1.8 Adjustment to Aggregate Merger Consideration.................................................. 2
1.9 Determination of Adjustment to Aggregate Merger
Consideration................................................................................. 4
2. Dissenting Shares; Payment for Shares; Options......................................................... 5
2.1 Dissenting Shares............................................................................. 5
2.2 Payment for Shares............................................................................ 6
2.3 Closing of the Company's Transfer Books....................................................... 8
2.4 Options and Warrants.......................................................................... 8
3. Representations and Warranties of the Company.......................................................... 8
3.1 Authority; No Conflicts....................................................................... 8
3.2 Capitalization................................................................................ 9
3.3 Compliance with Applicable Laws............................................................... 10
3.4 Financial Statements.......................................................................... 10
3.5 Taxes......................................................................................... 10
3.6 Absence of Changes or Events.................................................................. 11
3.7 Employee Benefit Matters...................................................................... 11
3.8 Contracts..................................................................................... 14
3.9 Litigation.................................................................................... 15
3.10 Intellectual Property......................................................................... 15
3.11 Brokers....................................................................................... 16
3.12 Environmental Matters......................................................................... 16
3.13 Percentage Completion of Accounting; Accounts
Receivable; Inventories....................................................................... 18
3.14 Backlog....................................................................................... 19
3.15 Customers and Suppliers....................................................................... 19
3.16 Product Warranties............................................................................ 19
3.17 Title to Assets; Liens........................................................................ 20
3.18 Labor Relations............................................................................... 20
3.19 Insurance..................................................................................... 20
3.20 Intercompany and Affiliate Transactions; Insider
Interests..................................................................................... 20
3.21 Absence of Undisclosed Liabilities............................................................ 21
3.22 Officers and Directors........................................................................ 21
3.23 Bankruptcy Matters............................................................................ 21
3.24 Disclosure.................................................................................... 22
4. Representations and Warranties of the Parent and Sub................................................... 22
4.1 Authority; No Conflicts....................................................................... 22
4.2 Interim Operations of Parent and Sub.......................................................... 23
4.3 Brokers....................................................................................... 23
4.4 Financing..................................................................................... 23
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5. Covenants.............................................................................................. 23
5.1 Capitalization................................................................................ 23
5.2 Access to Information......................................................................... 23
5.3 Reasonable Efforts............................................................................ 24
5.4 Antitrust Notification........................................................................ 24
5.5 Notification of Certain Matters............................................................... 24
5.6 Fees and Expenses............................................................................. 25
5.7 Employee Benefits............................................................................. 25
5.8 Indemnification; Directors' and Officers'
Insurance..................................................................................... 25
5.9 Conduct of the Business of the Company........................................................ 27
5.10 Meeting of Company Shareholders............................................................... 28
5.11 No Negotiations............................................................................... 28
5.12 Financial Statements.......................................................................... 29
6. Conditions to Consummation of the Merger............................................................... 30
6.1 Conditions to Each Party's Obligations to
Consummate the Merger......................................................................... 30
6.2 Conditions to the Parent's and Sub's Obligations
to Effect the Merger.......................................................................... 30
6.3 Conditions to the Company's Obligations to Effect
the Merger.................................................................................... 32
7. Termination; Amendment; Waiver......................................................................... 33
7.1 Termination................................................................................... 33
7.2 Effect of Termination......................................................................... 33
7.3 Amendment..................................................................................... 34
7.4 Extension; Waiver............................................................................. 34
8. Survival of Representations and Warranties;
Indemnification........................................................................................ 34
8.1 Survival of Representations and Warranties.................................................... 34
8.2 Indemnification From Indemnification Escrowed
Funds......................................................................................... 35
8.3 Limitation on Indemnity Obligation............................................................ 35
8.4. Procedure for Indemnification with Respect to
Third-Party Claims............................................................................ 35
8.5. Procedure For Indemnification with Respect to Non-
Third-Party Claims............................................................................ 36
9. Miscellaneous.......................................................................................... 37
9.1 Shareholders' Representative.................................................................. 37
9.2 Validity...................................................................................... 38
9.3 Notices....................................................................................... 38
9.4 Governing Law................................................................................. 39
9.5 Interpretation................................................................................ 39
9.6 Parties in Interest........................................................................... 40
9.7 Counterparts.................................................................................. 40
9.8 Press Releases; Confidentiality............................................................... 40
9.9 Entire Agreement.............................................................................. 40
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AGREEMENT AND PLAN OF MERGER
Dated as of June 5, 1997
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The parties to this agreement and plan of merger are Glasstech
Holding Co., a Delaware corporation (the "Parent"), Glasstech Sub Co., a
Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"),
and Glasstech, Inc., a Delaware corporation (the "Company").
The board of directors of each of the Parent, the Sub and the
Company has determined it is in the best interests of its stockholders for the
Parent to acquire the Company upon the terms and subject to the conditions set
forth in this agreement.
Accordingly, the parties agree as follows:
1. THE MERGER
1.1 THE MERGER. Upon the terms of this agreement and subject to the
provisions of the Delaware General Corporation Law (the "DGCL"), the Sub shall
be merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in section 6. The Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue its existence under the law of
the State of Delaware. At the Effective Time (as defined in section 1.2), the
separate corporate existence of the Sub shall cease.
1.2 CONSUMMATION OF THE MERGER. Subject to the provisions of this
agreement, the parties shall cause the Merger to be consummated by filing with
the secretary of state of the state of Delaware a duly executed certificate of
merger, which certificate of merger shall be filed as soon as practicable on the
date of the Closing and shall take all other action required by law to effect
the Merger. At 9:00 a.m., New York time, on the second business day following
the satisfaction or waiver of all of the conditions referred to in section 6,
and prior to the filing referred to above, a closing (the "Closing") shall be
held at the offices of Baker & Hostetler LLP, 3200 National City Center, 1900
East 9th Street, Cleveland, Ohio (or such other place, time or date as the
parties may agree in writing) for the purpose of completing the foregoing. The
time and date the Merger becomes effective in accordance with applicable law is
referred to as the "Effective Time."
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL and this agreement.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the certificate
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of incorporation of the Surviving Corporation until thereafter amended as
provided therein or by applicable law; PROVIDED, HOWEVER, that the certificate
of incorporation of the Surviving Corporation shall be amended to read in its
entirety substantially as set forth on Exhibit 1.4.
The bylaws of the Sub as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable law, except that the
name in the heading shall be changed to "Glasstech," Inc.
1.5 DIRECTORS AND OFFICERS. The directors of the Sub immediately prior
to the Effective Time and the officers of the Company immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation, until their respective successors are duly elected and
qualified.
1.6 CONVERSION OF SHARES. At the Effective Time, each share of common
stock of the Company, par value $.01 per share, issued and outstanding
immediately prior to the Effective Time (each, a "Share") (other than Shares
owned by the Parent, the Sub or any subsidiary of the Parent or Sub or held in
the treasury of the Company, all of which shall be cancelled and retired and no
consideration shall be delivered or deliverable in exchange therefor, and other
than Dissenting Shares (as defined in Section 2.1)) shall, by virtue of the
Merger and without any action on the part of the Parent, the Sub, the Company or
the holder, shall cease to exist and be converted into the right to receive in
cash, without interest, an amount determined by dividing the amount of Seventy
Eight Million Dollars ($78,000,000), as adjusted pursuant to Section 1.8 (the
"Aggregate Merger Consideration") plus the exercise price of all outstanding
Options ( as defined in Section 2.4) by the total number of Shares issued and
outstanding immediately prior to the Effective Time (including Shares issued
upon exercise of Options (as defined in Section 2.4), but excluding Shares owned
by the Parent, the Sub or any subsidiary of the Parent or Sub or held in
treasury of the Company) (the "Merger Consideration"), upon the surrender of
certificates representing the Shares in accordance with Section 2.2.
1.7 CONVERSION OF COMMON STOCK OF THE SUB. At the Effective Time, each
share of common stock, par value $.01 per share, of the Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Parent, the Sub or the Company,
be converted into and become one share of common stock of the Surviving
Corporation.
1.8 ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. The Aggregate
Merger Consideration shall be $78,000,000 (the "Merger Amount") as adjusted
upward or downward dollar for dollar to the extent that Net Working Capital (as
defined below) as of the
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Closing is more positive or more negative than NEGATIVE $6,320,000 (the
"Adjustment Amount"). To the extent Net Working Capital at the Closing is (i)
more positive than NEGATIVE $6,319,999 (I.E., negative $6,320,000 or more), the
Aggregate Merger Consideration shall be increased dollar for dollar by the
Adjustment Amount and (ii) more negative than NEGATIVE $6,320,000 (I.E.,
negative $6,320,001 or less), the amount of Aggregate Merger Consideration will
be decreased dollar for dollar by the Adjustment Amount.
"Unrestricted Cash" is cash other than Restricted Cash.
"Restricted Cash" shall mean cash collateral for outstanding standby letters of
credit issued on behalf of the Company in support of the Company's performance
obligations under various sales contracts. Restricted Cash becomes Unrestricted
Cash upon performance by the Company under the applicable sales contract and/or
expiration of the underlying letter of credit.
"Net Working Capital" shall mean the sum of the following
items, each determined in accordance with generally accepted accounting
principles, applied on a basis consistent with that used to prepare the
Financial Statements (as defined in Section 3.4) after giving effect to the
payments by the Company contemplated by Sections 3.11, 6.2(j), 6.2(k) and
6.2(n):
(i) any Unrestricted Cash retained in the Company as
of Closing;
(ii) Restricted Cash;
(iii) accounts receivable;
(iv) inventories stated at their FIFO values; and
(v) prepaid expenses;
MINUS
(A) the "Accounts Payable Amount" (as defined below);
(B) billings in excess of costs and estimated earnings
on uncompleted contracts;
(C) accrued payroll, pension, contract and tax expenses,
and items categorized as "Other Expenses" in the
Financial Statements; PROVIDED, HOWEVER, that this
item shall not include accrued incentive compensation
which shall be discharged at Closing in accordance
with Section 6.2; and
(D) all amounts, including interest and prepayment
penalties, required to pay off and discharge as of
the date of the Closing all third-party indebtedness
of the Company and its subsidiaries, including
capitalized lease obligations (to the
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extent any such indebtedness remains outstanding as
of the Closing), but excluding any indebtedness
incurred in connection with the financing of the
Merger.
The anticipated Net Working Capital as of the date of the
Closing is as set forth on Schedule 1.8.
The Accounts Payable Amount shall be determined as follows,
determined in accordance with generally accepted accounting principles, applied
on a basis consistent with that used to prepare the Financial Statements, after
giving effect to the payments contemplated by Sections 3.11, 6.2(j), 6.2(k) and
6.2(n):
(x) if the accounts payable of the Company total between
$3,000,000 and $3,800,000, the Accounts Payable Amount shall be $3,393,000;
(y) if the accounts payable of the Company total greater than
$3,800,000, the Accounts Payable Amount shall be the sum of (i) $3,393,000 and
(ii) the excess of the accounts payable of the Company over $3,800,000; and
(z) if the accounts payable of the Company total less than
$3,000,000, the Accounts Payable Amount shall be $3,393,000 minus the difference
between (i) $3,000,000 and (ii) the accounts payable of the Company.
1.9 DETERMINATION OF ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. No
later than 14 days prior to the Closing, the Company shall provide Parent with
the Company's good faith estimate of the Net Working Capital at Closing (based
on signed contracts as of the date of such good faith estimate), determined in
accordance with Section 1.8 (the "Estimated NWC") and, based on such Estimated
NWC, a preliminary estimate of the Adjustment Amount and the Aggregate Merger
Consideration (the "Preliminary Aggregate Merger Consideration").
Within 60 days of the Effective Date, an audit of the Company shall be
completed by Ernst & Young LLP ("Ernst & Young"). Pursuant to such audit, Ernst
& Young shall determine the Net Working Capital at Closing (the "NWC
Calculation") in accordance with Section 1.8 and, based on such NWC Calculation,
the final Adjustment Amount and the Aggregate Merger Consideration. Within 60
days of the Effective Date, Ernst & Young shall deliver to the Company, the
Parent, Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders'
Representative") and the Paying Agent (as defined in Section 2.2), a report
("E&Y Report") setting forth the NWC Calculation and its calculation of the
Adjustment Amount and the Aggregate Merger Consideration. Expenses of the audit
shall be borne by the Company after the Effective Time and shall not be
considered in the NWC Calculation.
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If within 30 days following delivery of the E&Y Report, the
Shareholders' Representative has not given the Parent notice of its objection to
the NWC Calculation, the Adjustment Amount and the Aggregate Merger
Consideration (such notice must contain a reasonably detailed statement of the
basis of Shareholders' Representative's objection), then the NWC Calculation,
the Adjustment Amount and the Aggregate Merger Consideration set forth in the
E&Y Report shall be considered accepted and binding on all parties. If the
Shareholders' Representative gives such notice of objection, then the issues in
dispute will be submitted to Deloitte & Touche, certified public accountants
(the "Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution, (i) each party will furnish to the Accountants such
work papers and other documents and information relating to the disputed issues
as the Accountants may request and are available to that party or its
subsidiaries (or its independent public accountants), and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants: (ii) the
determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) Shareholders' Representative and the Parent will each bear 50% of the fees
of the Accountants for such determination.
If the Aggregate Merger Consideration as determined pursuant to the
preceding paragraph is greater than the Preliminary Aggregate Merger
Consideration, Parent shall contribute the amount of such excess to the Working
Capital Escrow (the "Excess Amount") and the entire amount of the Working
Capital Escrow (including all earnings thereon) shall be paid to record holders
of Shares and Options as of the Effective Time. The Parent also shall contribute
to the Working Capital Escrow the amount of interest, at the average rate earned
in the Working Capital Escrow, on the Excess Amount that would have been earned
beginning on the Closing Date and ending on the date of payment thereof. If the
Aggregate Merger Consideration is less than the Preliminary Aggregate Merger
Consideration, the deficiency shall be paid to Parent out of the Working Capital
Escrow (together with all earnings thereon) and the balance of the Working
Capital Escrow (together with the earnings thereon) shall be paid to record
holders of the Shares and Options as of the Effective Time.
The parties will instruct the Paying Agent to pay the Working Capital
Escrow in accordance with the previous paragraph. Payments must be made in
immediately available funds.
2. DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
2.1 DISSENTING SHARES. Notwithstanding anything in this agreement to
the contrary, Shares issued and outstanding immediately prior to the Effective
Time and held by any stockholder who did not vote in favor of the Merger or
consent
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thereto in writing and comply with Section 262 of the DGCL (the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration, unless and until any such stockholder shall have failed to
perfect or shall have effectively withdrawn or lost his or her rights to
appraisal under the DGCL, but the holder of such Dissenting Shares shall be
entitled to payment from the Surviving Corporation of the appraised value of
such Shares in accordance with the provisions of the DGCL. If any such holder
shall have failed to perfect or shall have effectively withdrawn or lost that
right, that holder's Shares shall thereupon be converted into and become
exchangeable for the right to receive, as of the Effective Time, the Merger
Consideration without any interest. The Company shall give the Parent (a) prompt
notice of any written demands for appraisal of any Shares, attempted withdrawals
of such demand and any other instruments served pursuant to the DGCL and
received by the Company relating to stockholders' rights of appraisal and (b)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Parent, voluntarily make any payment with respect
to demands for appraisal of Shares, offer to settle or settle any demands or
approve any withdrawal of any such demands.
2.2 PAYMENT FOR SHARES
(a) At the Effective Time, the Parent shall cause the Sub to
deposit with National City Bank (or another bank or trust company reasonably
satisfactory to the Company) (the "Paying Agent") the Preliminary Aggregate
Merger Consideration (such funds, the "Payment Fund"). Of the Payment Fund, (i)
$3,000,000 (the "Indemnification Escrowed Fund") shall be held by the Paying
Agent pursuant to the terms of an Escrow Agreement in substantially the form of
Exhibit 2.2 attached hereto (the "Indemnification Escrow Agreement") in escrow
for any Losses (as defined in Section 8.2); (ii) $500,000 (the "Working Capital
Escrow" and collectively with the Indemnification Escrow Fund the "Escrow
Funds") shall be held in escrow by the Paying Agent pursuant to the terms of an
Escrow Agreement in substantially the form of Exhibit 2.2 attached hereto (the
"Working Capital Escrow Agreement") and; (iii) $250,000 shall paid to the
Shareholders' Representative (to be held in its escrow account) and shall be
used to pay the fees and expenses of the Shareholders' Representative. The
Paying Agent shall, pursuant to irrevocable instructions, make the payments
provided for in this paragraph (a) out of the Payment Fund. The Payment Fund
shall not be used for any other purpose, except as provided in this agreement.
(b) The amount resulting from the following formula
shall be the "Per Share Merger Amount":
1. (x) the excess of the Preliminary Aggregate
Merger Consideration over the aggregate amount of the Escrow Funds plus (y) the
exercise price of all outstanding Options (as defined in Section 2.4)
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divided by
2. (z) the number of Shares outstanding
immediately prior to the Effective Time (counting as
outstanding any Shares issued or issuable upon exercise or
deemed exercise of Options).
(c) Immediately after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder of Shares
and Options as of the Effective Time, a form of letter of transmittal and
instructions for use in effecting the surrender of certificates that immediately
prior to the Effective Time represented outstanding Shares and Options (the
"Certificates") for payment. Immediately upon surrender to the Paying Agent of a
Certificate, together with the letter of transmittal duly executed, and except
as set forth below with respect to the holders of Options, the holder of
Certificates representing Shares shall be paid in cash an amount equal to the
product of the Per Share Merger Amount and the number of Shares represented by
such Certificate. The holders of Certificates representing Options shall be paid
in cash an amount equal to the product of the Per Share Merger Amount and the
number of Options represented by such Certificate MINUS the aggregate exercise
price of such Options.
No interest shall be paid or accrued on the cash payable upon
the surrender of a Certificate. If payment is to be made to a person other than
the person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that the tax has been
paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with this Section 2.2, each Certificate (other than
Certificates representing Shares owned by the Parent or the Sub or any of their
subsidiaries, treasury shares and Dissenting Shares) shall represent for all
purposes solely the right to receive in cash an amount equal to the product of
the Per Share Merger Amount and the number of Shares or Options evidenced by the
Certificate, without interest.
(d) Any portion of the Payment Fund (including the proceeds of
any investments of the Payment Fund) that remains unclaimed by the former
stockholders of the Company for six months after the Effective Time and that is
not held in an Escrow Fund shall be repaid to the Surviving Corporation. Any
former stockholders of the Company who have theretofore complied with Section
2.1 shall thereafter look only to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) for payment of their claim
for the Per Share Merger Amount, without interest. Neither the Parent nor the
Surviving
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Corporation shall be liable to any holder of Shares for any monies delivered
from the Payment Fund or otherwise to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.3 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, on or after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for cash as provided in this Section 2, subject to applicable law in the case of
Dissenting Shares.
2.4 OPTIONS AND WARRANTS. At the Effective Time of the Merger, the
Company shall cause each option or warrant to purchase Shares outstanding on
such date (an "Option") to be cancelled by virtue of the Merger, without
consideration except as provided in this Section 2.4, and such Options shall
cease to exist. Each holder of an Option at the Effective Time, whether or not
then exercisable, shall be deemed to have exercised such Option at the Effective
Time and thus entitled to receive by virtue of the Merger the amount set forth
in Section 2.2(c).
All Shares issuable upon exercise of Options pursuant to this
Section 2.4 shall be deemed issued and outstanding at the Effective Time for
purposes of the Merger. No payment, assumption or conversion shall occur in the
Merger with respect to cancelled Options.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Parent and Sub as follows:
3.1 AUTHORITY; NO CONFLICTS. Each of the Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
law its jurisdiction of incorporation. The Company and its subsidiaries are each
duly qualified to do business and in good standing in each jurisdiction listed
on Schedule 3.1 and neither the nature of the business conducted by the Company
or its subsidiaries or the properties owned by it or its subsidiaries requires
any of them to qualify to do business as a foreign corporation in any other
jurisdiction, except where the failure to so qualify would not have a material
adverse effect on the business and financial condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). This agreement and
the transactions contemplated hereby have been duly authorized by the board of
directors of the Company and, assuming this agreement has been approved by the
shareholders of the Company and assuming this agreement constitutes a valid and
binding obligation of each of the Parent and Sub, constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject to general principles of
equity (whether considered in a proceeding in equity or at law). Except as set
forth on Schedule 3.1, the
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execution and delivery of this agreement does not, and the consummation of the
transactions contemplated by this agreement will not, (a) violate the Company's
or any of its subsidiaries' certificate of incorporation or bylaws, (b) result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, any note,
bond, mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which the Company or any of its subsidiaries is a
party or by which the Company or any of its assets or subsidiaries may be bound
or (c) violate any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
property or assets, other than, in the case of clauses (b) and (c) above, any
such conflicts, violations and defaults that, in the aggregate, would not have a
Material Adverse Effect. No consent, approval, order or authorization of, or
filing with or notification to any court or governmental or regulatory authority
is required to be obtained or made by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this agreement
or the consummation by the Company of the transactions contemplated by this
agreement, except (A) as may be required to comply with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (B) the filing of a
certificate of merger pursuant to the DGCL, and (C) tax and other filing
requirements the absence of which will not effect the validity or enforceability
of this Agreement.
3.2 CAPITALIZATION
(a) The authorized and outstanding capital stock of the
Company, and the record owners of capital stock of the Company, are as set forth
on schedule 3.2(a) to this Agreement. All the outstanding Shares have been duly
authorized and validly issued, are fully paid and nonassessable and are free of
preemptive rights. Except as set forth on schedule 3.2(a), there are no
outstanding subscriptions, options, warrants, puts, calls, rights or other
agreements or commitments relating to the issuance, transfer, purchase or sale
by the Company or any of its subsidiaries of any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company, or obligations of the Company to grant, extend
or enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment.
(b) Except as set forth on schedule 3.2(b), the Company is the
record owner of all the outstanding shares of capital stock of each of its
subsidiaries, free and clear of any adverse claim. There are no irrevocable
proxies with respect to any such shares. There are no outstanding (i) securities
of the Company or any of its subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
of its subsidiaries or (ii) options or
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other rights to acquire from the Company or any of its subsidiaries, or other
obligations of the Company or any of its subsidiaries to issue capital stock,
voting securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any of its subsidiaries, or other obligations of the Company or
any of its subsidiaries to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar agreement
or commitment. There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the Company's or
its subsidiaries' outstanding securities.
3.3 COMPLIANCE WITH APPLICABLE LAWS. The business of the Company and
its subsidiaries is being conducted in compliance with all applicable laws,
orders, ordinances, rules and regulations of any governmental authority, except
to the extent noncompliance would not have a Material Adverse Effect.
3.4 FINANCIAL STATEMENTS. Schedule 3.4 sets forth the unaudited
consolidated balance sheet and related income statement and statement of cash
flow of the Company and its subsidiaries (the "Interim Financials") as of and
for the nine months ended March 31, 1997 (the "Interim Financial Statement
Date") and the audited consolidated balance sheets and related income statements
and statements of cash flow of the Company and its subsidiaries of and for the
year ended June 30, 1996, the period from January 4, 1995 through June 30, 1995,
the period from July 1, 1994 though January 3, 1995 and the year ended June 30,
1994 (including the notes thereto, together with the Interim Financials, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
except as may be indicated in the notes thereto and except that the Interim
Financials (i) are subject to normal, recurring year-end adjustments and (ii) do
not include notes in accordance with generally accepted accounting principles.
The Financial Statements fairly present the financial position, results of
operations, cash flows and shareholders' equity of the Company and its
subsidiaries for the periods and at the dates presented. To the best knowledge
of the Company, the Financial Statements are true and complete in all material
respects.
3.5 TAXES. The Company has and each of its subsidiaries has (a) duly
and timely filed with the appropriate taxing authorities all federal income tax
returns and all other material federal, state, local and foreign income,
franchise, excise, real and personal property and other tax returns and reports
required to be filed by or with respect to it on or before the Closing Date
(except for those for which an extension beyond the date of the Closing was
properly obtained) (the "Returns"), and (b) paid in full or made adequate
provision for the payment of all amounts owed to any taxing authority for all
periods covered by such Returns. The Returns are true, correct and complete in
all material respects and have been prepared from and in accordance
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with the Company's books and records. Neither the Company nor any of its
subsidiaries has received any notice of deficiency or assessment from any
federal, state or local taxing authority with respect to liabilities for taxes
of the Company or any of its subsidiaries that have not been fully paid or
finally settled. Schedule 3.5 sets forth the year and result of all audits of
federal, state, local and foreign tax returns of the Company and each of its
subsidiaries. There are no pending or, to the best knowledge of the Company,
threatened tax audit, administrative proceeding or judicial proceeding being
conducted with respect to the Company or any of its subsidiaries. Neither the
Company nor any of its subsidiaries has executed or filed with the Internal
Revenue Service or any other taxing authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any taxes. Attached hereto as Schedule 3.5 is correspondence to a
predecessor of the Company from the Internal Revenue Service (the "IRS")
relating to the recognition of income by the Company (the "IRS Letter"). The
Company has received no other or further communication from the IRS relating to
the subject matter of the IRS Letter and the Company knows of no facts or
circumstances which might jeopardize its continued reliance on the IRS Letter.
3.6 ABSENCE OF CHANGES OR EVENTS. Since June 30, 1996, the business of
the Company and its subsidiaries has been conducted in all material respects in
the ordinary course and there has not been any material adverse change in the
business or financial condition of the Company and its subsidiaries taken as a
whole, other than changes relating to the United States economy or foreign
economies in general or the Company's industry in general, provided, however,
that solely with regard to the period between the date of this Agreement and the
date of the Closing, disruptions to the Company's business as a result of the
announcement of the Merger and changes attributable solely thereto shall not
constitute such a material adverse change.
3.7 EMPLOYEE BENEFIT MATTERS
(a) Schedule 3.7 sets forth a true and complete list of all
written bonus, incentive, stock purchase, stock option, severance, deferred
compensation, medical, pension, life or other insurance, profit-sharing or
retirement plans or arrangements sponsored or maintained, or that have been
sponsored or maintained, or contributed to by the Company, any of its
subsidiaries or by any trade or business, whether or not incorporated, that,
together with the Company, would be deemed a "single employer" within the
meaning of section 414(b), (c), (m) or (o) of the Internal Revenue Code or
section 4001 of the Employee Retirement Income Security Act of 1974 ("ERISA") (a
"Company ERISA Affiliate") (collectively, the "Company Plans"). The Company has
delivered to the Parent true and complete copies of all written Company Plan
documents, insurance contracts and other financing vehicles, and administrative
service agreements, as they may have been amended to the date hereof, embodying
or relating to the Company Plans; and with respect to each "employee benefit
plan,"
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within the meaning of Section 3(3) of ERISA, listed in Schedule 3.7, the Company
has delivered to the Parent true and complete copies of (A) the last filed Form
5500 Series, including all schedules and attachments, (B) the summary plan
description, and all modifications thereto, and (C) the most recent annual
accountings related to plan assets and liabilities, each of which shall be
correct in all material respects. Each Company Plan which is a "pension plan"
within the meaning of Section 3(2) of ERISA has received a favorable
determination letter from the Internal Revenue Service with respect to its
qualification under Section 401(a) of the Internal Revenue Code, and the related
trusts have been determined to be exempt from taxation under Section 501(a) of
the Internal Revenue Code. A copy of the most recent determination letter with
respect to each such plan has been delivered to the Parent and, nothing has
occurred since the date of such letter that would cause the loss of or vacation
of such exemption.
(b) Each Company Plan is and has been operated and
administered in all material respects in accordance with the terms of such
Company Plan and in accordance with the applicable requirements prescribed by
all applicable statutes and governmental rules and regulations, including
without limitation ERISA and the Internal Revenue Code. The Company has
performed all material obligations required to be performed by it under, and is
not in material default under or in material violation of, any Company Plan.
Full payment has been made, in a timely manner, of all amounts which the Company
or any of its subsidiaries is required to pay under the terms of each of the
Company Plans and none of the Company Plans nor any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in ERISA), whether
or not waived. The Financial Statements reflect an accrual of all amounts of
employer contributions accrued but unpaid under each of the Company Plans,
including without limitation the unpaid benefit expense for each of the Company
Plans for any portion of the fiscal year of each of the Company Plans ending on
the Closing.
(c) Except as disclosed on Schedule 3.7, neither the Company
nor any Company ERISA Affiliate nor any predecessors of the Company or any
Company ERISA Affiliate maintains, has maintained, contributes to or has
contributed to a plan subject to section 412 of the Internal Revenue Code or
Title IV of ERISA within the five years preceding this year. No Company Plan is
a multiemployer plan (within the meaning of sections 3(37) or 4003(a)(3) of
ERISA or section 414(f) of the Internal Revenue Code) ("Multiemployer Plan") and
no Company Plan is a multiple employer plan as defined in section 413 of the
Internal Revenue Code ("Multiple Employer Plan). Neither the Company nor any
ERISA Affiliate is or was obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan. Between the date of the most recent Financial Statement
and the date hereof, no material funding changes have been made to the Company
Plans, except as expressly noted in Schedule 3.7.
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(d) Neither the Company nor any other "disqualified person" or
"party in interest" (as defined in Section 4975 of the Internal Revenue Code and
Section 3(14) of ERISA, respectively) has engaged in any "prohibited
transaction," as such term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, which could subject any Company Plan (or its
related trust), any officer, director or employee of the Company, or any
trustee, administrator or other fiduciary of any Company Plan to the penalty
imposed under Section 4975 of the Internal Revenue Code or Section 502(i) or
ERISA.
(e) The Company hereby represents, covenants and warrants that
all Company Plans are and remain fully terminable by the Company at any time
(subject only to the payment of benefits accrued to date of such plan
termination), and that no written or oral statements or representations have
been made to any current or former employees of the Company (or to such current
or former employees' beneficiaries), which are in any way inconsistent
therewith.
(f) To the best knowledge of the Company, the "administrator"
(as described in Section 3(16)(A) of ERISA) of each of the Company Plans (as
described in Section 3(3) of ERISA) of the Company has complied, in all material
respects, with all applicable reporting and disclosure requirements of Part 1 of
Title 1 of ERISA and the Internal Revenue Code in a timely manner, and no
material penalties have been or will be imposed on the Company or the
administrator with respect thereto. With respect to such Company Plans, and any
trust(s), contracts or policies related thereto, the Company has no accrued or
contingent liability, including without limitation, liabilities for federal,
state or local taxes, other than routine administrative expenses. Moreover, to
the best knowledge of the Company, there is no material pending litigation,
arbitration, or disputed claim settlement or adjudication proceeding, and the
Company is not aware of any material pending, threatened or anticipated
litigation, arbitration or disputed claim, or any governmental or other
proceeding, or investigation with respect to any of the Company Plans or related
trust(s), or with respect to any fiduciary, administrator, or sponsor thereof
(in their capacities as such), or any party-in-interest thereof, (other than
routine claims for benefits).
(g) Except as disclosed on Schedule 3.7, or as reflected on
the Financial Statements, the Company has no material liability for unpaid
compensation or fringe benefits, including without limitation accrued vacation,
sick leave, post employment medical or other benefits, severance pay or "excess
parachute payments" (within the meaning of Section 280(G) of the Code).
(h) Except as set forth in Schedule 3.7, no Company Plan
provides benefits, including death or medical benefits (whether or not insured),
with respect to current or former employees after retirement or other
termination of service other
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than (i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan", as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of the Company or a Company ERISA Affiliate, or (iv) benefits, the
full cost of which is borne by the current or former employee (or his
beneficiary).
(i) With respect to each Company Plan that is funded wholly or
partially through an insurance policy, there will be no liability of the Company
or a Company ERISA Affiliate, as of the Effective Date, under any such insurance
policy or ancillary agreement with respect to such insurance policy in the
nature of a retroactive rate adjustment, loss sharing arrangement or other
material actual or contingent liability arising wholly or partially out of
events occurring prior to the Effective Date.
(j) Except as set forth in Schedule 3.7, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any current
or former employee or officer of the Company to severance pay, unemployment
compensation or any other similar payment other than as provided under
applicable law, except as expressly provided in this Agreement, (ii) accelerate
the time of payment or vesting, or increase the amount of, any compensation due
to any such employee or officer, or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
3.8 CONTRACTS. Schedule 3.8 sets forth a list of all legally binding
contracts, leases, agreements, purchase orders, obligations and undertakings,
whether verbal or written, material to the business or financial condition of
the Company and its subsidiaries, taken as a whole ("Contracts") (it being
understood that the following shall not be deemed to be material:
(i) any contract or agreement that involves an aggregate
commitment by the Company or any of its subsidiaries of not more
than $100,000;
(ii) any contract or agreement for the sale of goods in the
ordinary course of business that involves an aggregate commitment by
the Company or any of its subsidiaries of less than $250,000;
(iii) any contract or agreement terminable by the
Company by notice of not more than 60 days for a cost of
less than $100,000; or
(iv) executive compensation and bonus arrangements that will
terminate on or before the Effective Time.)
Each Contract is a valid and binding obligation of the Company or the subsidiary
of the Company that is a party to it and is in full force and effect and is
enforceable against the Company or
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such subsidiary, as the case may be, in accordance with its provisions. Except
as set forth on Schedule 3.8, neither the Company nor any of its subsidiaries
has assigned, mortgaged, pledged or otherwise encumbered its interest in any
Contract. Except as set forth on Schedule 3.8, neither the Company nor any of
its subsidiaries nor, to the best knowledge of the Company and its subsidiaries
any other party thereto, is in violation of, or in default under, any Contract,
nor has there occurred any event or condition which, with the passage of time or
giving of notice (or both) would constitute a violation of or default under any
Contract which could lead to termination of the Contract and/or damages in
excess of $100,000 plus the amounts reserved for or reflected on the Financial
Statements for the cost of completion for such Contract. No notice has been
received by the Company or any of its subsidiaries claiming any such default by
the Company or any of its subsidiaries, or indicating the desire or intention of
the other party thereto to amend rescind or terminate the Contract.
3.9 LITIGATION. Except as disclosed on Schedule 3.9, there are no
actions, suits, arbitrations, investigations or proceedings (adjudicatory,
rulemaking or otherwise) pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries (or any Company Plan), or any
property of the Company or any such subsidiary (including Intellectual Property
as defined in Section 3.10), in any court or before any arbitrator of any kind
or before or by any governmental entity or authority, except actions, suits,
arbitrations, investigations or proceedings which, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
3.10 INTELLECTUAL PROPERTY. All patents, trademarks and service marks
(registered or unregistered), and trade names, including pending applications
for any of the foregoing, that are owned, licensed or used by the Company or any
of its subsidiaries in the United States or abroad, are listed on Schedule 3.10
(the "Intellectual Property"; U.S. patents, U.S. trademarks and U.S.
servicemarks (registered or unregistered) and U.S. trade names, including
pending applications for any of the foregoing included in Intellectual Property
are "Domestic Intellectual Property." Intellectual Property other than Domestic
Intellectual Property is "Foreign Intellectual Property."
Except as disclosed on Schedule 3.10, the Company is the sole
and exclusive owner of all right, title and interest in and to the Domestic
Intellectual Property free and clear of all liens, claims, charges, rights of
use, encumbrances, and restrictions whatsoever and to the best of its knowledge
the Company is the sole and exclusive owner of all right, title and interest in
and to the Foreign Intellectual Property free and clear of all liens, claims,
charges, rights of use, encumbrances, and restrictions whatsoever (in all cases
without payment to any other person or entity, except as set forth in the Sales
Contracts in the ordinary course of business, and except for
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maintenance fees payable to governmental entities in the ordinary
course of business).
Except as disclosed on Schedule 3.10, to the best of the
Company's knowledge, the business of the Company, or any of its subsidiaries, as
conducted prior to the Closing, and the consummation of the transactions
contemplated by this agreement was not, is not, and will not be in contravention
of any patent, trademark, service mark, trade name, copyright, or other
proprietary right of any third party.
Except as disclosed on Schedule 3.10, to the best of the
Company's knowledge, the Intellectual Property rights are not infringed by any
person or other entity.
Except as provided in the sales Contracts in the ordinary
course of business and as disclosed on Schedule 3.10, neither the Company nor
any of its subsidiaries has indemnified any person or other entity with respect
to any claim by any third party of patent, trademark, or copyright infringement
arising from the use of equipment, materials, or products or processes produced,
licensed or sold by the Company.
To the best of the Company's knowledge, no product, process,
method or operation presently sold, engaged in or employed by the Company or any
of its subsidiaries infringes upon any rights owned by any other person, firm,
corporation or other legal entity.
3.11 BROKERS. No broker, finder or other investment banker (other than
CIBC Wood Gundy Securities Corp. ("CIBC") and Salomon Brothers) is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of the Company. The advisory fees due to CIBC
and Salomon Brothers in connection with the Merger and legal fees due to Kaye,
Scholer, Fierman, Hays & Handler, LLP in connection with the Merger, as well as
all other fees and expenses incurred by the Company in connection with the
Merger shall be paid at or prior to the Closing, and such payment shall not
diminish the assets of the Company. Fees and expenses due to CIBC in connection
with the financing arrangements for the transactions contemplated by this
agreement shall be paid by Parent.
3.12 ENVIRONMENTAL MATTERS. For purposes of this section
the following definitions shall apply:
"Environmental Laws" shall mean all applicable federal, state, foreign,
and local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent order, judgment, decree, injunction, or
agreement with any Governmental Authority, relating to: the protection of human
health; the protection, preservation, or restoration of the environment
(including, without limitation, ambient air, surface
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water, ground water, land surface, or subsurface strata); and the exposure to,
or the emission, discharge, generation, use, manufacture, storage, treatment,
processing, handling, labeling, production, transportation, distribution,
release or threatened release into the environment, or disposal of Hazardous
Substances, as herein defined. The term Environmental Laws includes, without
limitation, the federal statutes the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Occupational Health and Safety Acts, each as
amended, and the regulations promulgated under them, and their state and local
counterparts.
"Governmental Authority" shall mean any federal, state, local, agency;
or any department, commission, court, judiciary, board, bureau, or other
instrumentality.
"Hazardous Substances" shall mean any material listed, defined,
designated or classified or which could be construed to be, by type and/or
quantity as hazardous or toxic or injurious to public health under any
applicable Environmental Laws.
"Property" means the Real Property and all structures, fixtures, and
other assets that could be contaminated thereon.
"Real Property" means the land owned, leased, or occupied by
the Company or any of its subsidiaries.
Except as disclosed in Schedule 3.12 hereto:
- -------------------------------------------
(a) The Company and each of its subsidiary's operation and use of its
Property are in compliance with all applicable Environmental Laws except to the
extent noncompliance would not have a Material Adverse Effect;
(b) The Company and each of its subsidiaries have obtained all
environmental, health and safety permits necessary for the operation of the
business of the Company and its subsidiaries as presently conducted, and all
such permits are in full force and effect and the Company and each of its
subsidiaries is in compliance in all material respects with the terms and
conditions of each such permit except for such permits the lack of which or
noncompliance with the terms and conditions of which would not have a Material
Adverse Effect;
(c) Neither the Company nor any of its subsidiaries has received any
notice of any material violation of any Environmental Laws that has not been
resolved without prospective effect and there are no civil, criminal or
administrative actions, suits, hearings, proceedings, written notices of
violation, claims or demands pending, with respect to any material violation,
alleged or proven, of Environmental Laws by the Company or any such subsidiary;
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(d) Neither the Company nor any of its subsidiaries are aware of any
potential claims, damages, liabilities or costs associated with the condition of
the Property including, without limitation, air, soil, and groundwater
conditions that would have a Material Adverse Effect.
(e) Neither the Company nor any of its subsidiaries has been involved
in any activity in, upon, about, or under the Property in connection with the
generation, use, handling, treatment, removal, storage, clean up, transport, or
disposal of any Hazardous Substances which (i) has resulted in a release or
threat or release of Hazardous Substances in material violation of any
Environmental Law or (ii) has given or may give rise to any claims, losses,
damages, liabilities, penalties, expenses, demands, fines or cleanup or
monitoring cost which would have a Material Adverse Effect;
(f) All Hazardous Substances which have been removed from the Property,
have been removed, stored, cleaned-up, transported, and disposed of in
compliance with all applicable Environmental Laws. Neither the Company nor any
of its subsidiaries have been notified in writing that they are potentially
liable, and have not received any written requests for information or other
correspondence concerning the Real Property or off-site properties or facilities
and, to the Company's knowledge, neither the Company nor its subsidiaries are
considered potentially liable under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or any equivalent state law which
liabilities or potential liabilities would have a Material Adverse Effect.
(g) To the best knowledge of the Company, there are no areas in, upon,
or under the Property which are required to be permitted as treatment, storage,
or disposal facilities under the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ.; and
(h) To the best knowledge of the Company, there are no underground
storage tanks (as the term is defined in 40 CFR ss. 280.12) in, or under, any of
the Real Property.
3.13 PERCENTAGE COMPLETION OF ACCOUNTING; ACCOUNTS RECEIVABLE;
INVENTORIES. The Company utilizes the percentage of completion method of
accounting. The methodology used by the Company in estimating total contract
costs and profits, including the nature of judgments and estimations, at March
31, 1997 is consistent with the methodology utilized at June 30, 1995 and June
30, 1996. As such, the Company believes that contract gross profit through March
31, 1997 has been recorded on a basis consistent with contract gross profit
recognized in the periods ended June 30, 1995 and June 30, 1996. The Company has
no knowledge of any factors which would require material adjustment to the
estimated profit on uncompleted contracts at March 31, 1997.
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All of the accounts receivable of the Company and its subsidiaries as
of March 31, 1997 are set forth in Schedule 3.13.
The accounts receivable reflected on the Interim Financials, net of (i)
estimated costs of materials and services supplied by customers and (ii)
contract adjustments in the ordinary course of business, will be collectible as
billed in accordance with the terms of the underlying contracts.
All of the inventories of the Company and its subsidiaries as reflected
in the Financial Statements (the "Inventories") and each of its subsidiaries
consist of a quality and quantity usable and saleable in the ordinary course of
business, except for items of obsolete materials and materials of below-standard
quality, all of which have been written off or written down to net realizable
value.
3.14 BACKLOG. All unfilled orders to purchase goods of the Company and
its subsidiaries at a purchase price in excess of $100,000 are firm and binding
commitments of the respective purchasers (assuming that such purchaser has
properly authorized by all requisite corporate action and has properly executed
and delivered such purchase order, which, to the best knowledge of the Company,
is the case) to purchase the goods indicated. Set forth on Schedule 3.14 are the
amounts of OEM architectural, OEM automotive and aftermarket backlog on a
percent completion basis at June 30, 1996, June 30, 1995 and March 31, 1997.
3.15 CUSTOMERS AND SUPPLIERS. Set forth on Schedule 3.15(a) is a list
of all customers of the Company, transactions with any of whom represented more
than 5% of the Company's revenue in any of the preceding three fiscal years
("Customers"). Set forth on Schedule 3.15(b) is a list of all suppliers of raw
material or equipment to the Company who, in the preceding year, were paid more
than $250,000 ("Suppliers"). The Company's relationship with each of the
Customers and Suppliers is generally good and the Company knows of no plans by
any Customer or Supplier to terminate or alter its relationship with the Company
in a manner materially adverse to the Company.
3.16 PRODUCT WARRANTIES. Schedule 3.16 sets forth all losses and
expenses incurred by reason of liabilities arising under any warranties during
each of the three years ended June 30, 1994, 1995 and 1996 and the nine month
period ended March 31, 1997. There has been no material adverse change in that
experience since March 31, 1997.
3.17 TITLE TO ASSETS; LIENS. Except as disclosed in Schedule 3.17, the
Company and its subsidiaries have good and marketable title, insurable and
indefeasible fee simple title in the case of owned Real Property, to all of
their respective property, equipment and other assets, and such assets are free
and clear of any mortgages, liens, security interests, charges, encumbrances or
title defects of any nature whatsoever other than Permitted Liens (as
hereinafter defined). Schedule 3.17(a)
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contains a complete and accurate legal description of each parcel of real
property owned by each of the Company and its subsidiaries in the conduct of its
business. Schedule 3.17(b) contains a complete and accurate description of all
material tangible personal property owned or used by the Company or any
subsidiary in the conduct of its business. There are no pending or, to the best
knowledge of the Company, threatened zoning, condemnation or eminent domain
proceedings, building, utility or other moratoria, or injunctions or court
orders which would materially effect such continued operation. The current use
of the owned Real Property is permissible and in material compliance with
applicable zoning ordinances.
Permitted Liens shall mean: (A) statutory liens; (B) rights of
way disclosed on an ALTA survey of the property; and (C) items listed on
Schedule 3.17(a).
3.18 LABOR RELATIONS. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement covering any of their
respective employees and no such agreement is currently contemplated by the
Company or any of its subsidiaries. There is no unfair labor practice complaint
against the Company or any of its subsidiaries pending before the National Labor
Relations Board and there is no labor strike, dispute, slowdown or stoppage, or
any union-organizing campaign, actually pending or, to the best knowledge of the
Company, threatened against or involving the Company or any of its subsidiaries.
3.19 INSURANCE. Schedule 3.19 lists all material insurance policies of
the Company and its subsidiaries with respect to their respective businesses
and/or assets. All such insurance policies are in full force and effect and all
premiums due thereon have been paid. No written notice of termination or premium
increase has been received under any such insurance policy.
3.20 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
Schedule 3.20 lists all intercompany agreements or arrangements of any kind
between or among the Company and/or any of its subsidiaries, on the one hand,
and the Company's officers, directors or stockholders owning more than 5% of the
Shares of the Company, on the other hand.
Except as set forth in Schedule 3.20, none of the Company's officers
has any direct or indirect interest either by way of stock ownership or
otherwise, in any firm, corporation, association or business enterprise which
competes with the Company or any of its subsidiaries; is a supplier, client,
customer, agent or broker of the Company or any of its subsidiaries; or is
otherwise engaged in the business engaged in by the Company and such
subsidiaries. Except as set forth on Schedule 3.20, none of the Company's
directors has any direct or indirect interest either by way of stock ownership
or otherwise, in any firm, corporation, association or business enterprise
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which competes with the Company or any of its subsidiaries. Ownership of capital
stock listed on a national securities exchange or traded in the over-the-counter
market of any corporation shall not be deemed a violation of this Section,
provided the owner thereof and his affiliates do not own more than an aggregate
of 5% of the capital stock of such corporation.
3.21 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 3.21, neither the Company nor any of its subsidiaries has any
liabilities or obligations (whether choate or inchoate, absolute or contingent,
or otherwise) except (i) liabilities which are reflected and reserved against or
disclosed on the Financial Statements, (ii) liabilities incurred in the ordinary
course of business and consistent with past practice since June 30, 1996 and
which have not resulted in, and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect; (iii) liabilities
and obligations under any matter listed on a schedule to this agreement and
contracts not required to be listed on Schedule 3.8.
3.22 OFFICERS AND DIRECTORS. Schedule 3.22 sets forth the
names of all directors and officers of the Company and each of
its subsidiaries.
3.23 BANKRUPTCY MATTERS. Predecessors to the Company, Glasstech
Industries, Inc. and Glasstech, Inc., filed for bankruptcy protection under
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on May
24 and May 25, 1993, respectively, in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). The Company is the substantively
consolidated, reorganized debtor pursuant to the plan of reorganization and
confirmation order of the Bankruptcy Court. The Company has fully performed in
all material respects all conditions precedent to confirmation and effectiveness
of the plan of reorganization approved by the Bankruptcy court on or about
December 6, 1994, with the technical amendments thereto (the "Plan of
Reorganization") has become effective. Except as set forth in Schedule 3.23, the
Company has satisfied in all material respects all terms of the Plan of
Reorganization, including, but not limited to, payment in full of claims in
Classes 1 through 4, inclusive, payment to claims in Classes 5 through 8,
inclusive, as specified in the Plan of Reorganization, and treatment of Classes
9 and 10, inclusive, as specified in the Plan of Reorganization. Except as set
forth in Schedule 3.23, the Company has assumed obligations for health and
welfare plans, pension plans, and executory contracts as specified in the Plan
or Reorganization (the "Assumed Obligations") and is current and no default
exists with respect to all such Assumed Obligations and payment of such Assumed
Obligations are reflected on the Financial Statements. The Company represents
that no further orders to approve this Agreement and Plan of Merger are required
to be obtained from the Bankruptcy Court. The Company is current on its payments
to Senior Noteholders as defined in the Plan of Reorganization as
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Class 5 creditors and there is presently no default in the terms of the notes to
the Senior Noteholders and the balance outstanding, including both principal and
interest, is set forth in Schedule 3.23.
3.24 DISCLOSURE. None of this Agreement or any certificate or other
document delivered by the Company contains any untrue statement of a material
fact or omits any statement of a material fact necessary to make any statement
contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB. The
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
4.1 AUTHORITY; NO CONFLICTS. Each of the Parent and Sub is a
corporation duly organized, validly existing and in good standing under the law
of its jurisdiction of incorporation. All the issued and outstanding capital
stock of the Sub is owned of record directly by the Parent. This agreement and
the transactions contemplated hereby have been duly authorized by the board of
directors of each of the Parent and Sub and by the Parent, as the sole
stockholder of the Sub, and, assuming this agreement constitutes a valid and
binding obligation of the Company, this agreement constitutes a valid and
binding obligation of each of the Parent and Sub, enforceable against each of
the Parent and Sub in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors rights generally and subject to general principles of equity (whether
considered in a proceeding in equity or at law). The execution and delivery of
this agreement does not, and the consummation of the transactions contemplated
by this agreement will not, (a) conflict with the Parent's or the Sub's
certificate of incorporation or by-laws; (b) result in any violation of or
default (with or without notice or lapse of time or both) under, any material
note, bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which the Parent or Sub is a party or
(c) violate any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Parent, the Sub or any of their property or assets,
other than, in the case of clauses (b) and (c) above, any such conflicts,
violations and defaults that, in the aggregate, would not have a Material
Adverse Effect. No material consent, approval, order or authorization of or
filing with or notification to, any court or governmental or regulatory
authority is required to be made by or with respect to the Parent or Sub in
connection with the execution and delivery of this agreement or the consummation
by the Parent and Sub of the transactions contemplated by this agreement, except
(A) in as may be required to comply with the HSR Act and (B) the filing of a
certificate of merger pursuant to the DGCL.
4.2 INTERIM OPERATIONS OF PARENT AND SUB. Each of the
Parent and the Sub was formed solely for the purpose of engaging
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in the transactions contemplated by this agreement, and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated by this agreement.
4.3 BROKERS. No broker, finder or other investment banker (other than
CIBC in connection with the financing of the transaction contemplated hereby) is
entitled to any brokerage, finder's or other similar fee or commission in
connection with this agreement or the transactions contemplated by this
agreement based upon agreements made by or on behalf of the Parent or Sub.
4.4 FINANCING. The Parent and the Sub shall use all reasonable efforts
to obtain financing for the Merger through a sale of $70,000,000 of senior notes
of Sub in a Rule 144A offering. Key Equity Capital and certain members of the
management of the Company have agreed, subject to the availability of such
financing, to provide an aggregate equity investment in the Parent equal to
$15,000,000.
5. COVENANTS
5.1 CAPITALIZATION. The Company shall not, and shall not allow any of
its subsidiaries to, on or before the Effective Time, issue any shares of
capital stock (other than pursuant to the exercise or conversion of options or
warrants outstanding on the date of this agreement) or options, warrants, rights
or other instruments to acquire capital stock of the company or any of its
subsidiaries, make any material changes in its capitalization, declare dividends
or enter into any transaction not in the ordinary course of business without the
prior written consent of the Parent.
5.2 ACCESS TO INFORMATION
(a) Subject to any limitations imposed by applicable law,
between the date of this Agreement and the Effective Time, the Company shall (i)
give the Parent and Sub and their authorized representatives all reasonable
access (during regular business hours upon reasonable notice) to all employees,
plants, properties, offices, warehouses and other facilities and to all books
and records (including, without limitation, tax returns) documents, and subject
to the Company's reasonable approval and in a manner arranged by the Company,
customers, employees and lenders of the Company and its subsidiaries and cause
the Company's and its subsidiaries' independent accountants to provide access to
their work papers and such other information as the Parent or Sub may reasonably
request, (ii) permit the Parent and Sub to make such inspections as they may
reasonably require and (iii) cause its officers and those of its subsidiaries to
meet with and furnish the Parent and Sub with such financial and operating data
and other information with respect to the business, properties and personnel of
the Company and its subsidiaries as the Parent or Sub may from time to time
reasonably request. The rights of Parent under this Section
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5.2(a) shall not be exercised in such a manner as to interfere unreasonably with
the conduct of the business of the Company.
(b) Prior to the Effective Time, the Parent and Sub shall keep
confidential all information obtained pursuant to this section 5.2, in
accordance with the Confidentiality Agreement dated March 18, 1997 between Key
Equity Capital and the Company (the "Confidentiality Agreement") to the same
extent as if the Parent and the Sub were the parties to the Confidentiality
Agreement; provided, however, that Key Equity Capital and Parent may, in
connection with obtaining financing for the transactions contemplated by this
Agreement and with the prior approval of the Company, which shall not be
unreasonably withheld or delayed, disclose such information to lenders and other
entities as is reasonably required to obtain such financing.
5.3 REASONABLE EFFORTS. Each party shall use its reasonable best
efforts to cause the fulfillment at or prior to the Closing of all the
conditions to such other party's obligation to consummate the Merger.
5.4 ANTITRUST NOTIFICATION. Each of the Company and Parent shall, as
promptly as practicable, but in no event later than ten business days following
the execution and delivery of this agreement, determine if the Company and
Parent are required to file with the United States Federal Trade Commission (the
"FTC") and the United States Department of Justice (the "DOJ") the notification
and report form required for the transactions contemplated by this agreement and
if such filing is required to make such filing and thereafter shall promptly
file any supplemental information requested in connection with the filing
pursuant to the HSR Act. Any such notification and report form and supplemental
information shall be in substantial compliance with the requirements of the HSR
Act. Each of the parties shall furnish the other(s) such necessary information
and reasonable assistance as may reasonably be requested in connection with a
party's preparation of any filing or submission under the HSR Act. The parties
shall keep each other apprised of the status of any communications with, and
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request. Each of the Company and
Parent shall use its reasonable best efforts to obtain any clearance required
under the HSR Act for the Merger at the earliest date practicable.
5.5 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to the Parent and Sub, and the Parent or Sub, as the case may be, shall
give prompt notice to the Company, of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which is likely to cause any
representation or warranty of that party in this agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (b) any
failure of that party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this agreement; PROVIDED,
HOWEVER, that the
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delivery of any notice pursuant to this Section 5.5 shall not limit or otherwise
affect the remedies available under this agreement to any of the parties
receiving such notice.
5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this agreement and the
transactions contemplated by this agreement shall be paid by the party incurring
the cost or expense, subject to Sections 3.11 and 4.3.
5.7 EMPLOYEE BENEFITS. The Parent and Sub agree that, for a period of
at least two years following the Effective Time, the Surviving Corporation shall
maintain benefit plans or arrangements for the employees of the Company and its
subsidiaries with terms that, in the aggregate, are substantially equivalent or
better than those of the Company Plans covering such employees immediately
preceding the Effective Time, to the extent permitted under laws and regulations
in force from time to time.
5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, the Parent and the
Surviving Corporation shall indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior
the Effective Time, an officer, director or employee of the Company or any of
its subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any subsidiary of the Company,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time (the "Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to this agreement, the transactions contemplated hereby or the
financing thereof, in each case to the full extent the Company is permitted
under Delaware law and would have been permitted under its Certificate of
Incorporation and By-laws as they existed prior to the Effective Time to
indemnify such person (and the Surviving Corporation shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
undertaking required by Section 145(e) of the DGCL), provided that neither the
Parent not the Surviving Corporation shall be liable for any settlement of any
claim effected without its written consent, which consent, however, shall not be
unreasonably withheld. Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising
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before or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time must be reasonably satisfactory
to the Surviving Corporation, (ii) after the Effective Time, the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, and (iii)
after the Effective Time, the Parent and the Surviving Corporation shall use all
reasonable efforts to assist in the vigorous defense of any such matter. Any
Indemnified Party wishing to claim indemnification under this Section 5.8 shall
within 20 days of becoming aware of such claim, action, suit, proceeding or
investigation, notify the Parent and the Surviving Corporation and shall deliver
to the Surviving Corporation the undertaking, if any, required by Section 145(e)
of the DGCL; provided, however, that the rights of the Indemnified Party to be
indemnified hereunder shall not be adversely affected by its failure to give
notice pursuant to the foregoing unless and only to the extent that the Parent
and the Surviving Corporation are prejudiced thereby. The Parent and the
Surviving Corporation shall be liable for the fees and expenses hereunder with
respect to only one law firm, in addition to local counsel in each applicable
jurisdiction, to represent the Indemnified Parties as a group with respect to
each such matter unless there is, under applicable standards of professional
conduct, a conflict between the positions of any two or more Indemnified Parties
that would preclude or render inadvisable joint or multiple representation of
such parties.
(b) For a period of six years after the Effective Time, the
Parent shall cause the Surviving Corporation to maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to the Indemnified Parties and
underwritten by an insurance carrier of at least as favorable a financial
rating) with respect to claims arising from facts or events which occurred
before the Effective Time.
(c) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 5.8.
(d) The provisions of this Section 5.8: (i) are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his representatives; and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have contract or otherwise.
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5.9 CONDUCT OF THE BUSINESS OF THE COMPANY. During the period from the
date of this agreement to the Effective Time, except as otherwise agreed to in
writing by the Company and Parent: (i) the Company will, and will cause each of
its subsidiaries to, conduct its business only in, and the Company will not
take, and will cause each of its subsidiaries not to take, any material action
except in, the ordinary course consistent with past practice, (ii) the Company
will not, and the Company will cause each of its subsidiaries not to, enter into
any material transaction other than in the ordinary course of business
consistent with past practice, and (iii) to the extent consistent with the
foregoing, with no less diligence and effort than would be applied in the
absence of this Agreement, the Company will, and will cause each of its
subsidiaries to, preserve intact its current business organizations and
reputation, use its reasonable best efforts to preserve its relationships with
customers, suppliers and others having business dealings with it with the
objective that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time, and comply in all material respects with all laws, rules,
regulations and orders of all governmental entities or regulatory authorities
applicable to it. Without limiting the generality of the foregoing and except as
otherwise expressly permitted in this Agreement, prior to the Effective Time,
the Company will not and will not permit any of its Subsidiaries to, without the
prior written consent of the Parent:
(a) (i) increase the compensation of any of its directors,
officers or employees, except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company and its subsidiaries taken as a
whole, (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of the
Company Plans, to any director, officer or employee, whether past or
present, (iii) enter into any new or amend any existing employment
agreement with any director, officer or employee, (iv) enter into any
new or amend any existing severance agreement with any director,
officer or employee, (v) except as may be required to comply with
applicable law, become obligated under any new pension plan or
arrangement, welfare plan or arrangement, multiemployer plan or
arrangement, employee benefit plan or arrangement, severance plan or
arrangement, benefit plan or arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, or amend
any such plan or arrangement in existence on the date hereof;
(b) enter into any contract or amend any existing contract, or
engage in any new transaction outside the ordinary course of business
consistent with past practice or not on an arm's-length basis, with any
affiliate of the Company or any of its subsidiaries;
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(c) except to the extent required by applicable law, (i)
permit any material change in (A) accounting, financial reporting,
inventory, allowance or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other reserve for accounting,
financial reporting or tax purposes or (ii) make any material tax
election or settle or compromise any material income tax liability with
any governmental entity or regulatory authority;
(d) take any action that would cause any representations set
forth in Article 3 not to be true in all material respects from and
after the date hereof until the Effective Time;
(e) fail to maintain in full force the insurance
policies in effect on the date hereof or change any self-
insurance program in effect in any material respect;
(f) do any act or omit to do any act, or permit any act or
omission to act, which will cause a breach of any contract or
commitment of the Company or any of its subsidiaries, except to the
extent that such breach would not have a Material Adverse Effect.
5.10 MEETING OF COMPANY SHAREHOLDERS.
The Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
meeting of its stockholders or solicit shareholder consents as promptly as
practicable to consider and vote upon the approval of the Merger and the other
transactions contemplated hereby (the "Company's Stockholders' Approval") and
(ii) the Board of Directors of the Company shall recommend and declare advisable
such approval and shall not modify or revoke such recommendation and declaration
and the Company shall take all lawful action to solicit, and use all reasonable
efforts to obtain, such approval. Each of the Parent and the Sub agrees to
cooperate in all reasonable respects with the Company in the Company's efforts
to obtain the Company Stockholders' Approval.
5.11 NO NEGOTIATIONS. From the date hereof until the Effective Time or
the termination of this agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly, through any officer, director, agent,
employee, representative or otherwise, make, solicit, initiate or knowingly
encourage the submission of proposals or offers from any person or entity
(including any of its officers or employees) relating to any recapitalization,
merger, consolidation or other business combination involving the Company or any
of its subsidiaries, any sale of all or a substantial portion of the assets of
the Company or any of its subsidiaries, or the sale of any material equity
interest in the Company or any of its subsidiaries (any of the foregoing, a
"Competing Transaction"). During the term hereof, neither the Company nor any of
its subsidiaries shall, directly
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or indirectly, participate in any negotiations regarding, furnish to any other
person or entity any information with respect to, or otherwise cooperate, assist
or participate in any effort or attempt by any third party to propose or effect
any Competing Transaction. The Company shall immediately notify the Parent of
any proposal relating to a possible Competing Transaction and shall, if legally
permissible, immediately deliver to the Parent any information furnished to or
by any such third party.
5.12 FINANCIAL STATEMENTS. The Company covenants and agrees that it
will deliver to the Parent, within 30 days after the end of each month from the
date hereof until the Closing, unaudited consolidated statements of operations
and cash flows for the business of the Company and each of its subsidiaries for
the month then ended, along with a consolidated balance sheet of the business of
the Company and each of its subsidiaries as of the end of such month. All
financial statements furnished pursuant to this Section shall fairly present the
financial position, results of operations, cash flows and shareholders' equity
as of the dates and for the periods covered by such statements. To the best
knowledge of the Company, such financial statements shall be true and complete
in all material respects.
5.13 NON-CONTRACT INVENTORY. As the inventory set forth on Schedule
5.13 (the "Non-Contract Inventory") is sold, the Company shall pay to the
shareholders set forth on a schedule to be delivered prior to the Closing, at
the addresses and in the percentages specified on such schedule (the
"Shareholders") an amount equal to 50% of the Company's gross profit resulting
from such sales, calculated in a manner consistent with that used to prepare the
Financial Statements. Such payments shall be made within 45 days following the
end of each fiscal quarter in which such sales is recognized and any accounts
receivable attributed to such gross profit are collected, and shall be
accompanied by a schedule setting forth in reasonable detail the calculation of
such gross profit (the "Gross Profit Schedule"). A copy of the Gross Profit
Schedule shall concurrently be delivered to the Shareholders' Representative. If
within 30 days following delivery of the Gross Profit Schedule, the
Shareholders' Representative has not given the Parent notice of its objection to
the Gross Profit Schedule (such notice must contain a reasonably detailed
statement of the basis of such objection), then the Gross Profit Schedule shall
be considered accepted and binding on all parties. If the Shareholders'
Representative gives such notice, the issues in dispute will be submitted to the
Accountants for resolution in accordance with the procedures set forth in the
third paragraph of Section 1.9.
5.14. NO DISTRIBUTIONS. Between the date of this Agreement and the
Closing, the Company shall make no distributions, whether by way of dividends
or otherwise, to any holder of Shares, Options or warrants.
5.15. ASSISTANCE IN FINANCING. Parent and Sub acknowledge that
Sub currently intends that payment of the Merger
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Consideration will be financed by an offering of securities and the arranging of
senior bank debt financing. The Company will provide customary assistance in
connection with Parent and Sub's efforts to raise such financing, including,
without limitation, making senior management reasonably available for meetings
with prospective lenders and investors and cooperating in the preparation of
offering documents and necessary financial and business information to enable
documents, including the financial statements of the Company, to comply with the
rules and regulations of the Securities and Exchange Commission, it being
recognized that (a) neither the Company or any of the stockholders of the
Company will have any responsibility with respect to such compliance, (b) it is
contemplated that the indemnification described at Section 5.8 will apply to
such efforts, and (c) Parent and Sub will pay any travel expenses incurred by
the Company's executive officers in connection therewith.
6. CONDITIONS TO CONSUMMATION OF THE MERGER.
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE
THE MERGER. The obligation of each party to effect the Merger is
subject to the satisfaction or waiver, prior to the Closing, of
the following conditions:
(a) all necessary waiting periods under the HSR Act
applicable to the Merger shall have expired or been terminated;
and
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority against the Parent, the Sub or the Company and
be in effect that prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use all reasonable efforts to
have such prohibition or restriction lifted or vacated).
6.2 CONDITIONS TO THE PARENT'S AND SUB'S OBLIGATIONS TO EFFECT THE
MERGER. The obligations of the Parent and Sub to effect the Merger shall be
subject to the satisfaction or waiver, prior to the Closing, of the following
conditions:
(a) since the date of this agreement, there shall not have
been occurred any material adverse change in the business or financial condition
of the Company and its subsidiaries, other than changes relating to the
Company's industry or the economy in general and not specifically relating to
the Company and its subsidiaries. Each of the Parent and Sub acknowledges that
there may be disruptions to the Company's business as a result of the
announcement of the Merger and changes attributable solely thereto shall not
constitute a Material Adverse Change. Except as scheduled the Company knows of
no disruptions or changes which will be attributed to the announcement of the
Merger;
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(b) the representations and warranties of the Company in this
agreement shall be true and correct in all material respects as of the Closing
as if made again on and as of the Closing, and all the covenants in this
agreement to be complied with or performed by the Company or waived by Parent or
Sub at or before the Closing shall have been complied with and performed; and
(c) the Parent shall have received an opinion of Kaye,
Scholer, Fierman, Hays & Handler, LLP addressed to the Parent and Sub and dated
the Closing, reasonably satisfactory in form and substance to counsel for the
Parent and Sub, covering the first and third sentences of section 3.1, clause
(a) of the fourth sentence of section 3.1 as to the Company only, the first
sentence of section 3.2(a) and, to the best of the knowledge of such counsel
based solely on a certificate of an officer of the Company as to the existence
of the matters to be opined and the absence of any contrary knowledge on the
part of attorneys performing work for the Company, clauses (b) and (c) of the
fourth sentence of section 3.1, the second sentence of section 3.2(a) and the
first sentence and last two sentences of section 3.2(b);
(d) the Company shall not have received notice from the holder
or holders of more than 10% of the Shares that such holder or holders have
exercised or intend to exercise its or their appraisal rights under the DGCL,
and the Company shall have obtained approval of the Merger from the requisite
holders of Shares in accordance with applicable law and the Certificate of
Incorporation and Bylaws of the Company.
(e) the Company shall have furnished the Parent with a
certificate dated the Closing signed on its behalf by its Chairman, President or
any Vice President to the effect that the conditions set forth in paragraphs
(a), (b) and (d) above have been satisfied.
(f) the Company and each of the individuals listed on the
Schedule 6.2(f) shall have entered into employment and/or noncompetition
agreements reasonably satisfactory in form and substance to the Parent.
(g) the Company shall have delivered to the Parent its balance
sheet as at March 31, 1997, and the related statements of operations and
shareholders' equity and cash flows for the nine month period then ended.
(h) the Parent shall be satisfied with the results of its
legal and business due diligence review of the Company, Stir-Melter and [UK
Sub] and their respective properties and assets including, without limitation, a
review of the Company's financial results for fiscal 1997 year to date.
(i) the Company shall have delivered to Parent a
certificate of the Secretary of State of the State of Delaware,
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as of a recent date, certifying as to the good standing of the Company in the
State of Delaware.
(j) the Company shall have paid all incentive compensation
costs attributable to the period prior to the Closing;
(k) all third party debt of the Company and any accrued
interest and any pre-payment penalties thereon, and any capitalized lease
obligations of the Company shall have been paid;
(l) all required authorizations, consents or approvals
of any third party, the failure to obtain which could have a
Material Adverse Effect;
(m) the Parent shall have obtained debt and/or equity
financing to acquire the Shares on terms and conditions
reasonably satisfactory to it; and
(n) the Company shall have delivered to Parent an owners
policy of title insurance on ALTA Form B-1970 (amended) from Chicago Title
Insurance Company (the "Title Company") in an amount acceptable to Parent (with
each of the Title Company's standard printed exceptions deleted) insuring
indefeasible fee simple title to the Real Property owned by the Company to be
good in the Company from and after the Effective Time, subject only to: (i)
zoning ordinances and regulations which do not prohibit or restrict the present
use of such Real Property; (ii) real estate taxes and assessments both general
and special which are a lien but not yet due and payable at the Effective Time;
and (iii) mortgages, liens, easements, covenants, conditions, reservations and
restrictions of record, if any, as have been approved in writing by Parent prior
to Closing. With regard to such title policy, the Company shall bear the cost of
the title commitment and the cost of the issuance of a title guaranty in the
amount of $2,500,000, and Parent shall bear the difference between the cost of
the title guaranty and the cost of the title policy.
(p) Holders of a majority of the outstanding Shares
shall have voted for the adoption of this agreement.
6.3 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of the Company to effect the Merger is subject to the satisfaction
or waiver, prior to the Closing, of the following conditions:
(a) the representations and warranties of the Parent and Sub
in this agreement shall be true and correct in all material respects as of the
Closing as if made again on and as of the Closing, and all the covenants in this
agreement to be complied with or performed by the Parent and Sub at or before
the Closing shall have been complied with and performed;
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(b) the Company shall have received an opinion of Baker &
Hostetler LLP, counsel for the Parent and Sub, addressed to the Company and
dated the Closing, reasonably satisfactory in form and substance to counsel for
the Company, covering the first three sentences and clause (a) of the fourth
sentence of section 4.1 and, to the best of the knowledge of such counsel,
clauses (b) and (c) of the fourth sentence of Section 4.1; and
(c) the holders of a majority of the authorized and
outstanding Shares shall have voted for the adoption of this agreement.
7. TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This agreement may be terminated and the Merger
abandoned at any time, notwithstanding approval of the Merger by the
stockholders of the Company or the Sub, but prior to the Effective Time:
(a) by mutual written action of the respective boards
of directors of the Company and Parent;
(b) by the Parent or Company, if such terminating party is not
in material breach of its obligations under this agreement, if the Merger has
not been consummated on or after September 30, 1997;
(c) by the Parent or Company, if any court of competent
jurisdiction shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger; PROVIDED, HOWEVER, that the party seeking to
terminate this agreement shall have used its reasonable best efforts to remove
or lift such order, decree or ruling;
(d) by the Parent, if events occur that render impossible
compliance with one or more of the conditions set forth in section 6.1 or 6.2
that are not waived by the Parent or Sub, or by the Company, if events occur
that render impossible one or more of the conditions set forth in sections 6.1
or 6.3 that are not waived by the Company; or
(e) by either the Parent or the Company if this agreement
shall fail to receive the requisite vote for approval and adoption by the
shareholders of the Company.
7.2 EFFECT OF TERMINATION. If this agreement is terminated and the
Merger abandoned pursuant to section 7.1, this agreement, except for section
5.2(b) and 5.6 and (to the extent applicable to the foregoing sections) section
8, shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders. Nothing in this
section 7.2 shall relieve any party of liability for breach of this agreement.
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7.3 AMENDMENT. To the extent permitted by applicable law, this
agreement may be amended by action by or on behalf of the boards of directors of
the Company, the Parent and the Sub, at any time before or after adoption of
this Agreement by the stockholders of the Company, but no amendment shall be
made that decreases the amount or form of the Merger Consideration or adversely
affects the rights of the Company's stockholders under this Agreement, without
the approval of the stockholders of the Company. This Agreement may not be
amended, except by an instrument in writing signed on behalf of all the parties.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by or on behalf of the boards of
directors of the Company, the Parent and the Sub may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties in this agreement, (b) waive any inaccuracies in
the representations and warranties by any other party or in any document,
certificate or writing delivered pursuant to this agreement by any other party
or (c) waive compliance with any of the agreements or conditions in this
agreement. Any agreement by any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of that
party.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this agreement or in any certificate, document or
instrument delivered pursuant to this agreement shall survive the Closing
provided that, except as set forth below with respect to claims relating to tax
matters, there shall be no liability with respect to any representation or
warranty nor any rights to indemnification hereunder, except to the extent that
the Shareholders' Representative is given notice of a claim with respect thereto
within 18 months of the Effective Time specifying the factual basis for the
claim in reasonable detail, and provided further that the Shareholders'
aggregate liability with respect thereto shall be satisfied solely from to the
Indemnification Escrowed Funds and no shareholder shall have any personal
liability therefor. Any investigation by or on behalf of any party hereto shall
not constitute a waiver as to enforcement of any representation or warranty. Any
such claims relating to tax liabilities for a period (including any extensions
provided of such statutory period) prior to Closing, whether or not arising
prior to Closing, must be brought prior to the expiration of the statutory
period of limitations for such period, and Losses (as defined below) for such
claim shall include but not be limited to any tax paid, interest, legal costs,
penalties and the tax equivalent of any net operating losses utilized. Upon the
expiration of the final period during which claims may be brought, the parties
shall direct the Escrow Agent to pay to the Shareholders (as defined in the
Indemnification Escrow Agreement) the amounts remaining in the Indemnification
Escrow Fund.
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8.2 INDEMNIFICATION FROM INDEMNIFICATION ESCROWED FUNDS.
Notwithstanding the Closing and subject to the limitations set forth herein, the
Parent and the Surviving Corporation shall be entitled to be indemnified and
held harmless from the amount of the Indemnification Escrowed Funds from and
against, and pay or reimburse each such person for, any and all claims,
liabilities, obligations, losses, fines, costs, proceedings or damages (whether
absolute, accrued, conditional or otherwise, and whether or not resulting from
third party claims), including out-of-pocket expenses and reasonable attorneys'
and accountants' fees incurred in the investigation or defense of any of the
same or in asserting any of their respective rights hereunder (collectively,
"Losses") resulting from or arising out of:
(a) any breach or inaccuracy of any representation or warranty (or
the schedules relating thereto) or nonperformance of any covenant of the
Company; and
(b) any claim, liability or obligation arising with respect to or
relating to any holder of Shares' exercise of his, her or its appraisal rights
under Section 262 of the DGCL; provided, however, that the amount of
indemnification hereunder shall be limited to the difference between the price
per share for each outstanding Share held by such shareholder that such
shareholder would have received under this Agreement and the amount such
shareholder is entitled to as a result of such shareholder's exercise of his,
her or their appraisal rights under Section 262 of the DGCL.
8.3 LIMITATION ON INDEMNITY OBLIGATION. Notwithstanding anything in
this agreement to the contrary, indemnification sought under Article 8 shall be
satisfied solely from the Indemnification Escrowed Funds. The Parent and the
Surviving Corporation shall not be entitled to indemnification hereunder with
respect to an Indemnifiable Claim (as defined below) (or, if more than one
Indemnifiable Claim is asserted, with respect to all Indemnifiable Claims) until
the aggregate amount of Losses with respect to such Indemnifiable Claim or
Claims exceeds $10,000, in which event the indemnity provided for in this
Article 8 shall be with respect to the entire amount of Losses without regard to
the limitations set forth above, and further provided, that prior to termination
of the Indemnification Escrow, the Parent and the Surviving Corporation shall be
entitled to indemnification with respect to all Indemnifiable Claims, regardless
of the aggregate amount of such Claims.
8.4. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY CLAIMS.
(a) If the Parent determines to seek indemnification under
this Article with respect to Losses resulting from the assertion of liability by
third parties (an "Indemnifiable Claim"), it shall give notice to the
Shareholders' Representative as provided in Section 9.3, within 20 days of the
Parent becoming aware of any such Indemnifiable Claim or of facts upon which any
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such Indemnifiable Claim will be based; the notice shall set forth such
information with respect thereto as is then reasonably available to the Parent.
If the Parent so notifies the Shareholders' Representative thereof, the
Shareholders' Representative will be entitled, if the Shareholders'
Representative so elects by written notice delivered to the Parent within 20
days after receiving the Parent's notice, to assume the defense thereof with
counsel reasonably satisfactory to the Parent. Notwithstanding the foregoing (i)
the Parent shall also have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of the Parent;
and (ii) the rights of the Parent to be indemnified hereunder in respect of
Losses resulting from the assertion of liability by third parties shall not be
adversely affected by its failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, the Holders are materially
prejudiced thereby. With respect to any assertion of liability by a third party
that results in Losses, the parties hereto shall make available to each other
all relevant information in their possession material to any such assertion.
(b) In the event that the Shareholders' Representative, within
20 days after receipt of the aforesaid notice of Losses, fail to assume the
defense of the Parent against such Losses, the Parent shall have the right to
undertake the defense, compromise or settlement of such action on behalf of and
for the account and risk of the Indemnification Escrowed Funds.
(c) Notwithstanding anything in this Section to the contrary,
(i) if there is a reasonable probability that Losses may materially and
adversely affect the Parent or the Surviving Corporation, other than as a result
of money damages or other money payments, the Parent shall have the right, at
its own cost and expense, to defend, compromise or settle such Losses, provided
that the Shareholders' Representative shall not be bound by any such defense,
compromise or settlement made without the consent of the Shareholders'
Representative; and (ii) the Shareholders' Representative shall not, without the
Parent's written consent (which consent shall not be unreasonably withheld),
settle or compromise any Loss or consent to entry of any judgment in respect
thereof unless such settlement, compromise or consent includes as an
unconditional term thereof providing for the giving by the claimant or the
plaintiff to the Parent or the Company, as the case may be, and all affiliates
of the Parent and the Company a release from all liability in respect of such
Loss.
8.5. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD-PARTY
CLAIMS. In the event that the Parent asserts the existence of a Loss (but
excluding claims resulting from the assertion of liability by third parties), it
shall give written notice to the Shareholders' Representative specifying the
nature and amount of the claim asserted. If the Shareholders' Representative,
within 30 days after receiving the notice from
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the Parent, shall not give written notice to the Parent announcing its intent to
contest such assertion by the Parent, such assertion shall be deemed accepted,
and the amount of the Losses shall be paid to Parent out of the Indemnification
Escrowed Funds.
9. MISCELLANEOUS
9.1 SHAREHOLDERS' REPRESENTATIVE. (a) The Company hereby designates
Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders'
Representative"), as the representative of the shareholders of the Company. The
Shareholders' Representative shall have, among others, the following powers and
duties: (i) to take such actions and to incur such costs and expenses as the
Shareholders' Representative in its sole discretion deems necessary or advisable
to safeguard the interests of the shareholders in the [Escrow Accounts],
including, but not limited to, contesting any claim for Losses and commencing or
defending litigation and settling any such claim or litigation; (ii) to employ
accountants, attorneys and such other agents as the Shareholders' Representative
may deem advisable and to pay reasonable compensation for such services; (iii)
to maintain a register of the shareholders; and (iv) to take all actions which
the Shareholders' Representative deems necessary or advisable in order to carry
out the foregoing and the consummation and completion of the transactions
contemplated hereby.
(b) The Shareholders' Representative may resign at any time at
its sole and absolute discretion. The shareholders may, at any time, by a
majority vote (one vote for each Share held by a shareholder at the Effective
Time and assuming all Options outstanding at the Effective Time shall have been
exercised), remove, replace or appoint as necessary, the Shareholders'
Representative.
(c) The Shareholders' Representative shall be compensated for
its services on the basis of its customary fees and shall be reimbursed for
out-of-pocket expenses from the Shareholders' Representative's Escrow Fund). The
Shareholders' Representative shall direct the Paying Agent to pay expenses
incurred by it in performing its duties under this Section 9.1 out of the
Shareholders' Representative's Escrow Fund. Upon a determination by the
Shareholders' Representative that it will not incur any additional expenses, the
Shareholders' Representative shall direct the Paying Agent to pay any remaining
balance of the Shareholders' Representative's Fund proportionally to the
shareholders (other than to the holders of Dissenting Shares).
(d) The Shareholders' Representative shall not be liable to
any shareholder or by reason of any error of judgment or for any act done or
step taken or omitted by the Shareholders' Representative or for any mistake of
fact or law or anything which the Shareholders' Representative may do or refrain
from doing in connection herewith, unless caused by or arising out of
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willful misconduct. The Shareholders' Representative shall have full and
complete authorization and protection for any action taken or suffered by the
Shareholders' Representative hereunder in good faith and in accordance with the
advice of attorneys, accountants, experts or other agents engaged by the
Shareholders' Representative. The shareholders agree to indemnify and hold the
Shareholders' Representative harmless against any and all liabilities,
obligations, losses or expenses arising from the Shareholders' Representative's
actions in its capacity as a representative of the shareholders. The
Shareholders' Representative may, in its sole discretion, request instructions
from the shareholders at any time the Shareholders' Representative determines
such instructions are necessary or advisable prior to the execution of any act
or decision and shall have full and complete protection for any action taken in
good faith in reliance upon the instructions received by a majority of
shareholders responding to such request. It is a condition to the agreement by
the Shareholders' Representative to act in such capacity that a majority of the
shareholders confirm, in the letter of transmittal or other similar document,
their agreement to the provisions of this Section 9.1.
9.2 VALIDITY. The invalidity or unenforceability of any provision of
this agreement shall not affect the validity or enforceability of any other
provision of this agreement, which shall remain in full force and effect, unless
the invalidity or unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b) materially or
adversely frustrate the obligations of the parties in this agreement as
originally written.
9.3 NOTICES. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by nationally recognized overnight delivery service,
or five business days after the date of mailing if sent registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
if to the Parent or Sub:
Glasstech Holding Co.
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306
Telecopier: (216) 689-3204
Attention: David P. Given
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with a copy to:
Baker & Hostetler LLP
3200 National City Center
1900 E. 9th Street
Cleveland, Ohio 44114-3485
Telecopier: (216) 696-0740
Attention: R. Steven Kestner
if to the Company:
Glasstech, Inc.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, Ohio 43551
Telecopier: 419-661-9366
Attention: General Counsel
with copies to:
Balfour Investors, Inc.
620 Fifth Avenue
7th Floor
New York, New York 10020
Telecopier: 212-265-8049
Attention: Mr. Harry Freund
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier: 212-836-7149
Attention: Joel I. Greenberg
if to Shareholders' Representative:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopier 212-836-7149
Attention: Joel I. Greenberg
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
9.4 GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the law of the state of Delaware, without giving effect to
principles of conflicts of laws applicable thereto.
9.5 INTERPRETATION. Whenever a reference is made in this agreement to
Sections, such reference shall be to a Section of this agreement unless
otherwise indicated. The headings in this agreement are for convenience of
reference only and are not
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intended to be part of or to affect the meaning or interpretation
of this agreement.
9.6 PARTIES IN INTEREST. This agreement shall be binding upon and inure
solely to the benefit of each party to this agreement, and nothing in this
agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this agreement (other
than sections 5.7 and 5.8).
9.7 COUNTERPARTS. This agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
9.8 PRESS RELEASES; CONFIDENTIALITY. The Parent, the Sub and the
Company shall consult with each other before issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated by this agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law. Except in connection with the financing of the transactions
contemplated hereby, no party shall discuss or otherwise disclose to an
unrelated third party the terms and conditions of this agreement and the
transactions contemplated hereby prior to the Effective Time.
9.9 ENTIRE AGREEMENT. This agreement, together with the Confidentiality
Agreement, constitutes the entire agreement among the parties with respect to
its subject matter and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to that subject matter.
GLASSTECH HOLDING CO.
By:/s/ David P. Given
---------------------------------
Name: David P. Given
Title: Vice President
GLASSTECH SUB CO.
By:/s/ David P. Given
---------------------------------
Name: David P. Given
Title: Vice President
GLASSTECH, INC.
By:/s/ Mark D. Christman
---------------------------------
President, Chief Operating
Officer
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