EXHIBIT 2(a)
CONFORMED COPIES
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
AMONG HACH COMPANY, HACH ACQUISITION CORP.
AND
ENVIRONMENTAL TEST SYSTEMS, INC.
This Amendment to the Agreement and Plan of Merger entered into among
Hach Company, a Delaware corporation ("Hach"), Hach Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Hach ("Mergerco") and
Environmental Test Systems, Inc., an Indiana corporation ("ETS") is entered into
as of the 26th day of February 1998.
WHEREAS, Hach, Mergerco and ETS entered into an Agreement and Plan of
Merger as of January 21, 1998 (the "Agreement"); and
WHEREAS, the relative conversion ratios of the ETS Class A Common Stock
and the ETS Class B Common Stock as between the two classes was established on
the assumption that the merger transaction would be consummated on or before
December 31, 1997; and
WHEREAS, the parties now anticipate that the merger transaction may not
be consummated until the latter part of April 1998 or in May 1998; and
WHEREAS, the delay in closing of the merger transaction will unfairly
prejudice the Class B shareholders of ETS unless the relative conversion ratios
are equitably adjusted since the ETS charter requires that mandatory dividends
must continue to be paid to the holders of ETS Class A Common Stock until the
Merger is consummated but no dividends may be paid during such period to the
Class B shareholders.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:
1. Section 2.1(a)(i)(A) of the Agreement is amended by deleting
$17.465651 and substituting therefor $17.250026.
2. Section 2.1(a)(ii)(A) of the Agreement is amended by deleting
$14.749656 and substituting therefor $14.821706.
3. The last sentence of Section 11.1(a) of the Agreement is amended
to read as follows:
The liability for Damages hereunder shall be allocated among the holders
of ETS Class A Common Stock (the "CLASS A STOCKHOLDERS") and the holders
of ETS Class B Common Stock (the "CLASS B STOCKHOLDERS") in the Merger
(all such Class A Stockholders and Class B Stockholders, being
hereinafter collectively referred to as the "SURRENDERING STOCKHOLDERS"),
as follows:
Class A Stockholders 28%
Class B Stockholders 72%
4. All other provisions of the Agreement remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the 26th day of February 1998.
HACH COMPANY
By: /s/ Bruce J. Hach
----------------------------------
Bruce J. Hach, President
HACH ACQUISITION CORP.
By: /s/ Gary R. Dreher
----------------------------------
Gary R. Dreher,Vice President,
Treasurer and Secretary
ENVIRONMENTAL TEST SYSTEMS, INC.
By: /s/ Mark J. Stephenson
----------------------------------
Mark J. Stephenson, President
The undersigned hereby agrees to be bound by all of the provisions of
ARTICLE 11 of the above Agreement which are binding on the Representative and
shall be deemed to be a party hereto for such purposes.
/s/Harry Stephenson
--------------------------------------------
Harry Stephenson, as Representative
AGREEMENT AND PLAN OF MERGER
AMONG HACH COMPANY, HACH ACQUISITION CORP.
AND
ENVIRONMENTAL TEST SYSTEMS, INC.
January 21, 1998
TABLE OF CONTENTS
ARTICLE 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of Merger . . . . . . . . . . . . . . . . . . . . . 2
1.3 Certificate of Incorporation; By-Laws. . . . . . . . . . . . . . . 2
1.4 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Taking of Necessary Action; Further Action . . . . . . . . . . . . 2
ARTICLE 2
2.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Dissenting Stockholders. . . . . . . . . . . . . . . . . . . . . . 5
2.3 Exchange of Certificate. . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . 7
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Authority; Noncontravention. . . . . . . . . . . . . . . . . . . . 9
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .10
4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . .11
4.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.8 Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.9 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.10 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.11 Accounts Receivable; Returns . . . . . . . . . . . . . . . . . . .13
4.12 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . .14
4.13 Absence of Material Adverse Effect; Conduct of Business. . . . . .15
4.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.15 Contracts; Etc.. . . . . . . . . . . . . . . . . . . . . . . . . .17
4.16 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . .19
4.17 Employee Compensation. . . . . . . . . . . . . . . . . . . . . . .19
4.18 Transactions with Insiders . . . . . . . . . . . . . . . . . . . .22
4.19 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .22
4.20 ETS Products; Regulation . . . . . . . . . . . . . . . . . . . . .24
4.21 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . .24
4.22 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . .25
4.23 No Existing Discussions. . . . . . . . . . . . . . . . . . . . . .25
4.24 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
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4.25 Accuracy and Completeness of All Statements. . . . . . . . . . . .25
ARTICLE 5
5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . .25
5.2 Authority; Noncontravention. . . . . . . . . . . . . . . . . . . .25
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.4 SEC Filings; Financial Statements. . . . . . . . . . . . . . . . .27
5.5 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . .28
5.6 Ownership of Mergerco; No Prior Activities . . . . . . . . . . . .28
5.7 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.8 Accuracy and Completeness of All Statements. . . . . . . . . . . .29
ARTICLE 6
6.1 Registration Statement; Proxy Statement. . . . . . . . . . . . . .29
6.2 Shareholders' Meeting. . . . . . . . . . . . . . . . . . . . . . .31
6.3 Access; Confidentiality. . . . . . . . . . . . . . . . . . . . . .31
6.4 Conduct of Business of ETS Prior to the Effective Time . . . . . .31
6.5 Consents; Cooperation. . . . . . . . . . . . . . . . . . . . . . .35
6.6 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . .35
6.7 Interim Financial Statements; 1997 Audited Financials. . . . . . .36
6.8 Notification of Certain Matters. . . . . . . . . . . . . . . . . .36
6.9 Public Announcements . . . . . . . . . . . . . . . . . . . . . . .37
6.10 No Solicitation of Transactions. . . . . . . . . . . . . . . . . .37
6.11 Closing Balance Sheet and Income Statement,
ETS's Financial Managers' Report. . . . . . . . . . . . . . . . .38
6.12 Survey and Title Policy. . . . . . . . . . . . . . . . . . . . . .38
6.13 Approval by Mergerco Board of Directors
and Sole Stockholder. . . . . . . . . . . . . . . . . . . . . . .39
6.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE 7
7.1 Representations and Warranties; Agreements . . . . . . . . . . . .42
7.2 Authorization of Merger; Consents. . . . . . . . . . . . . . . . .42
7.3 Approval of Hach Board of Directors. . . . . . . . . . . . . . . .43
7.4 Opinion of ETS's Counsel . . . . . . . . . . . . . . . . . . . . .43
7.5 Report of ETS's Financial Managers . . . . . . . . . . . . . . . .43
7.6 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . .43
7.7 Options, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . .43
7.8 Stockholder's Agreement and Escrow Agreement . . . . . . . . . . .44
7.9 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . .44
7.10 Employment Agreements for Key Employees. . . . . . . . . . . . . .44
7.11 Harry Stephenson Agreements. . . . . . . . . . . . . . . . . . . .44
7.12 Registration Statement . . . . . . . . . . . . . . . . . . . . . .44
7.13 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
7.14 Listing of Hach Common Stocks; Compliance with
State Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . .45
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7.15 Investment Letters . . . . . . . . . . . . . . . . . . . . . . . .45
7.16 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.17 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . .45
7.18 Disposition of Certain ETS Agreements. . . . . . . . . . . . . . .45
ARTICLE 8
8.1 Representations and Warranties; Agreements . . . . . . . . . . . .46
8.2 Authorization of the Merger. . . . . . . . . . . . . . . . . . . .46
8.3 Stockholder Approvals. . . . . . . . . . . . . . . . . . . . . . .46
8.4 Opinion of Hach's Counsel. . . . . . . . . . . . . . . . . . . . .46
8.5 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . .46
8.6 Registration Statement . . . . . . . . . . . . . . . . . . . . . .47
8.7 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.8 Listing of Hach Common Stocks; Compliance with
State Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . .47
8.9 Investment Letters . . . . . . . . . . . . . . . . . . . . . . . .47
8.10 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . .47
8.11 Harry Stephenson Agreements. . . . . . . . . . . . . . . . . . . .48
8.12 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . .48
8.13 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . .48
8.14 No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . .48
ARTICLE 9
9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
9.2 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . .49
9.3 Procedure and Effect of Termination. . . . . . . . . . . . . . . .50
ARTICLE 10
10.1 Modification or Amendment. . . . . . . . . . . . . . . . . . . . .51
10.2 Waiver of Conditions; Investigation. . . . . . . . . . . . . . . .51
10.3 Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . . .51
10.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
10.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
10.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
10.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
10.8 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . .53
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .53
10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .53
10.11 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . .54
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .54
10.13 Specific Performance . . . . . . . . . . . . . . . . . . . . . . .54
10.14 Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . .54
10.15 Certain Interpretive Matters and Definitions . . . . . . . . . . .54
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ARTICLE 11
11.1 Indemnification by Surrendering Stockholders . . . . . . . . . . .58
11.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
11.3 The Representative . . . . . . . . . . . . . . . . . . . . . . . .63
11.4 Effectiveness of Section 11.1. . . . . . . . . . . . . . . . . . .64
11.5 Sole and Exclusive Remedy. . . . . . . . . . . . . . . . . . . . .64
EXHIBITS
Exhibit A Stockholders' Agreement
Exhibit B Form of Escrow Agreement
Exhibit C 1997 and 1998 Capital Expenditure Budgets
Exhibit D 1997 and 1998 Operating Budgets
Exhibit E Form of Non-competition Agreement
Exhibit F Form of Consulting Agreement
Exhibit G Form of Lock-up Letter
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 21, 1998 (the
"AGREEMENT"), among Hach Company, a Delaware corporation ("HACH"), Hach
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Hach
("MERGERCO"), and Environmental Test Systems, Inc., an Indiana corporation
("ETS").
The Boards of Directors of Hach and ETS each believe it is desirable and
in the best interests of their respective stockholders that ETS merge into
Mergerco and the holders of the outstanding shares of Class A Common Stock, no
par value, of ETS ("ETS CLASS A COMMON STOCK"), receive the Class A Common
Merger Consideration (as hereinafter defined), and all the holders of the
outstanding shares of Class B Common Stock, no par value, of ETS (the "ETS CLASS
B COMMON STOCK", and together with the ETS Class A Common Stock, the "ETS COMMON
STOCKS"), receive the Class B Merger Consideration (as hereinafter defined),
pursuant to the terms and conditions of this Agreement which provides, among
other things, for the merger of ETS into Mergerco (the "MERGER"), and have
directed that this Agreement and the Merger be submitted to ETS' stockholders
for approval. It is understood by the parties hereto, that the aggregate merger
consideration to the holders of ETS Class A Common Stock and ETS Class B Common
Stock outstanding as of the Effective Time (as defined in SECTION 1.2 hereof)
shall not exceed Sixteen Million Dollars ($16,000,000). In connection with the
execution and delivery of this Agreement, Harry T. Stephenson, the owner of a
majority of the ETS Class B Common Stock, has executed and delivered the
Stockholder's Agreement attached as EXHIBIT A to this Agreement (the
"STOCKHOLDER'S AGREEMENT") pursuant to which among other things, he has granted
Hach an irrevocable proxy to vote his ETS Class B Common Stock for the approval
of the Merger.
Accordingly, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
MERGER OF ETS INTO MERGERCO
1.1 THE MERGER. At the Effective Time, subject to the terms and
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DELAWARE CORPORATION LAW") and the Indiana
Business Corporation Law (the "INDIANA CORPORATION LAW"), (i) ETS shall be
merged with and into Mergerco and the separate existence of ETS shall cease;
(ii) Mergerco shall continue as the surviving corporation (the "SURVIVING
CORPORATION") under the name "ENVIRONMENTAL TEST SYSTEMS, INC."; and (iii) the
Merger shall have the effects set forth herein and in Sections 259, 260 and 261
of the Delaware Corporation Law and Section 7 of Chapter 40 of the Indiana
Corporation Law.
1.2 EFFECTIVE TIME OF MERGER. The Merger shall become effective at the
time which is the later to occur of (i) a Certificate of Merger with respect to
the Merger in a form satisfactory to Hach and ETS is filed with the Secretary of
State of the State of Delaware in accordance with the Delaware Corporation Law
and (ii) Articles of Merger with respect to the Merger are filed with the
Secretary of State of Indiana in accordance with the Indiana Corporation Law.
Such time is referred to herein as the "EFFECTIVE TIME." This Agreement can be
terminated by either party prior to the filing of either the Certificate of
Merger or the Articles of Merger in accordance with ARTICLE 9 hereof.
1.3 CERTIFICATE OF INCORPORATION; BY-LAWS. The Certificate of
Incorporation and By-Laws of Mergerco, as in effect immediately prior to the
Effective Time, shall become the Certificate of Incorporation and By-Laws of the
Surviving Corporation upon the Merger, except that effective as of the Effective
Time, Article First of the Certificate of Incorporation of Mergerco shall be
amended to read in its entirety as follows:
"The name of the corporation is Environmental Test Systems, Inc."
1.4 DIRECTORS AND OFFICERS. The Board of Directors of the Surviving
Corporation shall be those persons who constitute the Board of Directors of
Mergerco at the Effective Time. The principal officers of the Surviving
Corporation shall be those persons who are the principal officers of ETS at the
Effective Time except for Harry Stephenson who shall hold no office with the
Surviving Corporation. Each such director or officer shall hold office until
such person's respective successor has been duly elected or appointed or
qualified pursuant to the By-Laws of the Surviving Corporation or as otherwise
provided under applicable law.
1.5 TAKING OF NECESSARY ACTION; FURTHER ACTION. Hach, Mergerco and
ETS, respectively, shall take all such lawful action as may be necessary or
appropriate in order to effectuate the transactions contemplated by this
Agreement. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
properties, rights, privileges, powers and franchises of Mergerco or ETS, the
officers and directors of the Surviving Corporation are fully authorized in the
name and on behalf of Mergerco and ETS or otherwise to take, and shall take all
such lawful and necessary action.
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES
2.1 CONVERSION OF SHARES. (a) At the Effective Time, by virtue of the
Merger and without any action on the part of Hach, Mergerco, ETS or the holder
of any of the following securities:
2
(i) Each share of ETS Class A Common Stock issued and
outstanding immediately prior to the Effective Time, and subject to
SECTION 9.1(i) shall be converted into and become:
(A) a right to receive that number of shares of Hach
Common Stock, $1.00 par value ("HACH COMMON STOCK"), as shall have
on the Determination Date an aggregate value equal to $17.465651,
with the Hach Common Stock valued as calculated in accordance
with, and subject to, SECTION 2.1(c) (the "CLASS A BASE MERGER
CONSIDERATION");
(B) a right to receive on the third anniversary of the
Effective Time (the "ESCROW RELEASE DATE") or as soon thereafter
as possible in accordance with the Escrow Agreement in
substantially the form of the attached EXHIBIT B (the "ESCROW
AGREEMENT") to be executed and delivered at or prior to the
Closing by and among Hach, Harry Stephenson as Representative (as
defined in Section 11.3) of the Surrendering Stockholders (as
defined in Section 11.1(a)), and American National Bank and Trust
Company of Chicago, as escrow agent (the "ESCROW AGENT"), the
Additional Class A Merger Consideration (as defined below), if
any; and
(C) a right to receive from time to time after the
Escrow Release Date in accordance with the Escrow Agreement, the
Subsequent Class A Merger Consideration (as defined below), if any
(the Class A Base Merger Consideration, the Additional Class A
Merger Consideration and the Subsequent Class A Merger
Consideration are collectively referred to as the "CLASS A MERGER
CONSIDERATION").
(ii) Each share of ETS Class B Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into and become:
(A) a right to receive per share (1) cash, (2) that
number of shares of Hach Common Stock and (3) that number of
shares of Hach Class A Common Stock, $1.00 par value ("HACH CLASS
A COMMON STOCK" and together with the Hach Common Stock the "HACH
COMMON STOCKS"), with each of the Hach Common Stocks valued as
calculated in accordance with, and subject to, SECTION 2.1(c), as
shall have on the Determination Date an aggregate value equal to
$14.749656 (the "CLASS B BASE MERGER CONSIDERATION");
(B) a right to receive on the Escrow Release Date or as
soon thereafter as possible in accordance with the Escrow
Agreement, the Additional Class B Merger Consideration (as defined
below), if any; and
(C) a right to receive from time to time after the
Escrow Release Date in accordance with the Escrow Agreement, the
Subsequent Class B Merger Consideration (as defined below), if any
(the Class B Base Merger Consideration,
3
the Additional Class B Merger Consideration and the Subsequent
Class B Merger Consideration are collectively referred to as the
"CLASS B MERGER CONSIDERATION").
(iii) Hach shall have the right, in its sole discretion, to
determine the allocation of the components of the Class B Merger Consideration
to be delivered pursuant to Section 2.1(a)(ii) as between the Hach Common Stocks
and cash (as applicable); provided that in no event will Hach be permitted to
deliver cash which is less than $6,878,400 or greater than $7,343,875; and
provided further that the aggregate value of the Hach Common Stock and Hach
Class A Common Stock delivered as part of the Class B Merger Consideration shall
be equal.
(b) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) The "ADDITIONAL CLASS A MERGER CONSIDERATION" shall
be (A) that number of shares of Hach Common Stock held in the
Class A Escrow Fund (as defined in the Escrow Agreement) on the
Escrow Release Date in excess of the number of shares of Hach
Common Stock held in the Class A Escrow Fund (valued in accordance
with the Escrow Agreement) allocated to the aggregate amount
("PENDING CLAIMS AMOUNT") of Damages (as hereinafter defined)
being asserted in respect of all Claims (as hereinafter defined)
which have been made by Hach or any other Hach Party (as
hereinafter defined) pursuant to the Escrow Agreement for which no
Determination (as defined in the Escrow Agreement) has been made
as of the Escrow Release Date ("PENDING CLAIMS") together with the
interest thereon as provided in the Escrow Agreement, divided by
(B) the number of ETS Class A Common Shares;
(ii) The "ADDITIONAL CLASS B MERGER CONSIDERATION" shall
be (A)(1) the amount of cash in the Class B Escrow Fund (as
defined in the Escrow Agreement) on the Escrow Release Date in
excess of the cash held in the Class B Escrow Fund allocated to
the Pending Claims Amount together with the interest thereon as
provided in the Escrow Agreement, divided by (2) the number of
ETS Class B Common Shares and (B)(1) that number of shares of Hach
Common Stocks held in the Class B Escrow Fund on the Escrow
Release Date in excess of the number of shares of Hach Common
Stocks held in the Class B Escrow Fund (valued in accordance with
the Escrow Agreement) allocated to the Pending Claims Amount
together with the interest thereon as provided in the Escrow
Agreement, divided by (2) the number of ETS Class B Common
Shares.
(iii) The "SUBSEQUENT CLASS A MERGER CONSIDERATION" shall
be, with respect to each Resolved Pending Claim Amount (as defined
below), (A) the number of shares of Hach Common Stock held in the
Class A Escrow Fund (valued in accordance with the Escrow
Agreement) equal to that Resolved Pending Claim Amount divided by
(B) the number of ETS Class A Common Shares.
4
(iv) The "SUBSEQUENT CLASS B MERGER CONSIDERATION" shall
be, with respect to each Resolved Pending Claim Amount, (A) the
amount of cash and number of shares of Hach Common Stocks held in
the Class B Escrow Fund (valued in accordance with the Escrow
Agreement) equal to the Resolved Pending Claim Amount, in each
case divided by (B) the number of ETS Class B Common Shares.
(v) A "RESOLVED PENDING CLAIM AMOUNT" shall be an
amount, with respect to each Pending Claim which becomes the
subject of a Determination (a "RESOLVED PENDING CLAIM"), equal to
the amount, if any, by which (i) that portion of the Pending
Claims Amount which had been reserved for that Resolved Pending
Claim together with interest thereon as provided in the Escrow
Agreement, exceeds (ii) the amount of Damages paid to and/or at
the direction of a Hach Party in connection with the Determination
of that Resolved Pending Claim.
(c) For purposes of calculating the number of shares of Hach
Common Stocks to be distributed pursuant to the provisions of SECTIONS 2.1(a)(i)
AND (ii) of this Agreement the value of one share of each of such classes of
stock shall be deemed to be the average of the daily closing prices of one share
of such class of stock, as quoted on The National Association of Securities
Dealers Automated Quotations - National Market System ("NASDAQ"), for the 20
NASDAQ trading days immediately preceding and including the Determination Date;
provided that if there is no reported closing price of such shares of Hach
Common Stock or Hach Class A Common Stock, on NASDAQ for any such trading day,
the closing price for such day for such stock will be deemed to be the mean of
the closing bid and asked quotations on NASDAQ for that day for such stock (the
respective value for each class of stock being referred to as the "AVERAGE
MARKET PRICE"). The term "DETERMINATION DATE" shall mean the date which is five
(5) business days prior to the Effective Date or, if such date is not a NASDAQ
trading day, the NASDAQ trading day first immediately preceding such date. At
least two (2) business days prior to the Closing Date, Hach will calculate the
number of shares of Hach Common Stocks to be delivered pursuant to SECTIONS
2.1(a)(i) AND 2.1(a)(ii) (subject to SECTION 9.1(i)) in accordance with the
provisions of this SECTION 2.1(c) and Hach will deliver to ETS a certificate
signed by its Chief Financial Officer setting forth such share amounts and
providing all reasonable detail as to their calculation.
2.2 DISSENTING STOCKHOLDERS. (a) Shareholders of ETS who properly
exercise and perfect statutory dissenters' rights shall have the rights accorded
to dissenting shareholders under Chapter 44 of the Indiana Corporation Law, as
amended (the shares of ETS Common Stocks of such shareholders are collectively
referred to as the "DISSENTING SHARES").
(b) ETS shall give Hach (i) prompt notice upon receipt by ETS,
at any time prior to the Effective Time, of any notice of intent to demand
payment of the fair value of shares of ETS Common Stocks in accordance with
Section 11 of Chapter 44 of the Indiana Corporation Law and withdrawals of any
such notice and (ii) the opportunity to participate in all negotiations
5
and proceedings with respect to demands for fair value under Chapter 44 of the
Indiana Corporation Law. ETS shall not, except with the prior written consent of
Hach, make any payment with respect to any demands for the fair value of shares
of ETS Common Stocks or offer to settle or settle any such demands.
2.3 EXCHANGE OF CERTIFICATE.
(a) Those stockholders of ETS surrendering their
certificates representing outstanding shares of ETS Common Stocks at the
Closing shall be entitled to receive at the Closing from Hach the Class A
Base Merger Consideration or the Class B Base Merger Consideration, as
the case may be, in cash or other immediately available funds, with
respect to any cash consideration, or evidenced by stock certificates,
with respect to any stock consideration; PROVIDED, HOWEVER, that shares
of Hach Common Stocks constituting the Escrow Deposit shall be placed in
escrow under, and pursuant to, the Escrow Agreement. If any stockholder
of ETS fails to surrender all of their certificates representing
outstanding shares of ETS Common Stocks at the Closing, such certificates
until so surrendered will be deemed for all corporate purposes of Hach to
evidence ownership of a right to receive without interest thereon the
Class A Merger Consideration or the Class B Merger Consideration, as the
case may be, which shall be payable in accordance with this Agreement and
the Escrow Agreement to such stockholder upon surrender to Hach of such
stockholder's certificates formerly representing shares of ETS Common
Stocks. No dividends or other distributions otherwise payable subsequent
to the Effective Time on shares of Hach Common Stocks shall be paid to
any former stockholder of ETS entitled to receive the same until such
stockholder has surrendered to Hach such stockholder's certificates
formerly representing shares of ETS Common Stocks. Upon surrender of
such certificates, such stockholder shall be entitled to receive the
consideration provided in the first sentence of this subsection and Hach
shall pay in cash to the record holder of the new certificate evidencing
shares of Hach Common Stocks the amount of all dividends and other
distributions, without interest thereon, withheld with respect to such
shares of Hach Common Stocks.
(b) At the Closing, Hach shall deliver the Escrow
Deposit (as defined in SECTION 11.1) to the Escrow Agent which will be
held by the Escrow Agent subject to the terms and conditions of the
Escrow Agreement to provide the source of funds for the payment of
Damages in accordance with ARTICLE 11 hereof and the Escrow Agreement.
(c) No fractional shares of Hach Common Stocks will be
issued, but all fractions shall be settled in cash based upon the Average
Market Price of Hach Common Stocks calculated in accordance with SECTION
2.1(c).
(d) If payment of the Class A Base Merger Consideration
or Class B Base Merger Consideration is to be made to a person other than
the registered holder of the certificate surrendered in exchange
therefor, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to Hach any
transfer or other taxes required by reason of the payment to a person
other than the registered holder of the certificate
6
surrendered or establish to the satisfaction of Hach that such tax has
been paid or is not payable.
ARTICLE 3
CLOSING
3.1 CLOSING. Hach, Mergerco and ETS shall regularly communicate and
consult with each other with respect to the fulfillment of the various
conditions to the obligations of the parties under this Agreement. The exchange
of certificates, opinions and other documents contemplated by this Agreement in
connection with the consummation of the Merger (the "CLOSING") shall take place
at the offices of McBride, Baker & Coles, 500 West Madison Street, 40th Floor,
Chicago, Illinois (i) as promptly as practicable (and in any case within one
(1) business day) following the ETS Shareholders' Meeting (as defined in SECTION
6.2) or (ii) at such other time and date as may be agreed to by the parties. The
date on which the Closing occurs is referred to herein as the "CLOSING DATE". In
the event that at the Closing no party exercises any right it may have to
terminate this Agreement and no condition to the obligations of the parties
exists that has not been satisfied or waived, the parties shall (i) deliver to
each other at the Closing the certificates, opinions and other documents
required to be delivered under ARTICLES 7 AND 8 hereof and (ii) at the Closing
or as soon thereafter as practicable cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware and the Secretary of
State of the State of Indiana a Certificate of Merger and Articles of Merger,
respectively, in such form as required by, and executed in accordance with, the
Delaware Corporation Law and the Indiana Corporation Law.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ETS
ETS hereby represents and warrants to Hach and Mergerco as follows:
4.1 ORGANIZATION AND GOOD STANDING. Each of ETS and the ETS
Subsidiary (as defined below) is a corporation duly organized, validly existing
and is current in filing all reports required to be filed under the laws of its
state or jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted. Each of ETS and the ETS Subsidiary is duly qualified to
do business and is in good standing as a foreign corporation in any state or
jurisdiction where it has an office, owns property or has resident employees.
ETS has previously delivered to Hach complete and correct copies of its Articles
of Incorporation and all amendments thereto to the date hereof.
4.2 SUBSIDIARIES. ETS International, Inc. is the only Subsidiary of
ETS (the "ETS SUBSIDIARY"), and ETS has had no other Subsidiary since January 1,
1993. SCHEDULE 4.2 sets
7
forth with respect to the ETS Subsidiary, its jurisdiction of incorporation,
capitalization, and equity ownership. As used herein, the term "SUBSIDIARY"
of any person shall mean any corporation or other person in which such
person, directly or indirectly, owns beneficially securities or interests
representing 20% or more of (i) the aggregate equity or profit interests or
(ii) the combined voting power or voting interests ordinarily entitled to
vote for management or otherwise. Except as set forth in SCHEDULE 4.2, all
the outstanding shares of capital stock of the ETS Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law, and are owned by ETS of record and beneficially free and
clear of any security interest, pledge, lien, charge, claim, option, right to
acquire, restriction on transfer, or encumbrance of any nature whatsoever
("SECURITY INTEREST"). ETS does not own, directly or indirectly, any
ownership, equity, profits or voting interest in any corporation,
partnership, joint venture or other entity (other than the ETS Subsidiary),
and has no agreement or commitment to purchase any such interest. ETS has
previously delivered to Hach complete and correct copies of the charter and
By-laws (including comparable governing instruments with different names) of
the ETS Subsidiary, as amended and presently in effect.
4.3 CAPITALIZATION.
(a) The authorized capital stock of ETS consists of (i) 300,000
shares of Class A Common Stock, of which, as of the date hereof, and as of the
Effective Time, 231,304 shares will be issued and outstanding, and (ii)
1,000,000 shares of Class B Common Stock, of which, as of the date hereof, and,
as of the Effective Time, 692,228 shares will be issued and outstanding. As of
the date hereof, no shares of ETS Class A Common Stock or ETS Class B Common
Stock are held in the treasury of ETS and as of the Effective Time, none will be
held in treasury. All outstanding shares of ETS Class A Common Stock and ETS
Class B Common Stock are duly authorized and validly issued, fully paid and
non-assessable and not issued in violation of any preemptive rights or, to the
knowledge of ETS, of any Federal or state securities law. Except as set forth in
SCHEDULE 4.3(a), and except for this Agreement and the transaction contemplated
hereby, there is no security, option, warrant, right (including preemptive
rights), put, call, subscription, agreement, commitment, understanding or claim
of any nature whatsoever, fixed or contingent, that directly or indirectly
(i) calls for the acquisition, issuance, sale, pledge or other disposition of
any shares of capital stock of ETS or the ETS Subsidiary or any securities
convertible into, or other rights to acquire, any shares of capital stock of ETS
or the ETS Subsidiary; (ii) relates to the voting or control of such capital
stock, securities or rights; or (iii) obligates ETS or the ETS Subsidiary to
grant, offer or enter into any of the foregoing. Except as set forth in SCHEDULE
4.3(a), there are no voting agreements or voting trusts among or irrevocable
proxies executed by, or other stockholder agreements between or among, holders
of ETS Class A Common Stock and/or ETS Class B Common Stock. Except as set forth
in SCHEDULE 4.3(a), neither ETS nor the ETS Subsidiary has granted or agreed to
grant any registration rights, including piggyback registration rights, to any
person or entity. No request for the registration of any securities pursuant to
any outstanding registration right has been received by ETS or the ETS
Subsidiary which is outstanding, and ETS agrees to notify Hach promptly after
receipt of any such request.
8
(b) SCHEDULE 4.3(b) contains a complete and correct list of the
record and beneficial ownership of ETS Common Stocks by each stockholder and
designating whether such stockholder is an "officer" or "director" of ETS and
the current mailing address of each such stockholder. Except as set forth in
SCHEDULE 4.3(b) each of the stockholders owns the respective number of shares of
ETS Class A Common Stock and ETS Class B Common Stock listed in SCHEDULE 4.3(b)
free and clear of any Security Interest. At the Effective Time, Harry Stephenson
will be the record and beneficial owner of 476,756 shares of ETS Class B Common
Stock free and clear of all Security Interests.
4.4 AUTHORITY; NONCONTRAVENTION.
(a) ETS has the requisite corporate power and authority to
execute and deliver this Agreement and all other agreements required to be
executed by it pursuant to the terms hereof, to perform its obligations
hereunder and to consummate the transactions contemplated by this Agreement,
subject to the approval of the stockholders of ETS in accordance with the
Indiana Corporation Law. The execution and delivery of this Agreement by ETS and
the consummation by ETS of the transactions contemplated hereby, have been duly
authorized by the unanimous approval of ETS's Board of Directors, and no other
corporate actions or proceedings on the part of ETS are necessary to authorize
this Agreement or to consummate the transactions contemplated by this Agreement,
except for the Requisite ETS Stockholder Approval (as defined in SECTION 8.3),
in accordance with the Indiana Corporation Law and the Articles of Incorporation
and By-Laws of ETS. This Agreement has been duly executed and delivered by ETS
and constitutes the legal, valid and binding obligation of ETS, enforceable
against ETS in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws relating to or
affecting the rights and remedies of creditors generally and by general
principles of equity.
(b) Except as set forth in SCHEDULE 4.4, the execution,
delivery and performance of this Agreement by ETS and the consummation by ETS of
the transactions contemplated hereby do not and will not:
(i) contravene any provisions of the Articles of
Incorporation or by-laws of ETS or the charter or by-laws (or similar
documents with different names) of the ETS Subsidiary;
(ii) conflict with, result in a breach of any provision
of, constitute a default under, result in the modification or
cancellation of, or give rise to any right of termination or acceleration
in respect of, with or without the passage of time and/or giving of
notice, any ETS Agreement (as defined in SECTION 4.15 hereof), or require
any consent or waiver of any party to any ETS Agreement or cause ETS or
the ETS Subsidiary to lose any rights to Intellectual Property (as such
term is defined in SECTION 4.12);
(iii) result in the creation of any Security Interest
upon, or any person obtaining any right to acquire, any properties,
assets, or rights of ETS or the ETS
9
Subsidiary (as used herein, "assets" of a party shall include in each
instance, but not be limited to, Intellectual Property as hereafter
defined);
(iv) violate or conflict with any Legal Requirements or
result in the termination or material modification of any Permit (as such
terms are defined in SECTION 4.8 hereof) applicable to ETS or the ETS
Subsidiary or any of their respective businesses or properties except for
such violations and conflicts which would not, in the aggregate, have a
material adverse effect on ETS' or the ETS Subsidiary's ability to
perform their obligations hereunder; and
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority except in
connection with or in compliance with the Indiana Corporation Law, and
the laws of certain foreign jurisdictions under which a filing may be
required in connection with the Merger, and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and regulations
promulgated thereunder ("HSR Act").
4.5 FINANCIAL STATEMENTS.
(a) ETS previously has furnished to Hach true and complete
copies of (i) the audited consolidated balance sheets of ETS and the ETS
Subsidiary as of December 31, 1996, 1995 and 1994, and the related audited
consolidated statements of income, shareholders' equity and cash flows for ETS
and the ETS Subsidiary for the years then ended, (ii) the unaudited consolidated
balance sheets of ETS and the ETS Subsidiary as of October 31, 1997 and October
31, 1996 and the related unaudited consolidated statements of income and cash
flows for the ten months ended October 31, 1997 and October 31, 1996 (the
foregoing audited and unaudited financial statements are collectively referred
to as the "FINANCIAL STATEMENTS"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied and present fairly the consolidated financial position of
ETS and the ETS Subsidiary as of the dates indicated and the results of their
operations and their cash flows for the periods indicated (except as may be
indicated in the notes thereto and except that financial statements included
with interim reports do not contain all GAAP notes to such financial statements)
and each fairly presented in all material respects the consolidated financial
position, results of operations and changes in shareholders' equity and cash
flows of ETS and the ETS Subsidiary as at the respective dates thereof and for
the respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected to be, individually or in the aggregate, material to the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of ETS and the ETS Subsidiary, taken as a whole.
(b) As of October 31, 1997, the maximum liability to the
Corporation for Business Modernization and Technology ("CBMT") aggregates
$638,841 which liability is not reflected on the balance sheets of ETS and is
not payable by ETS except from future gross revenues from the Project described
in Footnote F to the Balance Sheet (as defined in Schedule 4.6) and then only to
the extent of a 6% royalty applicable to such future revenues.
10
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 4.6, ETS and the ETS Subsidiary have no liabilities or obligations of
any nature (whether due or to become due, absolute, accrued, contingent or
otherwise, and whether or not determined or determinable) and to the knowledge
of the directors of ETS after due inquiry there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, including, without limitation any unfunded obligation under
any employee benefit plan or arrangements except for (i) liabilities or
obligations reflected or reserved against in the consolidated balance sheet of
ETS and the ETS Subsidiary as of December 31, 1996 or specifically disclosed in
the notes thereto (the "BALANCE SHEET") and (ii) liabilities incurred in the
ordinary course of business and consistent with past practice since December 31,
1996 which individually and in the aggregate are not material to the business,
operations, results of operations, assets, liabilities, condition (financial or
otherwise) or prospects of ETS and the ETS Subsidiary. Neither ETS nor the ETS
Subsidiary is a party to any ETS Agreement, or subject to any charter or other
corporate restriction or any Legal Requirement, which has, or, to its knowledge,
in the future can reasonably be expected to have, a material adverse effect on
the business, operations, results of operations, assets, liabilities, condition
(financial or otherwise) or prospects of ETS and the ETS Subsidiary.
4.7 TAXES. Except as set forth in SCHEDULE 4.7, ETS and the ETS
Subsidiary has duly and timely filed all federal, state, local and foreign tax
returns, reports and declarations (hereafter "TAX RETURNS") required to be filed
and has paid, or made adequate provision for the payment of, all Taxes (as
defined below) which are due pursuant to said Tax Returns or pursuant to any
assessment received by ETS or the ETS Subsidiary. All such Tax Returns are true
and correct in all material respects. As used herein, "TAXES" shall mean all
taxes, fees, levies or other assessments, including but not limited to income,
excise, property, sales, value added, franchise, capital, net worth,
withholding, social security, and unemployment taxes imposed by the United
States, any state, county, local or foreign government, or any subdivision or
agency thereof, together with any interest, additions to tax, fines or penalties
relating to such taxes, charges, fees, levies, or other assessments. ETS files a
consolidated federal income tax return with the ETS Subsidiary. Except to the
extent reserves therefor are reflected on the Balance Sheet, neither ETS nor the
ETS Subsidiary is liable, or will become liable, for any Taxes for any period
commencing prior to December 31, 1996. The federal income tax returns of ETS and
the ETS Subsidiary have not been audited by the Internal Revenue Service except
as disclosed in Schedule 4.7. Neither ETS nor the ETS Subsidiary has given or
been requested to give any waiver or extension of any statutes of limitations
relating to the payment of Taxes. To the knowledge of ETS after due inquiry
there is no basis for a deficiency assessment for Taxes against ETS or the ETS
Subsidiary. ETS has heretofore furnished Hach with accurate and complete copies
of all Tax Returns filed by ETS and the ETS Subsidiary for the past five years
as well as all revenue, agent and other audit reports, assessments, protests and
similar documents received or submitted with respect to Taxes of ETS or the ETS
Subsidiary for the past five years.
4.8 LEGAL MATTERS. Except as set forth on SCHEDULE 4.8 hereto,
(i) there is no claim, action, suit, litigation, investigation, inquiry, review,
or proceeding pending against, or, to the knowledge of ETS or the ETS Subsidiary
after due inquiry, threatened against or affecting ETS, the ETS Subsidiary, any
ETS Plan (as defined in SECTION 4.17) or any of their respective
11
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial authority and (ii) neither ETS nor the
ETS Subsidiary is subject to any judgment, decree, writ, injunction or order of
any governmental, administrative or judicial authority which (a) individually or
in the aggregate, would reasonably be expected to have a material adverse effect
on the business, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of ETS and the ETS Subsidiary taken as a
whole or (b) seeks to delay or prevent the consummation of the Merger. Except
as set forth in SCHEDULE 4.8, the businesses of ETS and the ETS Subsidiary are
being conducted in compliance in all material respects with all laws,
ordinances, codes, rules, regulations, standards, judgments, decrees, writs,
rulings, injunctions, orders and other requirements of all governmental,
administrative or judicial authorities (collectively, "LEGAL REQUIREMENTS")
applicable to ETS or the ETS Subsidiary or any of their respective businesses or
properties. ETS and the ETS Subsidiary hold, and are in compliance in all
material respects with all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, "PERMITS")
required by all applicable Legal Requirements. ETS and the ETS Subsidiary own or
hold all Permits material to the conduct of its business. No event has occurred
and is continuing which permits, or after notice or lapse of time or both would
permit, any modification or termination of any Permit. Except as set forth in
SCHEDULE 4.8, neither ETS nor the ETS Subsidiary (i) has received any notice
asserting any noncompliance with any Legal Requirement or Permit, (ii) is
subject to any Legal Requirement or Permit which if enforced against or complied
with by ETS or the ETS Subsidiary would have a material adverse effect on the
business, operations, results of operations, assets, liabilities, condition
(financial or otherwise) or prospects of ETS and the ETS Subsidiary, taken as a
whole, or (iii) has any knowledge of any Legal Requirement proposed or under
consideration which if effective, could have a material adverse effect on the
business, operations, results of operation, assets, liabilities, condition
(financial or otherwise) or prospects of ETS and the ETS Subsidiary, taken as a
whole. To the knowledge of ETS, no governmental, administrative or judicial
authority has indicated any intention to initiate any investigation, inquiry or
review involving ETS, the ETS Subsidiary, any ETS Plan or any of their
respective properties or rights.
4.9 PROPERTY. ETS and the ETS Subsidiary own or lease all assets and
properties (including the ETS Real Property) necessary to the conduct of their
respective businesses as presently conducted.
(a) Except as set forth in SCHEDULE 4.9(a) hereto, ETS owns
good and marketable title to all of its assets, free and clear of all Security
Interests (other than for taxes not yet due and payable). The machinery and
equipment and other tangible property included in such assets which are
necessary for the conduct of the business of ETS and the ETS Subsidiary as
currently conducted are in all material respects in good condition and repair,
normal wear and tear excepted, and all leases of personal property to which ETS
is a party are fully effective and afford ETS peaceful and undisturbed
possession of the subject matter of each such lease.
(b) Except as set forth in SCHEDULE 4.9(b), all real property
owned in fee by ETS or the ETS Subsidiary is listed and described on SCHEDULE
4.9(b) and title to such property, together with all appurtenant easements
thereunto and all structures, fixtures, and improvements located thereon (the
"REAL PROPERTY"), is, and at Closing shall be, good and marketable, fee
12
simple absolute, free and clear of all Security Interests, adverse claims, and
other matters affecting title to or possession of such ETS Real Property,
including, all encroachments, boundary disputes, covenants, restrictions,
easements, rights of way, mortgages, liens, leases, encumbrances, and title
objections (other than for taxes not yet due and payable). At Closing, title to
the Real Property shall be insurable by First American Title Company,
Indianapolis, Indiana at such company's regular rates, free of all exceptions
except the aforesaid easements, restrictions, and covenants and such other
exceptions as are not objectionable to Hach. ETS has delivered to Hach true,
correct and complete copies of all policies of title insurance and any surveys
in the possession of ETS or the ETS Subsidiary for the ETS Real Property.
(c) Neither ETS nor the ETS Subsidiary is a party to any lease,
sublease or other agreement under which ETS or the ETS Subsidiary uses or
occupies or has the right to use or occupy, now or in the future, any real
property.
(d) To its knowledge after due inquiry, ETS is not in violation
of any zoning, building, safety or environmental ordinance regulation or
requirement or other law or regulation applicable to the operation of owned or
leased properties (the violation of which would have a material adverse effect
on the business, operations, results of operations, assets, liabilities,
condition (financial or otherwise) or prospects of ETS and the ETS Subsidiary,
taken as a whole), and ETS has not received any notice of such violation with
which it has not complied or had waived.
4.10 INVENTORIES. The values at which inventories are carried on the
Balance Sheet reflect the normal inventory valuation policies of ETS, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the Balance Sheet or arising since the date thereof are in good and
usable or currently marketable condition and can reasonably be anticipated to be
used, consumed or sold at normal mark-ups within 120 days after the date hereof
in the ordinary course of business (subject to the reserve for obsolete,
off-grade or slow-moving items that is set forth on the Balance Sheet or as set
forth on SCHEDULE 4.10).
4.11 ACCOUNTS RECEIVABLE; RETURNS.
(a) All accounts receivable reflected on the Balance Sheet or
arising since the date thereof are good and have been collected or are
collectible, without resort to litigation or extraordinary collection activity,
within 90 days after the Closing Date (subject to the reserve for bad debts
reflected on the Balance Sheet or except as set forth on SCHEDULE 4.11(a)), and
are subject to no defenses, set-offs or counterclaims other than normal cash
discounts accrued in the ordinary course of business of ETS and the ETS
Subsidiary. Set forth on SCHEDULE 4.11(a) hereto is a list of all accounts
receivable of ETS and the ETS Subsidiary as of August 31, 1997 showing
separately those receivables which as of such date have been outstanding (i) 1
to 29 days, (ii) 30 to 59 days, (iii) 60 to 89 days, (iv) 90 to 119 days and (v)
more than 119 days.
(b) SCHEDULE 4.11(b) sets forth a complete description of the
policy of ETS and the ETS Subsidiary regarding product returns and revenue
recognition.
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4.12 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.12 contains a complete list and description by
category and indication of status (owned, licensed, completed or in process) of
the following items which are owned, licensed by, licensed to, used or held for
use in or necessary for the conduct of the business of ETS or the ETS Subsidiary
as such business is presently, and contemplated to be, conducted or as to which
ETS or the ETS Subsidiary has a contractual right to an assignment: (i) all
issued patents and pending patent applications (the "PATENTS"); (ii) all
registered and unregistered trademarks, service marks, logos, trade names and
all applications to register the same (the "TRADEMARKS"); (iii) all registered
and unregistered copyrights, and all applications to register the same (the
"COPYRIGHTS"); (iv) all software and databases owned or used by ETS or under
development for ETS (the "SOFTWARE"); and (v) all licenses and agreements
pursuant to which ETS has acquired rights in or to the Trademarks, Patents,
Copyrights or Software (the "LICENSES"). Except as set forth in SCHEDULE 4.12:
the rights of ETS in and to the Trademarks, the Patents, the Copyrights, the
Software, the Licenses, and the trade secrets, know-how, inventions, processes,
procedures and proprietary information owned or used or held for use by ETS or
the ETS Subsidiary (the "TECHNOLOGY") (collectively, the "INTELLECTUAL
PROPERTY") are owned outright by ETS free and clear of any Security Interests,
restrictions or limitations; and all of ETS's rights in and to the Intellectual
Property are freely assignable in its own name, including the right to create
derivatives. Except as set forth in SCHEDULE 4.12(a)(v), neither ETS nor the ETS
Subsidiary is under any obligation to pay any royalty or other compensation to
any third party or to obtain any approval or consent for use of any of the
Intellectual Property. To the knowledge of ETS, no person uses, or has the
right to use, the name "Environmental Test Systems" or any derivation thereof in
connection with the manufacture, sale, marketing or distribution of products and
services commonly associated with ETS and the ETS Subsidiary.
(b) The Intellectual Property covers all patents, trademarks,
trade names, service marks, copyrights and publicity rights, which are necessary
to operate the business of ETS and the ETS Subsidiary as it is presently being,
and contemplated to be, conducted. ETS has delivered to Hach copies of all
copyright and trademark registration certificates, all letters patents, and all
applications therefor and all administrative correspondence with respect
thereto.
(c) Except as set forth in SCHEDULE 4.8, no Intellectual
Property or Software used by either ETS or the ETS Subsidiary and no process,
Software, product or service practiced, offered, licensed by, sold or under
development by either ETS or the ETS Subsidiary infringes any trademark, trade
name, copyright, trade secret, patent, right of publicity, right of privacy or
other proprietary right of any person or would give rise to an obligation to
render an accounting to any person as a result of co-authorship, co-invention or
an express or implied contract for any use or transfer and neither ETS nor the
ETS Subsidiary has received notice of any threatened claim or suit or action
filed asserting any such infringement or asserting that ETS or the ETS
Subsidiary does not have the legal right to own, enforce, sell, license, lease
or otherwise use any such Intellectual Property, product or service and neither
ETS nor the ETS Subsidiary knows of any facts which should give it reason to
believe that there exists any reasonable basis for any such claim or that any
such claim may be asserted in the future based on the issuance of a patent upon
any patent application it knows or has reason to believe is pending. Neither ETS
nor the ETS
14
Subsidiary has sent or otherwise communicated to any other person any notice,
charge, claim or assertion of, nor have they any knowledge of, any present,
impending or threatened infringement by such other person of any Intellectual
Property, by such other person. ETS and the ETS Subsidiary has the right to use
the Intellectual Property, to provide, sell and produce the services and
products provided, sold and produced by them, and to conduct its business as
heretofore conducted, and the consummation of the transactions contemplated
hereby will not alter or impair any such rights.
4.13 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS. Except
as set forth in SCHEDULE 4.13, since December 31, 1996, there has been no change
in or effect on ETS or the ETS Subsidiary and, to the knowledge of ETS, there is
no condition, development or contingency of any kind existing or in prospect
which, so far as reasonably can be foreseen at this time, may result in any
material adverse effect on the business, assets, liabilities, operations,
results of operations or condition (financial or otherwise) or prospects of ETS
and the ETS Subsidiary. Without limiting the foregoing, except as set forth on
SCHEDULE 4.13 hereto, since December 31, 1996 there has not been, occurred or
arisen:
(a) any damage, destruction or loss to any asset of ETS or the
ETS Subsidiary (whether or not covered by insurance) that, individually
or in the aggregate, would have a material adverse effect on the
business, assets, including, liabilities, results of operations,
operations, condition (financial or otherwise) or prospects of ETS and
the ETS Subsidiary;
(b) any change in any accounting principle or method used for
financial reporting purposes by ETS or the ETS Subsidiary;
(c) any commitment (including commitments for additions to
property, equipment or intangible capital assets), transaction or other
action by ETS or the ETS Subsidiary, including, without limitation, any
discharge or satisfaction of any obligation or liability or amendment,
termination or waiver of any claim or right of value, other than in the
ordinary course of business and consistent with past practice;
(d) any amendment or other change to the Articles of
Incorporation or By-Laws of ETS, or the charter or by-laws (or similar
organizational documents with different names) of the ETS Subsidiary;
(e) any declaration, setting aside, or payment of any dividend
or distribution (whether in cash, stock or property or any combination
thereof) in respect of capital stock of ETS or the ETS Subsidiary, or any
direct or indirect redemption, purchase, or other acquisition of shares
of such capital stock or any split, combination or reclassification of
such capital stock;
(f) any sale or other disposition of any right, title or
interest in or to any assets or properties of ETS or the ETS Subsidiary
or any revenues derived therefrom other than in the ordinary course of
business and consistent with past practice;
15
(g) except as disclosed on SCHEDULE 4.17, any general increase
in any compensation or benefits payable to any class or group of
employees of ETS or the ETS Subsidiary, any increase in the compensation
payable or committed to become payable by ETS or the ETS Subsidiary to
any of the individuals listed on SCHEDULE 7.10 hereto (collectively, "KEY
EMPLOYEES") or any bonus, service award, percentage compensation, or
other benefit paid, granted or accrued to or for the benefit of any Key
Employee other than in accordance with an ETS Plan or Compensation
Commitment expressly disclosed on SCHEDULE 4.17 hereto as in effect on
the date hereof;
(h) any borrowing by ETS or the ETS Subsidiary;
(i) any capital expenditures (including any expenditures for
property, plant or equipment) except to the extent of the total amounts
and, to the extent indicated therein, at the times set forth in ETS's
1997 capital expenditure budget and 1998 capital expenditure budget which
are attached hereto as EXHIBIT C (together the "1997 AND 1998 CAPITAL
EXPENDITURE BUDGETS");
(j) any agreement, understanding or transaction for the
acquisition of the business (whether by merger, consolidation,
acquisition of stock or assets, or otherwise) of any corporation, joint
venture, partnership or other entity;
(k) any guarantee of any indebtedness for borrowed money or any
guarantee of any other obligation of any person or entity, in any case,
except in the ordinary course of business and consistent with past
practice;
(l) any write-off as uncollectible of any notes or accounts
receivable except for immaterial write-offs in the ordinary course of
business and consistent with past practice;
(m) any license, sale, transfer, grant of a Security Interest,
disposition, or acquisition of any right, title or interest in or to
Intellectual Property; and
(n) any authorization, approval, agreement or commitment to do
any of the foregoing.
4.14 INSURANCE. All of the properties and assets of ETS and the ETS
Subsidiary which are of an insurable character are insured against loss or
damage by fire and other risks to the extent and in the manner customary for
companies engaged in similar businesses or owning similar assets. Set forth on
SCHEDULE 4.14 hereto is a list of all insurance policies held by ETS or the ETS
Subsidiary (including, without limitation, errors and omissions insurance) and
ETS previously has furnished or made available to Hach true and complete copies
of all such policies. All such policies (i) are in full force and effect; (ii)
are, to ETS's knowledge after due inquiry, valid, binding and enforceable; (iii)
will not be modified or terminated or lapse by reason of the Merger (except as
set forth in SCHEDULE 4.14); and (iv) neither ETS nor the ETS Subsidiary has
received any notice of cancellation with respect thereto. ETS or the ETS
Subsidiary have not failed to give any
16
notice of any claim under any Insurance Policy in due and timely fashion, nor to
the knowledge of ETS, has any coverage for claims been denied, which failure or
denial has had or would have a material adverse effect on the business,
operations, results of operations, assets, liabilities, condition (financial or
otherwise) or prospects of ETS and the ETS Subsidiary, taken as a whole.
4.15 CONTRACTS; ETC.. As used in this Agreement, the Term "ETS
AGREEMENTS" shall mean all mortgages, indentures, notes, agreements, contracts,
leases, licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, whether or
not considered by ETS to be binding or non-binding (including all leases and
other agreements referred to on SCHEDULE 4.9 hereto) to which ETS or the ETS
Subsidiary is a party or by which ETS or the ETS Subsidiary or any of their
respective properties may be bound or affected. Except as listed in SCHEDULES
4.3(a), 4.12, 4.14 and 4.17, and except for the Stockholder's Agreement and
Escrow Agreement, set forth on SCHEDULE 4.15 hereto is a complete and accurate
list (as of the most recent practicable date prior to the date this
representation is being made) of each ETS Agreement material to the businesses,
operations, results of operations, assets, liabilities, condition (financial or
otherwise) or prospects of ETS and the ETS Subsidiary taken as a whole (other
than (a) individual purchase orders entered into in the ordinary course of
business for less than $25,000, (b) individual sales orders received in the
ordinary course of business for less than $25,000, and (c) such other contracts
that involve less than $25,000 over the term of such agreement and have a term
or remaining term of less than one year or are cancelable within one year),
including each of the following ETS Agreements:
(i) any mortgage, indenture, note, installment obligation or
other instrument, agreement or arrangement for or relating to any
borrowing of money by ETS or the ETS Subsidiary;
(ii) any guaranty, direct or indirect, by ETS or the ETS
Subsidiary of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of business;
(iii) any ETS Agreement made other than in the ordinary course of
its business or providing for the grant of any preferential rights to
purchase or lease any of its assets;
(iv) any obligation to register any shares of capital stock of
ETS or the ETS Subsidiary or other securities with the Securities and
Exchange Commission or otherwise relating to such stock or other
securities;
(v) any obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business, assets or stock of
other companies;
(vi) any collective bargaining agreement with any labor union;
(vii) any lease or similar arrangement for the use by ETS or the
ETS Subsidiary of personal property;
17
(viii) any ETS Agreement to which any Insider (as defined in
SECTION 4.18 hereof) is a party;
(ix) any product development or licensing contracts;
(x) any ETS Agreement containing non-competition or other
limitations restricting the conduct of the business of ETS or the ETS
Subsidiary;
(xi) any partnership, joint venture or similar agreement;
(xii) any ETS Agreement with a term in excess of one (1) year and
providing for payments of $25,000 over the term of such agreement;
(xiii) any confidentiality agreements, independent contractor
agreements and assignments of rights to Intellectual Property; and
(xiv) any agreements or arrangement with other equipment
manufacturers (OEM) for the manufacture of products for sale by ETS under
ETS' label or the manufacture by ETS of ETS' products for sale by such
manufacturer under its label.
True and complete copies of all written ETS Agreements referred to on SCHEDULE
4.3(a), SCHEDULE 4.3(b), SCHEDULE 4.12, SCHEDULE 4.14, SCHEDULE 4.15 and
SCHEDULE 4.17 hereto have heretofore been delivered or made available to Hach,
and ETS has provided Hach with accurate written summaries of all such ETS
Agreements which are unwritten. Except as set forth in SCHEDULE 4.15, neither
ETS nor the ETS Subsidiary nor, to the knowledge of ETS after due inquiry, any
other party thereto is in breach of or default under any ETS Agreement, and to
the knowledge of ETS after due inquiry no event has occurred which (after notice
or lapse of time or both) would become a breach or default under, or would
permit modification, cancellation, acceleration or termination of, any ETS
Agreement or result in the creation of any Security Interest upon, or any person
obtaining any right to acquire, any properties, assets or rights of ETS or the
ETS Subsidiary. Except as disclosed in SCHEDULE 4.15, there are no unresolved
disputes involving ETS or the ETS Subsidiary under any ETS Agreement.
4.16 LABOR RELATIONS. As of October 31, 1997, ETS and the ETS
Subsidiary employed a total of 79 full-time employees and no temporary employees
and, as of the date hereof, except as set forth on SCHEDULE 4.16, (a) neither
ETS nor the ETS Subsidiary is delinquent in the payment (i) to or on behalf of
any past or present employees of any wages, salaries, commissions, bonuses,
benefit plan contributions or other compensation for all periods prior to the
date hereof or the Effective Time, as the case may be, (ii) of any amount which
is due and payable to any state or state fund pursuant to any workers'
compensation statute, rule or regulation or any amount which is due and payable
to any workers' compensation claimant or any other party arising under or with
respect to a claim that has been filed under state statutes and approved in the
ordinary course in accordance with ETS's policies regarding workers'
compensation and/or any applicable statute or administrative procedure;
(b) there is no unfair labor practice charge or complaint against ETS or the ETS
Subsidiary pending before the National Labor Relations Board or other
18
Governmental Entity, and, to the knowledge of ETS, none is threatened; (c) there
is no labor strike, dispute, slowdown or stoppage actually in progress or, to
the knowledge of ETS, threatened against ETS or the ETS Subsidiary; (d) there
are no union or collective bargaining agreements in effect, and there are no
union organizational drives in progress and there has been no formal or informal
request to ETS or the ETS Subsidiary for collective bargaining or for an
employee election from any union or from the National Labor Relations Board;
(e) no union representation or jurisdictional dispute or question exists
respecting the employees of ETS or the ETS Subsidiary; and (f) no grievance or
arbitration proceedings are pending and no claim therefor has been asserted
against ETS or the ETS Subsidiary. Set forth on SCHEDULE 4.16 is the form of
confidentiality agreement signed by each employee of ETS or the ETS Subsidiary
who has access to Technology. Except as set forth on SCHEDULE 4.16, ETS has
complied with all of the requirements of the Immigration Reform and Control Act
of 1986, including without limitation completed and maintained all I-9 Forms.
4.17 EMPLOYEE COMPENSATION.
(a) Set forth on SCHEDULE 4.17 hereto is a true and complete
list of:
(i) each pension, profit-sharing, thrift, deferred
compensation, stock ownership, stock purchase, stock option, performance,
bonus, incentive, retirement, severance, welfare, hospitalization or
other medical, dental, disability, life or other insurance, or other
employee benefit plan, trust or arrangement of any kind, whether written
or oral, whether or not considered by ETS to be binding or non-binding
(including, but not limited to any such plan within the meaning of
Section 3 of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA")),
which ETS or the ETS Subsidiary maintains or has maintained, has or ever
had in effect or is or ever was required to make contributions to
(collectively, "ETS PLANS");
(ii) each agreement, arrangement, commitment and
understanding of any kind, whether written or oral, whether or not
considered by ETS to be binding or non-binding, with any current or
former officer, director, employee or consultant of ETS or the ETS
Subsidiary or with any such consultant's employees pursuant to which
payments may be required to be made at any time following the date hereof
(including, without limitation, any employment, deferred compensation,
severance, termination and consulting agreements);
(iii) any other plan, agreement, arrangement, policy or
understanding, whether written or oral, whether or not considered by ETS
to be binding or non-binding, relating to any other compensation,
remuneration or benefits of any nature whatsoever (including, without
limitation, bonuses, incentives, vacation pay, holiday pay, insurance,
severance or retirement), in which any current or former officer,
director or employee of ETS or the ETS Subsidiary participates or has
participated since December 31, 1994 (all of the foregoing in clauses
(ii) and (iii) being referred to herein collectively as "COMPENSATION
COMMITMENTS"); or
19
(iv) any loans between ETS and any current or former
officer, director, employee or consultant ("ETS LOANS").
True and complete copies of all written ETS Plans and Compensation Commitments
referred to in SCHEDULE 4.17 (including all documents governing obligations, and
the most recent valuation or actuarial reports, annual reports and determination
letters relating to any ERISA Plans (as defined below)), have heretofore been
delivered to Hach, and ETS has provided Hach with accurate written summaries of
all such ETS Plans and Compensation Commitments which are unwritten; provided,
that, as to customary, unwritten arrangements for payment of wages, ETS has
provided Hach a listing of all employees by position and current rate of pay
only. Neither ETS nor the ETS Subsidiary has made any express commitment or has
any formal plan, whether considered by ETS to be legally binding, or not, to
create any additional ETS Plan or Compensation Commitment or to modify or change
in any material respect any existing ETS Plan or Compensation Commitment, except
as described on SCHEDULE 4.17 hereto.
(b) With respect to the ETS Plans and Compensation Commitments
and Employee Loans:
(i) Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agrement,will, in and of itself, result in (A) an event of default under
any ETS Plan or Compensation Commitment; (B) a payment, restriction or
limitation upon the assets of any ETS Plan or Compensation Commitment, or
(C) acceleration of payment or vesting, increase in benefits or
compensation or required funding, with respect to any ETS Plan or
Compensation Commitment, or the forgiveness of any Employee Loan;
(ii) No compensation payable by ETS to any of its
employees, officers, or directors under any ETS Plan or Compensation
Commitment will be subject to disallowance under Section 162(m) of the
Code;
(iii) No employee and no beneficiary or dependent of any
employee is or may become entitled under any ETS Plan (other than the
distribution of benefits to eligible employees and beneficiaries under
the current terms of the ETS 401(k) Plan and the ETS ESOP) or
Compensation Commitment to post-employment benefits of any kind,
including without limitation, death or medical benefits, other than
continuation health care coverage required by Section 4980B of the Code;
and
(iv) All liabilities and obligations of ETS with respect
to each and every ETS Plan and Compensation Commitment as of the Closing
Date have been paid in full or accrued and reflected on the Financial
Statements.
(c) SCHEDULE 4.17 hereto indicates each ETS Plan which is an
"EMPLOYEE PENSION BENEFIT PLAN" or an "EMPLOYEE WELFARE BENEFIT PLAN" (as such
terms are defined in
20
Section 3(3) of ERISA) maintained or contributed to by ETS or the ETS Subsidiary
(collectively, the "ERISA PLANS"). Except as set forth on SCHEDULE 4.17:
(i) each of the ERISA Plans (1) is currently in material
compliance, to the extent currently required to be in compliance, with
all applicable federal laws, including but not limited to ERISA, and the
Internal Revenue Code of 1986, as amended (the "CODE"), and (2) has been
administered in material compliance with the terms of such Plan and with
all applicable federal and state laws, including but not limited to ERISA
and the Code;
(ii) except as identified in SCHEDULE 4.17, none of the
ERISA Plans ever maintained by ETS or the ETS Subsidiary is or was ever
intended to be "QUALIFIED" within the meaning of Section 401(a) of the
Code;
(iii) none of the ERISA Plans is or has been a
"MULTIEMPLOYER PLAN" (as that term is defined in Section 3(37) of ERISA,
"MULTIEMPLOYER PLAN") and neither ETS nor the ETS Subsidiary has ever
contributed to or participated in a Multiemployer Plan;
(iv) neither ETS nor the ETS Subsidiary, nor any of the
ERISA Plans, nor any trust created thereunder, nor any trustee or
administrator thereof, has engaged in a transaction involving an ERISA
Plan in connection with which ETS or the ETS Subsidiary would be subject
to either a civil penalty assessed pursuant to Section 502(i) of ERISA,
or a tax imposed by Section 4975 of the Code.
(d) With respect to all group health plans (as such term is
defined in Section 5000(b)(1) of the Code, "GROUP HEALTH PLANS") maintained by
ETS or the ETS Subsidiary, ETS or such Subsidiary complied with the continuation
health care coverage requirements of Section 4980B of the Code and Sections 601
through 608 of ERISA (collectively, the "CONTINUATION COVERAGE REQUIREMENTS")
for all qualifying events within the meaning of Section 4980B(f)(3) of the Code
and Section 603 of ERISA ("QUALIFYING EVENTS"), affecting any current or former
employee of ETS or such Subsidiary and any qualified beneficiary related to such
employee or former employee (as defined in Section 4980B(g)(1) of the Code and
Section 607(3) of ERISA, "QUALIFIED BENEFICIARY"). Except as set forth on
SCHEDULE 4.17, there are no current or former employees of ETS or the ETS
Subsidiary or any Qualified Beneficiary related to any such employee or former
employee receiving or eligible to receive continued health care pursuant to the
Continuation Coverage Requirements.
4.18 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 4.18 hereto is
a complete and accurate list of (i) all ETS Agreements to which any Insider (as
defined below) is a party and (ii) a complete and accurate description of all
transactions between ETS, the ETS Subsidiary or any ETS Plan, on one hand, and
any Insider, on the other hand, that have occurred since January 1, 1994. For
purposes of this Agreement:
21
(w) the term "INSIDER" shall mean Harry Stephenson and any
stockholder, any director or officer of ETS or the ETS Subsidiary, and
any Affiliate, Associate or Relative of any of the foregoing persons,
(x) an "AFFILIATE" of a specified person is a person that
directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, the person specified,
(y) an "ASSOCIATE" of a specified person means (i) a
corporation or other organization other than ETS or the ETS Subsidiary of
which such person is an officer or partner or is, directly or indirectly,
the beneficial owner of 10% or more of any class of equity securities,
(ii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar capacity, and (iii) any Relative of such person who has the same
home as such person or who is a director or officer of ETS or the ETS
Subsidiary,
(z) a "RELATIVE" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
4.19 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 4.19:
(a) the operations of ETS and the ETS Subsidiary are in
material compliance with all applicable Environmental Laws;
(b) ETS and the ETS Subsidiary have obtained and currently
maintain all Environmental Permits;
(c) there are no judicial or administrative actions,
proceedings, or investigations pending or, to the knowledge of ETS, threatened
against ETS or the ETS Subsidiary alleging the violation of, or liability
pursuant to, any Environmental Law or Environmental Permit;
(d) neither ETS nor the ETS Subsidiary, nor to ETS's knowledge,
any predecessor of ETS or the ETS Subsidiary, has filed any notice under any
Environmental Law indicating past or present treatment, storage, or disposal of
or reporting of a Release or threatened Release of Hazardous Material into the
environment;
(e) neither ETS nor the ETS Subsidiary, nor to the knowledge of
ETS, any of its past or current facilities and operations, or, to ETS's
knowledge, any predecessor of ETS or the ETS Subsidiary, is subject to any
outstanding written order, injunction, judgment, decree, ruling, assessment, or
arbitration award of any agreement with any Governmental Entity or other person
relating to Environmental Laws or the Release of Hazardous Materials;
22
(f) there is not now, nor, to the knowledge of ETS, has there
been in the past, on, in, or under the Real Property or any other real property
currently or formerly owned, leased, or operated by ETS or the ETS Subsidiary or
any of its predecessors (i) any underground storage tanks, above-ground storage
tanks, dikes, or impoundments containing Hazardous Materials, (ii) any
asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances; and
(g) neither ETS nor the ETS Subsidiary is subject to
Environmental Costs and Liabilities with respect to Hazardous Materials, and no
facts or circumstances exist that could reasonably be likely to result in ETS or
the ETS Subsidiary incurring Environmental Costs and Liabilities in excess of
$10,000 individually or $25,000 in the aggregate.
(h) For purposes of the foregoing SECTION 4.19:
"ENVIRONMENTAL COSTS AND LIABILITIES" shall mean any and all
losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including fees, disbursements, and
expenses of legal counsel, experts, engineers, and consultants and the
costs of investigation and feasibility studies, remedial or removal
actions, and cleanup activities) arising from or under any Environmental
Law or Environmental Claim or any order or agreement now in effect with
any Governmental Entity or other person.
"ENVIRONMENTAL LAW" means any applicable federal, state, local or
foreign law (including common law), statute, code, ordinance, rule,
regulation or other requirement relating to the environment, natural
resources, or public and employee health and safety and includes, the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, ET SEQ., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, ET SEQ., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, ET SEQ., the Clean Water Act, 33
U.S.C. Section 1251 ET SEQ., the Clean Air Act, 33 U.S.C. Section 2601,
ET SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601, ET
SEQ., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
Section 136, ET SEQ., the Oil Pollution Act of 1990, 33 U.S.C. Section
2701, ET SEQ., the Federal Safe Drinking Water Act, 42 U.S.C. Section
300F, ET SEQ., and the Occupational Safety and Health Act, 29 U.S.C.
Section 651, ET SEQ., as such laws have been amended or supplemented,
and the regulations promulgated pursuant thereto, and all analogous state
or local statutes.
"ENVIRONMENTAL PERMIT" means any permit, approval, authorization,
license, variance, registration, or permission required of ETS or the ETS
Subsidiary under any applicable Environmental Law.
"HAZARDOUS MATERIAL" means any substance, material, or waste which
is regulated by any Governmental Entity, including, any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous substance,"
"restricted hazardous waste," "contaminant," "toxic waste," or "toxic
substance" under any provision of Environmental Law, which includes,
23
petroleum, petroleum products (including crude oil and any fraction
thereof), asbestos, asbestos-containing materials, urea formaldehyde, and
polychlorinated biphenyls.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the indoor or outdoor
environment or into or out of any property.
4.20 ETS PRODUCTS; REGULATION. Except as disclosed in SCHEDULE 4.20,
(a) there have been no written notices, citations or decisions by any
Governmental Authority that any product produced, manufactured, marketed or
distributed at any time by ETS or the ETS Subsidiary (the "ETS PRODUCTS") is
defective or fails to meet any applicable standards promulgated by any such
Governmental Authority; (b) ETS and the ETS Subsidiary have complied in all
material respects with the laws, regulations and specifications with respect to
design, manufacture, labeling, testing and inspection of ETS Products
promulgated by the Food and Drug Administration ("FDA"); (c) there have been no
recalls or seizures ordered or to the knowledge of ETS threatened by any such
Governmental Authority with respect to any of the ETS Products; and (d) neither
ETS nor the ETS Subsidiary have received any warning letter from the FDA.
4.21 CUSTOMERS AND SUPPLIERS. ETS has made available to Hach a list of
its customers. Except as set forth in SCHEDULE 4.21, no customer which,
individually or in the aggregate, accounted for more than 5% of ETS's
consolidated revenues during the 12 month period preceding the date hereof, and
no supplier or service provider or group of suppliers or service providers
which, individually or in the aggregate, accounted for more than 5% of ETS's
consolidated expenses during the 12 month period preceding the date hereof, has
canceled or otherwise terminated, or made any written threat to ETS or the ETS
Subsidiary to cancel or otherwise terminate, for any reason, including, without
limitation, the consummation of the transactions contemplated hereby, its
relationship with ETS or the ETS Subsidiary or has at any time on or after
December 31, 1996 decreased materially its services to ETS or the ETS Subsidiary
in the case of any such service provider, or its usage of the services or
products of ETS and the ETS Subsidiary. To the knowledge of ETS, no such
customer or supplier or service provider intends to cancel or otherwise
terminate its relationship with ETS or the ETS Subsidiary or to decrease
materially its services to ETS or the ETS Subsidiary or its usage of the
services or products of ETS and the ETS Subsidiary.
4.22 OPINION OF FINANCIAL ADVISOR. The Environmental Test Systems,
Inc. Employee Stock Ownership Plan ("ETS ESOP") has received the written opinion
of Comstock Valuation Advisors, Inc. ("COMSTOCK") on the date of this Agreement
to the effect that the Class A Merger Consideration to be received by the ETS
ESOP from Hach is not less than the "fair market value" of the ETS Class A
Common Stock held by the ETS ESOP and that the terms of the transactions
pursuant to this Agreement, including the disposition of the ETS ESOP, is fair
to the ETS ESOP and its participants from a financial point of view. ETS will
promptly, after the date of this Agreement, deliver a copy of such opinion to
Hach. A copy of the Comstock engagement letter, dated December 1, 1997, has
previously been delivered to Hach.
24
4.23 NO EXISTING DISCUSSIONS. As of the date of this Agreement, ETS is
not engaged, directly or indirectly, in any discussions with any other party
with respect to any Business Combination Transaction (as defined herein).
4.24 BROKERS. Neither ETS, nor the ETS Subsidiary, nor any director,
officer or employee thereof has employed any broker or finder or has incurred or
will incur any broker's, finder's or similar fees, commissions or expenses, in
each case in connection with the transactions contemplated by this Agreement.
4.25 ACCURACY AND COMPLETENESS OF ALL STATEMENTS. Each representation
or warranty by ETS made pursuant hereto (including the schedules hereto) and all
closing certificates hereafter provided by ETS pursuant to the terms hereof will
be true and correct in all material respects as of the date hereof and as of the
Closing Date and does not, and will not as of the Closing Date, omit any
material fact required to make the statements contained therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HACH AND MERGERCO
Hach and Mergerco hereby represent and warrant to ETS as follows:
5.1 ORGANIZATION AND GOOD STANDING. Each of Hach and Mergerco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
5.2 AUTHORITY; NONCONTRAVENTION. Each of Hach and Mergerco has the
corporate power and authority to execute and deliver this Agreement, the
Stockholder's Agreement and the Escrow Agreement and to perform its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement, the Stockholder's Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of each of Hach and Mergerco
(but with respect to Mergerco as to only the Merger Agreement) and by Hach as
the sole stockholder of Mergerco and no other corporate proceedings on the part
of Hach or Mergerco (but with respect to Mergerco as to only the Merger
Agreement) are necessary to authorize and approve this Agreement, the
Stockholder's Agreement and the Escrow Agreement and the transactions
contemplated hereby and thereby. This Agreement, the Stockholder's Agreement and
the Escrow Agreement have been duly executed and delivered by, and constitute
valid and binding obligations of, Hach and Mergerco (but with respect to
Mergerco as to only the Merger Agreement) enforceable against Hach and Mergerco
(but with respect to Mergerco as to only the Merger Agreement) in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies). The execution, delivery and performance of
this Agreement, the Stockholder's Agreement and the Escrow Agreement by Hach and
Mergerco (but with respect to Mergerco as to only the Merger
25
Agreement) and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws of Hach or Mergerco;
(ii) violate or conflict with any Legal Requirements or result
in the termination or material modification of any Permit applicable to
Hach or Mergerco or any of their respective businesses or properties
except for such violations and conflicts which would not, in the
aggregate, have a material adverse effect on Hach's or Mergerco's ability
to perform their obligations hereunder; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority to be made or
obtained by Hach or Mergerco, except in connection with or in compliance
with the provisions of the Delaware Corporation Law, the Securities Act
of 1933, ("Securities Act") the Securities and Exchange Act of 1934
("Exchange Act"), and the HSR Act under which a filing may be required in
connection with the Merger.
(iv) conflict with, result in a breach of, or constitutes a
default under any note, bond, indenture, mortgage, deed of trust,
license, contract, lease, agreement, arrangement, commitment or other
instrument to which Hach or Mergerco is a party or by which Hach or
Mergerco is subject or bound and which is material to Hach on a
consolidated basis;
(v) result in the creation of a Security Interest, upon any
right, property or asset of Hach or Mergerco; or
(vi) terminate or give any person, corporation or entity the
right to terminate, accelerate, amend, modify or refuse to perform under
any note, bond, indenture, mortgage, deed of trust, license, lease,
contract, agreement, arrangement, commitment or other instrument to which
Hach or Mergerco is bound or with respect to which Hach or Mergerco is to
perform any duties or obligations or receive any rights or benefits.
5.3 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of Hach consists of 25,000,000 shares of Hach Common Stock and
20,000,000 shares of Hach Class A Common Stock. As of January 16, 1998,
8,238,001 shares of Hach Common Stock and 8,230,133 shares of Hach Class A
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable. The authorized capital stock of Mergerco consists
of 1,000 shares of Mergerco Common Stock, all of which, as of the date of this
Agreement, are issued and outstanding and held by Hach. Except as contemplated
by this Agreement and as set forth in this SECTION 5.3 and SCHEDULE 5.3, as of
the date of this Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Hach or any Subsidiary of Hach, including Mergerco,
obligating Hach or any Hach Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in Hach or any Hach Subsidiary. Between
October 31, 1997 and the date of this
26
Agreement, no shares of Hach Common Stocks have been issued by Hach, except
pursuant to the exercise of the stock options and stock purchase rights
described above that were outstanding on September 30, 1997, in each case, in
accordance with their respective terms. There are no outstanding contractual
obligations of Hach or any Hach Subsidiary to repurchase, redeem or otherwise
acquire any shares of Hach Common Stocks, or any capital stock of, or any equity
interests in, any Hach Subsidiary. The shares of Hach Common Stocks to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights created by statute,
Hach's Amended and Restated Certificate of Incorporation or By-laws or any
agreement to which Hach is a party or by which Hach is bound and will, when
issued, be registered under the Securities Act and the Exchange Act and
registered or exempt from registration under applicable state securities laws
("Blue Sky Laws").
5.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Hach has filed all forms, reports and documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") since
December 31, 1994 (collectively, the "HACH SEC REPORTS"). The Hach SEC Reports
(i) were prepared in all material respects in accordance with the requirements
of the Securities Act and the Exchange Act, as the case may be, and the rules
and regulations thereunder and (ii) did not, at the time they were filed (or at
the effective date thereof in the case of registration statements), contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No
Subsidiary of Hach is currently required to file any form, report or other
document with the SEC under Section 12 of the Exchange Act.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in Hach SEC Reports, the consolidated
financial statements of Hach and its consolidated Hach Subsidiaries for the year
ended April 30, 1997 and the unaudited consolidated financial statements of Hach
and its consolidated Hach Subsidiaries for the quarter ended October 31, 1997
was prepared in accordance with GAAP consistently applied throughout the periods
indicated (except as may be indicated in the notes thereto and except that
financial statements included with interim reports do not contain all GAAP notes
to such financial statements) and each fairly presented in all material respects
the consolidated financial position, results of operations and changes in
shareholders' equity and cash flows of Hach and its consolidated subsidiaries as
at the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected to be, individually or in the
aggregate, material to the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Hach and its Subsidiaries,
taken as a whole.
(c) For purposes of this SECTION 5.4 only, the term "material"
shall have the meaning used by courts and the SEC when applying the Securities
Act and the Exchange Act to particular facts and circumstances.
27
5.5 ABSENCE OF LITIGATION. Except as disclosed in SCHEDULE 5.5 or the
Hach SEC Reports filed prior to the date of this Agreement, there is no claim,
action, suit, litigation, inquiry, review, proceeding or investigation pending
or, to the knowledge of Hach or any Hach Subsidiary after due inquiry,
threatened against or affecting Hach, any Hach Subsidiary, any Hach Benefit Plan
or any of their respective properties or rights before any court, arbitrator,
panel, agency or governmental, administrative or judicial, authority, which (a)
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the business, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of Hach and its
Subsidiaries taken as a whole or (b) seeks to delay or prevent the consummation
of the Merger. Neither Hach nor any Hach Subsidiary nor any property or asset
of Hach or any Subsidiary is in violation of any Legal Requirement,
individually or in the aggregate, a material adverse effect on the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of Hach and its Subsidiaries, taken as a whole.
5.6 OWNERSHIP OF MERGERCO; NO PRIOR ACTIVITIES.
(a) Mergerco was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the Merger and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Mergerco has not and
will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any person.
5.7 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Hach or Mergerco.
5.8 ACCURACY AND COMPLETENESS OF ALL STATEMENTS. Each representation
or warranty by Hach made pursuant hereto (including the schedules hereto) and
all closing certificates hereafter provided by Hach pursuant to the terms hereof
will be true and correct in all material respects as of the date hereof and as
of the Closing Date and does not, and will not as of the Closing Date, omit any
material fact required to make the statements contained therein not misleading.
28
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 REGISTRATION STATEMENT; PROXY STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, Hach shall prepare and file with the SEC a registration statement on
Form S-4 or the appropriate form (together with all amendments thereto, the
"REGISTRATION STATEMENT") including therein a combined proxy statement to be
sent to the stockholders of ETS (the "PROXY STATEMENT") and Prospectus, in
connection with the registration under the Securities Act of the shares of Hach
Common Stocks to be issued to the shareholders of ETS pursuant to the Merger.
Hach and ETS each shall use all reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Hach shall take all or any action
required under any applicable federal or state securities laws in connection
with the issuance of shares of Hach Common Stocks pursuant to the Merger. ETS
shall furnish all information concerning ETS as Hach may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Proxy Statement. As promptly as practicable after the Registration
Statement shall have become effective, ETS shall mail the Proxy Statement to its
shareholders. The Proxy Statement shall include the recommendation of the Board
of Directors of ETS in favor of the Merger, unless otherwise necessary due to
the applicable fiduciary duties of the directors of the Company, as determined
by such directors in good faith after consultation with independent legal
counsel (who may be such party's regularly engaged independent legal counsel),
subject to SECTION 6.10.
No amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Hach or ETS without the approval of the other party,
which shall not be unreasonably withheld. Hach and ETS each will advise the
other, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Hach Common Stocks issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
Hach shall promptly prepare and submit to NASDAQ a listing application
covering the shares of Hach Common Stocks issuable in the Merger, and shall use
its reasonable best efforts to obtain, prior to the Effective Time, approval for
the listing of such Hach Common Stocks, subject to official notice of issuance
and ETS shall cooperate with Hach with respect to such listing.
(b) Hach represents, warrants and agrees that the information
supplied by Hach for inclusion in the Registration Statement and the Proxy
Statement shall not at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the shareholders of ETS, (iii) the time
of the ETS Shareholders' Meeting, and (iv) the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with
29
respect to any material fact, or omits to state any material fact required to be
stated therein, or necessary in order to make the statements therein not false
or misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the ETS Shareholders' Meeting
which shall have become false or misleading. If at any time prior to the
Effective Time any event or circumstance relating to Hach or any Hach
Subsidiary, or their respective officers or directors, should be discovered by
Hach which should be set forth in an amendment or a supplement to the
Registration Statement or Proxy Statement, Hach shall promptly inform ETS.
Notwithstanding the foregoing, Hach and Mergerco make no representation or
warranty with respect to any information supplied by ETS or any of its
representatives which is contained in the Proxy Statement documents. All
documents that Hach is responsible for filing with the SEC in connection with
the transactions contemplated herein will comply as to form and substance in all
material aspects with the applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder and the Exchange Act and the rules
and regulations promulgated thereunder.
(c) ETS represents, warrants and agrees that the information
supplied by ETS for inclusion in the Registration Statement and the Proxy
Statement shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the shareholders of ETS, (iii) the time
of the ETS Shareholders' Meeting, and (iv) the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omits to
state any material fact required to be stated therein, or necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the ETS Shareholders' Meeting which shall have become false or
misleading. If at any time prior to the Effective Time any event or
circumstance relating to ETS or any ETS Subsidiary, or their respective officers
or directors, should be discovered by ETS which should be set forth in an
amendment or a supplement to the Registration Statement or Proxy Statement, ETS
shall promptly inform Hach. Notwithstanding the foregoing, ETS makes no
representation or warranty with respect to any information supplied by Hach or
any of its representatives in the Proxy Statement documents. All documents that
ETS is responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations promulgated thereunder and the Exchange Act and the rules and
regulations promulgated thereunder.
(d) ETS, Hach and Mergerco each hereby (i) consents to the use
of its name and, on behalf of its Subsidiaries and Affiliates, the names of such
Subsidiaries and Affiliates and to the inclusion of financial statements and
business information relating to such party and its Subsidiaries and Affiliates
(in each case, to the extent required by applicable securities laws) in the
Registration Statement or the Proxy Statement; (ii) agrees to use all reasonable
efforts to obtain the written consent of any person or entity retained by it
which may be required to be named (as an expert or otherwise) in the
Registration Statement or the Proxy Statement; and (iii) agrees to cooperate,
and agrees to use all reasonable efforts to cause its Subsidiaries and
Affiliates to cooperate, with any legal counsel, investment banker, accountant
or other agent or representative retained by any of the parties specified in
clause (i) above in connection with the preparation of
30
any and all information required, as determined after consultation with each
party's counsel, to be disclosed by applicable securities laws in the
Registration Statement or the Proxy Statement.
6.2 SHAREHOLDERS' MEETING. ETS shall use all reasonable efforts to
hold a meeting of its shareholders (the "ETS SHAREHOLDERS' MEETING") on or prior
to the 35th day following the date on which the Registration Statement becomes
effective, for the purpose of voting upon the approval of this Agreement and the
Merger. ETS shall take all action reasonably necessary or advisable to secure
the vote or consent of shareholders required by Indiana Corporation Law in favor
of such approval (including unanimously recommending such approval), unless
otherwise necessary and mandatory under the applicable fiduciary duties of the
directors of ETS, as determined by such directors in good faith after
consultation with independent legal counsel (who may be such party's regularly
engaged independent legal counsel).
6.3 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing
Date, ETS will and will cause the ETS Subsidiary to (i) provide, to the officers
and other authorized representatives of Hach full access, during normal business
hours, to any and all premises, properties, files, books, records, documents,
and other information of ETS and the ETS Subsidiary, and will cause its
respective officers to furnish to Hach or its authorized representatives any and
all financial, technical and operating data and other information pertaining to
the businesses and properties of ETS or the ETS Subsidiary as may be reasonably
requested by Hach and (ii) make available for inspection and copying by Hach
true and complete copies of any documents relating to the foregoing. All
information received by Hach pursuant to this SECTION 6.3 shall be held by it in
accordance with the terms of the Confidentiality Agreements dated October 23,
1997 between Hach and ETS.
6.4 CONDUCT OF BUSINESS OF ETS PRIOR TO THE EFFECTIVE TIME. ETS
agrees that from and after the date hereof until the Effective Time and except
as otherwise consented to or approved by Hach in writing:
(a) The business of ETS and the ETS Subsidiary shall be
conducted only in, and ETS and the ETS Subsidiary shall not take any action
except in, the ordinary course of business and consistent with past practice;
(b) No amendment or other change shall be made in the Articles
of Incorporation or By-Laws of ETS or in the charter or by-laws (or similar
organization documents with different names) of the ETS Subsidiary;
(c) Neither ETS nor the ETS Subsidiary shall (i) issue, grant,
sell or encumber any shares of its capital stock or (ii) issue, grant, sell, or
encumber any security, option, warrant, put, call, subscription or other right
of any kind, fixed or contingent, that directly or indirectly calls for the
acquisition, issuance, sale, pledge or other disposition of any shares of
capital stock of ETS or the ETS Subsidiary, (iii) enter into any agreement,
commitment or understanding calling for any transaction referred to in clause
(i) or (ii) of this paragraph (c), or (iv) make any other changes in its equity
capital structure;
31
(d) No dividend shall be declared or paid or other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect of any capital stock of ETS or the ETS Subsidiary,
nor shall ETS or the ETS Subsidiary, directly or indirectly, purchase, acquire
or redeem or split, combine or reclassify any shares of the capital stock of ETS
or the ETS Subsidiary except that ETS may pay to its stockholders its normal and
customary quarterly cash dividend in an amount not to exceed $0.24112 per share
on the ETS Class A Common Stock for each such dividend until the Effective Time
and the ETS Subsidiary may pay to ETS a cash dividend in the ordinary course of
business in accordance with past practice.
(e) Except as set forth in SCHEDULE 6.4, neither ETS nor the
ETS Subsidiary shall make any capital expenditures (including expenditures for
additions to plant, property and equipment) or appropriations or commitments
with respect thereto, except (i) to the extent of the total dollar amounts and,
to the extent indicated therein, at the times set forth in ETS's 1997 and 1998
Capital Expenditure Budgets; provided, however, that ETS shall not be deemed to
have breached this clause (i) of this subsection (e) so long as ETS and the ETS
Subsidiary shall not have made any such expenditures, appropriations or
commitments in the aggregate in excess of more than $25,000 above the budgeted
amounts and (ii) such additional capital expenditures, appropriations or
commitments as ETS and Hach mutually may agree upon;
(f) Except as set forth in SCHEDULE 6.4, neither ETS nor the
ETS Subsidiary shall without the prior written consent of Hach which consent
shall be promptly considered and not unreasonably withheld:
(i) enter into any distribution agreements;
(ii) amend the 1997 and 1998 operating budgets of ETS, a
copy of each is attached hereto as EXHIBIT D (together the "1997 AND 1998
OPERATING BUDGETS");
(iii) pay, discharge or satisfy claims, liabilities or
obligations (absolute, accrued, contingent or otherwise and whether due
or to become due), other than (A) liabilities or obligations incurred in
the ordinary course of business and consistent with past practice, (B)
the payment or discharge of obligations as contemplated by this Agreement
and (C) scheduled repayments of current portions of principal and
interest on long-term indebtedness, the estimated amounts of which
payments (which in the case of interest payments on variable rate debt
have been projected on the basis of rates currently in effect) have prior
to the execution of this Agreement been disclosed by ETS to Hach in a
writing which specifically refers to this SECTION 6.4;
(iv) create, incur or assume any indebtedness including
purchase money indebtedness or guarantee any indebtedness for money
borrowed or guarantee any other obligation of any person or entity;
32
(v) make any loans, advances or capital contributions
to, or investments in, any other person, other than short-term
investments in the ordinary course of business in obligations of the
United States of America for which the full faith and credit of the
United States of America is pledged to provide for the payment of
principal and interest or certificates of deposit issued by a commercial
bank or banks having at least $500 million or equivalent in other
currency in undivided capital and surplus;
(vi) other than to the extent provided for and at the
times, if indicated, in the 1997 and 1998 Operating Budgets, and other
than with respect to any ETS obligation to purchase ETS Class A Common
Stock from ETS ESOP participants whose employment is terminated prior to
the Closing, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business,
involving total payments to or by ETS or the ETS Subsidiary of, or
involving the acquisition or disposition by ETS or the ETS Subsidiary of
property, assets, or rights having a value of, at least $15,000;
provided, however, that no transaction shall be permitted by this clause
(vi) which is otherwise prohibited by the terms of this Agreement.
Notwithstanding the foregoing, nothing in this subsection (f) shall prevent any
borrowing or advances between or among ETS and the ETS Subsidiary or the
endorsement of negotiable instruments in the ordinary course of business;
(g) Without the prior written consent of Hach which consent
shall be promptly considered and not unreasonably withheld, ETS will not, and
will not permit the ETS Subsidiary to (i) approve or put into effect any general
increase in any compensation or benefits payable to any class or group of
employees of ETS or the ETS Subsidiary, (ii) grant to any Key Employee any
increase in compensation, remuneration or benefits of any nature whatsoever
including, without limitation, new benefits, (iii) enter into any Compensation
Commitment with any Key Employee, (iv) pay any bonus or other special
compensation to any Key Employee (except pursuant to ETS Plans and Compensation
Commitments disclosed on SCHEDULE 4.17 hereto) or (v) hire any new Key
Employees;
(h) ETS will use, and will cause the ETS Subsidiary to use, its
best efforts to preserve its business organization intact, to keep available to
itself the present services of its Key Employees; and to preserve for itself the
goodwill of its suppliers, customers and others with whom business relationships
exist; PROVIDED that nothing in this subsection (h) shall permit ETS or the ETS
Subsidiary to make or agree to make any increase in compensation, or take any
other action with respect to employees, suppliers or customers, which is
inconsistent with present policies and practices of ETS or such Subsidiary or
with any other provisions of this Agreement without the prior written consent of
Hach which consent shall be promptly considered and not unreasonably withheld;
(i) ETS will not and will not permit the ETS Subsidiary to
adopt or amend in any material respect any ETS Plan (except to the extent
necessary to maintain the ETS Plans' compliance with applicable law) or any
collective bargaining agreement;
33
(j) Neither ETS nor the ETS Subsidiary shall enter into or
approve any ETS Agreement to which an Insider is a party;
(k) Neither ETS nor the ETS Subsidiary shall reorganize,
restructure, recapitalize, liquidate or file a voluntary petition in bankruptcy
or enter into any composition with its creditors or file a voluntary winding up
petition;
(l) Neither ETS nor the ETS Subsidiary shall settle or
compromise any litigation involving the payment of, or any agreement to pay over
time, an amount, in cash, notes or other property, in excess of $15,000 in the
aggregate without the prior consent of Hach; provided, however, that in no event
shall ETS or the ETS Subsidiary settle or compromise any litigation involving
Intellectual Property;
(m) Neither ETS nor the ETS Subsidiary shall take any action or
fail to take any action which would result in any breach of any of its
representations, warranties or covenants contained herein;
(n) Neither ETS nor the ETS Subsidiary shall enter into any
license, sale, transfer, grant of Security Interest, disposition, or acquisition
of any right, title or interest in or to Intellectual Property;
(o) Without limiting any other provision of this Agreement,
neither ETS nor the ETS Subsidiary shall amend or terminate any ETS Agreement or
waive, release or cancel any debts, claims or rights, except in any such case in
the ordinary course of business and consistent with prior practice; or
(p) With respect to all Group Health Plans maintained by ETS or
the ETS Subsidiary, ETS will, and will cause the ETS Subsidiary to, comply with
the Continuation Coverage Requirements for all Qualifying Events affecting any
current or former employee of ETS or the ETS Subsidiary and any Qualified
Beneficiary related to any such employee or former employee. ETS will update
SCHEDULE 4.17 to include any current or former employee of ETS or the ETS
Subsidiary or any Qualified Beneficiary related to any such employee or former
employee who becomes eligible to receive continued health care pursuant to the
Continuation Coverage Requirements prior to the Closing Date.
6.5 CONSENTS; COOPERATION. Subject to the terms and conditions
hereof, ETS and Hach will, and ETS will cause the ETS Subsidiary to, and Hach
will cause Mergerco to use their respective best efforts at their respective own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
the consummation of the transactions contemplated by this Agreement;
34
(ii) to give the other parties prompt prior notice of and to
defend, consistent with applicable principles and requirements of law,
any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third
parties (including governmental authorities) challenging this Agreement
or the transactions contemplated hereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
ETS, Hach and Mergerco will, to the extent permitted by applicable requirements
of law, supply the other parties hereto with copies of all correspondence,
filings or written communications between such party, its Subsidiaries (as
applicable), or its representatives and any governmental authority with respect
to this Agreement and the transactions contemplated hereby.
6.6 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use its best efforts at its
own expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement; provided, however, that the provisions of this SECTION 6.6 AND
OF SECTION 6.4 hereof shall not require Hach, ETS or Mergerco to divest
themselves of any assets or properties or agree to limit the ownership or
operation by Hach, ETS or the ETS Subsidiary of any of the assets, or
businesses of ETS or the ETS Subsidiary following the Effective Time.
6.7 INTERIM FINANCIAL STATEMENTS; 1997 AUDITED FINANCIALS.
(a) Within twenty days after the end of each calendar month
after the date of this Agreement and until the Effective Time, ETS will deliver
to Hach unaudited consolidated statements of income for such calendar month and
the corresponding calendar month of the preceding fiscal year. Within twenty
days after the end of each fiscal quarter after the date of this Agreement and
until the Effective Time, ETS will deliver to Hach an unaudited consolidated
balance sheet as at the end of such fiscal quarter and at the end of the
corresponding fiscal quarter of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flows for the
fiscal quarter then ended. All such financial statements shall present fairly
the financial position, results of operations and cash flows of ETS and its
consolidated subsidiaries as at the date or for the periods indicated in
accordance with GAAP consistently applied (and shall be accompanied by a
certificate of the chief financial or accounting officer of ETS to such effect),
except as otherwise indicated in such statements and subject to normal and
recurring year-end audit adjustments which will not in the aggregate be material
to the business, operations, results of operations, assets, liabilities,
condition (financial or otherwise), or prospects of ETS and the ETS Subsidiary,
taken as a whole; PROVIDED, HOWEVER, that such financial statements need not
contain the footnote disclosures required by GAAP. All unaudited financial
statements delivered pursuant to this SECTION 6.7 shall be prepared on a basis
consistent with the audited financial statements for the year ended December 31,
1996.
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(b) Prior to the Effective Time, ETS will furnish Hach true and
complete copies of the audited consolidated balance sheets of ETS and the ETS
Subsidiary as of December 31, 1997, and the related audited consolidated
statements of income, shareholders' equity and cash flows for the year then
ended ("1997 AUDITED FINANCIALS") and from and after such delivery the 1997
Audited Financials shall be included as part of the "Financial Statements" for
purposes of the representations and warranties to be made by ETS at the
Effective Time in accordance with SECTION 7.1.
6.8 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Effective Time, ETS will give prompt notice in writing to Hach of: (i) any
information that indicates that any representation and warranty contained herein
was not true and correct as of the date hereof or will not be true and correct
as of the Effective Time, (ii) the occurrence or failure to occur of any event
which occurrence or failure to occur will result, or has a reasonable prospect
of resulting, in the failure to satisfy a condition specified in ARTICLE 7
hereof, (iii) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement, (iv) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement, (v) receipt of
any Business Combination Transaction Proposal (as defined below), (vi) any
actions, suits, claims, investigations or proceedings commenced or, to its
knowledge after due inquiry, threatened against, ETS or the ETS Subsidiary or
relating to or involving or otherwise affecting ETS or the ETS Subsidiary or
which relate to the consummation of the transactions contemplated by this
Agreement, and (vii) any notice of, or other communication relating to, any
default or event which, with notice or lapse of time or both, would become a
default under any ETS Agreement. ETS will (w) promptly advise Hach of any
material adverse change in the business, operations, assets, including,
Intellectual Property, liabilities, condition (financial or otherwise), results
of operations or prospects of ETS or the ETS Subsidiary, (x) confer on request
of Hach with one or more designated representatives of Hach to report
operational matters and to report the general status of ongoing operations, and
(y) notify Hach of any emergency or other change in the normal course of
business or in the operation of the properties of ETS or the ETS Subsidiary and
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory proceedings
involving any property of ETS or the ETS Subsidiary, and will keep Hach fully
informed of such events and permit Hach's representatives access to all
materials prepared in connection therewith.
6.9 PUBLICITY. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the transactions contemplated hereby and shall use all reasonable
efforts to agree upon the text of any such press release or public announcement
prior to the publication of such press release or the making of such public
announcement.
6.10 NO SOLICITATION OF TRANSACTIONS. Neither ETS nor the ETS
Subsidiary directly or indirectly, through any officer, director, agent or
otherwise, shall solicit, initiate or encourage the submission of any proposal
or offer from any person relating to a Business Combination Transaction (as
hereinafter defined) with ETS or the ETS Subsidiary or participate in any
36
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing; PROVIDED, HOWEVER, that nothing contained in this SECTION
6.10 shall prohibit the ETS Board of Directors from authorizing ETS or the ETS
Board of Directors or its designees from furnishing information to, or entering
into discussions or negotiations with, any person in connection with an
unsolicited proposal in writing by such person for a Business Combination
Transaction with ETS or the ETS Subsidiary received by the ETS Board of
Directors after the date of the Agreement, if, and only to the extent that,
(a) the ETS Board of Directors, after consultation with its independent legal
and financial advisors and taking into consideration the advice of such
advisors, determines in good faith that (i) such action is required for the ETS
Board of Directors to comply with its fiduciary duties to shareholders imposed
by applicable Legal Requirements and (ii) such unsolicited proposal may be
materially more favorable to the shareholders of ETS than the transactions
contemplated by the Agreement and (b) prior to furnishing such information to,
or entering into discussions or negotiations with, such person, ETS (i) gives
Hach and Mergerco as promptly as practicable prior written notice of the
material terms of such proposal in reasonable detail and of ETS's intention to
furnish such information or begin such discussions and (ii) receives from such
person an executed confidentiality agreement on terms no less favorable to ETS
than those contained in the Confidentiality Agreement dated as of October 23,
1997 between Hach and ETS. In addition, ETS may, but shall not be obligated to,
from time to time notify Hach as to any proposal or offer or any inquiry or
contact with any person with respect to a matter that does not rise to the level
of a Business Combination Transaction Proposal. ETS agrees not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which ETS is a party. For purposes of this Agreement, a proposal
for a Business Combination Transaction that follows the procedure and satisfies
the criteria set forth above in subdivisions (a)(i) and (ii) as well as
subdivisions (b)(i) and (ii) of this Section is deemed to be a business
combination transaction proposal ("BUSINESS COMBINATION TRANSACTION PROPOSAL").
As used herein, the term "BUSINESS COMBINATION TRANSACTION" shall mean any of
the following involving ETS or the ETS Subsidiary: (1) any merger,
consolidation, share exchange, business combination or other similar transaction
(other than the Merger); (2) any sale, lease, exchange, transfer or other
disposition (other than a pledge or mortgage) of 25% or more of the assets of
ETS and the ETS Subsidiary taken as a whole, in a single transaction or series
of transactions; or (3) the acquisition by a person or entity or any "group" (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 33% or more of the shares of
ETS Common Stock, whether by tender offer, exchange offer or otherwise.
6.11 CLOSING BALANCE SHEET AND INCOME STATEMENT, ETS's FINANCIAL
MANAGERS' REPORT.
(a) At least two (2) days prior to the Closing, ETS's Vice
President of Finance shall deliver to Hach a fluctuation analysis report
("FINANCIAL MANAGERS' REPORT") on the most recent statement of income and
balance sheet of ETS delivered pursuant to SECTION 6.7 which will compare actual
results to budgeted amounts and to prior year results for the same period. Any
variances over five percent shall be explained in such report.
37
(b) Hach shall have the right to verify the findings of the
Financial Managers' Report and satisfy itself as to the procedures used to
prepare such analysis.
6.12 SURVEY AND TITLE POLICY. On or prior to the Closing Date, ETS
shall deliver to Hach a current "as-built" metes and bounds survey for each
parcel of ETS Real Property, including all easements that benefit such
properties (collectively, the "SURVEYS"), which shall (a) be made in accordance
with the "Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys"
jointly established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping Minimum Standards in 1992 (the
"ALTA/ACSM STANDARDS") and meet the accuracy requirements of an "Urban" survey
as defined therein, (b) be in form, scope, and substance reasonably satisfactory
to Purchaser, (c) contain optional survey requirements 1, 2, 3, 4, 6, 7(a),
7(b), 8, 9, 10, 11 and 13 as described on Table A of the ALTA/ASCM Standards,
(d) contain a survey certification reasonably acceptable to Hach and (e) not
reflect the existence of any Security Interests affecting or relating to the ETS
Real Property (other than for taxes not yet due and payable). In addition, the
Company shall deliver to Hach on or prior to the Closing Date an American Land
Title Association ("ALTA") title insurance policy (the "TITLE POLICY") insuring
title to each parcel of ETS Real Property, which Title Policy shall be (i) in an
amount reasonably acceptable to Hach, (ii) contain such endorsements thereto as
are available and as Hach shall deem necessary or desirable, and (iii) not
reflect the existence of any Security Interests affecting or relating to such
ETS Real Property (other than for taxes not yet due and payable).
6.13 APPROVAL BY MERGERCO BOARD OF DIRECTORS AND SOLE STOCKHOLDER.
Following approval by the Hach Board of Directors of this Agreement and the
other agreements and transactions contemplated hereby, Hach will:
(i) cause the Board of Directors of Mergerco to approve this
Agreement and the agreements and transactions contemplated hereby; and
(ii) in its capacity as the Sole Stockholder of Mergerco, vote
its shares of Mergerco to approve this Agreement and the agreements and
transactions contemplated hereby; and
(iii) cause all other action to occur which is necessary to give
effect to this Agreement and the agreements and transactions contemplated
hereby.
6.14. EMPLOYEE BENEFIT PLANS.
(a) As soon as practical following the Effective Time, Hach
shall make available to the employees of ETS who continue as employees of Hach,
the Surviving Corporation or any Hach Subsidiary after the Effective Time
("CONTINUING EMPLOYEES"), subject to this Section 6.14 and without duplication,
substantially the same employee benefits on substantially the same terms and
conditions that Hach may offer to similarly situated employees of Hach from time
to time, provided, however, that until such time as the ETS ESOP is terminated,
frozen or merged into Hach's ESOP, or the ETS ESOP loan or any successor loan is
repaid, the
38
Environmental Test Systems, Inc. 401(k) Plan ("ETS 401(k) Plan") shall be
administered by Hach or the Surviving Corporation as a separate plan. Until such
time as the Continuing Employees become covered by the Hach welfare benefit
plans, the Continuing Employees shall remain covered by the welfare benefit
plans sponsored by ETS, subject to the terms of such plans.
(b) Subject to the provisions of Sections 6.14(c), 6.14(d) and
6.14(e), a Continuing Employee who becomes covered by a particular employee
benefit plan sponsored by Hach pursuant to Section 6.14(a) shall be credited
with his or her years of service (as defined in the applicable Hach employee
benefit plan) as an employee of ETS prior to the Effective Time, and of Hach,
the Surviving Corporation or any Hach Subsidiary after the Effective Time, for
purposes of (i) eligibility under the employee welfare benefit plans sponsored
by Hach; and (ii) eligibility and vesting, but not for purposes of benefit
accrual or contributions, under Hach's Profit Sharing Plan ("HACH PROFIT SHARING
PLAN").
(c) Subject to the requirements and limitations of applicable
law and the provisions of the benefit plans referenced below, Hach shall take or
cause to be taken the following actions regarding the disposition of The
Environmental Test Systems, Inc. "401(k)" Plan ("ETS 401(k) Plan"):
(i) The ETS 401(k) Plan, and all assets and liabilities
associated therewith, shall be merged with and into the Hach Profit
Sharing Plan at such time as Hach may determine but not later than the
date of the first to occur of (a) the termination or freezing of the ETS
ESOP, (b) the repayment of the loan to the ESOP by NBD Bank ("ETS ESOP
Loan") or any successor loan (should Hach determine to refinance the NBD
ESOP Loan or any successor loan) or (c) its merger into the Hach ESOP.
Until the effective date of such merger, eligible participants under the
ETS 401(k) Plan may continue to make salary deferral contributions
thereunder, subject to the terms of such plan but shall not participate
in the Hach Profit Sharing Plan or its 401(k) component.
(ii) Any outstanding loans to participants under the ETS 401(k)
Plan shall remain outstanding after the effective date of the merger of
the ETS 401(k) Plan into the Hach Profit Sharing Plan and shall be
serviced under the Hach Profit Sharing Plan pursuant to its terms.
(d) With respect to Continuing Employees, Hach will use
commercially reasonable efforts to cause the appropriate health care providers
under Hach's benefit plans to : (i) waive any preexisting condition exclusions
from coverage for such Continuing Employees; and (ii) credit such Continuing
Employees with amounts paid toward deductibles under their existing ETS
coverages, if coverage for the Continuing Employees under the relevant Hach plan
begins other than on the first day of the relevant Hach plan's plan year.
(e) (i) During the plan year of the ETS ESOP ending December
31, 1998, ETS shall pay dividends on the ETS Class A Common Stock held by the
ETS ESOP for the period commencing January 1, 1998 and ending on the Closing
Date in an amount equal to the lesser of:
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(A) The amount necessary to enable the ESOP to
make principal and interest payments on the NBD ESOP
Loan at the time such payments are due, and to satisfy
its liquidity needs with respect to distributions to
terminated participants; or
(B) The amount required to be paid with respect
to the ETS Class A Common Stock by the Articles of
Incorporation of ETS as in effect on the date hereof.
(ii) Subject to the requirements and limitations of
applicable law and the provisions of the ETS ESOP and Hach ESOP,
from and after the Effective Time, Hach shall take or cause to
be taken the following actions regarding the disposition of the
ETS ESOP:
(A) Until such time as Hach determines to
terminate, freeze or merge it into the Hach ESOP, Hach
will maintain the ETS ESOP as a tax-qualified "employee
stock ownership plan", within the meaning of Sections
401(a) and 4975(e)(7) of the Code from the Effective
Time through the date on which the ETS ESOP is frozen,
terminated or merged with the Hach ESOP or any successor
thereto.
(B) At such time or times as the then acting
Trustee determines, the Trustee may liquidate Hach
Common Stocks or other securities held in the "loan
suspense" account of the ETS ESOP to pay down or pay off
the ETS Loan. The proceeds from the sale of Hach Common
Stocks or other securities remaining in the loan
suspense account after the ETS Loan has been paid in
full and after the payment of all expenses incurred by
the ETS ESOP and the ETS ESOP Trustee shall be allocated
to the accounts of all active participants with account
balances under the ETS ESOP at the time of allocation,
and no part shall revert to Hach or any affiliate of
Hach or any other person unless required by law or
applicable regulations.
(C) In the event the ETS ESOP is terminated or
merged into the Hach ESOP or any successor stock
ownership plan, Hach will amend the Hach ESOP or such
successor plan, if then in existence, so that
contemporaneously with the termination or merger of the
ETS ESOP, all active participants in the ETS ESOP will
immediately participate in the Hach ESOP and they will
be credited with their years of service with ETS for
eligibility and vesting purposes under the Hach ESOP as
provided in SECTION 6.14(b).
(D) For so long as the ETS ESOP is in existence
and the ETS Loan is outstanding, Hach or the Surviving
Corporation will make contributions to the ETS ESOP
sufficient to enable the Trustee to meet its obligations
under the ETS
40
Loan or any loan the proceeds of which are used to refinance the
ETS ESOP Loan.
(E) All expenses and costs associated with the
disposition of all ETS Plans which are incurred from and after the
Effective Time shall be paid by Hach or the Surviving Corporation
to the extent not paid by the Plans.
(f) The final valuation of the ETS Class A Common Stock held by
the ETS ESOP will be made by ComStock effective December 31, 1997. ComStock
must have issued to the ESOP Trustee and Benefits Committee its opinion dated
not later than the date of the ETS Stockholder Meeting called to approve the
Plan and Agreement of Merger. Such opinion shall be to the effect that the
Class A Merger Consideration to be received by the ETS ESOP from Hach is not
less than "adequate consideration", as defined in Section 3(18) of ERISA, for
the ETS Class A Common Stock exchanged by the ETS ESOP and that the terms of the
transactions pursuant to this Merger Agreement, including the disposition of the
ETS ESOP, is fair to the ETS ESOP and its participants from a financial point of
view.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF HACH AND MERGERCO
The obligations of Hach and Mergerco to consummate the Closing and effect
the Merger shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Hach and
Mergerco as provided herein except as otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
(a) Each of the representations and warranties of ETS contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and (having been deemed to have been made again at and as of the
Effective Time) shall be true and correct in all material respects as of the
Effective Time (subject to any updates to the Schedules hereto representing
matters arising between the time of execution of this Agreement and the
Closing); provided, however, if any such representation or warranty is already
qualified by materiality, for purposes of determining whether this condition has
been satisfied, such representation and warranty must be true and correct in all
respects. Each obligation of ETS under this Agreement required to be performed
by it at or prior to the Effective Time shall have been duly performed and
complied with in all material respects as of the Effective Time.
(b) Each of the representations and warranties contained in the
Stockholder Agreement shall be true and correct as of the date hereof and
(having been deemed to have been made again at and as of the Effective Time)
shall be true and correct as of the Effective Time. Each obligation under the
Stockholder's Agreement to be performed by Harry Stephenson at or prior to the
Effective Time shall have been duly performed and complied with in all respects
as of the Effective Time.
(c) At the Closing, Hach and Mergerco shall have received (i) a
certificate, dated the Closing Date and duly executed by the chief executive
officer and the chief financial officer of ETS, to the effect that the
conditions set forth in Subsection (a) above have been satisfied and (ii) a
certificate, dated the Closing Date and duly executed by Harry Stephenson, to
the effect that the conditions set forth in Subsection (b) above have been
satisfied.
7.2 AUTHORIZATION OF MERGER; CONSENTS. All corporate action necessary
to authorize the execution, delivery and performance of this Agreement, the
Escrow Agreement and the Stockholder's Agreement and the consummation of the
transactions contemplated hereby, and thereby shall have been duly and validly
taken by ETS including without limitation the approval of the stockholders of
ETS contemplated by SECTION 8.3 hereof. All notices to, and declarations,
filings and registrations with, and consents, authorizations, approvals and
waivers from, governmental and regulatory bodies required to consummate the
transactions contemplated hereby shall have been made or obtained. All notices,
consents, and waivers required to be obtained by ETS and the ETS Subsidiary and
listed on SCHEDULE 4.4 shall have been made or obtained.
42
7.3 APPROVAL OF HACH BOARD OF DIRECTORS. The Board of Directors of
Hach shall have approved the Merger and the other transactions contemplated by
this Agreement.
7.4 OPINION OF ETS's COUNSEL. Hach shall have been furnished with
the opinion of Krieg DeVault, Alexander & Capehart, Indianapolis, Indiana,
counsel to ETS, dated the Closing Date, in form and substance reasonably
satisfactory to Hach and its counsel, which opinion may be in a form in
accordance with the Legal Opinion Accord of the American Bar Association
Section of Business Law (1991) ("ACCORD FORMAT").
7.5 REPORT OF ETS's FINANCIAL MANAGERS. ETS shall have delivered
to Hach the Financial Manager's Report referred to in Section 6.11.
7.6 ABSENCE OF LITIGATION. No order, stay, judgment or decree
shall have been issued and be in effect by any court restraining or
prohibiting the consummation of the transactions contemplated hereby or
requiring Hach or any of its Subsidiaries to divest any material assets or
properties or limiting the ownership or operation by Hach or any of its
Subsidiaries of any of the material assets or business of ETS or the ETS
Subsidiary. No statute, rule or regulation shall have been promulgated or
enacted by any federal, state or local government, governmental authority or
governmental agency which would prevent or make illegal the transactions
contemplated hereby. No action, suit or proceeding before any court or any
governmental or regulatory body shall be pending (or threatened by any
governmental or regulatory body), and no investigation by any governmental or
regulatory body shall have been commenced (and be pending) seeking (i) to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement, (ii)
material damages in connection therewith which Hach, in good faith and with
the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby, (iii) to limit the
ownership or operation by Hach or any of its Subsidiaries of any of the
assets or business of ETS or the ETS Subsidiary or (iv) to require Hach or
any of its Subsidiaries to divest any material assets or properties.
7.7 OPTIONS, ETC.. Hach shall have received assurances, to its
reasonable satisfaction, that at and after the Effective Time there shall not
exist any security, option, warrant, right (including preemptive rights),
put, call, subscription, agreement, commitment, understanding or claim of any
nature whatsoever, fixed or contingent that directly or indirectly calls for
ETS or the ETS Subsidiary to acquire or issue, pledge, deliver, sell or
otherwise dispose, or to cause to be acquired, issued, delivered, pledged,
sold or otherwise disposed, any shares of the capital stock of ETS or the ETS
Subsidiary or any securities convertible into or other rights to acquire any
shares of capital stock of ETS or the ETS Subsidiary or obligating ETS or the
ETS Subsidiary to grant, extend or enter into any of the foregoing.
7.8 STOCKHOLDER'S AGREEMENT AND ESCROW AGREEMENT. The Stockholder's
Agreement shall be in full force and effect, and there shall be no breach
thereunder as of the Effective Time. The Escrow Agreement shall be in full force
and effect, and there shall be no breach thereunder as of the Effective Time.
43
7.9 RESIGNATIONS. Hach shall have received the resignations,
effective as of the Effective Time of each director of ETS and the ETS
Subsidiary.
7.10 EMPLOYMENT AGREEMENTS. (a) Prior to the Closing, ETS shall
have delivered to Hach copies of fully executed Employment Agreements with
each Key Employee listed on SCHEDULE 7.10 hereto in form and substance and
pursuant to such terms and conditions as are satisfactory to Hach in its sole
discretion.
(b) Prior to the Closing, Hach and Mark Stephenson shall have entered
into an Employment Agreement in form and substance and pursuant to such terms
and conditions as are mutually satisfactory to them.
7.11 HARRY STEPHENSON AGREEMENTS. (a) At the Closing, Harry Stephenson
shall have delivered to Hach a fully executed noncompetition agreement in the
form of EXHIBIT E hereto.
(b) At the Closing, Hach and Harry Stephenson shall have
entered into a Consulting Agreement in the form of EXHIBIT F.
(c) At the Closing, Harry Stephenson shall have executed and
delivered a Lock-up Letter in the form of EXHIBIT G, whereby he agrees not to
sell the shares of Hach Common Stocks he receives in the Merger for a period of
six months from the Closing Date.
(d) Prior to or effective at the Closing, the current
employment agreement between ETS and Harry Stephenson shall be terminated with
no continuing obligation on the part of ETS.
7.12 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective, and no stop order suspending the effectiveness of the
Registration Statement shall be in effect.
7.13 TAX OPINION. Hach and ETS shall each have received an opinion of
Krieg, DeVault, Alexander & Capehart, legal counsel to ETS, reasonably
satisfactory in form and substance to ETS and to Hach and its counsel McBride
Baker & Coles, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of section
368(a)(1)(A) of the Code which shall be dated on or about the date that is two
business days prior to the date the Proxy Statement is first mailed to
shareholders of ETS and which shall be updated as of the Effective Time ("ETS
TAX OPINION").
7.14 LISTING OF HACH COMMON STOCKS; COMPLIANCE WITH STATE BLUE SKY
LAWS. Hach and ETS shall have received from NASDAQ evidence that the shares of
Hach Common Stocks to be issued to the shareholders of ETS in the Merger shall
be quoted on NASDAQ immediately following the Effective Time. Hach shall have
complied in all material respects with any state Blue Sky laws applicable to the
issuance of the Hach Common Stocks in connection with the Merger.
44
7.15 INVESTMENT LETTERS. At the Closing, Hach and ETS shall have
received investment letters in form and substance satisfactory to Hach and ETS
from ETS shareholders representing at least 51% of the Hach Common Stock issued
as Merger Consideration, representing the agreement of such shareholders that,
notwithstanding their registration, all shares of Hach Common Stocks to be
received by ETS shareholders as Merger Consideration shall be held for
investment (the "ETS INVESTMENT LETTERS").
7.16 CERTIFICATES. ETS shall have furnished Hach with such
certificates of its officers and others as Hach may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 7.
7.17 NO ADVERSE CHANGES. No material adverse changes shall have
occurred in the assets, liabilities, business, financial (or other) condition or
results of operations or prospects of ETS or the ETS Subsidiary since December
31, 1996.
7.18 DISPOSITION OF CERTAIN ETS AGREEMENTS. Prior to the Closing, Hach
and ETS shall take such actions with respect to the Registration Rights
Agreement and Security Agreements among ETS and its stockholders as is described
on SCHEDULE 7.18.
45
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF ETS
The obligations of ETS to consummate the Closing and effect the Merger
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by ETS as provided herein
except as otherwise provided by applicable law:
8.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the
representations and warranties of Hach and Mergerco contained in this Agreement
shall be true and correct in all material respects as of the date hereof and
(having been deemed to have been made again at and as of the Effective Time)
shall be true and correct in all material respects as of the Effective Time;
provided, however, if any such representation or warranty is already qualified
by materiality, for purposes of determining whether this condition has been
satisfied such representation and warranty must be true and correct in all
respects. Each obligation of Hach and Mergerco under this Agreement required to
be performed by it at or prior to the Effective Time shall have been duly
performed and complied with in all respects as of the Effective Time. At the
Closing, ETS shall have received a certificate, dated the Closing Date and duly
executed by an officer of Hach to the effect that the conditions set forth in
this SECTION 8.1 have been satisfied.
8.2 AUTHORIZATION OF THE MERGER. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement, the Escrow
Agreement and the Stockholder's Agreement and consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by Hach
and Mergerco. All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies required to consummate the transactions contemplated hereby
shall have been made or obtained.
8.3 STOCKHOLDER APPROVALS. This Agreement and the transactions
contemplated herein shall have been duly approved by the stockholders of ETS in
accordance with all applicable Legal Requirements (the "REQUISITE ETS
STOCKHOLDER APPROVAL"). The affirmative vote of the holders of at least a
majority of the outstanding shares of each of ETS Class A Common Stock and ETS
Class B Common Stock voting each as a separate voting group are the only votes
of the holders of any class or series of capital stock of ETS necessary to
approve this Agreement and the Merger.
8.4 OPINION OF HACH'S COUNSEL. ETS shall have been furnished with
opinion of McBride, Baker & Coles, dated the Closing Date, in form and substance
reasonably satisfactory to ETS and its counsel, which opinion may be in the
Accord Format.
8.5 ABSENCE OF LITIGATION. No order, stay, judgment or decree shall
have been issued and be in effect by any court restraining or prohibiting the
consummation of the transactions contemplated hereby or requiring Hach or any of
its Subsidiaries to divest ownership or operations by Hach or any of its
Subsidiaries of, any of the assets or business of Hach or any of its
46
Subsidiaries. No statute, rule or regulation shall have been promulgated or
enacted by any federal, state or local government, governmental authority or
governmental agency which would prevent or make illegal the transactions
contemplated hereby. No action, suit or proceeding before any court or any
governmental or regulatory body shall be pending (or threatened by any
governmental or regulatory body), and no investigation by any governmental or
regulatory body shall have been commenced (and be pending) seeking (i) to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement, (ii) material
damages in connection therewith which Hach, in good faith and with the advice of
counsel, believes makes it undesirable to proceed with the consummation of the
transactions contemplated hereby, (iii) to limit the ownership or operation by
Hach or any of its Subsidiaries of any of the assets or business of Hach or any
of its Subsidiaries or (iv) to require Hach or any of its Subsidiaries to divest
any material assets or properties.
8.6 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective, and no stop order suspending the effectiveness of the
Registration Statement shall be in effect.
8.7 TAX OPINION. Hach and ETS shall each have received the ETS Tax
Opinion, as provided in SECTION 7.13.
8.8 LISTING OF HACH COMMON STOCKS; COMPLIANCE WITH STATE BLUE SKY
LAWS. Hach and ETS shall have received from NASDAQ evidence that the shares of
Hach Common Stocks to be issued to the shareholders of ETS in the Merger shall
be quoted on NASDAQ immediately following the Effective Time. Hach shall have
complied in all material respects with any state Blue Sky Laws applicable to the
issuance of the Hach Common Stocks in connection with the Merger.
8.9 INVESTMENT LETTERS. (a) Hach and ETS shall have received the ETS
Investment Letters, as provided in SECTION 7.15.
(b) At the Closing, ETS shall have received from Hach an
investment letter in form and substance satisfactory to ETS in which Hach
represents that it has no present intention as of the Closing Date to direct the
ETS ESOP Trustee to sell any Hach Common Stocks to be received by the ETS ESOP
as a result of the Merger.
8.10 EMPLOYMENT AGREEMENTS. ETS shall have entered into Employment
Agreements with each Key Employee listed on SCHEDULE 7.10 and Hach shall have
entered into the Employment Agreement with Mark Stephenson, as provided in
SECTION 7.10.
8.11 HARRY STEPHENSON AGREEMENTS. Hach will have executed and
delivered the agreements as provided by SECTION 7.11.
8.12 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by each of the parties thereto.
47
8.13 CERTIFICATES. Hach and Mergerco shall have furnished ETS with
such certificates of their officers and others as ETS may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 8.
8.14 NO ADVERSE CHANGE. No material adverse change shall have occurred
in the assets, liabilities, business, financial (or other) condition or results
of operations or prospects of Hach on a consolidated basis since April 30, 1997.
ARTICLE 9
TERMINATION: ABANDONMENT OF MERGER
9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether prior to or after approval by the stockholders of
ETS:
(a) By mutual consent duly authorized by the Boards of
Directors of Hach and ETS;
(b) By either Hach or ETS if a permanent injunction is entered,
enforced or deemed applicable to this Agreement, which prohibits the
consummation of the transactions contemplated hereby and all appeals of such
injunction shall have been taken and shall have been unsuccessful (the appealing
party or parties shall be responsible for their respective costs and expenses
relating to such appeals);
(c) By either Hach or ETS if any governmental entity, the
consent of which is a condition to the obligation of such party to consummate
the transactions contemplated hereby, shall have determined not to grant its
consent and all reasonable appeals of such determination shall have been taken
and shall have been unsuccessful (the appealing party or parties shall be
responsible for their respective costs and expenses relating to such appeals);
(d) By either Hach or ETS if, without fault of such terminating
party, the Merger has not been consummated except for routine filings with the
Secretary of State of Delaware and Indiana on or before the Closing Date;
(e) By Hach, (i) if the Board of Directors of ETS shall have
withdrawn its recommendation of this Agreement or the Merger or shall have
resolved to do so, or (ii) within five (5) business days of receipt by Hach of a
written notice from ETS that ETS has received a Business Combination Transaction
Proposal; provided that during such five (5) business day period, Hach shall
have the right to make a good faith counter-offer to ETS in response to the
Business Combination Transaction Proposal;
(f) By ETS, in the exercise of its good faith judgment (subject
to Section 6.10) as to its fiduciary duties under law, if (x) after receiving an
unsolicited proposal, the ETS Board of Directors has made the determinations
called for by Section 6.10(a)(i) and Section 6.10 (a)(ii),
48
thus resulting in a Business Combination Transaction Proposal, (y) Hach has
received the notice called for by Section 6.10(b)(i) and (z) ETS has received
the confidentiality agreement referred to in Section 6.10(b)(ii); provided that
any termination of this Agreement by ETS pursuant to this Section 9.1(f) shall
not be effective until ETS has made payment of the full Break-up Fee required by
Section 9.2(a) hereof;
(g) By Hach, upon a breach of any representation, warranty,
covenant or agreement on the part of ETS set forth in this Agreement, or if any
representation or warranty of ETS shall have become untrue, in either case such
that the conditions set forth in Article 7 would not be satisfied (a
"TERMINATING ETS BREACH"); PROVIDED, HOWEVER, that, if such Terminating ETS
Breach is curable by ETS through the exercise of its best efforts and for so
long as ETS continues to exercise such best efforts, Hach may not terminate this
Agreement under this SECTION 9.1(g);
(h) By ETS, upon breach of any representations, warranty,
covenant or agreement on the part of Hach or Mergerco set forth in this
Agreement, or if any representation or warranty of Hach or Mergerco shall have
become untrue, in either case such that the conditions set forth in Article 8
would not be satisfied ("TERMINATING HACH BREACH"); PROVIDED, HOWEVER, that, if
such Termination Hach Breach is curable by Hach or Mergerco through best
efforts, and for so long as Hach or Mergerco continues to exercise such best
efforts, ETS may not terminate this Agreement under this SECTION 9.1(h);
(i) By either Hach or ETS, on the fifth business day following
the Determination Date if the Average Share Price on the Determination Date is
less then $9.00 for Hach Common Stock or $7.00 for Hach Class A Common Stock; or
(j) By Hach, in the event any updates of Schedules made
pursuant to Section 7.1 disclose any liabilities not disclosed at the time this
Agreement is executed and delivered or which arose after such execution or
delivery other than in the ordinary course of business, which liabilities are
individually or in the aggregate material.
9.2 FEES AND EXPENSES.
(a) ETS shall pay Hach a fee (a "BREAK-UP FEE") in immediately
available funds, equal to all of Hach's Expenses (as hereinafter defined), if:
(i) this Agreement is terminated pursuant to SECTION
9.1(e) OR 9.1(f); or
(ii) this Agreement is terminated pursuant to Section
9.1(e)(ii) and if, within one (1) year of such termination, ETS, the ETS
Subsidiary or any of their affiliates enters into a letter of intent or
similar agreement or a definitive agreement for a Business Combination
Transaction which relates to or results from the Business Combination
Transaction Proposal which was the subject of Hach's termination pursuant
to Section 9.1(e)(ii).
49
ETS shall provide Hach with prompt written notice of the events described
in SECTIONS 9.2(a)(i) AND (ii). Hach shall submit an accounting of its expenses
comprising the Break-up Fee within 15 days of receipt of such notice from ETS,
and ETS will pay the Break-up Fee within 5 business days following the receipt
by ETS of such accounting.
(b) As used herein, "EXPENSES" means all reasonable
out-of-pocket expenses and fees actually incurred or accrued by Hach or
Mergerco, or on their respective behalf in transactions contemplated by this
Agreement on and after September 1, 1997 and prior to the termination of this
Agreement (including, without limitation, all fees and expenses of counsel,
financial advisors, accountants, environmental and other experts and
consultants, and all governmental filing and registration fees and expenses and
all printing expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the structuring of the
transactions contemplated by this Agreement, any agreements relating thereto and
any filings to be made in connection therewith.
(c) Notwithstanding anything to the contrary in this SECTION
9.2, no Break-up Fee will be payable by ETS if the Merger is consummated.
9.3 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement as provided in this ARTICLE 9, notice thereof shall be
promptly given by the terminating party to the other parties and thereafter this
Agreement shall be of no further force or effect and there shall be no liability
on the part of any party with respect thereto except (i) the provisions of this
SECTION 9.3, SECTIONS 9.2, 10.3, 10.6, AND 10.10 and the Confidentiality
Agreement shall survive any termination and (ii) nothing herein will relieve any
party from any liability for any breach hereof (it being understood and agreed
that in the event of a termination of this Agreement in accordance with SECTION
9.1, neither Hach nor Mergerco, on the one hand, nor ETS, on the other hand,
shall be liable to the other hereunder as the result of the occurrence after the
date hereof of any event beyond such party's control which event results in the
inability of such party to bring down its representations as of the Closing in
accordance with the provisions of SECTION 7.1 OR 8.1 hereof, as the case may
be).
ARTICLE 10
MISCELLANEOUS
10.1 MODIFICATION OR AMENDMENT. At any time prior to the Effective
Time, the parties hereto may, by written agreement, make any modification or
amendment of this Agreement approved by their respective Boards of Directors;
provided, however, that the consideration to be received by holders of shares of
ETS Common Stocks in the Merger, as set forth in ARTICLE 2 hereof, and the
dollar amount of Hach Common Stocks to be placed in the Escrow as contemplated
in Article 11 hereof, shall not be amended or modified without the approval of
such holders at any time after such holders have approved this Agreement. This
Agreement shall not be
50
modified or amended except pursuant to an instrument in writing executed and
delivered on behalf of each of the parties hereto.
10.2 WAIVER OF CONDITIONS; INVESTIGATION. The conditions to each of
the parties' obligations to consummate the Merger are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by applicable law. The respective representations and warranties of
the parties contained herein and any Party's rights to receive payments for
Damages in accordance with ARTICLE 11 hereof shall not be deemed waived or
affected by any investigation by any party except to the extent expressly
provided in SECTION 11.1(c) hereof.
10.3 PAYMENT OF EXPENSES. Except as provided in this SECTION 10.3 and
as set forth in SECTION 9.2, whether or not the Merger shall be consummated,
each party hereto shall pay its own expenses incident to preparing for, entering
into and carrying out this Agreement and the consummation of the Merger;
provided, however, that in the event the Merger is consummated, the holders of
ETS Class B Common Stock shall reimburse Hach for twenty-five percent (25%) of
all such costs and expenses incurred by ETS following October 23, 1997, to the
extent such costs and expenses exceed the sum of Fifty Thousand Dollars
($50,000) (twenty-five percent (25%) of such excess being referred to as the
"REIMBURSEMENT AMOUNT"). At the Closing, ETS shall provide Hach with a fair
estimate of the Reimbursement Amount, and the Merger Consideration to be
delivered to the ETS Class B Stockholders shall be reduced by an amount equal to
the Reimbursement Amount by adjusting the cash and/or the stock components in a
manner agreed to by Hach and ETS. As soon as practical after the Effective
Date, a final adjustment to reflect any material discrepancy between the
estimate of the Reimbursement Amount and the actual Reimbursement Amount shall
be made as provided in the Escrow Agreement. Notwithstanding the foregoing,
Hach alone shall pay the costs and expenses with respect to the filing of the
Registration Statement, the printing of the Proxy Statement, the listing of the
Hach Common Stocks on NASDAQ, compliance with Blue Sky Laws, and all filings
under the HSR Act (other than the fees and disbursements of counsel, accountants
and other representatives of ETS relating to such matters). The ETS Employee
Stock Ownership Plan will be solely responsible for any fees and expenses due to
its independent trustee and to Comstock, relating to the Merger and the related
transactions, which are properly payable by it consistent with its fiduciary
duties.
10.4 SURVIVAL.
(a) Except as to (i) the representations and warranties
contained in SECTION 4.3 AND 4.4, which shall survive the Effective Time and
remain in effect indefinitely, (ii) the representations and warranties contained
in SECTIONS 4.16 AND 4.17 which shall survive the Effective Time until the
expiration of the statute of limitations applicable thereto, (iii) the
representations and warranties in SECTION 4.7 which shall survive the Effective
Time until 60 days after the expiration of the applicable tax statute of
limitations with respect to the relevant taxable period (including all periods
of extension (whether automatic or permissive)) and (iv) the representations and
warranties contained in SECTIONS 4.12 AND 4.19 which shall survive the Effective
Time until the expiration of three (3) years after the Effective Time, the
representations
51
and warranties of ETS shall survive the Effective Time until the expiration of
eighteen (18) months after the Effective Time; PROVIDED, HOWEVER, that such
representations and warranties and the liability of any person with respect
thereto including, without limitation, the indemnity referred to in ARTICLE 11
hereof, shall not terminate with respect to any claim, whether or not fixed as
to liability or liquidated as to amount, with respect to which the
Representative or Hach has been given written notice within such specified
period of survival in accordance with ARTICLE 11 hereof and the Escrow
Agreement.
(b) The covenants and agreements in this Agreement will survive
the Effective Time and remain in effect indefinitely, unless any covenant or
agreement provides that it will survive for a different period following the
Effective Time (in which event such different period shall apply.
10.5 HEADINGS. The article and section headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
10.6 NOTICES. All notices or other communications required or
permitted hereunder shall be given in writing and shall be delivered or sent, by
telecopy (or like transmission) with a conforming copy by first class U.S. Mail,
postage prepaid, by delivery against receipt from the parties to whom it is
given, by registered or certified U. S. Mail, or by overnight express delivery
service as follows:
If to ETS: Harry Stephenson
Environmental Test Systems, Inc.
23575 County Road 106
P. O. Box 4659
Elkhart, IN 46514-0659
Fax No.: (219) 262-2495
with a copy (which William R. Neale, Esq.
shall not constitute Krieg, DeVault, Alexander & Capehart
notice) to: One Indiana Square, Suite 2800
Indianapolis, IN 46204-2017
Fax No. (317) 636-1507
If to Hach: Gary R. Dreher
Hach Company
5600 Lindbergh Drive
Loveland, CO 80538
Fax No. (970) 962-6740
52
with a copy (which Robert O. Case, Esq.
shall not constitute McBride, Baker & Coles
notice) to: 500 W. Madison St., 40th Floor
Chicago, IL 60661-2511
Fax No. (312) 993-9350
or such other address as a party may from time to time designate in writing in
accordance with this Section. All such notices, requests or other communication
shall be effective (a) if delivered by hand, when delivered; (b) if mailed in
the manner provided herein, five (5) business days after deposit with the United
States Postal Service except that confirmation copies of telecopy notice shall
be deemed to be effective on the date mailed; (c) if delivered by overnight
express delivery service, on the next business day after deposit with such
service; and (d) if by telecopier, on the next business day if also confirmed by
mail in the manner provided herein.
10.7 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, PROVIDED, HOWEVER, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties.
10.8 COMPLETE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto and the Stockholder Agreement, the Escrow Agreement, the
Confidentiality Agreements and the other agreements referred to herein) contains
the entire understanding of the parties with respect to the transactions
contemplated hereby and supersedes all prior written or oral commitments,
arrangements or understandings with respect thereto, including, without
limitation (except for Section 17 thereof which is incorporated herein by this
reference), the provisions of the Letter of Intent between ETS and Hach dated as
of October 23, 1997. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly set forth or
referred to herein.
10.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.10 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Delaware (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect and performance.
10.11 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP on the date hereof.
10.12 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining
53
provisions of this Agreement shall not be affected thereby. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
10.13 SPECIFIC PERFORMANCE. Hach, Mergerco and ETS recognize that any
breach of the terms of this Agreement may give rise to irreparable harm for
which money damages would not be an adequate remedy, and accordingly agree that,
in addition to other remedies, any non-breaching party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy as a remedy of money damages.
10.14 THIRD PARTY BENEFICIARIES. Except and to the extent specifically
provided in SECTIONS 6.14(a) THROUGH (d) with respect to Continuing Employees,
SECTION 6.14 with respect to the ETS ESOP Trustee, and ARTICLE 11, with respect
to the Representative and the Hach Parties, this Agreement is not intended, and
shall not be construed, to confer any rights or remedies hereunder upon any
person other than the parties hereto and the Hach Parties.
10.15 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS. (a) Unless the
context otherwise requires, (i) all references to Sections, Articles, Exhibits
or Schedules are to Sections, Articles, Exhibits or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the meaning assigned to
it, (iii) "or" is disjunctive but not necessarily exclusive, (iv) words in the
singular include the plural and VICE VERSA, (v) the term "Affiliate" has the
meaning given to such term in Rule 12b-2 of Regulation 12B under the Exchange
Act, (vi) "including" and "includes" shall mean "including, without limitation,"
(vii) "person" or "Person" shall mean any individual, partnership, joint
venture, limited liability company, corporation, trust, unincorporated
association, governmental authority, or other entity, and (viii) words in the
masculine or neuter shall include the masculine, feminine or neuter as the
context requires. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
(b) No provision of this Agreement will be interpreted in favor
of, or against, any of the parties hereto by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
(c) The following terms defined elsewhere in this Agreement in
the Sections set forth below shall have the respective meanings therein defined.
Term Definition
---- ----------
1997 and 1998 Capital Expenditure Budgets Section 4.13(i)
1997 and 1998 Operating Budgets Section 6.4(f)(ii)
1997 Audited Financials Section 6.7(b)
Accord Format Section 7.4
Additional Class A Merger Consideration Section 2.1(b)(i)
Additional Class B Merger Consideration Section 2.1(b)(ii)
Affiliate Section 4.18
54
Agreement Recitals
ALTA Section 6.12
ALTA/ACSM Standards Section 6.12
Associate Section 4.18
Average Market Price Section 2.1(c)
Balance Sheet Section 4.6
Basket Amount Section 11.1(b)
Breach Notice Section 11.1(b)
Break-up Fee Section 9.2(a)
Business Combination Transaction Section 6.10
Business Combination Transaction Proposal Section 6.10
CBMT Section 4.5(b)
Claim Section 11.2(a)
Claim Notice Section 11.2(a)
Class A Base Merger Consideration Section 2.1(i)(A)
Class A Merger Consideration Section 2.1(i)(C)
Class A Stockholders Section 11.1(a)
Class B Base Merger Consideration Section 2.1(ii)(A)
Class B Merger Consideration Section 2.1(ii)(C)
Class B Stockholders Section 11.1(a)
Closing Section 3.1
Closing Date Section 3.1
Code Section 4.17(i)(i)
Compensation Commitments Section 4.17(a)(iii)
Comstock Section 4.22
Continuation Coverage Requirements Section 4.17(d)
Copyrights Section 4.12(a)
Damages Section 11.1(a)
Delaware Corporation Law Section 1.1
Determination of Claim Section 11.2(c)
Determined Claim Amount Section 11.2(c)
Determination Date Section 2.1(c)
Dissenting Shares Section 2.2(a)
Effective Time Section 1.2
Environmental Section 4.19(h)
Environmental Costs and Liabilities Section 4.19(h)
Environmental Law Section 4.19(h)
Environmental Permit Section 4.19(h)
Environmental Test Systems, Inc. Section 1.1
ERISA Section 4.17(a)(i)
ERISA Plans Section 4.17(c)
Escrow Agent Section 2.1(i)(B)
Escrow Agreement Section 2.1(i)(B)
Escrow Deposit Section 11.1(a)
Escrow Release Date Section 2.1(i)(B)
55
Exchange Act Section 5.2(iii)
ETS Recitals
ETS 401(k) Plan Section 6.14(c)(i)
ETS Agreements Section 4.15
ETS Class A Common Stock Recitals
ETS Class B Common Stock Recitals
ETS Common Stocks Recitals
ETS Employee Loans Section 4.17(a)(iv)
ETS ESOP Section 4.22
ETS ESOP Loan Section 6.14(e)(i)(A)
ETS Investment Letters Section 7.15
ETS Plans Section 4.17(a)(i)
ETS Products Section 4.20
ETS Real Property Section 4.9(c)
ETS Shareholders' Meeting Section 6.2
ETS Subsidiary Section 4.2
ETS Tax Opinion Section 7.13
Exchange Agent Section 2.3(a)
Expenses Section 9.2(b)
FDA Section 4.20
Financial Managers' Report Section 6.11(a)
Financial Statements Section 4.5(a)
Group Health Plans Section 4.17(d)
Hach Recitals
Hach Class A Stock Section 2.1(i)(A)
Hach Common Stock Section 2.1(i)(A)
Hach Common Stocks Section 2.1(i)(A)
Hach Parties Section 11.1(a)
Hach Party Section 11.1(a)
Hach Profit Sharing Plan Section 6.14(b)
Hach SEC Reports Section 5.4(a)
Hazardous Material Section 4.19(h)
HSR Act Section 4.4(c)(v)
Indemnification Expense Section 11.2(b)(i)
Indiana Corporation Law Section 1.1
Insider Section 4.18
Intellectual Property Section 4.12(a)
Key Employees Section 4.13(vii)
Legal Requirements Section 4.8
Licenses Section 4.12(a)
Merger Recitals
Mergerco Recitals
Multiemployer Plan Section 4.17(c)(iii)
NASDAQ Section 2.1(c)
Patents Section 4.12(a)
56
Pending Claims Section 2.1(b)(i)
Pending Claims Amount Section 2.1(b)(i)
Permits Section 4.8
Proposed Action Notice Section 11.2(b)(ii)
Proxy Statement Section 6.1(a)
Qualified Beneficiary Section 4.17(d)
Qualifying Events Section 4.17(d)
Real Property Section 4.9(b)
Real Property Leases Section 4.9(c)
Registration Statement Section 6.1(a)
Reimbursement Amount Section 10.3
Relative Section 4.18
Release Section 4.19(h)
Representative Section 11.3
Requisite ETS Stockholder Approval Section 8.3(b)
Resolved Pending Claim Section 2.1(b)(v)
Resolved Pending Claim Amount Section 2.1(b)(v)
SEC Section 3.1
Securities Act Section 5.2(iii)
Security Interest Section 4.2
Software Section 4.12(a)
Stockholder's Agreement Recitals
Subsequent Class A Merger Consideration Section 2.1(b)(iv)
Subsequent Class B Merger Consideration Section 2.1(b)(iv)
Subsidiary Section 4.2
Surrendering Stockholders Section 11.1(a)
Surveys Section 6.12
Surviving Corporation Section 1.1
Tax Returns Section 4.7
Taxes Section 4.7
Technology Section 4.12(a)
Terminating ETS Breach Section 9.1(g)
Terminating Hach Breach Section 9.1(h)
Third Anniversary Escrow Balance Section 2.1(b)(1)
Third Party Claim Section 11.2
Title Policy Section 6.12
Trademarks Section 4.12(a)
Treasury Shares Section 2.1(iii)
10.16. EXHIBITS AND SCHEDULES. All exhibits annexed hereto, and all
schedules referred to herein, are hereby incorporated in and made a part of this
Agreement as if set forth herein. Any matter disclosed on any schedule referred
to herein shall be deemed also to have been disclosed on any other applicable
schedule referred to herein. Capitalized terms used in any of the
57
schedules annexed hereto that are not otherwise defined in such schedule, shall
have the same meanings ascribed to them in this Agreement.
ARTICLE 11
INDEMNIFICATION AND HOLDBACK
11.1 INDEMNIFICATION BY SURRENDERING STOCKHOLDERS. (a) Subject to the
provisions of this ARTICLE 11 and SECTION 10.4 hereof, the Surrendering
Stockholders (as defined below) jointly and severally agree to indemnify and
hold harmless Hach and its Affiliates and their respective officers, directors,
employees and agents (individually a "HACH PARTY" and collectively, the "HACH
PARTIES") in respect of any and all losses, damages, claims, liabilities,
actions, suits, proceedings, and costs and expenses of defense thereof,
including reasonable attorney's fees and expenses which fees and expenses will
be payable at least quarterly (hereinafter referred to as "DAMAGES") suffered or
incurred by Hach or any such other Hach Party by reason of, resulting from or
arising out of (i) the breach or inaccuracy as of the date of this Agreement or
as of the Effective Time of any representation or warranty of ETS which is
contained in or made pursuant to this Agreement or (ii) the breach of any
covenant or other agreement of ETS contained in this Agreement. The liability
for Damages hereunder shall be allocated among the holders of ETS Class A Common
Stock (the "CLASS A STOCKHOLDERS") and the holders of ETS Class B Common Stock
(the "CLASS B STOCKHOLDERS") in the Merger (all such Class A Stockholders and
Class B Stockholders, being hereinafter collectively referred to as the
"SURRENDERING STOCKHOLDERS"), as follows:
Class A Stockholders 28.35%
Class B Stockholders 71.65%
(b) At the Effective Time, Hach will place in escrow cash and
shares of Hach Common Stocks having an aggregate value at Closing (valued in
accordance with, and subject to, SECTION 2.1(c)) of $1,750,000 (the "ESCROW
DEPOSIT"), in such amounts as set forth in Schedule A to the Escrow Agreement,
which Escrow Deposit, subject to the terms of this ARTICLE 11, SECTION 10.4 and
the Escrow Agreement, will be available together with the Escrow Earnings (as
defined in the Escrow Agreement) as the "Escrow Fund" to fund the Surrendering
Stockholders obligations under this SECTION 11.1. The Escrow Fund shall be paid
to a Hach Party and/or their designee, on the one hand, or to the Surrendering
Stockholders, on the other hand, in accordance with the terms of this Agreement
and the Escrow Agreement. The procedures pursuant to which the Hach Parties will
be entitled to payments for Damages are set forth in SECTION 11.2 hereof and in
the Escrow Agreement.
(c) Notwithstanding anything to the contrary contained herein,
(A) the Surrendering Stockholders shall not be responsible for any Damages under
SECTIONS 11.1(a)(i) AND 11.1(a)(ii) until the cumulative aggregate amount of all
such Damages exceeds One Hundred Thousand ($100,000) Dollars (the "BASKET
AMOUNT"), in which case the Surrendering Stockholders shall then be liable only
for such Damages in excess of the Basket Amount and (B)
58
the Surrendering Stockholders' liability under this SECTION 11.1 shall be
limited to the Escrow Fund held pursuant to the Escrow Agreement; provided
however, that the limitations on recovery of Damages herein shall not apply in
the case of (i) fraud or any intentional misrepresentation or omission or (ii)
Damages arising from or related to the representations and warranties of ETS
contained in SECTIONS 4.3, 4.4, 4.7 AND 6.1.
11.2 PROCEDURES. (a) As promptly as practicable after any Hach Party
shall receive notice of or otherwise become aware of the commencement of any
action, suit or proceeding, the assertion of any claim, the occurrence of any
event, the existence of any fact or circumstance or the incurrence of any
Damages, in respect of which such Hach Party may be entitled to seek indemnity,
reimbursement or payment under SECTION 11.1 hereof (a "CLAIM"), Hach shall
notify the Representative in writing thereof (a "CLAIM NOTICE") and concurrently
therewith deliver a copy of such Claim Notice to the Escrow Agent; PROVIDED,
HOWEVER, that the failure of Hach to so promptly notify the Representative and
Escrow Agent shall not prevent any Hach Party from being indemnified or
reimbursed for any Damages arising out of any such Claim except to the extent
that the failure to so promptly notify actually materially damages the
Surrendering Stockholders. Each Claim Notice shall describe in reasonable detail
the basis of the Claim and shall indicate the estimated amount of the Damages
that have been or which may be suffered by Hach or any other Hach Party, which
estimate may be revised from time to time ("PENDING CLAIM AMOUNT"); provided,
however, that any revised estimate of the Damages for a Claim which is not a
Third Party Claim (as defined below), shall constitute a new Claim. The
Representative shall have a period of 20 days from the receipt of any Claim
Notice to dispute in whole or in part any Claim made in the aforesaid Claim
Notice in accordance with SECTION 11.2(d) hereof by delivering to Hach and the
Escrow Agent within such 20 day period a written notice (the "DISPUTE NOTICE")
describing in reasonable detail the basis for the objection.
(b)(i) If any Claim involves the claim of a third party (a "THIRD
PARTY CLAIM"), and the Representative confirms in writing to Hach within 20 days
after receipt of the Claim Notice the Surrendering Stockholders' responsibility
to indemnify, reimburse and hold harmless the applicable Hach Party therefor
(which shall be deemed to constitute a determination by the Representative not
to dispute the Third Party Claim vis a vis Hach or the Hach Parties pursuant to
this Agreement, the Escrow Agreement or otherwise; provided that such
confirmation shall not be deemed to constitute a determination not to dispute
such claim vis a vis the third party making such Claim) and within such 20 day
period demonstrates to Hach's reasonable satisfaction that there is a sufficient
amount of funds then remaining in the Escrow Fund after deducting an amount
equal to all Pending Claims Amount for which a Determination has not yet been
made, together with the interest thereon as provided in the Escrow Agreement, in
order to pay the full amount of any potential liability in connection with such
Third Party Claim, the Representative shall have sole control over (with counsel
reasonably acceptable to Hach), and with respect to, the defense, settlement,
adjustment or compromise of such Third Party Claim, PROVIDED that (A) Hach may,
if it so desires, employ counsel at its own expense to assist in the handling of
such Third Party Claim, (B) the Representative shall keep Hach advised of all
material events with respect to such Third Party Claim, (C) the Representative
shall obtain the prior written approval of Hach (which consent may be withheld
for any reason), before entering into any settlement, adjustment or compromise
of such Third Party Claim or ceasing to defend against such Third Party Claim
either
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of which could result in injunctive or other equitable relief being imposed
against any Hach Party or which could result in Damages to Hach or any other
Hach Party which would exceed the amount then remaining in the Escrow Fund after
deducting an amount equal to all Pending Claims Amount for which a Determination
has not yet been made, together with the Escrow Earnings (as defined in the
Escrow Agreement) thereon as provided in the Escrow Agreement; and provided
further that the costs, expenses, including but not limited to attorneys fees
("INDEMNIFICATION EXPENSES"), of all such defenses undertaken by the
Representative pursuant to this SECTION 11.2(b)(i) shall be payable from the
Escrow Fund, to the extent thereof, up to a maximum aggregate amount of Two
Hundred Fifty Thousand ($250,000) Dollars and thereafter all such costs and
expenses shall be paid by the Representative. In the event the Representative
becomes responsible for Indemnification Expenses in excess of the $250,000
limit, the Representative shall have a claim against the Escrow Fund which shall
be subordinate to the claims of the Hach Parties to be paid by a pro-rata charge
against the distributable share of the Surrendering Stockholders, if any, on
final termination of the Escrow Agreement. If Hach does not object to any
action that it is entitled to approve pursuant to the preceding clause (C)
within ten (10) business days after receipt from the Representative of a notice
(the "PROPOSED ACTION NOTICE") describing in reasonable detail the proposed
action (which objection shall be made in writing), Hach shall be deemed to have
approved the action described in the Proposed Action Notice. Notwithstanding
anything contained herein to the contrary, the Representative shall not be
entitled to control (but shall be entitled to assist, at its own expense, in the
defense of), and Hach shall be entitled to have sole control over, the defense
or settlement of any Third Party Claim (x) which seeks an order, injunction or
other equitable relief against any Hach Party which, if successful, could
materially interfere with the business, assets, liabilities, obligations,
prospects, financial condition or results of operations of Hach, ETS or any of
their Affiliates or (y) relating to taxes of Hach, ETS or any of their
Affiliates.
(ii) If the Representative does not timely assume sole control
over the defense or settlement of any Third Party Claim as provided in this
SECTION 11.2(b) or is not entitled to assume such control of any Third Party
Claim pursuant to this SECTION 11.2(b), Hach shall have the right to defend,
settle and compromise such Third Party Claim in such manner as it may deem
appropriate at the cost and expense of the Surrendering Stockholders (but solely
from the Escrow Fund), and to cause the Escrow Agent to pay, in accordance with
ARTICLE 11 hereof and the Escrow Agreement, out of the Escrow Fund to the
applicable Hach Party and/or any third party designated in writing by Hach to
the Escrow Agent, the cost of the defense and/or settlement of such Third Party
Claim; provided, however, that (A) Hach shall keep the Representative advised of
all material events with respect to such Third Party Claim, (B) and the
Representative shall be entitled to assist, at its own expense, in the defense
of such Third Party Claim and (C) Hach shall act in good faith with respect to
any settlement, adjustment or compromise of, and the conduct or cessation of the
defense of, such Third Party Claim.
(c) "DETERMINATION OF THE CLAIM" means the following:
(i) If the Claim Notice does not involve a Third Party
Claim then:
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(A) if the Representative does not dispute in whole or in part
any such Claim within the 20-day period provided in SECTION
11.2(a), such Claim or the portion thereof which is not
disputed shall be deemed to have resulted in a
Determination of the Claim in favor of the applicable Hach
Party, and the applicable Hach Party will be entitled to be
paid an amount out of the Escrow Funds equal to the amount
of such Claim as estimated by such Hach Party in the Claim
Notice or the portion thereof which is not disputed and the
earnings thereon from the date such Claim Notice was
delivered to the Representative; and
(B) if the Representative does dispute such Claim within the
20-day period provided in SECTION 11.2(a), such Claim or
portion thereof which is disputed shall be resolved in
accordance with SECTION 11.2(d) hereof, which resolution
shall constitute a Determination of the Claim.
(ii) If the Claim Notice involves a Third Party Claim
then:
(A) if the Representative does not dispute (i) that such Third
Party Claim is indemnifable under this ARTICLE 11 or (ii)
the merits of or amount claimed under the Third Party Claim
within the 20-day period provided in SECTION 11.2(a), such
Third Party Claim shall be deemed to have resulted in a
Determination of the Claim in favor of the applicable Hach
Party, and the applicable Hach Party will be entitled to be
paid and/or direct that the third party asserting such
Third Party Claim be paid, an amount out of the Escrow
Funds equal to the amount of Damages actually incurred by
the Hach Party in connection with such Third Party Claim
and the earnings thereon from the date the applicable Claim
Notice was delivered to the Representative; and
(B) if the Representative does not dispute whether such Third
Party Claim is indemnifiable under this ARTICLE 11 but does
dispute the merits of or amount claimed under the Third
Party Claim within the 20-day period provided in Section
11.2(a), such Third Party Claim shall be deemed to have
resulted in a resolution that the Third Party Claim is
indemnifiable, but the Determination of the Claim shall be
derived from the outcome of such Third Party Claim; and
(C) if the Representative disputes whether such Third Party
Claim is indemnifiable (whether or not he disputes the
merits of or amount claimed under the Third Party Claim)
within the 20-day period provided in SECTION 11.2(a), such
dispute shall be limited to the issue of whether such Third
Party Claim is indemnifiable under this ARTICLE 11, and
shall be resolved in accordance with SECTION 11.2(d)
hereof. If such resolution is that the Third Party Claim
is not indemnifiable, such resolution shall constitute a
Determination of the Claim. If such resolution is that the
Third Party Claim is indemnifiable, the Determination of
the Claim shall be derived from the outcome of such Third
Party Claim.
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The amount, if any, with respect to any Claim which is to be paid to Hach
following a Determination of the Claim as provided above is referred to herein
as a "DETERMINED CLAIM AMOUNT".
(d) Any dispute which may arise under this SECTION 11.2 or the
Escrow Agreement with respect to (i) any Claim asserted by Hach or any other
Hach Party pursuant to SECTION 11.2(a) hereof which is timely objected to by the
Representative in a Dispute Notice in accordance with SECTION 11.2 hereof, or
(ii) any other questions arising under this ARTICLE 11, shall be settled as
promptly as practicable either by mutual agreement of the parties to such
dispute (evidenced by appropriate instructions in writing to the Escrow Agent
signed by Hach or such other Hach Party and the Representative) or by a binding
and final arbitration award resulting from arbitration proceedings conducted by
a single arbitrator in accordance with the commercial arbitration rules of the
American Arbitration Association to determine whether the Claim which is being
challenged is permitted under this ARTICLE 11 (such arbitration to take place in
Chicago, Illinois). In connection with any arbitration proceeding hereunder
relating to a Third Party Claim, the parties agree to specifically direct the
arbitrator to refrain from addressing the underlying merits of the Third Party
Claim. The person in whose favor a final decision shall be entered shall be
entitled to receive from the losing person, such amount as the arbitrator may
determine to be reasonable attorney's fees and expenses related thereto for the
services rendered to the person prevailing in any such arbitration proceeding.
In addition, if Hach is the losing person, Hach will reimburse the
Representative for any reasonable extraordinary expenses charged by the Escrow
Agent to the Representative in connection with the resolution of such dispute,
as soon as practicable after receipt by Hach of the appropriate supporting
invoice, including the Representative's share of the Escrow Agent's expenses
under the Escrow Agreement. If Hach and the Representative are unable to reach
an agreement as to any matter contained in a Dispute Notice within 20 days after
receipt of such Dispute Notice by Hach, Hach and the Representative shall submit
the dispute for resolution by an arbitrator in accordance with this SECTION
11.2(d). Prior to the settlement of any dispute as provided in this SECTION
11.2(d), the Escrow Agent is authorized and directed to retain such portion of
the Escrow Fund which is the subject of or involved in the dispute.
(e) In determining the amount of Damages to be paid from the
Escrow Fund to Hach or a Hach Party in any particular instance, the amount of
Damages to be paid shall be reduced (or, as applicable, Hach or the appropriate
Hach Party shall repay the Escrow Fund) to the extent of:
(i) any tax savings (assuming a tax rate of 35%)
realized by Hach or any Hach Party less the amount of any Taxes Hach or any Hach
Party is obligated to pay by reason of the receipt of the related
indemnification amount from the Escrow Fund, or
(ii) any proceeds received by Hach or any Hach Party from
any insurance policy with respect thereto.
All payments or distributions to Hach or any Hach Party shall be treated
as adjustments to the purchase price.
Notwithstanding anything to the contrary contained herein, if Hach is not
acting in good faith with respect to any settlement, adjustment or compromise
of, or the conduct or cessation of
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the defense of, any Third Party Claim over which or to the extent to which it
has sole control, the Representative shall be entitled to exercise all legal and
equitable remedies related thereto. The Representative shall not be deemed to
control any Third Party Claim solely by reason of the fact that the
Representative assists at his own expense in the defense thereof as provided in
SECTION 11.2(b)(ii)(c).
(f) No new Claim may be brought after the Escrow Release Date,
except that notwithstanding anything to the contrary contained herein or in the
Escrow Agreement, Hach may revise any Pending Claim at anytime after the Escrow
Release Date.
11.3 THE REPRESENTATIVE.
(a) ETS hereby authorizes and directs Harry Stephenson to take
such action, and to exercise such rights, power and authority, as are
authorized, delegated and granted to the Representative hereunder and under the
Escrow Agreement in connection with the transactions contemplated hereby and
thereby, and to exercise such rights, power and authority, as are incidental
thereto. Approval of the Merger by the ETS stockholders shall constitute
ratification by the ETS stockholders of the appointment of the Representative in
accordance herewith and agreement to be bound by the actions of the
Representative taken hereunder and under the Escrow Agreement.
(b) Upon the resignation, death or inability of Harry
Stephenson to act as Representative, John Gildea shall be the successor
Representative. If John Gildea is unable or unwilling to act as successor
Representative, the Surrendering Stockholders shall vote to select a successor
Representative (with each Surrendering Stockholder or their heirs or personal
representatives having one vote for each share of ETS Common Stocks owned
immediately prior to the Effective Time). No appointment of a successor shall
be effective unless such successor agrees in writing to be bound by the terms of
ARTICLE 11 of this Agreement and the Escrow Agreement.
(c) ETS agrees that the provisions set forth in this SECTION
11.3 shall not limit in any respect the obligations of the Representative and
shall in no way impose any obligations on Hach other than those explicitly set
forth in this Agreement or the Escrow Agreement. In particular, notwithstanding
in any case any notice received by Hach to the contrary, Hach shall be fully
protected in relying upon and shall be entitled to (A) rely upon actions,
decisions and determinations of the Representative and (B) assume that all
actions, decisions and determinations of the Representative are fully authorized
and binding upon the Representative and the Surrendering Stockholders.
(d) The Representative shall not be liable to the Surrendering
Stockholders for the performance of any act or the failure to act so long as he
acted or failed to act in good faith and such action or inaction did not
constitute willful misconduct or gross negligence.
11.4 EFFECTIVENESS OF SECTION 11.1. The provisions of SECTION 11.1
hereof shall have no force and effect unless and until the Merger is
consummated.
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11.5 SOLE AND EXCLUSIVE REMEDY. Except as provided by the proviso in
Section 11.1(c) of this Agreement, a claim for indemnification pursuant to this
ARTICLE 11 will be Hach's, any Hach Party's and Mergerco's sole and exclusive
remedy at law for breach or non-fulfillment by ETS of any representation,
warranty, covenant, agreement, obligation and indemnity hereunder, and Hach and
Mergerco will not be able to avoid any limitations on indemnification set forth
in this Agreement by electing to pursue some other action or remedy; provided,
however, this Section 11.5 shall not limit Hach or any Hach Party seeking or
obtaining any equitable remedies with respect to this Agreement or any remedies
that may be available to it in the case of fraud or any intentional
misrepresentation or omission.
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IN WITNESS WHEREOF, Hach, Mergerco and ETS have caused this Agreement and
Plan of Merger to be duly executed as of the day and year first above written.
HACH COMPANY
By: /s/ Bruce J. Hach
--------------------------------
Bruce J. Hach, President
HACH ACQUISITION CORP.
By: /s/ Gary R. Dreher
--------------------------------
Gary R. Dreher,Vice President,
Treasurer and Secretary
ENVIRONMENTAL TEST SYSTEMS, INC.
By: /s/ Mark J. Stephenson
--------------------------------
Mark J. Stephenson, President
The undersigned hereby agrees to be bound by all of the provisions of
ARTICLE 11 of the above Agreement which are binding on the Representative and
shall be deemed to be a party hereto for such purposes.
/s/Harry Stephenson
---------------------------------------------
Harry Stephenson, as Representative
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