Exhibit 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
among
DRS TECHNOLOGIES, INC.,
MAXCO, INC.
and
ENGINEERED SUPPORT SYSTEMS, INC.
Dated as of September 21, 2005
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TABLE OF CONTENTS
ARTICLE 1 The Merger
1.1 The Merger.....................................................................................1
1.2 The Closing....................................................................................1
1.3 Effective Time.................................................................................1
1.4 Articles of Incorporation, By-Laws, Directors and Officers of the Surviving Corporation........2
ARTICLE 2 Effect of the Merger on Securities of Merger Sub and the Company
2.1 Merger Sub Stock...............................................................................2
2.2 Common Stock...................................................................................2
2.3 Company Stock Options..........................................................................3
2.4 Exchange of Certificates Representing Common Stock.............................................4
2.5 Adjustment of Merger Consideration.............................................................6
2.6 Dissenting Company Shareholders................................................................6
ARTICLE 3 Representations and Warranties of the Company
3.1 Organization and Qualification.................................................................7
3.2 Articles of Incorporation and Bylaws...........................................................8
3.3 Capitalization.................................................................................8
3.4 Authority Relative to This Agreement...........................................................9
3.5 No Conflict; Required Filings and Consents....................................................10
3.6 Permits; Compliance...........................................................................11
3.7 SEC Filings; Financial Statements; Undisclosed Liabilities....................................12
3.8 Affiliate Transactions........................................................................13
3.9 Absence of Certain Changes or Events..........................................................13
3.10 Absence of Litigation.........................................................................13
3.11 Employee Benefit Plans........................................................................14
3.12 Labor and Employment Matters..................................................................17
3.13 Real Property; Title to Assets................................................................18
3.14 Intellectual Property.........................................................................18
3.15 Taxes.........................................................................................20
3.16 Environmental Matters.........................................................................22
3.17 Specified Contracts...........................................................................23
3.18 Government Contracts..........................................................................25
3.19 No Suspension or Debarment....................................................................26
3.20 Loss Contracts; Backlog.......................................................................26
3.21 Customers, Distributors and Suppliers.........................................................26
3.22 Insurance.....................................................................................27
3.23 Board Approval; Vote Required.................................................................27
3.24 Opinions of Financial Advisors................................................................28
3.25 Brokers.......................................................................................28
3.26 Certain Business Practices....................................................................28
3.27 Information Supplied..........................................................................28
3.28 Export Licenses and Agreements................................................................28
3.29 Full Disclosure...............................................................................29
ARTICLE 4 Representations and Warranties of Parent and Merger Sub
4.1 Organization and Qualification................................................................29
4.2 Capitalization................................................................................30
4.3 Authority Relative to This Agreement..........................................................30
4.4 No Conflict; Required Filings and Consents....................................................30
4.5 Interim Operations of Merger Sub..............................................................31
4.6 Financing.....................................................................................31
4.7 Ownership of Common Stock.....................................................................32
4.8 Parent SEC Reports............................................................................32
4.9 Information Supplied..........................................................................32
4.10 Absence of Litigation.........................................................................32
4.11 Compliance....................................................................................33
4.12 Certain Business Practices....................................................................34
4.13 Full Disclosure...............................................................................34
ARTICLE 5 Covenants
5.1 Alternative Proposals.........................................................................34
5.2 Interim Operations............................................................................36
5.3 Company Shareholder Approval; Joint Proxy Statement; Parent Registration Statement............38
5.4 Filings; Other Action.........................................................................39
5.5 Access to Information.........................................................................40
5.6 Publicity.....................................................................................40
5.7 Further Action................................................................................40
5.8 Insurance; Indemnity..........................................................................40
5.9 Benefit Plans.................................................................................42
5.10 Supplemental Disclosure.......................................................................43
5.11 NYSE Listing..................................................................................43
5.12 Payment of Bank Debt..........................................................................43
5.13 Parent Financing..............................................................................43
ARTICLE 6 Conditions
6.1 Conditions to Each Party's Obligation to Effect the Merger....................................44
6.2 Conditions to Obligation of Parent and Merger Sub to Effect the Merger........................45
6.3 Conditions to Obligation of the Company to Effect the Merger..................................45
ARTICLE 7 Termination
7.1 Termination...................................................................................46
7.2 Effect of Termination and Abandonment.........................................................48
7.3 Termination Fee...............................................................................48
7.4 Termination for Failure to Obtain Financing...................................................48
7.5 Amendment.....................................................................................49
7.6 Extension; Waiver.............................................................................49
ARTICLE 8 General Provisions
8.1 Nonsurvival of Representations and Warranties.................................................49
8.2 Notices.......................................................................................49
8.3 Assignment; Binding Effect....................................................................50
8.4 Entire Agreement..............................................................................51
8.5 Governing Law.................................................................................51
8.6 Fee and Expenses..............................................................................51
8.7 Certain Definitions...........................................................................51
8.8 Headings......................................................................................53
8.9 Interpretation................................................................................53
8.10 Waivers.......................................................................................54
8.11 Severability..................................................................................54
8.12 Enforcement of Agreement......................................................................54
8.13 Counterparts..................................................................................54
TABLE OF DEFINED TERMS
401(k) Plans.....................................................Section 8.7
Acquisition Agreement.........................................Section 5.1(b)
Action..........................................................Section 3.10
Affiliate........................................................Section 8.7
Agreement...........................................................Preamble
Alternative Proposal..........................................Section 5.1(a)
Ancillary Documents..............................................Section 5.4
Articles of Merger...............................................Section 1.3
Backlog.........................................................Section 3.20
Cap...........................................................Section 5.8(a)
Cash Consideration............................................Section 2.2(a)
Certificate...................................................Section 2.2(b)
Change in Control Agreement..................................Section 3.11(b)
Closing..........................................................Section 1.2
Closing Date.....................................................Section 1.2
Code..........................................................Section 2.4(b)
Collective Bargaining Agreements................................Section 3.12
Commitment Letter................................................Section 4.6
Common Stock..................................................Section 2.2(a)
Company.............................................................Preamble
Company Applicable Period.....................................Section 5.1(a)
Company Disclosure Schedule........................................ARTICLE 3
Company Financial Advisor.......................................Section 3.24
Company Material Adverse Effect..................................Section 8.7
Company Permits...............................................Section 3.6(a)
Company Shareholder Approval.....................................Section 3.4
Company Shareholders' Meeting.................................Section 5.3(a)
Company Stock Option..........................................Section 3.3(a)
Company Stock Option Plans....................................Section 3.3(a)
Company Stock Plans...........................................Section 3.3(a)
Computer Software............................................Section 3.14(g)
Confidentiality Agreement.....................................Section 5.5(b)
Continuing Employees..........................................Section 5.9(b)
Contract......................................................Section 3.5(a)
Credit Agreement................................................Section 5.12
Delaware Courts..................................................Section 8.5
Dissenting Common Stock..........................................Section 2.6
Effective Time...................................................Section 1.3
Environmental Claim..............................................Section 8.7
Environmental Laws...........................................Section 3.16(b)
ERISA........................................................Section 3.11(a)
ERISA Affiliate..............................................Section 3.11(b)
ESOP..........................................................Section 3.3(a)
ESPP..........................................................Section 3.3(a)
Exchange Act..................................................Section 3.5(b)
Exchange Agent................................................Section 2.4(a)
Exchange Ratio................................................Section 2.2(a)
Expense Payment...............................................Section 7.3(a)
Export Approvals.............................................Section 3.28(a)
Foreign Benefit Plan.........................................Section 3.11(f)
GAAP..........................................................Section 3.7(b)
Government Bid............................................Section 3.18(g)(i)
Government Contract......................................Section 3.18(g)(ii)
Governmental Authority........................................Section 3.5(b)
group............................................................Section 8.7
Hazardous Substance..........................................Section 3.16(d)
HSR Act.......................................................Section 3.5(b)
ICA...........................................................Section 3.5(b)
Indebtedness.....................................................Section 8.7
Indemnified Party.............................................Section 5.8(b)
Infringe.....................................................Section 3.14(a)
Intellectual Property........................................Section 3.14(g)
Investments...................................................Section 3.3(d)
IRS..........................................................Section 3.11(a)
Joint Proxy Statement.........................................Section 5.3(c)
knowledge........................................................Section 8.7
Law...........................................................Section 3.5(a)
Leased Properties............................................Section 3.13(b)
License Agreements...............................................Section 8.7
Liens............................................................Section 8.7
Loss Contract....................................................Section 8.7
MBCL.............................................................Section 1.1
Merger...........................................................Section 1.1
Merger Consideration..........................................Section 2.2(a)
Merger Sub..........................................................Preamble
Multiemployer Plan...........................................Section 3.11(b)
Multiple Employer Plan.......................................Section 3.11(b)
NYSE..........................................................Section 2.2(a)
Option Consideration..........................................Section 2.3(i)
Other Transactions...............................................Section 3.4
Outside Date...............................................Section 7.1(b)(i)
Owned Intellectual Property..................................Section 3.14(c)
Owned Properties.............................................Section 3.11(a)
Parent..............................................................Preamble
Parent Common Stock Value.....................................Section 2.2(a)
Parent Disclosure Schedule.........................................ARTICLE 4
Parent Material Adverse Effect...................................Section 8.7
Parent Preferred.................................................Section 4.2
Parent SEC Reports...............................................Section 4.8
Parent Stock..................................................Section 2.2(a)
Parent Stock Consideration....................................Section 2.2(a)
Parent Stockholder Vote..........................................Section 4.3
Parent Stockholders' Meeting..................................Section 5.3(b)
Parent Subsidiary................................................Section 4.1
PBGC.....................................................Section 3.11(h)(ii)
Pension Plan.................................................Section 3.11(b)
Permitted Liens..............................................Section 3.13(c)
Person...........................................................Section 8.7
Plans........................................................Section 3.11(a)
Properties...................................................Section 3.13(b)
Registration Statement........................................Section 5.3(c)
Sarbanes-Oxley Act............................................Section 3.6(c)
Scheduled Intellectual Property..............................Section 3.14(b)
SEC...........................................................Section 3.5(b)
SEC Reports...................................................Section 3.7(a)
Securities Act................................................Section 3.7(a)
Small Business Act...........................................Section 3.18(b)
Specified Contract...........................................Section 3.17(b)
SPPND.........................................................Section 3.3(a)
Subsidiary.......................................................Section 3.1
Superior Proposal.............................................Section 5.1(a)
Superior Proposal Notice......................................Section 5.1(b)
Surviving Corporation............................................Section 1.1
Tax..............................................................Section 8.7
Tax Returns......................................................Section 8.7
Taxes............................................................Section 8.7
Termination Fee...............................................Section 7.3(a)
Third Party Licenses.........................................Section 3.14(d)
Total Cash Consideration.....................................Section 2.3(ii)
Total Cash Exercise Price....................................Section 2.3(iv)
Total Parent Stock Exercise Price.............................Section 2.3(v)
Total Stock Consideration...................................Section 2.3(iii)
Trade Secrets................................................Section 3.14(e)
Treasury Regulations.........................................Section 3.16(b)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
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of September 21, 2005, among DRS Technologies, Inc., a Delaware corporation
("Parent"), Maxco, Inc., a Missouri corporation and a wholly owned
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subsidiary of Parent ("Merger Sub"), and Engineered Support Systems, Inc., a
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Missouri corporation (the "Company").
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RECITALS
WHEREAS, the respective Boards of Directors of Parent,
Merger Sub and the Company each have determined that it is in the best
interests of their respective companies and stockholders to enter into and
consummate this Agreement, providing for the merger of Merger Sub with and
into the Company with the Company as the surviving corporation, and subject
to the conditions set forth herein; and
WHEREAS, the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of
the representations, warranties, covenants and agreements contained herein,
the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time (as defined in
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Section 1.3), subject to the terms and conditions of this Agreement and the
applicable provisions of the General and Business Corporation Law of
Missouri (the "MBCL"), Merger Sub shall be merged with and into the Company
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and the separate corporate existence of Merger Sub shall thereupon cease
(the "Merger"). The Company shall be the surviving corporation in the Merger
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(sometimes hereinafter referred to as the "Surviving Corporation"). The
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Merger shall have the effects specified in the MBCL.
1.2 The Closing. Subject to the terms and conditions of
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this Agreement, the closing of the Merger (the "Closing") shall take place
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at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at Four
Times Square, New York, New York, at 10:00 a.m., local time, as soon as
practicable but in no event later than the Outside Date (as defined in
Section 7.1(b)(i)). The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
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1.3 Effective Time. If all the conditions to the Merger
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set forth in Article 6 shall have been fulfilled or waived in accordance
herewith and this Agreement shall not have been terminated as provided in
Article 7, the parties hereto shall cause Articles of Merger meeting the
requirements of the MBCL (the "Articles of Merger") to be filed with the
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Secretary of State of the State of Missouri on the Closing Date. The Merger
shall become effective at the time of filing of the Articles of Merger with
the Secretary of State of the State of Missouri in accordance with the MBCL,
or at such later time which the parties hereto shall have agreed upon and
designated in such filings as the effective time of the Merger (the
"Effective Time").
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1.4 Articles of Incorporation, By-Laws, Directors and
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Officers of the Surviving Corporation. (a) The Amended Articles of
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Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation,
from and after the Effective Time, until duly amended in accordance with
applicable Law and the terms thereof.
(b) The Amended and Restated By-Laws of the Company as in
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation from and after the Effective Time, until duly amended
in accordance with applicable Law, the terms thereof, and the Surviving
Corporation's Articles of Incorporation.
(c) The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation from and
after the Effective Time, until their successors are duly appointed or
elected in accordance with applicable Law and the Surviving Corporation's
Articles of Incorporation and By-Laws.
(d) The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time, until their successors are duly appointed or
elected in accordance with applicable Law and the Surviving Corporation's
Articles of Incorporation and By-Laws.
ARTICLE 2
EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY
At the Effective Time by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holders of any of
the securities of Merger Sub or the Company:
2.1 Merger Sub Stock. Each share of common stock, $0.01
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par value per share, of Merger Sub that is issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock, $0.01 par value per share, of the Surviving Corporation.
2.2 Common Stock. (a) Each share of common stock, par
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value $0.01 per share, of the Company (the "Common Stock") issued and
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outstanding immediately prior to the Effective Time (other than shares of
Common Stock owned by Parent or Merger Sub or held by the Company, all of
which shall be cancelled, and other than the shares of Dissenting Common
Stock (as defined in Section 2.6)) shall be converted into the right to
receive (i) the amount of $30.10 in cash without interest (the "Cash
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Consideration") and (ii) a fraction of a fully paid and nonassessable share
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(the "Parent Stock Consideration") of the common stock, $.01 par value per
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share, of Parent ("Parent Stock") equal to one share of Parent Stock
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multiplied by the Exchange Ratio. "Exchange Ratio" means (a) if the Parent
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Common Stock Value is $57.20 or greater, 0.2255; (b) if the Parent Common
Stock Value is less than $57.20 but greater than $46.80, the quotient,
calculated to the nearest one-ten thousandth, resulting from dividing $12.90
by the Parent Common Stock Value; or (c) if the Parent Common Stock Value is
$46.80 or less, 0.2756. "Parent Common Stock Value" means the average
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closing sale prices for a share of Parent Stock
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on the New York Stock Exchange, Inc. (the "NYSE") Composite Transactions
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Tape (as reported by The Wall Street Journal (Northeast edition), or, if not
reported thereby, as reported by any other authoritative source) for each of
the ten consecutive trading days ending with the second complete trading day
prior to the Closing Date (not counting the Closing Date). The Parent Stock
Consideration using the Exchange Ratio shall be calculated to the nearest
one-ten thousandth of a share of Parent Stock and the Parent Common Stock
Value shall be calculated to the nearest one-tenth of one cent. The Cash
Consideration and the Parent Stock Consideration to be received by the
holders of Common Stock hereunder (together with the cash in lieu of
fractional shares of Parent Stock as specified below) are referred to herein
collectively as the "Merger Consideration".
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(b) All shares of Common Stock (other than shares to be
cancelled in accordance with Section 2.2(c)) shall cease to be outstanding
and shall be cancelled and shall cease to exist, and each holder of shares
of Common Stock (other than Merger Sub and Parent) shall thereafter cease to
have any rights with respect to such shares of Common Stock, except, subject
to Section 2.5, the right to receive, without interest, the Merger
Consideration in accordance with Section 2.4 upon the surrender of a
certificate or certificates (a "Certificate") representing such shares of
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Common Stock.
(c) Each share of Common Stock issued and held in the
Company's treasury at the Effective Time, or held by Merger Sub or Parent,
shall, by virtue of the Merger, cease to be outstanding and shall be
cancelled without payment of any consideration therefor.
2.3 Company Stock Options. Each Company Stock Option that
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is outstanding immediately prior to the Effective Time shall be cancelled as
of the Effective Time and in exchange therefor, the holder of such Company
Stock Option shall be entitled to receive, in consideration for the
cancellation of such Company Stock Option and net of applicable withholding
Taxes, the Option Consideration (if any). The Company shall take any and all
action, as may be necessary, to effectuate the foregoing, including without
limitation adopting any plan amendments and obtaining any required consents.
(i) For purposes of this Agreement, "Option
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Consideration" means (x) an amount of cash equal to the positive difference,
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if any, between the Total Cash Consideration, less the Total Cash Exercise
Price; and (y) the number of shares of Parent Stock equal to the positive
difference, if any, between the Total Stock Consideration less the Total
Parent Stock Exercise Price.
(ii) For purposes of this Agreement, "Total Cash
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Consideration" means the product of (x) the Cash Consideration multiplied by
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(y) the number of shares of Company Stock subject to such Company Stock
Option immediately prior to the Effective Time.
(iii) For purposes of this Agreement, "Total Stock
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Consideration" means the product of (x) the Parent Stock Consideration
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multiplied by (y) the number of shares of Company Stock subject to such
Company Stock Option immediately prior to the Effective Time.
(iv) For purposes of this Agreement, "Total Cash
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Exercise Price" means the product of (x) the aggregate exercise price of
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such Company Stock Option, multiplied by (y)
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a fraction, the numerator of which is the Cash Consideration, and the
denominator of which is the sum of (A) the Cash Consideration and (B) the
product of the Parent Stock Consideration multiplied by the Parent Common
Stock Value.
(v) For purposes of this Agreement, "Total Parent
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Stock Exercise Price" means (A) the aggregate exercise price of such Company
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Stock Option, multiplied by a fraction, the numerator of which is the
product of the Parent Stock Consideration and the Parent Common Stock Value
and the denominator of which is the sum of the Cash Consideration and
product of the Parent Stock Consideration and the Parent Common Stock Value,
divided by (B) the Parent Common Stock Value.
2.4 Exchange of Certificates Representing Common Stock.
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(a) Prior to the Effective Time, Parent shall appoint a commercial bank or
trust company, subject to the reasonable satisfaction of the Company, to act
as Exchange Agent hereunder for the purpose of paying, in accordance with
this Article 2, the Cash Consideration and exchanging, in accordance with
this Article 2, Certificates for the Parent Stock Consideration (the
"Exchange Agent"). Parent shall take all steps necessary to cause the
Surviving Corporation to provide the Exchange Agent with the Merger
Consideration to be delivered in exchange for all the shares of Common Stock
pursuant to Section 2.2(a) as and when such amounts are needed by the
Exchange Agent.
(b) As promptly as possible after the Effective Time,
Parent shall instruct the Exchange Agent to mail to each holder of record of
shares of Common Stock: (i) a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to such
Certificate(s) shall pass, only upon delivery of such Certificate(s) to the
Exchange Agent and which letter shall be in such form and have such other
provisions as are customary for letters of this nature and (ii) instructions
for effecting the surrender of such Certificate(s) in exchange for the
Merger Consideration. Upon surrender of such Certificate(s) to the Exchange
Agent together with such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, and such other documents as may
be reasonably required by the Exchange Agent, the holder of such
Certificate(s) shall be entitled to receive in exchange therefor a
certificate (or evidence of shares in book entry form) representing that
number of whole shares of Parent Stock and the amount of cash, without
interest, into which shares of Common Stock formerly represented by such
Certificate(s) shall have been converted into the right to receive pursuant
to Section 2.2 after giving effect to any required Tax withholdings, and the
shares formerly represented by the Certificate(s) so surrendered shall
forthwith be cancelled. If any portion of the Parent Stock Consideration is
to be registered in the name of a Person other than the Person in whose name
the applicable surrendered Certificate is registered, it shall be a
condition to the registration of such shares constituting such Parent Stock
Consideration that the surrendered Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the Person requesting such
delivery of such shares shall pay to the Exchange Agent any transfer or
other Taxes required by reason of such registration in the name of a Person
other than the registered holder of such Certificate or establish to the
reasonable satisfaction of the Exchange Agent that such Tax has been paid or
is not applicable. No interest will be paid or will accrue on the cash
payable upon surrender of any Certificate(s), including in lieu of any
fractional shares of Parent Stock. In the event of a transfer of ownership
of Common Stock that is not registered in the transfer records of the
Company, payment may be made with respect to such Common Stock to such a
transferee if such Certificate(s) representing such shares of Common Stock
is presented to
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the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable transfer or other
Taxes have been paid. Until surrendered as contemplated by this Section
2.4(b), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount
of Parent Stock and cash, without interest, into which the shares of Common
Stock theretofore represented by such Certificate(s) shall have been
converted pursuant to this Article 2. Except to the extent that the holder
provides the appropriate party with a validly executed IRS Form W-8 or W-9,
as the case may be, Parent, Merger Sub or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Common Stock
of the Company such amounts as Parent, Merger Sub or the Exchange Agent are
required to deduct and withhold under the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder (the "Code"), or any
provision of state, local or foreign Tax Law, with respect to the making of
such payment. To the extent the amounts are so withheld by Parent, Merger
Sub or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of shares of
Common Stock of the Company in respect of whom such deduction and
withholding was made by Parent, Merger Sub or the Exchange Agent.
(c) All shares of Parent Stock issued and all cash paid
upon surrender of Certificates in accordance with the terms of this Article
2 shall be deemed to have been issued and paid in full satisfaction of all
rights pertaining to the shares of Common Stock theretofore represented by
such Certificates. At or after the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Company of the
shares of Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided
in this Article 2.
(d) No dividends or other distributions with respect to
Parent Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
2.4(e) until the surrender of such Certificate in accordance with this
Article 2. Subject to the effect of applicable Laws, following surrender of
any such Certificate, there shall be paid to the holder of the certificate
representing whole shares of Parent Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Stock to which such holder
is entitled pursuant to Section 2.4(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and
a payment date subsequent to such surrender payable with respect to such
whole shares of Parent Stock.
(e) No certificates or script, or evidence of shares in
book entry form, representing fractional shares of Parent Stock shall be
issued upon the surrender for exchange of Certificates, and such fractional
share interests will not entitle the owner thereof to vote or to any other
rights of a stockholder of Parent. Each holder of Common Stock exchanged
pursuant to the Merger who would otherwise be entitled to receive a fraction
of a share of Parent Stock shall receive, upon surrender of such holder's
Certificates in accordance with this Section 2.4, an
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amount in cash (without interest) equal to the product obtained by
multiplying (i) such fractional share interest to which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) the average of the per share closing
sales prices of shares of Parent Stock as reported on the NYSE Composite
Transactions reporting system (as reported in The Wall Street Journal or, in
the absence thereof, by another authoritative source) during the five (5)
consecutive trading days ending on (and including) the trading day
immediately preceding the date of the Effective Time. As promptly as
practicable after the determination of the amount of cash, if any, to be
paid to holders of fractional share interests, the Exchange Agent shall so
notify Parent, and Parent shall deposit such amount with the Exchange Agent
and shall cause the Exchange Agent to forward payments to such holders of
fractional share interests subject to and in accordance with the terms of
Section 2.4(b).
(f) Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 2.4(a) (including the proceeds of
any interest and other income received by the Exchange Agent in respect of
all such funds) that remains undistributed to the former shareholders of the
Company six (6) months after the Effective Time shall be delivered to
Parent, upon demand. Any former shareholders of the Company who have not
theretofore complied with this Article 2, with respect to the procedures for
receiving the Merger Consideration to which they are entitled, shall
thereafter look only to the Parent for payment of any Merger Consideration,
without any interest thereon, that may be payable in respect of each share
of Common Stock such shareholder held as of the Effective Time as determined
pursuant to this Agreement.
(g) None of Parent, the Company, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of shares of Common Stock for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or
similar Laws.
(h) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
reasonably required by the Surviving Corporation, the posting by such Person
of a bond in such reasonable amount as the Surviving Corporation may direct
as indemnity against any claim which may be made against it with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable in respect
thereof pursuant to this Agreement.
(i) Parent or Merger Sub shall pay all of the Exchange
Agent's fees in connection with the exchange of the Merger Consideration for
Certificates.
2.5 Adjustment of Merger Consideration. In the event that,
----------------------------------
subsequent to the date of this Agreement but prior to the Effective Time,
the outstanding shares of Common Stock or Parent Stock shall have been
changed into a different number of shares or a different class as a result
of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, split, combination, exchange, recapitalization or other
similar transaction, the Exchange Ratio and Cash Consideration shall be
appropriately adjusted.
2.6 Dissenting Company Shareholders. Notwithstanding any
-------------------------------
provision of this
6
Agreement to the contrary, to the extent permitted by the MBCL, shares of
Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of Common Stock
who are entitled to demand and properly demand payment of the fair value of
such Common Stock pursuant to Section 351.455 of the MBCL (the "Dissenting
----------
Common Stock") will not be converted into, or represent the right to
- ------------
receive, the Merger Consideration. Holders of such shares of Dissenting
Common Stock will be entitled to payment of the fair value of such
Dissenting Common Stock in accordance with the provisions of such Section
351.455 unless and until such holders fail to perfect or effectively
withdraw or lose their rights to appraisal and payment under the MBCL. If,
after the Effective Time, any such holder fails to perfect or effectively
withdraws or loses such right, such shares of Dissenting Common Stock will
thereupon be treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon the surrender of a
Certificate in accordance with Section 2.4. The Company shall give Parent:
(i) prompt notice of any demands for payment of fair value received by the
Company pursuant to Section 351.455 of the MBCL, withdrawals of such demands
and any other instruments served pursuant to Section 354.455 of the MBCL and
received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to any such demand for payment of fair value
under the MBCL. The Company shall not, except with the prior written consent
of Parent, make any payment with respect to any demands for payment of fair
value or offer to settle or settle any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to such exceptions as are disclosed in the
corresponding sections of the disclosure schedule which is attached hereto
and made a part hereof (the "Company Disclosure Schedule") (it being
---------------------------
understood that (a) the disclosure of any fact or item in any section of the
Company Disclosure Schedule shall, should the existence of such fact or item
be relevant to any other section, be deemed to be disclosed with respect to
that other section so long as the relevance of such disclosure to such other
section is reasonably apparent, and (b) the disclosure of any matter or item
in the Company Disclosure Schedule shall not be deemed to constitute an
acknowledgement that such matter or item is required to be disclosed therein
or is material to a representation or warranty set forth in this Agreement
and shall not be used as a basis for interpreting the terms "material,"
"materially," "materiality" or "Company Material Adverse Effect" or any word
or phrase of similar import and does not mean that such matter or item
would, alone or together with any other matter or item, could reasonably be
expected to have a Company Material Adverse Effect, as defined in Section
8.7), the Company hereby represents and warrants to each of Parent and
Merger Sub as of the date of this Agreement as follows:
3.1 Organization and Qualification. Each of the Company
------------------------------
and each subsidiary of the Company (each, a "Subsidiary") is a corporation,
----------
limited partnership or limited liability company duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
organization and has the requisite corporate, limited liability company, or
partnership (as the case may be) power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as it is now being conducted except for such governmental
approvals, the absence of which, individually or in the aggregate, has not
had and would not reasonably be expected to have a Company Material Adverse
Effect.
7
The Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed and in good standing
has not had, and would not reasonably be expected to have, a Company
Material Adverse Effect.
3.2 Articles of Incorporation and Bylaws. The Company has
------------------------------------
made available to Parent (i) all minute books of the Company and each
Subsidiary since March 5, 2002, which are complete and correct, and (ii) a
complete and correct copy of the Articles of Incorporation and the Bylaws
(or similar organizational documents), each as amended to date, of the
Company and each Subsidiary. Such Articles of Incorporation and Bylaws (or
similar organizational documents) are in full force and effect.
3.3 Capitalization.
--------------
(a) The authorized capital stock of the Company consists
of 85,000,000 shares of Common Stock. As of the date hereof, (i) 41,788,943
shares of Common Stock were issued and outstanding (excluding shares of
Common Stock held in the treasury of the Company), all of which are duly
authorized, validly issued, fully paid and nonassessable and were issued
free of preemptive (or similar) rights, (ii) no shares of Common Stock were
held in the treasury of the Company, (iii) no shares of Common Stock were
held by the Subsidiaries, (iv) 4,832,019 shares of Common Stock were
reserved for future issuance in connection with the exercise of each option
(a "Company Stock Option") issued pursuant to any stock option plan,
--------------------
agreement or commitment maintained by the Company (other than the ESOP, the
SPPND, and the ESSP as each is defined below) (the "Company Stock Option
--------------------
Plans") (including shares reserved pursuant to outstanding Company Stock
- -----
Options), (v) no shares of Common Stock were reserved for issuance in
connection with the Company's Employee Stock Ownership Plan (the "ESOP"),
----
(vi) 70,420 shares of Common Stock were reserved for issuance under the
Company's Stock Purchase Plan for Non-Employee Directors (of which not more
than 2,500 shares will be issued by the Company with respect to 2005) (the
"SPPND") and (vii) 1,333,418 shares of Common Stock were reserved for
-----
issuance under the Company's Employee Stock Purchase Plan (of which no
shares will be issued following the date hereof) (the "ESPP" and, together
----
with the Company Stock Option Plans, the ESOP and SPPND, the "Company Stock
-------------
Plans"). Section 3.3(a)(i) of the Company Disclosure Schedule sets forth, as
- ----- ----------------------------------------------------
of the Capitalization Date, each Company Stock Option and other right to
purchase or receive shares of Common Stock under the Company Stock Plans,
the expiration date, grant date, vesting commencement date, vesting
schedule, type of option and the exercise price of each such Company Stock
Option (including whether the exercise price was less than the fair market
value of the underlying Shares on the date of grant) or right and the number
of Shares issuable under each Company Stock Option.
(b) Except as set forth in Section 3.3(b), or as set forth
in Section 3.3(b) of the Company Disclosure Schedule, there are no (i)
-------------------------------------------------
subscriptions, calls, contracts, options, warrants or other rights,
agreements, arrangements, understandings, restrictions or commitments of any
character to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound relating to the issued or unissued
capital stock or equity interests of the Company or any Subsidiary or
obligating the Company or any Subsidiary to issue or sell any shares of
capital stock of, other equity interests in or debt securities of, the
Company or any
8
Subsidiary (including any rights plan or agreement), (ii) securities of the
Company or securities convertible, exchangeable or exercisable for shares of
capital stock or equity interests of the Company or any Subsidiary, or (iii)
equity equivalents, stock appreciation rights or phantom stock, stock based
performance units, ownership interests in the Company or any Subsidiary or
similar rights. All shares of Common Stock subject to issuance as set forth
in Section 3.3(a), upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive (or similar) rights. There are no outstanding contractual
obligations or rights of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any securities or equity interests of the Company or
any Subsidiary to vote or to dispose of any shares of capital stock or
equity interests of the Company or any Subsidiary. Except as set forth in
Section 3.3(b) of the Company Disclosure Schedule, none of the Company or
- -------------------------------------------------
any Subsidiary nor, to the knowledge of the Company, any other Person is a
party to any shareholders' agreement, voting trust agreement or registration
rights agreement relating to any equity securities or equity interests of
the Company or any Subsidiary or any other contract relating to disposition,
voting or dividends with respect to, or bound by, any equity securities or
equity interests of the Company or of any Subsidiary. No dividends on the
Common Stock have been declared or paid since July 31, 2005. All of the
issued and outstanding shares of Common Stock have been issued by the
Company in compliance with applicable federal and state securities Laws.
There are no outstanding bonds, debentures, notes or other indebtedness of
the Company or any of its Subsidiaries having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matter for which the Company's shareholders may vote.
(c) Each outstanding share of capital stock (or other unit
of equity interest) of each Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and was issued free of preemptive (or similar)
rights, and each such share or unit is owned by the Company, by one or more
wholly owned Subsidiaries of the Company, or by the Company and one or more
wholly-owned Subsidiaries of the Company, free and clear of all options,
rights of first refusal, agreements, limitations on the Company's or any
Subsidiary's voting, dividend or transfer rights, charges and other
encumbrances or Liens of any nature whatsoever. A true and complete list of
all the Subsidiaries of the Company together with the jurisdiction of
incorporation of each Subsidiary is set forth in Section 3.3(c) of the
---------------------
Company Disclosure Schedule.
- ---------------------------
(d) Section 3.3(d) of the Company Disclosure Schedule also
-------------------------------------------------
lists any and all Persons of which the Company directly or indirectly owns
an equity or similar interest, or an interest convertible into or
exchangeable or exercisable for an equity or similar interest, of any Person
which is not a Subsidiary (collectively, the "Investments"). The Company or
-----------
a Subsidiary, as the case may be, owns all Investments free and clear of all
Liens, and there are no outstanding contractual obligations of the Company
or any Subsidiary permitting the repurchase, redemption or other acquisition
of any of its interest in the Investments or requiring the Company or any
Subsidiary to provide funds to, make any investment (in the form of a loan,
capital contribution or otherwise) in, provide any guarantee with respect
to, or assume, endorse or otherwise become responsible for the obligations
of, any Investment (or any Person in which such Investment is made).
3.4 Authority Relative to This Agreement. The Company has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations
9
hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement to be consummated by the Company or the
Surviving Corporation (the "Other Transactions"). The execution, delivery
------------------
and performance of this Agreement by the Company and the consummation by the
Company of the Merger and the Other Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the Merger or such Other Transactions (other than
the adoption of this Agreement by the affirmative vote of the holders of
two-thirds of the then-outstanding shares of Common Stock entitled to vote
thereon (the "Company Shareholder Approval") and the filing and recordation
----------------------------
of appropriate merger documents as required by the MBCL). This Agreement has
been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency (including all Laws relating
to fraudulent transfers), reorganization, moratorium or similar Laws
affecting creditors' rights generally and subject to the effect of general
principles of equity.
3.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the Other Transactions will
not, (i) assuming the approval of the agreement by the shareholders of the
Company as required by the MBCL, conflict with, violate or result in a
breach of the Articles of Incorporation or Bylaws of the Company (or similar
organizational documents of any Subsidiary), (ii) assuming that all
consents, approvals and other authorizations described in Section 3.5(b)
have been obtained, that all filings and other actions described in Section
3.5(b) have been made or taken, and that the Company pays off in full at
Closing the outstanding amounts due under the Credit Facility (as
hereinafter defined), conflict with or violate any U.S. federal, state or
local or foreign statute, law, ordinance, regulation, rule, code, executive
order, judgment, decree or other order ("Law") applicable to the Company or
---
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in any breach or violation
of or constitute a default (or an event which, with notice or lapse of time
or both, would become a default) under, require consent or result in a loss
of a benefit under, give rise to an obligation under, give to others any
right of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any property or asset of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other binding commitment,
instrument or obligation (each, a "Contract") to which the Company or any
--------
Subsidiary is a party or by which the Company or a Subsidiary or any
property or asset of the Company or any Subsidiary is bound or affected,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which have not had, and
would not reasonably be expected to have, a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the Other Transactions will
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any supranational, national, provincial, federal,
state or
10
local or government, regulatory or administrative authority, or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority"), except
----------------------
for (i) applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the pre-merger notification requirements
------------
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the competition or Merger Control Laws of any other
-------
applicable jurisdiction, (iii) the notification requirements of the
Investment Canada Act (R.S. 1985, c. 28 (1st Supp.), as amended (the "ICA"),
---
(iv) the filing with the Securities and Exchange Commission (the "SEC") of
---
the Joint Proxy Statement, (v) any filings required by, and any approvals
required under, the rules and regulations of the Nasdaq National Market,
(vi) the filing and recordation of appropriate merger documents as required
by the MBCL, (vii) any novations, consents or approvals required in
connection with Government Contracts or similar novations, consents or
approvals under any other Contracts with any other Governmental Authorities,
(viii) any filings required under the DOD Industrial Security Manual for
Safeguarding Classified Information, and (ix) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filing
or notifications would not (a) prevent or materially delay the consummation
of the Merger, or (b) otherwise prevent or materially delay performance by
the Company of any of its material obligations under the Agreement.
3.6 Permits; Compliance.
-------------------
(a) Each of the Company and each Subsidiary is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Authority necessary for each such entity to own,
lease and operate its properties or to carry on its business as it is now
being conducted (the "Company Permits") and no default has occurred under
---------------
any such Company Permit, and no written notice of violation has been
received from any Governmental Authority, except where the failure to have,
or the suspension or cancellation of, or defaults under, or violations of,
any Company Permit have not had, and would not reasonably be expected to
have, a Company Material Adverse Effect. As of the date hereof, neither the
Company nor any Subsidiary has received any written notification from any
Governmental Authority threatening to revoke any such Person's material
Company Permit.
(b) To the knowledge of the Company, each of the Company
and each of its Subsidiaries and Affiliates (with respect to matters
relating to the Company's business) is, and at all times has been, in
compliance in all material respects with any Law applicable to such Person
or Affiliate or by which any property or asset of such entity is bound or
affected, and has not received written notice of any violation of any such
Law.
(c) Since the enactment of the Sarbanes-Oxley Act of 2002
and the related rules and regulations promulgated thereunder (the
"Sarbanes-Oxley Act"), the Company has been and is in compliance in all
------------------
material respects with the applicable provisions of the Sarbanes-Oxley Act.
The Company has designed and implemented disclosure controls and procedures
(as defined in Rule 13a-15 under the Exchange Act) to ensure that material
information relating to the Company, including its consolidated
Subsidiaries, is made known on a timely basis to the individuals responsible
for the preparation of the Company's filings with the SEC and other public
disclosure documents.
11
(d) The Company has disclosed, based on its most recent
evaluation, to the Company's auditors and the audit committee of the Board
of Directors of the Company (i) any significant deficiencies and material
weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect in any material
respect the Company's ability to record, process, summarize and report
financial information and (ii) any fraud or allegation of fraud, whether or
not material, that involves management or other employees who have a
significant role in the Company's internal controls over financial
reporting. True, correct and complete copies of any written reports or other
correspondence with respect to such disclosures (whether prepared by the
Company, its counsel or other advisors) have been provided to Parent prior
to the date of this Agreement, except in any instances where providing such
reports or other correspondence would constitute a waiver of applicable
attorney-client privilege (in which case Parent has been advised of the
subject matter thereof).
(e) The Company has not received any complaint,
allegation, assertion or claim in writing regarding the accounting
practices, procedures, methodologies or methods of the Company or its
internal accounting controls, which deals with any matter that would
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, there is no reason to believe that its auditors
and its chief executive officer and chief financial officer will not be able
to give the certifications and attestations required pursuant to the rules
and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act
when next due.
(f) Since October 1, 2003, neither the Company nor any of
its Subsidiaries has effected any securitization transaction or other
"off-balance sheet arrangement" (as defined in Item 303 of Regulation S-K of
the SEC).
3.7 SEC Filings; Financial Statements; Undisclosed
----------------------------------------------
Liabilities. (a) The Company has filed all forms, reports, statements,
- -----------
schedules, certifications and other documents required to be filed by it
with the SEC since November 1, 2001 (collectively, the "SEC Reports"). As of
-----------
their respective dates, the SEC Reports (including any documents or
information incorporated by reference therein and including any financial
statements or schedules included therein) (i) complied in all material
respects with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the Sarbanes-Oxley Act
--------------
and, in each case, the rules and regulations promulgated thereunder, and
(ii) did not, at the time they were filed, or, if amended, as of the date of
such amendment, 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 is or has been required
to file any form, report, statement, schedule, certification or other
document with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any notes and schedules thereto) contained in the
SEC Reports was prepared in accordance with accounting principles generally
accepted in the United States ("GAAP") applied on a consistent basis
----
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC and the requirements of Regulation S-X under the Securities Act)
and each fairly presents, in all material respects, the consolidated
financial position, results of operations, shareholders' equity and cash
flows of the
12
Company 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 the absence of footnotes and to normal and
recurring year-end adjustments). All of the Subsidiaries are consolidated
for accounting purposes.
(c) Except as set forth in the SEC Reports, and to the
extent set forth on the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at October 31, 2004, included in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 2004,
neither the Company nor any Subsidiary has any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except for
liabilities and obligations (i) incurred in the ordinary course of business
and in a manner consistent with past practice since October 31, 2004, or
(ii) the obligations to pay fees and expenses to the Company's attorneys,
accountants and the Company Financial Advisor relating to the obligations
contemplated by this Agreement. None of the liabilities or obligations
contemplated by the preceding sentence have had, individually or in the
aggregate, or would reasonably be expected to have a Company Material
Adverse Effect. As of the date hereof, the aggregate amount of all
Indebtedness of the Company and its Subsidiaries (other than any
Indebtedness owed by the Company to any Subsidiary or any Subsidiary to the
Company or another Subsidiary) does not exceed $75 million.
3.8 Affiliate Transactions. Except as set forth in Section
---------------------- -------
3.8 of the Company Disclosure Schedule, there are no transactions,
- --------------------------------------
agreements, arrangements or understandings between (i) the Company or any of
its Subsidiaries, on the one hand, and (ii) any Affiliate of the Company
(other than any of its Subsidiaries), on the other hand.
3.9 Absence of Certain Changes or Events. Except as set
------------------------------------
forth in Section 3.9 of the Company Disclosure Schedule, since October 31,
----------------------------------------------
2004, there has not occurred any Company Material Adverse Effect, or any
event, circumstance or occurrence that has had, or would reasonably be
expected to have, a Company Material Adverse Effect. Since October 31, 2004,
except as expressly contemplated by this Agreement, (a) the Company and the
Subsidiaries have conducted their businesses only in the ordinary course of
business and in a manner consistent with past practice and (b) neither the
Company nor any Subsidiary has taken any action or agreed to take any action
that would be prohibited by clauses (i) through (xviii) of Section 5.2(b)
taken after the date hereof other than in the ordinary course of business
and in a manner consistent with past practice.
3.10 Absence of Litigation. Except as set forth in Section
--------------------- -------
3.10 of the Company Disclosure Schedule, and excluding workers' compensation
- ---------------------------------------
claims for which the Company is insured or has recorded adequate reserves in
its financial statements to cover such claims, there is no litigation, suit,
claim, action, proceeding, hearing, petition, grievance, complaint, charge
or investigation (an "Action") pending or, to the knowledge of the Company,
------
threatened against the Company or any of its Subsidiaries or Affiliates
(with respect to matters relating to the Company's business), or any
property or asset of the Company or any Subsidiary, or to the knowledge of
the Company, or any officer, director or employee of the Company or any of
its Subsidiaries or Affiliates (with respect to matters relating to the
Company's business), before any Governmental Authority or arbitrator. Except
as set forth in Section 3.10 of the Company Disclosure Schedule, neither the
-----------------------------------------------
Company nor any of its Subsidiaries or Affiliates (with respect
13
to matters relating to the Company's business) nor any property or asset of
the Company or of its Subsidiaries or Affiliates (with respect to matters
relating to the Company's business) is subject to any order, writ, judgment,
injunction, decree, determination or award of, or, to the knowledge of the
Company, any investigation by, any Governmental Authority.
3.11 Employee Benefit Plans. (a) Section 3.11(a) of the
---------------------- ----------------------
Company Disclosure Schedule lists: (i) all employee benefit plans (as
- ---------------------------
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and all material bonus, stock option, stock
-----
purchase, restricted stock, stock bonus, stock appreciation right, employee
stock ownership, profit sharing, savings, change in control, retirement,
pension, health, life insurance, disability, accident, group insurance,
vacation, holiday, sick leave, fringe benefit, layoff, salary continuation,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements; and (ii) all employment, termination, severance or other
Contracts, agreements or commitments to which the Company, any ERISA
Affiliate or any Subsidiary is a party, with respect to which the Company,
any ERISA Affiliate or any Subsidiary has or may reasonably be expected to
have any obligation or which are maintained, contributed to or sponsored by
the Company, any ERISA Affiliate or any Subsidiary for the benefit of any
current or former employee, consultant, officer or director of the Company
or any Subsidiary (collectively, the "Plans"). The Company has made
-----
available to Merger Sub a true and complete copy (where applicable) of (i)
each Plan (or, where a Plan has not been reduced to writing, a summary of
all material Plan terms of such Plan), (ii) each trust or funding
arrangement prepared in connection with each such Plan, (iii) the annual
report on Internal Revenue Service ("IRS") Form 5500 or any other annual
---
report required by applicable Law for the three (3) most recent plan years,
(iv) the most recently received IRS determination letter for each such Plan,
(v) the two (2) most recent actuarial reports and financial statements
prepared in connection with each such Plan, and (vi) the most recent summary
plan description, any summaries of material modification, any employee
handbooks, and any material written communications (or a description of any
material oral communications) by the Company or the Subsidiaries to any
current or former employees, consultants, or directors of the Company or any
Subsidiary concerning the extent of the benefits provided under a Plan.
Neither the Company nor any Subsidiary has any plan or commitment to
establish any new material Plan or to materially modify any Plan.
(b) Except as set forth in Section 3.11(b) of the Company
------------------------------
Disclosure Schedule, none of the Company or any Subsidiary or any other
- -------------------
Person or entity that, together with the Company or any Subsidiary, is or
was treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code (each, together with the Company and any Subsidiary, an "ERISA
-----
Affiliate"), has now or at any time within the past six years (and in the
- ---------
case of any such other Person or entity, only during the period within the
past six years that such other Person or entity was an ERISA Affiliate)
contributed to, sponsored, or maintained: (i) a pension plan (within the
meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or
Title IV of ERISA (each, a "Pension Plan"); (ii) a multiemployer plan
------------
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA or the
comparable provisions of any other applicable Law) (a "Multiemployer Plan");
------------------
or (iii) a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which an ERISA Affiliate would reasonably be
expected to incur liability under Section 4063 or 4064 of ERISA (a "Multiple
--------
Employer Plan"). Except as set forth on Section 3.11(b) of the Company
- ------------- ------------------------------
Disclosure Schedule (each, a "Change in Control
- ------------------- -----------------
14
Agreement"), no Plan exists that would result in the payment to any present
- ---------
or former employee, director or consultant of the Company or any Subsidiary
of any money or other property or result in the forgiveness of indebtedness
or accelerate or provide any other rights or benefits to any current or
former employee, director or consultant of the Company or any Subsidiary as
a result of the consummation of the Merger or any other transaction
contemplated by this Agreement (whether alone or in connection with any
other event). No payment or other benefit that has been or may be made to
any current or former employee or independent contractor of the Company or
any Subsidiary under any Plan, employment, severance or termination
agreement, other compensation arrangement or employee benefit plan or
arrangement with the Company or any Subsidiary may be characterized as an
"excess parachute payment," as such term is defined in Section 280G of the
Code and no such Plan, arrangement or agreement provides for, or provided
for, the payment by the Company or any Subsidiary of any amount that is not
or was not reasonably deductible under Section 162(m) or Section 404 of the
Code. Neither the Company nor any of its Subsidiaries nor any of its ERISA
Affiliates is required to provide any "gross up" payments to any employee or
service provider with respect to any tax imposed under section 4999 of the
Code.
(c) Each Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the IRS that the Plan is so qualified, and each trust established in
connection with any Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received a determination
letter from the IRS that it is so exempt, and, to the knowledge of the
Company, no fact or circumstance exists that would reasonably be expected to
adversely affect the qualified status of any such Plan or the exempt status
of any such trust. The ESOP is a duly organized, validly existing employee
stock ownership plan under Section 407 of ERISA and Section 4975(e)(7) of
the Code and is not a party to any outstanding loans.
(d) (i) Each Plan and each related trust agreement,
annuity Contract or funding instrument has been established and
administered, both as to form and operation, in accordance with its terms,
and in compliance with the applicable provisions of ERISA, the Code and
other applicable Laws, except to the extent such noncompliance has not had,
and would not reasonably be expected to have a Company Material Adverse
Effect, and (ii) except as set forth in Section 3.11(d) of the Company
------------------------------
Disclosure Schedule, no Plan provides post-termination or retiree welfare
- -------------------
benefits, and neither the Company nor any Subsidiary has any obligation to
provide any post-termination benefits other than for health care
continuation as required by Section 4980B of the Code or any similar
statute. All obligations to be performed at or prior to the Closing Date
with respect to each Plan (including, without limitation, those with respect
to the making or payment of contributions or premiums, as applicable) have
been or will have been performed in accordance with the relevant terms of
each Plan and all applicable Law, and no taxes are owing or exigible under
any Plan;
(e) With respect to any Plan, except as set forth in
Section 3.11(e) of the Company Disclosure Schedule, (i) no Actions (other
- --------------------------------------------------
than routine claims for benefits in the ordinary course) are pending or, to
the knowledge of the Company, threatened, except for those that have not
had, and would not reasonably be expected to have, a Company Material
Adverse Effect, (ii) to the knowledge of the Company, no facts or
circumstances exist that would reasonably be expected to give rise to any
such Actions, and (iii) no administrative investigation,
15
audit or other administrative proceeding by the Department of Labor, the IRS
or other Governmental Authority is pending, in progress or, to the knowledge
of the Company, threatened, except for those that have not had, and would
not reasonably be expected to have, a Company Material Adverse Effect.
(f) Section 3.11(f) of the Company Disclosure Schedule
--------------------------------------------------
sets forth a complete and accurate list of each Plan that is not subject to
United States Law (each such Plan, a "Foreign Benefit Plan"). Without
--------------------
limiting the representations set forth in Section 3.11(a) through (e),
except as has not had, and would not reasonably be expected to have, a
Company Material Adverse effect: (i) all employer and employee contributions
to each Foreign Benefit Plan required by Law or by the terms of such Foreign
Benefit Plan have been made or, if applicable, accrued in accordance with
normal accounting practices; (ii) the fair market value of the assets of
each funded Foreign Benefit Plan, the liability of each insurer for any
Foreign Benefit Plan funded through insurance or the book reserve
established for any Foreign Benefit Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the date of this Agreement, with respect to all current
and former participants in such plan according to the actuarial assumptions
and valuations most recently used and consistent with applicable Law to
determine employer contributions to such Foreign Benefit Plan and no
transaction contemplated by this Agreement shall cause such assets, reserve
or insurance obligations to be less than such benefit obligations; (iii)
each Foreign Benefit Plan required to be registered has been registered and
has been maintained in good standing with applicable regulatory authorities;
(iv) each Foreign Benefit Plan is in compliance in all material respects
with all applicable Laws; and (v) no Foreign Benefit Plan is a registered
pension plan for purposes of applicable Canadian Law.
(g) Neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any fiduciary of any Plan has any material
liability with respect to any transaction in violation of Section 404 or 406
of ERISA or any "prohibited transaction," as defined in Section 4975(c)(1)
of the Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code.
(h) Except as set forth in Section 3.11(h) of the Company
------------------------------
Disclosure Schedule, the Company represents as follows:
- -------------------
(i) The funding method used in connection with each
Pension Plan which is subject to the minimum funding requirements of ERISA
is acceptable and the actuarial assumptions used in connection with funding
each such plan are reasonable. The Company has provided Parent with a true
and correct copy of the most recent actuarial valuation for each Pension
Plan. Nothing has occurred since the date of such reports that would
materially and adversely affect the funded status of each Pension Plan as
reflected in such reports. No "accumulated funding deficiency" (for which an
excise tax is due or would be due in the absence of a waiver) as defined in
Section 412 of the Code or as defined in Section 302(a)(2) of ERISA,
whichever may apply, has been incurred with respect to any Pension Plan with
respect to any plan year, whether or not waived. Neither the Company nor any
ERISA Affiliate has failed to pay when due any "required installment,"
within the meaning of Section 412(m) of the Code and Section 302(e) of
ERISA, whichever may apply, with respect to any Pension Plan. Neither the
Company nor any ERISA Affiliate is subject to any lien imposed under Section
412(n) of the
16
Code or Section 302(f) of ERISA, whichever may apply, with respect to any
Pension Plan. Neither the Company nor any ERISA Affiliate has any liability
for unpaid contributions that are payable currently with respect to any
Pension Plan. Neither the Company nor any ERISA Affiliate is required to
provide security to a Pension Plan which covers or has covered employees or
former employees of the Company or a Subsidiary under Section 401(a)(29) of
the Code.
(ii) The Company has paid all premiums (and interest
charges and penalties for late payment, if applicable) due the Pension
Benefit Guarantee Corporation (the "PBGC") with respect to each Pension Plan
for each plan year thereof for which such premiums are required. Neither the
Company nor any ERISA Affiliate has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in
Section 4069 of ERISA. There has been no "reportable event" (as defined in
Section 4043(b) of ERISA and the PBGC regulations under such Section) with
respect to any Pension Plan. No filing has been made by the Company or any
ERISA Affiliate with the PBGC, and no proceeding has been commenced by the
PBGC, to terminate any Pension Plan. To the knowledge of the Company, no
condition exists and no event has occurred that could constitute grounds for
the termination of any Pension Plan by the PBGC. Neither the Company nor any
ERISA Affiliate has, at any time, (A) ceased operations at a facility so as
to become subject to the provisions of Section 4068(e) of ERISA, (B)
withdrawn as a substantial employer so as to become subject to the
provisions of Section 4063 of ERISA, or (C) ceased making contributions on
or before the Closing Date to any Pension Plan subject to Section 4064(a) of
ERISA to which the Company or any ERISA Affiliate made contributions during
the six years prior to the Closing Date.
3.12 Labor and Employment Matters. Section 3.12 of the
---------------------------- -------------------
Company Disclosure Schedule sets forth all collective bargaining agreements
- ---------------------------
to which or by which the Company or any Subsidiary is a party or bound (the
"Collective Bargaining Agreements"). Other than the Collective Bargaining
--------------------------------
Agreements, neither the Company nor any Subsidiary is, or at any time has
been, a party to or bound by any collective bargaining agreement or other
labor union agreements applicable to Persons employed by the Company or any
Subsidiary, nor, to the knowledge of the Company, are there any such
employees represented by a labor union, works council or other labor
organization or activities or proceedings of any labor union, works council
or group of employees to organize any such employees. The Company has
delivered or made available to Parent true, correct and complete copies of
each Collective Bargaining Agreement, as amended to date. Neither the
Company nor any Subsidiary party thereto nor, to the knowledge of the
Company, the other party or parties thereto, is in breach of any term of any
such Collective Bargaining Agreement. From January 1, 2003 to the date of
this Agreement, there has been no actual or, to the knowledge of the Company
or any Subsidiary, threatened work stoppage, slowdown, labor strike, lockout
or labor dispute against or affecting the Company or any Subsidiary. The
Company and its Subsidiaries (a) have no direct or indirect liability with
respect to any misclassification of any Persons as an independent contractor
rather than as an employee, except for those misclassifications that have
not had, and would not reasonably be expected to have, a Company Material
Adverse Effect, (b) are in material compliance with all applicable Laws
respecting employment, employment practices, terms and conditions of
employment and wages and hours, and (c) have complied in all material
respects with Executive Order 11246 and any similar Laws regarding
affirmative action and nondiscrimination applicable to government
contractors. The Company and its Subsidiaries are and have been in
compliance with all notice and other requirements under the Workers'
17
Adjustment Retraining Notification Act and any similar Laws relating to
plant closings and layoffs.
3.13 Real Property; Title to Assets.
------------------------------
(a) Section 3.13(a) of the Company Disclosure Schedule
--------------------------------------------------
lists by address each parcel of real property owned by the Company or any
Subsidiary (the "Owned Properties"). There are no material leases,
----------------
subleases, licenses, occupancy agreements, options, rights, concessions or
other agreements or arrangements, written or oral, granting to any Person
the right to purchase, use or occupy any of the Owned Properties.
(b) Section 3.13(b) of the Company Disclosure Schedule
--------------------------------------------------
lists by address each parcel of real property leased or subleased by the
Company or any Subsidiary for which the annual rental payments exceeds
$50,000 (the "Leased Properties" and together with the Owned Properties, the
-----------------
"Properties"). True and complete copies of all agreements under which the
----------
Company or any of its Subsidiaries leases or subleases, together with all
amendments and assignments, the Leased Properties have been provided or made
available to Parent and Merger Sub. To the extent that any Person other than
the Company or its Subsidiaries has a right to use or occupy any portion of
any of the Leased Properties, such right(s) would not reasonably be expected
to have a Company Material Adverse Effect. Except as has not had, and would
not reasonably be expected to have, a Company Material Adverse Effect, (i)
each agreement under which the Company or any Subsidiaries leases or
subleases the Leased Properties is a legal, valid and binding obligation of
the Company or such Subsidiary, as applicable, in full force and effect and
enforceable against the Company or such Subsidiary in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency
(including all Laws relating to fraudulent transfers), reorganization,
moratorium or similar Laws affecting creditors' rights generally and subject
to the effect of general principles of equity, (ii) to the knowledge of the
Company, each such agreement is a legal, valid and binding obligation of the
counterparty thereto, in full force and effect and enforceable against such
counterparty in accordance with its terms, and (iii) neither the Company nor
any of its Subsidiaries is and, to the Company's knowledge, no counterparty
is, in breach or violation of, or in default under, any such agreement.
(c) The Company or one of its Subsidiaries (i) has good
title to all of their material properties and assets, and (ii) owns or has a
valid leasehold interest in all of the Properties, free and clear of all
Liens, except (i) Liens for current taxes and assessments not yet past due,
(ii) inchoate mechanics' and materialmen's Liens for construction in
progress, (iii) workmen's, repairmen's, warehousemen's and carriers' Liens
arising in the ordinary course of business of the Company or such Subsidiary
consistent with past practice if the underlying obligations are not more
than 30 days past due or are being contested in good faith, and (iv) all
Liens and other imperfections of title (including matters of record) and
encumbrances that do not materially interfere with the conduct of the
businesses of the Company or any of its Subsidiaries taken as a whole
(collectively, "Permitted Liens"). Except as set forth in Section 3.13(c) of
--------------- ------------------
the Company Disclosure Schedule, there are no material pending or, to the
- -------------------------------
knowledge of the Company, threatened condemnation proceedings with respect
to any Property or litigation or administrative actions relating to any
Property.
3.14 Intellectual Property.
---------------------
18
(a) Except as has not had, and would not reasonably be
expected to have, a Company Material Adverse Effect, to the knowledge of the
Company, (i) the Company and its Subsidiaries own or have the valid right to
use all the Intellectual Property (as defined below) used in, or necessary
in, the conduct of the business of the Company and the Subsidiaries, and
(ii) the conduct of the business of the Company and its Subsidiaries as
currently conducted does not infringe upon, misappropriate or violate
("Infringe") any Intellectual Property of any third party. Except as has not
--------
had, and would not reasonably be expected to have, a Company Material
Adverse Effect, no claim or demand has been given in writing to the Company
or any Subsidiary that the conduct of the business of the Company or any
Subsidiary Infringes upon or may Infringe upon the Intellectual Property
rights of any third party (including any demand that the Company or a
Subsidiary must license or refrain from using any Intellectual Property of a
third party).
(b) Section 3.14(b) of the Company Disclosure Schedule
--------------------------------------------------
sets forth a true and complete list of all Intellectual Property rights
which are either registered or have been applied for and are currently owned
by the Company and its Subsidiaries that are material to the business of the
Company and its Subsidiaries, taken as a whole (collectively, "Scheduled
---------
Intellectual Property"). Each item listed on Section 3.14(b) of the Company
- --------------------- ------------------------------
Disclosure Schedule has been duly registered or application filed with the
- -------------------
U.S. Patent and Trademark Office or such other governmental or
organizational authority. Except as has not had, and would not reasonably be
expected to have, a Company Material Adverse Effect, to the knowledge of the
Company, all patent, copyright, and trademark applications, renewals and
other similar fees have been properly paid and are current, and all patent,
copyright, and trademark registrations and filings remain in full force and
effect. There are no actual or, to the knowledge of the Company, threatened
opposition proceedings, reexamination proceedings, cancellation proceedings,
interference proceedings or other similar actions challenging the validity,
existence, ownership of any portion of the Scheduled Intellectual Property
or Intellectual Property which should have been listed in Section 3.14(b) of
------------------
the Company Disclosure Schedule. To the knowledge of the Company, none of
- -------------------------------
the Scheduled Intellectual Property or Intellectual Property which should
have been listed in Section 3.14(b) of the Company Disclosure Schedule has
--------------------------------------------------
been previously adjudged to be invalid or unenforceable in whole or in part.
(c) With respect to the Intellectual Property rights that
are owned by the Company or any of its Subsidiaries that are material to the
business of the Company or any of its Subsidiaries (collectively, "Owned
-----
Intellectual Property"), to the knowledge of the Company, the Company or a
- ---------------------
Subsidiary is the owner of the entire right, title and interest in and to
such Owned Intellectual Property and is entitled to make, use, offer for
sale, sell, import, license and transfer products made in accordance with
the Owned Intellectual Property and otherwise to exploit such Owned
Intellectual Property in the continued operation of its respective business
consistent with past practice. To the knowledge of the Company, (i) no
Person has or is engaged in any activity that has Infringed upon the Owned
Intellectual Property, and (ii) the Company has not performed any acts or
made any statements, or failed to perform any acts or make any statements,
which would adversely affect either the validity or enforceability of any of
the Owned Intellectual Property against any Person. Except as has not had,
and would reasonably be expected to have, a Company Material Adverse Effect,
neither the Company nor any Subsidiary has exclusively licensed any Owned
Intellectual Property to any Person.
19
(d) Except as has not had, and would not reasonably be
expected to have, a Company Material Adverse Effect, to the knowledge of the
Company, the Company and its Subsidiaries use the Intellectual Property of
third parties only pursuant to valid, effective written License Agreements
(collectively, the "Third Party Licenses") that will allow the continued
--------------------
operation of material aspects of the Company's business consistent with past
practice. Section 3.14(b) of the Company Disclosure Schedule sets forth a
--------------------------------------------------
true and complete list of all third party software contained in the Owned
Intellectual Property (as defined above) that, if the Company or any of its
Subsidiaries did not have the right to make, use, offer for sale, sell,
import, license, transfer, sublicense, and otherwise exploit, would have, or
could reasonably be expected to have, a Company Material Adverse Effect.
(e) The Company and its Subsidiaries have taken
commercially reasonable actions to protect, preserve, and maintain the
secrecy of the Owned Intellectual Property that is not the subject of any
patent, copyright, or trademark registration as a trade secret under
applicable Law ("Trade Secrets") and to maintain the confidentiality of and
-------------
restrict the improper use of the Trade Secrets. Without limitation, such
reasonable actions have included requiring employees and consultants to
enter into non-disclosure and intellectual property assignment agreements
and waivers of moral rights (where applicable) to the extent that such
employees or consultants have worked with or have developed any part of the
Owned Intellectual Property. To the knowledge of the Company, (i) there has
been no unauthorized disclosure of any of the Trade Secrets, and (ii) there
has been no material breach of the Company's or any Subsidiary's security
procedures wherein any of the Trade Secrets has been improperly disclosed to
a third Person.
(f) To the knowledge of the Company, the consummation of
the Merger will not result in the loss or the impairment of the right of the
Company or any of its Subsidiaries to own or use any of the material
Intellectual Property.
(g) For purposes of this Agreement, "Intellectual
------------
Property" means the following and all rights pertaining thereto: (i)
- --------
patents, patent applications, provisional patent applications and statutory
invention registrations (including all utility models and other patent
rights under the Laws of all countries), (ii) trademarks, service marks,
trade dress, distinguishing guises, logos, trade names, service names,
corporate names, domain names and other brand identifiers, registrations and
applications for registration thereof, (iii) copyrights, proprietary
designs, Computer Software (as defined below), mask works, databases, and
registrations and applications for registration thereof, (iv) confidential
and proprietary information, trade secrets, know-how and show-how, and (v)
all similar rights, however denominated, throughout the world. For purposes
of this Agreement, "Computer Software" means computer software and includes
-----------------
all source code, object code, executable or binary code.
3.15 Taxes.
-----
(a) (i) The Company and the Subsidiaries have timely filed
or caused to be filed (taking into account any extension of time to file
granted or obtained) all Tax Returns required to be filed by them, and any
such filed Tax Returns are true, correct and complete, (ii) the Company and
the Subsidiaries have timely paid any Taxes due and payable except to the
extent that such Taxes are being contested in good faith and for which the
Company or the appropriate Subsidiary has set aside adequate reserves in
accordance with GAAP, (iii) without
20
taking into account any transactions contemplated by this Agreement and
based upon activities to date, adequate reserves in accordance with GAAP
have been established by the Company and the Subsidiaries for all Taxes not
yet due and payable in respect of taxable periods ending on the date hereof
and (iv) all amounts of Tax required to be withheld by the Company and its
Subsidiaries have been timely withheld and paid over to the appropriate Tax
authority.
(b) Except as set forth in Section 3.15 of the Company
---------------------------
Disclosure Schedule, no deficiency for Taxes has been asserted or assessed
- -------------------
by any Governmental Authority in writing against the Company or any
Subsidiary (or, to the knowledge of the Company, has been threatened or
proposed), except for deficiencies which have been satisfied by payment,
settled or been withdrawn or which are being contested in good faith and are
Taxes for which the Company or the appropriate Subsidiary has set aside
adequate reserves in accordance with GAAP. There are no Liens for Taxes,
other than Liens for current Taxes and assessments not yet past due or which
are being contested in good faith and for which the Company or the
appropriate Subsidiary has set aside adequate reserves in accordance with
GAAP, on the assets of the Company or any Subsidiary.
(c) (i) Except as set forth in Section 3.15 of the Company
---------------------------
Disclosure Schedule, there are no pending or, to the knowledge of the
- -------------------
Company, threatened audits, examinations, investigations or other
proceedings in respect of Taxes of the Company or any Subsidiary with
respect to which the Company or a Subsidiary has been notified in writing
and (ii) neither the Company nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to an assessment or deficiency for Taxes (other than pursuant to
extensions of time to file Tax Returns obtained in the ordinary course).
(d) Except as set forth in Section 3.15 of the Company
---------------------------
Disclosure Schedule, neither the Company nor any Subsidiary is a party to
- -------------------
any indemnification, allocation or sharing agreement with respect to Taxes
that could give rise to a payment or indemnification obligation (other than
agreements among the Company and its Subsidiaries and other than customary
Tax indemnifications contained in credit or other commercial lending
agreements).
(e) Neither the Company nor any of its Subsidiaries is
required to make any disclosure to the Internal Revenue Service with respect
to a "listed transaction" pursuant to Section 1.6011-4(b)(2) of the Treasury
Regulations promulgated under the Code (the "Treasury Regulations").
--------------------
(f) Neither the Company nor any Subsidiary (i) has been a
member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the Company) or
(ii) has any liability for the Taxes of any Person (other than the Company
or any Subsidiary) under Treasury Regulation section 1.1502-6 (or any
similar provision of state, local or foreign Law), as a transferee,
successor, by contract or otherwise.
(g) Neither the Company nor any Subsidiary has distributed
the stock of another company in a transaction that was purported or intended
to be governed by Section 355 or Section 361 of the Code.
(h) During the past three years, no claim has ever been
made by any Taxing
21
authority in a jurisdiction where the Company or any of its Subsidiaries
does not file a Tax Return that it is or may be subject to tax in that
jurisdiction.
3.16 Environmental Matters.
---------------------
(a) Except as set forth in Section 3.16 of the Company
---------------------------
Disclosure Schedule, (i) the Company and its Subsidiaries are and at all
- -------------------
times have been in compliance with all Environmental Laws, and (ii) neither
the Company nor any Subsidiary has any material liability under any
Environmental Law. Except as set forth in Section 3.16 of the Disclosure
------------------------------
Schedule, all Property currently and formerly owned or leased by the Company
- --------
or any Subsidiary was at all times during which such premises were occupied
by the Company or any Subsidiary, free from material contamination from
Hazardous Substances. Except as set forth in Section 3.16 of the Company
---------------------------
Disclosure Schedule, during the past five years (i) neither the Company nor
- -------------------
any Subsidiary has received (A) any notices of any material violation or
alleged material violation of, or any material liability under, any
Environmental Law or (B) any written CERCLA Section 104(e) requests, or
potentially responsible party or "PRP" notices or any similar information
request or notice under CERCLA or any similar state Law and (ii) there is no
material Environmental Claim pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary and there are no present or
to the knowledge of the Company, past events, conditions or activities, that
would give rise to any such material Environmental Claim. The Company and
each Subsidiary has, and maintains in full force and effect, all permits,
licenses and authorizations required under the Environmental Laws for the
operation of their business as it is currently operated and, based on the
manner in which the business of the Company and the Subsidiaries is
currently conducted, no modification or change to the operations of such
business will be required upon renewal of any such permits, licenses and
authorizations. Except as set forth in Section 3.16 of the Company
---------------------------
Disclosure Statement, neither the Company nor any Subsidiaries is
- --------------------
responsible for, or party to any Contract by which it is obligated to
indemnify any other person with respect to, or be reasonably responsible
for, any Environmental Claim, obligations or liabilities under any
applicable Environmental Law, including, without limitation, related to the
Properties or any other real property formerly owned or operated by the
Company or any Subsidiary.
(b) For purposes of this Agreement, the term
"Environmental Laws" means all federal, state, local and foreign Laws and
------------------
regulations relating to pollution or protection of human health or the
environment, including without limitation, Laws relating to releases or
threatened releases of Hazardous Substances or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Substances and all Laws and regulations
with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances.
(c) For purposes of this Agreement, "Environmental Claim"
-------------------
means any claim, action, cause of action, investigation or notice, written
or oral, by any Person or entity alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from: (i) the presence, release or threatened release into the
environment, of any Hazardous Substance at any location, whether or not
owned or operated by the Company or any its Subsidiaries or (ii)
circumstances forming
22
the basis of any violation, or alleged violation, of any Law relating to
Environmental Matters.
(d) For purposes of this Agreement, the term "Hazardous
---------
Substance" means all substances defined as Hazardous Substances, Oils,
- ---------
Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as such by,
or regulated as such under, any Law relating to Environmental Matters.
3.17 Specified Contracts.
-------------------
(a) Except as disclosed in Section 3.17(a) of the Company
Disclosure Statement (i) each Specified Contract is a legal, valid and
binding obligation of the Company or a Subsidiary, as applicable, in full
force and effect and enforceable against the Company or a Subsidiary in
accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
(ii) to the knowledge of the Company, each Specified Contract is a legal,
valid and binding obligation of the counterparty thereto, in full force and
effect and enforceable against such counterparty in accordance with its
terms, (iii) neither the Company nor any of its Subsidiaries is and, to the
Company's knowledge, no counterparty is, in breach or violation of, or in
default under, any Specified Contract (which breach, violation or default is
not capable of being cured promptly without penalty), (iv) none of the
Company or any of the Subsidiaries has received any claim of default under
any Specified Contract (which default is not capable of being cured promptly
without penalty), or any written notice of an intention to, and to the
knowledge of the Company, no other party to a Specified Contract intends to,
terminate, not renew, stop work under or challenge the validity or
enforceability of any Specified Contract (including as a result of the
execution and performance of this Agreement) and (v) to the Company's
knowledge, no event has occurred which would result in a breach or violation
of, or a default under, any Specified Contract (in each case, with or
without notice or lapse of time or both).
(b) For purposes of this Agreement, the term "Specified
---------
Contract" means any of the following Contracts (together with all exhibits
- --------
and schedules thereto) to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary or any of their respective properties
or assets are bound or affected as of the date hereof:
(i) any limited liability company agreement, joint
venture or other similar agreement or arrangement with respect to any
material business of the Company or any of its Subsidiaries;
(ii) any Contract relating to or evidencing
Indebtedness;
(iii) any Contract filed or required to be filed as
an exhibit to the Company's Annual Report on Form 10-K pursuant to Item
601(b)(10) of Regulation S-K under the Securities Act or disclosed or
required to be disclosed by the Company in a Current Report on Form 8-K or
other SEC filing, other than Plans disclosed in Section 3.11(a);
(iv) any Contract that purports to limit the right
of the Company or the Subsidiaries or any Affiliate of the Company (A) to
engage or compete in any line of business or (B) to compete with any Person
or operate in any location;
23
(v) any Contract that (A) contains most favored
customer pricing provisions or (B) grants any exclusive rights, rights of
first refusal, rights of first negotiation or similar rights to any Person;
(vi) any Contract for the acquisition or disposition,
directly or indirectly (by merger or otherwise), of assets or capital stock
or other equity interests of any Person for aggregate consideration under
such Contract in excess of $1,000,000;
(vii) any Contract between or among the Company or a
Subsidiary, on the one hand, and any of their respective Affiliates (other
than the Company or any Subsidiary), on the other hand;
(viii) any acquisition Contract pursuant to which the
Company or any of its Subsidiaries has continuing indemnification,
"earn-out" or other contingent payment obligations;
(ix) any Contract that, individually or in the
aggregate, would, or would reasonably be expected to prevent, materially
delay or materially impede the Company's ability to consummate the
transactions contemplated by this Agreement;
(x) any Contract that contains a put, call, right of
first refusal or similar right pursuant to which the Company or any
Subsidiary would be required to purchase or sell, as applicable, any
ownership interests of any Person;
(xi) any Contract that involves performance of
services or delivery of goods supplies, products and/or materials or other
personal property by the Company or any Subsidiary after the date hereof
which is believed by management of the Company to be significant with
respect to the Company and its Subsidiaries taken as a whole;
(xii) any Contract which involves receipt of services
or purchase of goods, supplies, products and/or materials or other personal
property by the Company or any Subsidiary after the date hereof which is
believed by management of the Company to be significant with respect to the
Company and its Subsidiaries taken as a whole;
(xiii) any lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property and involving aggregate
payments in excess of $1,000,000 per annum;
(xiv) any foreign sales agent agreement;
(xv) any Contract expressly requiring capital
expenditures after the date hereof in an amount in excess of $500,000; and
(xvi) any Contract entered into during the current
fiscal year relating to the settlement of any litigation, suit, proceeding,
action, investigation, claim, judgment, award, order or decree which
involves liability of the Company or any Subsidiary.
A true and complete list of the Specified Contracts
referred to in subsections (i)
24
through (xvi) above is set forth in Section 3.17(b) of the Company
------------------------------
Disclosure Schedule. True, correct and complete copies of each Specified
- -------------------
Contract, including all amendments thereto (except for Specified Contracts
filed prior to the date hereof as exhibits to SEC Reports), have been
provided or made available to Parent or its advisors prior to the date
hereof.
3.18 Government Contracts.
--------------------
(a) Except as set forth in Section 3.18(a) of the Company
------------------------------
Disclosure Schedule: (i) each of the Company and the Subsidiaries has
- -------------------
complied in all respects at all times during the last three years with all
material requirements of any statute, Law, rule or regulation pertaining to
any Government Contract or Government Bid; (ii) all representations and
certifications made by each of the Company and any Subsidiary with respect
to such Government Contract during the last three years were accurate in
every respect as of their effective date, and each of the Company and the
Subsidiaries has fully complied with such representations and certifications
in all respects; and (iii) as of the date hereof, no termination or default,
cure notice or show cause notice has been issued and remains unresolved.
(b) Except as set forth in Section 3.18(b) of the Company
------------------------------
Disclosure Schedule: (i) neither the Company, its Subsidiaries or any of
- -------------------
their current or former employees is (or during the last three years has
been) under any administrative, civil or criminal investigation or
indictment by any Governmental Authority with respect to the conduct of the
business of each of the Company and the Subsidiaries; (ii) to the knowledge
of the Company, there is no pending U.S. governmental investigation of the
Company or any Subsidiary, or any of their respective officers, employees or
representatives, nor within the last three years has there been any U.S.
governmental investigation of the Company or any Subsidiary, or any of their
respective officers, employees or representatives resulting in any material
adverse finding with respect to any material alleged irregularity,
misstatement or omission arising under or relating to any Government
Contract or Government Bid (other than routine Defense Contract Audit Agency
audits); and (iii) during the last three years neither the Company nor any
Subsidiary has made any voluntary disclosure in writing to any Governmental
Authority with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Government Bid.
(c) Except as set forth in Section 3.18(c) of the Company
------------------------------
Disclosure Schedule, as of the date of this Agreement, there are no
- -------------------
outstanding written (or to the Company's knowledge, unwritten) claims,
allegations, or dispute proceedings that have been asserted against (i) the
Company or any of its Subsidiaries, by any Governmental Authority or any
prime contractor, subcontractor or vendor relating to any Government
Contract or Government Bid to which the Company or any of its Subsidiaries
is a party or (ii) by the Company or any of its Subsidiaries against any
Governmental Authority, or any prime contractor, or subcontractor or vendor
relating to any Government Contract or Government Bid to which the Company
or any of its Subsidiaries is a party.
(d) Except as set forth in Section 3.18(d) of the Company
------------------------------
Disclosure Schedule, the rates and rate schedules submitted to the
- -------------------
government of the United States of America, its agencies and
instrumentalities with respect to Government Contracts of the Company or any
Subsidiary have been closed for all years prior to 2002.
25
(e) Each of the Company and the Subsidiaries is in
compliance in all material respects with all national security obligations,
including, without limitation, those specified in the National Industrial
Security Program Operating Manual, DOD 5220.22-M (January 1995).
(f) Each of the Company and the Subsidiaries is in
compliance in all respects with the Small Business Act of 1958, as amended,
and the regulations promulgated thereunder (collectively, the "Small
-----
Business Act"), in connection with the Government Contracts and Government
- ------------
Bids awarded or granted pursuant to a small business set aside or 8(a)
program. Each of the Company and the Subsidiaries has an adequate system of
controls and procedures to ensure compliance with the Small Business Act.
(g) For purposes of this Section 3.18, the following terms
shall have the meanings set forth below:
(i) "Government Bid" means any quotation, bid or proposal
--------------
by the Company or any of its Subsidiaries which, if accepted or awarded,
would lead to a contract with the U.S. Government or any other entity,
including a prime contractor or a higher tier subcontractor to the U.S.
Government, for the design, manufacture or sale of products or the provision
of services by the Company or any of its Subsidiaries; and
(ii) "Government Contract" means any prime contract,
-------------------
subcontract, teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order, Bid, change
order, arrangement or other commitment of any kind relating to the business
of the Company or any of its Subsidiaries between the Company or any of its
Subsidiaries and: (A) the U.S. Government, (B) any prime contractor to the
U.S. Government or (C) any subcontractor with respect to any contract
described in clause (A) or (B).
3.19 No Suspension or Debarment. Since January 1, 2001,
--------------------------
neither the Company any of its Subsidiaries nor any of their respective
Affiliates has been suspended or debarred from bidding on Contracts of
subcontracts for or with any Governmental Authority. Except as set forth on
Section 3.19 of the Company Disclosure Schedule, no suspension or debarment
- -----------------------------------------------
actions with respect to Government Contracts have been commenced or
threatened in writing against the Company, any Subsidiary or any of their
respective officers, directors or employees.
3.20 Loss Contracts; Backlog. Section 3.20 of the Company
------------------------ ---------------------------
Disclosure Schedule sets forth those Specified Contracts that are Loss
- -------------------
Contracts for which there are accruals in excess of $500,000. The collective
Backlog of the Company and the Subsidiaries as of July 31, 2005 with respect
to Contracts for the sale of goods or services to unaffiliated third parties
where there is an official award reported for the Company is not less than
$612,753,000. "Backlog" means, as of any given date, (i) the total amount
-------
awarded and funded under the applicable Contract as of such date less (ii)
the amount of the shipments made in respect of such Contract of such date.
3.21 Customers, Distributors and Suppliers. Section 3.21
------------------------------------- ------------
of the Company Disclosure Schedule sets forth a list of the names of (a) the
- ----------------------------------
customers of the Company and the Subsidiaries believed by management of the
Company to be significant with respect to the
26
Company and its Subsidiaries taken as a whole; and (b) the suppliers of each
such division of the business believed by management of the Company to be
significant with respect to the Company and its Subsidiaries taken as a
whole. Neither the Company nor any Subsidiary has received any communication
in writing from any customer or supplier of the Company of any intention to
terminate or materially reduce purchases from or supplies to the business of
the Company and the Subsidiaries, which termination or reduction would
reasonably be expected to have a Material Adverse Effect.
3.22 Insurance. Section 3.22 of the Company Disclosure
--------- --------------------------------------
Schedule sets forth a complete and correct list of all property, casualty
- --------
and liability material insurance policies owned or held by the Company and
each Subsidiary. With respect to each such insurance policy: (i) to the
knowledge of the Company, the policy is legal, valid, binding and
enforceable in accordance with its terms and is in full force and effect and
provides insurance in such amounts and against such risks as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices or as is required by Law or regulation, and all premiums
due and payable thereon have been paid; (ii) neither the Company nor any
Subsidiary is in material breach or default (including any such breach or
default with respect to the payment of premiums or the giving of notice),
and, to the Company's knowledge, no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination or modification, under the policy; (iii) to the knowledge of the
Company, no insurer on the policy has been declared insolvent or placed in
receivership, conservatorship or liquidation; and (iv) no notice of
cancellation or termination has been received other than in connection with
ordinary renewals.
3.23 Board Approval; Vote Required.
-----------------------------
(a) The Board of Directors of the Company, by resolutions
duly adopted at a meeting duly called and held, which resolutions, have not
been subsequently rescinded, modified or withdrawn in any way, has by
unanimous vote of those directors present duly (i) determined that this
Agreement and the Merger and the Other Transactions are fair to and in the
best interests of the Company and its shareholders, (ii) approved this
Agreement and the Merger and the Other Transactions and declared their
advisability, and (iii) recommended that the shareholders of the Company
approve this Agreement and the Other Transactions and directed that this
Agreement be submitted for consideration by the Company's shareholders at
the Company Shareholders' Meeting. The approval of this Agreement by the
Board of Directors of the Company, constitutes approval of this Agreement
and the Merger for purposes of Sections 351.459 and 351.407 of the MBCL and
represents the only action necessary to ensure that Sections 351.459 and
351.407 of the MBCL does not and will not apply to the execution and
delivery of this Agreement or the consummation of the Merger and the Other
Transactions. No "fair price," "moratorium," "control share acquisition," or
other similar anti-takeover statute or regulation enacted under state or
federal Laws in the United States (with the exception of Section 351.459 and
351.407 of the MBCL) applicable to the Company is applicable to the
transactions contemplated by this Agreement.
(b) The only vote of the holders of any class or series of
capital stock or other securities of the Company necessary to adopt this
Agreement or consummate the Other Transactions is the Company Shareholder
Approval.
27
3.24 Opinions of Financial Advisors. The Company has
------------------------------
received the opinion of Lehman Brothers, Inc. (the "Company Financial
-----------------
Advisor"), to the effect that, as of the date of this Agreement, the Merger
- -------
consideration to be received by the holders of Common Stock is fair, from a
financial point of view, to such holders. An executed copy of such opinion
has been delivered to Parent.
3.25 Brokers. No broker, finder or investment banker
-------
(other than the Company Financial Advisor) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Company. The Company has delivered to Parent complete and accurate copies of
all agreements under which any fees or expenses are or may be payable to
Lehman Brothers, Inc.
3.26 Certain Business Practices. None of the Company, any
--------------------------
of its Subsidiaries, or any director, officer or employee of the Company or
any of its Subsidiaries has, in furtherance of any business of the Company
or any of its Subsidiaries: (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful payments relating to political
activity or (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political
party or campaign or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
3.27 Information Supplied. The information supplied or to
--------------------
be supplied by the Company for inclusion or incorporation by reference in
the Registration Statement (as defined in Section 5.3(c)) and the Joint
Proxy Statement shall not, at (i) the time the Registration Statement is
declared effective, (ii) the time the Joint Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the shareholders
of the Company and Parent and (iii) the time of the Company Shareholders'
Meeting (as defined in Section 5.3(a)), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. All
documents that the Company is responsible for filing with the SEC in
connection with the Merger or the Other Transactions contemplated by this
Agreement will comply as to form and substance with the applicable
requirements of the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing sentence, no representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Registration Statement or
Joint Proxy Statement.
3.28 Export Licenses and Agreements. (a) Section 3.28(a)
------------------------------ ---------------
of the Company Disclosure Schedule sets forth a true, correct and complete
- ----------------------------------
list of: (i) each export license, technical assistance agreement,
manufacturing license agreement or other form of export approval to which
the Company or any of its Subsidiaries is a party or which apply to the
Company or any of its Subsidiaries or any of their operations or assets
(collectively, "Export Approvals") which is in effect as of the date of this
----------------
Agreement and (ii) each application for an Export Approval for which the
Company of any of its Subsidiaries has requested an Export Approval.
(b) (i) Except as set forth in Section 3.28(b) of the
----------------------
Company Disclosure
- ------------------
28
Schedule, the Company and its Subsidiaries have complied with each Export
- --------
Approval as required; (ii) the Company and its Subsidiaries have complied
with the requirements of any applicable Law pertaining to any Export
Approval; (iii) as of the effective date of each Export Approval, all
representations and certifications made by the Company and its Subsidiaries
with respect to any Export Approval were accurate and the Company and its
Subsidiaries have fully complied with all such representations and
certifications; and (iv) based on its export activities, including those
involving foreign nationals in the United States and abroad, the Company and
its Subsidiaries have no knowledge of any violation by them of the Arms
Export Control Act, the International Traffic In Arms Regulations, the
Export Administration Act, the Export Administration Regulations or any
other United States export regulation.
(c) Except as set forth in Section 3.28(c) of the Company
------------------------------
Disclosure Schedule: (i) there are no pending audits or investigations of
- -------------------
the Company or its Subsidiaries or any of their respective officers,
employees or representatives and (ii) within the five (5) years prior to the
date of this Agreement, there has not been any audit or investigation with
respect to any Export Approval directed or requested by any Governmental
Authority of the Company or its Subsidiaries or any of their respective
officers, employees or representatives resulting in findings materially
adverse to the Company. During the five (5) years prior to the date of this
Agreement, the Company and its Subsidiaries have not made any voluntary
disclosure to any Governmental Authority with respect to any irregularity,
misstatement or omission arising under United States trade or transaction
controls or otherwise relating to the export activities of the Company and
its Subsidiaries.
3.29 Full Disclosure. No representation or warranty or
---------------
other statement made by the Company in this Agreement in connection with the
Merger or the transactions contemplated hereby contains any untrue statement
or omits to state a material fact necessary to make any of them, in light of
the circumstances in which it was made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Subject to such exceptions as are disclosed in the
corresponding sections of the disclosure schedule which is attached hereto
and made a part hereof (the "Parent Disclosure Schedule") (it being
understood that (a) the disclosure of any fact or item in any section of the
Parent Disclosure Schedule shall, should the existence of such fact or item
be relevant to any other section, be deemed to be disclosed with respect to
that other section so long as the relevance of such disclosure to such other
section is reasonably apparent, and (b) the disclosure of any matter or item
in the Parent Disclosure Schedule shall not be deemed to constitute an
acknowledgement that such matter or item is required to be disclosed therein
or is material to a representation or warranty set forth in this Agreement
and shall not be used as a basis for interpreting the terms "material,"
"materially," "materiality" or "Parent Material Adverse Effect" or any word
or phrase of similar import and does not mean that such matter or item
would, alone or together with any other matter or item, could reasonably be
expected to have a Parent Material Adverse Effect, as defined in Section
8.7), Parent and Merger Sub hereby represent and warrant to the Company as
follows:
4.1 Organization and Qualification. Each of Parent, Merger
------------------------------
Sub and each
29
other subsidiary of Parent (each a "Parent Subsidiary") is a corporation
-----------------
validly existing and in good standing under the Laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority and
all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted except
for such governmental approvals, the absence of which, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Parent Material Adverse Effect.
4.2 Capitalization. The authorized capital stock of Parent
--------------
consists of 50,000,000 shares of Parent Stock and 2,000,000 shares of
preferred stock, par value $10.00 per share ("Parent Preferred"). As of
----------------
September 19, 2005: (i) 28,009,256 shares of Parent Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid
and nonassessable and were issued free of preemptive (or similar) rights,
and (ii) no shares of Parent Preferred were issued and outstanding. Except
for 3,147,025 outstanding options, there are no (i) subscriptions, calls,
contracts, options, warrants or other rights, agreements, arrangements,
understandings, restrictions or commitments of any character to which Parent
or Merger Sub is a party or by which Parent or Merger Sub is bound relating
to the issued or unissued capital stock or equity interests of Parent or
Merger Sub or obligating Parent or Merger Sub to issue or sell any shares of
capital stock of, other equity interests in or debt securities of, Parent or
Merger Sub (including any rights plan or agreement), (ii) securities of
Parent or Merger Sub or securities convertible, exchangeable or exercisable
for shares of capital stock or equity interests of Parent or Merger Sub, or
(iii) equity equivalents, stock appreciation rights or phantom stock, stock
based performance units, ownership interests in Parent or Merger Sub or
similar rights. All shares of capital stock of Parent to be issued in
connection with the Merger, when issued pursuant to this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable.
4.3 Authority Relative to This Agreement. Each of Parent
------------------------------------
and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Merger and the Other Transactions. The execution, delivery
and performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the Merger and the Other
Transactions have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Parent
and Merger Sub are necessary to authorize this Agreement or to consummate
the Merger or such Other Transactions (other than the authorization and
approval of the issuance of Parent Stock in connection with the Merger by
the affirmative vote of the holders of a majority of the votes cast by the
holders of Parent Stock, provided, that the total votes cast represents over
--------
50% in interest of all securities entitled to vote, as required by the
Listed Company Manual of the NYSE (the "Parent Stockholder Vote") and the
-----------------------
filing and recordation of appropriate merger documents as required by the
MBCL). This Agreement has been duly and validly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable each of Parent and
Merger Sub in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting creditors'
rights generally and subject to the effect of general principles of equity.
4.4 No Conflict; Required Filings and Consents.
------------------------------------------
30
(a) The execution and delivery of this Agreement by Parent
and Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub and the consummation by Parent and Merger Sub of the Merger and
the Other Transactions will not, (i) conflict with, violate or result in a
breach of the Certificate of Incorporation or Bylaws of Parent or Merger Sub
(or similar organizational documents of any Parent Subsidiary), (ii)
assuming that the Parent Stockholder Approval has been obtained and that all
filings and other actions described in Section 4.4(b) have been made or
taken, conflict with or violate any Law applicable to Parent, Merger Sub, or
any Parent Subsidiary, or by which any property or asset of Parent, Merger
Sub, or any Parent Subsidiary, is bound or affected, or (iii) result in any
breach or violation of or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, require
consent or result in a loss of a benefit under, give rise to an obligation
under, give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any property or
asset of Parent, Merger Sub, or any Parent Subsidiary, pursuant to any
Contract to which Parent, Merger Sub, or any Parent Subsidiary is a party,
or by which Parent, Merger Sub, or any Parent Subsidiary, or any property or
asset of Parent, Merger Sub, or any Parent Subsidiary, is bound or affected,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which have not had, and
would not reasonably be expected to have, a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent
and Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub and the consummation by Parent and Merger Sub of the Merger and
the Other Transactions will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
Governmental Authority, except for (i) applicable requirements of the
Exchange Act, (ii) the pre-merger notification requirements of the HSR Act,
and the competition or merger control Laws of any other applicable
jurisdiction, (iii) the notification requirements of the ICA, (iv) the
filing with the SEC of the Registration Statement and Joint Proxy Statement,
(v) any filings required by, and any approvals required under, the rules and
regulations of the NYSE or the Nasdaq National Market, (vi) the filing and
recordation of appropriate merger documents as required by the MBCL, (vii)
any novations, consents or approvals required in connection with Government
Contracts or similar novations, consents or approvals under any other
Contracts with any other Governmental Authorities, (viii) any filings
required under the DOD Industrial Security Manual for Safeguarding
Classified Information, and (ix) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filing or
notifications would not (a) prevent or materially delay the consummation of
the Merger, or (b) otherwise prevent or materially delay performance by the
Company of any of its material obligations under the Agreement.
4.5 Interim Operations of Merger Sub. Merger Sub was
--------------------------------
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations as contemplated hereby.
4.6 Financing. Merger Sub has received and furnished a
---------
true and correct copy to the Company of a commitment letter pursuant to
which Parent has received a commitment from a nationally-recognized
financial institution to make available funds to Merger Sub for the purpose
of consummating the Merger (the "Commitment Letter"). As of the date hereof,
-----------------
the Commitment Letter has not been withdrawn and is in full force and effect
and there is no breach
31
or default existing (or which with notice or lapse of time or otherwise may
exist) thereunder. The aggregate proceeds of the financing contemplated by
the Commitment Letter or any alternative financing arrangement contemplated
by Parent, together with cash on hand, are sufficient to pay the cash
portion of the Merger Consideration, to repay the existing indebtedness of
the Company and its Subsidiaries (excluding any indebtedness the parties
agree shall not be repaid) and to pay all fees and expenses to be paid by
Parent and Merger Sub related to the transactions contemplated by this
Agreement.
4.7 Ownership of Common Stock. As of the date hereof and
-------------------------
without taking into account the transactions contemplated hereby, neither
Parent nor Merger Sub nor any of their Affiliates beneficially owns any
shares of Common Stock of the Company.
4.8 Parent SEC Reports. Parent has filed all forms,
------------------
reports, statements, schedules, certifications, and other documents required
to be filed by it with the SEC since March 31, 2002 (collectively, the
"Parent SEC Reports"). As of their respective dates, Parent SEC Reports
------------------
(including any documents or information incorporated by reference therein
and including any financial statements or schedules included therein) (i)
complied in all material respects with the applicable requirements of the
Securities Act, the Exchange Act, the Sarbanes-Oxley Act and, in each case,
the rules and regulations promulgated thereunder and (ii) did not at the
time they were filed, or, if amended, as of the date of such amendment,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Since March 31, 2005, there has not been any event or state of
facts that, individually or in the aggregate, would reasonably be expected
to have a Parent Material Adverse Effect.
4.9 Information Supplied. The information supplied or to
--------------------
be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in the Registration Statement and the Joint Proxy Statement shall
not, at (i) the time the Registration Statement is declared effective, (ii)
the time the Joint Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the shareholders of the Company and Parent and
(iii) the time of the Parent Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
All documents that Parent or Merger Sub is responsible for filing with the
SEC in connection with the Merger or the other transactions contemplated by
this Agreement will comply as to form and substance in all material respects
with the applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, no representation or warranty is
made by Parent or Merger Sub with respect to statements made or incorporated
by reference therein based on information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement or
Joint Proxy Statement.
4.10 Absence of Litigation. Except as set forth in the
---------------------
Parent SEC Reports or Section 4.10 of the Parent Disclosure Schedule, there
----------------------------------------------
is no Action pending or, to the knowledge of Parent, threatened against
Parent or any of the Parent Subsidiaries, or any property or asset of Parent
or any Parent Subsidiary, or, to the knowledge of Parent, any officer,
director or employee
32
of Parent or any of the Parent Subsidiaries, before any Governmental
Authority or arbitrator, except as has not, and would not reasonably be
expected to have, a Parent Material Adverse Effect. Except as set forth in
Section 4.10 of the Parent Disclosure Schedule, neither Parent nor any of
- ----------------------------------------------
the Parent Subsidiaries nor any property or asset of Parent or of the Parent
Subsidiaries is subject to any order, writ, judgment, injunction, decree,
determination or award of, or, to the knowledge of Parent, any investigation
by, any Governmental Authority.
4.11 Compliance.
----------
(a) To the knowledge Parent, each of Parent and each of
the Parent Subsidiaries is, and at all times has been, in compliance in all
material respects with any Law applicable to such entity or by which any
property or asset of such entity is bound or affected, and has not received
written notice of any violation of any such Law.
(b) Since the enactment of the Sarbanes-Oxley Act, Parent
has been and is in compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act. Parent has designed and implemented
disclosure controls and procedures (as defined in Rule 13a-15 under the
Exchange Act) to ensure that material information relating to Parent,
including its consolidated Parent Subsidiaries, is made known on a timely
basis to the individuals responsible for the preparation of Parent's filings
with the SEC and other public disclosure documents.
(c) Parent has disclosed, based on its most recent
evaluation, to Parent's auditors and the audit committee of the Board of
Directors of Parent (i) any significant deficiencies and material weaknesses
in the design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect in any material respect
Parent's ability to record, process, summarize and report financial
information and (ii) any fraud or allegation of fraud, whether or not
material, that involves management or other employees who have a significant
role in Parent's internal controls over financial reporting. True, correct
and complete copies of any written reports or other correspondence with
respect to such disclosures (whether prepared by Parent, its counsel or
other advisors) have been made available to the Company prior to the date of
this Agreement, except in any instances where providing such reports or
other correspondence would constitute a waiver of applicable attorney-client
privilege (in which case the Company has been advised of the subject matter
thereof).
(d) Parent has not received any complaint, allegation,
assertion or claim in writing regarding the accounting practices,
procedures, methodologies or methods of Parent or its internal accounting
controls, which deals with any matter that would reasonably be expected to
have a Parent Material Adverse Effect. To the knowledge of Parent, there is
no reason to believe that its auditors and its chief executive officer and
chief financial officer will not be able to give the certifications and
attestations required pursuant to the rules and regulations adopted pursuant
to Section 404 of the Sarbanes-Oxley Act when next due.
(e) Since April 1, 2003, neither Parent nor any of the
Parent Subsidiaries has effected any securitization transaction or other
"off-balance sheet arrangement" (as defined in Item 303 of Regulation S-K of
the SEC).
33
4.12 Certain Business Practices. None of Parent, any of
--------------------------
the Parent Subsidiaries or any director, officer or employee of Parent or
any of the Parent Subsidiaries has, in furtherance of any business of Parent
or any of the Parent Subsidiaries: (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to
political activity or (ii) made any unlawful payment to any foreign or
domestic government official or employee or to any foreign or domestic
political party or campaign or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
4.13 Full Disclosure. No representation or warranty or
---------------
other statement made by Parent in this Agreement in connection with the
Merger or the transactions contemplated hereby contains any untrue statement
or omits to state a material fact necessary to make any of them, in light of
the circumstances in which it was made, not misleading.
ARTICLE 5
COVENANTS
5.1 Alternative Proposals. (a) Neither the Company nor any
---------------------
of its Subsidiaries shall, and they shall cause their officers, directors
and employees and direct their agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained
by the Company or its Subsidiaries) not to initiate, solicit, or knowingly
encourage, directly or indirectly, any inquiries or the making or
implementation of any Alternative Proposal (as defined below) or participate
in any negotiations concerning, or provide any confidential information or
data to, afford access to the properties, books or records of the Company or
its Subsidiaries to, or have any discussions with, any Person relating to an
Alternative Proposal, or otherwise facilitate any effort or attempt to make
or implement an Alternative Proposal; provided, however, that nothing
contained in this Section 5.1 shall prohibit the Company or its Board of
Directors from: (i) at any time prior to obtaining the Company Shareholder
Approval (the "Company Applicable Period"), participating in discussions or
-------------------------
negotiations with, providing confidential information or data to, or
affording access to the properties, books or records of the Company or its
Subsidiaries to, any Person who has made, in the good faith judgment of the
Board of Directors of the Company after consultation with their financial
advisors, a bona fide written Alternative Proposal that would reasonably be
expected to result in a Superior Proposal (as defined below); provided that:
-------- ----
(w) such Alternative Proposal was not initiated, solicited or knowingly
encouraged by the Company, its Subsidiaries or their agents in violation of
this Section 5.1, (x) the Company has complied with its obligations under
this Section 5.1, (y) the Board of Directors of the Company, after
consultation with outside legal counsel, determines in good faith that the
failure to so participate in discussions or negotiations, provide
confidential information or data or afford access would result in a breach
of the fiduciary duty of the Board of Directors of the Company to
shareholders of the Company under applicable Law and (z) a copy of all the
information provided to such Person is delivered simultaneously to Parent if
it has not previously been furnished or made available to Parent or (ii)
making such disclosure to the Company's shareholders, if the Board of
Directors of the Company determines in good faith, after consultation with
outside legal counsel, that the failure to disclose such information would
result in a breach of the fiduciary duty of the Board of Directors of the
Company to the shareholders of the Company under applicable Law. Any actions
permitted under clauses (i) and (ii) above, and taken in compliance with the
foregoing, shall not be deemed a breach of any other covenant or agreement
of such party contained in this Agreement.
34
"Alternative Proposal" means an inquiry, offer or
--------------------
proposal regarding any of the following (other than the
transactions contemplated hereby) involving the Company: (i) any
merger, consolidation, share exchange, recapitalization,
liquidation, dissolution, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 20% or more of the consolidated
assets of the Company and its Subsidiaries, taken as a whole; (iii)
any tender offer (including a self tender offer) or exchange offer
that, if consummated, would result in any Person or group
beneficially owning more than 20% of the outstanding shares of any
class of equity securities of the Company or its Subsidiaries or
the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any acquisition of 20% or more of the
outstanding shares of capital stock of the Company or the filing of
a registration statement under the Securities Act in connection
therewith or any other acquisition or disposition the consummation
of which would prevent or materially diminish the benefits to
Parent of the Merger.
"Superior Proposal" means any proposal made by a
-----------------
third party to acquire, directly or indirectly, including pursuant
to a tender offer, exchange offer, merger, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or other similar transaction, for 100% of then
outstanding shares of Common Stock or all or substantially all of
the consolidated assets of the Company, which the Board of
Directors of the Company determines in good faith (after
consultation with its financial advisor) to be more favorable to
the Company and the Company's shareholders from a financial point
of view than the transactions contemplated by this Agreement taking
into account at the time of determination the ability of the Person
making such proposal to consummate the transactions contemplated by
the proposal (based upon, among other things, the availability of
financing and the expectation of obtaining required approvals).
(b) Except as expressly permitted by this Section 5.1 and
Section 5.3(a)(iii), neither the Board of Directors of the Company nor any
committee thereof shall: (i) withdraw, modify or fail to make, or propose to
withdraw, modify or fail to make its approval or recommendation of the
Merger or of this Agreement and the transactions contemplated hereby; (ii)
approve or recommend, or propose to approve or recommend, any Alternative
Proposal; (iii) take any action to render the provisions of any
anti-takeover statute, rule or regulation inapplicable to any Person (other
than Parent, Merger Sub or their Affiliates) or group or to any Alternative
Proposal; or (iv) cause the Company to accept such Alternative Proposal
and/or enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement")
---------------------
related to any Alternative Proposal; provided, however, that prior to the
-------- -------
expiration of the Company Applicable Period, the Board of Directors of the
Company may not (other than as permitted under Section 5.3(a)(iii)) take any
of the actions detailed in clauses (i) through (iv) above unless it complies
with the terms of this Section 5.1(b) and (A) there is an Alternative
Proposal which is a Superior Proposal, (B) the Board of Directors of the
Company, after consultation with outside legal counsel, determines in good
faith that the failure to do so would result in a breach of the fiduciary
duty of the Board of Directors of the Company to the shareholders of the
Company under applicable Law, (C) the Company has provided Parent at least
two (2) business days prior written notice ("Superior Proposal Notice")
------------------------
advising Parent that the Board of Directors of the Company has received a
Superior Proposal
35
which it intends to accept, specifying the terms and conditions of such
Superior Proposal and identifying the Person making such Superior Proposal
and (D) for a period of not less than two (2) business days after Parent's
receipt from the Company of each Superior Proposal Notice, the Company
shall, if requested by Parent, negotiate in good faith with Parent to revise
this Agreement so that the Superior Proposal no longer constitutes a
Superior Proposal.
(c) In addition to the obligations of the Company set
forth in paragraphs (a) and (b) above, the Company shall promptly advise
Parent of any request for information involving an Alternate Proposal or
possible Alternate Proposal or the submission or receipt of any Alternative
Proposal, or any inquiry with respect to or which would reasonably be
expected to lead to any Alternative Proposal, the material terms and
conditions of such request, Alternative Proposal or inquiry, and the
identity of the Person making any such request, Alternative Proposal or
inquiry and its response or responses thereto. The Company will keep Parent
fully informed on a prompt basis of the status and details (including
amendments or proposed amendments) of any such request, Alternative Proposal
or inquiry. The Company shall promptly provide to Parent copies of all
written correspondence or other written material, including material in
electronic form, between the Company and any Person making any such request,
Alternative Proposal or inquiry. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing
and will promptly request that all Persons provided confidential information
concerning the Company and its Subsidiaries pursuant to a confidentiality,
non-disclosure or similar agreement, return to the Company all of such
confidential information, without keeping any copies thereof (if
permissible), in accordance with such confidentiality, non-disclosure or
similar agreements.
(d) The Company agrees that it will promptly inform it and
its Subsidiaries' respective officers, directors, representatives and agents
of the obligations undertaken in this Section 5.1.
(e) Nothing contained in this Section 5.1 shall prohibit
the Company from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated
under the Exchange Act or (ii) making any required disclosure to the
shareholders of the Company if, in the good faith judgment of the Board of
Directors of the Company (after consultation with outside counsel), failure
to so disclose would constitute a violation of applicable Law.
5.2 Interim Operations. (a) From the date of this
------------------
Agreement until the Effective Time, except as required by Law or as set
forth in Section 5.2(a) of the Company Disclosure Schedule, unless Parent
-------------------------------------------------
has consented in writing thereto, the Company shall, and shall cause its
Subsidiaries to: (i) conduct its operations according to its ordinary course
of business consistent with past practice and in compliance in all material
respects with all applicable Laws; (ii) use its commercially reasonable
efforts to preserve intact its business organizations and goodwill, keep
available the services of its officers, employees and consultants, and
maintain satisfactory relationships with those Persons having business
relationships with them; (iii) upon the discovery thereof, promptly notify
Parent of the existence of any breach of any representation or warranty
contained herein (or, in the case of any representation or warranty that
makes no reference to Company Material Adverse Effect or
36
materiality, any breach of such representation or warranty in any material
respect) or the occurrence of any event that would cause any representation
or warranty contained herein no longer to be true and correct (or, in the
case of any representation or warranty that makes no reference to Company
Material Adverse Effect or materiality, to no longer be true and correct in
any material respect); (iv) promptly deliver to Parent true and correct
copies of any report, statement or schedule filed with the SEC subsequent to
the date of this Agreement; and (v) pay its Taxes when due.
(b) From and after the date of this Agreement until the
Effective Time, except as may be required by Law or any pre-existing
contractual obligation, and except as set forth in Section 5.2(b) of the
---------------------
Company Disclosure Schedule, unless Parent has consented in writing thereto
- ---------------------------
(which consent shall not be unreasonably withheld or delayed), the Company
shall not, and shall cause its Subsidiaries not to: (i) amend its Amended
Articles of Incorporation or Amended and Restated By-Laws; (ii) offer,
issue, sell or pledge any shares of its capital stock or other ownership
interest in the Company or its Subsidiaries, or any securities convertible
into or exchangeable for any such shares or ownership interest, or any
rights, warrants or options to acquire or with respect to any such shares of
capital stock, ownership interest, or convertible or exchangeable securities
other than pursuant to the Company's existing employee benefits plans; (iii)
effect any stock split or otherwise change its capitalization as it exists
on the date hereof; (iv) grant, confer or award any option, warrant,
convertible security or other right to acquire any shares of its or its
Subsidiaries' capital stock; (v) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of its
capital stock or other ownership interests (other than such payments by the
Subsidiaries to the Company); (vi) directly or indirectly redeem, purchase
or otherwise acquire any shares of its capital stock or capital stock of its
Subsidiaries or any securities that are convertible into or exchangeable for
any shares of capital stock of, or other equity interests in, or any
outstanding options, warrants or rights of any kind to acquire any shares of
capital stock of, or other equity interests in, the Company or any of its
Subsidiaries; (vii) sell, lease, license, mortgage, pledge, encumber,
transfer, exchange or otherwise dispose of any of its properties or assets,
whether tangible or intangible (including capital stock of its
Subsidiaries), other than the sale or disposition of inventory in the
ordinary course of business consistent with past practice or the sale, lease
or other disposition of assets which individually or in the aggregate, are
obsolete or not material to the Company and its Subsidiaries taken as a
whole; (viii) acquire by merger or consolidation with, by purchase of any
equity interest of or by any other manner, any business or entity or
otherwise acquire any assets, except for purchases of inventory, supplies or
capital equipment in the ordinary course of business; (ix) incur or assume
any long-term or short-term debt, except for working capital purposes and
the purchase of capital equipment in the ordinary course of business under
the Credit Facility; (x) assume, guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person except its Subsidiaries; (xi) make or
forgive any loans, advances or capital continuations to, or investments in,
any other Person other than advances to officers or employees in the
ordinary course of business consistent with past practice; (xii) increase
the compensation (or benefits) payable to or to become payable to any
director, officer or other employee, except for payments of bonuses not to
exceed the amounts set forth on Section 5.2(b) of the Company Disclosure
----------------------------------------
Schedule, increases in salary or wages of non-officer employees in the
- --------
ordinary course of business and consistent with past practice or pursuant to
any existing employment agreements of the Company; (xiii) establish, adopt,
enter into, materially amend, or take any action to accelerate any rights or
37
benefits under any collective bargaining agreement or any Plan; (xiv) effect
any reorganization or recapitalization; (xv) pay, discharge, settle or
satisfy any claims, liabilities, obligations or litigation (absolute,
accrued, asserted or unasserted, contingent or otherwise) in excess of
$250,000 individually and $500,000 in the aggregate, other than the payment,
discharge, settlement or satisfaction in the ordinary course of business or
in accordance with their terms, of liabilities disclosed, reflected or
reserved against in the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company SEC Reports or
incurred since the date of such financial statements in the ordinary course
of business, or cancel any indebtedness in excess of $50,000 individually
and $500,000 in the aggregate; (xvi) take any action that would reasonably
be expected to: (A) prevent, impair or materially delay the ability of the
Company, Parent or Merger Sub to consummate the Merger or (B) cause any of
the conditions to the consummation of the Merger not to be satisfied; (xvii)
make or change any Tax election, file any amended Tax Return, enter into any
closing agreement, settle or compromise any liability with respect to Taxes,
agree to any material adjustment of any Tax attribute, file any claim for a
refund of Taxes, or consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment; or (xviii) agree in
writing or otherwise to take any of the foregoing actions.
5.3 Company Shareholder Approval; Joint Proxy Statement;
----------------------------------------------------
Parent Registration Statement. (a) The Company, acting through its Board of
- -----------------------------
Directors, shall: (i) call a meeting of its shareholders (the "Company
-------
Shareholders' Meeting") for the purpose of voting upon this Agreement, (ii)
- ---------------------
hold the Company Shareholders' Meeting as soon as practicable following the
date the Joint Proxy Statement (as defined below) is cleared by the SEC, and
(iii) subject to its fiduciary duties under applicable Law, recommend to its
shareholders the approval and adoption of this Agreement and the
transactions contemplated hereby and take all reasonable and lawful action
to solicit and obtain such approval and adoption. The record date for the
Company Shareholders' Meeting shall be a date chosen by the Board of
Directors of the Company.
(b) Parent, acting through its Board of Directors, shall:
(i) call a meeting of its stockholders (the "Parent Stockholders' Meeting")
----------------------------
for the purpose of voting upon the issuance of Parent Stock in connection
with the Merger, (ii) hold the Parent Stockholders' Meeting as soon as
practicable following the date the Joint Proxy Statement (as defined below)
is cleared by the SEC, and (iii) subject to its fiduciary duties under
applicable Law, recommend to its stockholders the authorization and approval
of the issuance of Parent Stock in connection with the Merger and take all
reasonable and lawful action to solicit and obtain such authorization and
approval. The record date for the Parent Stockholders' Meeting shall be a
date chosen by the Board of Directors of Parent.
(c) As soon as practicable after the execution of this
Agreement, (i) the Company and Parent shall prepare and file a joint proxy
statement (such joint proxy statement, and any amendments or supplements
thereto, the "Joint Proxy Statement") with the SEC with respect to the
---------------------
Company Shareholders' Meeting and the Parent Stockholders' Meeting and (ii)
Parent shall prepare and file with the SEC a registration statement on Form
S-4 (together with all amendments thereto, the "Registration Statement") in
----------------------
which the Joint Proxy Statement shall be included, in connection with the
registration under the Securities Act of the shares of Parent Stock to be
issued to the shareholders of the Company in connection with the Merger.
Parent
38
and the Company will notify each other of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Joint Proxy Statement or the Registration
Statement or for additional information and will supply each other with
copies of all correspondence between each other or any of its
representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Joint Proxy Statement or the Merger. Each party
shall give the other party and its counsel the opportunity to review the
Joint Proxy Statement prior to it being filed with the SEC and shall give
the other party and its counsel the opportunity to review all amendments and
supplements to the Joint Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company and Parent agrees to use its
reasonable best efforts, after consultation with the other parties hereto,
to respond promptly to all such comments of and requests by the SEC. Parent
and the Company shall use their reasonable best efforts to cause the
Registration Statement to become effective as promptly as practicable, and,
prior to the effective date of the Registration Statement, Parent shall take
all or any action required under any applicable federal or state securities
Laws in connection with such actions and the preparation of the Registration
Statement. As promptly as practicable after the Registration Statement shall
have become effective, each of the Company and Parent shall mail the Joint
Proxy Statement to its respective stockholders. If at any time prior to the
approval of this Agreement by each of the Company's and Parent's
stockholders there shall occur any event which must be set forth in an
amendment or supplement to the Joint Proxy Statement, the Company or Parent,
as the case may be, will prepare and mail to its stockholders such an
amendment or supplement.
(d) Except for an amendment or supplement (including by
incorporation by reference) relating to an Alternative Proposal, a Superior
Proposal or other withdrawal, qualification or modification of a
recommendation by the Board of Directors of the Company, no amendment or
supplement to the Joint Proxy Statement or the Registration Statement will
be made by Parent or the Company without the approval of the other party
(such approval not to be unreasonably withheld or delayed).
5.4 Filings; Other Action. Subject to the terms and
---------------------
conditions herein provided, the Company, Parent and Merger Sub shall: (i)
use reasonable efforts to cooperate with one another in: (A) determining
which filings are required to be made prior to the Effective Time with, and
which consents, approvals, permits or authorizations are required to be
obtained prior to the Effective Time from, Governmental Authorities
(including all filings and submissions under the HSR Act) or other third
parties in connection with the execution and delivery of this Agreement and
any other agreements and documents contemplated by the Agreement ("the
Ancillary Documents") and the consummation of the transactions contemplated
- -------------------
hereby and thereby and (B) timely making all such filings and timely seeking
all such consents, approvals, permits, authorizations and waivers; and (ii)
use reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper or appropriate
to consummate and make effective the transactions contemplated by this
Agreement; provided, however, that in no event shall Parent or any of its
-------- -------
subsidiaries be required to agree or commit to divest, hold separate, offer
for sale, abandon, limit its operation of or take similar action with
respect to any material assets (tangible or intangible) or any material
business interests in connection with or as a condition to receiving the
consent or approval of any Governmental Authority (including, without
limitation, under the HSR Act). If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the purpose of
this
39
Agreement, the proper officers and directors of Parent and the Surviving
Corporation shall take all such necessary action.
5.5 Access to Information. (a) From the date of this
---------------------
Agreement until the Closing, each party shall, and shall cause its
subsidiaries to: (i) give the other party and its authorized representatives
reasonable access during normal business hours to all books and records
(including Tax Returns) and management of such party and its subsidiaries;
(ii) permit the other party to make such copies and inspections thereof as
Parent may reasonably request; and (iii) furnish the other party with such
financial and operating data and other information with respect to the
business and properties of such party and its subsidiaries as the other
party may from time to time reasonably request; provided that no
investigation or information furnished pursuant to this Section 5.5 shall
affect any representation or warranty made herein by such party or the
conditions to the obligations of the other party to consummate the
transactions contemplated by this Agreement. The Company shall also provide
to Parent such information set forth in clauses (i)-(iii) above as may be
reasonably requested by Parent in connection with Parent's financing of the
transactions contemplated by this Agreement.
(b) All such information shall be subject to the terms and
conditions of the letter agreement, dated as of September 1, 2005, between
Parent and the Company (the "Confidentiality Agreement").
-------------------------
5.6 Publicity. Prior to the Effective Time, except as
---------
required by applicable Law or listing agreement with any securities
exchange, no party shall, nor shall any party permit its Affiliates to, make
any public announcement in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties,
which consent shall not be unreasonably withheld or delayed. The parties
hereto agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be issued jointly by the
Company and Parent immediately after the execution of this Agreement.
5.7 Further Action. Each party hereto shall, subject to
--------------
the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further
acts and execute such documents as may be reasonably required to effect the
Merger.
5.8 Insurance; Indemnity. (a) Parent will cause the
--------------------
Surviving Corporation to maintain in effect for not less than six (6) years
after the Effective Time, the Company's current directors and officers'
insurance policies (or policies of at least the same coverage containing
terms and conditions no less advantageous to the current and all former
directors and officers of the Company) with respect to acts or failures to
act prior to the Effective Time, including acts relating to the transactions
contemplated by this Agreement; provided, however, that Parent and the
-------- -------
Surviving Corporation shall not be required to maintain or obtain policies
providing such coverage except to the extent such coverage can be provided
at an annual cost of no greater than 150% the most recent annual premium
paid by the Company prior to the date hereof (the "Cap"); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained
only by paying an annual premium in excess of the Cap, Parent or the
Surviving Corporation shall only be required to obtain as much coverage as
can be obtained by paying an annual premium equal to the Cap.
40
(b) From and after the Effective Time, Parent and the
Surviving Corporation shall jointly and severally indemnify and hold
harmless to the fullest extent permitted under applicable Law, each Person
who is, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer or director of the Company or any of
its Subsidiaries (each, an "Indemnified Party"), so long as such Person is,
-----------------
or has been, acting within the scope of such Person's employment or
fiduciary duties, against all losses, claims, damages, liabilities, costs or
expenses (including attorneys' fees), judgments, fines, penalties and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in their capacities as
such, which acts or omissions occurred prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time. In the event
of any such claim, action, suit, proceeding or investigation, the Surviving
Corporation shall control the defense of such Action with counsel selected
by the Surviving Corporation, which counsel shall be reasonably acceptable
to the Indemnified Party; provided, however, that the Indemnified Party
-------- -------
shall be permitted to participate in the defense of such Action through
counsel selected by the Indemnified Party, at the Indemnified Party's
expense. Notwithstanding the foregoing, if there is any conflict between the
Surviving Corporation and any Indemnified Parties or there are additional
defenses available to any Indemnified Parties, the Indemnified Parties shall
be permitted to participate in the defense of such Action with counsel
selected by the Indemnified Parties and Parent shall cause the Surviving
Corporation to pay the reasonable fees and expenses of such counsel, as
accrued and in advance of the final disposition of such Action to the
fullest extent permitted by applicable Law; provided, however, that the
-------- -------
Surviving Corporation shall not be obligated to pay the reasonable fees and
expenses of more than one counsel (in addition to any necessary local
counsel) for all Indemnified Parties in any single Action except to the
extent that Indemnified Parties have conflicting interests in the outcome of
such Action.
(c) Parent shall cause the Surviving Corporation to keep
in effect in its Amended Articles of Incorporation and Amended and Restated
By-Laws provisions at least as favorable as the provisions in the Company's
Certificate of Incorporation and By-Laws that provide for exculpation of
director and officer liability and indemnification (and advancement of
expenses related thereto) of the past and present officers and directors of
the Company to the fullest extent permitted by the MBCL, so long as such
Person is, or has been, acting within the scope of such Person's employment
or fiduciary duties, and such provisions shall not be amended except as
either required by applicable Law or to make changes permitted by Law that
would enhance the rights of past or present officers and directors to
exculpation, indemnification or advancement of expenses.
(d) If Parent or the Surviving Corporation or any of their
respective successors or assigns: (i) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any Person, then and in
each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation shall assume all of the
obligations set forth in this Section 5.8.
(e) The provisions of this Section 5.8 are intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives, and shall not be deemed
exclusive of any other rights to which an Indemnified Party is entitled,
41
pursuant to Law, contract or otherwise. The Surviving Corporation shall pay
all expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity obligations provided for in
this Section 5.8.
(f) Notwithstanding anything to the contrary in this
Section 5.8, neither Parent nor the Surviving Corporation shall be liable
for any settlement effected without its written consent, which consent shall
not be unreasonably withheld or delayed.
5.9 Benefit Plans.
-------------
(a) Except as set forth herein, Parent shall, or shall
cause the Surviving Corporation to, assume, honor, and continue to perform
all obligations of the Company or any Subsidiary under all Plans pursuant to
the terms thereof; provided, however, that nothing herein shall limit the
-------- -------
right of Parent to amend or terminate such Plans in accordance with their
terms.
(b) Parent agrees, for a period of twelve (12) months
following the Effective Time, to provide, or to cause the Surviving
Corporation to provide, employees of Parent and the Surviving Corporation
who were employees of the Company or its Subsidiaries immediately prior to
the Effective Time ("Continuing Employees") with benefits (other than
--------------------
equity-based benefits and other than individual employment agreements) that
are, in the aggregate, similar to those provided by the Company and its
Subsidiaries prior to the Effective Time. Nothing contained herein shall
require Parent to continue the employment of any employee following the
Effective Time.
(c) Following the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, use all reasonable efforts to give
Continuing Employees full credit for prior service with the Company and its
Subsidiaries for purposes of eligibility and vesting under any employee
benefit plan maintained by Parent except where such crediting would: (i)
result in a duplication of benefits or (ii) otherwise cause Parent or any
employee benefit plan maintained by Parent to accrue or pay for benefits
that relate to any time period prior to the Continuing Employee's
participation in such plan.
(d) To the extent permissible under Parent's benefit
plans, if a Continuing Employee participates in a benefit plan, other than a
long-term disability plan, of Parent or any of its subsidiaries after the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
waive any pre-existing condition exclusions and actively-at-work
requirements and provide that any expenses incurred on or before the
Effective Time by the Continuing Employee or the Continuing Employee's
covered dependent shall be taken into account for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions. The
Company agrees to furnish Parent with any information necessary to meet its
obligations under this Section 5.9(d).
(e) With respect to matters described in this Agreement,
the Company will consult with Parent (and consider in good faith the advice
of Parent) prior to sending any notices or other communication materials to
employees of the Company and its Subsidiaries.
(f) At the request of Parent, the Company shall terminate
any and all 401(k) Plans of the Company, effective not later than the day
immediately preceding the date on which
42
the Effective Time occurs. The Company shall provide Parent with evidence
that such 401(k) Plan(s) have been terminated pursuant to a resolution of
the Company's Board of Directors (the form and substance of which shall be
subject to review and approval by Parent) not later than the day immediately
preceding the date on which the Effective Time occurs.
(g) As soon as practicable after the date hereof, the
Board of Directors of the Company shall take all action necessary to
terminate the ESPP, in accordance with section 9.2 of such plan.
5.10 Supplemental Disclosure. The Company shall give
-----------------------
prompt notice to Parent, and Parent shall give prompt notice to the Company,
of: (i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause: (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (B) any
covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided,
--------
however, that the delivery of any notice pursuant to this Section 5.10 shall
- -------
not have any effect for the purpose of determining the satisfaction of the
conditions set forth in Article 6 of this Agreement or otherwise limit or
affect the remedies available hereunder to any party.
5.11 NYSE Listing. Prior to the Effective Time, Parent
------------
shall cause Parent Stock issuable in connection with the Merger to be
approved for listing on the NYSE, subject to official notice of issuance.
5.12 Payment of Bank Debt. At the Closing, Parent will
--------------------
cause (i) the Surviving Corporation to pay all amounts then due and payable
pursuant to that Amended and Restated Credit Agreement, dated as of January
27, 2005 among the Company, as the Borrower, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer, and the Other
Lenders Party Thereto, (the "Credit Agreement") and the Loan Documents (as
defined in the Credit Agreement) and (ii) the Credit Agreement to be
terminated.
5.13 Parent Financing
----------------
(a) Parent and Merger Sub will use their reasonable
commercial efforts to obtain the financing required for the consummation of
the Merger and to satisfy all conditions to funding, whether pursuant to the
Commitment Letter or otherwise. To the extent that any portion of the
financing contemplated by the Commitment Letter becomes unavailable or
Parent determines to obtain alternative financing for the Merger, Parent and
Merger Sub will use their reasonable commercial efforts to arrange for
alternative financing for the Merger.
(b) The Company and its Subsidiaries shall use reasonable
best efforts to provide Parent and its representatives with such
information, including financial statement information and access to the
Company's independent accountants, regarding the Company and its
Subsidiaries as may be reasonably requested by Parent in connection with
Parent's financing of the transactions contemplated by this Agreement.
(c) The Company and its Subsidiaries shall cooperate with
Parent and Parent's accountants and other advisors in order to prepare any
pro forma financial statements as may be
43
required in connection with Parent's financing contemplated by the
Commitment Letter or otherwise. The Company and its Subsidiaries shall take
such other actions as are reasonably requested by Parent in order to
consummate Parent's financing contemplated by the Commitment Letter or
otherwise, including, but not limited to, making members of its senior
management reasonably available for meetings with potential investors,
including participation in road-shows, providing access to documents and
other information for due diligence purposes, participating in due diligence
sessions, participating in presentations to rating agencies, inclusion of
the Company's financial statements in a private placement or other selling
memorandum, use reasonable efforts to arrange for the Company's accountants
to provide a customary comfort letter on the Company's financial statements
included in any offering or other selling memorandum, customary legal
opinions and other efforts customary for an acquired party in connection
with a financing in similar transactions.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the Merger shall
- ------
be subject to the satisfaction or waiver, where permissible, prior to the
Effective Time, of the following conditions:
(a) HSR Approval. Any waiting period applicable to the
------------
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the Merger, which action shall have not been withdrawn or
terminated.
(b) Company Shareholder Approval. The Company Shareholder
----------------------------
Approval shall have been obtained.
(c) Parent Stockholder Approval. The Parent Stockholder
---------------------------
Approval shall have been obtained.
(d) Effectiveness of Registration Statement. The SEC shall
---------------------------------------
have declared the Registration Statement effective and no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued by the SEC and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy Statement,
shall have been initiated or threatened in writing by the SEC.
(e) Listing on the NYSE. The shares of Parent Stock to be
-------------------
issued in the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(f) No Order. There shall not have been issued any
--------
injunction, judgment or other order, or issued or enacted any Law, which
prohibits or has the effect of prohibiting the consummation of the Merger or
makes such consummation illegal.
(g) Approvals. Other than the filings of merger documents
---------
in accordance with the MBCL and filings pursuant to the HSR Act, all
authorizations, consents, waivers, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
44
Governmental Authority, the failure of which to obtain, make or occur would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, shall have been obtained, been filed or have
occurred.
6.2 Conditions to Obligation of Parent and Merger Sub to
----------------------------------------------------
Effect the Merger. The obligations of Parent and Merger Sub to effect the
- -----------------
Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following additional conditions, unless waived in writing by
Parent:
(a) Representations and Warranties. Each of the
------------------------------
representations and warranties of the Company contained in this Agreement
(considered individually) shall be true and correct in all material respects
as of the date of this Agreement and as of the Effective Time (without
regard to materiality or Company Material Adverse Effect) as if made at the
Effective Time except that representations and warranties given as of a
specific date shall be true and correct only as of such date. Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company to such
effect.
(b) Performance of Obligations of the Company. Each of the
-----------------------------------------
Company and its Subsidiaries shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Effective Time, and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company to such effect.
(c) Company Material Adverse Effect. Since the date of
-------------------------------
this Agreement, there shall have been no event, development or state of fact
that results in or would reasonably be expected to result in a Company
Material Adverse Effect.
(d) Consent. The Company shall have obtained the consent
-------
of each Person whose consent shall be required in connection with the
transactions contemplated hereby under any Specified Contract; provided that
-------- ----
in no event shall the Company or its Subsidiaries modify any terms of any
Specified Contract or make any payment(s) to any third party in excess of
$150,000, in the aggregate in connection with obtaining such consents,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed.
6.3 Conditions to Obligation of the Company to Effect the
-----------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall be subject
- ------
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by the Company:
(a) Representations and Warranties. Each of the
------------------------------
representations and warranties of Parent and Merger Sub contained in this
Agreement (considered individually) shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective
Time (without regard to materiality or Parent Material Adverse Effect) as if
made at the Effective Time except that representations and warranties given
as of a specific date shall be true and correct only as of such date. The
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such
effect.
45
(b) Performance of Obligations of Parent and Merger Sub.
---------------------------------------------------
Each of Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Effective Time, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer or the
chief financial officer of Parent to such effect.
(c) Parent Material Adverse Effect. Since the date of this
------------------------------
Agreement, there shall have been no event, development or state of facts
that results in or would reasonably be expected to result in a Parent
Material Adverse Effect.
ARTICLE 7
TERMINATION
7.1 Termination. This Agreement, notwithstanding adoption
-----------
of this Agreement by the stockholders of the Company, may be terminated at
any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company:
(i) if the Effective Time shall not have occurred on
or before June 30, 2006 (the "Outside Date") (provided that the right to
------------
terminate this Agreement pursuant to this clause (i) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Effective Time to
occur on or before such date); or
(ii) if there shall be any statute, Law, rule or
regulation that makes consummation of the Merger illegal or prohibited, or
if any court of competent jurisdiction in the United States or other
Governmental Authority shall have issued an order, judgment, decree or
ruling, or taken any other action retraining, enjoining or otherwise
prohibiting the Merger and such order, judgment, decree, ruling or other
action shall have become final and non-appealable;
(c) by Parent or the Company if the Company's Board of
Directors authorizes the Company to enter into a definitive Acquisition
Agreement with respect to a Superior Proposal in accordance with the
provisions of Section 5.1;
(d) by Parent if the Board of Directors of the Company
shall have failed to recommend, or shall have withdrawn its approval or
recommendation of the Merger or shall have modified its recommendation of
the Merger, in a manner adverse to Parent or Merger Sub or shall fail to
recommend against the acceptance of any tender or exchange offer that
constitutes an Alternative Proposal or shall have resolved to do any of the
foregoing;
(e) by Parent if: (i) any representation or warranty of
the Company contained in this Agreement shall not be true and correct at any
time prior to the Effective Time, in each case such that the conditions set
forth in Section 6.2(a) would not be satisfied or (ii) the
46
Company shall not have performed and complied with each covenant or
agreement contained in the Agreement and required to be performed or
complied with by it, in each case such that the conditions set forth in
Section 6.2(b) would not be satisfied, and which breach, in the case of
clause (i) and (ii) above, shall not have been cured prior to fifteen (15)
days following written notice of such breach;
(f) by the Company if: (i) any representation or warranty
of Parent or Merger Sub contained in this Agreement shall not be true and
correct at any time prior to the Effective Time, in each case such that the
conditions set forth in Section 6.3(a) would not be satisfied or (ii) Parent
or Merger Sub shall not have performed or complied with each covenant or
agreement contained in this Agreement and required to be performed or
complied with by it, in each case such that the conditions set forth in
Section 6.3(b) would not be satisfied, and which breach, in the case of
clause (i) and clause (ii) above, shall not have been cured prior to fifteen
(15) days following written notice of such breach;
(g) by Parent if there shall have been entered any
injunction, judgment ruling or decree by the government of the United States
or by any agency or instrumentality thereof that: (i) restrains or otherwise
interferes with the Merger; (ii) imposes limitations on the ability of
Parent or Merger Sub (or any of their Affiliates) effectively to acquire or
hold, or requires Parent, Merger Sub or the Company or any of their
respective Affiliates or Subsidiaries to dispose of or hold separate, any
material portion of the assets or the business of any one of them; or (iii)
limits or prohibits any material business activity by Parent, Merger Sub or
any of their Affiliates, including, without limitation, requiring the prior
consent of any Person or entity (including the government of the United
States and any instrumentality thereof) to future transactions by Parent,
Merger Sub or any of their Affiliates;
(h) by Parent or the Company, if the shareholders of the
Company fail to approve and adopt this Agreement and the transactions
contemplated hereby at the Company Shareholders' Meeting, including any
adjournment thereof; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 7.1(h) shall not be available to any party
whose failure to fulfill any obligations under this Agreement shall have
been the cause of or result in the failure to obtain the Company Shareholder
Approval;
(i) by Parent or the Company, if the stockholders of
Parent fail to authorize and approve the issuance of Parent Stock in
connection with the Merger at the Parent Stockholders' Meeting, including
any adjournment thereof; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 7.1(j) shall not be available to any party
whose failure to fulfill any obligations under this Agreement shall have
been the cause of or result in the failure to obtain the Parent Stockholder
Approval;
(j) by Parent, if the financing contemplated by the
Commitment Letter shall not have become available to Parent on substantially
the terms and conditions identified in the Commitment Letter or on such
other terms or pursuant to other financing arrangements reasonably
acceptable to Parent; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 7.1(i) shall not be available to Parent if its
failure to fulfill any obligations under Section 5.13(a) shall have been the
cause of or result in the failure of such financing becoming available; or
47
(k) by the Company, if the Company shall have been advised
that financing will not be available under the Commitment Letter or pursuant
to alternate financing arrangements as contemplated by Section 5.13(a)
hereof, and Parent fails to enter into a substitute Commitment Letter or
alternate arrangements with other financing sources within twenty (20)
business days thereafter.
7.2 Effect of Termination and Abandonment. In the event of
-------------------------------------
termination of this Agreement and the abandonment of the Merger pursuant to
this Article 7, all obligations of the parties hereto shall terminate,
except the obligations of the parties pursuant to this Section 7.2 and
Sections 5.5(b), 5.6, 7.3, 7.4, 8.5 and 8.6 and except that nothing herein
shall relieve any party from liability for any breach of any covenant or
agreement under this Agreement.
7.3 Termination Fee. (a) If: (i) Parent or the Company, as
---------------
the case may be, terminates this Agreement pursuant to Sections 7.1(b)(i),
7.1(c), 7.1(d), or 7.1(h) and (ii) in case of a termination pursuant to
Sections 7.1(b)(i) or 7.1(h) an Alternative Proposal with respect to the
Company shall have been publicly announced prior to such termination and any
merger or extraordinary transaction is, entered into or consummated by the
Company within twelve (12) months following such termination, then, in any
such case, the Company shall pay to Parent (i) a fee ("Termination Fee"), in
---------------
cash, equal to $60 million and (ii) all costs and expenses incurred or
payable by or on behalf of Parent or Merger Sub in connection with or in
anticipation of the transactions contemplated by this Agreement, including,
without limitation, all attorneys' fees, accountants' fees, financial
advisors' fees, internal time charges for Parent employees (based on
customary charges in the industry) consultant fees, commitment fees and
filing fees, not to exceed $10 million in the aggregate (the "Expense
-------
Payment"); provided, however, that the Company in no event shall be
- ------- -------- -------
obligated to pay more than once such Termination Fee with respect to all
such agreements and occurrences and such termination.
(b) Any payments required to be made pursuant to this
Section 7.3 shall be made to Parent, by wire transfer of immediately
available same day funds to an account designated by Parent, within two (2)
business days after the termination of this Agreement pursuant to Section
7.1(c) or (d) or, if this Agreement is terminated pursuant to Sections
7.1(b)(i) or 7.1(h), two business days after the earlier of the entering
into or the consummation of any merger or extraordinary transaction. The
Company acknowledges that the covenants contained in Section 7.3(a) are an
integral part of the transactions contemplated in this Agreement and that
without such covenants Parent would not enter into this Agreement.
Accordingly, in the event the Company fails to pay to Parent the Termination
Fee and Expense Payment, promptly when due, the Company shall, in addition
thereto, pay to Parent all costs and expenses, including attorneys' fees and
disbursements, incurred in collecting such Termination Fee and Expense
Payment together with interest on the amount of the Termination Fee and
Expense Payment or any unpaid portion thereof, from the date such payment
was due until the date such payment is received by Parent, accrued at the
fluctuating prime rate (as quoted in The Wall Street Journal) as in effect
from time to time during the period.
7.4 Termination for Failure to Obtain Financing. If this
-------------------------------------------
Agreement is terminated by Parent pursuant to Section 7.1(j), or by the
Company pursuant to Section 7.1(k), Parent shall pay to the Company the sum
of $20 million in cash as liquidated damages. Parent and the Company hereby
acknowledge that the amount of damages which would be incurred by
48
the Company as a result of such termination are difficult to ascertain, and
that the amount of liquidated damages provided by this Section 7.4 is
reasonable. Except as provided in this Section 7.4, Parent shall not have
any liability to the Company in the event of a termination pursuant to
Section 7.1(j). The payment required to be made by this Section 7.4 shall be
made to the Company within two (2) business days after termination of this
Agreement pursuant to Section 7.1(j) or Section 7.1(k) by wire transfer of
immediately available same day funds to an account designated by the Company
prior to and as a condition to termination pursuant to Section 7.1(j).
7.5 Amendment. To the extent permitted by applicable Law,
---------
this Agreement may be amended by action taken by or on behalf of the Board
of Directors of the Company and Parent at any time before or after (i)
approval and adoption of this Agreement by the stockholders of the Company
or (ii) the authorization and approval of the issuance of Parent Stock in
connection with the Merger by the shareholders of Parent but, after any such
stockholder approval, no amendment shall be made which by Law requires the
further approval of such stockholders without such further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all of the parties.
7.6 Extension; Waiver. At any time prior to the Effective
-----------------
Time, any party hereto, by action taken by its Board of Directors, may, to
the extent legally allowed: (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto; and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of
---------------------------------------------
the representations and warranties in this Agreement, or in any instrument
delivered pursuant to this Agreement, shall survive after the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the
parties hereto which by its terms contemplates performance after the
Effective Time.
8.2 Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given or made as of the date
of receipt and shall be delivered personally or mailed by registered or
certified mail (postage prepaid, return receipt requested), sent by
overnight courier or sent by facsimile (but only if the appropriate
facsimile transmission confirmation is received), to the applicable party at
the following addresses or facsimile numbers (or at such other address or
telecopy number for a party as shall be specified by like notice):
49
If to Parent or Merger Sub, to:
DRS Technologies, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054
Attention: Nina Laserson Dunn, Esq.
Telephone: (973) 898-6020
Facsimile: (973) 898-0717
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Jeffrey W. Tindell, Esq.
Telephone: (212) 735-3380
Facsimile: (917) 777-3380
If to the Company, to:
Engineered Support Systems, Inc.
201 Evans Lane
St. Louis, Missouri 63121
Attention: David D. Mattern, Esq.
Telephone: (314) 553-4984
Facsimile: (314) 553-4320
with copies to:
Thompson Coburn LLP
One US Bank Plaza
St. Louis, Missouri 63101
Attention: Thomas A. Litz
Telephone: (314) 552-6072
Facsimile: (314) 552-7072
Wittner, Poger, Spewak, Maylack & Spooner, P.C.
7733 Forsyth Boulevard, Suite 2000
St. Louis, Missouri 63105
Attention: David S. Spewak
Telephone: (314) 862-3535
Facsimile: (314) 862-5741
8.3 Assignment; Binding Effect. Neither this Agreement nor
--------------------------
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto, in whole or in part (whether by operation of Law
or otherwise), without the prior written consent of the other parties. Any
attempt to make any such assignment without such consent shall be null and
void. Subject to the preceding sentences, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and permitted assigns.
50
Notwithstanding anything contained in this Agreement to the contrary, except
for the provisions of Article 2 and Sections 5.8 and 5.9 which may be
enforced directly by the beneficiaries thereof, nothing in this Agreement,
expressed or implied, is intended to or shall confer on any Person other
than the parties hereto or their respective permitted successors and assigns
any rights, benefits, remedies, obligations or liabilities whatsoever under
or by reason of this Agreement.
8.4 Entire Agreement. This Agreement (including the
----------------
Company Disclosure Schedule), the Confidentiality Agreement, the Ancillary
Documents and any other documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them,
with respect thereto.
8.5 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Delaware (except to
the extent that Missouri Law applies to the Merger) without regard to its
rules of conflict of Laws. Each of the Company, Parent and Merger Sub hereby
irrevocably and unconditionally: (i) consents to submit to the exclusive
jurisdiction of the state and federal courts located in the State of
Delaware (the "Delaware Courts") for any litigation arising out of or
---------------
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such
courts), (ii) waives any objection to the laying of venue of any such
litigation in the Delaware Courts and (iii) agrees not to plead or claim in
any Delaware Court that such litigation brought therein has been brought in
an inconvenient forum. Each of the parties hereto irrevocably waives any and
all rights to trial by jury in any proceedings arising out of or related to
this Agreement or the transactions contemplated hereby.
8.6 Fee and Expenses. Except as otherwise provided herein,
----------------
including, but not limited to, in Sections 2.4(i), 7.3 and 7.4, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such costs and expenses.
8.7 Certain Definitions. For purposes of this Agreement,
-------------------
the following terms shall have the following meanings:
(i) "401(k) Plans" means: the [Excalibur], Inc.
------------
401(k) and Employee Stock Ownership Plan and the Mobilized Systems, Inc.
401(k) Incentive Savings Plan. [For Discussion]
(ii) "Affiliate" of a Person means a Person that
---------
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person.
(iii) "Company Material Adverse Effect" means: (A) any
-------------------------------
change or effect that is or would reasonably be expected to be materially
adverse to the business, results of operations, assets, liabilities,
financial condition, or reputation of the Company and its Subsidiaries,
taken as a whole, including any material worsening with respect to any
matter disclosed in the Company Disclosure Schedule; provided, however, that
-------- -------
in determining whether there has been a Company Material Adverse Effect, any
adverse effect primarily resulting from
51
or arising in connection with the following shall be disregarded: (x) the
taking of any action permitted or required by this Agreement or the
announcement or pendency of the Merger; or (y) changes or conditions
(including GAAP (as defined in Section 3.7(b)), Law, regulation or other
interpretation) affecting the industry in which the Company or its
Subsidiaries operate, so long as such changes do not disproportionately
affect the Company or its Subsidiaries; or (B) any event, matter, condition
or effect which precludes or delays or would reasonably be expected to
preclude or delay the Company from materially performing its material
obligations under this Agreement or the consummation of the transactions
contemplated hereby.
(iv) "group" has the meaning ascribed to such term
-----
under Rule 13d-5(b)(1) under the Exchange Act.
(v) "Indebtedness" means (i) indebtedness of the
------------
Company or any of its Subsidiaries for borrowed money (including the
aggregate principal amount thereof, the aggregate amount of any accrued but
unpaid interest thereon and any prepayment penalties or other similar
amounts payable in connection with the repayment thereof on or prior to the
Closing Date), (ii) obligations of the Company or any of its Subsidiaries
evidenced by bonds, notes, debentures, letters of credit or similar
instruments, (iii) obligations of the Company or any of its Subsidiaries
under capitalized leases, (iv) obligations of the Company or any of its
Subsidiaries under conditional sale, title retention or similar agreements
or arrangements creating an obligation of the Company or any of its
Subsidiaries with respect to the deferred purchase price of property, (v)
obligations in respect of interest rate and currency obligation swaps,
hedges or similar arrangements and (vi) all obligations of any of the
Company or any Subsidiary to guarantee any of the foregoing types of
obligations on behalf of any Person other than the Company or any
Subsidiary.
(vi) "knowledge" of with respect to the Company shall
---------
mean the actual or constructive knowledge of any of the persons set forth in
Section 8.7 of the Company Disclosure Schedule.
(vii) "Liens" means any pledges, claims, liens,
-----
charges, encumbrances, options to purchase or lease or otherwise acquire any
interest, conditional sales agreement, restriction (whether on voting, sale,
transfer, disposition or otherwise) and security interests of any kind or
nature whatsoever.
(viii) "Loss Contract" means any Contract to which
-------------
the Company or any Subsidiary is a party with respect to which the Company
accrued a loss on the consolidated balance sheet of the Company and the
Subsidiaries as of July 31, 2005, included in the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended July 31, 2005 (without regard to
any selling, general and administrative expenses accrued with respect to
such Contract).
(ix) "License Agreements" means all material
------------------
agreements, whether oral or written, and whether between the Company, its
Subsidiaries and third parties or intercompany, to which the Company or any
of its Subsidiaries is a party or otherwise bound: (i) granting or obtaining
any right to use or practice any rights under any Intellectual Property
(other than licenses for readily available commercial Software having an
acquisition price of less than
52
$10,000) or (ii) restricting the Company's or any of its Subsidiaries'
rights to use any Intellectual Property, including, without limitation,
license agreements, development agreements, distribution agreements,
settlement agreements, consent to use agreements and covenants not to sue.
(x) "Parent Material Adverse Effect" means: (A) any
------------------------------
change or effect that is or would reasonably be expected to be materially
adverse to the business, results of operations, assets, liabilities or
financial condition of Parent and its subsidiaries, taken as a whole; or (B)
any event, matter, condition or effect which precludes or delays or would
reasonably be expected to preclude or delay Parent from materially
performing its material obligations under this Agreement or the consummation
of the transactions contemplated hereby; provided, however, that in
determining whether there has been a Parent Material Adverse Effect, any
adverse effect primarily resulting from or arising in connection with the
following shall be disregarded: (x) the taking of any action permitted or
required by this Agreement or the announcement or pendency of the Merger; or
(y) changes or conditions (including GAAP (as defined in Section 3.7(b)),
Law, regulation or other interpretation) affecting the industry in which
Parent or its Subsidiaries operate, so long as such changes do not
disproportionately affect the Parent or its Subsidiaries; or (B) any event,
matter, condition or effect which precludes or delays or would reasonably be
expected to preclude or delay Parent from materially performing its material
obligations under this Agreement or the consummation of the transactions
contemplated hereby.
(xi) "Person" means an individual, corporation,
------
partnership, limited liability company, association, trust, unincorporated
organization, entity or group (as defined in the Exchange Act).
(xii) "Tax" or "Taxes" means any and all federal,
--- -----
state, local and foreign income, gross receipts, payroll, employment,
excise, stamp, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, real property, personal
property, sales, use, transfer, value added, alternative or add-on minimum,
estimated, or other taxes (together with interest, penalties and additions
to tax imposed with respect thereto) imposed by any Governmental Authority;
and
(xiii) "Tax Returns" means returns, declarations,
-----------
claims for refund, or information returns or statements, reports and forms
relating to Taxes filed or required to be filed with any Governmental
Authority (including any schedule or attachment thereto) with respect to the
Company or the Subsidiaries, including any amendment thereof.
8.8 Headings. Headings of the articles and sections of
--------
this Agreement are for the convenience of the parties only, and shall be
given no substantive or interpretive effect whatsoever. The table of
contents contained in this Agreement is for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
8.9 Interpretation. In this Agreement, unless the context
--------------
otherwise requires, words describing the singular number shall include the
plural and vice versa, words denoting any gender shall include all genders
and words denoting natural Persons shall include corporations and
partnerships and vice versa. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be understood to be
followed by the words "without limitation."
53
8.10 Waivers. No action taken pursuant to this Agreement,
-------
including, without limitation, any investigation by or on behalf of any
party, nor any failure or delay on the part of any party hereto in the
exercise of any right hereunder, shall be deemed to constitute a waiver by
the party taking such action of compliance of any representations,
warranties, covenants or agreements contained in this Agreement or in any of
the Ancillary Documents. The waiver by any party hereto of a breach of any
provision hereunder shall not operate or be construed as a waiver of any
prior or subsequent breach of the same or any other provision hereunder.
8.11 Severability. Any term or provision of this Agreement
------------
that is invalid, illegal or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
8.12 Enforcement of Agreement. The parties hereto agree
------------------------
that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with its specific terms
or was otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
Delaware Court, this being in addition to any other remedy to which they are
entitled at Law or in equity.
8.13 Counterparts. This Agreement may be executed by the
------------
parties hereto in one or more separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original. All such
counterparts shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.
[Signature Page Follows]
54
IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on their behalf, on the
day and year first written above.
ENGINEERED SUPPORT SYSTEMS, INC.
By: /s/ Garald A. Potthoff
------------------------------------
Name: Garald A. Potthoff
Title: Vice Chairman and
Chief Executive Officer
DRS TECHNOLOGIES, INC.
By: /s/ Mark S. Newman
------------------------------------
Name: Mark S. Newman
Title: Chairman, President and
Chief Executive Officer
MAXCO, INC.
By: /s/ Mark S. Newman
------------------------------------
Name: Mark S. Newman
Title: President
COMPANY DISCLOSURE SCHEDULES
Section 3.3(a)(i) Stock Options
Section 3.3(b) Stock Rights Agreements
Section 3.3(c) Subsidiaries Jurisdictions of Incorporation
Section 3.3(d) Investments
Section 3.8 Affiliate Transactions
Section 3.9 Material Events
Section 3.10 Litigation
Section 3.11(a) Benefit Plans, Employment Agreements, etc.
Section 3.11(b) Certain Pension Plans, Change in Control
Agreements
Section 3.11(d) Post-Termination and Retiree Benefits
Section 3.11(e) Plan Actions
Section 3.11(f) Foreign Benefit Plans
Section 3.11(h) Exceptions to Pension/ERISA Compliance
Section 3.12 Collective Bargaining Agreements
Section 3.13(a) Owned Real Property
Section 3.13(b) Leased Real Property
Section 3.13(c) Condemnation
Section 3.14(b) Intellectual Property
Section 3.15 Tax Claims, Audits and Indemnifications
Section 3.16 Environmental Matters
Section 3.17(a) Contract Issues
Section 3.17(b) Specified Contracts
Section 3.18(a) Government Contract Non-Compliance
Section 3.18(b) Governmental Investigations
Section 3.18(c) Government Contract Claims
Section 3.18(d) Unclosed Rate Schedules
Section 3.19 Suspensions and Debarments
Section 3.20 Loss Contracts
Section 3.21 Significant Customers and Suppliers
Section 3.22 Insurance
Section 3.28(a) Export Licenses and Agreements
Section 3.28(b) Export Approval - Compliance
Section 3.28(c) Export Approval Audits and Investigations
Section 5.2(a) Exceptions to Interim Covenants
Section 5.2(b) Exceptions to Ordinary Course
Section 8.7 Knowledge Persons
PARENT DISCLOSURE SCHEDULES
Section 4.10 Litigation