<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 23, 1999
---------------------
AAVID THERMAL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27308 02-0466826
- ---------------------------- ----------- -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One Eagle Square, Suite 509
Concord, New Hampshire 03301
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (603) 224-1117
---------------------
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
ACQUISITION OF THERMAL MANAGEMENT BUSINESS OF BOWTHORPE PLC
On August 23, 1999, Aavid Thermal Technologies, Inc. (the "Company")
entered into a Stock Purchase Agreement by and among Bowthorpe plc, Bowthorpe
B.V., Bowthorpe International Inc., Bowthorpe GmbH (collectively, "Bowthorpe")
and the Company. Pursuant to the Stock Purchase Agreement, the Company will
purchase the stock of the Bowthorpe subsidiaries engaged in the thermal
management business for a cash purchase price of $79.5 million, subject to
certain purchase price adjustments based on the acquired business' outstanding
liabilities at closing and inventory at July 31, 1999. The closing of the
acquisition is subject to certain customary conditions, including expiration of
the applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and completion of the audited financial
statements for the acquired business for each of the years in the three year
period ended December 31, 1998. The Company intends to finance the purchase
price with borrowings under a new credit facility. A copy of the Stock Purchase
Agreement is attached as Exhibit 2.1 hereto, the text of which is incorporated
by reference under this Item 5.
A copy of the press release issued by the Company announcing the
execution of the Stock Purchase Agreement is attached as Exhibit 99 hereto, the
text of which is incorporated by reference under this Item 5.
ACQUISITION OF AAVID THERMAL TECHNOLOGIES, INC. BY WILLIS STEIN & PARTNERS
On August 23, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") by and among the Company, Heat Holdings Corp., a
corporation newly formed by Willis Stein & Partners, II, L.P. ("Purchaser"), and
Heat Merger Corp., a wholly owned subsidiary of Purchaser ("Merger Sub"). The
Merger Agreement contemplates, among other things, that following approval of
the Company's stockholders, Merger Sub will merge with and into the Company (the
"Merger"), the Company will become a wholly-owned subsidiary of Purchaser and
the Company's stockholders will receive $25.50 per share in cash. The Merger is
conditioned upon, among other things, the expiration of the applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and approval of the Company's stockholders. Although the Merger is also
conditioned upon the closing of the Company's acquisition of the thermal
management business of Bowthorpe, the Purchaser has agreed that in the event the
Company for any reason does not consummate the acquisition, it will still
acquire the Company pursuant to the Merger Agreement, but at a price of $24.50
per share. In such event, either the Company or the Purchaser may elect to have
the Purchaser commence a tender offer for the Company's shares. The Merger
Agreement may be terminated under certain circumstances, including without
limitation in connection with the Company's entering into a definitive agreement
with respect to another acquisition transaction which the Company's Board of
Directors has concluded in good faith, after
-2-
<PAGE> 3
consulting with its financial advisor, is more favorable to the Company's
stockholders than the Merger and is reasonably capable of being financed. In
such event and certain other circumstances, the Company would be obligated under
the Merger Agreement to pay Purchaser a termination fee of $8.3 million. Certain
of the Company's directors and executive officers, beneficially owning an
aggregate of 1,275,970 shares of the Company's common stock (including 899,176
shares issuable upon exercise of outstanding options), entered into voting
agreements with Purchaser pursuant to which they agreed to vote their shares in
favor of the Merger. A copy of the Merger Agreement is attached as Exhibit 2.2
hereto, the text of which is incorporated by reference under this Item 5.
A copy of the press release issued by the Company announcing the
execution of the Merger Agreement is attached as Exhibit 99 hereto, the text of
which is incorporated by reference under this Item 5.
Following the public announcement of the Merger, lawsuits were filed
against the Company, Willis, Stein & Partners, the Company's directors and one
former director in the Court of Chancery of the State of Delaware by
stockholders of the Company. The complaints allege, among other things, that the
Company's directors have breached their fiduciary duties and seek to enjoin,
preliminarily and permanently, the Merger and also seek compensatory damages.
The stockholder plaintiffs, on behalf of the Company's public stockholders,
also seek class action certification for their lawsuits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
None
(b) PRO FORMA FINANCIAL INFORMATION.
None
(c) EXHIBITS.
2.1 Stock Purchase Agreement by and among Bowthorpe plc,
Bowthorpe B.V., Bowthorpe International Inc.,
Bowthorpe GmbH (collectively, "Bowthorpe") and Aavid
Thermal Technologies, Inc., dated as of August 23,
1999
2.2 Agreement of Plan and Merger, dated as of August 23,
1999, by and among Heat Holdings Corp., Heat Merger
Corp. and Aavid Thermal Technologies, Inc.
2.3 Form of Voting Agreement
99 Press Release.
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AAVID THERMAL TECHNOLOGIES, INC.
Date: August 31, 1999 By: /s/ John W. Mitchell
-------------------------------
Name: John W. Mitchell
Title: General Counsel
-4-
<PAGE> 5
Exhibit Index
2.1 Stock Purchase Agreement by and among Bowthorpe plc, Bowthorpe
B.V., Bowthorpe International Inc., Bowthorpe GmbH
(collectively, "Bowthorpe") and Aavid Thermal Technologies,
Inc., dated as of August 23, 1999
2.2 Agreement of Plan and Merger, dated as of August 23, 1999, by
and among Heat Holdings Corp., Heat Merger Corp. and Aavid
Thermal Technologies, Inc.
2.3 Form of Voting Agreement
99 Press Release.
-5-
<PAGE> 1
EXHIBIT 2.1
- --------------------------------------------------------------------------------
BOWTHORPE PLC
BOWTHORPE B.V.
BOWTHORPE INTERNATIONAL INC.
BOWTHORPE GMBH
SALE OF SHARES OF
REDPOINT THERMALLOY LIMITED
EL.BO.MEC. S.R.L.
THERMALLOY (MALAYSIA) SDN BHD
THERMALLOY LIMITED (HONG KONG)
THERMALLOY INVESTMENT COMPANY
CURAMIK ELECTRONICS GMBH
TO
AAVID THERMAL TECHNOLOGIES, INC.
--------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------
Dated as of August 23, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
1. Sale and Purchase. .....................................................................1
1.1 Sale and Purchase of the Shares................................................1
1.2 Closing........................................................................2
1.3 Allocation of Purchase Price..................................................3
1.4 Post-Closing Purchase Price Calculation........................................4
1.5 Inventory Purchase Price Adjustment............................................5
2. Representations and Warranties of the Sellers...........................................6
2.1 Authorization, etc.............................................................6
2.2 Corporate Status...............................................................7
2.3 No Conflicts, Consents and Approvals, etc......................................7
2.4 The Shares.....................................................................8
2.5 Financial Statements and Other Information.....................................8
2.6 Absence of Undisclosed Liabilities.............................................9
2.7 Assets, Properties, etc.......................................................10
2.8 Contracts.....................................................................12
2.9 Employee Benefit Matters......................................................14
2.10 Intellectual Property.........................................................19
2.11 Governmental Authorizations; Compliance with Law..............................21
2.12 Litigation....................................................................21
2.13 Taxes.........................................................................21
2.14 Absence of Changes............................................................26
2.15 Insurance.....................................................................28
2.16 Environmental Matters.........................................................28
2.17 Affiliate Transactions........................................................30
2.18 Customers.....................................................................30
2.19 Suppliers; Raw Materials......................................................31
2.20 Product Warranties............................................................31
2.21 Absence of Certain Business Practices.........................................31
2.22 Banking and Agency Arrangements...............................................31
2.23 Brokers.......................................................................32
2.24 Foreign Subsidiaries..........................................................32
2.25 Disclosure....................................................................32
3. Representations and Warranties of the Purchaser........................................32
3.1 Authorization, etc............................................................32
3.2 Corporate Status..............................................................33
3.3 No Conflicts, Consents and Approvals, etc.....................................33
3.4 Bank Financing Commitment.....................................................33
3.5 Litigation....................................................................33
3.6 Purchase for Investment.......................................................34
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
3.7 Brokers.......................................................................34
3.8 Purchaser's Investment Plan...................................................34
4. Certain Covenants......................................................................34
4.1 Obligations of Both the Parties...............................................34
4.2 Obligations of the Sellers....................................................35
4.3 Payment of Transaction-Related Taxes and Expenses.............................38
4.4 Taxes.........................................................................38
4.5 Publicity.....................................................................45
4.6 Modification of Disclosure Schedules..........................................46
4.7 Contact with Employees, Customers and Suppliers...............................46
4.8 Credit Support Arrangements...................................................46
4.9 Intercompany Accounts.........................................................47
4.10 Target Assets.................................................................47
4.11 No Solicitation...............................................................47
4.12 Discharge of Indebtedness and Liens...........................................48
4.13 Confidentiality...............................................................48
4.14 Insurance.....................................................................49
4.15 Non-Competition...............................................................49
4.16 Remediation of Existing Environmental Conditions..............................51
5. Employees and Employee Benefit Plans...................................................54
5.1 Compensation and Benefits of Target Company Employees.........................54
5.2 Savings Plan..................................................................57
5.3 No Third Party Beneficiaries..................................................58
6. Conditions Precedent...................................................................58
6.1 General.......................................................................58
6.2 Conditions to Obligations of Both Parties.....................................58
6.3 Conditions to Obligations of the Sellers......................................59
6.4 Conditions to Obligations of the Purchaser....................................59
7. Indemnification........................................................................60
7.1 Survival of Representations and Warranties....................................60
7.2 Indemnification...............................................................60
8. General Provisions.....................................................................64
8.1 Modification; Waiver..........................................................64
8.2 Entire Agreement..............................................................64
8.3 Exclusivity of Representations and Warranties and
Indemnification Provision; Relationship Between the Parties...................64
8.4 No Additional Rights or Remedies under Certain Agreements.....................65
8.5 Termination...................................................................65
8.6 Expenses......................................................................67
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
8.7 Further Actions...............................................................67
8.8 Post-Closing Access...........................................................67
8.9 Notices.......................................................................67
8.10 Assignment....................................................................68
8.11 No Third Party Beneficiaries..................................................69
8.12 Counterparts..................................................................69
8.13 Interpretation................................................................69
8.14 Governing Law.................................................................70
8.15 Consent to Jurisdiction, etc..................................................70
8.16 Waiver of Jury Trial..........................................................70
</TABLE>
-iii-
<PAGE> 5
SCHEDULES
SCHEDULE DESCRIPTION
SELLERS' SCHEDULES
Schedule 2.1 Authorization, etc.
Schedule 2.2 Corporate Status
Schedule 2.3 Conflicts; Consents
Schedule 2.4 Ownership of Shares
Schedule 2.5 Financial Statements
Schedule 2.6 Absence of Undisclosed Liabilities
Schedule 2.7 Assets, Property, etc.
Schedule 2.8 Contracts
Schedule 2.9 Employee Benefit Matters
Schedule 2.10 Intellectual Property
Schedule 2.11 Governmental Permits
Schedule 2.12 Litigation
Schedule 2.13 Tax Matters
Schedule 2.14 Absence of Certain Changes
Schedule 2.15 Insurance Policies
Schedule 2.16 Environmental Matters
Schedule 2.17 Affiliate Transactions
Schedule 2.18 Customers
Schedule 2.19 Suppliers
Schedule 2.20 Product Warranties
Schedule 2.21 Absence of Certain Business Practices
Schedule 2.22 Banking and Agency Arrangements
Schedule 4.8 Credit Support Arrangements
Schedule 4.10 Target Assets
PURCHASER'S SCHEDULES
Schedule 3.3 Conflicts; Consents
Schedule 5.1 Target Company Group Benefit Plans Not Assumed by the
Purchaser
SELLERS' AND PURCHASER'S SCHEDULES
Schedule 1.3 Preliminary Allocation of Purchase Price
Schedule 4.2.1 Liabilities Schedule
Schedule 4.3 Payment of Transaction Related Taxes and Expenses
Schedule 6.2.1 Required Third-Party Consents
-iv-
<PAGE> 6
EXHIBITS
Exhibit 1.2 Form of Local Purchase Agreement
Exhibit 2.9 Foreign Benefit Plan Representations
Exhibit 2.24 Foreign Subsidiary Representations
Exhibit 4.5 Press Release
Exhibit 4.10 Target Asset Purchase Agreement
Exhibit 5.1 UK Pension Transfer Provisions
-v-
<PAGE> 7
DEFINED TERMS
SECTION
Aavid Group 4.15(b)
Accountant Inventory Statement 1.5(d)
Accountant Statement 1.4(c)
Active Employees 5.1(a)
Active Savings Participants 5.2(b)
Affiliate 2.17
Affiliated Group 2.13(a)
Ancillary Agreements 2.1
Assumed Liabilities Adjustment 1.1
Attached Tax Information 4.4.3(c)(i)
Benefit Plan 2.9
Bowthorpe B.V. Preamble
Bowthorpe GmbH Preamble
Bowthorpe International Preamble
Bowthorpe plc Preamble
Business 2.5
Business day 7.2.3(a)
capital stock Preamble
CIBC 3.4
Closing 1.2
Closing Date 1.2
Closing Date Inventory Statement 1.5(c)
Closing Date Statement 1.4(b)
Code 2.9
Combined Income Tax Returns 4.4.2(c)
Combined Income Taxes 4.4.2(c)
Company Contracts 2.8
Company Permits 2.11
Company Y2K Plan 2.10(b)
Computer Systems 2.10(b)
Confidentiality Agreement 4.2.2
Contracts 2.8
Credit Support Arrangements 4.8
Curamik Preamble
Damages 7.2.1
Department 2.9
ElBoMec Preamble
Employee 2.9
Employment Agreement 2.9
Environmental Conditions 4.16(a)
Environmental Law 2.16(a)
-vi-
<PAGE> 8
SECTION
ERISA 2.9
ERISA Affiliate 2.9
Estimated Assumed Liabilities Adjustment 1.2
Exclusivity Period 4.11(a)
Financial Statements 2.5(a)
French Employees 2.9.3
GAAP 2.5(a)
German Employees 2.9.3
Hazardous Substance 2.16(a)
HSR Act 2.3(b)
Indemnitee 7.2.3
Indemnitor 7.2.3
Intellectual Property 2.10(a)
Inventory Adjustment 1.5(b)
Inventory Difference 1.5(b)
Inventory Revaluation 1.5(b)
IRS 2.9
Leased Real Property 2.7(a)
Leases 2.7(c)
Liabilities Schedule 4.2.1
Liens 2.3(a)
Local Purchase Agreements 1.2(a)
Malaysian Purchase Price 1.2
Malaysian Shares 1.2
Material Adverse Effect 2.2
Multi-Employer Plan 2.9
New Inventory Value 1.5(a)
New 1998 Inventory Value 1.5(a)
1998 Inventory Adjustment 1.5(b)
1999 Combined Income Taxes 4.4.1(b)
1999 Pro Forma Return 4.4.1(b)
1999 Tax 4.4.1(b)
Non-Company Affiliate 4.4.1
Order 4.1.2(b)
Organizational Documents 2.1
PBGC 2.9
Pension Plan 2.9
pension scheme 2.9.3
Permitted Liens 2.7(a)
Person 8.13
Pre 1999 Period 4.4.2(c)
Profit Adjustment` 1.5(b)
Property 4.16(b)
Purchase Price 1.1
-vii-
<PAGE> 9
SECTION
Purchaser Preamble
Purchaser Statement 1.4(b)
Purchaser Statement of Objection 1.5(c)
Purchaser's Investment Plan 5.2(a)
Redpoint Preamble
Restricted Activities 4.15(a)
Restricted Period 4.15(a)
Restrictive Covenants 4.15(d)
Returns 2.13(dd)
Reviewing Accountants 1.4(c)
Section 338 Taxes 4.4.2(c)
Seller Group Employee 2.9(a)
Seller Indemnified Group 7.2.2
Seller Savings Plan 5.1.2(a)
Seller Statement 1.5(c)
Sellers Preamble
Sellers Representative 1.2(b)
Shadow ACT Regulation 2.13(w)
Shares Preamble
Stand-alone Taxes 4.4.2(c)
Statement of Objection 1.4(b)
Straddle Period Return 4.4.3(b)
Subsidiary Purchaser 1.1
Tangible Assets 2.7(a)
Target Asset Purchase Agreement 4.10
Target Assets 4.10
Target Companies Preamble
Target Company Group 2.1
Target Company Group Benefit Plan 2.9
Tax Dispute Accountants 4.4.7
Tax Dispute Resolution Mechanism 4.4.7
Taxes 2.13(dd)
Thermal Management Business 4.15(a)
Thermalloy Hong Kong Preamble
Thermalloy Investment Preamble
Thermalloy Malaysia Preamble
Transfer Date 5.1.2(b)
Treasury Regulations 2.13(l)
TNRCC 4.16(a)
VCP 4.16(a)
VOCs 4.16(a)
Welfare Plan 2.9
Y2K Compliant 2.10(b)
-viii-
<PAGE> 10
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 23,
1999, among Bowthorpe plc, a company formed under the laws of England and Wales
("BOWTHORPE PLC"), Bowthorpe B.V., a Netherlands corporation ("BOWTHORPE B.V."),
Bowthorpe International Inc., a Delaware corporation ("BOWTHORPE
INTERNATIONAL"), Bowthorpe GmbH, a German corporation ("BOWTHORPE GMBH";
together with Bowthorpe plc, Bowthorpe B.V. and Bowthorpe International, the
"SELLERS"), and Aavid Thermal Technologies, Inc., a Delaware corporation (the
"PURCHASER").
WHEREAS, Bowthorpe plc beneficially owns and controls all of the
outstanding shares of Redpoint Thermalloy Limited, a company formed under the
laws of England and Wales ("REDPOINT"); Bowthorpe B.V. beneficially owns and
controls all of the outstanding share quota of El.Bo.Mec. S.r.l., an Italian
corporation ("ELBOMEC"), and all of the outstanding ordinary shares of
Thermalloy (Malaysia) Sdn Bhd, a Malaysian corporation ("THERMALLOY MALAYSIA");
Bowthorpe International beneficially owns and controls all of the outstanding
ordinary shares of Thermalloy Limited (Hong Kong), a Hong Kong corporation
("THERMALLOY HONG KONG"), and all of the outstanding capital stock of Thermalloy
Investment Company, a Texas corporation ("THERMALLOY INVESTMENT"); Bowthorpe
GmbH owns 65.2% of the outstanding company shares of Curamik Electronics GmbH, a
German corporation ("CURAMIK"); (together with Redpoint, ElBoMec, Thermalloy
Malaysia, Thermalloy Hong Kong and Thermalloy Investment, the "TARGET
COMPANIES");
WHEREAS, each Seller desires to sell all of the shares, share capital,
ordinary shares, quota, company shares or capital stock, as the case may be, of
each of the Target Companies owned by it (collectively the "SHARES") to the
Purchaser and the Purchaser desires to purchase the Shares. For purposes of this
Agreement, shares, share capital, ordinary shares, company shares, capital stock
or any other equity interest of any Target Company shall hereinafter be referred
to generally as "CAPITAL STOCK".
NOW, THEREFORE, the parties hereto agree as follows:
1. SALE AND PURCHASE.
1.1 SALE AND PURCHASE OF THE SHARES. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 1.2), each
Seller will sell the Shares owned by it, and the Purchaser will purchase (either
directly or by a designated subsidiary to which Purchaser's rights hereunder are
assigned in accordance with Section 8.10 hereof (a "SUBSIDIARY PURCHASER")) the
Shares, for an aggregate purchase price (the "PURCHASE PRICE") equal to
$79,500,000 less the sum of (A) any liabilities set forth on the Liabilities
Schedule (as defined in Section 4.2.1 below) which remain outstanding on the
Closing Date as permitted by this Agreement, after giving effect to payments
pursuant to Section 4.12, (B) the amount, if any, by which (pound)1,313,000
exceeds the amount of the Target Company Group overdraft facilities paid by the
Sellers pursuant to Section 4.12 (the amount set forth in clauses (A) and (B)
being referred to as the "ASSUMED LIABILITIES ADJUSTMENT"), (C) the Inventory
Adjustment (as defined below) and (D) the Profit Adjustment (as defined below),
<PAGE> 11
payable as set forth below in Section 1.2. That portion of the Shares comprising
Redpoint capital stock shall be sold with full title guarantee free from all
Liens (as defined below), charges and encumbrances, except Liens arising by or
through the Purchaser or any of its Affiliates.
1.2 CLOSING. The closing of the sale and the purchase of the Shares
(the "CLOSING") will take place at the offices of Fulbright & Jaworski L.L.P.,
New York, New York 10103, at 10:00 A.M., local time, no later than the second
business day after satisfaction of the latest to occur of the conditions set
forth in Section 6 hereof (other than the delivery of the officers' certificates
referred to therein and other than any conditions which are waived in accordance
with said Section) or such other time, place or date as the Sellers and
Purchaser may mutually agree. Failure to consummate the transactions provided
for in this Agreement on the date and time selected pursuant to this Section 1.2
shall not, except as permitted by Section 8.5 hereof, result in the termination
of this Agreement and shall not relieve any party to this Agreement of any
obligation hereunder. The date on which the Closing shall occur is hereinafter
referred to as the "CLOSING DATE". At the Closing:
(a) each Seller will deliver to the Purchaser (i) a stock certificate
or stock certificates representing the Shares owned by it, endorsed or
accompanied by stock powers or transfer forms in favor of the Purchaser or
duly executed in blank, or an indemnity agreement in form reasonably
satisfactory to Purchaser, indemnifying Purchaser against loss resulting
from lost certificates, and accompanied by all requisite stock transfer
stamps or (ii) in the case of a Target Company organized outside the United
States, such other evidence of ownership or instruments of transfer as are
customary, if any, in the jurisdiction of organization of such Target
Company and sufficient to convey ownership of the shares of capital stock
of such Target Company to the Purchaser or to the Purchaser's designated
subsidiaries, and in the case of ElBoMec, Thermalloy Hong Kong and Curamik
pursuant to stock purchase agreements, in substantially the form attached
hereto as EXHIBIT 1.2, to be entered into as of the Closing Date hereof
between the relevant Seller and the Purchaser or such designated
subsidiaries of the Purchaser (the "LOCAL PURCHASE AGREEMENTS");
(b) in relation to Redpoint, the Sellers will deliver, or cause to be
delivered, in addition to those documents referred to in Section 1.2(a), a
copy of any power of attorney under which this Agreement, or any of the
transfers or other documents referred to or required by this Section 1.2,
is executed and evidence to the Purchaser's reasonable satisfaction of the
authority of any person signing on behalf of any corporate entity, (ii)
duly executed transfers in favor of the Purchaser or as it directs in
respect of the shares in Redpoint's subsidiary, Redpoint Limited, which are
not registered in the name of Redpoint together with the share certificates
for the shares in question and (iii) powers of attorney in a form agreed
between the parties duly executed by the registered holders of shares in
Redpoint for the purpose of securing the interest of the Purchaser in the
Shares in Redpoint pending their registration into the names of the
Purchaser and/or its nominee(s);
(c) in relation to Thermalloy Malaysia, the Sellers will deliver, or
cause to be delivered, in addition to those documents referred to in
Section 1.2(a), a copy of any power
-2-
<PAGE> 12
of attorney or other authority under which the transfer of the Shares
in Thermalloy Malaysia is executed and evidence to the Purchaser's
reasonable satisfaction of the authority of any person signing on
behalf of Bowthorpe B.V.; and
(d) the Purchaser will deliver, or cause to be delivered, an
amount equal to $79,500,000 less the sum of (I) the Estimated Assumed
Liabilities Adjustment (as defined below), (II) the Inventory
Adjustment, as finally determined pursuant to Section 1.5 below, and
(III) the Profit Adjustment, as finally determined pursuant to Section
1.5 below, to Bowthorpe plc, as representative of the Sellers (the
"SELLERS REPRESENTATIVE"), by wire transfer of immediately available
funds to a previously designated account of the Sellers Representative
on behalf of the Sellers.
At least five (5) business days prior to the Closing Date, the Sellers shall
prepare and deliver to Purchaser a good faith estimate of the Assumed
Liabilities Adjustment as of the Closing Date (the "ESTIMATED ASSUMED
LIABILITIES ADJUSTMENT"), prepared in U.S. Dollars in accordance with United
Kingdom generally accepted accounting principles, and accompanied by a
certificate signed by the chief financial officer of Bowthorpe plc to that
effect.
In the event that all the conditions to the Closing set forth in
Section 6, other than receipt of the Malaysian governmental approvals referred
to below and the resignation of officers and directors of Thermalloy Malaysia as
required by Section 6.4.3, are satisfied, but the Controller of Foreign Exchange
of Malaysia has not yet approved the payment of that portion of the Purchase
Price allocated to the Malaysian Shares, as set forth on Schedule 1.3 (the
"MALAYSIAN PURCHASE PRICE"), or the Ministry of International Trade and Industry
of Malaysia has not yet approved the transfer of the shares of Thermalloy
Malaysia (the "MALAYSIAN SHARES") to the Purchaser, then receipt of such
approvals and the satisfaction of such other conditions relating solely to
Thermalloy Malaysia, including without limitation the resignation of officers
and directors of Thermalloy Malaysia as required by Section 6.4.3, shall not
constitute conditions to the closing of the purchase and sale of the Shares
other than the Malaysian Shares, and at the Closing the Malaysian Shares shall
be placed in escrow by Bowthorpe B.V. and the Malaysian Purchase Price shall be
placed in escrow by Purchaser pursuant to a mutually agreed escrow agreement,
pending receipt of all such approvals. Upon receipt of all such approvals, the
Malaysian Shares shall be delivered to Purchaser (or its designee) and the
Malaysian Purchase Price shall be delivered to Bowthorpe B.V. Bowthorpe B.V.
hereby covenants and agrees to operate Thermalloy Malaysia in accordance with
all the terms of this Agreement, including without limitation those set forth in
Section 4, until the closing of the purchase and sale of the Malaysian Shares is
consummated. From and after the Closing, the Purchaser shall cause each other
member of the Target Company Group to deal with Thermalloy Malaysia, and
Bowthorpe B.V. shall cause Thermalloy Malaysia to deal with the other members of
the Target Company Group, in the ordinary course of business and consistent with
past practice until the Malaysian Purchase Price is delivered to the Sellers. If
such approvals have not been received by the six-month anniversary of the
Closing Date, this Agreement shall terminate with respect to the Malaysian
Shares.
-3-
<PAGE> 13
1.3 ALLOCATION OF PURCHASE PRICE. Schedule 1.3 sets forth the
allocation of the Purchase Price to the Shares of each Target Company and the
Target Assets (as defined in Section 4.10 below). The parties shall prior to
Closing cooperate in good faith to finalize Schedule 1.3. In the event that the
Purchase Price is adjusted pursuant to Sections 1.4 or 1.5, such adjustment
shall be allocated to the purchase price for the Shares of the Target Company to
which such adjustment relates. The parties shall (and shall cause their
respective Affiliates (as defined in Section 2.17) to) report the transaction
contemplated by this Agreement in their respective Returns (as defined in
Section 2.13 below) in a manner consistent with such allocation unless otherwise
required by law.
1.4 POST-CLOSING PURCHASE PRICE CALCULATION. (a) If the Assumed
Liabilities Adjustment as of the Closing Date is greater than the Estimated
Assumed Liabilities Adjustment, then the Sellers shall pay the difference to
Purchaser. If the Assumed Liabilities Adjustment on the Closing Date is less
than the Estimated Assumed Liabilities Adjustment, then Purchaser shall pay the
difference to the Sellers. Any such payment shall be made in immediately
available funds within five business days after the date the Assumed Liabilities
Adjustment is finally determined pursuant to this Section 1.4, and shall be
accompanied by interest on such amount from the Closing Date to the date of
payment at a floating rate equal to the publicly announced base rate of Canadian
Imperial Bank of Commerce.
(b) As promptly as practicable, but in no event more than sixty (60) days,
following the Closing Date, Purchaser shall prepare or cause to be prepared and
shall deliver to the Sellers Representative a reasonably detailed statement
setting forth the Assumed Liabilities Adjustment, which statement shall include
a calculation of (I) the liabilities on the Liabilities Schedule that remain
outstanding as of the Closing Date after giving effect to the payments pursuant
to Section 4.12 and (II) the amount by which (pound)1,313,000 exceeds the amount
of the Target Company Group overdraft facilities paid by Sellers on the day
prior to the Closing Date (the "PURCHASER STATEMENT"). Unless within thirty (30)
days after its receipt of the Purchaser Statement the Sellers Representative
shall deliver to Purchaser a reasonably detailed statement describing its
objections to the Purchaser Statement (a "STATEMENT OF OBJECTION"), the Assumed
Liabilities Adjustment determined in accordance with this clause (b) shall be
final and binding on the parties hereto and the Purchaser Statement shall be the
final statement hereunder (the "CLOSING DATE STATEMENT").
(c) If the Sellers Representative shall deliver to Purchaser a timely
Statement of Objection, Purchaser and the Sellers Representative and their
respective independent accountants shall negotiate in good faith and use
reasonable best efforts to resolve any disputes. If a resolution is reached,
such resolution shall be final and binding on the parties and Purchaser and the
Sellers shall set forth the Assumed Liabilities Adjustment on a mutually
acceptable statement and such statement shall be the Closing Date Statement. If
a final resolution is not reached within fifteen (15) days after the Sellers
Representative has submitted its Statement of Objection, any remaining disputes
shall be resolved by a third firm of independent accountants (the "REVIEWING
ACCOUNTANTS") selected jointly by the parties' independent accounting firms. The
Reviewing Accountants shall be instructed to resolve any matters in dispute as
promptly as practicable, but in no event more than thirty (30) days, and set
forth their resolution in a statement setting forth the Assumed Liabilities
Adjustment (the "ACCOUNTANT
-4-
<PAGE> 14
STATEMENT"). In such event, the determination of the Reviewing Accountants shall
be final and binding on the parties hereto and the Accountant Statement shall be
the Closing Date Statement.
(d) The Sellers and Purchaser each shall pay one-half of the fees and
expenses of the Reviewing Accountants. The Sellers and the Purchaser shall
cooperate with each other and the Reviewing Accountants in connection with the
matters contemplated by this Section 1.4, including Purchaser's preparation of
and Sellers' review of the Closing Date Statement, including by furnishing such
information and access to books, records (including accountants' work papers),
personnel and properties as may be reasonably requested.
(e) The Closing Date Statement shall be prepared in U.S. Dollars in
accordance with United Kingdom Generally Accepted Accounting Principles applied
in a manner consistent with the preparation of the Financial Statements (as
defined in Section 2.5 below).
1.5 INVENTORY PURCHASE PRICE ADJUSTMENT. (a) Prior to the Closing
Date, the Sellers shall determine the value of the inventory of Thermalloy Inc.
at December 31, 1998 (the "NEW 1998 INVENTORY VALUE") and at July 31, 1999 (the
"NEW INVENTORY VALUE") using the new standard costing system but otherwise in
all respects consistent with the historical valuation of such inventory.
(b) For purposes of this Section 1.5, the following terms shall have the
following meanings:
"INVENTORY ADJUSTMENT" is the amount, if any, by which $9,079,000
exceeds the New Inventory Value. Sellers estimate that the Inventory Adjustment
is approximately $836,000.
"INVENTORY DIFFERENCE" is the amount, if any, by which the Inventory
Adjustment exceeds the 1998 Inventory Adjustment.
"INVENTORY REVALUATION AMOUNT" shall be an amount equal to the
quotient determined by dividing (I) the product determined by multiplying (1) 12
by (2) the amount, if any, by which the Inventory Difference exceeds $200,000 by
(II) 7.
"1998 INVENTORY ADJUSTMENT" is the amount, if any, by which $8,099,000
exceeds the New 1998 Inventory Value.
"PROFIT ADJUSTMENT" shall be an amount equal to the product determined
by multiplying (I) 3.0 by (II) the Inventory Revaluation Amount.
(c) As promptly as practicable, but in no event more than five (5) days
following the date of this Agreement, the Sellers Representative shall deliver
to the Purchaser a reasonably detailed statement setting forth the New Inventory
Value, the Inventory Adjustment, the Inventory Difference, the New 1998
Inventory Adjustment, the Profit Adjustment, the Inventory Revaluation Amount
and the 1998 Inventory Adjustment (the "SELLER STATEMENT"). Unless within
fifteen (15) days after its receipt of the Seller Statement the Purchaser shall
deliver to the Sellers Representative a reasonably
-5-
<PAGE> 15
detailed statement describing its objections to the Seller Statement (a
"PURCHASER STATEMENT OF OBJECTION"), the Inventory Adjustment and the Profit
Adjustment determined in accordance with this clause (c) shall be final and
binding on the parties hereto and the Seller Statement shall be the final
statement hereunder (the "CLOSING DATE INVENTORY STATEMENT").
(d) If the Purchaser shall deliver to the Sellers Representative a timely
Purchaser Statement of Objection, Purchaser and the Sellers Representative and
their respective independent accountants shall negotiate in good faith and use
reasonable best efforts to resolve any disputes. If a resolution is reached,
such resolution shall be final and binding on the parties and Purchaser and the
Sellers shall set forth the Inventory Adjustment and the Profit Adjustment on a
mutually acceptable statement and such statement shall be the Closing Date
Inventory Statement. If a final resolution is not reached within five (5) days
after the Purchaser has submitted its Purchaser Statement of Objection, any
remaining disputes shall be resolved by the Reviewing Accountants. The Reviewing
Accountants shall be instructed to resolve any matters in dispute as promptly as
practicable, but in no event more than fifteen (15) days, and set forth their
resolution in a statement setting forth the Inventory Adjustment and the Profit
Adjustment (the "ACCOUNTANT INVENTORY STATEMENT"). In such event, the
determination of the Reviewing Accountants shall be final and binding on the
parties hereto and the Accountant Inventory Statement shall be the Closing Date
Inventory Statement.
(e) The Sellers and Purchaser each shall pay one-half of the fees and
expenses of the Reviewing Accountants. The Sellers and the Purchaser shall
cooperate with each other and the Reviewing Accountants in connection with the
matters contemplated by this Section 1.5, including the Sellers preparation of
and Purchaser's review of the Closing Date Inventory Statement, including by
furnishing such information and access to books, records (including accountants'
work papers), personnel and properties as may be reasonably requested.
(f) The Closing Date Inventory Statement shall be prepared in U.S. Dollars
in accordance with United Kingdom Generally Accepted Accounting Principles
applied in a manner consistent with the preparation of the Financial Statements
(as defined in Section 2.5 below).
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS Except as set forth
in the Disclosure Schedules attached hereto, the Sellers, jointly and severally,
represent and warrant to the Purchaser as of the date hereof as follows:
2.1 AUTHORIZATION, ETC. Each of the Sellers has the corporate power
and authority to execute and deliver this Agreement, along with the Local
Purchase Agreements and the Target Asset Purchase Agreement (as defined in
Section 4.10, together with the Local Purchase Agreements and any instruments of
transfer and similar instruments contemplated herein required to be executed and
delivered by it pursuant to this Agreement in order to consummate the
transactions contemplated hereby, the "ANCILLARY AGREEMENTS"), to which it is or
will be a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the
-6-
<PAGE> 16
Sellers party hereto and thereto, which constitutes all necessary corporate
action on the part of the Sellers for such authorization. This Agreement has
been, and each of the Ancillary Agreements when executed and delivered will be,
duly executed and delivered by the Sellers party hereto and thereto, and
constitute the valid and binding obligations of the Sellers, enforceable against
each of them in accordance with their terms, except as limited by laws affecting
the enforcement of creditors' rights generally or by general equitable
principles. The Purchaser has previously been furnished with complete and
correct copies of the certificate or articles of incorporation or association,
memorandum of association, by-laws and other organizational documents (the
"ORGANIZATIONAL DOCUMENTS") of each Target Company and its respective
subsidiaries (collectively, the "TARGET COMPANY GROUP"). Such Organizational
Documents are in full force and effect, and neither the Sellers nor any member
of the Target Company Group are in violation of any of the provisions of their
respective Organizational Documents. The stock certificate books, the stock
record books and/or other statutory books of each member of the Target Company
Group are correct and complete in all material respects, and all actions
required to be approved by the directors and/or stockholders of each member of
the Target Company Group under applicable law have been so approved, except
where the failure to obtain such approval will not (I) adversely affect the
ability of Purchaser to conduct the Business in all material respects as
currently conducted or (II) result in a liability to such Target Company Group
member.
2.2 CORPORATE STATUS. Each of the Sellers and each member of the
Target Company Group is a company duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, as set forth in Schedule 2.2. Each of the Sellers has all
requisite corporate power and authority to own the Shares owned by it. Each
member of the Target Company Group has all requisite corporate power and
authority to conduct its business and to own or lease its properties, as now
conducted, owned or leased. Each member of the Target Company Group is duly
qualified to do business in each jurisdiction where the character of its
business or the nature of its properties makes such qualification or licensing
necessary, except where the failure to so qualify or be licensed would not
reasonably be expected to have a material adverse effect on the business,
operations, prospects (excluding the prospects of (I) the Target Company Group's
industry in general or (II) the economy in general), condition (financial or
otherwise) or assets ("MATERIAL ADVERSE EFFECT") of the Target Company Group
taken as a whole or adversely affect the ability of the Target Company Group to
conduct the Business (as defined in Section 2.5 below) after the Closing in all
material respects as currently conducted, all of which jurisdictions are set
forth on Schedule 2.2.
2.3 NO CONFLICTS, CONSENTS AND APPROVALS, ETC. (a) The execution,
delivery and performance of this Agreement and the Ancillary Agreements by the
Sellers party hereto and thereto and the consummation of the transactions
contemplated hereby and thereby by the Sellers will not result in (i) any
conflict with the Organizational Documents of the Sellers or of any member of
the Target Company Group, (ii) subject to obtaining the consents referred to in
Section 2.3(b), any breach or violation of or default under, or loss of benefit
pursuant to the terms of, or the acceleration of the performance pursuant to the
terms of, any law, rule, statute, regulation, judgment, order or decree
applicable to any Seller or any member of the Target Company Group, or license,
permit or other
-7-
<PAGE> 17
governmental authorization held by any Seller or any member of the Target
Company Group or any mortgage, lease, agreement, deed of trust, indenture or any
other instrument to which any Seller or any member of the Target Company Group
is a party or by which any of its properties or assets are bound, (iii) the
creation or imposition of any liens, security interests, mortgages, pledges,
rights of third parties, adverse claims, charges or other encumbrances or
matters affecting title ("LIENS") other than Liens created by the Purchaser, or
(iv) result in any suspension, revocation, impairment, forfeiture or non-renewal
of any Company Permit (as defined in Section 2.11).
(b) Except as set forth in Schedule 2.3 and for filings required with
respect to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), no consent, approval or authorization of, notice to or filing
with any governmental authority or third party is required on the part of any
Seller or any member of the Target Company Group in connection with the
execution and delivery of this Agreement or the Ancillary Agreements or the
consummation of the transactions contemplated hereby and thereby, except for
consents of third parties under agreements the failure of which to obtain will
not adversely affect the ability of the Target Company Group to conduct the
Business after the Closing in all material respects as currently conducted.
2.4 THE SHARES. Schedule 2.4 contains a complete and correct
description of the shares of capital stock, including the number of authorized
shares and the number of issued and outstanding shares, of each member of the
Target Company Group. All of such outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable, and are owned
beneficially and of record by the Sellers or members of the Target Company Group
set forth on Schedule 2.4, free and clear of any Liens. None of such outstanding
securities has been issued in violation of any pre-emptive rights, rights of
first refusal or similar rights. There are no outstanding options, warrants,
conversion, exchange or other rights, agreements or understandings of any kind
(other than this Agreement and the Local Purchase Agreements) for the purchase
or acquisition from, or the sale or issuance by, the Sellers or any member of
the Target Company Group of any shares of capital stock, and no authorization
therefor has been given. There are no outstanding obligations, contingent or
other, of any Seller or any member of the Target Company Group to purchase,
redeem or otherwise acquire any shares of Curamik's capital stock. There are no
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating to
voting, dividend or other rights with respect to the capital stock of Curamik.
Upon payment for the Shares at the Closing as contemplated by this Agreement and
the Local Purchase Agreements, the Purchaser will acquire from the Sellers good
title to the Shares, free and clear of all Liens, except Liens arising by or
through the Purchaser or any of its Affiliates. The Target Company Group has no
direct or indirect equity, membership, partnership or similar interests or
investments in any Person (as defined in Section 8.13 below) other than a member
of the Target Company Group. The Sellers have no direct or indirect equity,
membership, partnership or similar interests or investments in any Person
involved in the Business other than the members of the Target Company Group.
2.5 FINANCIAL STATEMENTS AND OTHER INFORMATION. (a) The Sellers have
delivered to the Purchaser complete and correct copies of unaudited balance
sheets and related statements of
-8-
<PAGE> 18
income and cash flows of the Target Company Group on a combined basis for the
1996, 1997 and 1998 fiscal years and the six-month period ended July 4, 1999
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements have been
derived from the books and records of the members of the Target Company Group.
The Financial Statements are complete and correct in all material respects and
present fairly in all material respects and on a consistent basis the financial
condition and results of operations and cash flows of the Target Company Group
on a combined basis as of the dates or for the periods indicated. The audited
Financial Statements delivered pursuant to Section 6.4.6 hereof will be prepared
in accordance with the requirements of the Companies Act 1985 and will not,
except as set forth on the face of such statements, be affected by any
extraordinary item (as that term is used in the Companies Act 1985). The
Financial Statements were prepared in accordance with United Kingdom Generally
Accepted Accounting Principles ("GAAP"), except that the unaudited Financial
Statements do not contain all footnotes required by GAAP. The Sellers have
conducted their thermal management business (the "BUSINESS") solely through the
Target Company Group during the period covered by the Financial Statements and
during such period the Target Company Group conducted no business other than the
Business. The July 4, 1999 balance sheet included in the Financial Statements
does not include any material assets not intended to constitute a part of the
Business after giving effect to the transactions contemplated hereby (other than
assets being transferred to Non-Company Affiliates in accordance with Section
2.5(d) or Section 4.2.1), it being understood that subsequent to July 4, 1999
inventory will be sold, cash used, accounts receivable collected and properties
or assets replaced or disposed of, in each case in the ordinary course of
business and consistent with past practice. The statements of income and cash
flows included in the Financial Statements do not reflect the operations of any
entity or business not intended to constitute a part of the Business after
giving effect to all such transactions and reflect all costs that historically
have been incurred by the Business.
(b) The accounts receivable of the Target Company Group, net of applicable
allowances in accordance with GAAP consistently applied, as set forth on the
latest balance sheet included in the Financial Statements or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business transactions
in the ordinary course of business consistent with past practice; are not
subject to valid defenses, set-offs or counterclaims; and are collectible at the
full recorded amount thereof over the period of usual trade terms (by use of
such company's normal collection methods without resort to litigation or
reference to a collection agency). Each member of the Target Company Group has
fully performed all obligations with respect thereto which it was obligated to
perform to the date hereof. The Sellers have delivered to Purchaser an aging
schedule for the accounts receivable as of July 4, 1999.
(c) The inventory of the Target Company Group is of good, usable and
merchantable quality, in all material respects and does not include obsolete or
discontinued items. (I) All inventory that is finished goods is saleable as
current inventory at the current prices thereof in the ordinary course of
business, (II) all inventory is recorded on the books and records of the Target
Company Group at the lower of cost or market value determined in accordance with
GAAP and (III) no write-down in inventory has been or should have been made
pursuant to GAAP since January 1, 1997.
-9-
<PAGE> 19
(d) Since July 4, 1999, no member of the Target Company Group has paid any
dividend to, or made any distribution or other payment to, or made any payment
on behalf of, or in respect of any liability or other obligation of, any Seller
or any Affiliate of any Seller (other than other members of the Target Company
Group), except for any payments of the type permitted to be made after the date
hereof pursuant to Section 4.2.1.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities
reflected or reserved against in the Financial Statements or reflected in the
Disclosure Schedules, no member of the Target Company Group has any liabilities
or obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, other than liabilities
or obligations incurred since July 4, 1999 in the ordinary course of business
and consistent with past practice (none of which is a liability for breach of
contract, breach of warranty, tort, infringement claim or lawsuit). All vacation
time, vacation pay or severance pay to which any Employee (as defined in Section
2.9 below) is now or will, as a result of any event occurring prior to the
Closing Date, including without limitation by the passage of time, hereinafter
become entitled to receive has been properly accrued, in accordance with United
Kingdom generally accepted accounting principles consistently applied, in the
latest balance sheet included in the Financial Statements and, for accruals
since such date, in the books and records of the Target Company Group.
2.7 ASSETS, PROPERTIES, ETC. (a) The Target Company Group does not own
any real property. Schedule 2.7 lists all items of real property leased by the
Target Company Group (the "LEASED REAL PROPERTY"). The Target Company Group has
(I) valid leasehold interests in and, in the case of Leased Real Property
located in the United Kingdom, good and marketable title to, the Leased Real
Property listed on Schedule 2.7 and (II) legal and beneficial ownership of all
of their respective tangible personal property and assets included in the
balance sheet dated as of July 4, 1999 and all such personal property and assets
acquired since such date (except, in each such case, for (A) properties and
assets disposed of since July 4, 1999 in the ordinary course of business and (B)
title retention arrangements entered into or arising in the ordinary course of
business) (collectively, "TANGIBLE ASSETS"), in each case, free and clear of all
Liens, except as set forth on Schedule 2.7 (which Liens, to the extent they
secure obligations required to be paid or discharged pursuant to Section 4.12
hereof, will be removed on or before the Closing Date (by way of delivery to
Purchaser at the Closing of UCC-3 Termination Statements or other documentation
necessary to remove the Lien upon filing, duly executed by debtor and creditor
and ready for filing in the appropriate jurisdiction) and except for (I) Liens
for taxes and other governmental charges and assessments which are not yet due
and payable or which are being contested in good faith by appropriate
proceedings (for which adequate reserves have been made in the Financial
Statements), (II) Liens of carriers, warehousemen, mechanics and materialmen and
other like Liens arising in the ordinary course of business for sums not yet due
and payable or that are being contested in good faith by appropriate proceedings
(for which adequate reserves have been made in the Financial Statements), (III)
easements, rights of way, title imperfections and restrictions, zoning
ordinances and other similar encumbrances affecting the real property which in
the aggregate do not materially and adversely affect the value of such real
property or materially impair its current use by the Target Company Group, and
(IV) statutory Liens in favor of lessors arising in connection with any property
leased to
-10-
<PAGE> 20
the Target Company Group (collectively, the "PERMITTED LIENS"). Except for the
Target Assets, the Target Company Group owns or has the right to use (pursuant
to valid lease or license arrangements where necessary) all of the rights,
properties and assets used in the conduct of their business as currently
conducted, which rights, properties and assets constitute all the rights,
properties and assets relating to or used or held for use in connection with, or
otherwise material to, the Business during the past 12 months (except inventory
sold, cash used, accounts receivable collected, prepaid expenses realized,
contracts fully performed, properties or assets replaced by equivalent or
superior properties or assets and properties and assets no longer necessary for
the conduct of the Business as currently conducted, in each case in the ordinary
course of business).
(b) To the knowledge of Sellers, there exist no pending condemnation
proceedings, lawsuits or administrative actions of or relating to the Leased
Real Property (or any part thereof) or other matters affecting materially and
adversely the current use or occupancy thereof.
(c) Each lease pursuant to which any member of the Target Company Group
leases any Leased Real Property is listed on Schedule 2.7 (the "LEASES") and is
in full force and effect and, to the knowledge of the Sellers, is enforceable
against the landlord which is party thereto in accordance with its terms. There
exists no default or event of default (or any event which with notice or lapse
of time or both would become a default) on the part of any member of the Target
Company Group under any Leases which, individually or in the aggregate, would
reasonably be expected to adversely affect the ability of the Target Company
Group to conduct the Business after the Closing in all material respects as
currently conducted. None of the Sellers or any member of the Target Company
Group has received any notice of any default under any Lease nor any other
termination notice with respect thereto. There are no pending material disputes
with any landlord under the Leases. With respect to each parcel of Leased Real
Property:
(i) all leased facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in all material
respects in accordance with such approvals and applicable laws, rules and
regulations;
(ii) all leased facilities are supplied with utilities and other
services necessary for the operation of said facilities; and
(iii) neither Sellers nor any member of the Target Company Group has
assigned, transferred, conveyed, leased or otherwise transferred any of its
interest in the Leased Real Property.
Each member of the Target Company Group enjoys peaceful and undisturbed
possession under its respective Lease. The Sellers have delivered to the
Purchaser complete and correct copies of all Leases including all amendments
thereto.
-11-
<PAGE> 21
(d) The Tangible Assets used by the Target Company Group or included in the
Target Assets are in good operating condition and repair, normal wear and tear
excepted, are usable in the ordinary course of business, are adequate and
suitable for the uses to which they are being put and conform in all material
respects to all applicable laws, ordinances, codes, rules, regulations and
authorizations relating to their construction, use and operation. None of the
Target Company Group's Tangible Assets or the Target Assets are in need of
maintenance or repairs other than ordinary routine maintenance and repairs which
are not material, individually or in the aggregate, in nature or cost. The
walls, roof and subterranean portions, if any, of the improvements on each
parcel of the Leased Real Property presently are, and as of the Closing will be,
sound and watertight and presently there is, and as of the Closing will be, no
water, chemical or gaseous seepage, diffusion or other intrusion into said
buildings, including any subterranean portions which would impair the continued
beneficial use of any parcel of the Leased Real Property or the Tangible Assets.
(e) Each U.K. member of the Target Company Group has no liability (whether
actual, contingent or prospective) or obligation in respect of any property
whether freehold (with title in perpetuity), leasehold, licensed or occupied
under an informal or undocumented arrangement in any part of the world (other
than the Leased Real Property), including without limitation any liability or
obligation to:
(i) perform covenants (restrictive or positive) or agreements
affecting or relating to land;
(ii) pay rents, service charges, insurance premiums or other monies or
observe or perform covenants, obligations or conditions contained in any
agreement for lease, lease, license, deed, agreement or other document
ancillary or supplemental to a lease whether or not expressed to be so;
(iii) pay principal, interest or other monies or observe or perform
covenants or agreements contained in any mortgage, charge or other document
creating a security interest affecting any property to which this Section
2.7(e) applies;
(iv) make payments under or otherwise observe or perform any guarantee
or surety (whether as primary or secondary obligor) or indemnity or
otherwise assume any liabilities of any third party by accepting a
leasehold or in any other manner;
(v) make payments under or otherwise observe or perform any agreement
for sale, option or right of pre-emption; or
(vi) make payments under or otherwise observe or perform any building
contract, collateral warranty, duty of care agreement or professional
appointment.
2.8 CONTRACTS. Schedule 2.8 lists all contracts, agreements,
commitments, understandings or arrangements (whether written or oral)
(collectively "CONTRACTS") of the following
-12-
<PAGE> 22
types to which any member of the Target Company Group is a party or by which any
member of the Target Company Group or any of the respective properties of such
members is bound (other than Leases, labor or employment-related agreements and
Intellectual Property licenses, which are listed in Schedules 2.7, 2.9 and 2.10,
respectively):
(i) all Contracts with customers and suppliers disclosed on Schedules
2.18 and 2.19, respectively, and all material Contracts with any other
customers or suppliers, other than in each case Contracts or purchase
orders with respect to the sale by any member of the Target Company Group
of its products or the purchase by any member of the Target Company Group
of materials or supplies that are entered into in the ordinary course of
business;
(ii) all material Contracts with distributors of or for the marketing
of the products of the Target Company Group, other than Contracts with
distributors that are only in the form of customary purchase orders;
(iii) all mortgages, indentures, debentures, security agreements,
notes, loan agreements or guarantees of the obligations of third parties
and other Contracts and instruments relating to the borrowing of money or
the obtaining or extension of credit binding upon any member of the Target
Company Group or with respect to which any assets of the Target Company
Group or the Target Assets are subject;
(iv) all Contracts (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease payments in
excess of $50,000 per annum;
(v) Contracts prohibiting or materially limiting the ability of any
member of the Target Company Group to engage in any business or compete
with any Person;
(vi) Contracts relating to acquisitions or divestitures of any assets
or properties (other than in the ordinary course of business), of any
business, or of any capital stock of or other equity interest in any Person
by any member of the Target Company Group involving continuing indemnity or
other obligations, in any case in excess of $50,000;
(vii) Contracts for capital expenditures or acquisitions in excess of
$50,000 for one project or series of related projects;
(viii) joint venture, partnership and similar Contracts involving a
sharing of profits or expenses (including joint research and development
and joint marketing Contracts);
(ix) Contracts between any member of the Target Company Group and any
Seller or any Affiliate of any Seller (other than any other member of the
Target Company Group) other than Contracts relating to indebtedness that
will be terminated immediately prior to the Closing;
-13-
<PAGE> 23
(x) other Contracts which are not cancelable without penalty or with
notice of 60 days or less or which require payment by any member of the
Target Company Group after the date hereof of more than $50,000 in any one
calendar year; and
(xi) all Contracts, other than the foregoing, which could reasonably
be considered material to the business of the Target Company Group taken as
a whole.
The Sellers have furnished or made available to the Purchaser true and
correct copies of all of the Contracts listed on Schedule 2.8, other than those
described on Schedule 2.8 as not being furnished for the reasons set forth
therein. Each Contract to which any member of the Target Company Group is a
party, whether or not listed on Schedule 2.8 (all Contracts to which any member
of the Target Company Group is a party, whether or not listed on such Schedule,
being hereinafter referred to as "COMPANY CONTRACTS"), is a valid and binding
agreement of the member of the Target Company Group party thereto and, to the
knowledge of the Sellers, as to each other party thereto, and is in full force
and effect, the terms and enforceability of the Company Contracts will be
unaffected by the consummation of the transactions contemplated hereby. No
member of the Target Company Group, nor, to the knowledge of the Sellers, any
other Person is in breach or default under, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under any Company Contract, except
for such defaults and events as would not, individually or in the aggregate,
reasonably be expected to adversely affect the ability of the Target Company
Group to conduct the Business after the Closing in all material respects as
currently conducted. No party has repudiated any provision of a Company
Contract.
2.9 EMPLOYEE BENEFIT MATTERS. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"BENEFIT PLAN" means each plan, program, policy, contract, agreement
or other arrangement (other than any Employment Agreement) providing for
compensation, deferred compensation, retention, change in control, supplemental
retirement, insurance, vacation, health, welfare, severance, termination pay,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind which is maintained in the United States, whether
formal or informal, funded or unfunded, written or oral, including, without
limitation, each "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEPARTMENT" means the U.S. Department of Labor.
"EMPLOYEE" means each current, former or retired employee, officer,
consultant, independent contractor, agent or director of any member of the
Target Company Group, including any Seller Group Employee, but shall not include
any director who is not an employee of the Target Company Group and whose
compensation for services as a director has been borne entirely by any of the
Sellers or one of its Affiliates other than a member of the Target Company
Group.
-14-
<PAGE> 24
"EMPLOYMENT AGREEMENT" means each management, employment, consulting,
non-compete, confidentiality or similar agreement or contract to which any
Employee is a party and pursuant to which any member of the Target Company Group
or any Seller has or may have any liability, contingent or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with any member of the Target Company Group within the meaning of
Section 414(b), (c) or (m) of the Code, or required to be aggregated with any
member of the Target Company Group under Section 414(o) of the Code, or is under
"common control" with any member of the Target Company Group, within the meaning
of Section 4001(a)(14) of ERISA.
"IRS" means the Internal Revenue Service.
"MULTI-EMPLOYER PLAN" means each Target Company Group Benefit Plan
which is a "multi-employer plan" within the meaning of Section 3(37) or
4001(a)(3) of ERISA or any single employer plan which is subject to Sections
4063 and 4064 of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means each Target Company Group Benefit Plan (other
than a MultiEmployer Plan) which is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA.
"SELLER GROUP EMPLOYEE" means any person who is an employee of any of
the Sellers or one of its Affiliates (other than a member of the Target Company
Group) who has been seconded to, and devotes all his working time and attention
to the affairs of, one or more members of the Target Company Group.
"TARGET COMPANY GROUP BENEFIT PLAN" means each Benefit Plan (i) which
is now or has during the last six years been sponsored, maintained, contributed
to, or required to be contributed to, by any member of the Target Company Group
for the benefit of any Employee or their beneficiaries or covered dependents, or
(ii) with respect to which any member of the Target Company Group has or may
have any direct or indirect liability, contingent or otherwise.
"WELFARE PLAN" means each Target Company Group Benefit Plan which is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
2.9.1 EMPLOYMENT AGREEMENTS AND BENEFITS. (a) SCHEDULE. Schedule 2.9
contains a true and complete list of each Target Company Group Benefit Plan and
each Employment Agreement. There is no plan or commitment, whether legally
binding or not, to establish any new
-15-
<PAGE> 25
Target Company Group Benefit Plan, to enter into any Employment Agreement or to
modify or to terminate any Target Company Group Benefit Plan or Employment
Agreement (except to the extent required by law, to conform any such Target
Company Group Benefit Plan to the requirements of any applicable law or as
provided under the terms of any such Target Company Group Benefit Plan,
Employment Agreement or other written contract, in each case as previously
disclosed to Purchaser, or as required by this Agreement), nor has any intention
to do any of the foregoing been communicated to Employees. No event, condition
or circumstance exists which would prevent the unilateral amendment or
termination (without participant consent) of any Target Company Group Benefit
Plan except with regard to those disclosed on Schedule 5.1.
(b) DOCUMENTS. The Sellers have provided, or have caused to be provided, to
Purchaser (I) current, accurate and complete copies of each Target Company Group
Benefit Plan and each Employment Agreement (or, in the case of Employment
Agreements having substantially identical terms, the form of such agreements and
the names of the Employees party thereto), including all amendments thereto, and
trust or funding agreements with respect thereto; (II) the two most recent
annual actuarial valuations, if any, prepared for each Target Company Group
Benefit Plan; (III) the two most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA in connection with each Target
Company Group Benefit Plan or related trust; (IV) any statement of alternative
form of compliance pursuant to Department of Labor Regulation ss. 2520.104-23,
if any, filed for each Target Company Group Benefit Plan which is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA for a select group of
management or highly compensated employees; (V) the most recent determination
letter received from the IRS, if any, for each Target Company Group Benefit Plan
and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (VI) if the Target Company Group Benefit Plan is funded, the
most recent annual and periodic accounting of Target Company Group Benefit Plan
assets; (VII) the most recent summary plan description together with the most
recent summary of material modification, if any, required under ERISA with
respect to each Target Company Group Benefit Plan; and (VIII) all material
written communications to any Employee or Employees relating to any Target
Company Group Benefit Plan.
(c) COMPLIANCE. (i) Each Target Company Group Benefit Plan has been
administered and operated in all material respects in accordance with its terms
and all applicable laws, statutes, orders, rules and regulations, including but
not limited to ERISA and the Code; (II) each Target Company Group Benefit Plan
intended to qualify under Section 401 of the Code is, and since its inception
has been, so qualified and a determination letter has been issued by the IRS to
the effect that each such Target Company Group Benefit Plan is so qualified and
that each trust forming a part of any such Target Company Group Benefit Plan is
exempt from tax pursuant to Section 501(a) of the Code and, to the knowledge of
each Seller, no circumstances exist which would adversely affect such
qualification or exemption; (III) no action or failure to act and no transaction
or holding of any assets by, or with respect to, any Target Company Group
Benefit Plan prior to the Closing has or may subject any member of the Target
Company Group to any Tax (as defined in Section 2.13(o)), penalty or other
liability; (IV) there are no actions, proceedings, arbitrations, suits or claims
pending or, to the knowledge of each Seller, threatened (other than routine
claims for benefits) with respect to any
-16-
<PAGE> 26
Target Company Group Benefit Plan or Employment Agreement; (V) all payments or
contributions required to be made with respect to all periods through the
Closing Date with respect to each Target Company Group Benefit Plan, each
related trust, each collective bargaining agreement or by law shall have been
made prior to the Closing Date; (VI) no Target Company Group Benefit Plan is
under audit or investigation by the IRS, the Department or the PBGC, and, to the
knowledge of each Seller, no such audit or investigation is threatened; (VII) no
liability under any Target Company Group Benefit Plan has been funded nor has
any such obligation been satisfied with the purchase of a contract from an
insurance company as to which notice has been received to the effect that such
insurance company is insolvent or is in rehabilitation or any similar
proceeding; (VIII) the Target Company Group has complied in all material
respects with the provisions of Section 4980B of the Code with respect to any
Target Company Group Benefit Plan which is a group health plan within the
meaning of Section 5001(b)(1) of the Code; (IX) with respect to each Target
Company Group Benefit Plan that is an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or which is a "plan" within the meaning of Section
4975(e) of the Code, there has occurred no transaction which is prohibited by
Section 406 of ERISA or which constitutes a "prohibited transaction" under
Section 4975(c) of the Code; (X) no member of the Target Company Group has any
unfunded liabilities pursuant to any Target Company Group Benefit Plan that is
not intended to be qualified under Section 401(a) of the Code except as
otherwise reflected in the Financial Statements; and (XI) all liabilities of the
Target Company Group for matching contributions under the Seller Savings Plan
for service by the Active Savings participants for all periods through the date
hereof have been accrued on the latest balance sheet included in the Financial
Statements, and all such liabilities arising after the date hereof will be
accrued on the balance sheets to be delivered to Purchaser pursuant to Section
4.2.3 hereof.
(d) NO POST-EMPLOYMENT OBLIGATIONS. No member of the Target Company Group
maintains or contributes to any Target Company Group Benefit Plan, or is
obligated under, any plan, contract, policy or arrangement which provides life
insurance, medical, severance or other welfare benefits to any Employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code.
(e) EFFECT OF TRANSACTION. Except as otherwise expressly contemplated
hereby and thereby, the execution of, and performance of the transactions
contemplated in, this Agreement and the Ancillary Agreements by the Sellers
party hereto and thereto will not (either alone or in conjunction with another
event, such as a termination of employment or other services) (I) result in any
additional payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or an
obligation to fund benefits with respect to any Employee, or (II) result in the
triggering or imposition of any restrictions or limitations on the right of any
member of the Target Company Group or the Purchaser to amend or terminate any
Target Company Group Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. No payment or benefit which will or may be made by any member
of the Target Company Group or the Sellers will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code or will
fail to be deductible by virtue of Sections 280G or 162(m) of the Code. To the
knowledge of the Sellers, no
-17-
<PAGE> 27
officer, key employee or group of employees of the Target Company Group has any
plans to terminate their employment.
(f) EMPLOYMENT MATTERS. Each member of the Target Company Group and each of
the Sellers is in compliance in all material respects with all applicable
federal, state and local laws, rules and regulations (domestic and foreign)
respecting employment, employment practices, labor, terms and conditions of
employment, wages and hours and occupational safety and health, in each case,
with respect to Employees. Neither the Sellers nor any member of the Target
Company Group has instituted any "freeze" of, or delayed or deferred the grant
of, any cost-of-living or other salary adjustments for any of its Employees.
(g) LABOR. No work stoppage, slowdown or labor strike against any member of
the Target Company Group is pending or, to the knowledge of the Sellers,
threatened. No member of the Target Company Group (I) is involved in or, to the
knowledge of the Sellers, threatened with any labor dispute, grievance or
litigation relating to labor matters involving any Employees, including, without
limitation, violation of any federal, state or local labor, safety or employment
laws (domestic or foreign), charges of unfair labor practices or discrimination
complaints; (II) has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act or the Railway Labor Act; or (III) is
presently, nor has been in the past a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no such
agreement or contract is currently being negotiated. No Employees are currently
represented by any labor union for purposes of collective bargaining and no
activities the purpose of which is to achieve such representation of all or some
of such Employees are threatened or ongoing.
2.9.2 ERISA MATTERS. (a) PENSION PLANS. No steps have been taken to
terminate any Pension Plan now maintained or contributed to by any member of the
Target Company Group. No direct or indirect liability(contingent or otherwise)
under Title IV or Section 302 of ERISA or Section 412 of the Code has been, is
or will be incurred by any member of the Target Company Group which has not been
satisfied in full. No event has occurred and no condition exists that could
reasonably be expected to result in the Target Company Group incurring any
liability, direct or indirect, contingent or otherwise, under Title IV or
Section 302 of ERISA, Section 412 of the Code and, with respect to any group
health plan within the meaning of Section 5001(b)(1) of the Code, Section 4980B
of the Code or could constitute grounds for terminating any Pension Plan. No
proceeding has been initiated by the PBGC to terminate any Target Company Group
Benefit Plan that is a Pension Plan or to appoint a trustee to administer any
Target Company Group Benefit Plan that is a Pension Plan. No Target Company
Group Benefit Plan that is a Pension Plan which is subject to Part 3 of Subtitle
B of Title 1 of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived. No member of the Target Company Group, the Sellers
or any ERISA Affiliate has sought or received a waiver of its funding
requirements with respect to any Pension Plan.
(b) MULTI-EMPLOYER PLANS. During the last six years, no member of the
Target Company Group or any of their ERISA Affiliates has contributed to, or
been required to contribute to, or
-18-
<PAGE> 28
otherwise participated in, or in any way directly or indirectly has any
liability with respect to, any Multi-Employer Plan. During the last six years,
no member of the Target Company Group has incurred any withdrawal liability
(within the meaning of Section 4201 of ERISA).
(c) 501(c)(9) TRUST. No Target Company Group Benefit Plan nor Employment
Agreement is funded by a trust described in Section 501(c)(9) of the Code.
(d) PENSION FUNDING. Except with regard to the Seller Savings Plan and the
Salary Continuation Plan of Thermalloy, Inc., no Target Company Group Benefit
Plan is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA.
2.9.3 FOREIGN BENEFIT PLAN MATTERS. The Sellers jointly and severally
represent to the Purchaser with respect to benefit plans for non-United States
employees as set forth in EXHIBIT 2.9. The warranties set out in EXHIBIT 2.9 are
the only warranties given in respect of pension schemes of which any of the
German Employees and of the French Employees and any of the employees of the
Target Companies which are incorporated or organized outside the United States
of America are members or in which those Target Companies participate or have
participated. For the purposes of this Section 2.9.3 "PENSION SCHEME" means any
agreement, arrangement, custom or practice (whether legally enforceable or not
and whether or not approved by the Board of Inland Revenue for the purposes of
Chapter I of Part XIV of the Income and Corporation Taxes Act 1988) to which the
Target Companies or Bowthorpe GmbH or Hellermann France SA contribute or have
contributed (or promise or have promised to provide on a funded or unfunded
basis) for the payment of any pensions, allowances, lump sums or other like
benefits on retirement, death or termination of employment (whether voluntary or
not) or during periods of sickness or disablement. For the purposes of this
Section 2.9.3 "GERMAN EMPLOYEES" means the employees of Bowthorpe GmbH whose
employment is to transfer in connection with this Agreement and "FRENCH
EMPLOYEES" means the employees of Hellermann France SA whose employment is to
transfer in connection with this Agreement.
2.10 INTELLECTUAL PROPERTY. (a) Schedule 2.10 lists all trademark and
service mark registrations, copyright registrations, trade names and patents and
applications for any of the foregoing (I) owned by any member of the Target
Company Group or (II) licensed by any member of the Target Company Group (except
for "off-the-shelf" software and similar property which is readily available),
that, in each case, are necessary to the business or operations of such member
of the Target Company Group as currently conducted. Each member of the Target
Company Group owns or has the right to use all Intellectual Property that is
necessary to the business or operations of such member free and clear of all
Liens, except Permitted Liens. No member of the Target Company Group has
infringed upon or misappropriated any intellectual property rights of third
parties, and none of the Sellers or any member of the Target Company Group has
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that any member of the Target Company Group must license or refrain from using
any intellectual property rights of any third party), and the Sellers have no
knowledge of any infringement on or conflict with any Intellectual Property
owned by any member of the Target Company Group by any other Person. The Sellers
have furnished or made available to the Purchaser
-19-
<PAGE> 29
complete and correct copies of all licenses (other than licenses of standard,
"off-the-shelf" software) under which any member of the Target Company Group has
Intellectual Property licensed to it. Each license of Intellectual Property to
which any member of the Target Company Group is a party is a valid and binding
agreement of the member of the Target Company Group party thereto and, to the
knowledge of the Sellers, as to each other party thereto, and is in full force
and effect and the terms and enforceability thereof will be unaffected by the
consummation of the transactions contemplated hereby. No member of the Target
Company Group nor, to the knowledge of the Sellers, any other party thereto, is
in breach or default under any such license (and no event has occurred which
with notice or lapse of time would constitute a breach or default), except for
such defaults as, individually and in the aggregate, would not reasonably be
expected to adversely affect the ability of the Target Company Group to conduct
the Business after the Closing in all material respects as currently conducted.
No member of the Target Company Group has granted any royalty-bearing or
exclusive licenses of any Intellectual Property to any other Person. Each member
of the Target Company Group has taken such steps as such member has determined
are commercially reasonable to register and maintain (including ensuring that
all payments due in respect thereof are up to date) the registration of the
Intellectual Property owned by such member with the United States Patent and
Trademark Office, United States Copyright Office or such other filing offices,
domestic or foreign, and each member of the Target Company Group has taken such
other actions as such member has determined are commercially reasonable to
ensure full protection of such Intellectual Property, in each case to the extent
material to the Business.
For the purposes of this Agreement, "INTELLECTUAL PROPERTY" means in each
case to the extent necessary to the conduct of the business or operations of the
Target Company Group, (I) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (II) all trademarks, service marks, trade dress, logos, trade names,
corporate names and Internet domain names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (III) all copyrightable works, all copyrights, and all
applications, registrations and renewals in connection therewith, (IV) all mask
works and all applications, registrations and renewals in connection therewith,
(V) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (VI) all computer software
(including data and related documentation), (VII) all other similar proprietary
rights, and (VIII) all copies and tangible embodiments thereof (in whatever form
or medium).
(b) Each member of the Target Company Group has conducted a thorough
inventory and assessment of the hardware, software and embedded microcontrollers
in noncomputer equipment (collectively, the "COMPUTER SYSTEMS") used by the
Target Company Group in the conduct of their business in order to determine
which parts of the Computer Systems are not Y2K Compliant (as defined below) and
to estimate the cost of rendering such Computer Systems Y2K Compliant prior
-20-
<PAGE> 30
to January 1, 2000 or such earlier date on which the Computer Systems may shut
down or may produce incorrect calculations or otherwise malfunction without
becoming totally inoperable. Schedule 2.10 describes all actions taken by each
member of the Target Company Group to render its Computer Systems Y2K Compliant
(the "COMPANY Y2K PLAN"). The actions described on Schedule 2.10 are all those
actions which, to Sellers' knowledge, are necessary to ensure that all computer
hardware and software used in and material to the Business is designed to be Y2K
Compliant. Each member of the Target Company Group has taken reasonable steps to
determine whether the failure of any suppliers or customers with which any
member of the Target Company Group has a material relationship to be Y2K
Compliant would adversely affect the ability of the Target Company Group to
conduct its business as currently conducted and, assuming the consummation of
the Company Y2K Plan, the occurrence of calendar year 2000 will not cause or
will not reasonably be expected to adversely affect the ability of the Target
Company Group to conduct its business as currently conducted. The Computer
Systems are scheduled to be Y2K Compliant by October 30, 1999. For purposes of
this Agreement, "Y2K COMPLIANT" means (i) with respect to Date Data (as defined
below), that such data is in proper format and accurate for all dates in the
twentieth and twenty-first centuries, and (ii) with respect to Date-Sensitive
Systems (as defined below), that each such system accurately processes all Date
Data, including for the twentieth and twenty-first centuries, without loss of
any functionality or performance, including, without limitation, calculating,
comparing, sequencing, storing and displaying such Date Data (including all leap
year considerations), when used as a stand-alone system or in combination with
other software or hardware; "DATE DATA" means any data of any kind that includes
date information or which is otherwise derived from, dependent on or related to
date information; and "DATE-SENSITIVE SYSTEM" means any software, microcode or
hardware system or component, including any electronic or electronically
controlled system or component that processes any Date Data and that is
installed, in development or on order, for internal or external use, or the
provision or operation of which provides a benefit to customers, vendors,
suppliers or any other party.
2.11 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAW. Each member of
the Target Company Group holds all licenses, permits and other governmental
authorizations necessary to conduct its business as currently conducted
(collectively, the "COMPANY PERMITS"), all of which Company Permits are listed
on Schedule 2.11, and no member of the Target Company Group has received any
notice of any violation of any law, statute, rule, regulation, judgment, order,
decree, permit or other governmental authorization or approval, whether federal,
state, local or foreign, applicable to it or to any of its properties, except
for violations which would not, individually or in the aggregate, reasonably be
expected to adversely affect the ability of the Target Company Group to conduct
the Business after the Closing in all material respects as currently conducted.
The business of the Target Company Group is being conducted and since January 1,
1997 has been conducted in compliance in all material respects with all laws,
statutes, rules, regulations, judgments, orders, decrees, permits, concessions,
franchises and other governmental authorizations and approvals, whether federal,
state, local or foreign, applicable to them or to any of their properties.
Schedule 2.11 contains a true and complete list of all federal, state, local and
foreign governmental or judicial consents, orders, decrees and other compliance
agreements relating to any member of the Target Company Group or any of their
respective assets or businesses under which any member of the Target
-21-
<PAGE> 31
Company Group is operating or bound. This Section 2.11 does not relate to
matters with respect to Taxes which are the subject of Section 2.13, to employee
benefit matters which are the subject of Section 2.9 or environmental matters
which are the subject of Section 2.16.
2.12 LITIGATION. There are no judicial or administrative actions,
proceedings, arbitrations or investigations pending or, to the knowledge of the
Sellers, threatened (I) against or affecting any member of the Target Company
Group or their respective businesses or operations or (II) which question the
validity of this Agreement or the Ancillary Agreements or any action taken or to
be taken by the Sellers or any member of the Target Company Group in connection
herewith and therewith. None of the actions, proceedings, arbitrations or
investigations described in Schedule 2.12 or Schedule 2.13 would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Target Company Group taken as a whole or adversely affect the ability of the
Target Company Group to conduct the Business after the Closing in all material
respects as currently conducted.
2.13 TAXES. (a) Since January 1, 1997, (I) all Returns required to be
filed (taking into account any valid extension) with respect to any member of
the Target Company Group (or any affiliated, combined, consolidated, unitary or
similar group ("AFFILIATED GROUP") of which a member of the Target Company Group
is, or since January 1, 1997 was, a member) on or before the Closing Date have
(or by the Closing Date will have) been duly and timely filed (except for
Returns where the failure to so file would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Target Company Group taken as a whole) and all such Returns are true, correct
and complete in all material respects and accurately set forth all items
required to be reflected or included in such Returns by applicable tax laws,
(II) all Taxes required to be paid (taking into account any valid extension)
with respect to any member of the Target Company Group on or before the Closing
Date either directly, as part of the consolidated Return of another taxpayer, or
otherwise, and including any liability for Taxes as a successor-in-interest or
transferee of another entity, have (or by the Closing Date will have) been duly
and timely paid in full (except for Taxes where the failure to so pay would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Target Company Group taken as a whole) and (III) all Taxes
required to be withheld and paid (taking into account any valid extension) by
any member of the Target Company Group in connection with amounts paid or owing
to any employee, independent contractor or creditor on or before the Closing
Date have (or by the Closing Date will have) been duly withheld and paid to the
proper taxing authority or properly set aside in accounts for such purpose
(except for Taxes, where the failure to so withhold would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Target Company Group taken as a whole). The liability for Taxes of each
member of the Target Company Group for all periods or portions thereof ending on
or prior to December 31, 1998, to the extent any such liability was not paid on
or prior to July 4, 1999, has been (or, will on the due date be) paid in full by
the Sellers or provided for on the Sellers' financial statements, without the
use of any assets or revenues attributable to any member of the Target Company
Group. With respect to taxable periods or portions thereof beginning after
December 31, 1998, none of the revenues or assets of any member of the Target
Company Group have been used to pay any Taxes after July 4, 1999, other than
Taxes relating to the Target Company
-22-
<PAGE> 32
Group that are due and payable. All estimated Taxes required to be paid on or
prior to the Closing Date with respect to any member of the Target Company Group
for taxable periods or portions thereof beginning on or after January 1, 1999
have, or prior to the Closing will have, been duly and timely paid in full. The
estimated U.S. federal income Taxes paid with respect to the applicable members
of the Target Company Group for taxable periods beginning on or after January 1,
1999 through May 31, 1999 are an amount equal to $277,000, and were determined
on the basis of such members' annualized actual income for such periods.
(b) No written agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any material Taxes with
respect to any member of the Target Company Group, and no power of attorney with
respect to any such Taxes, has been executed or filed with the IRS or any other
taxing authority. No member of the Target Company Group has requested in writing
any extension of time to file any income or franchise Tax Return, which Return
has not (or by the Closing Date will not have) been filed.
(c) No member of the Target Company Group is or has been at any time since
January 1, 1997 a member of any Affiliated Group for purposes of filing income
Returns.
(d) (I) No Return with respect to any member of the Target Company Group is
currently under audit by any taxing authority, and neither the IRS nor any other
taxing authority is now asserting in writing against any member of the Target
Company Group any material deficiency or claim for additional Taxes or any
material adjustment of Taxes, (II) no taxing authority has indicated in writing
that it intends to conduct an audit or investigation of the Taxes of any member
of the Target Company Group and (III) since January 1, 1997, no claim for Taxes
has been asserted in writing against any member of the Target Company Group by a
taxing authority where such member does not file a Return. All Returns filed by
or on behalf of each member of the Target Company Group for the taxable years
ended on the respective dates set forth on Schedule 2.13 have been examined or
audited by the relevant taxing authority or the statue of limitations with
respect to such Returns has expired. No issue has been raised in writing in any
audit or examination that, by application of similar principles, reasonably can
be expected to result in the assertion of a deficiency for any other year not so
examined or audited.
(e) No member of the Target Company Group is a party to or bound by or has
any obligation under any written Tax sharing agreement or arrangement.
(f) The Purchaser is not required to withhold Taxes pursuant to Section
1445 of the Code from payments made to the Sellers pursuant to this Agreement.
(g) No U.S. member of the Target Company Group has executed any closing
agreement pursuant to Section 7121 of the Code or any similar provision of
state, local or foreign law, in each case, which agreement is currently in
effect.
(h) No U.S. member of the Target Company Group is subject to any private
letter ruling of
-23-
<PAGE> 33
the IRS or comparable rulings of other taxing authorities, in each case, which
ruling or rulings are currently in effect.
(i) No U.S. member of the Target Company Group has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such is defined in
Section 341(f)(4) of the Code) owned by such member of the Target Company Group.
(j) No U.S. member of the Target Company Group has agreed or is required to
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of other tax law, domestic or international, by reason of a change in
accounting method initiated by it or any other relevant party or it has no
knowledge that any taxing authority has proposed any such adjustment or change
in accounting method. No U.S. member of the Target Company Group has any
application pending with any taxing authority anywhere in the world requesting
permission for any changes in accounting methods.
(k) No U.S. member of the Target Company Group will, as a result of the
transaction contemplated by this Agreement, make or become obligated to make any
"parachute payment" as defined in Section 280G of the Code.
(l) Since January 1, 1997, no U.S. member of the Target Company Group or
any member of an Affiliated Group has filed an election pursuant to Rev. Proc.
95-11, 1995-1 C.B. 505 or under Section 1.1502-75(c) of the regulations under
the Code ("TREASURY REGULATIONS") or any similar provision of other Tax law with
respect to a U.S. member of the Target Company Group.
(m) No U.S. member of the Target Company Group owns any interest in any
entity that is treated as a partnership for U.S. federal income tax purposes or
as a pass-through or transparent entity for any U.S. Federal income tax purpose.
(n) No property owned by any U.S. member of the Target Company Group is (A)
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(B) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (C) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code.
(o) If each of the assets other than trading stock of any non-U.S. member
of the Target Company Group were disposed of for a consideration equal to the
book value of that asset in, or adopted for the purpose of, the Financial
Statements, no liability to taxation and no balancing charge (or corresponding
tax in any jurisdiction) in relation to any such asset or pool of assets would
arise (disregarding for this purpose any relief and allowances available to any
non-U.S. member of the Target Company Group other than amounts falling to be
deducted from consideration receivable for the asset in question).
-24-
<PAGE> 34
(p) No liability to taxation would arise on the disposal by any non-U.S.
member of the Target Company Group of any asset other than trading stock
acquired since July 4, 1999 for a consideration equal to the consideration
actually given for the acquisition.
(q) No U.K. member of the Target Company Group has at any time acquired any
assets from another company which was at any relevant time a member of the same
group of companies (as defined in Section 170 TCGA 1992) as that of which the
relevant member of the Target Company Group was also a member or an associated
company as defined in Section 774 ICTA 1988.
(r) No non-U.S. member of the Target Company Group has since January 1,
1999 done or omitted to do, or agreed to do, or permitted to be done, any act as
a result of which there may be made a balancing charge or any disposal value may
be brought into account or any deemed trading receipt may arise under or by
virtue of any provision of CAA 1990 (or any corresponding legislation in the UK
or elsewhere), or there may be a withdrawal or refusal of allowances or a
recovery of excess relief under any such provision.
(s) No U.K. member of the Target Company Group is party to any loan
relationship as defined in Chapter II, Part IV Finance Act 1996 which may give
rise to any debits or credits for the purposes of that Chapter other than in
relation to interest, charges or expenses.
(t) No U.K. member of the Target Company Group is a party to any loan
relationship: (i) where there is a connection between the parties as defined by
Section 87 Finance Act 1996; (II) where there has been or will be a release of
the amounts payable under the relationship; (III) to which the transitional
provisions of Schedule 15 Finance Act 1996 apply or will apply; (IV) to which
paragraphs 11 or 13, Schedule 9 Finance Act 1996 apply or may apply
(transactions not at arm's length); (V) to which Sections 92 (convertible
securities etc), 93 (relationships linked to the value of chargeable assets) or
94 (indexed gilt-edged securities) Finance Act 1996 apply.
(u) Each U.K. member of the Target Company Group accounts for all its loan
relationships (as defined in Section 81 Finance Act 1996) on an authorized
accruals basis and no circumstances exist by virtue of which a balancing debit
or credit may be brought into account in an accounting period ending after
Closing pursuant to Section 89 Finance Act 1996 (inconsistent application of
accounting methods) or Section 90 Finance Act 1996 (changes of accounting
method).
(v) No non-U.S. member of the Target Company Group has at any time been a
party to or otherwise involved in a transaction or series of transactions in
relation to which advisers considered that there was a risk that a non-U.S.
member of the Target Company Group could be liable to taxation under the
provisions of Part XVII ICTA 1988 or as a result of the principles in W.T.
Ramsay Limited v IRC (54 TC 101) or Furniss v Dawson (55 TC 324), as developed
in subsequent cases, or similar rules or concepts outside the UK.
(w) As at April 6, 1999, no U.K. member of the Target Company Group had any
unrelieved surplus advance corporation tax, as defined in The Corporation Tax
(Treatment of Unrelieved Surplus
-25-
<PAGE> 35
Advance Corporation Tax) Regulations 1999 (SI 1999/358) (the "SHADOW ACT
REGULATIONS").
(x) No U.K. member of the Target Company Group has at any time on or after
April 6, 1999 been a member of any group (for the purposes of the Shadow ACT
Regulations) that had another member which had unrelieved surplus advance
corporation (as defined in such Regulations) as at April 6, 1999.
(y) All U.K. members of the Target Company Group are required by The
Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175) (in this
warranty referred to as "the Regulations") to pay corporation tax by
instalments.
(z) For each accounting period of each U.K. member of the Target Company
Group in respect of which the date when corporation tax is due and payable in
accordance with TMA 1970 section 59D(1) has not passed (9 month date) the
Disclosure Letter gives full details of the following:
(i) The dates when payments of corporation tax are treated by the
Regulations as becoming due and payable.
(ii) The amount of such member's "total liability" for the purposes of
the Regulations.
(iii) The amount of corporation tax payable and the amount of
corporation tax paid by each member of the Target Company Group on each
instalment date, in respect of the respective accounting periods.
(iv) Any claim by any member of the Target Company Group for
corporation tax paid by way of instalment to be repaid.
(v) Any interest paid or payable by or to any member of the Target
Company Group in respect of any instalment payment.
(aa) In relation to each accounting period of each U.K. member of the
Target Company Group in respect of which the date when corporation tax is due
and payable in accordance with TMA 1970 section 59D has not passed (9 month
date), each Company has duly paid all corporation tax which has been treated as
becoming due and payable by it pursuant to the Regulations.
(bb) Schedule 2.13 gives full details of the calculation (including
assumptions made) of the "total liability" of each U.K. member of the Target
Company Group for the purposes of the Regulations in relation to any instalment
payments due on or before Completion in respect of the current accounting period
of each member of the Target Company Group.
(cc) Since December 31, 1998, each U.K. member of the Target Company Group
has conducted its business in the ordinary course consistent with past practice
and has not otherwise incurred any liability for Taxes.
-26-
<PAGE> 36
(dd) DEFINITIONS.
(i) "TAXES" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, in each case which are in the
nature of taxes, including without limitation all income taxes, franchise
taxes, withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, excise taxes, real and personal property taxes,
stamp taxes, transfer taxes, workers' compensation taxes, payroll taxes,
capital taxes, net worth taxes, estimated taxes and other similar taxes or
similar governmental charges imposed on or payable to the United States or
any state, county, local or foreign government, subdivision or agency
thereof, together with all interest and penalties and other additions
payable with respect thereto.
(ii) "RETURNS" means any return, report, declaration, form or
statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
2.14 ABSENCE OF CHANGES. Since July 4, 1999, other than in connection
with the transactions contemplated by this Agreement or the Ancillary
Agreements:
(a) there has not been any material adverse change or event in the
business, prospects or financial condition of the Target Company Group taken as
a whole, other than those relating to or as may be a result of (I) the
transactions contemplated by this Agreement or the Ancillary Agreements, (II)
generally applicable economic conditions or (III) the Target Company Group's
industry in general; and
(b) each member of the Target Company Group has conducted its business
in the ordinary course consistent with past practice, and no member of the
Target Company Group has:
(i) purchased, redeemed or otherwise acquired any shares of its
capital stock or issued or agreed to issue any capital stock or other
equity securities (or securities convertible into or exchangeable for
equity securities) or amended any of the terms of any equity securities
outstanding on the date hereof, or declared, set aside or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind);
(ii) incurred any long-term indebtedness for borrowed money or entered
into any guarantee, or incurred any other obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to become due,
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, none of which obligations or
liabilities, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on the Target Company Group taken as a
whole;
(iii) mortgaged, pledged or subjected (or permitted to be subjected)
to any Lien any of its properties or assets, except for Permitted Liens
incurred in the ordinary course of business;
(iv) except as required by GAAP, made any material change in its
accounting methods, principles or practices;
-27-
<PAGE> 37
(v) other than in the ordinary course of business consistent with past
practice, sold, assigned, transferred, conveyed, leased or otherwise
disposed of any material assets of the Target Company Group or any Target
Assets;
(vi) other than in the ordinary course of business consistent with
past practice, increased the benefits payable under or established any
Benefit Plan or in any other fashion increased the compensation payable or
to become payable to any officers or Employees of the Target Company Group,
or entered into any Contract or other binding commitment to effect any of
the foregoing;
(vii) amended the Organizational Documents of any member of the Target
Company Group;
(viii) canceled or forgiven any material debts or claims, except in
the ordinary course of business consistent with past practice;
(ix) entered into any material Contract, lease or license (or series
of related Contracts, leases and licenses) outside the ordinary course of
business;
(x) failed to replenish inventories and supplies in a normal and
customary manner consistent with its prior practice, or made any purchase
commitment in excess of the normal, ordinary and usual requirements of its
business or at any price in excess of the then current market price, or
made any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice;
(xi) made any capital expenditures or capital additions or
improvements, or commitments therefor, in excess of an aggregate of
$50,000;
(xii) delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(xiii) except as permitted by Section 4.2.1, paid, loaned or advanced
any amount to, or sold, transferred or leased any property or asset (real,
personal or mixed, tangible or intangible) to, any Seller or any Affiliate
of any Seller (other than any member of the Target Company Group);
(xiv) entered into any Contract with any Seller or any Affiliate of
any Seller (other than any member of the Target Company Group) other than
Contracts entered into in the ordinary course of business and consistent
with past practice in respect of both type and terms; or
(xv) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
-28-
<PAGE> 38
2.15 INSURANCE. Schedule 2.15 contains a complete and correct list of,
and Sellers have provided to Purchaser summary descriptions of, all insurance
policies covering the members of the Target Company Group and their respective
businesses, assets and properties. The policies of insurance covering the
members of the Target Company Group or any of their respective businesses,
assets or properties cover such risks and contain such policy limits, types of
coverage and deductibles as are customary for companies engaged in businesses
similar to that of the Target Company Group. Such policies are in full force and
effect and all premiums due with respect to all periods to and including the
Closing Date have either been paid or adequate provisions for payment thereof
have been made in the Financial Statements. All members of the Target Company
Group have complied in all material respects with the terms and provisions of
such policies. Neither the Sellers nor any member of the Target Company Group
has received any notice of increase of premiums with respect to, or cancellation
or non-renewal of, any of such insurance policies. There are no pending claims
against such insurance by any member of the Target Company Group as to which the
insurers have denied coverage or otherwise reserved rights. All such policies
are sufficient for compliance in all material respects with all requirements of
applicable law and the terms of leases to which any member of the Target Company
Group is a party.
2.16 ENVIRONMENTAL MATTERS. DEFINITIONS. (a) For purposes of this
Section 2.16, the following capitalized terms shall have the following meanings:
"ENVIRONMENTAL LAW" means any foreign, federal, state, or local law,
statute, rule, regulation, order or other requirement of law relating to (I) the
manufacture, transport, use, treatment, storage, disposal, release or threatened
release of Hazardous Substances (as defined below), or (II) the protection of
human health or the environment (including, without limitation, natural
resources, air, and surface or subsurface land or waters).
"HAZARDOUS SUBSTANCE" means any material or substance that is: (I)
listed, classified or regulated pursuant to or under any applicable
Environmental Law, or (II) any petroleum product or by-product, asbestos, urea
formaldehyde insulation or polychlorinated biphenyls.
(b) ENVIRONMENTAL COMPLIANCE AND CONDITIONS. (I) Each member of the Target
Company Group has been and is currently being operated in compliance in all
material respects with all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations of Environmental Laws and
related orders of any court or other governmental authority;
(ii) There are not any existing, pending or, to the knowledge of the
Sellers, threatened actions, suits, claims, investigations, inquiries or
proceedings by or before any court or any other governmental entity
directed against any member of the Target Company Group that pertain or
relate to (1) any remedial obligations under any applicable Environmental
Law, (2) violations by any member of the Target Company Group of any
Environmental Law, (3) personal injury or property damage claims relating
to a release of chemicals or Hazardous Substances, or (4) response,
removal, or remedial costs under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C.ss. 9601 et seq. the
Resource
-29-
<PAGE> 39
Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., or any
similar state or federal laws;
(iii) With respect to permits and licenses, (1) all licenses, permits,
consents, or other approvals required under Environmental Laws that are
necessary to the operations of any member of the Target Company Group have
been obtained and are in full force and effect and the Sellers are unaware
of any basis for revocation or suspension of any such licenses, permits,
consents or other approvals; (2) to the knowledge of Sellers, no
Environmental Laws impose any obligation upon Purchaser to provide prior
notification to any governmental entity of the transactions contemplated
hereby in order to maintain in full force and effect any permit, license,
consent, or other approval which is necessary to the operations of the
assets or the business; and (3) each member of the Target Company Group has
operated in compliance in all material respects with such permits,
licenses, consents, or approvals, and at the production levels or emission
levels specified in such permits, licenses, consents, or approvals;
(iv) To the knowledge of the Sellers, no portion of any of the Leased
Real Property is listed on the National Priorities List ("NPL") or the
Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS") list under CERCLA, or any similar ranking or
listing under any state law;
(v) To the knowledge of the Sellers, all Hazardous Substances
generated by any member of the Target Company Group has been transported by
carriers, or stored, treated and disposed of by treatment, storage and
disposal facilities, authorized or maintaining valid permits under all
applicable Environmental Laws;
(vi) No Seller or member of the Target Company Group nor, to the
knowledge of the Sellers, any other Person has disposed or released any
Hazardous Substances on, at, or under the Leased Real Property, except in
compliance with laws;
(vii) To the knowledge of the Sellers, no member of the Target Company
Group has any obligation to remediate or has entered into any agreement to
remediate any condition resulting from the release, treatment, storage or
disposal of any Hazardous Substances.
(viii) No facts or circumstances exist which could reasonably be
expected to result in any liability to any member of the Target Company
Group or Purchaser with respect to the current or past business and
operations of the Sellers in connection with (i) any release,
transportation or disposal of any Hazardous Substances, or (ii) any action
taken or omitted that was not in full compliance with or was in violation
of any applicable Environmental Law.
2.17 AFFILIATE TRANSACTIONS. None of the members of the Target Company
Group is a party to any agreement with (A) any of their respective directors or
officers or (B) any Seller or any of its subsidiaries or Affiliates (other than
the members of the Target Company Group). Schedule 2.17 sets forth a list of all
services provided by the Sellers or any of their respective subsidiaries or
Affiliates
-30-
<PAGE> 40
(other than the members of the Target Company Group) to the members of the
Target Company Group and the charges and allocations therefor. There have been
no changes in the intercompany charges or allocations shown on Schedule 2.17
since January 1, 1998. No Seller nor, to the knowledge of the Sellers, any of
their or any member of the Target Company Group's respective officers, directors
or Affiliates, nor any relative or spouse (or relative of such spouse) of any
such officer, director or Affiliate, nor any entity controlled by one of more of
the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than
2% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant
of, any Person which is, or is engaged in business as, a competitor,
licensor, lessor or lessee of the Target Company Group; or
(ii) has any cause of action or other claim whatsoever against, or
owes any amount to, any member of the Target Company Group, except for
claims in the ordinary course of business such as for wages, accrued
vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
For purposes of this Agreement, "AFFILIATE" shall mean, with respect to any
Person, any other Person that, directly or indirectly, controls or is controlled
by or is under common control with such Person. As used in this definition of
"Affiliate", the term "control" and any derivatives thereof mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.
2.18 CUSTOMERS. Schedule 2.18 lists for each of the 1997 and 1998
fiscal years and the six month period ended July 4, 1999 (A) the ten largest
customers of each member of the Target Company Group based on the aggregate
value of goods and services ordered from the Target Company Group by such
customers during each such period and (B) the aggregate amount for which all
such customers were invoiced during each such period. No Seller nor any member
of the Target Company Group has received any notice since January 1, 1998 that
any customer listed on Schedule 2.18 or any other customer of the Business that
ordered more than $1,000,000 of goods and services from the Target Company Group
during the 1998 fiscal year or $500,000 of goods and services from the Target
Company Group during the six months ended July 4, 1999, (I) has ceased or
intends to cease to use the products, goods or services of the Target Company
Group, (II) has substantially reduced or intends to substantially reduce the
Target Company Group's products, goods and services, (III) intends to cancel any
outstanding purchase order or (IV) has sought, since January 1, 1998, or is
seeking, to reduce the price it will pay for the Target Company Group's
products, goods and services, including in each case following consummation of
the transactions contemplated hereby.
2.19 SUPPLIERS; RAW MATERIALS. Schedule 2.19 lists for each of the
1997 and 1998 fiscal years and the six months ended July 4, 1999 (A) the ten
largest suppliers of each member of the Target Company Group based on the
aggregate value of raw materials, supplies, component parts, merchandise and
other goods and services ordered by the Target Company Group from such suppliers
during each such period and (B) the aggregate amount for which all such
suppliers invoiced the Target
-31-
<PAGE> 41
Company Group during each such period. No Seller nor any member of the Target
Company Group has received any notice since January 1, 1999 that any supplier
listed on Schedule 2.19 or any other significant supplier will not (I) sell
supplies, raw materials and other goods to the Target Company Group during the
one year period following the Closing Date on terms and conditions similar to
those used in its current sales to the Target Company Group, subject to general
and customary price increases, or (II) be unable to fulfill any outstanding
purchase order placed by any member of the Target Company Group.
2.20 PRODUCT WARRANTIES. Except for warranties under applicable law,
(A) there are no warranties, express or implied, written or oral, with respect
to the products or services of the Business and (B) there are no pending or, to
the knowledge of the Sellers, threatened claims with respect to any such
warranty, and no member of the Target Company Group has any liability with
respect to any such warranty, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, other than warranty
claims in the ordinary course of business which are not material in amount. No
member of the Target Company Group has outstanding any warranty which allows for
the recovery of consequential damages.
2.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. None of the Sellers, any
member of the Target Company Group, any of their respective officers, employees
or agents, or any other Person acting on their behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other Person
who is or may be in a position to help or hinder the Business (or assist any
member of the Target Company Group in connection with any actual or proposed
transaction relating to the Business) (I) which subjected or might have
subjected any Seller or any member of the Target Company Group to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (II)
which if not given in the past, might have had a Material Adverse Effect on the
Target Company Group taken as a whole, (III) which if not continued in the
future, could reasonably be expected to adversely affect the ability of the
Target Company Group to conduct the Business in all material respects as
currently conducted or subject any member of the Target Company Group to suit or
penalty in any private or governmental litigation or proceeding, (IV) for any of
the purposes described in Section 162(c) of the Code or (V) for the purpose of
establishing or maintaining any concealed fund or concealed bank account.
2.22 BANKING AND AGENCY ARRANGEMENTS. Schedule 2.22 sets forth a list
of: (A) each bank, savings and loan or similar financial institution in which
each member of the Target Company Group has an account or safe deposit box or
other custodial arrangement and the numbers of such accounts or safe deposit
boxes maintained by the Target Company Group and (B) the names of all persons
authorized to draw on each such account or to have access to any such safe
deposit box facility. None of the Sellers or members of the Target Company Group
have outstanding any power of attorneys in respect of the Target Company Group.
2.23 BROKERS. Except for NM Rothschild & Sons, whose fees will be paid
by Bowthorpe plc, all negotiations relating to this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby have been
carried out without the intervention of any Per-
-32-
<PAGE> 42
son acting on behalf of the Sellers or the Target Company Group in such manner
as to give rise to any valid claim against the Purchaser, the Sellers or the
Target Company Group for any brokerage or finder's commission, fee or similar
compensation.
2.24 FOREIGN SUBSIDIARIES. The Sellers jointly and severally represent
and warrant to Purchaser with respect to the matters set forth on EXHIBIT 2.24.
2.25 DISCLOSURE. To the knowledge of Sellers, no representation or
warranty by Sellers contained in this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material
fact required to make the statements contained herein or therein not misleading.
There is no fact (other than matters of a general economic or political nature
which do not affect the Business uniquely) known to Sellers that has not been
disclosed by Sellers to the Purchaser that might reasonably be expected to have
or result in a Material Adverse Effect on the Target Company Group taken as a
whole or adversely affect the ability of the Target Company Group to conduct the
Business after the Closing in all material respects as currently conducted.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Sellers as follows:
3.1 AUTHORIZATION, ETC. The Purchaser has the corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the board of directors of the Purchaser, which constitutes all
necessary corporate action on the part of the Purchaser for such authorization.
This Agreement has been, and each of the Ancillary Agreements when executed and
delivered will be, duly executed and delivered by the Purchaser and constitute
the valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as limited by laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
In the event Purchaser assigns its rights hereunder to one or more Subsidiary
Purchasers:
(i) such Subsidiary Purchaser will have the corporate power and
authority to assume the obligations of Purchaser hereunder, to execute and
deliver the Ancillary Agreements to which it becomes a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby;
(ii) the assumption of the obligations of the Purchaser hereunder, the
execution, delivery and performance by such Subsidiary Purchaser of the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby will have been duly authorized
by all necessary corporate action on the part of such Subsidiary Purchaser;
and
(iii) each of the Ancillary Agreements, when executed and delivered by
such Subsidiary Purchaser, will be duly executed and delivered by such
Subsidiary Purchaser and will constitute,
-33-
<PAGE> 43
together with this Agreement, the valid and binding obligations of such
Subsidiary Purchaser, enforceable against such Subsidiary Purchaser in
accordance with its terms, except as limited by laws affecting the
enforcement of creditors' rights generally or by general equitable
principles.
3.2 CORPORATE STATUS. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to conduct its
business.
3.3 NO CONFLICTS, CONSENTS AND APPROVALS, ETC. (a) Except as set forth
in Schedule 3.3, the execution, delivery and performance of this Agreement and
the Ancillary Agreements by the Purchaser and the consummation by Purchaser of
the transactions contemplated hereby and thereby will not result in (I) any
conflict with the Organizational Documents of the Purchaser, or (II) subject to
obtaining the consents referred to in Section 3.3(b), any breach or violation of
or default under any law, rule, statute, regulation, judgment, order, decree,
license, permit or other governmental authorization or any mortgage, lease,
agreement, deed of trust, indenture or any other instrument to which the
Purchaser is a party or by which the Purchaser or any of its properties or
assets are bound, except in the case of clause (ii) only for such breaches,
violations or defaults which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Purchaser's
ability to consummate the transactions contemplated hereby and thereby.
(b) Except as set forth in Schedule 3.3, no consent, approval or
authorization of, notice to or filing with any governmental authority or third
party is required on the part of the Purchaser in connection with the execution
and delivery of this Agreement or the Ancillary Agreements or the consummation
of the transactions contemplated hereby and thereby, except (I) filings required
with respect to the HSR Act and (II) filings, consents or approvals which, if
not made or obtained, would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Purchaser's ability to
consummate the transactions contemplated hereby and thereby.
3.4 BANK FINANCING COMMITMENT. The Purchaser has delivered to the
Sellers a copy of a commitment letter from Canadian Imperial Bank of Commerce
("CIBC"), pursuant to which CIBC has advised the Purchaser that it is willing,
on the terms and subject to the conditions set forth in such commitment letter,
to provide up to an aggregate of $100 million of senior credit facilities to the
Purchaser upon the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
3.5 LITIGATION. There are no judicial or administrative actions,
proceedings or investigations pending or, to the knowledge of the Purchaser,
threatened, which question the validity of this Agreement or the Ancillary
Agreements or any action taken or to be taken by the Purchaser in connection
herewith and therewith.
3.6 PURCHASE FOR INVESTMENT. The Purchaser is acquiring the Shares for
investment and not with a view toward any resale or distribution thereof except
in compliance with the Securities
-34-
<PAGE> 44
Act of 1933, as amended.
3.7 BROKERS. All negotiations relating to this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby have
been carried out without the intervention of any Person acting on behalf of the
Purchaser in such manner as to give rise to any valid claim against the Sellers
or any member of the Target Company Group for any brokerage or finder's
commission, fee or similar compensation.
3.8 PURCHASER'S INVESTMENT PLAN. The Purchaser has provided, or has
caused to be provided, to Sellers current, accurate and complete copies of the
following materials with respect to the Purchaser's Investment Plan: (I) the
plan document, including all amendments thereto; (II) the most recent annual
report (Series 5500 and all schedules thereto); (III) the most recent
determination letter received from the IRS; and (IV) the most recent summary
plan description together with the most recent summary of material modification,
if any, required under ERISA. The Purchaser's Investment Plan is intended to
qualify under Section 401 of the Code and, since its inception, has been so
qualified. To the knowledge of Purchaser, no circumstances exist which would
adversely affect such qualification.
4. CERTAIN COVENANTS.
4.1 OBLIGATIONS OF BOTH THE PARTIES.
4.1.1 CLOSING CONDITIONS. The parties shall use their
commercially reasonable best efforts to bring about the satisfaction as soon as
practicable of all the conditions contained in Section 6 and to effect the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements by October 2, 1999. Without limiting the generality of the
foregoing, the parties shall apply for and diligently prosecute all applications
for, and shall use their commercially reasonable best efforts promptly to
obtain, such consents, authorizations and approvals from such governmental
authorities and third parties as shall be necessary to permit the consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements.
4.1.2 HART-SCOTT-RODINO ACT AND FOREIGN REGULATORY REQUIREMENTS.
(a) Each of the Sellers and the Purchaser shall (i) prepare and file as promptly
as practicable with the Department of Justice and the Federal Trade Commission
the notification and report form, if any, required for the transactions
contemplated hereunder by the HSR Act, including without limitation, a request
for early termination of the waiting period thereunder, as well as any filings
with, or submissions to, any antitrust, competition or other similar authority
in any foreign jurisdiction where such filing is required in connection with the
transactions contemplated hereby and (ii) respond promptly to inquiries, if any,
from the Federal Trade Commission or the Department of Justice or the antitrust,
competition or comparable governmental authority of any foreign jurisdiction in
connection with such filing. The Purchaser will pay all filing fees in
connection with the filings required by the HSR Act or the antitrust,
competition or comparable laws of any foreign jurisdiction and each party shall
bear the expenses for the preparation of their documentation for the filing.
-35-
<PAGE> 45
(b) Without limiting the generality of the foregoing, the Sellers, on
the one hand, and the Purchaser, on the other hand, agree to cooperate and to
use their respective commercially reasonable best efforts to obtain any
government clearances required to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements (including through compliance with
the HSR Act), to respond to any federal, state or foreign government requests
for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent (an "ORDER")) that restricts, prevents or
prohibits the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. The parties also agree to take any and all of the
following actions to the extent commercially reasonable to obtain the approval
of any governmental authority with jurisdiction over the enforcement of any
applicable laws regarding the transactions contemplated by this Agreement and
the Ancillary Agreements: entering into negotiations; providing information;
substantially complying with any second request for information pursuant to the
HSR Act; or making proposals; entering into and performing agreements or
submitting to judicial or administrative orders. The parties hereto will consult
and cooperate with one another, and consider in good faith the views of one
another, in connection any analyses, appearances, presentations, memoranda,
briefs, arguments, opinions and proposals made or submitted by or on behalf of
any party hereto in connection with proceedings under or relating to the HSR Act
or any other federal, state or foreign antitrust or fair trade law.
Notwithstanding anything to the contrary in this section, none of the Sellers,
Target Company Group or the Purchaser shall be required to take any action that
would reasonably be expected to substantially impair the overall benefits
expected, as of the date hereof, to be realized from the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
4.2 OBLIGATIONS OF THE SELLERS.
4.2.1 CONDUCT OF BUSINESS, ETC. From the date hereof until the
Closing, except (A) for the execution of and the performance under this
Agreement and the Ancillary Agreements, (B) for the effect of the consummation
of the transactions contemplated hereby and thereby, (C) for the performance of
the Sellers' obligations hereunder and thereunder or (D) as otherwise consented
to by the Purchaser in writing, such consent not to be unreasonably withheld or
delayed, the Sellers shall cause each member of the Target Company Group to:
(i) conduct their business in the ordinary course in substantially the
same manner in which it previously has been conducted and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep
available the services of its present officers (other than those officers
disclosed to Purchaser in writing) and significant employees, and preserve
its relationship with customers, suppliers and others having business
dealings with it, to the end that its goodwill and going business shall be
in all material respects unimpaired following the Closing;
(ii) pay accounts payable and other obligations when they become due
and payable in
-36-
<PAGE> 46
the ordinary course of business consistent with prior practice;
(iii) perform in all material respects all of its obligations under
all Company Contracts and other agreements and instruments relating to or
affecting the Business, and comply in all material respects with all laws
applicable to it or the Business;
(iv) not take any action or omit to take any action which act or
omission would result in the inaccuracy of any of its representations and
warranties set forth herein if such representations or warranties were to
be made immediately after the occurrence of such act or omission; and
(v) not otherwise engage in any practice, take any action or enter
into any transaction of the sort described in Section 2.14 above.
From and after the date hereof until the Closing, the Sellers shall not
cause or permit any member of the Target Company Group to pay any liabilities or
obligations other than (A) trade payables and accrued expenses (including
interest on indebtedness for borrowed money and the interest component of
finance lease obligations) to unAffiliated third parties which are included in
the July 4, 1999 balance sheet included in the Financial Statements, (B) trade
payables and accrued expenses (including interest on indebtedness for borrowed
money and the interest component of finance lease obligations) to unAffiliated
third parties incurred subsequent to July 4, 1999 in the ordinary course of
business and consistent with past practice, (C) reimbursement of Sellers' direct
out-of-pocket costs for Seller Group Employees, but not for any allocation of
overhead or similar charge, incurred subsequent to July 4, 1999 in the ordinary
course of business and consistent with past practice, (D) payments to Sellers
and their Affiliates for products supplied to the Target Company Group
subsequent to July 4, 1999 in the ordinary course of business and consistent
with past practice, PROVIDED that the charges for such products are no greater
than charged to unAffiliated third parties, (E) reimbursement of Sellers' direct
out-of-pocket costs for the accounting personnel assisting in the implementation
of the new accounting system in Dallas, but not for any allocation of overhead
or similar charge, incurred subsequent to July 4, 1999 in the ordinary course of
business and consistent with past practice, (F) the Target Company Group's
allocable portion of insurance premiums and employee benefit costs, in each
case, incurred subsequent to July 4, 1999 in the ordinary course of business and
consistent with past practice, (G) payments to Employees and operating expenses
incurred by such persons in the performance of their employment-related duties
and obligations, in each case incurred subsequent to July 4, 1999 in the
ordinary course of business and consistent with past practice, (H) payments
relating to the employment of Robin Johnson incurred subsequent to July 4, 1999
in the ordinary course of business and consistent with past practice, (I) fees
charged by financial institutions and governmental agencies incurred subsequent
to July 4, 1999 in the ordinary course of business and consistent with past
practice, (J) liabilities listed on Schedule 4.2.1 (the "LIABILITIES SCHEDULE")
in accordance with the payment schedule set forth on the Liabilities Schedule,
(K) Taxes relating to any member of the Target Company Group due and payable for
any taxable period (or a portion thereof) beginning on or after January 1, 1999,
and (L) payments in respect of any overdraft facility of any member of the
Target Company Group.
-37-
<PAGE> 47
Notwithstanding anything herein to the contrary, (A) the Target Company
Group may transfer to the Sellers on or before the Closing Date Tax receivables
relating to 1998 Tax refunds in the aggregate amount of (pound)236,000, an
insurance policy in the amount of (pound)263,000 relating to the deferred
compensation plan being retained by Sellers and (pound)194,000 in respect of
Taxes relating to any member of the Target Company Group for any taxable period
(or a portion thereof) beginning on or after January 1, 1999 directly or
indirectly previously paid by the Sellers or any Non-Company Affiliates, (B)
Curamik may pay the (pound)277,000 dividend declared by Curamik in respect of
its 1998 profits, and (c) the members of the Target Company Group may transfer
such amounts to the Sellers or the Non-Company Affiliates, as applicable (which
amounts shall be determined by the Sellers Representative in good faith and
based on the annualized actual 1999 income of the applicable members of the
Target Company Group, as represent each installment due and payable on or prior
to the Closing Date for timely payment of estimated 1999 Combined Income Taxes.
4.2.2 ACCESS AND INFORMATION. Prior to the Closing, the Sellers
shall, and, subject to the rights of the minority stockholders of Curamik, shall
cause each member of the Target Company Group to (A) give to the Purchaser or
its authorized representatives reasonable access at all reasonable times to the
properties, books and records of members of the Target Company Group, (B)
furnish to the Purchaser or its authorized representatives such financial and
operating data and other information with respect to the business and properties
of or otherwise relating to members of the Target Company Group, in each case,
as the Purchaser may reasonably request, PROVIDED that the Purchaser shall not
be entitled to any such access, information or documents for the purposes of
conducting any environmental audit or assessment without the prior written
consent of the Sellers Representative, which consent shall not be unreasonably
withheld, conditioned or delayed, and (C) cooperate with and assist Ernst &
Young LLP in connection with (I) their preparation of the audited financial
statements required by Section 6.4.6 hereof and (II) their review of the
Quarterly Financial Statements required to be delivered by Section 4.2.3 hereof.
All such information and documents obtained by the Purchaser shall be subject to
the terms of the Confidentiality Agreement, dated September 11, 1998, between
the Pur chaser and the Sellers Representative and the Letter Agreement, dated
June 8, 1999, between the Purchaser and the Sellers Representative (together,
the "CONFIDENTIALITY AGREEMENT"). The Purchaser hereby agrees that the
provisions of the Confidentiality Agreement will apply to any properties, books,
records, data, documents or other information relating to the Sellers or the
members of the Target Company Group provided to the Purchaser or its affiliates
or any of their respective advisers or employees pursuant to this Agreement or
the Ancillary Agreements.
4.2.3 UPDATED FINANCIAL STATEMENTS. As soon as available and in
any event within 30 days after the end of each accounting month prior to the
Closing Date, commencing with July 1999, the Sellers shall deliver to Purchaser
the standard monthly reporting packages showing the financial condition and
results of operations of each member of the Target Company Group, which packages
shall be prepared in the ordinary course of business and consistent with past
practice and fairly present the information shown therein. As soon as available
and in any event within 45 days after the end of each fiscal quarter ending
prior to the Closing Date, commencing with the fiscal quarter ending September
26, 1999, the Sellers shall deliver to Purchaser a combined balance sheet and
related combined statements of operations and cash flows of the Target Company
Group for such fiscal quarter
-38-
<PAGE> 48
and the year to date (the "QUARTERLY FINANCIAL STATEMENTS"). All such Quarterly
Financial Statements shall be covered by and conform to the representations and
warranties set forth in Section 2.5 hereof and shall be included in the term
"Financial Statements" for purposes of this Agreement.
4.3 PAYMENT OF TRANSACTION-RELATED TAXES AND EXPENSES. All transfer,
sales, use and similar Taxes and notarial and other transfer related fees
arising out of the sale of the Shares and Target Assets pursuant to this
Agreement and the Ancillary Agreements shall be paid by the Person specified on
Schedule 4.3. Purchaser shall pay the fees and expenses of Ernst & Young LLP in
connection with (I) the preparation of the audited financial statements required
by Section 6.4.6 hereof and (II) the review of the Quarterly Financial
Statements required to be delivered by Section 4.2.3 hereof.
4.4 TAXES.
4.4.1 TERMINATION OF EXISTING TAX SHARING ARRANGEMENTS; TAX
SHARING PAYMENT. (a) As of the Closing Date, all existing tax sharing, group
relief or similar agreements and arrangements in any jurisdiction (other than
any tax sharing agreement or arrangement provided herein) between any member of
the Target Company Group, on the one hand, and any of the Sellers or any
Affiliate of the Sellers other than any member of the Target Company Group (a
"NON-COMPANY AFFILIATE") on the other hand, shall be terminated, and no
additional payments shall be made thereunder. After the Closing, neither any
member of the Target Company Group, the Sellers nor the Non-Company Affiliates
shall have any further rights or liabilities under any such agreements or
arrangements for any taxable period (whether the current year, a future year or
a past year).
(b) (i) With respect to any Combined Income Taxes relating to any member of
the Target Company Group for taxable periods or portions thereof beginning on or
after January 1, 1999 and ending prior to or on the Closing Date (the "1999
COMBINED INCOME TAXES"), such 1999 Combined Income Taxes shall be computed as if
no member of the Target Company Group had been included in any Combined Income
Tax Return which includes any Seller or any Non-Company Affiliate as a member,
and as if, instead, the members (and only such members) of the Target Company
Group eligible to file a Return on a consolidated, combined or unitary basis had
filed a separate Combined Income Tax Return with respect to such 1999 Combined
Income Taxes. Such 1999 Combined Income Taxes shall be computed assuming that
the books of the Target Company Group were closed at the close of business on
December 31, 1998 and the close of business on the Closing Date (except that
deductions (such as depreciation) allowable on a periodic basis and real and
personal property Taxes shall be allocated on a daily basis). For purposes of
such computation, the Sellers Representative shall (or shall cause its
Affiliates to) deliver to the Purchaser a draft of a pro forma Return relating
to the 1999 Combined Income Taxes (the "1999 PRO FORMA RETURN") no later than 60
days prior to the due date (including any valid extension) on which the Combined
Income Tax Return relating to the 1999 Pro Forma Return is required to be filed
with the applicable taxing authority. Unless otherwise provided in this
Agreement, the Combined Income Tax Return for 1999 as filed with the applicable
taxing authorities shall be consistent with the 1999 Pro Forma Return, and the
1999 Pro Forma Return shall not be affected by any amendments to such Combined
Income Tax Return, audit adjustments or claims for refunds. The Purchaser shall
have the right at its own expense to review all work papers and
-39-
<PAGE> 49
procedures used to prepare the 1999 Pro Forma Return. Unless the Purchaser
timely delivers notice of objection as specified in this Section 4.4.1(b), the
1999 Pro Forma Return shall be final and binding on the parties without further
adjustment. If the Purchaser objects to any item on the 1999 Pro Forma Return,
it shall, within 30 days after delivery of such 1999 Pro Forma Return, notify
the Sellers Representative in writing that it so objects, specifying any such
item and stating the factual or legal basis for any such objection. If a notice
of objection shall be duly delivered, disputed items shall be resolved pursuant
to the Tax Dispute Resolution Mechanism (as defined in Section 4.4.7). Upon
resolution of all disputed items, such 1999 Pro Forma Return shall be adjusted
to reflect such resolution and shall be final and binding on the parties without
further adjustment.
(ii) Within five (5) business days after the 1999 Pro Forma Return
becomes final, (A) the Purchaser shall (or shall cause its Affiliates to) pay to
the Sellers designated by the Sellers Representative the excess, if any, of (X)
the 1999 Combined Income Taxes shown on the 1999 Pro Forma Return over (Y) the
sum of $277,000 (which amount is equal to the April 15, 1999 and June 15, 1999
estimated Tax payments with respect to the 1999 Combined Income Taxes made by
the Target Company Group out of its assets or revenues, as properly computed
based on the annualized actual income for 1999 of the applicable members of the
Target Company Group) and any similar Tax payment with respect to 1999 Combined
Income Taxes made after June 15, 1999 by any member of the Target Company Group
out of its assets or revenues (the "1999 TAX") or (B) the Sellers Representative
shall (or shall cause its Affiliates to) pay to the Purchaser the excess, if
any, of (X) the 1999 Tax over (Y) the 1999 Combined Income Taxes shown on the
1999 Pro Forma Return. In addition, the Sellers Representative shall (or shall
cause its Affiliates to) pay to the Purchaser an amount equal to the tax benefit
actually realized by the Sellers and the Non-Company Affiliates by use of the
loss, if any, shown on the 1999 Pro Forma Return, based upon the assumption that
any such loss is the last tax benefit utilized. For avoidance of uncertainty,
notwithstanding anything to the contrary contained herein, the Purchaser shall
not be responsible for any Combined Income Taxes relating or attributable to any
member of the Target Company Group for any period or portion thereof ending on
or prior to the Closing Date (other than the payment of the 1999 Combined Income
Taxes, if any, pursuant to Section 4.4.1(b)).
(c) If the Closing Date occurs after December 31, 1999, provisions similar
to those contained in Section 4.4.1(b) shall be applicable to determine the
Combined Income Taxes attributable to the members of the Target Company Group
for the period beginning on or after January 1, 2000 and ending on or prior to
the closing Date (the "2000 Combined Income Taxes), except that the amount
described in clause (ii)(A)(y) shall equal the sum of all payments with respect
to 2000 Combined Income Taxes made after January 1, 2000 by any member of the
Target Company Group out of its assets or revenues.
4.4.2 PAYMENTS. (a) The applicable Sellers shall indemnify and
hold harmless the Purchaser and its Affiliates from and against, and be
responsible for, any liability for (I) any Stand-alone Taxes (as defined below)
of any member of the Target Company Group for any Pre-1999 Period (as defined
below), (II) any transaction-related Taxes pursuant to Section 4.3 to the extent
set forth on Schedule 4.3 and (III) any Combined Income Taxes (as defined below)
imposed on, asserted against or incurred by any member of the Target Company
Group, including, without limitation, any increase in
-40-
<PAGE> 50
such Combined Income Taxes resulting from any audit or examination of a member
of the Target Company Group. Subject to this Agreement, the Sellers shall also
be responsible for all reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable expenses and fees for attorneys, consultants,
expert witnesses and accountants and expenses reasonably incurred in
prosecution, investigation, remediation, defense or settlement) incurred by the
Purchaser or its Affiliates in connection with the liability for Taxes for which
the Sellers are required to indemnify Purchaser hereunder.
(b) The Purchaser shall indemnify and hold harmless the Sellers and their
respective Affiliates from and against, and shall be responsible for, any
liability for any Taxes (including, without limitation, any Section 338 Taxes
(as defined below) and any transaction-related taxes pursuant to Section 4.3 to
the extent set forth on Schedule 4.3) with respect to any member of the Target
Company Group which are not described as the Sellers' responsibility in the
paragraph (a) of this Section 4.4.2. Subject to this Agreement, the Purchaser
shall also be responsible for all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable expenses and fees for attorneys,
consultants, expert witnesses and accountants and expenses reasonably incurred
in prosecution, investigation, remediation, defense or settlement) incurred by
the Sellers or any Non-Company Affiliate in connection with the liability for
Taxes for which the Purchaser is required to indemnify Sellers hereunder.
(c) For the purposes of Section 4.4, (I) "COMBINED INCOME TAXES" shall mean
(X) any Taxes with respect to any member of the Target Company Group for any
taxable period or portion thereof ending on or prior to the Closing Date for
which such member has been included or is required to be included (at any time
during the periods ending on or before the Closing Date) as a member of an
Affiliated Group of which any of the Sellers or any Non-Company Affiliate is or
was the common parent for the purpose of paying (or filing a Return with respect
to) such Taxes and (Y) any Taxes imposed on, asserted against or incurred by any
member of the Target Company Group under Section 1.1502-6 of the Treasury
Regulations or similar provisions under state or local law as a result of such
member's being a member (at any time on or before the Closing Date) of any
Affiliated Group of which any of the Sellers or any Non-Company Affiliate is or
was the common parent for the purpose of filing a Return or paying Taxes;
PROVIDED, HOWEVER, that Combined Income Taxes shall not include any Section 338
Taxes, (II) "COMBINED INCOME TAX RETURNS" shall mean any Returns relating to any
Combined Income Taxes, (III) "SECTION 338 TAXES" shall mean any Taxes arising
from or attributable to any election made under Section 338 of the Code (or the
comparable provisions of other Tax law) with respect to any member of the Target
Company Group in connection with the Purchaser's acquisition of the Shares
pursuant to this Agreement or the Local Purchase Agreements, (IV) "STAND-ALONE
TAXES" shall mean Taxes other than Section 338 Taxes and Combined Income Taxes,
and (V) "PRE 1999 PERIOD" means, with respect to Stand-alone Taxes, a taxable
period or portion thereof that ends on or prior to December 31, 1998. If a
taxable period begins on or prior to December 31, 1998 and ends after December
31, 1998, then the portion of the taxable period that ends on (and including)
December 31, 1998 shall constitute a Pre 1999 Period. For purposes of clause (v)
of this Section 4.4.2(c), Taxes attributable to a Pre 1999 Period shall be
determined on the basis of an interim closing of the books as of the close of
business on December 31, 1998, except that deductions (such as depreciation)
allowable on a periodic basis and real and personal property Taxes shall be
allocated on
-41-
<PAGE> 51
a daily basis over the taxable year.
(d) Notwithstanding anything to the contrary contained in this Agreement,
this Section 4.4.2 shall be the exclusive provision governing the responsibility
of the Sellers relating to indemnification with respect to the payment of Taxes
for any taxable period (or a portion thereof) ending on or before the Closing
Date.
4.4.3 RETURNS. (a) The Sellers Representative and the Purchaser
shall cause each member of the Target Company Group, to the extent permitted by
law, to join, for all taxable periods of such member of the Target Company Group
ending on or prior to the Closing Date, in any Combined Income Tax Return with
respect to which such member of the Target Company Group filed such a Combined
Income Tax Return for the most recent taxable period prior to the Closing Date
and is eligible to file such a Combined Income Tax Return for such taxable
periods ending on or prior to the Closing Date. The income, gains, losses,
deductions and credits of such member of the Target Company Group for periods
ending on or prior to the Closing Date shall be included in such Combined Income
Tax Return where applicable. The Sellers shall file, or cause to be filed, all
Combined Income Tax Returns relating to any member of the Target Company Group
for any taxable period ending on or before the Closing Date, all Returns
relating to the Stand-alone Taxes of any member of the Target Company Group for
any Pre 1999 Period and all other Returns of any member of the Target Company
Group required to be filed (taking into account any valid extension) on or prior
to the Closing Date. Any such Returns for which the Sellers are responsible
shall, insofar as they relate to items or transactions for periods ending on or
prior to the Closing Date and to the extent permitted by applicable Tax law, be
filed on a basis consistent with the past custom and practice of the applicable
member of the Target Company Group.
(b) (i) The Purchaser shall file, or cause to be filed, all Returns
(including, without limitation, any Return for any taxable period beginning
on or after January 1, 1999 but no later than the Closing Date, (such
Return, a "STRADDLE PERIOD RETURN")) relating to the business or assets of
any member of the Target Company Group other than those Returns described
in Section 4.4.3(a). The income, gains, losses, deductions and credits of
the Target Company Group, other than those required to be included in the
Returns described in Section 4.4.3(a), shall be included in the Returns
described in the immediately preceding sentence. Any such Returns for which
the Purchaser is responsible shall, insofar as they relate to items or
transactions for periods ending on or prior to the Closing Date and to the
extent permitted by applicable Tax law, be filed on a basis consistent with
the past custom and practice of the applicable member of the Target Company
Group.
(ii) With respect to any Straddle Period Return, the Purchaser shall
provide to the Sellers Representative a draft of such Straddle Period
Return and Tax information (including, without limitation, work papers and
schedules) for review of such Straddle Period Return in a timely manner no
later than 60 days prior to the due date (taking into account valid
extensions) of filing such Straddle Period Return. The Sellers
Representative shall have the right at its expense to review all work
papers and procedures used to prepare each such draft Straddle
-42-
<PAGE> 52
Period Return. Unless the Sellers Representative timely objects as
specified in this Section 4.4.3(b)(ii), each such draft Straddle Period
Return shall be final and binding on the parties without further
adjustment. If the Sellers Representative objects to any item on any such
draft Straddle Period Return, it shall, within 30 days after delivery of
such draft Straddle Period Return, notify the Purchaser in writing that it
so objects, specifying any such item and stating the factual or legal basis
for any such objection. If a notice of objection shall be duly delivered,
any disputed item shall be resolved pursuant to the Tax Dispute Resolution
Mechanism. Upon resolution of all disputed items, such Straddle Period
Return shall be adjusted to reflect such resolution and shall be final and
binding on the parties without further adjustment.
(iii) Notwithstanding the provisions of Section 4.4.2(a), (X) if the
Purchaser shall fail to provide notice to the Sellers Representative with
respect to a Return or to an audit relating to a Tax as provided in Section
4.4.6, the Sellers shall not be required to pay to the Purchaser pursuant
to Section 4.4.2(a) any portion of such Tax to the extent that such failure
to give notice results in a lack of actual notice to the Sellers and the
Sellers or any Non-Company Affiliates are materially prejudiced as a result
of such failure or (Y) if the Purchaser shall file any Straddle Period
Return (including amended Returns) described in Section 4.4.3(b)(ii)
without complying with the provisions of Section 4.4.3(b)(ii) or any Return
(including amended Returns) relating to any Tax described as being the
responsibility of the Sellers in Section 4.4.2(a), the Sellers shall not be
required to pay to the Purchaser pursuant to Section 4.4.2(a) any portion
of such Taxes to the extent that the Sellers or any Non-Company Affiliates
are materially prejudiced as a result of such failure to comply (in each
case, except to the extent such failure was caused by the Sellers or any
Non-Company Affiliates).
(c) (i) With respect to 1999 Combined Income Tax Returns, the Sellers
shall provide the Purchaser a draft of the portion of the schedules,
workpapers and attachments, if any, for all such Returns relating to the
applicable members of the Target Company Group (the "ATTACHED TAX
INFORMATION") for review of Attached Tax Information in a timely manner no
later than 60 days prior to the due date (taking into account valid
extensions) for filing the 1999 Combined Income Tax Returns. The Sellers
may redact any portion of the Attached Tax Information which does not
relate to any member of the Target Company Group. The Purchaser shall have
the right at its expense to review all workpapers and procedures used to
prepare each such draft Attached Tax Information. Unless the Purchaser
timely objects as specified in this Section 4.4.3(c)(i), each such draft
Attached Tax Information shall be final and binding on the parties without
further adjustment. If the Purchaser objects to any item on any such draft
Attached Tax Information, it shall, within 30 days after delivery of such
draft Attached Tax Information, notify the Sellers Representative in
writing that it so objects, specifying any such item and stating the
factual or legal basis for any such objection. If a notice of objection
shall be duly delivered, any disputed item shall be resolved pursuant to
the Tax Dispute Resolution Mechanism. Upon resolution of all disputed
items, such Attached Tax Information shall be adjusted to reflect the
resolution and shall be final and binding on the parties without further
adjustment.
-43-
<PAGE> 53
(ii) Notwithstanding the provisions of Section 4.4.2(b), (x) if the
Sellers Representative shall fail to provide notice to the Purchaser with
respect to a Return or to an audit relating to a Tax as provided in Section
4.4.6, the Purchaser shall not be required to pay to the applicable Sellers
pursuant to Section 4.4.2(b) any portion of such Tax to the extent the
failure to give notice results in a lack of actual notice to the Purchaser
and the Purchaser, the members of the Target Company Group or their
Affiliates are materially prejudiced as a result of such failure or (y) if
the Sellers Representative shall file any Attached Tax Information
(including amended Attached Tax Information) referred to in Section
4.4.3(c)(i) without complying with the provisions of Section 4.4.3(c)(i) or
any Return (including amended Returns) relating to any Tax described as
being the responsibility of the Purchaser in Section 4.4.2(b), the
Purchaser shall not be required to pay to the applicable Sellers pursuant
to Section 4.4.2(b) any portion of such Taxes to the extent the Purchaser,
the members of the Target Company Group or their Affiliates are materially
prejudiced as a result of such failure to comply (in each case, except to
the extent such failure was caused by the Purchaser any member of the
Target Company Group or any member of their Affiliates).
4.4.4 AMENDMENT OF RETURNS. Unless otherwise required by law, the
Sellers shall not (and shall not permit any Non-Company Affiliate to) amend any
Return with respect to any member of the Target Company Group for any taxable
period (including a portion thereof) ending on or prior to the Closing Date, in
a way that would reasonably be expected to have an adverse effect on any Tax
liability or obligation of any member of the Target Company Group without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed. Unless otherwise required by law, the
Purchaser shall not (and shall not permit any member of the Target Company Group
or any of its other Affiliates to) amend any Return with respect to any member
of the Target Company Group for any taxable period (including a portion thereof)
ending on or prior to the Closing Date, in a way that would reasonably be
expected to have an adverse effect on any Tax liability or obligation of any
Seller or any Non-Company Affiliate without the prior written consent of the
Sellers Representative, which consent shall not be unreasonably withheld,
conditioned or delayed. Sellers and Purchaser shall provide each other with
copies of any schedules, workpapers and attachments, if any, for such amended
Returns (other than any Combined Income Tax Return) or, in the case of a
Combined Income Tax Return, such amended Attached Tax Information, if any, at
least 30 days prior to the filing thereof.
4.4.5 REFUNDS. The Sellers or the Non-Company Affiliates shall be
entitled to retain (or shall be entitled to receive immediate payment from the
Purchaser of) any refund or credit with respect to Taxes (plus any interest
received with respect thereto) (including, without limitation, the refund of the
remaining Tax receivable described in the last sentence of Section 4.2.1) from
the applicable taxing authorities relating to any member of the Target Company
Group that are described as being the responsibility of the Sellers in Section
4.4.2(a), and (b) the Purchaser and the Target Company Group shall be entitled
to retain (or shall be entitled to receive immediate payment from the Sellers
of) any refund or credit with respect to Taxes (plus any interest received with
respect thereto) from the applicable taxing authorities relating to any member
of the Target Company Group that are not described as being the right of the
Sellers or the Non-Company Affiliates in clause (a) of this
-44-
<PAGE> 54
Section 4.4.5. Any payments made by Purchaser or the Sellers, as the case may
be, under this Section 4.4.5 shall be net of any Tax cost to Purchaser or its
Affiliates or the Sellers or the Non-Company Affiliates, as the case may be,
attributable to the receipt of such Refund, taking into account the
deductibility of state and local taxes for other income Tax purposes.
Notwithstanding the foregoing, no refunds shall be paid to the Sellers that
arise as a result of a carryback of a tax attribute from a taxable period ending
after the Closing Date to a taxable period ending on or before the Closing Date,
except to the extent Taxes of any Seller or any Non-Company Affiliate are
increased as a result of such carryback.
4.4.6 AUDITS, ETC. Each of the Purchaser and the Sellers
Representative shall promptly (and shall cause their respective Affiliates to)
notify the other in writing within 10 business days from receipt of notice of
any pending or threatened Tax audits or assessments of any member of the Target
Company Group relating to any taxable period (or a portion thereof) ending on or
prior to the Closing Date. The Sellers shall have the right to represent the
interests of the Target Company Group in any Tax audit or administrative or
court proceeding to the extent relating to Taxes that are described as being the
responsibility of the Sellers in Section 4.4.2(a), and to employ counsel of
their choice at their expense; PROVIDED, HOWEVER, that the Purchaser and the
Sellers shall each have the right to consult with the other regarding any Tax
proceeding relating to any taxable period beginning before but ending after
December 31, 1998; and PROVIDED, FURTHER, that any settlement or other
disposition of any such Tax proceeding that may adversely affect the Tax
liability of any member of the Target Company Group in an amount, individually
or in the aggregate, of $10,000 or more for any periods after the Closing Date
or would result in an indemnity payment by Purchaser to the Sellers pursuant to
Section 4.4.2(b) may be made subject to the consent of Purchaser, which consent
shall not be unreasonably withheld, conditioned or delayed. The Purchaser shall
have the right to represent the interests of the Target Company Group in any
other Tax audit or administrative or court proceeding not described as being the
right of the Sellers under this Section 4.4.6 and to employ counsel of its
choice at its expense; PROVIDED, HOWEVER, that any settlement or other
disposition that may adversely affect any obligation of Sellers as set forth in
Section 4.4.2(a) in an amount, individually or in the aggregate, of $10,000 or
more or would result in an indemnity payment by the Sellers to the Purchaser
pursuant to Section 4.4.2(a) may be made subject to the consent of the Sellers
Representative, which consent shall not be unreasonably withheld, conditioned or
delayed.
4.4.7 THE TAX DISPUTE RESOLUTION MECHANISM. Wherever in this
Agreement it shall be provided that a dispute shall be resolved pursuant to the
"TAX DISPUTE RESOLUTION MECHANISM", such dispute shall be resolved as follows:
(A) the parties will in good faith attempt to negotiate a prompt settlement of
the dispute; (B) if the parties are unable to negotiate a resolution of the
dispute within 10 business days, the dispute will be submitted to a firm of
independent accountants of nationally recognized standing reasonably
satisfactory to the Purchaser and the Sellers Representative (or, if the
Purchaser and the Sellers Representative do not agree on such a firm, then a
firm chosen by the Arbitration and Mediation Committee of the New York Society
of Certified Public Accountants) (the "TAX DISPUTE ACCOUNTANTS"); (C) the
parties will present their arguments and submit the proposed amount of each item
in dispute to the Tax Dispute Accountants within 10 business days after
submission of the dispute to the Tax Dispute Accountants; (D) the Tax Dispute
Accountants, whose decision shall
-45-
<PAGE> 55
be final, conclusive and binding on the parties, shall resolve the dispute, in a
fair and equitable manner and in accordance with applicable Tax law and the
provisions of this Agreement, by selecting, for each item in dispute, the
proposed amount for such item submitted by one party or the other party within
10 business days after the parties have presented their arguments to the Tax
Dispute Accountants; (E) notwithstanding any other provision of this Agreement,
any payment to be made as a result of the resolution of a dispute shall be made,
and any other action to be taken as a result of the resolution of a dispute
shall be taken, on or before the later of (I) the date on which such payment or
action would otherwise be required or (II) the third business day following the
date on which the dispute is resolved (in the case of a dispute resolved by the
Tax Dispute Accountants, such date being the date on which the parties receive
written notice from the Tax Dispute Accountants of their resolution); PROVIDED,
that if a dispute with respect to an item in a Return shall not be resolved on
or before the date that is three business days prior to the latest date on which
such Return may be filed under applicable Tax law, then the party having the
responsibility for filing such Return pursuant to Section 4.4.3 shall file such
Return reflecting all disputed items that have been resolved in the manner so
resolved, and reflecting all unresolved disputed items in the manner proposed by
such party, and shall, if necessary, upon the resolution of all such unresolved
disputed items, file an amended Return reflecting the resolution thereof in the
manner so resolved; and (F) the fees and expenses of the Tax Dispute Accountants
in resolving a dispute will be borne equally by the Purchaser and the applicable
Seller.
4.4.8 COOPERATION ON TAX MATTERS. (a) The Purchaser and the
Sellers shall (and shall cause their respective Affiliates to) cooperate, with
respect to the preparation or filing of any Return referred to in Section
4.4.1(b) or 4.4.3 and any Tax audit or administrative or court proceeding
referred to in Section 4.4.6. Such cooperation shall include causing the
appropriate officer to sign any such Return, executing of the applicable power
of attorney, providing such information (including access to books and records)
relating to any member of the Target Company Group as is reasonably necessary
for the preparation or filing of any such Return or the preparation of any such
audit, proceeding, prosecution or defense and making personnel available at and
for reasonable times, including, without limitation, to prepare responses to any
taxing authority's requests for information, PROVIDED that the foregoing shall
be done in a manner so as not to interfere unreasonably with the conduct of the
business of the parties or their respective Affiliates.
(b) Each of the Purchaser and the Sellers agrees to retain or cause to be
retained all books, records, Returns, schedules, documents, work papers and
other material items of information relating to Taxes with respect to any member
of the Target Company Group for any period (or a portion thereof) ending on or
prior to the Closing Date for the longer of (I) the seven-year period beginning
on the Closing Date or (II) the full period of the applicable statute of
limitations, including any extension thereof, and to abide by all record
retention agreements entered into with any taxing authority. Each of the
Purchaser and the Sellers agrees to give each other reasonable notice prior to
transferring, discarding or destroying any such materials relating to Taxes with
respect to any member of the Target Company Group, and, if the other party so
requests, to allow the other party to take possession of such materials at its
expense.
4.4.9 CONDUCT OF TAX AFFAIRS ON THE CLOSING DATE. The Purchaser
shall cause
-46-
<PAGE> 56
each member of the Target Company Group to carry on its business on the Closing
Date following the conclusion of the Closing in the ordinary course.
4.5 PUBLICITY. No press release or public announcement related to this
Agreement or the Ancillary Agreements or the transactions contemplated hereby
and thereby shall be issued or made without the joint approval of the Sellers
Representative, on the one hand, and the Purchaser on the other hand, unless
required by law or London Stock Exchange Limited, the United Kingdom Panel on
Mergers and Acquisitions or Nasdaq National Market rule, in which case the
Sellers and the Purchaser shall have the right to review such press release or
announcement prior to publication and, where practicable, agree to the form and
wording of such release or announcement. Notwithstanding the foregoing, (i)
Sellers and Purchaser agree that a press release, in substantially the form of
Exhibit 4.5, will be released upon execution of this Agreement, and (ii) Sellers
understand and agree that Purchaser will disclose this transaction in the
Schedules 14D-1 and 14D-9 and/or proxy statement filed in connection with the
proposed acquisition of Purchaser by a private investment firm. Purchaser will
provide counsel for the Sellers with drafts of the Schedules 14D-1 and 14D-9
and/or proxy statement prior to their being filed with the Securities and
Exchange Commission, and will, to the extent practicable, give consideration to
any comments of such counsel, it being understood that there are strict
deadlines for the filing of such Schedules.
4.6 MODIFICATION OF DISCLOSURE SCHEDULES. At any time prior to ten
business days before the Closing Date, the Sellers may amend or supplement the
schedules attached to this Agreement with respect to any matter that, if
existing or occurring at or prior to the Closing Date, would have been required
to be set forth or described in such a schedule or that is necessary to complete
or correct any information in any representation or warranty contained in
Section 2. No supplement or amendment of a schedule made pursuant to this
Section shall be deemed to cure any breach of, affect or otherwise diminish any
representation or warranty made in this Agreement unless Purchaser specifically
agrees thereto in writing.
4.7 CONTACT WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS. The Purchaser
(and all of its agents and Affiliates and any employees, directors or officers
thereof) shall contact and communicate with the employees, customers, suppliers
and licensors of any member of the Target Company Group in connection with the
transactions contemplated hereby only with the prior written consent of
Bowthorpe plc, which consent shall not be unreasonably withheld or delayed but
may be conditioned upon an officer of Bowthorpe plc or one of its Affiliates
being present.
4.8 CREDIT SUPPORT ARRANGEMENTS. The Purchaser acknowledges that in
the course of the conduct by the members of the Target Company Group of their
business, the Sellers and their respective subsidiaries (other than any member
of the Target Company Group) have entered into various arrangements (a) in which
guarantees (including of performance under contracts, leases or agreements),
letters of credit or other credit arrangements, including surety and performance
bonds, were issued by or for the account of the Sellers and their respective
subsidiaries (other than any member of the Target Company Group) or (b) in which
the Sellers and their respective subsidiaries (other than members of the Target
Company Group) are the primary or secondary obligors on debt instruments or
financing or
-47-
<PAGE> 57
other contracts or agreements, in any case to support or facilitate business
transactions by such Target Company and its subsidiary. Such arrangements are
referred to herein as the "CREDIT SUPPORT ARRANGEMENTS". Schedule 4.8 hereto
lists all Credit Support Arrangements in effect on the date of this Agreement.
Sellers will update Schedule 4.8 from time to time as new Credit Support
Arrangements are entered into and existing Credit Support Arrangements expire,
it being understood and agreed that Sellers will not, and will not permit their
Affiliates to, enter into new Credit Support Arrangements without the prior
consent of the Purchaser, such consent not to be unreasonably withheld or
delayed. Prior to the Closing, the Purchaser shall (i) obtain replacement Credit
Support Arrangements or (ii) repay, or cause the repayment of, all debt and
other obligations to which such Credit Support Arrangements relate (and cause
the cancellation of such Credit Support Arrangements) or arrange for itself or
one of its subsidiaries to be substituted as the obligor thereof. Following the
Closing, the Purchaser shall indemnify the Sellers and their respective
Affiliates from and against any loss, obligations, cost or expense (including
reasonable attorneys' fees) they may suffer arising out of the Credit Support
Arrangements, except to the extent such loss, obligation, cost or expense was
caused by Sellers' actions or omissions. Notwithstanding anything to the
contrary herein, the Sellers shall retain all liability for any obligations of
Thermalloy, Inc. and Thermalloy Investment Company to permit Larry Tucker's
continued participation in the Salary Continuation Plan or a plan that is
substantially equivalent in all material respects (which obligations are set
forth in the expired Employment Agreement, dated September 22, 1998, between
Thermalloy, Inc. and Larry Tucker, certain provisions of which survive
expiration by express incorporation into the Manufacturer's Representative
Agreement, dated August 1, 1996, between Thermalloy, Inc. and Larry Tucker).
4.9 INTERCOMPANY ACCOUNTS. All intercompany accounts between any
member of the Target Company Group, on the one hand, and any Seller or any
Non-Company Affiliate, on the other hand, other than (I) those arising after
July 4, 1999 in respect of amounts permitted under clauses (c), (d), (e), (f),
(g), (h) or (i) of the second paragraph of Section 4.2.1 hereof, (II) those
arising on or after January 1, 1999 in respect of Taxes, including the
obligation to pay (pound)194,000 referred to in the third paragraph of Section
4.2.1 hereof and (III) the dividend of (pound)277,000 referred to in the last
sentence of this Section 4.9, shall be cancelled as of the close of business on
the business day immediately preceding the Closing Date. Where any cancellation
contemplated by this Section 4.9 is either unlawful or gives rise to a Tax
liability in a member of the Target Company Group, the parties shall take such
steps as are required to put the parties in, to the nearest extent possible, the
position they would have been in had the cancellation not been unlawful or such
Tax liability not arisen. Sellers shall, and shall cause the Target Company
Group to, cancel all dividends declared by any member of the Target Company
Group after January 1, 1999 but unpaid at July 4, 1999, including the
(pound)560,000 dividend payable included on the July 4, 1999 balance sheet
included in the Financial Statements but excluding the dividend of
(pound)277,000 declared by Curamik in respect of its 1998 profits. Sellers shall
assume, pursuant to an assignment and assumption agreement reasonably acceptable
to Purchaser, the $523,000 deferred compensation liability for retired employees
and the (pound)822,000 liability for 1998 Taxes, which Taxes Sellers have agreed
to pay pursuant to Section 4.4.
4.10 TARGET ASSETS. On or prior to the Closing Date, Bowthorpe GmbH
shall enter into an asset purchase agreement, substantially in the form of
EXHIBIT 4.10 (the "TARGET ASSET PURCHASE
-48-
<PAGE> 58
AGREEMENT"), for the sale of certain assets owned by Bowthorpe GmbH used in the
business and operations of ElBoMec and Redpoint set forth on Schedule 4.10 (the
"TARGET ASSETS").
4.11 NO SOLICITATION. (a) None of the Sellers nor any of their
Affiliates, whether acting directly or through any authorized agent, attorney or
representative, shall, from the date hereof through the Closing Date (the
"EXCLUSIVITY PERIOD"), (i) solicit, encourage or entertain any offers from any
Person other than Purchaser, or initiate or enter into any form of preliminary
discussion or negotiation with any Person other than the Purchaser for a
purchase (or other acquisition), merger, share exchange or other consolidation,
sale of stock or other equity securities or any other form or manner of
transaction, howsoever described or denominated, of any member of the Target
Company Group or, other than in the ordinary course of business, any properties
or assets used in the conduct of the Business, or any option or other
contractual right with respect to any of the foregoing or (ii) in connection
with any offer or proposal furnish or cause to be furnished any non-public
information relating to any member of the Target Company Group to any Person
(other than Purchaser and its agents and representatives or except as required
by applicable law, the London Stock Exchange Limited or the United Kingdom Panel
on Mergers and Acquisitions). In the event any Seller or any of its Affiliates
receives any offer, proposal or other communication to enter into any such
negotiations with a party other than Purchaser during the Exclusivity Period,
such Seller will provide prompt notice of the same to Purchaser.
(b) The parties hereto recognize and acknowledge that a breach by Sellers
of this Section 4.11 will cause irreparable and material loss and damage to
Purchaser as to which it will not have an adequate remedy at law or in damages.
Accordingly, each party acknowledges and agrees that the issuance of an
injunction or other equitable remedy (without the posting of a bond) is an
appropriate remedy for any such breach.
4.12 DISCHARGE OF INDEBTEDNESS AND LIENS. At or prior to the Closing,
Sellers shall cause (A) to be paid in full (I) all amounts outstanding under the
Target Company Group's overdraft facilities, up to a maximum of (pound)1,313,000
And (ii) all other indebtedness for borrowed money of each member of the Target
Company Group to unAffiliated third parties, including any guarantee of
indebtedness for borrowed money of any other Person and loans from minority
stockholders and including without limitation all loans and obligations, as
shown on the Liabilities Schedule, except to the extent permitted to be paid
prior to the Closing Date by the Target Company Group in accordance with the
Liabilities Schedule and except any obligations to be transferred as set forth
in clause (c) of this Section 4.12, (B) all Liens (other than Permitted Liens)
on any real or personal property owned or leased by any member of the Target
Company Group to be terminated or otherwise discharged in the manner and to the
extent provided in Section 2.7(a) and (C) that certain lease of the Property (as
defined below), dated as of April 24, 1981, as amended, between David H.
Kennington and Thermalloy, Inc. to be transferred to the Sellers pursuant to an
assignment and assumption agreement reasonably acceptable to Purchaser whereby
the Sellers will assume all of Thermalloy Inc.'s obligations under the lease and
will allow Thermalloy Inc. to continue to use the Property as long as it
desires, subject to Thermalloy Inc.'s obligation to comply with all covenants of
the lease, other than the obligation to pay rent, for the period from the
Closing Date until Thermalloy, Inc. ceases to use the Property. At the Closing,
the
-49-
<PAGE> 59
Target Company Group or, if the Target Company Group does not have sufficient
available cash, the Purchaser, shall pay in full all amounts, if any,
outstanding under the Target Company Group's overdraft facilities in excess of
(pound)1,313,000, together with all interest accrued and unpaid on the
indebtedness for borrowed money and guarantees thereof paid or discharged
pursuant to the first sentence of this Section 4.12.
4.13 CONFIDENTIALITY. From and after the Closing Date, the Sellers
shall, and shall cause their respective Affiliates and their respective
officers, directors, employees and advisors (collectively, the "RECIPIENTS") to,
keep confidential any information relating to the Target Company Group or the
Business, except for any such information that (i) is available to the public on
the Closing Date, (ii) thereafter becomes available to the public other than as
a result of a disclosure by the Sellers or any of the Recipients, or (iii) is or
becomes available to the Sellers or any of the Recipients on a non-confidential
basis from a source that to the Sellers' or such Recipient's knowledge is not
prohibited from disclosing such information to the Sellers or such Recipient by
a legal, contractual or fiduciary obligation to any other Person; PROVIDED,
HOWEVER, that nothing contained in this Section 4.13 shall prohibit the Sellers
from disclosing any information in connection with the filing of Tax Returns or
any arbitration, action or proceeding by or against the Purchaser or any of its
Affiliates against or by the Sellers or any of their Affiliates or, subject to
the provisions of the next sentence, any other disclosure required by court
order, law, a request of a governmental authority, rules of the London Stock
Exchange or administrative process. Should any Seller or Recipient be required
to disclose any such information in response to a court order or as otherwise
required by law, a request of a governmental authority, rules of the London
Stock Exchange or administrative process, it shall inform the Purchaser in
writing of such request or obligation as soon as possible after it is informed
of it and, if possible, before any information is disclosed and shall cooperate
with Purchaser, so that a protective order or other appropriate remedy may be
obtained by Purchaser or any Person designated by Purchaser. If any Seller or
Recipient is obligated to make the disclosure, it may make such disclosure, but
only to the extent to which it is so obligated, but not further or otherwise.
4.14 INSURANCE. Effective 12:01 a.m. (New York City time) on the
Closing Date, the Target Company Group and the Business shall cease to be
insured by the Sellers' insurance policies; PROVIDED, HOWEVER, that with respect
to insurance coverage written on an "occurrence basis" and for which any member
of the Target Company Group was an insured under such policies, then (I) for the
first year following the Closing Date, such member shall continue to be an
insured under such policies to the extent the events giving rise to a claim
under such policies occurred prior to 12:01 a.m. (New York City time) on the
Closing Date, and (II) the Sellers agree to cooperate with such member for the
first year following the Closing Date in making claims under the Sellers'
insurance policies in connection with insurable events that occurred prior to
12:01 a.m. (New York City time) on the Closing Date and shall promptly remit any
recoveries that the Sellers receive with respect thereto to the Target Company
Group. Purchaser acknowledges and agrees that the Sellers shall have no
liability with respect to any failure by any carrier under such insurance
policies to make payment with respect to any such claim. Furthermore, the
Purchaser acknowledges and agrees that the Sellers shall not have any liability
to Purchaser or the Target Company Group with respect to deductibles and the
failure of any claim to be covered as a result of such deductibles under any
insurance coverage with respect to the Target
-50-
<PAGE> 60
Company Group or the Business.
4.15 NON-COMPETITION. (a) For a period of two (2) years from the
Closing Date (the "RESTRICTED PERIOD"), Bowthorpe plc shall not, and shall cause
its subsidiaries not to, whether for compensation or without compensation,
directly or indirectly, as an owner, principal, partner, stockholder,
independent contractor, consultant, joint venturer, investor, licensor, lender
or in any other capacity whatsoever, alone, or in association with any other
Person, carry on, be engaged or take part in, or render services (other than
services which are generally offered to third parties) or advice to, own, share
in the earnings of, invest in the stocks, bonds or other securities of, or
otherwise become financially interested in any Person engaged in the business of
designing, manufacturing or selling products that remove heat from electrical
and electronic components and systems (the "THERMAL MANAGEMENT BUSINESS") (the
"RESTRICTED ACTIVITIES"). The record or beneficial ownership by Bowthorpe plc
and its subsidiaries of up to one percent (1%) of the shares of any corporation
whose shares are publicly traded on a national securities exchange or in the
over-the-counter market shall not of itself constitute a breach hereunder.
(b) During the Restricted Period, Bowthorpe plc shall not, and shall cause
its subsidiaries not to, whether for its own account or for the account of any
Person, (I) solicit, endeavor to entice away from Aavid Thermal Technologies,
Inc. or any of its subsidiaries, including without limitation the members of the
Target Company Group (collectively, the "AAVID GROUP"), or otherwise interfere
with the relationship of any member of the Aavid Group with, any Person that,
(A) during the Restricted Period, is employed by or otherwise engaged to perform
services for any member of the Aavid Group (including, but not limited to, any
independent sales representatives or organizations) or (B) during the Restricted
Period, is, or, during the one (1)-year period preceding the Closing, was, a
customer or client of the Aavid Group or (II) solicit, interfere with or entice
from the Aavid Group any employee of the Aavid Group, but nothing in this
subparagraph (b) shall preclude Bowthorpe plc or any of its subsidiaries from
(A) general advertising for employees which is not directed at members of the
Aavid Group or (B) soliciting or otherwise doing business with any independent
sales representatives or organizations, customers or clients other than in
connection with the Thermal Management Business, so long as Bowthorpe plc or
such subsidiary would not reasonably expect its activities to interfere with the
relationship of the Aavid Group with such Person in the Thermal Management
Business.
(c) The Restrictive Covenants (as defined below) set forth herein have been
separately bargained for to protect the Business, including goodwill, being
acquired by Purchaser hereunder and to ensure that Purchaser shall have the full
benefit of the value thereof. The Sellers recognize and acknowledge that the
business and markets of the Aavid Group (including without limitation the
thermal management business) are national and international in scope, and that
the Purchaser is investing substantial sums in purchasing the Business and in
consideration for the Restrictive Covenants contained in this Agreement, that
such covenants are necessary in order to protect and maintain the legitimate
business interests of the Aavid Group and are reasonable in all respects, and
that Purchaser would not consummate the transactions contemplated hereby but for
such agreements. The Sellers hereby waive, on behalf of themselves and their
subsidiaries, any and all right to contest the validity of the Restrictive
Covenants on the ground of the breadth of their geographic or product coverage
or the length of their
-51-
<PAGE> 61
term. The Sellers acknowledge and agree that a substantial and legally
sufficient portion of the Purchase Price is attributable to the Restrictive
Covenants and the Sellers, on behalf of themselves and their subsidiaries,
hereby waive any right to assert inadequacy of consideration as a defense to
enforcement of the Restrictive Covenants should such enforcement ever become
necessary
(d) If Bowthorpe plc or any of its subsidiaries breaches, or threatens to
commit a breach of, any of the provisions of this Section 4.15 (the "RESTRICTIVE
COVENANTS"), the Aavid Group shall have, in addition to, and not in lieu of, any
other rights and remedies available to them under law or in equity, the rights
to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to the Aavid Group and
that money damages would not provide an adequate remedy to the Aavid Group. The
Sellers, on behalf of themselves and their subsidiaries, covenant and agree not
to oppose any demand for specific performance and injunctive and other equitable
relief in case of any such breach or attempted breach.
(e) The existence of any claim or cause of action by any Seller or any of
its Affiliates against any member of the Aavid Group shall not constitute a
defense to the enforcement by the Aavid Group of the Restrictive Covenants, but
such claim or cause of action shall be litigated separately.
(f) In addition to the remedies the Aavid Group may seek and obtain
pursuant to Section 4.15(d) hereof, the Restricted Period shall be extended by
any and all periods during which Bowthorpe plc or any of its subsidiaries shall
be found by a final non-appealable judgment of a court possessing personal
jurisdiction over it to have been in violation of the Restrictive Covenants.
(g) Whenever possible, each provision of this Section 4.15 shall be
interpreted in such manner as to be effective and valid under applicable law but
if any provision of this Section 4.15 shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Section 4.15. If any provision of this
Section 4.15 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 4.15 but shall be confined in
its operation to the provision of this Section 4.15 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 4.15 should ever be deemed to exceed the time or
geographic limitations permitted by applicable law, then such provision shall be
reformed to the maximum time or geographic limitations permitted by applicable
law.
(h) Notwithstanding anything in this Section 4.15 to the contrary, nothing
herein shall prevent Bowthorpe B.V. from continuing to operate Thermalloy
Malaysia in the ordinary course of business and consistent with the past
practice from and after the Closing Date if the Malaysian Shares are not
transferred to Purchaser at the Closing; PROVIDED, HOWEVER, that the operation
of Thermalloy Malaysia cannot be expanded beyond the scope of its operations on
the date of this Agreement.
4.16 REMEDIATION OF EXISTING ENVIRONMENTAL CONDITIONS. (a) For
purposes of this
-52-
<PAGE> 62
Section 4.16, the following capitalized terms shall have the following meanings:
"ENVIRONMENTAL CONDITIONS" means any pollution, contamination,
degradation, damage or injury caused by or arising from the generation,
handling, use, treatment, storage, transportation, disposal, discharge, release,
or emission of volatile organic compounds ("VOCs").
"VCP" means the Voluntary Cleanup Program implemented by the Texas
Natural Resource Conservation Commission ("TNRCC") under House Bill 2296 of the
74th Legislature, codified at Tex. Health & Safety Code Ann. ch 361, subch. S
(Vernon Supp. 1999), and all regulations promulgated thereunder.
(b) With respect to the property operated by Thermalloy, Inc. located at
2021 West Valley View Lane in Dallas, Texas (the "PROPERTY"), the Sellers
covenant that they will timely remediate under the VCP all Environmental
Conditions existing on, at or underlying the Property as of the Closing Date in
accordance with the provisions set forth in this Section 4.16.
(c) Sellers shall remediate the Property to the satisfaction of the TNRCC.
The determinations of the TNRCC shall be final and binding on the parties
hereto. All remediation obligations shall be governed by the classification of
the Property as an industrial site.
(d) Purchaser further agrees that the Sellers shall control all
investigation and remediation activities addressed in this Section 4.16 and
shall control all communications, discussions and negotiations with the TNRCC.
Unless required by applicable law, Purchaser may not conduct any communications,
discussions or negotiations with the TNRCC relating to this remediation without
the prior consent of the Sellers.
(e) Sellers shall provide copies of any and all remedial action plans,
closure plans or other similar plans to Purchaser for review and comment before
implementation of the same. No remedial action plan or closure plan shall be
implemented if it unreasonably interferes with the Purchaser's operations.
(f) The procedures to be followed for the remediation of the Property and
approval of the plans are as follows:
(i) The Sellers will prepare the VCP application for submission to the
TNRCC, along with the documentation and reports necessary to support the
application. Purchaser will be permitted to be a co-applicant on the VCP
application, but will not be required to enter into any agreed orders or
similar agreements required by the TNRCC to be accepted into the VCP.
Purchaser will be provided a period of ten (10) business days to review and
provide comments on the VCP application or supporting documentation before
the foregoing is submitted to the TNRCC; however, Sellers are under no
obligation to incorporate any of Purchaser's comments in the VCP
application.
-53-
<PAGE> 63
(ii) The Sellers will prepare a draft Closure Plan for submission to
the TNRCC. Purchaser will be afforded ten (10) business days to provide
comments to Sellers on the draft Closure Plan before the plan is submitted
to the TNRCC. Sellers will submit a revised Closure Plan to Purchaser
within ten (10) working days upon receipt of Purchaser's comments.
(iii) The Sellers will submit the Closure Plan to the TNRCC within
twenty (20) days of receipt of Purchaser's comments on the final draft
Closure Plan.
(iv) The Sellers covenant that they will commence the work described
in the Closure Plan within fifteen (15) days of receiving TNRCC approval of
the Closure Plan and will proceed in a timely manner to complete the work
and to prepare the documentation necessary to achieve a Final Certificate
of Completion from the TNRCC for the Property.
(v) The Sellers agree to provide Purchaser with copies of all written
communications transmitted by the Sellers, or their agents,
representatives, contractors or attorneys on their behalf, to the TNRCC,
and all written communications received from the TNRCC with respect to any
of the existing Environmental Conditions on the Property or any of the
plans described herein. The Sellers further agree to allow Purchaser to
have representatives present during all meetings with the TNRCC.
(vi) All costs of the Sellers' investigation and any remediation
conducted on the Property that is required by the TNRCC in order to achieve
a final Certificate of Completion pursuant to this Section 4.16 will be
paid by the Sellers.
(vii) All remediation shall be conducted in a manner that does not
interfere unreasonably with Purchaser's operation of the Property. Subject
to the Sellers' right to direct the work, Purchaser shall be kept advised
of, and may monitor, the implementation of the remediation. Purchaser, at
its sole expense, may also reasonably inspect all stages of the remediation
provided that such inspection does not interfere with or delay the work.
(viii) The Sellers shall be granted access to the Property during
normal business hours or at such other times as may be agreed upon by
Purchaser and the Sellers, for the purpose of implementing any remediation
for which they are responsible under this Agreement. The Sellers shall
coordinate with Purchaser as to the timing of specific remediation
activities so as to minimize any disruption to Purchaser's operations. In
this regard, the Sellers shall provide Purchaser with at least two (2)
business days advance notice of their intention to enter the Property for
the purposes of performing remediation work. Purchaser and the Sellers
agree to cooperate in good faith to select a mutually acceptable
alternative date for entry onto the Property if entry on the date desired
by the Sellers would result in an unreasonable interference with
Purchaser's use or operation of the Property.
(ix) The Sellers agree that, in performing remedial activities on or
at the Property, the Sellers or their agents, contractors and
subcontractors shall carry liability insurance in the
-54-
<PAGE> 64
following minimum amounts:
KINDS OF INSURANCE IN LIMITS NOT LESS THAN
------------------ -----------------------
Workmen's Compensation Statutory
Employer's Liability $100,000 each accident/disease
$500,000 Policy Limit
Comprehensive General Combined Bodily Injury and
Property Damage
$1,000,000 each person
$1,000,000 each occurrence
Automotive Bodily Injury $1,000,000 each person
Liability (including hired
automobiles and non-ownership
liability).
Errors and Omissions $1,000,000 each occurrence
(Professional Liability) $2,000,000 annual aggregate
Furthermore, Purchaser shall be named as an additional insured on all of
the foregoing policies except for Worker's Compensation.
(x) Purchaser agrees that the Sellers shall not be responsible for any
investigation or remediation at the Property that relates to, or arises
from, any Environmental Condition caused by the Purchaser or caused by any
Person other than Sellers or their employees, agents or contractors after
the Closing Date. Such costs and expenses shall be borne by the Purchaser.
(g) The Sellers, jointly and severally, agree to indemnify, defend, and
hold Purchaser free and harmless from any loss, injury, damage, claim, lien,
cost or expense, including reasonable attorney's fees and costs, arising out of
or caused by the conduct of the remediation by the Sellers; PROVIDED, that the
Sellers shall not have any obligation to pay any consultants', engineers' or
attorneys' fees, or any other expenses or fees incurred by the Purchaser in
exercising its rights of monitoring or inspection in the remediation pursuant to
this Section 4.16. The Sellers, jointly and severally, agree to indemnify,
defend and hold Purchaser free and harmless from any loss, injury, damage,
claim, lien, cost or expense arising out of (x) any subsequent remediation,
monitoring or inspection of the Property required by the TNRCC with respect to
VOCs, other than VOCs which Sellers can prove were released, disposed, generated
or used by the Purchaser, its agents or Affiliates after the Closing or (y) any
claim by David H. Kennington, as landlord of the Property, or any other third
party, arising out of the presence of VOCs on the Property, other than VOCs
which Sellers can prove were released, disposed, generated or used
-55-
<PAGE> 65
by the Purchaser, its agents or Affiliates after the Closing; PROVIDED that,
notwithstanding any provision in this Agreement to the contrary, the rights to
indemnification set forth in this paragraph (g) shall not be transferable,
directly or indirectly, to any other Person, including without limitation, any
subsequent transferee of the leasehold interest in the Property or any of the
assets or stock of Thermalloy, Inc.; and PROVIDED FURTHER that, the indemnity
set forth in this clause (g) is intended to benefit only the Purchaser and its
Affiliates.
(h) Promptly following the Closing, the Purchaser shall commence, at its
expense, additional environmental assessments, investigations or studies of the
Property, as it deems appropriate. To the extent any such assessment,
investigation or study undertaken by the Purchaser after the Closing indicates
the presence of any Hazardous Substance (other than VOCs, which are provided for
above) above the level permitted by applicable law such presence shall be
considered a breach of the representations and warranties set forth in Section
2.16 regardless of whether set forth in the Disclosure Schedules. The
representations, warranties, indemnities and other undertakings set forth herein
shall not be affected by any such assessment, investigation or study or lack
thereof, or the results of any such assessment, investigation or study.
5. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
5.1 COMPENSATION AND BENEFITS OF TARGET COMPANY EMPLOYEES. (a) From
and after the Closing, the Purchaser shall, or shall cause a Target Company or
such Target Company's subsidiary or one of the Purchaser's subsidiaries, as
applicable, to honor, pay, perform and satisfy any and all liabilities,
obligations and responsibilities with respect to the Employees under each Target
Company Group Benefit Plan (other than those Target Company Group Benefit Plans
sponsored or maintained by Sellers, including without limitation those listed on
Schedule 5.1) and each Employment Agreement. Except as otherwise expressly
provided herein, the Sellers shall honor, pay, perform, satisfy and be solely
responsible for any and all liabilities, obligations and responsibilities (I)
under any Target Company Group Benefit Plan that is disclosed on Schedule
5.1(II) under any Target Company Group Benefit Plan that is not disclosed on
Schedule 2.9, (III) under the Thermalloy Inc. Salary Continuation Plan and any
obligations of Thermalloy, Inc. and Thermalloy Investment Company to permit
Larry Tucker's continued participation in the Salary Continuation Plan or a plan
that is substantially equivalent in all material respects (which obligations are
set forth in the expired Employment Agreement, dated September 22, 1998, between
Thermalloy, Inc. and Larry Tucker, certain provisions of which survive
expiration by express incorporation into the Manufacturer's Representative
Agreement, dated August 1, 1996, between Thermalloy, Inc. and Larry Tucker) and
(IV) with respect to any Target Company Group Benefit Plan participant who is
not an Employee or the beneficiary or dependent of an Employee. Nothing in this
Section 5.1 shall preclude the Purchaser or any Target Company or its subsidiary
from, at any time following the Closing, (i) unilaterally amending, modifying or
terminating any particular Assumed Target Company Benefit Plan pursuant to the
relevant provision of such Assumed Target Company Benefit Plan, PROVIDED that
the covenants set forth in this Section 5 are satisfied, or (ii) terminating the
employment of each Employee actively employed by such Target Company or its
subsidiary immediately prior to the Closing (the "ACTIVE EMPLOYEES"), so long
as, if such termination occurs prior to six (6) months following the Closing
Date and such termination is not for cause, any such
-56-
<PAGE> 66
terminated Active Employee receives severance and other termination benefits
upon or in connection with such termination in an amount which is at least equal
to the severance and other termination benefits which would have been provided
to such Active Employee if his or her employment had been terminated for the
same reason immediately prior to the Closing, all of which benefits are
described on Schedule 2.9. Notwithstanding the foregoing, Sellers shall bear (I)
any relocation and similar costs and loyalty bonus payable to Robin Johnson in
connection with the termination of his employment and (II) any loyalty bonus
payable to any other Person pursuant to an arrangement entered into by Sellers
or any member of the Target Company Group at any time prior to the Closing.
(b) Active Employees shall be given credit for all service with the Target
Companies for purposes of eligibility and vesting, to the same extent as such
service was credited for such purpose by Sellers under any Target Company Group
Benefit Plan prior to the Closing Date, under each employee benefit plan,
program or arrangement of Purchaser or any of its subsidiaries in which the
Active Employees are eligible to participate, PROVIDED, HOWEVER, that in no
event shall the employees be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.
(c) Purchaser and the Sellers agree to comply with the agreements set forth
in EXHIBIT 5.1 attached hereto.
(d) (i) If, by operation of law as provided for in Section 613a of the
German Civil Code, the employment contracts of Helmut Scheuering and Jurgen
Mullmaier the ("German Employees") have effect after Closing as if originally
made between the Purchaser or the Purchaser's German subsidiary and the German
Employees the Sellers agree that they shall or shall procure that Bowthorpe GmbH
shall:
(A) perform and discharge for their own account all their obligations
towards the German Employees for the period up to and including
Closing; and
(B) indemnify the Purchaser against all liabilities arising from the
Sellers, or Bowthorpe GmbH's performance and discharge of those
obligations (including any failure by the Sellers or Bowthorpe
GmbH to inform and/or consult the German Employees'
representatives before the transfer of their employment to the
Purchaser or the Purchaser's German subsidiary).
(ii) If any contract of employment of any person employed by Bowthorpe
GmbH who is not a German Employee is found or alleged to have effect
pursuant to Section 613a of the German Civil Code on or after Closing as if
it was a contract of employment originally made with the Purchaser or the
Purchaser's German subsidiary, the Sellers agree that:
(A) in consultation with the Purchaser, it shall or shall procure
that Bowthorpe GmbH shall within seven days of discovering such a
finding or allegation or within seven days of being so requested
by the Purchaser make to such person
-57-
<PAGE> 67
an offer in writing to employ him under a new contract of
employment to take effect on the termination referred to below;
and
(B) such offer of employment will be on terms and conditions which,
when taken as a whole do not materially differ from the terms and
conditions of employment of that person immediately before
Closing.
Upon that offer being made, or at any time after the expiry of seven days from a
request by the Purchaser for the Sellers to make or procure that Bowthorpe GmbH
make that offer, the Purchaser shall terminate the employment of the person
concerned, and the Sellers shall indemnify and hold harmless and keep the
Purchaser indemnified against all and any claims, costs, liabilities, losses,
expenses, damages, demands and actions (including, without limitation, legal
costs) directly or indirectly arising both out of or relating to the employment
of such person from Closing until such termination and the termination of such
employment (including without prejudice to the generality of the foregoing any
redundancy pay and compensation for breach of contract or unfair dismissal).
(iii) The Sellers shall make available, to the extent such individuals
remain employees of the Sellers or their Affiliates, the German Employees
and the two French salesmen currently employed by Hellermann Tyton S.A., an
Affiliate of Bowthorpe plc, until the employment of such individuals can be
transferred to Affiliates of Purchaser.
(iv) Purchaser shall reimburse the Sellers for the actual
out-of-pocket expenses relating to the employment of such individuals, but
not for any allocation for overhead or depreciation. Subject to
subparagraph (v) Purchaser shall be responsible for any severance expense
with respect to these individuals if Purchaser determines not to transfer
their employment to Purchaser's Affiliates.
(v) Subject to subparagraph (vi) Purchaser shall have no liability to
such employees if they cease to be employed by Sellers or their Affiliates
through the act or default of Sellers or their Affiliates or if such
employees refuse to accept a "comparable offer" of employment made with 120
days following Closing made by the Purchaser or its Affiliates; for the
purpose of this subparagraph the expression "comparable offer" shall mean
an offer at least as favorable to the employee as the terms of his existing
engagement with the Sellers or their Affiliates;
(vi) Purchaser covenants with Sellers and their Affiliates that in
relation to each of such employees it shall:
(A) not engage in any conduct which, if any such employee had been an
employee of Purchaser or its Affiliates, could reasonably be
considered unfair or repudiatory conduct in its nature on the
part of the Purchaser or its Affiliates;
(B) provide Sellers and Sellers' Affiliates with all reasonable
assistance as Sellers and Sellers' Affiliates shall reasonably
require in connection with defending any
-58-
<PAGE> 68
claim any such employee may bring against Sellers and Sellers'
Affiliates; and
(C) maintain a complete and accurate record of all communications
between Purchaser and its Affiliates and all such employees
relating to their employment by the Purchaser or its Affiliates
following Closing.
(vii) Sellers covenant with Purchaser that in relation to each of such
employees they shall provide or shall procure that Sellers' Affiliates
provide the Purchaser with all reasonable assistance as Purchaser shall
reasonably require in connection with defending any claim any such employee
may bring against Purchaser.
(e) The Sellers shall make available, to the extent such individuals remain
employees of the Sellers or their Affiliates, the services of the two German
salesmen currently employed by Bowthorpe GmbH and the two French salesmen
currently employed by Hellermann Tyton SA, an Affiliate of Bowthorpe plc, until
the employment of such individuals can be transferred to Affiliates of
Purchaser. Purchaser shall reimburse the Sellers for the actual out-of-pocket
expenses relating to the employment of such individuals, but not for any
allocation for overhead or depreciation. Purchaser shall be responsible for any
severance expense with respect to these individuals if Purchaser determines not
to transfer their employment to Purchaser's Affiliates.
5.2 SAVINGS PLAN. (a) As of the Closing Date, each of the Target
Companies shall cease to be a participating employer under the 401(k) Retirement
and Profit Sharing Plan for Employees of the U.S. Affiliates of Bowthorpe (the
"SELLER SAVINGS PLAN") and the Sellers shall take any and all actions necessary
to effect such cessation of participation. As soon as practicable, but in no
event later than 120 days after the Closing Date, the Purchaser shall, or shall
cause the Company to, establish or designate, a defined contribution plan (the
"PURCHASER'S INVESTMENT PLAN") to provide benefits to the Active Employees (for
purposes of this Section 5.2, Active Employees shall include those Employees on
disability, vacation and approved leaves of absence) who are participants in the
Seller Savings Plan as of the Closing Date (the "ACTIVE SAVINGS PARTICIPANTS").
The Purchaser's Investment Plan shall contain such provisions required to be
provided pursuant to Section 411(d)(6) of the Code by a transferee plan.
(b) As soon as practicable after the Closing Date, upon the reasonable
determination by Purchaser and the Sellers Representative, that the Seller
Savings Plan, in form, meets the requirements of Sections 401(a) and (k) of the
Code, the Sellers shall cause to be transferred to the Purchaser's Investment
Plan an amount equal to the account balances of all Active Savings Participants
as of the end of the date ended immediately prior to the transfer date (the
"TRANSFER DATE"). Such distribution shall be effected by a transfer in cash or
by the transfer of a proportionate interest in any investments held for the
benefit of such Active Savings Participants under the terms of the Seller
Savings Plan, PROVIDED THAT, to the extent that any loan had been extended to
any Active Savings Participant from the Seller Savings Plan prior to the Closing
Date, such loans and any promissory notes or other documents evidencing such
loans shall be transferred to the Purchaser's Investment Plan and shall be
valued based on the outstanding principal and interest due thereunder. From and
after such transfer from the Seller Savings
-59-
<PAGE> 69
Plan to Purchaser's Investment Plan in accordance with the provisions of this
Section 5.2, the Purchaser's Investment Plan shall be solely responsible for the
provision of all benefits to the Active Savings Participants previously provided
under the Seller Savings Plan.
(c) As of the Closing Date, Purchaser shall contribute to the Seller
Savings Plan, on behalf of each Employee who contributed 401(k) contributions to
the Seller Savings Plan during the plan year in which the Closing Date occurs, a
matching contribution for such plan year to the extent such matching
contribution has been accrued on the most recent balance sheet included in the
Financial Statements. Sellers shall cause the Employees to be fully vested in
their accrued benefits under the Seller Savings Plan. Sellers shall take all
necessary actions (including, without limitation, by amending the Seller Savings
Plan to allow contributions on behalf of participants who are not employed by
Sellers or its affiliates on the last day of the plan year and who do not
complete 1,000 hours of service during such plan year) to cause the
contributions and vesting referenced in this Section 5.2(c) to occur.
5.3 NO THIRD PARTY BENEFICIARIES. Nothing in this Section 5 is
intended, or shall be construed, to confer upon any person, other than the
parties to this Agreement and their successors and permitted assigns, any rights
or remedies by reason of this Section 5.
6. CONDITIONS PRECEDENT.
6.1 GENERAL. The respective obligations set forth herein of the
Sellers and the Purchaser to consummate the sale and purchase of the Shares at
the Closing shall be subject to the fulfillment or waiver, on or before the
Closing Date, in the case of the Sellers, of the conditions set forth in
Sections 6.2 and 6.3, and in the case of the Purchaser, of the conditions set
forth in Sections 6.2 and 6.4.
6.2 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES.
6.2.1 CONSENTS. All governmental consents listed on Schedules 2.3(b)
and 3.3(b) and all third party consents listed on Schedule 6.2.1 shall have been
obtained. If notifications are required to be filed under the HSR Act or the
antitrust, competition or comparable laws of any foreign jurisdiction, the
waiting period under the HSR Act or such other laws shall have been terminated
or expired.
6.2.2 NO INJUNCTION. There shall not be in effect any injunction or
other order issued by a court of competent jurisdiction, local or foreign, and
no statute, rule or regulation shall have been enacted, in each case restraining
or prohibiting the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, and no proceeding seeking to prevent
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements which has a reasonable likelihood of success shall be pending.
-60-
<PAGE> 70
6.2.3 PURCHASE AND SALE OF SHARES. At the Closing, Sellers shall sell
all of the Shares (other than the Malaysian Shares to the extent provided in
Section 1.2) and Purchaser shall purchase all of the Shares (other than the
Malaysian Shares to the extent provided in Section 1.2).
6.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS.
6.3.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
representations and warranties in Section 3 (i) that are qualified as to
materiality shall be true in all respects on and as of the Closing Date and (ii)
that are not qualified as to materiality shall be true in all material respects
on and as of the Closing Date, with the same force and effect as though such
representations and warranties were made on and as of the Closing Date. The
Purchaser shall have duly performed and complied in all material respects with
all agreements contained herein required to be performed or complied with by it
at or before the Closing.
6.3.2 OFFICER'S CERTIFICATE. The Purchaser shall have delivered on the
Closing Date to the Sellers a certificate, dated the Closing Date and signed by
a duly authorized officer of the Purchaser, as to the fulfillment of the
conditions set forth in Section 6.3.1.
6.4 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
6.4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The
representations and warranties in Section 2 (i) that are qualified as to
materiality shall be true in all respects on and as of the Closing Date and (ii)
that are not qualified as to materiality shall be true in all material respects
on and as of the Closing Date, with the same force and effect as though such
representations and warranties were made on and as of the Closing Date. Each
Seller shall have duly performed and complied in all material respects with all
agreements contained herein required to be performed or complied with by it at
or before the Closing.
6.4.2 OFFICER'S CERTIFICATE. The Sellers shall have delivered on the
Closing Date to the Purchaser a certificate, dated the Closing Date and signed
by a duly authorized officer of each Seller, as to the fulfillment of the
conditions set forth in Sections 6.4.1 and 6.4.4.
6.4.3 RESIGNATIONS. The directors and officers of any member of the
Target Company Group (other than Curamik) specified in a notice delivered by the
Purchaser to the Sellers at least five days prior to the Closing and each
director and officer of Curamik appointed by Seller shall have submitted their
resignations, or shall have been removed by shareholder action, from the Boards
of Directors and as officers of such members, effective as of the Closing Date,
in each case without liability to any member of the Target Company Group. For
purposes of this Section 6.4.3, the officers who must submit their resignations
are those Persons who are employees of any Seller or any Affiliate and who do
not devote their full working time to the Target Company Group.
6.4.4 MATERIAL ADVERSE CHANGE. Since July 4, 1999, there shall have
been no material
-61-
<PAGE> 71
adverse change in the business or financial condition of the Target Company
Group taken as a whole, other than those relating to or those that are as a
result of (i) generally applicable economic conditions or (ii) the Target
Company Group's industry in general.
6.4.5 FIRPTA CERTIFICATE. Bowthorpe International shall have delivered
on the Closing Date to the Purchaser a certificate, as contemplated under and
meeting the requirements of Section 1.1445-2(b)(2)(i) of the Treasury
Regulations to the effect that Bowthorpe International is not a foreign person
within the meaning of the Code and applicable Treasury Regulations.
6.4.6 AUDITED FINANCIAL STATEMENTS. The Sellers shall have delivered
to Purchaser audited combined balance sheets of the Target Company Group as of
December 31, 1997 and 1998 and the related audited combined statements of income
and cash flows for each of the years ended December 31, 1996, 1997 and 1998,
accompanied by an unqualified report of the Sellers' independent accountants,
Ernst & Young (the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial
Statements shall be prepared in accordance with United Kingdom generally
accepted accounting principles, shall be accompanied by a reconciliation to
United States generally accepted accounting principles, shall be covered by and
conform to the representations and warranties set forth in Section 2.5(a)
hereof, and shall be included in the term "Financial Statements" for purposes of
this Agreement.
7. INDEMNIFICATION.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in this Agreement and the Ancillary Agreements shall
survive the Closing hereunder, regardless of any investigation made by Purchaser
or Sellers. Any claim for indemnification under Section 7 with respect to the
representations and warranties contained in this Agreement must be brought
within 18 months following the Closing Date in accordance with Section 7.2.3,
PROVIDED, HOWEVER, that claims for indemnification with respect to the
representations and warranties set forth in (a) Section 2.13 may be brought at
any time prior to 30 days following the expiration of the applicable statute of
limitations for matters covered by such Sections and (b) Section 2.4 may be
brought at any time.
7.2 INDEMNIFICATION.
7.2.1 BY THE SELLERS. (a) From and after the Closing, the Sellers,
jointly and severally, agree to indemnify and hold harmless the Purchaser and
its Affiliates, and its and their respective officers, directors, employees and
agents (collectively, the "PURCHASER INDEMNIFIED GROUP"), from and against any
demands, claims, actions or causes of action, losses, liabilities, damages,
costs and expenses, including without limitation interest, penalties and
reasonable fees and expenses of attorneys and other professionals (collectively,
"DAMAGES"), incurred or sustained by the Purchaser Indemnified Group resulting
from (I) the breach by the Sellers of any covenant set forth in this Agreement,
and (II) subject to Section 7.1, the breach by the Sellers of any representation
or warranty set forth in this Agreement (without regard to any materiality
qualifier (including any Material Adverse Effect qualifier) contained in such
representation or warranty).
-62-
<PAGE> 72
(b) The rights of the Purchaser Indemnified Group to indemnification under
this Section 7 shall be limited as follows:
(i) The amount of any Damages incurred by the Purchaser Indemnified
Group shall be reduced by the net amount the Purchaser or any of its
Affiliates recovers (after deducting all attorneys' fees, expenses and
other costs of recovery) from any insurer or other party liable for such
Damages, and the Purchaser shall use commercially reasonable efforts to
effect any such recovery.
(ii) The Purchaser Indemnified Group shall be entitled to
indemnification under clause (ii) of Section 7.2.1(a) only to the extent
that the aggregate amount of such Damages (reduced as provided in paragraph
(b)(i) above) for one or more claims exceeds $825,000, at which point the
Sellers will be obligated to indemnify the Purchaser Indemnified Group from
and against all such Damages (reduced as provided in paragraph (b)(i)
above) in excess of $400,000 and in no event will the Purchaser Indemnified
Group be entitled to indemnification under clause (ii) of Section 7.2.1(a)
in excess of $12,375,000; PROVIDED that the foregoing threshold, basket and
limit shall not apply to indemnification for Damages resulting from
breaches of Sections 2.4 or 2.13; and PROVIDED FURTHER that the foregoing
threshold and basket shall not apply to indemnification for Damages
resulting from any deemed breach of the representations or warranties set
forth in Section 2.16 pursuant to Section 4.16(h).
(iii) The Purchaser Indemnified Group shall not be entitled to
indemnification for breaches of:
(A) representations and warranties in respect of the unaudited
financial statements for the years ended December 31, 1996, 1997 and
1998 following delivery of the Audited Financial Statements and after
delivery of the Audited Financial Statements the term Financial
Statements shall not include the unaudited financial statements for
the years ended December 31, 1996, 1997 and 1998;
(B) Sellers representations and warranties if such breach was a
direct result of any act or thing done or omitted to be done at any
time after the date of this Agreement at the written request of, with
the written approval of or by Purchaser;
(C) Sellers representations and warranties set forth in Section
2.5(c) if such breach is directly the result of actions taken by
Purchaser after the Closing; and
(D) Sellers covenant in clause (ii) of the second sentence of
Section 5.1(a) to the extent the Damages from such breach, together
with Damages from breaches of all other representations and warranties
set forth in this Agreement, do not exceed the threshold and basket
set forth in Section 7.2.1(b)(ii) hereof, and then such recovery shall
only be to the extent set forth in Section 7.2.1(b)(ii) hereof.
-63-
<PAGE> 73
(c) Each Seller hereby agrees that it will not, and will not permit any
member of the Seller Indemnified Group (as defined below) in respect of an
action brought against such Person by any Seller to, make any claim for
indemnification against any member of the Target Company Group by reason of the
fact that it or he was a stockholder, director, officer, employee or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by the
Purchaser against such Seller (whether such action, suit, proceeding, complaint,
claim or demand is pursuant to this Agreement, applicable law or otherwise).
7.2.2 BY THE PURCHASER. (a) From and after the Closing, the Purchaser
agrees to indemnify and hold harmless the Sellers and their respective
Affiliates and their respective officers, directors, employees and agents
(collectively, the "SELLER INDEMNIFIED GROUP"), from and against any Damages
incurred or sustained by the Seller Indemnified Group resulting from (i) the
breach by the Purchaser of any covenant set forth in this Agreement, and (ii)
subject to Section 7.1, the breach by Purchaser of any representation or
warranty set forth in this Agreement (without regard to any materiality
qualifier (including any material adverse effect qualifier), contained in any
such representation or warranty), PROVIDED that there shall not be any
duplicative payments or indemnities by the Purchaser.
(b) The rights of the Seller Indemnified Group to indemnification under
this Section 7 shall be limited as follows:
(i) The amount of any Damages incurred by the Seller Indemnified Group
shall be reduced by the net amount the Sellers or any of its Affiliates
recovers (after deducting all attorneys' fees, expenses and other costs of
recovery) from any insurer or other party liable for such Damages, and the
Sellers shall use commercially reasonable efforts to effect any such
recovery.
(ii) The Seller Indemnified Group shall be entitled to indemnification
under clause (ii) of Section 7.2.2(a) only to the extent that the aggregate
amount of such Damages (reduced as provided in paragraph (b)(i) above)
exceeds $825,000, at which point the Purchaser will be obligated to
indemnify the Seller Indemnified Group from and against all such Damages
(reduced as provided in paragraph (b)(i) above) in excess of $400,000 and
in no event will the Seller Indemnified Group be entitled to
indemnification under clause (ii) of Section 7.2.2(a) in excess of
$12,375,000.
7.2.3 INDEMNIFICATION PROCEDURES. A party entitled to indemnification
hereunder shall herein be referred to as an "INDEMNITEE." A party obligated to
indemnify an Indemnitee hereunder shall herein be referred to as an
"INDEMNITOR."
(a) THIRD PARTY CLAIMS. Within 15 business days after an Indemnitee
receives notice
-64-
<PAGE> 74
of any third party claim or the commencement of any action by any third party
which such Indemnitee reasonably believes may give rise to a claim for
indemnification from an Indemnitor hereunder, such Indemnitee shall, if a claim
in respect thereof is to be made against an Indemnitor under Section 7, notify
such Indemnitor in writing in reasonable detail of such claim or action,
PROVIDED, HOWEVER, that failure to so notify the Indemnitor shall not relieve
the Indemnitor of its indemnification obligations hereunder, except to the
extent the Indemnitor is actually prejudiced thereby. Upon receipt of such
notice, the Indemnitor shall be entitled to participate in such claim or action,
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee, and to settle or compromise such claim or action without the consent
of the Indemnitee as long as such settlement or compromise (i) does not include
the entry of any judgment or provide for injunctive or other non-monetary relief
affecting the Indemnitee and (ii) includes as an unconditional term thereof the
giving by such plaintiff or claimant of a release from all liability with
respect to such claim or litigation; PROVIDED that if the Indemnitee has elected
to be represented by separate counsel pursuant to the proviso to the following
sentence, such settlement or compromise shall be effected only with the consent
of the Indemnitee, which consent shall not be unreasonably withheld or delayed.
After notice to the Indemnitee of the Indemnitor's election to assume the
defense of such claim or action, the Indemnitor shall not be liable to the
Indemnitee under Section 7 for any legal or other expenses subsequently incurred
by the Indemnitee in connection with the defense thereof other than reasonable
costs of investigation (although the Indemnitee shall have the right to
participate in any defense at its own cost and expense); PROVIDED, HOWEVER, that
the Indemnitee shall have the right to employ counsel to represent it at the
Indemnitor's expense if either (x) such claim or action involves remedies other
than monetary damages and such remedies, in the Indemnitee's reasonable
judgment, could have a material adverse effect on such Indemnitee or (y) the
Indemnitee may have available to it one or more defenses or counterclaims which
are inconsistent with one or more defenses or counterclaims which may be alleged
by the Indemnitor. If the Indemnitor does not elect to assume the defense of
such claim or action, the Indemnitee shall have the full right to defend against
any such claim or demand and shall be entitled to agree to settle, compromise or
pay in full such claim or demand without the consent of the Indemnitor. The
parties hereto agree to render to each other such assistance as may reasonably
be requested in order to insure the proper and adequate defense of any such
claim or action, including making employees available on a mutually convenient
basis to provide additional information and explanation of any relevant
materials or to testify at any proceedings relating to such claim or action. For
the purposes of this Agreement, a "BUSINESS DAY" shall be a day other than a
Saturday, Sunday or other day on which commercial banks in New York, New York
are authorized or required by law to close.
(b) OTHER CLAIMS. Within 20 business days after an Indemnitee obtains
knowledge that it has sustained any Damages not involving a third party claim or
action which such Indemnitee reasonably believes may give rise to a claim for
indemnification from an Indemnitor hereunder, such Indemnitee shall deliver
notice of such claim to the Indemnitor; PROVIDED, HOWEVER, that failure to so
notify the Indemnitor shall not relieve the Indemnitor of its indemnification
obligations hereunder, except to the extent that the Indemnitor is actually
prejudiced thereby. If the Indemnitor does not notify the Indemnitee within 30
calendar days following its receipt of such notice that the Indemnitor disputes
its liability to the Indemnitee under this Section 7, such claim specified by
the Indemnitee in such notice shall be conclusively deemed a liability of the
Indemnitor under this Section 7 and the Indemnitor shall
-65-
<PAGE> 75
pay the amount of such claim to the Indemnitee on demand or, in the case of any
notice in which the amount of the claim (or any portion thereof) is estimated,
on such later date when the amount of such claim (or such portion thereof)
becomes finally determined. If the Indemnitor has timely disputed its liability
with respect to such claim, as provided above, the Indemnitor and the Indemnitee
shall proceed in good faith to negotiate a resolution of such dispute and, if
not resolved through negotiations, such dispute shall be resolved by litigation
in an appropriate court of competent jurisdiction in accordance with Section
8.15.
7.2.4 TAX TREATMENT OF INDEMNITY PAYMENT. Each of the Sellers, on the
one hand, and the Purchaser, on the other hand, agrees to treat any payment made
pursuant to Section 7.2 or Section 4.4 as an adjustment to the Purchase Price
for all Tax purposes unless otherwise required by law.
8. GENERAL PROVISIONS.
8.1 MODIFICATION; WAIVER. This Agreement may be modified only by a
written instrument executed by the parties hereto. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or prior to
the Closing Date by the party entitled to the benefits thereof.
8.2 ENTIRE AGREEMENT. This Agreement, including the Schedules hereto
(which are hereby incorporated by reference and made a part hereof), and the
Ancillary Agreements constitute the entire agreement of the parties with respect
to the subject matter hereof and thereof and supersede all other prior
agreements, understandings, documents, projections, financial data, statements,
representations and warranties, oral or written, express or implied, between
the parties hereto and thereto and their respective affiliates, representatives
and agents in respect of the subject matter hereof and thereof, except that this
Agreement and the Ancillary Agreements do not supersede the Confidentiality
Agreement, the terms and conditions of which the parties hereto expressly
reaffirm, except that nothing in the Confidentiality Agreement shall prevent the
Purchaser from disclosing information regarding the Target Company Group
following the Closing.
8.3 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
PROVISION; RELATIONSHIP BETWEEN THE PARTIES. It is the explicit intent and
understanding of each of the parties hereto that none of such parties or any of
their respective Affiliates, representatives or agents is making any
representation or warranty whatsoever, oral or written, express or implied,
other than those set forth in Section 2 and 3 and no party is relying on any
statement, representation or warranty, oral or written, express or implied, made
by any other party or such other party's Affiliates, representatives or agents,
except for the representations and warranties set forth in such sections and in
the Ancillary Agreements. The indemnity provided for in Section 7 shall be the
sole and exclusive monetary remedy of the Purchaser and the Sellers after the
Closing for any inaccuracy of any representation or warranty of the Sellers or
the Purchaser, as the case may be, or any failure or breach of any covenant,
obligation, condition or agreement to be performed or fulfilled by the Sellers
or the Purchaser, as the case may be, pursuant to this Agreement and the
Ancillary Agreements or otherwise arising out of Purchaser's purchase of the
Shares, PROVIDED, HOWEVER, that the foregoing shall not (i) prevent Purchaser or
Sellers from bringing an action for fraud or (ii) apply to Sellers' or
Purchaser's obligations under Section 4.4.
-66-
<PAGE> 76
The parties agree that this is an arm's length transaction in which the parties'
undertakings and obligations are limited to the performance of their obligations
under this Agreement. The Purchaser acknowledges that it is a sophisticated
investor and that it has only a contractual relationship with the Sellers, based
solely on the terms of this Agreement and that there is no special relationship
of trust or reliance between the Purchaser and any Seller. Notwithstanding
anything herein to the contrary, no investigation by or on behalf of Purchaser
into the business, operations, prospects, assets or condition (financial or
otherwise) of the Target Company Group shall diminish in any way the effect of
any representations or warranties made by the Sellers in this Agreement or the
Ancillary Agreements or shall relieve any Seller of any of its obligations under
this Agreement or the Ancillary Agreements.
8.4 NO ADDITIONAL RIGHTS OR REMEDIES UNDER CERTAIN AGREEMENTS.
Bowthorpe plc and the Purchaser hereby agree, on their own behalf and on behalf
of each other Seller and each Subsidiary Purchaser, respectively, that,
notwithstanding any provision to the contrary in any Local Purchase Agreement,
the Target Asset Purchase Agreement or any applicable law, statute, rule or
regulation, the legal or equitable contractual rights or remedies that any of
the Sellers on the one hand, or any of the Purchasers, on the other hand, may
have in respect of any breach or violation by the other of any of its
representations, warranties, obligations, covenants or agreements under this
Agreement or any of the Local Purchase Agreements or the Target Asset Purchase
Agreement shall be limited to the rights and remedies under this Agreement and
hereby waive, on their behalf and on behalf of each other Seller and each
Subsidiary Purchaser, respectively, any additional rights or remedies they may
otherwise have under any Local Purchase Agreement, the Target Asset Purchase
Agreement or any applicable law, statute, rule or regulation. For the avoidance
of doubt and without limiting the generality of the foregoing, the provisions of
Section 7 shall be the sole monetary remedy for breaches of any of the
provisions of this Agreement or any of the Local Purchase Agreements or the
Target Asset Purchase Agreement, and the provisions of Sections 8.13-8.16 shall
govern any disputes between any of the parties to this Agreement or any of the
Local Purchase Agreements or the Target Asset Purchase Agreement. In the event
that, notwithstanding the foregoing provisions of this Section 8.4, any Seller
or the Purchaser or any Subsidiary Purchaser asserts any rights or remedies it
alleges it has under any Local Purchase Agreement, the Target Asset Purchase
Agreement or any applicable law, statute, rule or regulation, Bowthorpe plc and
the Purchaser hereby agree to indemnify and hold each other and each other's
Affiliates harmless against any Damages arising out of such assertions of any
Seller or the Purchaser or any Subsidiary Purchaser, respectively.
8.5 TERMINATION. (a) Notwithstanding anything contained herein to the
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of the Sellers and the Purchaser;
(ii) by any party hereto, if the Closing does not occur on or
prior to January 23, 2000;
(iii) by the Purchaser by written notice to the Sellers
Representative if (A) any
-67-
<PAGE> 77
of the conditions set forth in Sections 6.2 or 6.4 shall not have
been, or if it becomes apparent that any of such conditions will not
be, fulfilled by 5:00 p.m. New York City time on January 23, 2000 or
(B) the operating profit before head office charges and extraordinary
items (as defined in GAAP) for the Target Company Group for the year
ended December 31, 1998 shown in the Audited Financial Statements is
more than five percent (5%) lower than the operating profit before
head office charges for the Target Company Group for such period shown
in the unaudited Financial Statements delivered pursuant to Section
2.5; or
(iv) by Sellers by written notice to the Purchaser if (A) any of
the conditions set forth in Sections 6.2 or 6.3 shall not have been,
or if it becomes apparent that any of such conditions will not be,
fulfilled by 5:00 p.m. New York City time on January 23, 2000 or (B)
the operating profit before head office charges and extraordinary
items (as defined in GAAP) for the Target Company Group for the year
ended December 31, 1998 shown in the Audited Financial Statements is
more than five percent (5%) higher than the operating profit before
head office charges for the Target Company Group for such period shown
in the unaudited Financial Statements delivered pursuant to Section
2.5;
PROVIDED, HOWEVER, that the party seeking termination pursuant to the foregoing
clauses (ii), (iii) or (iv) is not in breach in any material respect of any of
its representations, warranties, covenants or agreements contained in this
Agreement, other than the representations and warranties set forth in Section
2.5 with respect to the unaudited Financial Statements for the years ended
December 31, 1996, 1997 and 1998 if Sellers terminate pursuant to subclause (B)
of clause (iv) above.
(b) In the event of termination by the Sellers, on the one hand, or
the Purchaser, on the other hand, pursuant to this Section 8.5, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by any
party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(i) the Purchaser shall return to the Sellers all documents and
other materials received from the Sellers, their Affiliates or their
agents (including all copies of or materials developed from any such
documents or other materials) relating to the transactions
contemplated hereby, whether obtained before or after the execution
hereof; and
(ii) all confidential information received by the Purchaser with
respect to the Sellers and their Affiliates shall be treated in
accordance with the Confidentiality Agreement which shall remain in
full force and effect notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated as provided in this Section 8.5,
this Agreement shall become null and void and of no further force or effect,
except for the Confidentiality Agreement, Section 4.5 relating to publicity and
Section 8.6 relating to certain expenses; PROVIDED that nothing in this Section
8.5 shall be deemed to release the Sellers, on the one hand, or the Purchaser,
on the other hand, from any liability for any breach by any of the Sellers or
the Purchaser, as the case may be, of the terms and provisions of this Agreement
or to impair the right of any party to compel specific
-68-
<PAGE> 78
performance by any of the Sellers or the Purchaser, as the case may be, of their
respective obligations under this Agreement.
8.6 EXPENSES. Except as expressly provided herein, whether or not the
transactions contemplated herein shall be consummated, each party shall pay its
own expenses incident to the preparation and performance of this Agreement and
the Ancillary Agreements.
8.7 FURTHER ACTIONS. Each party shall execute and deliver such
certificates and other documents and take such other actions as may reasonably
be requested by the other party in order to consummate or implement the
transactions contemplated hereby.
8.8 POST-CLOSING ACCESS. In connection with any matter relating to any
period prior to, or any period ending on, the Closing, the Purchaser shall (and
shall cause its Affiliates to), upon the reasonable request of the Sellers,
permit the Sellers and their representatives full access at all reasonable times
to the books and records of each member of the Target Company Group which shall
have been transferred to the Purchaser, and the Purchaser shall execute (and
shall cause each member of the Target Company Group to execute) such documents
as the Sellers may reasonably request to enable the Sellers to file any required
reports or Returns relating to such member. Subject to Section 4.4.8 of this
Agreement, the Purchaser may dispose of such books and records at any time,
PROVIDED that for the six-year period beginning with the Closing Date, the
Purchaser shall give 30 days' prior written notice of any such destruction to
the Sellers, and the Sellers shall have the right to take possession of such
books and records within 60 days at no expense to the Purchaser.
8.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as follows: (a) if sent by registered or certified mail in the United
States return receipt requested, upon receipt; (b) if sent by reputable
overnight air courier (such as DHL or Federal Express), two business days after
mailing; (c) if sent by facsimile transmission, with a copy mailed on the same
day in the manner provided in (a) or (b) above, when transmitted and receipt is
confirmed by telephone; or (d) if otherwise actually personally delivered, when
delivered and shall be delivered as follows:
if to any of the Sellers, to such Seller:
c/o Bowthorpe plc
Gatwick Road
Crawley, West Sussex
RH102RZ, United Kingdom
Fax Number: 011-44-129-351-0927
Attention: Company Secretary
-69-
<PAGE> 79
with a copy to (which shall not constitute notice):
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax Number: (212) 909-6836
Attention: Robert Quaintance, Esq.
if to the Purchaser:
Aavid Thermal Technologies, Inc.
One Eagle Square
Suite 509
Concord, New Hampshire 03301
Fax Number: (603) 224-6673
Attention: Ronald F. Borelli, Chairman and
Chief Executive Officer
with copies to (which shall not constitute notice):
Aavid Thermal Technologies, Inc.
One Eagle Square
Suite 509
Concord, New Hampshire 03301
Fax Number: (603) 224-6673
Attention: John Mitchell, Esq., Vice President and
General Counsel
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103-3198
Fax Number: (212) 752-5958
Attention: Paul Jacobs, Esq.
or to such other address or fax number or to such other person as either party
hereto shall have last designated by notice to the other party.
8.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but shall not be assignable, by operation of law or otherwise, by any
of the Sellers, on the one hand, or the Purchaser, on the other hand, without
the prior written consent of the Sellers or the Purchaser, as the case may be,
and any purported assignment or other transfer without such consent shall be
void and unenforceable; PROVIDED that no such consent shall be required for the
Purchaser (I) to assign all or any part of its rights and obligations under this
Agreement to one or more of its Affiliates, PROVIDED that no such assignment
shall relieve the Purchaser of its obligations hereunder and each such assignee
shall execute and deliver to
-70-
<PAGE> 80
the Sellers an assumption agreement in form and substance reasonably
satisfactory to the Sellers pursuant to which such assignee becomes jointly and
severally obligated hereunder with the Purchaser or (II) to grant a security
interest in its rights hereunder to CIBC or any other financial institution
extending credit to Purchaser and its Affiliates and for the enforcement of all
rights and remedies in connection herewith.
8.11 NO THIRD PARTY BENEFICIARIES. Except as otherwise provided
herein, nothing in this Agreement shall confer any rights upon any person or
entity which is not a party or a successor or permitted assignee of a party to
this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
8.13 INTERPRETATION. The Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. As used
in this Agreement, the term "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, a limited liability
company, an association, an unincorporated organization or any other entity or
organization, including a government or any department or agency thereof. Any
references to the knowledge of any Seller or any Seller's knowledge or any
similar formulation shall mean the actual knowledge of each of Greg Shaw, Carl
Sheffer, Richard Atkinson, Robin Johnson, Gary Boldry, Raul Herrera Trevino,
C.L. Wu, Derek Ma, Luca Rossi, Irene Ortzi, K.H. Tan, Peter Maier, Klaus
Elsasser, Adrian Girling and Robert McEwan, in each case after due inquiry,
including inquiry of other officers and employees of the Sellers and the Target
Company Group responsible for the relevant matter. References herein to a
particular schedule shall be deemed to refer to the versions of such schedule
relating to each jurisdiction, and general disclosure relating to the Target
Company Group as a whole contained in one Schedule shall be deemed to apply to
all Schedules. The disclosure of any matter in the Schedules hereto shall be
deemed to be a disclosure for all purposes of this Agreement to which such
matter could reasonably be likely to be pertinent, but shall expressly not be
deemed to constitute an admission by any Seller or the Purchaser, or to
otherwise imply, that any such matter is material for the purposes of this
Agreement or that such matter is required to be disclosed or that the existence
of such would if not disclosed constitute a breach or violation of this
Agreement. However, no disclosure in a Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Schedule identifies and describes the exception with such detail as would allow
a reasonable person to understand what exception is being taken. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the
-71-
<PAGE> 81
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
8.14 GOVERNING LAW. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
8.15 CONSENT TO JURISDICTION, ETC. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or for recognition or enforcement of any judgment relating thereto, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the
Ancillary Agreements or the transactions contemplated hereby or thereby in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.9. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
8.16 WAIVER OF JURY TRIAL. (a) EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY AGREEMENTS
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) IT UNDERSTANDS
-72-
<PAGE> 82
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 8.16.
-73-
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
BOWTHORPE PLC
By: /s/ Nicholas Brookes
----------------------------------
Name Nicholas Brookes
Title Chief Executive Officer
BOWTHORPE B.V.
By: /s/ Paul Eardley
----------------------------------
Name Paul Eardley
Title Duly Authorized Attorney
BOWTHORPE INTERNATIONAL INC.
By: /s/ Frank V. Pizzi
----------------------------------
Name Frank V. Pizzi
Title Assistant Secretary
BOWTHORPE GMBH
By: /s/ Paul Eardley
----------------------------------
Name Paul Eardley
Title Duly Authorized Attorney
AAVID THERMAL TECHNOLOGIES, INC.
By: /s/ Ronald L. Borelli
----------------------------------
Name Ronald L. Borelli
Title Chief Executive Officer
-74-
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AMONG
HEAT HOLDINGS CORP.,
HEAT MERGER CORP.
AND
AAVID THERMAL TECHNOLOGIES, INC.
DATED AS OF AUGUST 23, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE 1 - THE MERGER...................................................................................1
1.1. The Merger......................................................................................1
1.2. The Closing.....................................................................................1
1.3. Effective Time..................................................................................1
1.4. Actions by the Company..........................................................................2
ARTICLE 2 - CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.........................3
2.1. Certificate of Incorporation....................................................................3
2.2. Bylaws..........................................................................................3
ARTICLE 3 - DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION..........................................3
3.1. Directors.......................................................................................3
3.2. Officers........................................................................................3
ARTICLE 4 - EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY.............................3
4.1. Merger Sub Stock................................................................................3
4.2. Company Securities..............................................................................3
4.3. Exchange of Certificates Representing Common Stock..............................................5
4.4. Adjustment of Merger Consideration..............................................................6
4.5. Dissenting Company Stockholders.................................................................6
ARTICLE 5 - THE OFFER....................................................................................7
5.1. The Offer.......................................................................................7
5.2. Actions by Purchaser and Merger Sub.............................................................8
5.3. Company Actions................................................................................10
5.4. Directors......................................................................................11
5.5. Merger without Meeting of Stockholders.........................................................12
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................12
6.1. Existence, Good Standing, Corporate Authority..................................................12
6.2. Authorization, Validity and Effect of Agreements...............................................13
6.3. Compliance with Laws...........................................................................13
6.4. Capitalization.................................................................................13
6.5. Subsidiaries...................................................................................14
6.6. No Violation...................................................................................15
6.7. Company Reports................................................................................15
6.8. Financial Statements...........................................................................15
6.9. Litigation.....................................................................................16
6.10. Absence of Certain Changes.....................................................................16
6.11. Taxes..........................................................................................18
6.12. Employee Benefit Plans.........................................................................19
6.13. Labor and Employment Matters...................................................................21
6.14. Brokers........................................................................................22
6.15. Licenses and Permits...........................................................................22
6.16. Intellectual Property..........................................................................22
6.17. Environmental Compliance and Disclosure........................................................24
6.18. Title to Assets................................................................................25
6.19. Material Contracts.............................................................................25
6.20. Required Vote of Company Stockholders..........................................................26
6.21. Inapplicability of Certain Restrictions........................................................26
6.22. Rights Plan....................................................................................26
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB..................................26
7.1. Existence, Good Standing, Corporate Authority..................................................26
7.2. Authorization, Validity and Effect of Agreements...............................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
7.3. No Violation...................................................................................27
7.4. Brokers, Finders or Financial Advisors.........................................................28
7.5. No Prior Activities............................................................................28
7.6. Financing......................................................................................28
7.7. Litigation.....................................................................................28
ARTICLE 8 - COVENANTS...................................................................................28
8.1. No Solicitation................................................................................29
8.2. Interim Operations.............................................................................31
8.3. Company Stockholder Approval, Proxy Statement..................................................34
8.4. Filings, Notices, Other Actions................................................................35
8.5. Access to Information..........................................................................36
8.6. Publicity......................................................................................36
8.7. Further Action; Cooperation Concerning Certain Litigation......................................37
8.8. Insurance, Indemnity...........................................................................37
8.9. Employee Benefit Plans.........................................................................39
ARTICLE 9 - CONDITIONS..................................................................................40
9.1. Conditions to Each Party's Obligation to Effect the Merger.....................................40
9.2. Conditions to the Obligations of Purchaser.....................................................41
ARTICLE 10 - TERMINATION, AMENDMENT, WAIVER.............................................................41
10.1. Termination....................................................................................41
10.2. Effect of Termination..........................................................................43
10.3. Amendment......................................................................................43
10.4. Extension; Waiver..............................................................................43
ARTICLE 11 - GENERAL PROVISIONS.........................................................................44
11.1. Nonsurvival of Representations and Warranties..................................................44
11.2. Notices........................................................................................44
11.3. Assignment, Binding Effect.....................................................................44
11.4. Entire Agreement...............................................................................45
11.5. Fees and Expenses..............................................................................45
11.6. Governing Law..................................................................................45
11.7. Headings.......................................................................................45
11.8. Interpretation.................................................................................45
11.9. Investigations.................................................................................46
11.10.Severability...................................................................................46
11.11.Enforcement of Agreement.......................................................................46
11.12.Counterparts...................................................................................47
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 23,
1999, between Heat Holdings Corp., a Delaware corporation ("Purchaser"), Heat
Merger Corp., a Delaware corporation and a wholly owned subsidiary of Purchaser
("Merger Sub"), and Aavid Thermal Technologies, Inc., a Delaware corporation
(the "Company").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
determined that it is in the best interests of their respective companies and
stockholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth in this Agreement.
WHEREAS, the parties to this Agreement desire to make certain
representations, warranties, covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties to this Agreement hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into the Company in accordance with this Agreement and the applicable
provisions of the General Corporation Law of the State of Delaware (the "DGCL"),
and the separate corporate existence of Merger Sub shall thereupon cease (the
"Merger"). The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"). The Merger
shall have the effects specified in the DGCL.
1.2. THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Bartlit Beck Herman Palenchar & Scott, 54 W. Hubbard Street, Chicago, Illinois,
at 10:00 a.m., local time, as soon as practicable following the satisfaction (or
waiver if permissible) of the conditions set forth in Article 9. The date on
which the Closing occurs is hereinafter referred to as the "Closing Date."
1.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance with this Agreement
and this Agreement shall not have been terminated as provided in Article 10, the
parties to this Agreement shall cause a Certificate of Merger meeting the
requirements of Section 251
1
<PAGE> 5
of the DGCL to be properly executed and filed in accordance with such Section on
the Closing Date. The Merger shall become effective at the time of filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the DGCL or at such later time which the parties to this
Agreement shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time"). From and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and Merger Sub, all as provided under the DGCL.
1.4. ACTIONS BY THE COMPANY. The Company hereby approves of and consents to
the Offer (as defined below), the Voting Agreements between Merger Sub and
certain of the Company's stockholders pursuant to which, among other things,
each such stockholder has agreed to vote all of his or its shares of the Common
Stock of the Company, par value $.01 per share (the "Common Stock"), in favor of
this Agreement and the Merger (the "Voting Agreements") and the Merger and
represents and warrants that the Board of Directors of the Company (the "Board
of Directors" or the "Board") at a meeting duly called and held has duly
adopted, by unanimous vote (with one director not present), resolutions (i)
approving this Agreement, the Offer and the Merger which approval satisfies in
full the requirements of the DGCL and the Certificate of Incorporation of the
Company with respect to the requisite approval of the board of directors, (ii)
approving the Voting Agreements for the purposes of Section 203 of the DGCL, and
(iii) determining that the Merger is advisable and that the terms of the Offer
and Merger are fair to, and in the best interests of, the Company's stockholders
and recommending that the Company's stockholders accept the Offer and approve
the Merger and this Agreement; provided, that such recommendations may be
withdrawn, modified or amended following receipt of an Acquisition Proposal (as
defined in Section 8.1) if the Company has complied with the provisions of
Section 8.1. The Company further represents and warrants that the Board of
Directors has received the written opinion of Hambrecht & Quist, LLC (the
"Financial Advisor") that, as of the date of such opinion and subject to the
limitations set forth therein, the proposed Merger Consideration (as defined
below) or the Offer Consideration (as defined below), as the case may be, to be
received by the holders of shares of Common Stock pursuant to the Merger and the
Offer is fair to such holders from a financial point of view (the "Fairness
Opinion"). The Company hereby consents to the inclusion in the Proxy Statement
(as defined below) and the Offer Documents (as defined below) of the
recommendation of the Board of Directors described in the first sentence of this
Section 1.4. The Company hereby represents and warrants that it has been
authorized by the Financial Advisor to permit, subject to prior review and
consent by the Financial Advisor (such consent not to be unreasonably withheld),
references to the Fairness Opinion in the Offer Documents and the Schedule 14D-9
(as defined below) and the inclusion of the Fairness Opinion in the Proxy
Statement.
2
<PAGE> 6
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation shall be the Certificate of Incorporation of Merger Sub
(except that the name of the Surviving Corporation shall be Aavid Thermal
Technologies, Inc.), until duly amended in accordance with applicable law.
2.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
3.2. OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY
4.1. MERGER SUB STOCK. At the Effective Time, each share of common stock,
$.01 par value per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $.01 par value per share,
of the Surviving Corporation.
4.2. COMPANY SECURITIES.
(a) At the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of Common
Stock owned by Purchaser or Merger Sub or held by the Company, all of which
shall be cancelled, and other than shares of Dissenting Common Stock (as defined
below)) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive the Merger Consideration
from the Surviving
3
<PAGE> 7
Corporation. For purposes of this Agreement, the "Merger Consideration" shall
mean either (i) if the Company has consummated the transactions contemplated by
that certain Stock Purchase Agreement dated as of August 23, 1999 among the
Company, Bowthorpe plc, Bowthorpe B.V., Bowthorpe International Inc., and
Bowthorpe GmbH, as in effect on the date of this Agreement or as subsequently
amended with the prior consent of the Purchaser (the "Thermalloy Agreement"),
$25.50 per share of Common Stock or, (ii) if the Thermalloy Agreement has been
terminated prior to the consummation of the transactions contemplated thereby,
the Offer Consideration (as defined below), in each case in cash, without
interest.
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Common Stock converted in
accordance with Section 4.2(a) shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist, and each holder of shares of
Common Stock converted in accordance with Section 4.2(a) shall thereafter cease
to have any rights with respect to such shares of Common Stock, except the right
to receive, without interest, the Merger Consideration in accordance with
Section 4.3 upon the surrender of a certificate or certificates (a
"Certificate") representing such shares of Common Stock.
(c) Each share of Common Stock issued and held in the Company's treasury at
the Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be cancelled and retired without payment of any consideration therefor.
(d) (i) At or immediately prior to the Effective Time, each outstanding
employee stock option ("Options") to purchase shares of Common Stock granted
under any employee stock option or compensation plan or arrangement of the
Company (collectively, the "Stock Option Plans") shall be canceled, and each
holder of any such Option, whether or not then vested or exercisable, shall be
paid by the Company promptly after the Effective Time for each such Option an
amount determined by multiplying (x) the excess, if any, of the Merger
Consideration over the applicable per share exercise price of such Option by (y)
the number of shares of Common Stock such holder could have purchased (assuming
full vesting of all Options) had such holder exercised such Option in full
immediately prior to the Effective Time.
(ii) Prior to the Effective Time, the Company shall use its reasonable
best efforts (x) to obtain any consents from holders of Options to purchase
shares of Common Stock granted under the Stock Option Plans and (y) make any
amendments to the terms of the Stock Option Plans that, in the case of either
clauses 4.2(d)(ii)(x) or 4.2(d)(ii)(y), are necessary to give effect to the
transactions contemplated by Section 4.2(d)(i). Notwithstanding any other
provision of this Section 4.2(d), payment may be withheld in respect of any
Option until necessary consents are obtained.
(iii) At the Effective Time each outstanding warrant or similar right
(other than the Options) to purchase or otherwise acquire shares of Common Stock
(a "Company Warrant") shall be converted into and be exchangeable for the right
to receive, in lieu of the shares of Common Stock theretofore purchasable upon
the exercise of the
4
<PAGE> 8
Company Warrant, an amount in cash equal to the product of (i) the excess, if
any, of the Merger Consideration over the per share exercise price for one share
of Common Stock subject to such Company Warrant multiplied by (ii) the number of
shares of Common Stock subject to such Company Warrant. At the Effective Time,
each Company Warrant with an exercise price equal to or greater than the Merger
Consideration shall be terminated without payment of any consideration. Prior to
the Effective Time, the Company shall use its reasonable best efforts to obtain
any necessary consents of each holder of a Company Warrant to the transactions
contemplated by this Section 4.2(d)(iii). The Company shall provide to each
holder of a Company Warrant any required notice under the Company Warrant.
4.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK.
(a) Prior to the Effective Time, Purchaser shall appoint a commercial bank
or trust company having net capital of not less than $20 billion, or such other
party reasonably satisfactory to the Company, to act as paying agent hereunder
for payment of the Merger Consideration upon surrender of Certificates (the
"Paying Agent"). Purchaser shall, or shall cause the Surviving Corporation to,
provide the Paying Agent with cash in amounts necessary to pay for all the
shares of Common Stock pursuant to Section 4.2(a) as and when such amounts are
needed by the Paying Agent. Such amounts shall hereinafter be referred to as the
"Exchange Fund." The Exchange Fund shall not be used for any other purpose than
as specified in this Section 4.3(a).
(b) Promptly after the Effective Time, Purchaser shall cause the Paying
Agent to mail to each holder of record of shares of Common Stock (other than
holders of shares of Dissenting Common Stock) (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to
such Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and which letter shall be in such form and have such other
provisions as Purchaser may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate to the Paying Agent together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificate shall promptly receive in
exchange therefor the amount of cash into which shares of Common Stock
previously represented by such Certificate shall have been converted pursuant to
Section 4.2, and the shares represented by the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or will accrue on the cash
payable upon surrender of any Certificate. In the event of a transfer of
ownership of Common Stock which 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 the Certificate representing such shares of Common Stock is
presented to the Paying Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
5
<PAGE> 9
(c) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Common Stock which 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 4.
(d) Any portion of the Exchange Fund (including the proceeds of any
interest and other income received by the Paying Agent in respect of all such
funds) that remains unclaimed by the former stockholders of the Company nine
months after the Effective Time shall be delivered to the Surviving Corporation
(subject to abandoned property, escheat or similar laws). Any former
stockholders of the Company who have not previously complied with this Article 4
shall thereafter look only to the Surviving Corporation (subject to abandoned
property, escheat or similar laws) for payment of any Merger Consideration that
may be payable in respect of each share of Common Stock such stockholder holds
as determined pursuant to this Agreement, without any interest thereon. Any
amounts remaining unclaimed by holders of Common Stock two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation free and clear of any claims or interest of any Person
(as defined in Section 11.8) previously entitled thereto.
(e) None of Purchaser, the Company, the Surviving Corporation, the Paying
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.
(f) If 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 required by the Surviving Corporation, the
posting by such Person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration payable in
respect thereof pursuant to this Agreement.
4.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Common
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 Merger Consideration shall be appropriately
adjusted.
4.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of this
Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, shares of Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of
6
<PAGE> 10
Common Stock who have properly exercised appraisal rights with respect thereto
in accordance with Section 262 of the DGCL (the "Dissenting Common Stock") will
not be exchangeable for the right to receive the Merger Consideration, and
holders of such shares of Dissenting Common Stock will be entitled to receive
payment of the appraised value of such shares of Common Stock in accordance with
the provisions of such Section 262 unless and until such holders fail to perfect
or effectively withdraw or lose their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such shares of Common Stock will
thereupon be treated as if they had been converted into and had become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Purchaser
prompt notice of any demands received by the Company for appraisals of shares of
Common Stock. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands unless such payment is ordered by a court
of competent jurisdiction which order is final and non-appealable.
ARTICLE 5
THE OFFER
5.1 THE OFFER. Subject to the provisions of this Agreement and this
Agreement not having been terminated, if the Thermalloy Agreement is terminated
prior to the Company's consummation of the transactions contemplated thereby,
then Merger Sub may, upon written notice to the Company (the "Purchaser
Notice"), and shall if the Company so requests in writing (the "Company
Request") (and the Purchaser shall cause Merger Sub to), commence, within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "Exchange Act"), as
promptly as practicable but in no event later than five business days after
giving the Purchaser Notice or receiving the Company Request, an offer to
purchase all of the outstanding shares of Common Stock at a price (the "Offer
Consideration") of $24.50 per share of Common Stock net to the seller in cash
(the "Offer"). Subject to the conditions set forth in EXHIBIT A, Merger Sub
shall not withdraw the Offer and shall purchase all Common Stock duly tendered
and not withdrawn. The obligation of Merger Sub to, and of Purchaser to cause
Merger Sub to, accept for payment, and pay for, any shares of Common Stock
tendered pursuant to the Offer shall be subject only to the condition that there
shall have been validly tendered in accordance with the terms of the Offer prior
to the expiration date of the Offer and not withdrawn a number of shares of
Common Stock which, together with the shares then owned by Purchaser or Merger
Sub, represents at least a majority of the shares of Common Stock outstanding on
a fully diluted basis (the "Minimum Condition"), and to the other conditions set
forth in Exhibit A to this Agreement and subject to the terms and conditions of
this Agreement. For purposes of this Agreement, "on a fully diluted basis"
means, as of any date, the number of shares of Common Stock outstanding,
together with the number of shares of Common Stock the Company is then required
to issue pursuant to obligations outstanding at that date under the Stock Option
Plans or otherwise
7
<PAGE> 11
(assuming all Options and other rights to acquire Common Stock are fully vested
and exercisable and all Common Stock issuable at any time thereunder has been
issued). Subject to the provisions of the Offer, the Offer shall expire 20
business days (as defined in Rule 14d-1(c)(6) promulgated under the Exchange
Act) after the date of its commencement, unless this Agreement is terminated in
accordance with Article 10, in which case the Offer (whether or not previously
extended in accordance with the terms of this Agreement) shall expire on such
date of termination. Merger Sub expressly reserves the right to extend the Offer
and to waive the Minimum Condition or any of the other conditions to the Offer
and to make any change in the terms or conditions of the Offer; provided that
the Merger Sub shall not waive the Minimum Condition without the consent of the
Company; and provided further that no change may be made which changes the form
of consideration to be paid or decreases the price per share of Common Stock or
the number of shares sought in the Offer or which, except as provided in the
next sentence, extends the Offer or which modifies or imposes conditions to the
Offer in addition to those set forth in Exhibit A or which otherwise materially
and adversely affects the Company or the holders of the Common Stock.
Notwithstanding the foregoing, Merger Sub may, without the consent of the
Company, (i) extend the Offer on one or more occasions for not more than 10
business days for each such extension beyond the scheduled expiration date (the
initial scheduled expiration date being 20 business days following commencement
of the Offer), if at the scheduled expiration date of the Offer any of the
conditions to Merger Sub's obligation to accept for payment, and pay for, shares
of Company Common Stock shall not be satisfied or waived, until such time as
such conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iii) extend the Offer for an aggregate period of not more than 15 business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence if there shall not have been tendered
sufficient shares of Common Stock so that the Merger could be effected as
provided in Section 5.5. Subject to the terms and conditions of the Offer and
this Agreement, Merger Sub shall, and Purchaser shall cause Merger Sub to,
accept for payment, and pay for, all shares of Common Stock validly tendered and
not withdrawn pursuant to the Offer that Merger Sub becomes obligated to accept
for payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
5.2. ACTIONS BY PURCHASER AND MERGER SUB. As soon as reasonably practicable
following receipt of the Company Request or giving of the Purchaser Notice, but
in no event later than five business days from such date, Purchaser and Merger
Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer, which shall contain an offer to purchase and a related
letter of transmittal and any other ancillary documents pursuant to which the
Offer shall be made (such Schedule 14D-1 and the documents therein pursuant to
which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents"). The Company and its counsel shall be given an
opportunity to review and comment on the Schedule 14D-1 and each amendment and
supplement thereto, in each case prior to the filing thereof with the SEC. The
Offer Documents shall comply as to form in all
8
<PAGE> 12
material respects with the requirements of the Exchange Act, and on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Purchaser or Merger Sub with respect to information
supplied by or on behalf of the Company for inclusion in the Offer Documents.
Each of Purchaser, Merger Sub and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Purchaser, Merger Sub and the Company further agrees to
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of shares of Common Stock,
in each case as and to the extent required by applicable federal securities
laws. Purchaser and Merger Sub agree to provide the Company and its counsel in
writing with any comments Purchaser, Merger Sub or their counsel may receive
from the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments and with copies of any written responses and telephonic
notification of any verbal responses by Purchaser, Merger Sub or their counsel.
Purchaser shall provide or cause to be provided to Merger Sub on a timely
basis the funds necessary to accept for payment, and pay for, any shares of
Common Stock that Merger Sub becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
None of the information supplied by Purchaser or Merger Sub for inclusion
or incorporation by reference in the Schedule 14D-9 (as defined below) or the
Information Statement (as defined below) will, at the respective times such
documents are filed with the SEC or first published, sent or given to the
Company stockholders, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time either
Purchaser or Merger Sub shall obtain knowledge of any facts with respect to
itself, any of its officers and directors or any of its Subsidiaries that would
require the supplement or amendment to any of the foregoing documents in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or to comply with applicable Laws (as defined
below), such amendment or supplement shall be promptly filed with the SEC and,
as required by Law, disseminated to the stockholders of the Company, and in the
event the Company shall advise Purchaser or Merger Sub as to its obtaining
knowledge of any facts that would make it necessary to supplement or amend any
of the foregoing documents, Purchaser or Merger Sub shall promptly amend or
supplement such document as required and distribute the same to the stockholders
of the Company.
9
<PAGE> 13
5.3. COMPANY ACTIONS.
(a) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the recommendations described in the
first sentence of Section 1.4 above and shall mail the Schedule 14D-9 to the
stockholders of the Company. The Company shall cooperate with Purchaser in
mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. Purchaser and its counsel shall be
given an opportunity to review and comment upon the Schedule 14D-9 and each
amendment and supplement thereto prior to the filing thereof with the SEC. The
Company covenants that none of the Schedule 14D-9, the information statement, if
any, filed by the Company in connection with the Offer pursuant to Rule 14f-1
under the Exchange Act (the "Information Statement"), any schedule required to
be filed by the Company with the SEC in connection with the Offer or any
amendment or supplement thereto, at the respective times such documents are
filed with the SEC or first published, sent or given to the Company's
stockholders, will contain any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading except that no representation is made by the
Company with respect to information supplied by Purchaser or Merger Sub for
inclusion in the Schedule 14D-9 or Information Statement or any schedule,
amendment or supplement. The Company covenants that none of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Offer Documents will, at the date of filing with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the Company, Purchaser and Merger Sub agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of shares of Common Stock, in each case as and to
the extent required by applicable federal securities laws. The Company agrees to
provide Purchaser and Merger Sub and their counsel in writing with any comments
the Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments and with copies
of any written responses and telephonic notification of any verbal responses by
the Company or its counsel.
(b) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
Persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to Merger Sub such
information and assistance (including updated lists of
10
<PAGE> 14
stockholders, security position listings and computer files) as Merger Sub may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Purchaser and Merger Sub and each of their
affiliates and associates shall hold in confidence the information contained in
any of such labels, lists and files, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated,
shall promptly deliver to the Company all copies of such information then in
their possession.
(c) Subject to the terms and conditions of this Agreement, if there shall
occur a change in law or in a binding judicial interpretation of existing law
which would, in the absence of action by the Company or the Board, prevent the
Merger Sub, were it to acquire a specified percentage of the shares of Common
Stock then outstanding, from approving and adopting this Agreement by its
affirmative vote as the holder of a majority of the shares of Common Stock and
without the affirmative vote of any other stockholder, the Company will use its
reasonable best efforts to promptly take or cause such action to be taken unless
the Board of Directors of the Company in good faith determines, after
consultation with outside counsel, that taking or causing such action to be
taken would violate the fiduciary duties of the Board of Directors to the
stockholders of the Company under applicable law.
5.4. DIRECTORS.
(a) Promptly upon the purchase of shares of Common Stock pursuant to the
Offer, Purchaser shall be entitled to designate such number of directors,
rounded up to the next whole number, as will give Purchaser representation on
the Board of Directors equal to the product of (i) the number of directors on
the Board of Directors and (ii) the percentage that the number of shares of
Common Stock purchased by Merger Sub or Purchaser or any affiliate bears to the
number of shares of Common Stock outstanding (the "Percentage"), and the Company
shall, upon request by Purchaser, promptly increase the size of the Board of
Directors and/or exercise its reasonable best efforts to secure the resignations
of such number of directors as is necessary to enable Purchaser's designees to
be elected to the Board of Directors and shall take all actions available to the
Company to cause Purchaser's designees to be so elected. At the request of
Purchaser, the Company will use its best efforts to cause such individuals
designated by Purchaser to constitute the same Percentage of (i) each committee
of the Board, (ii) the board of directors of each of the Company's Subsidiaries
and (iii) the committees of each such board of directors. The Company's
obligations to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Exchange Act. The Company shall take, at its expense, all
action necessary to effect any such election, and shall include in the Schedule
14D-9 the information required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. Purchaser will supply to Company in writing and be
solely responsible for any information with respect to itself and its nominees,
directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding the foregoing, the parties to this Agreement shall use their
respective reasonable best efforts to ensure that at least two of
11
<PAGE> 15
the members of the Board of Directors shall at all times prior to the Effective
Time be Continuing Directors (as defined below); provided that, in such event,
if the number of Continuing Directors shall be reduced below two for any reason
whatsoever, the remaining Continuing Director shall be entitled to designate an
individual to fill such vacancy who shall be deemed to be a Continuing Director
for purposes of this Agreement or, if no Continuing Director then remains, the
other directors shall designate two individuals to fill such vacancies who shall
not be officers of the Company or stockholders, directors, officers, employees,
affiliates or associates of Merger Sub or Purchaser or any of their affiliates
or associates and such persons shall be deemed to be Continuing Directors for
purposes of this Agreement.
(b) Following the election or appointment of Purchaser's designees pursuant
to this Section 5.4 and prior to the Effective Time, the approval of a majority
of the directors of the Company then in office who are not designated by
Purchaser (the "Continuing Directors") shall be required to authorize (and such
authorization shall constitute the authorization of the Board of Directors and
no other action on the part of the Company, including any action by any other
director of the Company, shall be required to authorize) any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Board of Directors, any extension of time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, any exercise of any of the
Company's rights, benefits or remedies hereunder, and any waiver of compliance
with any of the agreements or conditions contained in this Agreement for the
benefit of the Company.
5.5. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the foregoing,
if Merger Sub, or any other direct or indirect Subsidiary of Purchaser, shall
acquire at least 90 percent of the outstanding shares of Common Stock, the
parties to this Agreement shall take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the expiration
of the Offer without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Merger Sub as
follows:
6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of the Company and
its Subsidiaries (as defined in Section 11.8) is (i) a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and (ii) is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the character of the properties owned
or leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified
12
<PAGE> 16
or to be in good standing, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (as defined in Section
11.8). Each of the Company and its Significant Subsidiaries (as defined in
Section 11.8) has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted, except
where the failure to have such power and authority, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Company has previously delivered to Purchaser true and correct copies of the
Company's Certificate of Incorporation and Bylaws as currently in effect.
6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby or executed in connection
herewith (the "Ancillary Documents") and subject to obtaining any necessary
stockholder approval of the Merger, to consummate the transactions contemplated
hereby and thereby, and to enter into and consummate the transactions
contemplated by the Thermalloy Agreement. The execution and delivery of this
Agreement and the Ancillary Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and the
Ancillary Documents or to consummate the transactions contemplated hereby and
thereby (other than the approval of this Agreement by the holders of a majority
of the shares of Common Stock if required by applicable law). This Agreement has
been, and any Ancillary Document at the time of execution will have been, duly
and validly executed and delivered by the Company, and (assuming this Agreement
and such Ancillary Documents each constitutes a valid and binding obligation of
Purchaser and Merger Sub) constitutes and will constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
6.3. COMPLIANCE WITH LAWS. Except as set forth in the Company Reports (as
defined below), each of the Company and its Subsidiaries (as defined in Section
11.8) is in compliance with all applicable foreign, federal, state or local
laws, statutes, ordinances, rules, regulations, orders, judgments, rulings and
decrees ("Laws") of any foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority or any court,
arbitration, board or tribunal ("Governmental Entity"), except where the failure
to be in compliance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
6.4. CAPITALIZATION. The authorized capital stock of the Company consists
of 25,000,000 shares of Common Stock, $.01 par value, and 4,000,000 shares of
preferred stock, $.01 par value ("Preferred Stock"). As of August 16, 1999, (a)
9,599,828 shares of Common Stock were issued and outstanding, (b) Options and
Company Warrants to purchase an aggregate of 1,461,302 shares of Common Stock
were outstanding and there are no stock appreciation rights or limited stock
appreciation rights outstanding other than those attached to such Options, (c)
no shares of Common Stock
13
<PAGE> 17
were held by the Company in its treasury, (d) no shares of capital stock of the
Company were held by the Company's Subsidiaries and (e) no shares of Preferred
Stock were issued and outstanding. The Company has no outstanding bonds,
debentures, notes or other obligations entitling the holders thereof to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter. Since August 16, 1999,
the Company (i) has not issued any shares of Common Stock, other than upon the
exercise of Options and the Company Warrants and as permitted under the ESPP (as
defined in Section 8.9(c)), (ii) has granted no Options to purchase shares of
Common Stock under the Stock Option Plans or otherwise, other than as permitted
under the ESPP, and (iii) has not split, combined or reclassified any of its
shares of capital stock. All issued and outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in this Section 6.4 or in Schedule 6.4,
there are no other shares of capital stock or voting securities of the Company,
and no existing options, warrants, calls, subscriptions, convertible securities,
or other rights, agreements or commitments which obligate the Company or any of
its Subsidiaries to issue, transfer or sell any shares of capital stock of, or
equity interests in, the Company or any of its Subsidiaries. There are no
outstanding obligations of the Company or any Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company and there are no
performance awards outstanding under the Stock Option Plans or any other
outstanding stock related awards. After the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
capital stock of the Company or the Surviving Corporation pursuant to any
Company Benefit Arrangements (as defined in Section 6.12). There are no voting
trusts or other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of capital stock of the
Company or any of its Subsidiaries.
6.5. SUBSIDIARIES. Except as set forth in Schedule 6.5, (i) the Company
owns, directly or indirectly through a Subsidiary, all of the outstanding shares
of capital stock (or other ownership interests having by their terms ordinary
voting power to elect directors or others performing similar functions with
respect to such Subsidiary) of each of the Company's Subsidiaries, and (ii) each
of the outstanding shares of capital stock of each of the Company's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances ("Encumbrances") except (in the
case of Subsidiaries which are not Significant Subsidiaries) for Encumbrances
which individually or in the aggregate would not reasonably be expected to have
a Material Adverse Effect. Schedule 6.5 sets forth for each Subsidiary of the
Company: (i) its name and jurisdiction of incorporation or organization; (ii)
its authorized capital stock or share capital; (iii) the number of issued and
outstanding shares of capital stock or share capital; (iv) the holder or holders
of such shares; and (v) whether such Subsidiary is a Significant Subsidiary.
Except for interests in the Company's Subsidiaries or as set forth in Schedule
6.5, neither the Company nor any of its Subsidiaries owns directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or other entity.
14
<PAGE> 18
6.6. NO VIOLATION. Except as set forth in Schedule 6.6, neither the
execution and delivery by the Company of this Agreement or any of the Ancillary
Documents nor the consummation by the Company of the transactions contemplated
hereby or thereby will: (i) violate, conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of the Company or any
Subsidiary; (ii) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the triggering of any payment or other obligations pursuant to,
result in the creation of any Encumbrance upon any of the properties of the
Company or its Subsidiaries under, or result in there being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound (each, a "Contract" and collectively, "Contracts"), except
for any of the foregoing matters which individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect; (iii) other than
(a) the filings provided for in Section 1.3, (b) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and (c) the filings required under the Exchange Act and
the Securities Act of 1933, as amended (the "Securities Act"), require any
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Entity, the lack of which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect or by
Law prevent the consummation of the transactions contemplated hereby; and (iv)
violate any Laws applicable to the Company, any of its Subsidiaries or any of
their respective assets, except for violations which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect or
materially adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
6.7. COMPANY REPORTS. The Company has delivered to Purchaser each
registration statement, report, proxy statement or information statement (as
defined under the Exchange Act) prepared by it since January 1, 1997, each in
the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of their respective dates, (i) except
as set forth on Schedule 6.7, the Company Reports complied as to form in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations thereunder and (ii) the Company
Reports did not 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.
6.8. FINANCIAL STATEMENTS. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and its Quarterly Report on Form 10-Q for the six month period ended July 3,
15
<PAGE> 19
1999 (the "July 10-Q") fairly present in all material respects, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto and except as permitted by Form
10-Q under the Exchange Act with respect to the unaudited consolidated interim
financial statements), the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). Except as set forth in Schedule 6.8, neither the Company
nor any of its Subsidiaries has any liabilities or obligations, contingent or
otherwise, except (i) liabilities and obligations in the respective amounts
reflected or reserved against in the Company's consolidated balance sheet as of
July 3, 1999 (the "Most Recent Balance Sheet") included in the Company Reports
or (ii) liabilities and obligations incurred in the ordinary course of business
since July 3, 1999 which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect, or (iii) liabilities and
obligations under this Agreement, or (iv) liabilities and obligations under the
Thermalloy Agreement.
6.9. LITIGATION. Except as set forth in Schedule 6.9 or in the Company
Reports, (i) there are no claims, actions, suits, proceedings, arbitrations,
investigations or audits (collectively, "Litigation") by a Governmental Entity
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, at law or in equity, other than those in the ordinary
course of business which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect or which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the Offer or the Merger
or any of the other transactions contemplated hereby, and (ii) there are no
claims, actions, suits, proceedings, or arbitrations by a non-Governmental
Entity third party pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, at law or at equity, other than
those in the ordinary course of business which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth in the Company Reports, no Governmental Entity has indicated in
writing an intention to conduct any audit, investigation or other review with
respect to the Company or any of its Subsidiaries which investigation or review,
if adversely determined, individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
6.10. ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 6.10 or
in the Company Reports, since December 31, 1998, the Company and its
Subsidiaries have conducted their business only in the ordinary course of such
business consistent with past practices, and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts, which has had or reasonably would be expected to have a Material Adverse
Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
any
16
<PAGE> 20
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices;
(e) any creation or assumption by the Company or any Subsidiary of any
Encumbrance on any material asset which would impair the use thereof by the
Company in any material respect, other than in the ordinary course of business
consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than (i) loans, advances or capital contributions
to or investments in wholly-owned Subsidiaries made in the ordinary course of
business consistent with past practices, and (ii) travel and similar advances to
employees made in the ordinary course of business consistent with past
practices;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any Subsidiary
which, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other right,
in either case, material to the Company and the Subsidiaries taken as a whole,
other than (i) transactions and commitments in the ordinary course of business
consistent with past practice, (ii) those contemplated by this Agreement, and
(iii) those contemplated by the Thermalloy Agreement;
(i) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles;
(j) except as set forth on Schedule 6.10(j), any (i) grant of any severance
or termination pay to any director or officer of the Company or any Subsidiary,
(ii) entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director or
officer of the Company or any Subsidiary, (iii) increase in benefits payable
under any existing severance or termination pay policies or employment
agreements or (iv) increase in compensation,
17
<PAGE> 21
bonus or other benefits payable to directors or officers of the Company or any
Subsidiary, other than in the ordinary course of business consistent with past
practice;
(k) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary, which employees were not subject
to a collective bargaining agreement at December 31, 1998, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees; or
(l) any cancellation of any licenses, sublicenses, franchises, permits or
agreements to which the Company or any Subsidiary is a party, or any
notification to the Company or any Subsidiary that any party to any such
arrangements intends to cancel or not renew such arrangements beyond its
expiration date as in effect on the date hereof, which cancellation or
notification, individually or in the aggregate, has had or reasonably would be
expected to have a Material Adverse Effect.
6.11. TAXES.
(a) Except as set forth in Schedule 6.11, and except where the failure to
file such Return has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, all tax returns,
statements, reports and forms (including estimated tax returns and reports and
information returns and reports) required to be filed with any taxing authority
with respect to any tax period (or portion thereof) ending on or before the
Effective Time (a "Pre-Closing Tax Period") by or on behalf of the Company or
any Subsidiary of the Company (collectively, the "Returns"), were filed when due
(including any applicable extension periods) in accordance with all applicable
laws.
(b) Except as set forth in Schedule 6.11, the Company and its Subsidiaries
have timely paid, or withheld and remitted to the appropriate taxing authority,
all taxes required to be paid, withheld or remitted or shown as due and payable
on the Returns that have been filed, except where the failure to so pay or
withhold and remit has not had and would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.
(c) The charges, accruals and reserves for taxes with respect to the
Company and any Subsidiary for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed) reflected on the
books of the Company and its Subsidiaries (excluding any provision for deferred
income taxes) are adequate to cover such taxes.
(d) Except as set forth in Schedule 6.11, there is no material claim
(including under any indemnification or tax-sharing agreement), audit, action,
suit, proceeding, or investigation now pending or, to the Company's knowledge,
threatened against or in respect of any tax or "tax asset" of the Company or any
Subsidiary. For purposes of this Section 6.11, the term "tax asset" shall
include any net operating loss, net capital loss,
18
<PAGE> 22
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute that could reduce taxes.
(e) There are no material Encumbrances for taxes upon the assets of the
Company or its Subsidiaries except for Encumbrances for current taxes not yet
due, or taxes being contested in good faith by appropriate proceedings for which
adequate reserves have been established on the Company's books..
(f) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Internal Revenue Code of 1986, as amended (the "Code") during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
6.12. EMPLOYEE BENEFIT PLANS.
(a) The Company has provided Purchaser with a list identifying each
"employee benefit plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
provision of ERISA and (ii) is maintained, administered or contributed to by the
Company or any Subsidiary or affiliate (as defined below) and covers any
employee or former employee of the Company or any Subsidiary or affiliate to
which the Company or any Subsidiary or affiliate has any material liability.
Copies of such plans (and, if applicable, related trust agreements) and all
amendments thereto have been furnished to Purchaser together with (A) the most
recent annual report (Form 5500 including, if applicable, Schedule B thereto)
prepared in connection with any such plan and (B) the most recent actuarial
valuation report prepared in connection with any such plan. Such plans are
referred to collectively in this Agreement as the "Employee Plans". For purposes
of this Section, "affiliate" of any Person means any other Person which,
together with such Person, would be treated as a single employer under Section
414 of the Code. The only Employee Plans which individually or collectively
would constitute an "employee pension benefit plan" as defined in Section 3(2)
of ERISA (the "Pension Plans") are identified as such in the list referred to
above. The Company has provided Purchaser with complete age, salary, service and
related data as of a recent date for employees and former employees of the
Company and any affiliate covered under the Pension Plans.
(b) Except as otherwise indicated on Schedule 6.12(b), no Employee Plan (i)
constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA; (ii)
is maintained in connection with any trust described in Section 501(c)(9) of the
Code; or (iii) is subject to Title IV of ERISA. The Company knows of no
"reportable event", within the meaning of Section 4043 of ERISA, for which
notice is not waived, and no event described in Section 4041, 4042, 4062 or 4063
of ERISA which has occurred in connection with any Employee Plan. Neither the
Company nor any of its affiliates has incurred any unsatisfied liability under
Title IV of ERISA arising in connection with the termination of, or complete or
partial withdrawal from, any plan covered or previously covered by Title IV of
ERISA. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Employee Plan has caused the
19
<PAGE> 23
Company or any Subsidiary, or any officer or director of the Company or any
Subsidiary, to be subject to any liability under Title I of ERISA or liable for
any tax pursuant to Section 4975 of the Code.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to
Purchaser copies of the most recent Internal Revenue Service determination
letters with respect to each such Employee Plan. Each Employee Plan has been
maintained in substantial compliance with its terms and with the applicable
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code.
(d) Except as otherwise indicated on Schedule 6.12(d), there is no
contract, agreement, plan or arrangement covering any employee or former
employee of the Company or any affiliate that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Sections 162(a)(1) or 280G of the Code.
(e) The Company has provided Purchaser with a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be, by the Company
or any of its Subsidiaries or affiliates and (iii) covers any executive officer
or director or any employee or former employee of the Company or any of its
Subsidiaries or affiliates earning a salary in excess of $150,000 per annum.
Such contracts, plans and arrangements as are described above, copies or
descriptions of all of which have been furnished previously to Purchaser, are
referred to collectively in this Agreement as the "Benefit Arrangements." Each
Benefit Arrangement has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Benefit Arrangement.
(f) The Company does not provide post-employment health or medical benefits
for former employees of the Company and its Subsidiaries or affiliates except as
required to avoid imposition of tax under Section 4980B of the Code. No
condition exists that would prevent the Company or any Subsidiary from amending
or terminating any Employee Plan or Benefit Arrangement providing health or
medical benefits in respect of any active employee of the Company or any
Subsidiary other than limitations imposed under the terms of a collective
bargaining agreement.
20
<PAGE> 24
(g) Except as disclosed in writing to Purchaser prior to the date hereof or
as required by applicable law, there has been no amendment to, written
interpretation or announcement (whether or not written) by the Company or any of
its Subsidiaries or affiliates relating to, or change in employee participation
or coverage under, any Employee Plan or Benefit Arrangement which would increase
materially the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended December 31, 1998.
(h) Except as set forth in Schedule 6.12(h), neither the Company nor any
Subsidiary is a party to or subject to any union contract or any employment
contract or arrangement providing for annual future compensation of $150,000 or
more with any officer, consultant, director or employee.
(i) Schedule 6.12(i) identifies each International Plan (as defined below).
The Company has furnished to Purchaser copies of each International Plan. Each
International Plan has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations (including any special provisions relating to qualified
plans where such Plan was intended to so qualify) and has been maintained in
good standing with applicable regulatory authorities. Except as required by
applicable law, there has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any Subsidiary relating
to, or change in employee participation or coverage under, any International
Plan that would increase materially the expense of maintaining such
International Plan above the level of expense incurred in respect thereof for
the most recent fiscal year ended prior to the date hereof.
"International Plan" means any employment, severance or similar contract or
arrangement (whether or not written) or any plan, policy, fund, program or
arrangement or contract providing for severance, insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, pension or retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that (i) is not an Employee
Plan or a Benefit Arrangement, (ii) is entered into, maintained, administered or
contributed to by the Company or any Subsidiary and (iii) covers any executive
officer or director or any employee or former employee of the Company or any
Subsidiary earning a salary in excess of $150,000 per annum.
6.13. LABOR AND EMPLOYMENT MATTERS. Except as set forth in Schedule 6.13,
neither the Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or other Contracts or understanding with a labor
union or labor organization. Except for such matters which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect, there is no (i) unfair labor practice, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries
relating to their business, (ii) to the knowledge of
21
<PAGE> 25
the Company, activity or proceeding by a labor union or representative thereof
to organize any employees of the Company or any of its Subsidiaries, or (iii)
lockouts, strikes, slowdowns, work stoppages or, to the knowledge of the
Company, threats thereof by or with respect to such employees.
6.14. BROKERS. Except for the Financial Advisor and the Company's financial
advisor in respect of the transactions contemplated by the Thermalloy Agreement,
no broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company's fee arrangements with the Financial Advisor have been disclosed to
Purchaser.
6.15. LICENSES AND PERMITS. Except as set forth in Schedule 6.15, the
Company and its Subsidiaries have all necessary licenses, franchises, permits,
certificates, approvals or other similar authorizations (the "Permits") required
to lawfully conduct their respective businesses as presently conducted, except
for those Permits the lack of which individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect, and (a) no Permit is
subject to revocation or forfeiture by virtue of any existing circumstances, (b)
there is no Litigation pending or, to the knowledge of the Company, threatened
to modify or revoke any Permit, and (c) no Permit is subject to any outstanding
order, decree, judgment, stipulation, or, to the knowledge of the Company,
investigation that would reasonably be likely to affect such Permit, where the
effect of the foregoing individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
6.16. INTELLECTUAL PROPERTY.
(a) Schedule 6.16 contains a complete and accurate list of all (i) patented
or registered Intellectual Property (as defined in Section 11.8) owned or filed
by the Company or any Subsidiary, (ii) pending patent applications and
applications for registration of other Intellectual Property filed by or on
behalf of the Company or any Subsidiary, (iii) material unregistered trade
names, corporate names, or Internet domain names owned or used by the Company or
any Subsidiary, (iv) material unregistered trademarks, service marks, copyrights
and mask works owned or used by the Company or any Subsidiary, (v) all computer
software owned and/or used by the Company or any of its Subsidiaries (other than
mass-marketed software with a license fee of less than $50,000) that is material
to the Business, and (vi) all material licenses or similar agreements or
arrangements pertaining to Intellectual Property to which the Company or its
Subsidiaries is a party, either as licensee or licensor.
(b) Except as set forth on Schedule 6.16, (i) the Company or one of its
Subsidiaries owns or possesses adequate licenses or other rights to use all
Intellectual Property necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted, except where the failure to
own or possess would not reasonably be expected to have a Material Adverse
Effect and free and clear of all
22
<PAGE> 26
Encumbrances or restrictions other than Permitted Liens (as defined in Section
6.18) and, in the case of licensed Intellectual Property, as set forth in the
license therefor; (ii) no claim by any other Person contesting the validity,
enforceability, use or ownership of any of the Intellectual Property owned or
used by the Company or any of its Subsidiaries (the "Company Intellectual
Property") has been made, is currently outstanding or, to the knowledge of the
Company, is threatened (including, without limitation, any demand or request
that the Company or its Subsidiaries license any rights from a third Person);
(iii) neither the Company nor its Subsidiaries have received any notices of, nor
are aware of any facts which indicate a reasonable likelihood of, any
infringement or misappropriation by any third Person with respect to the Company
Intellectual Property that would reasonably be expected to have a Material
Adverse Effect; (iv) to the knowledge of the Company, neither the Company nor
its Subsidiaries have infringed or misappropriated any Intellectual Property or
other rights of any third Persons in a manner that would reasonably be expected
to have a Material Adverse Effect, and neither the Company nor its Subsidiaries
is aware of any infringement or misappropriation which will occur as a result of
the continued operation of the business of the Company or its Subsidiaries as
currently conducted and which would reasonably be expected to have a Material
Adverse Effect; (v) to the Company's knowledge, no loss or expiration of any of
the material Company Intellectual Property is threatened, pending or reasonably
foreseeable; (vi) the transactions contemplated by this Agreement will have no
Material Adverse Effect on the right, title and interest in and to the Company
Intellectual Property; and (vii) the Company and its Subsidiaries have taken all
actions to maintain and protect the Company Intellectual Property which they
have determined to be commercially reasonable.
(c) The Company and each of its Subsidiaries have conducted an inventory
and assessment of the hardware, software and embedded microcontrollers in
noncomputer equipment (collectively, the "Computer Systems") used by and
material to the Company and its Subsidiaries in its business, in order to
determine which parts of the Computer Systems are not Year 2000 Compliant (as
defined below) and to estimate the cost of rendering such Computer Systems Year
2000 Compliant prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down or may produce incorrect calculations or
otherwise malfunction without becoming totally inoperable. Based on the above
inventory and assessment, the estimated total cost of rendering the Computer
Systems Year 2000 Compliant is $125,000, which expenditure has been included in
the budget adopted by the Company. For purposes of this Agreement, "Year 2000
Compliant" means that all of the Computer Systems will correctly differentiate
between years in different centuries that end in the same two digits, and will
accurately process date/time data (including but not limited to calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, including leap year calculations.
23
<PAGE> 27
6.17 ENVIRONMENTAL COMPLIANCE AND DISCLOSURE.
(a) Except as set forth on Schedule 6.17:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been received by the Company or
any Subsidiary that has not been fully resolved, or, to the knowledge of
the Company or any Subsidiary, is pending or threatened by any Person
against, the Company or any Subsidiary, nor has any material penalty been
assessed against the Company or any Subsidiary with respect to any (A)
alleged violation of any Environmental Law or liability thereunder, (B)
alleged failure to have any permit, certificate, license, approval,
registration or authorization required under any Environmental Law, (C)
generation, treatment, storage, recycling, transportation or disposal of
any Hazardous Substance or (D) discharge, emission or release of any
Hazardous Substance;
(ii) no Hazardous Substance has been discharged, emitted or released
by the Company or any Subsidiary in violation of applicable Environmental
Laws at any property now or previously owned, leased or operated by the
Company or any Subsidiary, which circumstances, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect; and
(iii) there are no Environmental Liabilities that have had or would
reasonably be expected to have a Material Adverse Effect.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted since January 1, 1993 of which the Company
has knowledge in relation to the current or prior business of the Company or any
property or facility now or previously owned or leased by the Company or any
Subsidiary that discusses or reveals any material environmental liability which
has not been delivered to Purchaser at least five days prior to the date hereof.
(c) Neither the Company nor any Subsidiary owns or leases or has, since
January 1, 1993, owned or leased any real property in New Jersey or Connecticut.
(d) For purposes of this Section, the following terms shall have the
meanings set forth below:
(i) "Company" and "Subsidiary" shall include any entity that is, in
whole or in part, a predecessor of the Company or any Subsidiary;
(ii) "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, relating to human health, the environment or to emissions,
discharges or releases of pollutants,
24
<PAGE> 28
contaminants or other Hazardous Substances or wastes into the environment,
including without limitation ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants or other Hazardous Substances or wastes or the clean-up or
other remediation thereof;
(iii) "Environmental Liabilities" means any and all liabilities of or
relating to the Company and any Subsidiary, whether contingent or fixed,
actual or potential, known or unknown, which (i) arise under or relate to
matters covered by Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time; and
(iv) "Hazardous Substances" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, which in any
event is regulated under Environmental Laws.
6.18. TITLE TO ASSETS. Except as set forth in the Most Recent Balance Sheet
or as otherwise disclosed in the July 10-Q, the Company and each of its
Subsidiaries have good and marketable title to all of their real and personal
properties and assets reflected on the Most Recent Balance Sheet (other than (i)
assets disposed of since July 3, 1999 in the ordinary course of business
consistent with past practice or acquired since July 3, 1999 and (ii) title
retention arrangements entered into or arising in the ordinary course of
business), in each case free and clear of all Encumbrances except for (i)
Encumbrances which secure indebtedness which is properly reflected in the Most
Recent Balance Sheet or incurred since July 3, 1999 in the ordinary course of
business pursuant to credit facilities described in the Company's annual report
on Form 10-K for the year ended December 31, 1998; (ii) liens for Taxes accrued
but not yet payable; (iii) liens arising as a matter of law in the ordinary
course of business with respect to obligations incurred after the date of the
Most Recent Balance Sheet, provided that the obligations secured by such liens
are not delinquent; and (iv) such imperfections of title and Encumbrances, if
any, as individually or in the aggregate would not reasonably be expected to
have a Material Adverse Effect (collectively "Permitted Liens"). Except as set
forth in Schedule 6.18, the Company and each of its Subsidiaries either own, or
have valid leasehold interests in, all properties and assets used by them in the
conduct of their business except where the absence of such ownership or
leasehold interest would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.
6.19. MATERIAL CONTRACTS. Schedule 6.19 sets forth a list of all (i)
Contracts for borrowed money or guarantees thereof involving a currently
outstanding principal amount in excess of $100,000, (ii) Contracts containing
non-compete covenants by the Company or any Subsidiary and (iii) other Contracts
(other than the Thermalloy Agreement) which involve the payment or receipt of $1
million or more per year. All Contracts to which the Company or any of its
Subsidiaries is a party or by which any of
25
<PAGE> 29
their respective assets is bound are valid and binding, in full force and effect
and enforceable against the Company or any of its Subsidiaries, as the case may
be, and to the knowledge of the Company, the other parties thereto in accordance
with their respective terms, subject to applicable bankruptcy, insolvency or
other similar laws relating to creditors' rights and general principles of
equity, except where the failure to be so valid and binding, in full force and
effect or enforceable would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.
6.20. REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger may be
consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required to adopt this Agreement and approve the
Merger is the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock.
6.21 INAPPLICABILITY OF CERTAIN RESTRICTIONS. The action of the Board of
Directors of the Company in approving the Merger and this Agreement is
sufficient to render inapplicable to the Merger, the Voting Agreements and this
Agreement (and the transactions provided for herein) the provisions of Section
203 of the DGCL assuming the representation and warranty contained in the last
sentence of Section 7.3 is true and correct.
6.22 RIGHTS PLAN. The Company has not entered into, and its Board of
Directors has not adopted or authorized the adoption of, a shareholder rights or
similar agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby jointly and severally represent and warrant
to the Company as follows:
7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser and
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted, except where the failure to have
such power and authority individually or in the aggregate would not materially
adversely affect Purchaser and Merger Sub, taken as a whole. Each of Purchaser
and Merger Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not materially adversely
affect Purchaser and Merger Sub, taken as a whole.
26
<PAGE> 30
7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Purchaser
and Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and the Ancillary Documents and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Documents and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective Boards of Directors of Purchaser and
Merger Sub and by Purchaser as the sole stockholder of Merger Sub and no other
corporate proceedings on the part of Purchaser or Merger Sub are necessary to
authorize this Agreement and the Ancillary Documents or to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and any
Ancillary Documents at the time of execution will have been, duly and validly
executed and delivered by Purchaser and Merger Sub, and (assuming this Agreement
and such Ancillary Documents each constitutes a valid and binding obligation of
the Company) constitutes and will constitute the valid and binding obligations
of each of Purchaser and Merger Sub, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
7.3. NO VIOLATION. Neither the execution and delivery of this Agreement or
any of the Ancillary Documents by Purchaser and Merger Sub nor the consummation
by them of the transactions contemplated hereby or thereby will (i) violate,
conflict with or result in any breach of any provision of the respective
Certificates of Incorporation or Bylaws of Purchaser or Merger Sub; (ii) other
than the filings provided for in Section 1.3, compliance with the HSR Act and
the filings required under the Exchange Act and the Securities Act, require any
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Entity, the lack of which individually or in the
aggregate would have a material adverse effect on the ability of Purchaser or
Merger Sub to consummate the transactions contemplated hereby, (iii) violate any
Laws applicable to Purchaser or the Merger Sub or any of their respective
assets, except for violations which individually or in the aggregate would not
have a material adverse effect on the ability of Purchaser or Merger Sub to
consummate the transactions contemplated hereby, and (iv) violate, conflict with
or result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
result in the termination or in a right of termination of, accelerate the
performance required by or benefit obtainable under, result in the triggering of
any payment or other obligations pursuant to, result in the creation of any
Encumbrance upon any of the properties of Purchaser or Merger Sub under, or
result in there being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which Purchaser or
Merger Sub is bound, except for any of the foregoing matters which would not
individually or in the aggregate have a material adverse effect on Purchaser and
Merger Sub, taken as a whole, or on the ability of Purchaser or Merger Sub to
consummate the transactions contemplated hereby. Neither Purchaser nor any of
its affiliates or associates (as each such term is defined in Section 203 of the
DGCL) was, prior to the execution of this
27
<PAGE> 31
Agreement, an "interested stockholder" (as such term is defined in Section 203
of the DGCL) of the Company.
7.4. BROKERS, FINDERS OR FINANCIAL ADVISORS. No broker, investment banker,
financial advisor or other Person, other than CIBC World Markets Corp., is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser or Merger Sub.
7.5. NO PRIOR ACTIVITIES. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, and, except for obligations
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Merger Sub has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any Person.
7.6. FINANCING. The Purchaser will provide to Merger Sub sufficient funds
to consummate the Merger, pay the Merger Consideration and the Offer
Consideration and pay related transaction expenses. The Purchaser has delivered
to the Company: (i) copies of commitment letters from CIBC World Markets Corp.
("CIBC World Markets") indicating that it is willing, on the terms and subject
to the conditions set forth in such commitment letter, to purchase up to: (a) an
aggregate of $135 million of debt financing to the Company upon consummation of
the transactions contemplated by this Agreement (assuming the transactions
contemplated by the Thermalloy Agreement do not occur) or (b) an aggregate of
$123 million of debt financing to the Company upon consummation of the
transactions contemplated by this Agreement (assuming the transactions
contemplated by the Thermalloy Agreement occur), and (ii) a copy of a commitment
letter from Willis Stein & Partners, II, L.P. indicating that it is willing, on
the terms and subject to the conditions set forth in such commitment letter, to
provide up to an aggregate of (a) $119 million of equity financing to the
Purchaser upon the consummation of the transactions contemplated by this
Agreement (assuming the transactions contemplated by the Thermalloy Agreement do
not occur) or (b) $146 million of equity financing upon consummation of the
transactions contemplated by this Agreement (assuming the transactions
contemplated by the Thermalloy Agreement occur). Such financing is adequate to
pay in cash the Merger Consideration and the Offer Consideration and pay related
transaction expenses.
7.7. LITIGATION. There is no Litigation by a Governmental Entity or other
Person pending or, to the knowledge of the Purchaser and Merger Sub, threatened
against the Purchaser or Merger Sub, at law or in equity, which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the Offer or
the Merger or any of the other transactions contemplated hereby.
ARTICLE 8
COVENANTS
28
<PAGE> 32
8.1. NO SOLICITATION
(a) Neither the Company nor any of its Subsidiaries shall (whether directly
or indirectly through advisors, agents or other intermediaries), nor shall the
Company or any of its Subsidiaries authorize or permit any of its or their
officers, directors, agents, representatives, advisors or Subsidiaries to (i)
solicit, initiate or take any action knowingly to facilitate the submission of
inquiries, proposals or offers from any Third Party (as defined below) (other
than Purchaser) which constitutes or would reasonably be expected to lead to (A)
any acquisition or purchase of 30% or more of the consolidated assets of the
Company and its Subsidiaries or of over 30% of any class of equity securities of
the Company or any of its Subsidiaries, (B) any tender offer (including a self
tender offer) or exchange offer that if consummated would result in any Third
Party beneficially owning 30% or more of any class of equity securities of the
Company or any of its Subsidiaries, (C) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute more
than 30% of the consolidated assets of the Company other than the transactions
contemplated by this Agreement, or (D) any other transaction (other than
transactions contemplated by the Thermalloy Agreement) the consummation of which
would reasonably be expected to interfere with in a material way, prevent or
materially delay the Merger or which would reasonably be expected to materially
dilute the benefits to Purchaser of the transactions contemplated hereby
(collectively, "Acquisition Proposals"), or agree to or endorse any Acquisition
Proposal, (ii) enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any Third Party any information
with respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or knowingly assist or participate in,
facilitate or encourage, any effort or attempt by any Third Party (other than
Purchaser) to do or seek any of the foregoing, or (iii) grant any waiver or
release under any standstill or similar agreement with respect to any class of
equity securities of the Company or any of its Subsidiaries; provided, however,
that the foregoing shall not prohibit the Company (either directly or indirectly
through advisors, agents or other intermediaries) from (A) furnishing
information pursuant to an appropriate confidentiality letter (which letter
shall not be less favorable to the Company in any material respect (with respect
to duration and standstill provisions) than the Confidentiality Agreement (as
defined in Section 8.5), and a copy of which shall be provided for informational
purposes only to Purchaser) concerning the Company and its businesses,
properties or assets to a Third Party who has made or is seeking to initiate
discussions with respect to a bona fide Acquisition Proposal, (B) engaging in
discussions or negotiations with such a Third Party who has made a bona fide
Acquisition Proposal, (C) following receipt of a bona fide Acquisition Proposal,
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) under the Exchange Act or otherwise making disclosure to its
stockholders, (D) following receipt of a bona fide Acquisition Proposal, failing
to make or withdrawing or modifying its recommendation referred to in Section
1.4 and/or (E) taking any non-appealable, final action ordered to be taken by
the Company by any court of competent jurisdiction; but in each case referred to
29
<PAGE> 33
in the foregoing clauses (A) through (D) only to the extent that the Board of
Directors of the Company shall have concluded in good faith on the basis of
advice from outside counsel that such action by the Board of Directors is
necessary in order to comply with the fiduciary duties of the Board of Directors
to the stockholders of the Company under applicable law; provided, further, that
if the Board of Directors of the Company receives an Acquisition Proposal, then
the Company shall promptly inform Purchaser of the terms and conditions of such
proposal and the identity of the Person making it. Since June 7, 1999 the
Company has not and has not permitted its advisors, agents and other
intermediaries to engage in any activities, discussions or negotiations with any
parties contacted prior to that date with respect to any of the foregoing, and
has used its reasonable best efforts to cause any such parties in possession of
confidential information about the Company that was furnished by or on behalf of
the Company to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of any such party. In no
event shall the Company enter into a definitive agreement in connection with an
Acquisition Proposal earlier than two business days after the Purchaser receives
the Company's initial notification to Purchaser of an inquiry or proposal
relating to such Acquisition Proposal. As used in this Agreement, the term
"Third Party" means any Person or "group," as defined in Section 13(d) of the
Exchange Act, other than Purchaser or any of its affiliates.
(b) If a Payment Event (as defined below) occurs, the Company shall pay to
Purchaser, within two business days following such Payment Event, a fee of $8.3
million. "Payment Event" means (i) the termination of this Agreement by the
Company or Purchaser pursuant to Section 10.1(d), Section 10.1(g), Section
10.1(i) or Section 10.1(k); or (ii) (A) an Acquisition Proposal shall have been
made by a Third Party at any time on or after the date of this Agreement and
prior to the termination of this Agreement, and, (B) within 9 months of the
termination of this Agreement pursuant to Section 10.1(b) or Section 10.1(e)(i)
any of the following events occurs (or the Company enters into a definitive
agreement with respect to any such event within a 6 month period after
termination of this Agreement and such transaction is subsequently consummated)
whereby stockholders of the Company receive, pursuant to such event, cash,
securities or other consideration having an aggregate value, when taken together
with the value of any securities of the Company or its Subsidiaries otherwise
held by the stockholders of the Company after such event, in excess of the
Merger Consideration: (1) the Company is acquired by merger or otherwise by a
Third Party; (2) a Third Party acquires more than 50% of the total assets of the
Company and its Subsidiaries, taken as a whole; (3) a Third Party acquires more
than 50% of the outstanding Common Stock; or (4) the Company adopts and
implements a plan of liquidation, recapitalization or share repurchase relating
to more than 50% of the outstanding Common Stock or an extraordinary dividend
relating to more than 50% of the outstanding Common Stock or 50% of the assets
of the Company and its Subsidiaries, taken as a whole.
(c) If this Agreement is terminated because of a Company Breach (as defined
below), the Company shall reimburse Purchaser and its affiliates not later than
two business days after submission of reasonable documentation thereof for 100%
of their documented out-of-pocket fees and expenses (including the fees and
expenses of counsel)
30
<PAGE> 34
up to $1.5 million, in each case, actually incurred by any of them or on their
behalf in connection with this Agreement and the transactions contemplated
hereby (including the Merger and the arrangement, obtaining the commitment to
provide or obtaining the financing for the transactions contemplated by this
Agreement (including fees payable to the financing entities and their respective
counsel)). "Company Breach" means (i) the Company shall have breached or failed
to perform in any material respect any of its covenants or agreements under this
Agreement or any of the representations and warranties of the Company set forth
in this Agreement shall not be true in any material respect when made or at any
time prior to consummation of the Merger as if made at and as of such time
(except for representations and warranties made as of a specific date, which
shall be true and correct in all material respects as of such date), and, in any
such case, such breach, failure to perform or misrepresentation shall not have
been cured within a reasonable period of time following Purchaser's notice to
the Company of such breach, failure to perform or misrepresentation, or (ii) a
Thermalloy Alteration (as defined in Section 9.2(c)). Purchaser and Merger Sub
agree that, in the absence of fraud, such payment shall be Purchaser and Merger
Sub's exclusive remedy for any Company Breach.
(d) The Company acknowledges that the agreements contained in this Section
8.1 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Purchaser would not enter into this Agreement;
accordingly, if the Company fails to promptly pay any amount due pursuant to
this Section 8.1, and, in order to obtain such payment, the other party
commences a suit which results in a judgment against the Company for the fee or
fees and expenses set forth in this Section 8.1, the Company shall also pay to
Purchaser its reasonable costs and expenses incurred in connection with such
litigation.
(e) Sections 8.1(b) and 8.1(c) shall survive any termination of this
Agreement, however caused.
(f) Any sale by Bowthorpe plc of Thermalloy to a Third Party shall not give
rise to any payment to the Purchaser or Merger Sub pursuant to this Section 8.1.
8.2. INTERIM OPERATIONS. Except as expressly required by this Agreement,
the Thermalloy Agreement or with the prior consent of Purchaser, from the date
hereof until the Effective Time, the Company and the Subsidiaries shall conduct
their business in all material respects in the ordinary course consistent with
past practice and shall use their reasonable best efforts to preserve
substantially intact their business organizations and relationships with third
parties that are material to the Company and the Subsidiaries taken as a whole
and to keep available the services of their present officers and employees.
Without limiting the generality of the foregoing, from the date hereof until the
Effective Time the Company will not, and will cause its Subsidiaries not to:
(a) adopt or propose any change in its Certificate of Incorporation or
Bylaws;
31
<PAGE> 35
(b) except pursuant to existing agreements or arrangements (which
arrangements shall be deemed to include the Thermalloy Agreement on the terms
that have heretofore been disclosed to Purchaser, including the financing
thereof):
(i) acquire (by merger, consolidation or acquisition of stock or
assets) any material corporation, partnership or other business
organization or division thereof, or sell, lease or otherwise dispose of a
material Subsidiary or a material amount of assets or securities;
(ii) make any investment other than in readily marketable securities
in an amount in excess of $50,000 in the aggregate whether by purchase of
stock or securities, contributions to capital or any property transfer, or
purchase for an amount in excess of $50,000 in the aggregate, any property
or assets of any other individual or entity other than purchases of raw
materials and finished goods components in the ordinary course of business
consistent with past practice;
(iii) waive, release, grant, or transfer any rights of value material
to the Company and the Subsidiaries taken as a whole;
(iv) modify or change in any material respect any existing license,
lease, contract, or other document material to the Company and its
Subsidiaries, taken as a whole;
(v) except to refund or refinance commercial paper and for borrowings
and repayments under its revolving credit facilities for working capital
purposes, incur or assume an amount of long-term or short-term debt in
excess of $250,000 in the aggregate;
(vi) assume, guarantee, endorse (other than endorsements of negotiable
instruments in the ordinary course of business) or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person (other than any Subsidiary) which are in
excess of $25,000 in the aggregate;
(vii) make any loans or advances to any other Person (other than any
Subsidiary) which are in excess of $100,000 in the aggregate;
(viii) except for the items contemplated by the Company's 1999 capital
expenditure budget made available to Purchaser, authorize any new capital
expenditures which, individually, is in excess of $100,000 or, in the
aggregate, are in excess of $250,000; or
(ix) issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of, the
Company's capital stock (other than the issuance of shares of Common Stock
upon the exercise of
32
<PAGE> 36
Options and Company Warrants outstanding on the date of this Agreement and
in accordance with their present terms).
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, other than
cash dividends and distributions by a wholly owned Subsidiary of the Company to
the Company or to a Subsidiary all of the capital stock of which is owned
directly or indirectly by the Company, or redeem, repurchase or otherwise
acquire or offer to redeem, repurchase, or otherwise acquire any of its
securities or any securities of its Subsidiaries;
(d) adopt or, except as required by law, amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or employee benefit plan, agreement, trust,
plan, fund or other arrangement for the benefit and welfare of any director,
officer or employee, or (except as required by law or for normal increases in
the ordinary course of business that are consistent with past practices)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options or
stock appreciation rights or the removal of existing restrictions in any benefit
plans or agreements);
(e) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory in any material manner or
write-off of notes or accounts receivable in any material manner;
(f) pay, discharge or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise) other than the payment, discharge or satisfaction in the ordinary
course of business, consistent with past practices, of liabilities reflected or
reserved against in the consolidated financial statements of the Company or
incurred since the most recent date thereof pursuant to an agreement or
transaction described in this Agreement (including the schedules to this
Agreement) or incurred in the ordinary course of business, consistent with past
practices;
(g) except as set forth on Schedule 8.2(g), make any tax election or settle
or compromise any material income tax liability;
(h) take any action other than in the ordinary course of business and
consistent with past practices with respect to accounting policies or procedures
other than any change in accounting policies (that is not material to the
Company and its Subsidiaries taken as a whole) that is required by regulations
of the SEC or a change in generally accepted accounting principles;
(i) take or agree or commit to take any action that would make any
representation and warranty of the Company hereunder inaccurate in any respect
at, or as of any time prior to, the Effective Time (or, in the case of
representations and warranties
33
<PAGE> 37
that are not qualified by reference to the term "Material Adverse Effect" and/or
taken as a whole, or derivatives or variations of such terms, inaccurate in any
material respect at, or as of any time prior to, the Effective Time);
(j) amend, waive or otherwise alter any provision of the Thermalloy
Agreement; or
(k) agree or commit to do any of the foregoing.
8.3. COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT.
(a) If approval or action in respect of the Merger by the stockholders of
the Company is required by applicable law, the Company, acting through the Board
of Directors, shall (i) call a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of voting upon the Merger, (ii) hold the Stockholders
Meeting as soon as practicable following the earlier of the purchase of shares
of Common Stock pursuant to the Offer and the consummation of the transactions
contemplated by the Thermalloy Agreement, and (iii) subject to its fiduciary
duties under applicable law as advised by outside counsel, recommend to its
stockholders the approval of the Merger. If the Offer is consummated, the record
date for the Stockholders Meeting shall be a date subsequent to the date
Purchaser or Merger Sub becomes a record holder of Common Stock purchased
pursuant to the Offer.
(b) If required by applicable law, the Company will, as soon as practicable
following the earlier of the expiration of the Offer and the consummation of the
transactions contemplated by the Thermalloy Agreement, prepare and file a
preliminary Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "Proxy Statement") or, if applicable, an Information
Statement with the SEC with respect to the Stockholders Meeting and will use its
reasonable best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement to be cleared by the SEC. The Company will notify
Purchaser 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 Proxy
Statement or for additional information and will supply Purchaser with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. The Company shall give Purchaser and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Purchaser and its counsel the opportunity to review all
amendments and supplements to the 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 Purchaser agrees to use its
reasonable best efforts, after consultation with the other parties to this
Agreement, to respond promptly to all such comments of and requests by the SEC.
As promptly as practicable after the Proxy Statement has been cleared by the
SEC, the Company shall mail the Proxy Statement to the stockholders of the
Company. If at any time prior to the approval of this Agreement by the Company's
stockholders there shall occur any event that should be set forth in an
amendment or supplement to the Proxy
34
<PAGE> 38
Statement, the Company will prepare and mail to its stockholders such an
amendment or supplement.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by Purchaser or Merger Sub. Purchaser represents and warrants that none
of the information supplied by Purchaser or Merger Sub for inclusion in the
Proxy Statement will, at the respective times filed with the SEC and distributed
to stockholders of the Company, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Company shall use its reasonable best efforts to obtain the
necessary approvals by its stockholders of the Merger, this Agreement and the
transactions contemplated hereby.
(e) Purchaser agrees, subject to applicable law, to cause all shares of
Common Stock purchased by Merger Sub pursuant to the Offer and all other shares
of Common Stock owned by Purchaser, Merger Sub or any other Subsidiary or
affiliate of Purchaser to be voted in favor of the approval of the Merger.
8.4. FILINGS; NOTICES; OTHER ACTION.
(a) Subject to the terms and conditions provided in this Agreement and
subject to any fiduciary duty of the Company's Board of Directors with respect
to an Acquisition Proposal exercised in a manner consistent with Section 8.1,
the Company, Purchaser, and Merger Sub shall: (i) use their reasonable best
efforts to cooperate with one another in (x) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits, authorizations or waivers are required to be obtained prior
to the Effective Time from, Governmental Entities or other third parties in
connection with the execution and delivery of this Agreement and any other
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby and (y) timely making all such filings and timely seeking all such
consents, approvals, permits, authorizations and waivers; and (ii) use their
reasonable best 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
(including, in the case of the Purchaser and Merger Sub, obtaining the financing
necessary for the Merger and, if necessary, the Offer). If, at any time after
the Effective Time, any further action is necessary or
35
<PAGE> 39
desirable to carry out the purpose of this Agreement, the proper officers and
directors of Purchaser and the Surviving Corporation shall take all such
necessary action.
(b) The Company shall promptly notify Purchaser of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving the Company or any Subsidiary which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 6.9 or which relate to the consummation of the transactions
contemplated by this Agreement.
8.5. ACCESS TO INFORMATION.
(a) From the date of this Agreement to the Closing, the Company shall, and
shall cause its Subsidiaries to, (i) give Purchaser and its authorized
representatives and lenders (and such lenders' counsel) reasonable access during
normal business hours to all books, records, personnel, offices and other
facilities and properties of the Company and its Subsidiaries and their
accountants and accountants' work papers provided that such access shall not
materially interfere with the normal business operations of the Company, (ii)
permit Purchaser to make such copies and inspections thereof as Purchaser may
reasonably request and (iii) furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of the
Company and its Subsidiaries as Purchaser may from time to time reasonably
request; provided that no investigation or information furnished pursuant to
this Section 8.5 shall affect any representations or warranties made by the
Company in this Agreement or the conditions to the obligations of Purchaser to
consummate the transactions contemplated hereby.
(b) All such information and access shall be subject to the provisions of
the letter agreement between an affiliate of Purchaser and the Company dated as
of April 13, 1999 (the "Confidentiality Agreement") relating to the confidential
treatment of "Evaluation Material" (as defined therein).
8.6. PUBLICITY. Purchaser and Merger Sub, on the one hand, and the Company,
on the other hand, will consult with each other before issuing, and give each
other the opportunity to review and comment upon, any press release or other
public statements or filing with any Governmental Entity with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement or filing prior
to such consultation, except as
36
<PAGE> 40
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange or the Nasdaq
National Market. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties.
8.7. FURTHER ACTION; COOPERATION CONCERNING CERTAIN LITIGATION. Each party
to this Agreement shall, subject to the fulfillment at or before the Effective
Time of each of the conditions of performance set forth in this Agreement or the
waiver thereof, perform such further acts and execute such documents as may be
reasonably required to effect the Merger. If there shall be any judgment,
injunction, order or decree enjoining Purchaser or the Company from consummating
the Merger, each party to this Agreement shall use its reasonable best efforts
to lift such judgment, injunction order or decree.
8.8. INSURANCE; INDEMNITY.
(a) For a period of not less than six years after the Effective Time, the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former officers and directors of the Company (the "Company Indemnified Persons")
in respect of all losses, claims, damages, costs, expenses (including counsel
fees and expenses), settlement, payments or liabilities arising out of or in
connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such Person is or was an officer or director of the Company or any of its
Subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time (including without limitation matters related to
the transactions contemplated by this Agreement), whether or not claimed or
asserted prior to or after the Effective Time. The Surviving Corporation shall
periodically advance expenses as incurred by the Company Indemnified Persons
with respect to the foregoing to the fullest extent permitted under applicable
law provided that the Person to whom the expenses are advanced provides an
undertaking to repay such advance if it is ultimately determined that such
Person is not entitled to indemnification.
(b) For six years after the Effective Time, the Surviving Corporation shall
use its reasonable best efforts to provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to and including the
Effective Time covering each such Person currently covered by the Company's
officers' and directors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided that in satisfying its obligation under this Section, the
Surviving Corporation shall not be obligated to pay premiums in excess of 200%
of the amount per annum the Company paid in its last full fiscal year, which
amount has been disclosed to Purchaser; and provided further that if the annual
premiums of such insurance coverage shall exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount. It is understood that such
obligation to indemnify (but not to maintain insurance) shall apply to claims of
which the Surviving Corporation shall
37
<PAGE> 41
have been notified prior to the expiration of such six-year period regardless of
when such claims shall have been disposed of.
(c) For a period of six years from and after the Effective Time, the
Certificate of Incorporation and Bylaws of the Surviving Corporation and its
Subsidiaries shall include provisions for the limitation of liability of
directors and indemnification of the Company Indemnified Persons to the fullest
extent permitted under applicable law and shall not, unless required by
applicable law, be amended in any manner materially adverse to the Company
Indemnified Persons without the prior written consent of such Persons. From and
after the Effective Time, the Surviving Corporation shall fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification
agreements between the Company or any Subsidiary and their respective directors
and officers as of or prior to the date of this Agreement and any
indemnification provisions under the Company's or any Subsidiary's Certificate
of Incorporation or Bylaws as in effect as of the date of this Agreement.
(d) The Surviving Corporation shall pay all expenses, including reasonable
attorney's fees, that may be incurred by any Indemnified Person (as defined
below) in enforcing the indemnity and other obligations provided for in this
Section 8.8.
(e) If requested by an Indemnified Person, any determination to be made as
to whether any Indemnified Person has met any standard of conduct imposed by law
shall be made by legal counsel reasonably acceptable to such Indemnified Person
and the Surviving Corporation, retained at the Surviving Corporation's expense.
(f) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers 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 the Surviving Corporation shall assume the
obligations set forth in this Section 8.8.
(g) If the Merger shall have been consummated, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless Purchaser and any Person or entity who was a stockholder, officer,
director or affiliate of Purchaser prior to the Effective Time against any
Losses in connection with any litigation arising out of or pertaining to any of
the transactions contemplated by this Agreement or the Ancillary Documents.
Purchaser shall periodically advance expenses as incurred with respect to the
foregoing to the fullest extent permitted under applicable law provided that the
Person to whom the expenses are advanced provides an undertaking to repay such
advance if it is ultimately determined that such Person is not entitled to
indemnification.
(h) If any litigation described in paragraph (a) or (g) of this Section 8.8
(each, an "Action") arises or occurs, the Surviving Corporation shall control
the defense of such Action through its counsel, provided that such counsel shall
be reasonably acceptable to the Person to whom indemnity is being provided (the
"Indemnified Persons"), and the
38
<PAGE> 42
Indemnified Persons shall be permitted to participate in the defense of such
Action through such counsel of their choice but such counsel shall be solely at
the Indemnified Person's expense. If there is any conflict between the Surviving
Corporation and any Indemnified Persons or there are additional defenses
available to any Indemnified Persons, the Indemnified Persons shall be permitted
to participate in the defense of such Action with counsel selected by the
Indemnified Persons, which counsel shall be reasonably acceptable to the
Surviving Corporation and the reasonable fees and expenses of which counsel
shall be paid by the Surviving Corporation; provided that the Surviving
Corporation shall not be obligated to pay the reasonable fees and expenses of
more than one counsel for all Indemnified Persons in any single Action except to
the extent that, in the opinion of counsel for the Indemnified Persons, two or
more of such Indemnified Persons have conflicting interests in the outcome of
such Action. The Surviving Corporation shall not be liable for any settlement
effected without its written consent, which consent shall not unreasonably be
withheld.
(g) This Section 8.8 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Purchaser, the Surviving
Corporation and the Indemnified Persons, and shall be binding on all successors
and assigns of the Surviving Corporation. So long as the Purchaser holds
securities permitting the Purchaser to elect at least a majority of the members
of the Board of Directors of the Surviving Corporation, the Purchaser shall
cause the Surviving Corporation to comply with its obligations under this
Section 8.8.
8.9 EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, unless the Surviving Corporation and
an officer, director or employee of the Company otherwise agree, the Surviving
Corporation and its respective Subsidiaries will honor and assume, in accordance
with their terms, all existing employment and severance agreements between the
Company or any of its Subsidiaries and any officer, director, or employee of the
Company or any of its Subsidiaries and all benefits or other amounts earned or
accrued to the extent vested or which become vested in the ordinary course under
all employee benefit plans of the Company and any of its Subsidiaries.
(b) Purchaser confirms that it is Purchaser's intention that, until the
first anniversary of the Effective Time, subject to applicable law, the
Surviving Corporation and its Subsidiaries will provide salary, benefits and
equity-based compensation to their employees which will, in the aggregate, be
comparable to those currently provided by the Company and its Subsidiaries to
their employees. Notwithstanding the foregoing, nothing in this Agreement shall
obligate or require the Surviving Corporation or any of its Subsidiaries to
provide its employees with a plan or arrangement similar to any equity-based
compensation plans currently maintained by the Company and nothing in this
Agreement shall otherwise limit the Surviving Corporation's right to amend,
modify or terminate any Employee Plan or Benefit Arrangement. Purchaser intends
that, after the first anniversary of the Effective Time, the Surviving
Corporation and its Subsidiaries will provide benefits to their employees
(excluding employees covered by collective
39
<PAGE> 43
bargaining agreements, if any) which benefits are appropriate in the judgment of
the Surviving Corporation, taking into account all relevant factors, including,
without limitation, the businesses in which the Surviving Corporation and its
Subsidiaries are engaged.
(c) The Company shall terminate its 1995 Employee Stock Purchase Plan (the
"ESPP"), including all employee salary deductions in connection therewith, on or
before the Closing Date. On the Closing Date, all accumulated employee salary
deductions shall be applied to the purchase of whole shares of Company Common
Stock in accordance with the terms of the ESPP and any remaining employee salary
deductions shall be returned to participants without interest. The shares of
Company Common Stock to be delivered by the Company pursuant to the ESPP shall
be converted into cash on the Closing Date in accordance with Article 4, without
further action by any participant. Further, the Company shall immediately amend,
effective as of the date hereof, the ESPP to suspend any new offering periods or
stock purchases after the date hereof (and any increases in employee salary
deductions thereunder) except employees currently participating therein may
continue to purchase stock in the current offering period in accordance with
their current salary deduction election or may reduce the amount of their salary
deduction election through the Closing Date. The Company shall promptly notify
Purchaser of any changes in employee salary deductions and the number of shares
of Company Common Stock hereafter acquired under the ESPP.
ARTICLE 9
CONDITIONS
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Purchaser and Merger Sub to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) if required by the DGCL, this Agreement shall have been adopted by the
stockholders of the Company in accordance with such Law;
(b) any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(d) if the Offer is required to be commenced by the terms of this
Agreement, then Purchaser shall have purchased shares of Common Stock pursuant
to the Offer; provided, however that this condition shall not be applicable to
the obligations of Purchaser and Merger Sub if, in breach of this Agreement or
the terms of the Offer, Merger Sub fails to purchase any shares of Common Stock
validly tendered and not withdrawn pursuant to the Offer;
40
<PAGE> 44
(e) all actions by or in respect of or filings with any governmental body,
agency, official, or authority required to permit the consummation of the Merger
shall have been obtained; and
(f) either the transactions contemplated by the Thermalloy Agreement shall
have been consummated or the Thermalloy Agreement shall have been terminated.
9.2. CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of the Company set forth in this
Agreement that are qualified by reference to Material Adverse Effect and/or
taken as a whole, or derivatives or variations of such terms shall be true and
correct in all respects, as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date; and the representations and
warranties of the Company set forth in this Agreement that are not qualified by
reference to Material Adverse Effect and/or taken as a whole, or derivatives or
variations of such terms shall be true and correct in all material respects, as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date. Purchaser have received a certificate signed on behalf
of the Company by the Chairman of the Board and the chief financial officer of
the Company to the effect set forth in this paragraph; and
(c) no amendment or waiver of any provision of the Thermalloy Agreement
shall have been made (including any waiver or amendment in connection with a
breach of any provision of the Thermalloy Agreement) (a "Thermalloy
Alteration"), provided, however that this condition shall not be applicable to
the obligations of Purchaser and Merger Sub if the Thermalloy Agreement has been
terminated.
ARTICLE 10
TERMINATION; AMENDMENT; WAIVER
10.1. TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company, the Purchaser and Merger Sub;
(b) by either the Company or Purchaser, if the Offer has been commenced but
has not been consummated by the date that is 60 days after the commencement of
the Offer; provided, however, that the right to terminate under this clause (b)
shall not be
41
<PAGE> 45
available to Purchaser if Purchaser shall have failed to purchase Common Stock
in violation of the Offer;
(c) by either the Company or Purchaser, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Purchaser or the
Company from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and non-appealable;
(d) by the Purchaser, if the Board of Directors of the Company shall have
(i) withdrawn or materially modified its approval of the Merger or its
recommendation set forth in Section 1.4, or (ii) failed, as a result of the
exercise of its fiduciary duties, to take the action otherwise required to be
taken by this Agreement;
(e) by either the Company or Purchaser, if (i) the Merger has not been
consummated by March 31, 2000, or (ii) the Company's stockholders fail to
approve the Merger at the Stockholders Meeting;
(f) by Purchaser, if any condition to the Offer is not met (whether or not
the Offer is commenced) provided, however, that the right to terminate under
this clause (f) shall not be available to Purchaser if Purchaser shall have
failed to purchase Common Stock in violation of the Offer;
(g) by Purchaser if the Offer shall not have been required to be commenced
and the Company shall have failed (i) to call the Stockholders Meeting within a
reasonable time after (A) completion of the SEC review process of the Proxy
Statement and (B) the consummation of the transactions contemplated by the
Thermalloy Agreement or the termination of the Thermalloy Agreement, (ii) as
promptly as reasonably practicable thereafter to mail the Proxy Statement to its
stockholders or (iii) to include in such Proxy Statement the recommendation
referred to in Section 1.4;
(h) by the Company if Purchaser and/or Merger Sub fails to commence the
Offer as provided in Section 5.1; provided, that the Company may not terminate
this Agreement pursuant to this Section 10.1(h) if the Company is at such time
in breach of its obligations under this Agreement such as to (A) cause a
Material Adverse Effect or (B) prevent or materially hinder or delay the
purchase of the shares of Common Stock pursuant to the Offer or the Merger;
(i) by the Company if (i) its Board of Directors determines in good faith
(after reviewing the advice of its financial advisor) that an Acquisition
Proposal is more favorable to the holders of Common Stock than the transactions
contemplated by this Agreement and is reasonably capable of being financed, (ii)
the Company has complied with the requirements of Section 8.1(a), including all
notice provisions, (iii) concurrently with such termination, the Company makes
all payments required by Section 8.1(b) and (iv) concurrently with such
termination, the Company enters into a definitive agreement to effect the more
favorable Acquisition Proposal;
42
<PAGE> 46
(j) by the Purchaser if a Thermalloy Alteration occurs; or
(k) by the Company if (i) on or prior to November 30, 1999 (A) the Offer
has not been commenced and (B) the Proxy Statement has not been mailed to the
Company's stockholders (unless such failure to mail is the result of the
Company's breach of its obligations under this Agreement) and (ii) following
November 30, 1999 and prior to the commencement of the Offer or the mailing of
the Proxy Statement, (A) the Company's Board of Directors requests that the
Financial Advisor issue a "bring down" of the Fairness Opinion, (B) the
Financial Advisor advises the Company in writing that it can no longer issue its
opinion that the Merger Consideration or the Offer Consideration is fair to the
stockholders of the Company from a financial point of view, and (C) the Company
provides a copy of such advise and any related analysis to the Purchaser at
least two business days before terminating this Agreement pursuant to this
clause (k).
The party desiring to terminate this Agreement pursuant to clauses 10.1(b)
through 10.1(k) shall give written notice of such termination to the other party
in accordance with Section 11.2.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1, this Agreement shall become void and of no effect with no
liability on the part of any party to this Agreement, except that termination of
this Agreement shall be without prejudice to any rights any party may have
hereunder against any other party for willful breach of this Agreement. The
agreements contained in Sections 8.1(b), 8.1(c), 8.5(b), 11.4, 11.5 and 11.6 and
this Section 10.2 shall survive the termination hereof.
10.3. 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 (subject to Section 5.4), Merger Sub and Purchaser at any time before or
after adoption of this Agreement by the stockholders of the Company but, after
any such stockholder approval, no amendment shall be made which decreases the
Merger Consideration which adversely affects the rights of the Company's
stockholders hereunder or otherwise requires by law further approval of such
stockholders without the approval of such stockholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of all of the
parties.
10.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties to this Agreement, by action taken by or on behalf of the Board of
Directors of the Company (subject to Section 5.4), Merger Sub and Purchaser, may
(i) extend the time for the performance of any of the obligations or other acts
of the other parties to this Agreement, (ii) waive any inaccuracies in the
representations and warranties contained in this Agreement by any other
applicable party or in any document, certificate or writing delivered pursuant
to this Agreement by any other applicable party or (iii) waive compliance with
any of the agreements or conditions contained in this Agreement. Any agreement
on the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
43
<PAGE> 47
ARTICLE 11
GENERAL PROVISIONS
11.1. 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 the Effective Time. This Section 11.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
11.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Purchaser or Merger Sub: If to the Company:
Heat Holdings Corp. Aavid Thermal Technologies, Inc
c/o Willis Stein & Partners Management One Eagle Square, Suite 509
227 West Monroe Street, Suite 4300 Concord, NH 03301
Chicago, Illinois 60606
With a copy to (which shall With a copy to (which shall not
not constitute notice): constitute notice):
Fulbright & Jaworski L.L.P.
Bartlit Beck Herman Palenchar & Scott 666 Fifth Avenue, 31st Floor
511 Sixteenth Street, Suite 700 New York, NY 10103-3198
Denver, Colorado 80202
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties to this Agreement (whether by operation of law or otherwise) without the
prior written consent of the other parties; provided, however, that either
Purchaser or Merger Sub (or both) may assign its rights hereunder (including
without limitation the right to make the Offer and/or to purchase shares of
Common Stock in the Offer) to an affiliate but nothing shall relieve the
assignor from its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties to
this Agreement and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 8.8 and
44
<PAGE> 48
8.9 and Article IV, nothing in this Agreement, expressed or implied, is intended
to confer on any Person other than the parties to this Agreement or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement, the
Schedules, the Exhibits, 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 among the parties with respect to this
Agreement.
11.5. FEES AND EXPENSES. Except as provided in Section 8.1, whether or not
the Offer or the Merger is consummated, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
11.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of the Company, Purchaser and Merger Sub hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
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), waives any objection to the laying of venue of any such litigation
in the Delaware Courts and agrees not to plead or claim in any Delaware Court
that such litigation brought therein has been brought in an inconvenient forum.
11.7. 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.
11.8. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and 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 deemed to be followed by the words "without
limitation." As used in this Agreement: (i) "Person" shall mean an individual,
partnership, limited liability company, corporation, joint stock company, trust,
estate, joint venture, association or unincorporated organization, or any other
entity or organization, including a government or political subdivision or any
agency or instrumentality thereof; (ii) "Subsidiary" shall mean, when used with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization; provided, however, that whether or not the
45
<PAGE> 49
transactions contemplated by the Thermalloy Agreement have been consummated,
"Subsidiary" shall not include Thermalloy and each of its Subsidiaries; (iii)
"Significant Subsidiaries" shall refer to Subsidiaries (as defined above) which
constitute "significant subsidiaries" under Rule 12b-2 under the Exchange Act;
(iv) "Material Adverse Effect," means any effect, event, occurrence, change or
state of facts that, or aggregated with other effects, events, occurrences,
changes or states of facts, is, or is reasonably likely to be, materially
adverse to (a) the business, operations, prospects (excluding the prospects of
the Company's industry in general or the economy in general), financial
condition or assets of the Company and its Subsidiaries taken as a whole,
provided, however, that the Company's failure to consummate the transactions
contemplated by the Thermalloy Agreement shall not constitute a Material Adverse
Effect or (b) the ability of the Company and its Subsidiaries to perform in all
material respects their obligations under this Agreement; and (v) "Intellectual
Property" means (a) all patents, patent applications and patent disclosures; all
inventions (whether or not patentable and whether or not reduced to practice);
(b) all trademarks, service marks, trade names, logos, slogans, corporate names
and Internet domain names, and all the goodwill associated with each of the
foregoing; (c) all mask works and registrations and applications for registry
thereof; (d) all registered and unregistered statutory and common law
copyrights; (e) all registrations, applications and renewals for any of the
foregoing; and (f) all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research information, drawings, specifications, designs, plans, improvements,
proposals, technical and computer data, documentation and software, financial
business and marketing plans, customer and supplier lists and related
information and marketing materials and all other proprietary rights; and (vi)
"knowledge" means the actual knowledge of the executive officers of the Company
after due inquiry of the other officers or employees of the Company and its
Subsidiaries responsible for the relevant matter (all such executive officers
being listed on Schedule 11.8).
11.9. INVESTIGATIONS. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
11.10. SEVERABILITY. Any term or provision of this Agreement which is
invalid 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.
11.11. ENFORCEMENT OF AGREEMENT. The parties to this Agreement 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
46
<PAGE> 50
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.
11.12. COUNTERPARTS. This Agreement may be executed by the parties to this
Agreement in separate counterparts, each of which when so executed and delivered
shall be an original, but 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
to this Agreement.
47
<PAGE> 51
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.
AAVID THERMAL TECHNOLOGIES, INC.
By: /s/ Ronald L. Borelli
------------------------------------
Name: Ronald L. Borelli
----------------------------------
Title: Chief Executive Officer
---------------------------------
HEAT HOLDINGS CORP.
By: /s/ Daniel H. Blumenthal
-------------------------------------
Name: Daniel H. Blumenthal
-----------------------------------
Title: Vice President
----------------------------------
HEAT ACQUISITION CORP.
By: /s/ Daniel H. Blumenthal
------------------------------------
Name: Daniel H. Blumenthal
----------------------------------
Title: Vice President
----------------------------------
48
<PAGE> 52
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for any shares of Common Stock, and may
terminate the Offer, if (i) prior to the expiration date of the Offer, (A) less
than a majority of the outstanding shares of Common Stock on a fully diluted
basis has been tendered pursuant to the Offer by the expiration of the Offer and
not withdrawn or, (B) the applicable waiting period under the HSR Act in respect
of any of the transactions contemplated by the Merger Agreement shall not have
expired or been terminated, or (ii) at any time on or after August 23, 1999 and
prior to the acceptance for payment of or payment for shares of Common Stock,
any of the following conditions exist:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by any
other person, domestic or foreign, before any court or governmental authority or
agency, domestic or foreign, which, in Purchaser's sole reasonable judgment, has
a reasonable likelihood of success, (i) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to restrain or prohibit
the making of the Offer, the acceptance for payment of or payment for some of or
all the shares of Common Stock by Purchaser or the consummation by Purchaser of
the Merger, or seeking to obtain material damages, (ii) seeking to restrain or
prohibit Purchaser's ownership or operation (or that of its respective
Subsidiaries or affiliates) of all or any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or to compel
Purchaser or any of its Subsidiaries or affiliates to dispose of or hold
separate all or any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, (iii) seeking to impose or confirm
material limitations on the ability of Purchaser or any of its Subsidiaries or
affiliates effectively to exercise full rights of ownership of the shares of
Common Stock, including, without limitation, the right to vote any shares of
Common Stock acquired or owned by Purchaser or any of its Subsidiaries or
affiliates on all matters properly presented to the Company's stockholders, or
(iv) seeking to require divestiture by Purchaser or any of its Subsidiaries or
affiliates of any shares of Common Stock; or
(b) there shall be any statute, rule, regulation, injunction, order or
decree enacted, enforced, promulgated, issued or deemed applicable to the Offer
or the Merger, by any court, government or governmental authority or agency,
domestic or foreign other than the application of the waiting period provisions
of the HSR Act to the Offer or the Merger, that, in the reasonable judgment of
Purchaser, is likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a) above; or
49
<PAGE> 53
(c) there shall have occurred any event or any worsening, after the date of
the Agreement, of any condition existing on the date of this Agreement which,
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect; or
(d) a tender or exchange offer for more than 30% of the shares of Common
Stock at a price per Share in excess of the Offer Consideration shall have been
made by another person, or it shall have been publicly disclosed or Purchaser
shall have otherwise learned that (i) any person or "group" (as defined in
Section 13(d)(3) of the Exchange Act) shall have acquired beneficial ownership
of more than 30% of any class or series of capital stock of the Company
(including the shares of Common Stock), through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted any option, right
or warrant, conditional or otherwise, to acquire beneficial ownership of more
than 30% of any class or series of capital stock of the Company (including the
shares of Common Stock) other than acquisitions for bona fide arbitrage purposes
only and other than as disclosed in a Schedule 13D or 13G on file with the
Commission on August 23, 1999, or (ii) any such person or group which, prior to
August 23, 1999, had filed such a Schedule with the Commission shall have
acquired beneficial ownership of additional shares of any class or series of
capital stock of the Company (including the shares of Common Stock), through the
acquisition of stock, the formation of a group or otherwise, constituting 10% or
more of any such class or series, or shall have been granted any option, right
or warrant, conditional or otherwise, to acquire beneficial ownership of
additional shares of any class or series of capital stock of the Company
(including the shares of Common Stock) constituting 10% or more of any such
class or series or (iii) any person or group shall have entered into a
definitive agreement or an agreement in principle with respect to a merger,
consolidation or other business combination with the Company; or
(e) the Company shall have breached or failed to perform in any material
respect any of its covenants or agreements under the Merger Agreement or any of
the representations and warranties of the Company set forth in the Merger
Agreement shall not be true in any material respect when made or at any time
prior to consummation of the Offer as if made at and as of such time (except for
representations and warranties made as of a specific date, which shall be true
and correct in all material respects as of such date); or
(f) the Merger Agreement shall have been terminated in accordance with its
terms; or
(g) the Board of Directors of the Company shall have withdrawn or
materially modified its approval or recommendation of the Offer or the Merger;
or
(h) the Company and Purchaser shall have reached an agreement or
understanding regarding termination of the Offer;
50
<PAGE> 54
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by Purchaser or the Company)
giving rise to any such condition and may be waived by Purchaser or Merger Sub,
in whole or in part, at any time and from time to time, in the sole discretion
of Purchaser. The failure by Purchaser or Merger Sub at any time to exercise any
of the foregoing rights will not be deemed a waiver of any right, the waiver of
such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Common Stock not previously accepted for payment shall
forthwith be returned by the depositary to the tendering stockholders.
The capitalized terms used in this Exhibit A shall have the meaning set
forth in the Agreement to which it is annexed.
51
<PAGE> 1
EXHIBIT 2.3
VOTING AGREEMENT
VOTING AGREEMENT made this ___ day of August, 1999 (the "AGREEMENT"), among
the Stockholder (as defined below) of Aavid Thermal Technologies, Inc., a
Delaware corporation (the "COMPANY"), Heat Holdings Corp., a Delaware
corporation ("PURCHASER"), and Heat Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Purchaser ("MERGERCO").
The term "STOCKHOLDER", as used herein, shall mean each of the Persons set
forth on the signature pages hereof as Owners, and each reference to the
Stockholder is intended to encompass each of such Persons. The term "SHARES", as
used in this Agreement, shall mean any and all shares of capital stock of the
Company which are entitled to vote in any election of the board of directors of
the Company now owned and/or subsequently acquired by the Stockholder through
purchase, gift, stock splits, stock dividends and the exercise of stock options.
R E C I T A L S
Concurrently with the execution of this Agreement, Purchaser, MergerCo and
the Company have entered into an Agreement and Plan of Merger dated as of the
date of this Agreement (the "MERGER AGREEMENT") pursuant to which MergerCo will
merge with and into the Company (the "MERGER"). The transactions contemplated by
the Merger Agreement are collectively referred to as the "TRANSACTIONS."
In order to induce Purchaser and MergerCo to enter into the Merger
Agreement with the Company, Purchaser and MergerCo have requested, and the
Stockholder has agreed, that the Stockholder enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE 1
VOTING AGREEMENT
The Stockholder hereby agrees with Purchaser and MergerCo as follows:
SECTION 1.1. Voting of Shares. (a) At any meeting of the stockholders of
the Company, however called, at every adjournment of any such meeting, and in
connection with any written consent of the stockholders of the Company, the
Stockholder will cause all of his Shares to be voted, during the term of this
Agreement, (A) in favor of (i) the Merger and the approval and adoption of the
Merger Agreement, and (ii) all other Transactions as to which stockholders of
the Company are called upon to vote, and (B) against any proposal submitted to
the Company's stockholders which could result in or would reasonably be expected
to lead to (i) any acquisition or purchase of 30% or more of the consolidated
assets of the Company and its Subsidiaries or of over 30% of any class of equity
securities of the Company or any of its Subsidiaries, (ii) any tender offer
(including a self tender offer) or exchange offer that if consummated would
result in any party other than Purchaser or MergerCo beneficially owning 30% or
more of any class of equity securities of the Company or any of its
Subsidiaries, (iii) any
<PAGE> 2
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 30% of the consolidated assets of the Company
other than the Transactions, or (iv) any other transaction the consummation of
which would reasonably be expected to interfere with in a material way, prevent
or materially delay the Merger or which would reasonably be expected to
materially dilute the benefits to Purchaser of the Transactions, (each of the
matters referred to in clause (B) above, an "ACQUISITION PROPOSAL").
For purposes of this Agreement, (i) "CONTROL" and correlative terms shall
have the meanings ascribed to them in Rule 405 under the Securities Act of 1933;
(ii) "PERSON" shall mean an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof,
and (iii) "SUBSIDIARY" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by a Person.
(b) The Stockholder agrees that during the term of this Agreement, the
Stockholder shall attend or otherwise participate in all duly called stockholder
meetings and any adjournments of such meetings and in all actions by written
consent of stockholders.
SECTION 1.2. No Proxies or Encumbrances. Other than as provided in this
Agreement, the Stockholder, until the termination of this Agreement, shall not
(i) grant any proxies or enter into any voting trust or other agreement or
arrangement with respect to the voting of any of the Shares (other than proxies
to vote in the manner set forth in Section 1.1), (ii) sell, assign, transfer,
encumber or otherwise dispose of or enter into any contract, option or other
arrangement or understanding with respect to, the direct or indirect sale,
assignment, transfer, encumbrance or other disposition of any of its Shares or
any interest therein except for Permitted Transfers to Permitted Transferees (as
such terms are defined below) or (iii) seek or solicit any of the foregoing. The
Stockholder shall notify Purchaser and MergerCo promptly and provide all details
requested by Purchaser and MergerCo if the Stockholder shall be approached or
solicited, directly or indirectly, by any Person with respect to any of the
foregoing.
For purposes of this Agreement, (i) "PERMITTED TRANSFEREE" means, with
respect to any particular Owner any Person controlled, directly or indirectly,
by the Stockholder and (ii) each transfer to a Permitted Transferee shall
constitute a "PERMITTED TRANSFER" only if it is a:
(i) transfer to a Permitted Transferee of such Owner and, in the case
of a Permitted Transferee, transfer to the Owner who transferred such
securities to the Permitted Transferee or to other Permitted Transferees of
such Owner; provided that, any such Permitted Transferee shall enter into a
supplement to this Agreement, consented to in writing by Purchaser and
MergerCo, agreeing to be bound by the terms of this Agreement; or
(ii) pledge to a bank or securities firm of such Owner's Shares
securing a bona fide loan; provided that the pledge agreement with the
pledgee shall provide that the transferring Owner shall continue at all
times to have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to such pledged Shares; and provided
further that any pledge agreement that any Owner enters into shall provide
that the pledgee shall give written
2
<PAGE> 3
notice to Purchaser and MergerCo at least 10 days prior to the date such
pledgee takes any action to exercise any remedies with respect to such
Shares;
provided that no such transfer is in violation of applicable federal or state
securities laws.
SECTION 1.3. No Solicitation. The Stockholder shall not, during the term of
this Agreement, directly or indirectly solicit, initiate or encourage (or
authorize any person to solicit, initiate or encourage) any Acquisition
Proposal.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
The Stockholder represents and warrants to Purchaser and MergerCo as
follows:
SECTION 2.1. Valid Title. The Stockholder is the true and lawful owner of
100% of the Shares set forth next on the Shares Schedule to this Agreement, with
full power to vote and dispose of such Shares, and there are no restrictions on
the Stockholder's voting rights or rights of disposition pertaining to such
Shares except as set forth in this Agreement, pursuant to bona fide pledge
agreements to secure loans to such Stockholder, or imposed by federal and state
securities law. None of the Shares is subject to any voting trust or other
agreement or arrangement with respect to the voting of such shares.
SECTION 2.2. Non-Contravention. The execution, delivery and performance by
the Stockholder of this Agreement and the consummation of the transactions
contemplated hereby, do not and will not contravene or constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any material right or obligation of the Stockholder or to a loss of any material
benefit of the Stockholder under any provision of applicable law or regulation
or of any agreement, judgment, injunction, order, decree or other instrument
binding on the Stockholder.
SECTION 2.3. Authorization. The execution, delivery and performance by the
Stockholder of this Agreement and the consummation by the Stockholder of the
Transactions are within the Stockholder's powers and have been duly authorized
by all necessary actions.
SECTION 2.4. Binding Effect. This Agreement constitutes a valid and binding
agreement of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally. If the
Stockholder is married and the Shares set forth on the signature pages hereto
next to the Stockholder's name constitute community property under applicable
laws, this Agreement has been duly authorized, executed and delivered by, and
constitutes the valid and binding agreement of, the Stockholder's spouse,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally. If this Agreement is being executed in a
representative or fiduciary capacity, the person signing this Agreement has full
power and authority to enter into and perform this Agreement and has obtained
any necessary consents in connection with execution of this Agreement.
SECTION 2.5. No Other Shares. The number of Shares set forth on the Shares
Schedule next to the name of the Stockholder are the only Shares owned by the
Stockholder. Except as set forth on the
3
<PAGE> 4
Shares Schedule, the Stockholder owns no options to purchase or rights to
subscribe for or otherwise acquire any securities of the Company and has or have
no other interest in or voting rights with respect to any securities of the
Company (other than the Shares set forth on the signature pages hereof).
SECTION 2.6. Finder's Fees. No investment banker, broker, finder or other
intermediary has been retained by or is authorized to act on behalf of the
Stockholder who is or may be entitled to a commission or fee from Purchaser,
MergerCo or the Company in respect of this Agreement based upon any arrangement
or agreement made by or on behalf of the Stockholder.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. Notices. All notices, requests and other communications to any
party hereunder shall be deemed to have been duly given when delivered in
person, by telegram, facsimile or by registered or certified mail (postage
prepaid, return receipt requested) to such party at its address set forth on the
signature pages hereto.
SECTION 3.2. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by each of the parties hereto, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 3.3. Termination. This Agreement shall automatically terminate upon
termination of the Merger Agreement in accordance with its terms.
SECTION 3.4. Severability. If any provision of this Agreement or the
application of such provision to any party or set of circumstances shall, in any
jurisdiction and to any extent, be finally held invalid or unenforceable, such
term or provision shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without invalidating or
rendering unenforceable any other terms or provisions of this Agreement or under
any other circumstances, and the parties shall negotiate in good faith a
substitute provision which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each party in a position as
nearly comparable as possible to the position it would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 3.5. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof.
4
<PAGE> 5
SECTION 3.6. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (and, in the case of the Stockholder, the
heirs and executors of the Stockholder); provided that, except as permitted by
Section 1.2 or by will or intestacy, no party may assign, delegate or otherwise
transfer all or any of its rights or obligations under this Agreement without
the consent of the other parties hereto.
SECTION 3.7. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party shall have received
counterparts (or signature pages) hereof signed by all of the other parties.
SECTION 3.8. Governing Law; Jurisdiction; Specific Performance. (a)
Governing Law. The terms of this Agreement shall be construed in accordance with
and governed by the law of the State of Delaware (without regard to principles
of conflict of laws).
(b) Jurisdiction; Specific Performance. (i) Each of the parties hereto
agrees that any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought against any of the parties
in any state or federal court in the State of Delaware, and each of the parties
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such suit, action, or proceeding and waives
any objection to venue laid therein. Process in any suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
State Delaware. Without limiting the foregoing, each of the parties hereto
agrees that service of process upon such party at the address referred to in
Section 3.1, together with written notice of such service to such party, shall
be deemed effective service of process upon such party, and (ii) each of the
parties acknowledges and agrees that the parties' respective remedies at law for
a breach or threatened breach of any of the provisions of this Agreement would
be inadequate and, in recognition of that fact, each agrees that, in the event
of a breach or threatened breach by any party of the provisions of this
Agreement, in addition to any remedies at law, each party, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.
(c) Waiver of Jury Trial. Each of the parties irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Agreement or
the actions of any of them in the negotiation, administration, performance and
enforcement thereof.
SECTION 3.9. Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
SECTION 3.10. Certain Events. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to its Shares and shall be binding
upon any person to which legal or beneficial ownership of such shares shall
pass, whether by operation of law or otherwise.
SECTION 3.11. No Revocation. The voting agreements contained herein are
coupled with an interest and may not be revoked prior to termination of this
Agreement in accordance with Section 3.3, except by written consent of Purchaser
and MergerCo.
5
<PAGE> 6
SECTION 3.12. Stockholder Capacity. No person executing this Agreement who
is or becomes an officer or director of the Company makes any agreement or
understanding herein in his capacity as an officer or director. The Stockholder
signs solely in his capacity as the record holder and beneficial owner of such
Stockholder's Shares and nothing in this Agreement shall limit or affect any
actions taken by the Stockholder in his capacity as an officer or director of
the Company.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused this Agreement to be duly executed by their respective authorized
officers or representatives, as of the day and year first above written.
AAVID THERMAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
Title:
HEAT MERGER CORP.
By:
-----------------------------
Name:
Title:
HEAT HOLDINGS CORP.
By:
-----------------------------
Name:
Title:
OWNERS:
----------------------------
----------------------------
<PAGE> 8
SHARES SCHEDULE
Owners: NUMBER OF SHARES NUMBER OF OPTIONS
---------------- -----------------
<PAGE> 1
EXHIBIT 99
[AAVID THERMAL TECHNOLOGIES, INC. LOGO]
CORPORATE HEADQUARTERS - ONE EAGLE SQUARE, SUITE 509, CONCORD, NH 03301
TELEPHONE (603) 224-1117 FAX (603) 224-6673
FOR IMMEDIATE RELEASE
AAVID THERMAL TECHNOLOGIES ANNOUNCES IT WILL BE
ACQUIRED BY WILLIS STEIN & PARTNERS
AAVID THERMAL TECHNOLOGIES ANNOUNCES IT WILL
PURCHASE THERMAL MANAGEMENT BUSINESS OF BOWTHORPE
CONCORD, NH, AUGUST 23, 1999 - Aavid Thermal Technologies, Inc. (NASDAQ: AATT)
announced today that it has entered into a definitive agreement pursuant to
which a new company formed by Willis Stein & Partners will acquire Aavid in a
merger for $25.50 per share in cash, or approximately $260 million. The
transaction was approved by Aavid's Board of Directors after it conducted a
review of Aavid's strategic alternatives. The Board received a fairness opinion
with respect to the proposed transaction from Hambrecht & Quist LLC, which the
Board had engaged to assist it in its review and evaluation of strategic
alternatives.
The transaction is subject to a number of customary closing conditions,
including stockholder and regulatory approval. In addition, the transaction at
$25.50 is conditioned on the Company's acquisition of the thermal management
sector of Bowthorpe plc as set forth below. The Company intends to hold a
special meeting of its stockholders to approve the transaction as soon as
possible following the completion of the acquisition of the thermal management
sector of Bowthorpe. The Company expects to complete the transaction with Willis
Stein in the fourth quarter of 1999.
1
<PAGE> 2
The Company also announced today that it has entered into a definitive
Stock Purchase Agreement to acquire the thermal management sector of Bowthorpe
for approximately $79.5 million in cash, subject to certain closing date
adjustments. Prudential Securities Incorporated advised the Board with respect
to the acquisition. The proposed acquisition, which is expected to close in the
fourth quarter of 1999, is subject to various conditions, including expiration
of applicable Hart Scott Rodino waiting periods. Willis Stein has agreed to
proceed with the acquisition of the Company even if the acquisition of
Bowthorpe's thermal management sector does not occur, although at a price per
share of $24.50.
Bowthorpe's thermal management sector provides heatsinks and associated
products for the cooling of semiconductors, power hybrid circuits, high power
electronics, and other electronic devices. Upon closing of the stock purchase
agreement, Aavid will acquire Bowthorpe's thermal management product
manufacturing facilities in Dallas, Texas; Monterey, Mexico; Swindon, England;
Corby, England; Milan, Italy; Hong Kong and Malaysia. As part of the acquisition
from Bowthorpe, Aavid will also acquire 65.2%, representing Bowthorpe's entire
shareholding, of Curamik Electronics GmbH, a German corporation which
manufactures direct bonded copper substrates used in the packaging and cooling
of high power electronic devices. The sector, including Curamik, had revenues of
approximately $102 million for the year ended December 31, 1998 and $50 million
for the first half of 1999. The acquisition is not expected to be accretive to
Aavid's earnings for twelve months following the closing.
2
<PAGE> 3
COMPANY BACKGROUND
Aavid Thermal Technologies is a leading provider of thermal management
solutions for dissipating potentially damaging heat from digital and power
electronics. Aavid serves a highly diversified range of markets, principally in
North America, Europe, and the Far East. Aavid's 1998 sales totaled $209
million, driven by the company's operations in two distinct markets: thermal
management solutions and computational fluid dynamics software.
Thermal management solutions include products and services for problems
associated with the dissipation of unwanted heat in electronic and electrical
components and systems.
Computational fluid dynamics (CFD) software involves developing software
for computer modeling and flow analysis of products and processes that would
otherwise require time consuming and expensive physical models and the
facilities to test them.
Ongoing increases in silicon and system integration, higher processing
speeds and frequencies, smaller form factors, more sophisticated power
requirements and other advances in chip technology create excessive heat in
microprocessors and IC's (semiconductors) in electronic and electrical
components and systems. Microprocessors and integrated circuits operate
efficiently only in a narrow temperature band.
The excessive heat generated by these semiconductors not only harms their
own performance, but also degrades system performance and reliability and can
cause system failure. The increasingly wide range of environmental conditions,
including temperature extremes, in which electronic systems are expected to
operate, exacerbates these negative effects.
3
<PAGE> 4
The use of Aavid's thermal solutions helps maintain device and system
performance and reliability, and help avoid premature component and system
failure. Additional information on Aavid Thermal Technologies is available on
the World Wide Web at http://www.aatt.com
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Statements contained in this press release which are not historical facts may be
considered forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties, which could cause actual results to differ
materially from those projected. Such risks, uncertainties and factors include,
but are not limited to, changes in the Company's markets, particularly the
potentially volatile semiconductor market, changes in and delays in product
development plans and schedules, customer acceptance of new products, changes in
pricing or other actions by competitors, patents owned by the Company and its
competitors, risk of foreign operations and markets, difficulties in integrating
newly acquired businesses and general economic conditions, as well as other
risks detailed in the Company's filings with the Securities and Exchange
Commission.
###
4
