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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): JUNE 15, 1998
METALLURG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-1661467
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
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6 EAST 43RD STREET
NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
Registrant's telephone number, including area code:
(212) 835-0200
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ITEM 1. PROPOSED CHANGE OF CONTROL OF REGISTRANT.
On June 15, 1998, Metallurg, Inc. ("Metallurg"), Metallurg Holdings, Inc.
("Metallurg Holdings") and Metallurg Acquisition Corp. ("Metallurg Acquisition")
entered into a merger agreement (the "Merger Agreement") pursuant to which
Metallurg Acquisition will merge with and into Metallurg, with Metallurg being
the Surviving Corporation of the merger (the "Merger"). Upon consummation of the
Merger, each share of Metallurg's outstanding common stock will be converted
into the right to receive $30.00 in cash, subject to the terms of the Merger
Agreement. Upon consummation of the Merger, Metallurg Holdings will own 100% of
the outstanding common stock of Metallurg. Metallurg Holdings is owned by a
group led by Safeguard International Fund, L.P. ("Safeguard International").
Safeguard International is an international public equity fund based in Wayne,
Pennsylvania.
The obligations of Metallurg and Metallurg Holdings to consummate the
Merger are subject to various conditions, including, without limitation, the
following: obtaining the requisite approval of Metallurg's stockholders; the
receipt of certain consents from Metallurg's lenders; and the absence of any
injunction or other legal restraint or prohibition preventing the Merger.
Metallurg Holdings' obligations are further subject to no material adverse
change relating to Metallurg and its subsidiaries having occurred and being
continuing; receipt of the favorable opinion of Deloitte & Touche LLP to the
effect that the Merger will be recorded by Metallurg as a recapitalization for
financial reporting purposes; and the receipt of the requisite consents from
holders of Metallurg's 11% Senior Notes due 2007 to a one-time waiver of
Metallurg's obligation to make a change of control offer following the Merger in
accordance with the Indenture for the Notes and to certain other amendments to
the Indenture to reflect the beneficial ownership of Metallurg following Merger.
Metallurg can give no assurance that the conditions to the Merger will be
satisfied or that the Merger will ever be consummated. In addition, subject to
the provisions of Delaware law, the Merger Agreement may be amended by the
parties.
As of June 4, 1998, Metallurg had 4,956,406 shares of common stock
outstanding. Directors and executive officers of Metallurg beneficially owned
3,085,415 shares of common stock and options to purchase 130,000 shares of
common stock of Metallurg as of that date. In addition, pursuant to existing
employment agreements between Metallurg and Michael A. Standen, J. Richard Budd,
Michael A. Banks, Barry C. Nuss and Eric L. Schondorf, each of these individuals
will, in certain circumstances, be entitled to payments of $1.2 million,
$474,300, $321,300, $346,300 and $313,650, respectively, if their employment is
terminated by them or by the Surviving Corporation in accordance with the terms
of their respective employment agreements following the Merger. See Metallurg's
Annual Report on Form 10-K for the year ended January 31, 1998 which has been
filed with the Securities and Exchange Commission for a discussion of these
employment agreements and of certain other benefits to which these employees may
become entitled in the event of their termination.
The Merger Agreement provides that immediately following the Merger, the
officers of Metallurg immediately prior to the Merger will be the officers of
Metallurg immediately following the Merger, and that the directors of Metallurg
will be the following persons: Heinz C. Schimmelbusch, Arthur R. Spector and
Michael A. Standen. Information with regard to Mr. Standen can be found in
Metallurg's Annual Report on Form 10-K for the year ended January 31, 1998 which
has been filed with the Securities and Exchange Commission. Information with
regard to Messrs. Schimmelbusch and Spector is set forth below:
Heinz C. Schimmelbusch has been a director of Safeguard since 1989. From
1973 to 1993, Dr. Schimmelbusch was associated with Metallgesellschaft AG, a raw
materials company of which he served as Chairman of the Executive Board from
March 1989 to December 1993 and as Deputy Chairman of the Board of Management
from July 1988 to March 1989. Dr. Schimmelbusch is a director of Safeguard
Scientifics, Inc. and Arthur Treacher's Seafood Grill.
Arthur R. Spector has served as a director of USDATA Corporation since
November 1994 where he was Chairman until April 1, 1998. From January 1997 to
March 1998, Mr. Spector served as a managing director of TL Ventures LLC, a
venture capital management company organized to manage day-to-day operations of
TL Ventures III L.P. and TL Ventures III Offshore L.P. From January 1995 through
December 1996,
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Mr. Spector served as Director of Acquisitions of Safeguard Scientifics, Inc.
From July 1992 until May 1995, Mr. Spector served as Vice Chairman and Secretary
of Casino & Credit Services, Inc. From October 1991 to December 1994, Mr.
Spector was Chief Executive Officer and a director of Perpetual Capital
Corporation, a merchant banking organization. Mr. Spector serves on the Board of
Neoware Systems, Inc. (formerly HDS Network Systems Inc.), a manufacturer of
network computers and a provider of desktop computing services, and is a
director of DocuCorp International., Inc.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
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(2) Merger Agreement dated June 15, 1998 between Metallurg,
Metallurg Holdings and Metallurg Acquisition.
(99)(a) Press Release of Metallurg, Inc. dated June 15, 1998.
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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, thereunto duly authorized.
METALLURG, INC.
By /s/ ERIC L. SCHONDORF
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Name: Eric L. Schondorf
Title: Vice President
Date: June 16, 1998
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 15, 1998
BY AND AMONG
METALLURG HOLDINGS, INC.,
METALLURG ACQUISITION CORP.
AND
METALLURG, INC.
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
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1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 1
1.4 Effects of the Merger....................................... 1
1.5 Certificate of Incorporation................................ 2
1.6 By-laws..................................................... 2
1.7 Directors and Officers...................................... 2
ARTICLE II
CONVERSION OF SHARES
2.1 Acquisition Shares.......................................... 2
2.2 Conversion of Company Shares................................ 2
2.3 Dissenting Shares........................................... 3
2.4 Surrender of Shares; Stock Transfer Books................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization, Standing and Corporate Power.................. 4
3.2 Capital Structure........................................... 4
3.3 Subsidiaries................................................ 5
3.4 Authority, Due Execution and Noncontravention............... 5
3.5 SEC Documents and Financial Statements...................... 6
3.6 Absence of Certain Changes or Events........................ 7
3.7 Real and Personal Property.................................. 7
3.8 Employee Matters; ERISA..................................... 8
3.9 Taxes....................................................... 9
3.10 Compliance with Applicable Laws............................. 11
3.11 Environmental Protection.................................... 12
3.12 Litigation.................................................. 15
3.13 Labor Relations............................................. 15
3.14 Intellectual Property....................................... 16
3.15 No Default.................................................. 16
3.16 Insurance................................................... 17
3.17 Brokers..................................................... 17
3.18 Change in Business Relationships............................ 17
3.19 Material Contracts.......................................... 17
3.20 No Omissions................................................ 18
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization, Standing and Corporate Power.................. 18
4.2 Authority, Due Execution and Noncontravention............... 18
4.3 Consents and Approvals; Licenses............................ 18
4.4 No Conflicts................................................ 18
4.5 No Brokers.................................................. 19
4.6 Receipt of Information...................................... 19
4.7 Business and Activity....................................... 19
4.8 Liabilities and Obligations................................. 19
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Consent Solicitation........................................ 20
5.2 Preparation of Information Statement........................ 20
5.3 Meeting of the Company's Shareholders; Consents of
Shareholders................................................ 20
5.4 Offering Memorandum......................................... 21
5.5 Access to Information; Confidentiality...................... 21
5.6 Public Announcements........................................ 21
5.7 Acquisition Proposals....................................... 21
5.8 Fiduciary Duties............................................ 22
5.9 Filings; Other Action....................................... 22
5.10 Cooperation, Notification................................... 22
5.11 Best Efforts................................................ 22
5.12 Recapitalization Accounting................................. 23
5.13 Indemnification............................................. 23
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 Conduct of Business of Company Prior to Merger.............. 23
6.2 Environmental Matters....................................... 25
6.3 Other Actions............................................... 25
ARTICLE VII
COVENANTS OF BUYER
7.1 Indemnification for Prior Acts.............................. 26
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ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
8.1 Accuracy of Representations and Warranties.................. 26
8.2 Performance................................................. 26
8.3 Material Adverse Change..................................... 26
8.4 Opinion of Counsel.......................................... 27
8.5 Opinion of Accountants...................................... 27
8.6 Additional Documents........................................ 27
8.7 Consents.................................................... 27
8.8 No Government Prohibition................................... 27
8.9 Company Notes............................................... 27
8.10 ISRA Compliance............................................. 27
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
9.1 Accuracy of Representations and Warranties.................. 27
9.2 Performance................................................. 27
9.3 Fairness Opinion............................................ 28
9.4 Opinion of Counsel.......................................... 28
9.5 No Government Prohibition................................... 28
9.6 Shareholder Approval........................................ 28
9.7 Consents.................................................... 28
ARTICLE X
TERMINATION
10.1 Termination Events.......................................... 28
10.2 Effect of Termination....................................... 29
ARTICLE XI
SURVIVAL OF PROVISIONS
11.1 Survival.................................................... 29
ARTICLE XII
GENERAL PROVISIONS
12.1 Expenses.................................................... 29
12.2 Notices..................................................... 29
12.3 Waiver...................................................... 30
12.4 Entire Agreement............................................ 30
12.5 Assignments, Successors and No Third-Party Rights........... 30
12.6 Severability................................................ 30
12.7 Governing Law............................................... 30
12.8 Headings.................................................... 31
12.9 Definitions................................................. 31
12.10 Counterparts................................................ 31
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EXHIBIT 1.7 LIST OF INITIAL DIRECTORS
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of the 15th day of June, 1998, by and among Metallurg Holdings, Inc., a
Delaware corporation ("Buyer"), Metallurg Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Buyer ("Acquisition"), and
Metallurg, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, Buyer and the Company have determined to engage in a strategic
business combination;
WHEREAS, in furtherance thereof, the respective boards of directors of each
of Buyer, Acquisition and the Company have approved this Agreement, which
contemplates the merger of Acquisition with and into the Company (the "Merger"),
whereby the Company will become a wholly owned subsidiary of Buyer, and have
approved the Merger upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, Buyer, Acquisition and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Acquisition shall be merged with and into the Company at the Effective
Time (as defined in Section 1.3). At the Effective Time, the separate existence
of Acquisition shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation").
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1, and subject to the satisfaction or waiver of the conditions set forth in
Articles VIII and IX, the closing of the Merger (the "Closing") shall take place
at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P. ("LLG&M"), 125 West
55th Street, New York, New York, at 10:00 a.m. local time on the second business
day following the date on which the last of the conditions set forth in Articles
VIII and IX shall have been fulfilled or waived in accordance with this
Agreement but in no event later than July 31, 1998, unless Buyer and the Company
agree to another place, date or time (the "Closing Date").
1.3 Effective Time. The parties hereto shall file with the Secretary of
State of the State of Delaware on the Closing Date a certificate of merger or
other appropriate documents, mutually satisfactory in form and substance to
Buyer and the Company and executed in accordance with the relevant provisions of
the DGCL, and shall make all other filings or recordings required under the DGCL
in connection with the Merger. The Merger shall become effective upon the filing
of the certificate of merger with the Secretary of State of the State of
Delaware (the "Delaware Secretary of State") or at such later time as is
specified in the certificate of merger (the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Acquisition shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Buyer shall become the debts,
liabilities and duties of the Surviving Corporation, all as provided under the
DGCL.
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1.5 Certificate of Incorporation. At the Effective Time and without any
further action on the part of Buyer or the Company, the certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation (the
"Certificate of Incorporation") until thereafter amended as provided therein and
under the DGCL.
1.6 By-laws. At the Effective Time and without any further action on the
part of Buyer or the Company, the by-laws of the Company as in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation (the "By-laws") until thereafter amended or repealed as provided by
law, the By-laws or the Certificate of Incorporation.
1.7 Directors and Officers. The initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws, will be the persons set forth on Exhibit 1.7. The
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until the earlier of
their resignation or removal or until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
2.1 Acquisition Shares. Each share of common stock, par value $0.01 per
share, of Acquisition issued and outstanding immediately prior to the Effective
Time shall, at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of common
stock, par value $0.01 per share, of the Surviving Corporation.
2.2 Conversion of Company Shares. (a) Outstanding Company Shares. Subject
to the provisions of this Section 2.2, each share of common stock, par value
$0.01 per share of the Company (the "Company Shares"), issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares (as
defined in Section 2.3)) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled, extinguished and converted
automatically into the right to receive $30.00 in cash (the "Merger
Consideration") payable to the holder thereof, without interest, less any
required withholding taxes, upon surrender in the manner provided in Section 2.4
of the certificate that prior to the Merger represented such Company Share. Each
Company Share held in treasury shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired and cease to
exist.
(b) Company Stock Options. Immediately prior to the Effective Time, each
outstanding employee stock option to purchase Company Shares granted under the
Company's Management Stock Award and Stock Option Plan (the "Company SASOP")
(each, a "Company Stock Option"), whether or not then vested or exercisable,
shall be (or, if not previously vested and exercisable, shall become),
consistent with the plans and agreements applicable to such Company Stock
Option, vested and exercisable and such Company Stock Option immediately
thereafter shall be canceled by the Company. Buyer shall pay to the Surviving
Corporation, and each holder of a canceled Company Stock Option shall be
entitled to receive from the Surviving Corporation at the Effective Time or as
soon as practicable thereafter, in consideration for the cancellation of such
Company Stock Option, an amount in cash equal to the product of (i) the number
of Company Shares previously subject to such Company Stock Option and (ii) the
excess, if any, of the Merger Consideration over the exercise price per Company
Share previously subject to such Company Stock Option. Prior to the Effective
Time the Company shall (y) use its best efforts to obtain any consents from
holders of Company Stock Options and (z) make any amendments to the terms of
such Company Stock Options and the Company SASOP that are necessary to give
effect to the transactions contemplated by this Section 2.2. Notwithstanding any
other provision of this Section 2.2, delivery of any Merger Consideration may be
withheld in respect of any employee stock option until such necessary consents
are obtained; provided that, in the event that any such consent with respect to
any such option is not obtained, the consideration payable pursuant to this
Section 2.2(b) shall nevertheless be paid by Buyer to the Surviving Corporation,
and retained by the Surviving Corporation, in respect of such option and, when
applicable, the Surviving Corporation shall pay any such consideration to the
holder of such option. Prior to the Effective Time, the Company shall be
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permitted to amend the Company SASOP or any Company Stock Option to extend the
date of exercise or accelerate the vesting of any currently outstanding Company
Stock Option through the earlier of the Effective Time and the date of
termination of this Agreement.
2.3 Dissenting Shares. (a) Notwithstanding anything in this Agreement to
the contrary, Company Shares that are issued and outstanding immediately prior
to the Effective Time and that are held by any shareholders who shall not have
voted in favor of or consented to the Merger and who shall have delivered a
written demand for appraisal of such Company Shares in the time and manner
provided in Section 262 of the DGCL and shall not have failed to perfect or
shall not have effectively withdrawn or lost their rights to appraisal and
payment under the DGCL (the "Dissenting Shares") shall not be converted into the
right to receive the Merger Consideration, but shall be entitled to receive the
consideration as shall be determined pursuant to Section 262 of the DGCL;
provided, however, that if any such shareholder shall have failed to perfect or
shall have effectively withdrawn or lost such shareholder's right to appraisal
and payment under the DGCL, such shareholder's Company Shares shall thereupon be
deemed to have been converted, at the Effective Time, into the right to receive
the Merger Consideration set forth in Section 2.2(a) of this Agreement, without
any interest thereon, less any required withholding taxes, upon surrender in the
manner provided in Section 2.4 of the certificate that prior to the Merger
represented such Company Shares.
(b) The Company shall give Buyer (i) prompt notice of any demands for
appraisal pursuant to Section 262 of the DGCL received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Buyer, make any payment with respect to any such
demands for appraisal or offer to settle or settle any such demands.
2.4 Surrender of Shares; Stock Transfer Books. (a) Paying Agent. Prior to
the Effective Time, Buyer shall designate a bank or trust company to act as
agent for the holders of Company Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Company
Shares shall become entitled pursuant to Section 2.2(a). At the Closing, Buyer
shall deposit in trust with the Paying Agent, for the benefit of the holders of
Company Shares, cash in immediately available funds in an amount equal to the
aggregate Merger Consideration. Such funds shall be invested by the Paying Agent
as directed by Buyer or, after the Effective Time, the Surviving Corporation;
provided that such investments shall only be in obligations of or guaranteed by
the United States of America (the "United States"). Any net profit resulting
from, or interest or income produced by, such investments will be payable to the
Surviving Corporation or Buyer, as Buyer directs.
(b) Surrender of Shares. As soon as practicable after the Effective Time
(but in no event more than five business days after the Effective Time), the
Surviving Corporation shall cause to be mailed to each record holder of a
certificate or certificates representing Company Shares immediately prior to the
Effective Time (the "Certificates") a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon surrender to
the Paying Agent of a Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each Company Share formerly
represented by such Certificate, and such Certificate shall then be canceled. If
a Certificate has been lost, stolen or destroyed, the Surviving Corporation
shall accept an affidavit and indemnity reasonably satisfactory to the Surviving
Corporation in lieu of such Certificate. No interest shall be paid or accrued
for the benefit of holders of the Certificates on the Merger Consideration
payable upon the surrender of the Certificates. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have
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established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) Exchange Fund. At any time following six months after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest and other income received with
respect thereto) that had been made available to the Paying Agent and that had
not been disbursed to holders of Certificates, and thereafter such holders shall
be entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or other similar law.
(d) No Further Ownership Rights in Company Shares. From and after the
Effective Time, the holders of Certificates evidencing ownership of Company
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Company Shares except as otherwise provided for
herein or by applicable law. After the Effective Time, there shall be no further
transfer on the records of the Company or its transfer agent of certificates
representing Company Shares and if such Certificates are presented to the
Company for transfer, they shall be canceled against delivery of the Merger
Consideration as herein provided. The Merger Consideration paid upon the
surrender for exchange of Certificates representing Company Shares in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Company Shares theretofore
represented by such Certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared by the Company on such Company Shares in accordance with the terms of
this Agreement or prior to the date of this Agreement and that remain unpaid at
the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and Acquisition as
follows:
3.1 Organization, Standing and Corporate Power. The Company is a
corporation duly incorporated and validly existing under the laws of the State
of Delaware, has the requisite corporate power and authority to carry on its
business as now being conducted, and 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 the leasing of its properties makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not individually or in the aggregate have a Company
Material Adverse Effect. As used in this Agreement, the term "Company Material
Adverse Effect" shall mean a material adverse effect on the business, assets,
liabilities, results of operations or financial condition of the Company and its
Material Subsidiaries (as defined in Section 3.3.1) taken as a whole, and the
"Knowledge of the Company" shall include the knowledge of any Material
Subsidiary. The Company has delivered to Buyer complete and correct copies of
its certificate of incorporation and by-laws, as amended to the date of this
Agreement.
3.2 Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 15,000,000 Company Shares, of which 4,956,406
shares are issued and outstanding. The Company has no Company Shares reserved
for issuance, except that, as of May 31, 1998, there were 187,000 Company Shares
reserved for issuance pursuant to the Company SASOP. All outstanding Company
Shares are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. No bonds, debentures, notes or other indebtedness
of the Company conferring the right to vote (or convertible into, or
exchangeable for, securities conferring the right to vote) on any matters on
which the shareholders of the Company may vote are issued or outstanding. Except
as set forth in Section 3.2 of the disclosure schedule dated as of the date
hereof of the Company (the "Company Disclosure Schedule"), the Company does not
have any outstanding option, warrant, subscription or other right, agreement or
commitment that either
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obligates the Company to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of capital stock of the Company or that
restricts the transfer of Company Shares.
3.3 Subsidiaries.
3.3.1 Section 3.3.1 of the Company Disclosure Schedule sets forth the
name of each Subsidiary (as defined below) of the Company and the
jurisdiction of its organization and identifies each Subsidiary of the
Company that is a "Material Subsidiary." Each Material Subsidiary is a
corporation or partnership duly organized and validly existing under the
laws of the jurisdiction of its organization and has the corporate or
partnership power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and
in good standing or to have such power and authority or necessary
governmental approvals would not individually or in the aggregate have a
Company Material Adverse Effect. Each Material Subsidiary is duly qualified
or licensed and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not individually or in the aggregate
have a Company Material Adverse Effect. As used in this Agreement,
"Subsidiary" shall mean any corporation or other entity (including joint
ventures, partnerships and other business associations) in which the
Company, Buyer or Acquisition, as the case may be, directly or indirectly
owns outstanding capital stock or other voting securities having the power
to elect a majority of the directors or similar members of the governing
body of such corporation or other entity, or otherwise to direct the
management and policies of such corporation or other entity. Without
investigating, the Company does not know of any fact or reason why any
representation, warranty or other statement contained in this Agreement
with respect to a Material Subsidiary would be rendered false or misleading
if such representation, warranty or other statement had been made also with
respect to all Subsidiaries of the Company. The Subsidiaries designated as
Material Subsidiaries in Section 3.3.1 of the Company Disclosure Schedule
include (i) all Subsidiaries that have operations other than sales and (ii)
all Subsidiaries that are not corporations or other entities with liability
of the owners limited solely to loss of their investment.
3.3.2 Section 3.3.2 of the Company Disclosure Schedule sets forth, as
to each Material Subsidiary, its authorized capital structure and the
number of its issued and outstanding shares of capital stock or other
ownership units. Except as set forth in Section 3.3.2 of the Company
Disclosure Schedule, the Company is, directly or indirectly, the record and
beneficial owner of all of the outstanding shares of capital stock or other
ownership units of each of its Subsidiaries, except for directors'
qualifying shares and shares held by third parties that in the aggregate
represent no more than 2% of the outstanding shares of capital stock of any
Subsidiary, and no capital stock or other ownership units of any such
Subsidiary is or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable or exercisable for, shares of any capital stock or other
ownership units of any such Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may be bound to issue, redeem, purchase or sell
additional shares of capital stock or other ownership units of any such
Subsidiary or securities convertible into or exchangeable or exercisable
for any such shares or units. All of such shares and other ownership units
are validly issued, fully paid and nonassessable and, except as set forth
in Section 3.3.2 of the Company Disclosure Schedule, are owned by the
Company, or by a wholly owned Subsidiary of the Company, free and clear of
all liens, claims, encumbrances, restraints on alienation, or any other
restrictions with respect to the transferability or assignability thereof
(other than restrictions on transfer imposed by United States (federal or
state) or foreign (federal or state) securities laws).
3.4 Authority, Due Execution and Noncontravention. The Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the Merger have
been duly authorized by all necessary corporate action on the part of the
Company other than the consent of its shareholders. This Agreement has been duly
executed and delivered by the Company and, assuming this
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Agreement has been duly executed and delivered by Buyer and Acquisition,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally and by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). Except as set forth in Section 3.4 of the
Company Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the Merger and compliance with the provisions
hereof will not, (a) conflict with any of the provisions of the certificate of
incorporation or by-laws of the Company or the comparable documents of any of
its Material Subsidiaries or conflict with the joint venture agreement or
comparable document of any joint venture, partnership or other business
association or entity to which the Company or a Material Subsidiary is a party;
(b) subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent (the "Company Required Consents")
of any person under, any indenture or other agreement, permit, concession,
franchise, license or similar instrument or undertaking to which the Company or
any of its Material Subsidiaries is a party or by which the Company or any of
its Material Subsidiaries or any of their assets is bound or affected, which
loss, obligation or failure to obtain a consent would have a Company Material
Adverse Effect; or (c) subject to the governmental filings and other matters
referred to in the following sentence, contravene any law, rule or regulation of
any state or of the United States or any foreign country or any political
subdivision of any thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect, except where, in the case of
clauses (b) and (c) above, such conflicts, breaches, defaults and similar
matters would not, individually or in the aggregate, have a Company Material
Adverse Effect or materially and adversely affect Buyer's ability to consummate
the Merger. No consent, approval or authorization of, or declaration or filing
with, or notice to, any governmental agency or regulatory body, court, agency,
commission, division, department, public body or other authority ("Governmental
Entity") that has not been received or made, is required by or with respect to
the Company or any of its Material Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except for (i)
the filing of pre-merger notification and report forms under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) the
filing of the certificate of merger with the Delaware Secretary of State; and
(iii) such other consents, approvals, authorizations, filings or notices as are
set forth in Section 3.4 of the Company Disclosure Schedule or as, in the
aggregate could not reasonably be expected to have a Company Material Adverse
Effect (collectively, the "Company Required Statutory Approvals").
3.5 SEC Documents and Financial Statements.
3.5.1 The Company and each of its Material Subsidiaries that is or
was required by law to do so, has timely filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission (the "SEC") since March 16, 1998 (the date on which the
Company was first required under federal securities laws to file with the
SEC) (the "Company SEC Documents"). As of their respective dates, the
Company SEC Documents complied as to form in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and none
of the Company SEC Documents as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
3.5.2 The consolidated financial statements of the Company included
in the Company SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved ("GAAP") (except as may be
indicated in the notes thereto or, in the case of unaudited interim
financial statements, as permitted by Rule 10-01 of Regulation S-X) and
fairly present, in all material respects,
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the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations, changes in shareholders' equity and consolidated cash flows for
the respective periods then ended (subject, in the case of unaudited
interim financial statements, to normal recurring adjustments and absence
of footnotes, none of which is material).
3.5.3 Except as disclosed in the Company SEC Documents filed and
publicly available prior to June 10, 1998 (the "Filed Company SEC
Documents") or in Section 3.5.3 of the Company Disclosure Schedule, neither
the Company nor any of its Material Subsidiaries has any absolute, accrued,
contingent or other liabilities or obligations due or to become due, and
there are no claims or causes of action that have been or, to the Knowledge
of the Company, may be asserted against the Company or any of its Material
Subsidiaries, except (a) as and to the extent reflected or reserved against
on the balance sheet included in the Company's Annual Report on Form 10-K
for the year ended January 31, 1998 (the "Company Base Balance Sheet"), or
included in the notes to the Company Base Balance Sheet; (b) for normal and
recurring liabilities incurred since January 31, 1998, in the ordinary
course of business consistent with past practice; and (c) for such other
liabilities and obligations that are not in the aggregate reasonably likely
to have a Company Material Adverse Effect.
3.6 Absence of Certain Changes or Events. As of the date hereof, except
as disclosed in the Filed Company SEC Documents or in Section 3.6 of the Company
Disclosure Schedule, since the date of the Company Base Balance Sheet, the
Company and its Material Subsidiaries have conducted their business only in the
ordinary course consistent with past practice, and, except as otherwise
expressly permitted by this Agreement, there has not been (a) any change that
has had or that could reasonably be expected to have a Company Material Adverse
Effect; (b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's outstanding capital stock; (c) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock; (d) any entry by
the Company or any of its Material Subsidiaries into any employment, severance,
change-of-control, termination or similar agreement with any officer, director
or key employee, or any increase in the compensation or severance or termination
benefits payable to any director, officer or key employee of the Company or any
of its Material Subsidiaries (except in the ordinary course of business
consistent with past practice, or as was required under employment agreements in
effect as of the date of the Company Base Balance Sheet); or (e) any change in
the method of accounting or policy used by the Company or any of its Material
Subsidiaries and disclosed in the financial statements included in the Filed
Company SEC Documents.
3.7 Real and Personal Property.
3.7.1 The Company and its Material Subsidiaries own, or have a valid
and marketable right to use or a valid and enforceable leasehold interest
in, all real property (including all buildings, fixtures and other
improvements thereto) used by them in the conduct of their respective
businesses as such businesses are now being conducted. Except as disclosed
in the Filed Company SEC Documents or Section 3.7.1 of the Company
Disclosure Schedule, neither the Company's nor any of its Material
Subsidiaries' ownership of or leasehold interest in any such property is
subject to any mortgage, pledge, lien, option, conditional sale agreement,
encumbrance, security interest, title exception or restriction or claim or
charge of any kind ("Encumbrances"), except for such Encumbrances as are
not in the aggregate reasonably likely to have a Company Material Adverse
Effect and except for any statutory Encumbrance arising in the ordinary
course of business by operation of law with respect to a liability that is
not yet due or delinquent. All such property is in good condition and
repair and is suitable in all material respects for the purposes for which
it is now being used in the conduct of the businesses of the Company and
its Material Subsidiaries, except to the extent that the poor condition or
unsuitability of any such property is not in the aggregate reasonably
likely to have a Company Material Adverse Effect.
3.7.2 Except as otherwise disclosed in Section 3.7.2 of the Company
Disclosure Schedule, all personal property that is owned by the Company or
any of its Material Subsidiaries or used by any of them in the conduct of
their respective businesses is owned free and clear of any Encumbrances,
except
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for such Encumbrances as are not in the aggregate reasonably likely to have
a Company Material Adverse Effect. All such property is in good working
condition, subject to normal wear and tear, and is suitable in all material
respects for the purposes for which it is now being used in the conduct of
the businesses of the Company and its Material Subsidiaries, except to the
extent that the poor condition or unsuitability of any such property is not
in the aggregate reasonably likely to have a Company Material Adverse
Effect.
3.8 Employee Matters; ERISA.
3.8.1 Each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
bonus, deferred compensation, equity-based, severance or other plan or
written agreement relating to employment, compensation or fringe benefits
for employees, currently maintained or contributed to by the Company at any
time during the five-calendar year period immediately preceding the date
hereof and with respect to which the Company has any liability
(collectively, the "Plans") is listed on Section 3.8.1 of the Company
Disclosure Schedule, is, except as disclosed in Section 3.8.1 of the
Company Disclosure Schedule, in substantial compliance with all applicable
laws and has been administered and operated in all material respects in
accordance with its terms.
3.8.2 Each Plan that is intended to be "qualified" within the meaning
of Section 401(a) of the Code, has received a favorable determination
letter from the Internal Revenue Service ("IRS") and, to the Knowledge of
the Company, no event has occurred and no condition exists that could
reasonably be expected to result in the revocation of any such
determination. No event that constitutes a "reportable event" (as defined
in Section 4043(c) of ERISA) for which the applicable notice requirement
has not been waived by the Pension Benefit Guaranty Corporation (the
"PBGC") has occurred with respect to any Plan that is subject to Title IV
of ERISA. No Plan subject to Title IV of ERISA has been terminated or is or
has been the subject of termination proceedings pursuant to Title IV of
ERISA. Except as disclosed in Section 3.8.2 of the Company Disclosure
Schedule, full payment has been made of all amounts that the Company was
required under the terms of the Plans to have paid as contributions to such
Plans on or prior to the date hereof (excluding any amounts not yet due)
and, except as disclosed in Section 3.8.2 of the Company Disclosure
Schedule, no Plan that is subject to Part 3 of Subtitle B of Title I of
ERISA has incurred any "accumulated funding deficiency" (within the meaning
of Section 302 of ERISA or Section 412 of the Code), whether or not waived.
3.8.3 Neither the Company nor, to the Knowledge of the Company, any
other "disqualified person" or "party in interest" (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively), has
engaged in any transaction in connection with any Plan that would result in
the imposition of a material penalty pursuant to Section 502(i) of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975(a) of the Code. The Company has not maintained any Plan (other than a
Plan that is intended to be "qualified" within the meaning of Section
401(a) of the Code) that provides benefits with respect to employees or
former employees following their termination of service with the Company
(other than as required pursuant to Section 601 of ERISA). Each Plan
subject to the requirements of Section 601 of ERISA has been operated in
substantial compliance therewith.
3.8.4 Except as set forth on Section 3.8.4 of the Company Disclosure
Schedule, no individual shall accrue or receive additional benefits,
service or accelerated rights to payment of benefits as a direct result of
the transactions contemplated by this Agreement. Except as disclosed in
Section 3.8.4 of the Company Disclosure Schedule, no material liability,
claim, investigation, audit, action or litigation has been incurred, made,
commenced or, to the Knowledge the Company, threatened, by or against any
Plan or the Company with respect to any Plan (other than for benefits
payable in the ordinary course and PBGC insurance premiums). No Plan or
related trust owns any securities in violation of Section 407 of ERISA.
Except as disclosed in Section 3.8.4 of the Company Disclosure Schedule,
with respect to each Plan that is subject to Title IV of ERISA, as of the
most recent actuarial valuation report prepared for each such
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Plan, the aggregate present value of the accrued liabilities thereof did
not exceed the aggregate fair market value of the assets allocable thereto.
3.8.5 Except as set forth on Section 3.8.4 of the Company Disclosure
Schedule, no Plan is a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) and the Company has not been obligated to contribute
to any multiemployer plan. Except as disclosed in Section 3.8.5 of the
Company Disclosure Schedule, no material liability other than a liability
that would not be reasonably likely to have a Company Material Adverse
Effect has been incurred under Title IV of ERISA (other than for benefits
payable in the ordinary course or PBGC insurance premiums) or Section
412(f) or (n) of the Code by any entity required to be aggregated with the
Company, pursuant to Section 4001(b) of ERISA and/or Section 414(b) or (c)
of the Code (and the regulations promulgated thereunder) with respect to
any "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA.
3.8.6 With respect to each Plan, the Company has made available to
Buyer true and complete copies of the following documents, as applicable,
to each respective Plan: (a) all Plan documents, with all amendments
thereto; (b) the current summary plan description with any applicable
summaries of material modifications thereto; (c) all current trust
agreements and/or other documents establishing Plan funding arrangements;
(d) the most recent IRS determination letter and, if a request for such a
letter has been filed and is currently pending with the IRS, a copy of such
filing; (e) the most recently prepared IRS Forms 5500; (f) the most
recently prepared actuarial valuation reports, if applicable; and (g) the
most recently prepared financial statements.
3.8.7 With respect to each material employee benefit plan, policy,
arrangement or agreement maintained for employees of the Company or any
Subsidiary located outside of the United States, each such plan, policy,
arrangement and agreement has been (a) listed on Section 3.8.7 of the
Company Disclosure Schedule and identified thereon as a "Foreign Plan," (b)
operated in compliance in all material respects with the terms thereof and
(c) maintained in compliance in all material respects with the requirements
of all applicable laws.
3.9 Taxes. "Taxes," as used in this Agreement, shall mean any federal,
state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipts, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any Governmental Entity, and includes
any interest and penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination, settlement or
litigation of any tax liability. "Tax Return," as used in this Agreement, shall
mean a report, return or other information required to be supplied to a
Governmental Entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company or any of its Subsidiaries, on the one hand, or Buyer or
any of its Subsidiaries, on the other hand. "Tax Rulings," as used in this
Agreement, shall mean a written ruling of a taxing authority relating to Taxes.
"Closing Agreement," as used in this Agreement, shall mean a written and legally
binding agreement with a taxing authority relating to Taxes. There are no Tax
matters that, individually or in the aggregate, would reasonably be likely to
have a Company Material Adverse Effect.
3.9.1 Filing of Timely Tax Returns. The Company and each of its
Material Subsidiaries have filed all Tax Returns required to be filed by
each of them under applicable law and all such Tax Returns were in all
material respects (and, as to Tax Returns not filed as of the date hereof,
will be) true, complete and correct and filed on a timely basis. To the
best Knowledge of the Company, each of its non-Material Subsidiaries has
filed all Tax Returns required to be filed by each of them under applicable
law and all such Tax Returns were in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete and
correct and filed on a timely basis, except where the failure to so file or
be in material compliance would not have a Company Material Adverse Effect.
3.9.2 Payment of Taxes. The Company and each of its Material
Subsidiaries have, within the time and in the manner prescribed by law,
paid (and until the Closing Date will pay within the time and in the manner
prescribed by law) all Taxes that are currently due and payable except for
Taxes for which
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reserves have been taken on the Company Balance Sheet. To the best
Knowledge of the Company, each of its non-Material Subsidiaries has, within
the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for Taxes for which
reserves have been taken on the Company Balance Sheet, except where the
failure to make such payment would not have a Company Material Adverse
Effect.
3.9.3 Tax Reserves. The Company and its Material Subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves adequate to pay all Taxes and reserves for deferred income
taxes in accordance with GAAP. To the best Knowledge of the Company, each
of its non-Material Subsidiaries has established (and until the Closing
Date will maintain) on their books and records reserves adequate to pay all
Taxes and reserves for deferred income taxes in accordance with GAAP,
except where the failure to establish and maintain such reserves would not
have a Company Material Adverse Effect.
3.9.4 Tax Liens. There are no Tax liens upon the assets of the
Company or any of its Material Subsidiaries except liens for Taxes not yet
due. To the best Knowledge of the Company, there are no Tax liens upon the
assets of any of the Company's non-Material Subsidiaries except liens for
Taxes not yet due, except where such Tax Liens would not have a Company
Material Adverse Effect.
3.9.5 Withholding Taxes. Except as disclosed in Section 3.9.5 of the
Company Disclosure Schedule, the Company and each of its Material
Subsidiaries have complied (and until the Closing Date will comply) in all
material respects with applicable law relating to the payment and
withholding of Taxes, including without limitation the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401 through
3606, and 6041 and 6049, as well as similar provisions under the laws of
any other jurisdictions, and have within the time and in the manner
prescribed by law withheld from employee wages and paid over to the proper
governmental authorities all amounts required. To the best Knowledge of the
Company, each of its non-Material Subsidiaries has complied (and until the
Closing Date will comply) in all material respects with the provisions of
applicable law relating to the payment and withholding of Taxes, and have
within the time and in the manner prescribed by law withheld from employee
wages and paid over to the proper governmental authorities all amounts
required, except where the failure to so comply or to make such
withholdings would not have a Company Material Adverse Effect.
3.9.6 Extensions of Time for Filing Tax Returns. Neither the Company
nor any of its Material Subsidiaries has requested any extension of time
within which to file any Tax Return relating to periods prior to December
31, 1996 that has not since been filed. The Company and its Material
Subsidiaries have requested extensions of time to file their Tax Returns
for the year ended December 31, 1997 and such extensions have not yet
expired.
3.9.7 Waivers of Statute of Limitations. Except as disclosed in
Section 3.9.7 of the Company Disclosure Schedule, neither the Company nor
any of its Material Subsidiaries has executed any outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns.
3.9.8 Audit, Administrative and Court Proceedings. Except as
disclosed in Section 3.9.8 of the Company Disclosure Schedule, no audits or
other administrative proceedings or court proceedings are presently pending
with regard to any Taxes or Tax Returns of the Company or any of its
Material Subsidiaries.
3.9.9 Powers of Attorney. Except as disclosed in Section 3.9.9 of
the Company Disclosure Schedule, no power of attorney currently in force
has been granted by the Company or any of its Material Subsidiaries
concerning any Tax matter.
3.9.10 Tax Rulings. Neither the Company nor any of its Material
Subsidiaries has received a Tax Ruling or entered into a Closing Agreement
with any taxing authority that would have a continuing effect after the
Closing Date.
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3.9.11 Availability of Tax Returns. The Company and its Subsidiaries
have made available to Buyer complete and accurate copies, covering all
open years, of (a) all Tax Returns, and any amendments thereto, filed by
the Company or any of its Subsidiaries; (b) all audit reports received from
any taxing authority relating to any Tax Return filed by the Company or any
of its Subsidiaries; and (c) any Closing Agreements entered into by the
Company or any of its Subsidiaries with any taxing authority.
3.9.12 Tax-Sharing Agreements. There are no agreements relating to
the allocation or sharing of Taxes between or among the Company and any of
its Material Subsidiaries.
3.9.13 Code Section 341(f). Neither the Company nor any of its
Material Subsidiaries has filed a consent pursuant to Code Section 341(f)
or has agreed to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Code Section 341 (f)(4))
owned by the Company or any of its Material Subsidiaries.
3.9.14 Code Section 168. No property of the Company or any of its
Material Subsidiaries is property that the Company or any such Material
Subsidiary or any party to this transaction is or will be required to be
treated as being owned by another person pursuant to the provisions of Code
Section 168(f)(8) (as in effect prior to its amendment by the Tax Reform
Act of 1986) or is tax-exempt use property within the meaning of Code
Section 168.
3.9.15 Code Section 481 Adjustments. Neither the Company nor any of
its Material Subsidiaries is required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a voluntary change in
accounting method initiated by the Company or any of its Material
Subsidiaries, and, to the best Knowledge of the Company, the IRS has not
proposed any such adjustment or change in accounting method.
3.9.16 Code Sections 6661 and 6662. Except as disclosed in Section
3.9.16 of the Company Disclosure Schedule, the Company and its Material
Subsidiaries have or had substantial authority within the meaning of
Section 6662 of the Code for all transactions that could give rise to an
understatement of federal income tax within the meaning of Section 6662 of
the Code.
3.9.17 Code Section 280G. Except as disclosed in Section 3.9.17 of
the Company Disclosure Schedule, neither the Company nor any of its
Material Subsidiaries is a party to any agreement, contract, or arrangement
that would result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code Section 280G.
3.9.18 Intercompany Transactions. Neither the Company nor any of its
Material Subsidiaries has engaged in any intercompany transactions within
the meaning of Treasury Regulations Section l.1502-13 for which any income
or gain will remain unrecognized as of the close of the last taxable year
prior to the Closing Date.
3.9.19 Liability for Others. Except as disclosed in Section 3.9.19
of the Company Disclosure Schedule, neither the Company nor any of its
Material Subsidiaries has any liability for Taxes of any person other than
the Company and its Material Subsidiaries (a) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law)
as a transferee or successor, (b) by contract or (c) otherwise.
3.10 Compliance with Applicable Laws. Except as disclosed in Section 3.10
of the Company Disclosure Schedule:
3.10.1 The business of the Company and each of its Material
Subsidiaries is being conducted in compliance in all material respects with
all applicable laws, ordinances, rules and regulations, decrees and orders
of any Governmental Entity, and all material notices, reports, documents
and other information required to be filed thereunder within three years of
the date hereof were properly filed and were in compliance in all material
respects with such laws.
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3.10.2 Each of the Company and its Material Subsidiaries has all
material licenses, permits, authorizations, franchises and rights
("Licenses") that are necessary for it to own or lease, as the case may be,
and operate its properties and assets and to conduct its business as now
conducted. The business of the Company and each of its Material
Subsidiaries has been and is being conducted in compliance in all material
respects with all such Licenses. All such Licenses are in full force and
effect, and there is no proceeding or investigation pending or, to the
Knowledge of the Company, threatened that would reasonably be expected to
lead to the revocation, amendment, failure to renew, limitation, suspension
or restriction of any such License.
3.11 Environmental Protection.
3.11.1 (a) Except as disclosed in the Company SEC Documents or in
Section 3.11.1 of the Company Disclosure Schedule, the Company and its
Material Subsidiaries and their businesses, operations and facilities are
and have been in compliance with all applicable Environmental Laws (as
defined in Section 3.11.10), except where the failure to do so,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect as defined in Section 3.11.10.
(b) Except as disclosed in the Company SEC Documents or in Section
3.11.1 of the Company Disclosure Schedule and except where the receipt of a
notice would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, to the Knowledge of the Company and its
Material Subsidiaries, neither the Company, the Material Subsidiaries nor
any of their businesses, operations or facilities has received any notice,
whether actual or threatened, from any person or Governmental Entity that
alleges that the Company or any of its Material Subsidiaries or any of
their businesses, operations or facilities: (a) is or are out of compliance
with applicable Environmental Laws; or (b) would pose a risk to the
environment or the health and safety of any person.
(c) Except as disclosed in the Company SEC Documents or in Section
3.11.l of the Company Disclosure Schedule, and except where receipt of a
request for information would not reasonably be expected to have a Material
Adverse Effect, neither the Company nor any of its Material Subsidiaries or
their businesses, operations or facilities has received any written or oral
request for information under Section 104 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
sec. 9601, et seq.) or analogous laws.
3.11.2 Except as disclosed in Section 3.11.2 of the Company
Disclosure Schedule or as disclosed in the Company SEC Documents and except
where the failure to do so, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, the Company and
each of its Material Subsidiaries and their businesses, operations and
facilities have obtained all environmental, land use, health and safety
permits, registrations, approvals, licenses and authorizations
(collectively, "Environmental Permits") necessary for the operation or
construction of their facilities, the conduct of their operations and the
management and disposal of Hazardous Materials, and all such Environmental
Permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and the Company and
its Material Subsidiaries and their businesses, operations and facilities
are in material compliance with all terms and conditions of all such
Environmental Permits. Prior to or at the Effective Time, the Company and
its Material Subsidiaries shall, where required by applicable laws,
transfer all existing Environmental Permits to the Surviving Corporation,
or, where not permissible, shall use their best efforts to assist Buyer and
the Surviving Corporation in obtaining new Environmental Permits for the
Surviving Corporation.
3.11.3 Except as disclosed in Section 3.11.3 of the Company
Disclosure Schedule or as disclosed in the Company SEC Documents, and
except where not reasonably expected to have a Material Adverse Effect,
either individually or in the aggregate, no Environmental Claims (as
defined in Section 3.11.10) are pending or, to the Knowledge (as defined in
Section 3.11.10) of the Company and its Material Subsidiaries, threatened:
(a) against the Company or any of its Subsidiaries or their businesses,
operations or facilities; (b) against any person, entity, or
predecessor-in-interest whose liability for any Environmental Claim the
Company or any of its Material Subsidiaries and their businesses,
operations or facilities has or may have retained or assumed either
contractually or by operation of law; or (c) against
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any real or personal property, operations or facilities presently or
formerly owned, leased or managed, in whole or in part, by the Company or
any of its Material Subsidiaries.
3.11.4 Except as disclosed in Section 3.11.4 of the Company
Disclosure Schedule or as disclosed in the Company SEC Documents and except
where not reasonably expected to have a Material Adverse Effect, either
individually or in the aggregate, there have been no Releases (as defined
in Section 3.11.10), threatened Releases or disposal of Hazardous Materials
(as defined in Section 3.11.10) that would be reasonably likely to: (a)
form the basis of any Environmental Claim against the Company or any of its
Material Subsidiaries and their businesses, operations or facilities, or
against any person or entity whose liability for any Environmental Claim
which the Company or any of its Material Subsidiaries and their businesses,
operations or facilities has or may have retained or assumed either
contractually or by operation of law; (b) cause damage to, or diminution
in, the value of the real properties, operations or facilities which the
Company or any of its Material Subsidiaries owns, leases, or manages, in
whole or in part; or (c) result in any imminent restriction on the
ownership, occupancy, use or transferability of the real properties,
operations or facilities of the Company or any of its Material
Subsidiaries.
3.11.5 Except as disclosed in Section 3.11.5 of the Company
Disclosure Schedule or as disclosed in the Company SEC Documents, with
respect to the remediation of the Newfield, New Jersey facility
("Newfield") and the Cambridge, Ohio facility ("Cambridge"), the Company
and its Material Subsidiaries reasonably believe, after due inquiry, that
the Company and its Material Subsidiaries and their businesses, operations
and facilities: (a) are diligently performing their obligations pursuant to
the terms and conditions of the Settlement Agreements (as defined in
Section 3.11.10) and are otherwise in material compliance with all of the
applicable terms and conditions of the Settlement Agreements; and (b) have
established Financial Assurance Measures (as defined in Section 3.11.10) to
fund the investigation, remediation and monitoring of the Newfield and
Cambridge facilities as required by the Settlement Agreements.
3.11.6 The Company and its Material Subsidiaries have, to their
Knowledge, provided or made available to Buyer all material information,
facts and circumstances (including requests for production of reports,
correspondence, records, data, monitoring results, auditing results, site
assessments, or any other documents concerning compliance with
Environmental Laws) concerning their businesses, operations and facilities
that pertain to: (a) the costs of pollution-control equipment currently
required or known to be required in the future; (b) investigatory, removal,
remediation or response costs currently known to be required, or reasonably
expected to be required, in the future, in each case, both on-site and
off-site; (c) the environmental health and safety conditions existing on
the sites on which the Company and any of its Material Subsidiaries and
their businesses, operations or facilities are located (including but not
limited to the manufacturing, use, generation, treatment, storage and/or
handling of Hazardous Materials and the existence of any waste or slag
piles, underground storage tanks or surface impoundments); (d)
Environmental Claims against the Company its Material Subsidiaries or their
businesses, operations or facilities; or (e) any other environmental
matters affecting the Company or any of its Material Subsidiaries and their
businesses, operations or facilities; and that, in the case of each of
clauses (a), (b), (c), (d) and (e) of this subsection or in the aggregate,
are reasonably likely to have a Material Adverse Effect.
3.11.7 To the Knowledge of the Company and its Material Subsidiaries,
they have provided or otherwise made available to Buyer all material
information relating to the identity and location of all off-site solid,
hazardous and/or radioactive waste treatment, storage and disposal
facilities used by the Company and its Subsidiaries and their businesses,
operations or facilities and any predecessors for which the Company or any
of its Material Subsidiaries and their businesses, operations or facilities
may retain liability except where such information would not, individually
or in the aggregate, be expected to have a Material Adverse Effect. A
complete and accurate list of all such off-site waste, treatment, storage
and disposal facilities is attached hereto in Section 3.11.7 of the Company
Disclosure Schedule.
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3.11.8 The Company and its Material Subsidiaries have provided or
otherwise made available to Buyer the names and job descriptions of key
environmental personnel from the Company and its Material Subsidiaries, and
an executive officer of each of Elektrowerk Weisweiler GmbH, GfE
Gesellschaft fur Elektrometallurgie mbH, London & Scandinavian
Metallurgical Co., Limited and Shieldalloy Metallurgical Corporation who
has knowledge of, or who has enquired of key environmental personnel with
respect to, environmental matters has certified to the accuracy of the
Company's representations and warranties with respect to environmental
matters ("Certification Statement"). The executed Certification Statement
of each shall be dated as of, and shall be delivered simultaneously with
the delivery of, this Agreement.
3.11.9 The Company and its Subsidiaries have established all
Financial Assurance Mechanisms required under applicable Environmental Laws
and the Settlement Agreements to the satisfaction of federal and state
governmental authorities.
3.11.10 As used in this Agreement:
(a) "Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including without
limitation any Governmental Entity) alleging potential liability
(including without limitation potential liability for enforcement costs,
investigatory costs, cleanup costs, response costs, removal costs,
remedial costs, natural resources damages, property damages, personal
injuries, fines or penalties) arising out of, based on or resulting from
(a) the presence or Release or threatened Release, of any Hazardous
Materials at any location, whether or not owned, operated, leased or
managed by the Company or any of its Subsidiaries and their businesses,
operations or facilities or joint ventures; (b) circumstances Known by
the Company or its Subsidiaries forming the basis of any violation, or
alleged violation, of any Environmental Laws; or (c) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence
or Release or threatened Release of any Hazardous Materials.
(b) "Environmental Laws" shall mean all applicable foreign,
international and United States federal, state and local laws, rules,
regulations, conventions, treaties, annexes, directives, standards,
management systems and any binding judicial or administrative
interpretation thereof or requirement thereunder relating to pollution
or protection of human health or the environment (including without
limitation ambient air, surface water, groundwater, land surface or
subsurface strata), including without limitation laws and regulations
relating to Releases or threatened Releases of Hazardous Materials or
otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, registration,
transport, handling or the import or export of Hazardous Materials.
(c) "Financial Assurance Measures" shall mean, collectively, those
funds, trusts, accounts, letters of credit or other financial
instruments established by the Company or its Subsidiaries for the
purpose of securing: (1) the investigation and remediation of any
Release of Hazardous Material for which the Company or its Subsidiaries
may be held responsible; or (2) the satisfaction of any Environmental
Claim against the Company or its Subsidiaries and their businesses,
operations or facilities.
(d) "Hazardous Materials" shall mean (a) any petroleum or petroleum
products or petroleum wastes (including crude oil or any fraction
thereof), nuclear fuel or waste or other radioactive materials or any
mixture thereof, friable asbestos or friable asbestos-containing
material, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated
biphenyls; (b) any chemicals, materials or substances that are now
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"radioactive wastes," "regulated source material," "regulated material"
or words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material,
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substance or waste, exposure to which is now prohibited, limited or
regulated under any Environmental Law in a jurisdiction in which the
Company or its Subsidiaries and their businesses, operations or
facilities operate(s) or in which the Company or its Subsidiaries have
treated, stored or disposed of Hazardous Materials.
(e) "Knowledge," for the purposes of this Section 3.11 only, shall
mean the actual knowledge of any and all directors, officers and
managerial employees of the Company.
(f) "Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property (indoors or outdoors).
(g) "Settlement Agreements" shall mean, collectively,
administrative consent orders, judicial decrees, judgments, settlement
agreements, plans of reorganization other negotiated or bargained-for
agreements which, by their terms and conditions, ascribe to the Company
or its Subsidiaries certain obligations with respect to any
Environmental Claims or Hazardous Material.
(h) "Material Adverse Effect" shall consist of any condition which
individually or collectively would lead to expenses, costs or losses of
five (5) million dollars or more in excess of any financial reserves
which the Company and its Subsidiaries have established to address that
condition.
3.12 Litigation. Except as set forth in the Filed Company SEC Documents
or Section 3.12 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Material Subsidiaries,
and the Company has no knowledge of any facts likely to give rise to any such
litigation, that, individually or in the aggregate, could reasonably be expected
to have a Company Material Adverse Effect or to materially and adversely affect
the Company's ability to consummate the Merger or continue with existing
business or operations post Merger. Neither the Company nor any of its Material
Subsidiaries is subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect.
3.13 Labor Relations. Except as set forth in Section 3.13 of the Company
Disclosure Schedule or in the Company SEC Documents:
3.13.1 Neither the Company nor any of its Material Subsidiaries is a
party to any collective bargaining agreement or other current labor
agreement with any labor union or organization. There is no current union
representation question involving employees of the Company or any of its
Material Subsidiaries or, to the Knowledge of the Company or any of its
Material Subsidiaries, any activity or proceeding of any labor organization
(or representative thereof) or employee group (or representative thereof)
to organize any such employees.
3.13.2 There is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure
against the Company or any of its Material Subsidiaries pending or, to the
Knowledge of the Company or any of its Material Subsidiaries, threatened,
that will have a Company Material Adverse Effect.
3.13.3 There is no complaint, lawsuit or proceeding in any forum by
or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express
or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship against the
Company or any of its Material Subsidiaries pending or, to the Knowledge of
the Company or any of its Material Subsidiaries, threatened, that could
reasonably be expected to have a Company Material Adverse Effect.
3.13.4 There is no strike, dispute, slowdown, work stoppage or
lockout pending or, to the Knowledge of the Company or any of its Material
Subsidiaries, threatened, against or involving the Company or any of its
Material Subsidiaries that could reasonably be expected to have a Company
Material Adverse Effect.
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3.13.5 The Company and each of its Material Subsidiaries is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for noncompliance that could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.13.6 There is no proceeding, claim, suit, action or governmental
investigation pending or, to the Knowledge of the Company or any of its
Material Subsidiaries, threatened, in respect to which any current or
former director, officer, employee or agent of the Company or any of its
Material Subsidiaries is or may be entitled to claim indemnification from
the Company or any of its Material Subsidiaries pursuant to their
respective articles of organization or articles or certificates of
incorporation or by-laws, as provided in any indemnification agreement to
which the Company or any of its Material Subsidiaries is a party or
pursuant to applicable law that could reasonably be expected to have a
Company Material Adverse Effect.
3.14 Intellectual Property. The Company and its Material Subsidiaries
possess or have adequate rights to use all material trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of their
respective businesses (collectively, the "Company Intellectual Property"),
except where the failure to possess or have adequate rights to use such
properties would not have a Company Material Adverse Effect. Except as set forth
in Section 3.14 of the Company Disclosure Schedule, all of the Company
Intellectual Property is owned by the Company or one of its Material
Subsidiaries, free and clear of any and all Encumbrances, except for those
Encumbrances that would not, individually or in the aggregate, have a Company
Material Adverse Effect, and neither the Company nor any of its Material
Subsidiaries has forfeited or otherwise relinquished any Company Intellectual
Property, which forfeiture would have a Company Material Adverse Effect. To the
Knowledge of the Company, the use of the Company Intellectual Property by the
Company or its Material Subsidiaries does not, in any material respect, conflict
with, infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill (including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark, brand
mark, brand name, computer program, database, industrial design, copyright or
any pending application therefor) of any other person, and neither the Company
nor any of its Material Subsidiaries has received written notice of any claim or
otherwise knows that any of the Company Intellectual Property is invalid,
conflicts with the asserted rights of any other person, has not been used or
enforced or has failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the Company
Intellectual Property, except for such conflicts, infringements, violations,
interferences, claims, invalidity, abandonments, cancellations or
unenforceability that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
3.14.1 The Company has made plans such that by the end of the first
quarter of 1999 each item of equipment and software program used by the
Company (a "Company System") in the course of its business is expected to
have been produced or amended in a manner that ensures that a change of,
reference to or use of a date after 31 December 1999 in the operation of
such Company System, whether alone or in conjunction with each other
Company System, will not have a Company Material Adverse Effect.
3.14.2 Without prejudice to the generality of Section 3.14.1, each
Company System will, in responding to two-digit date input and providing
date output, resolve any ambiguity as to century in a manner that is
consistent, clearly defined, apparent to the user and ensures reference to
the correct century.
3.15 No Default. Neither the Company nor any of its Material Subsidiaries
is in default or violation (and no event has occurred that, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (a) its articles of organization or articles or
certificate of incorporation or by-laws; (b) any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which it is
now a party or by which it or any of its properties or assets may be bound
(except for the requirement under certain of such instruments to file
supplemental indentures as a result of the transactions contemplated hereby); or
(c) any order, writ, injunction, decree, statute, rule or regulation
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applicable to it, except in the case of clauses (b) and (c) above for defaults
or violations that in the aggregate would not have a Company Material Adverse
Effect. The Company and each of its Material Subsidiaries have fulfilled, and
have taken all action reasonably necessary to date to enable them to fulfill
when due, all of their material obligations under all contracts, commitments and
arrangements, and to the Knowledge of the Company no breach or default by any
other party under such contracts, commitments or arrangements has occurred or,
is threatened that will or could singly or taken together have a material
adverse effect on the business, assets, liabilities, results of operations or
financial condition of the Company or the Material Subsidiary, as the case may
be, that is a party to such contract, commitment or arrangement.
3.16 Insurance. Each of the Company and each of its Material Subsidiaries
is, and has been continuously since January 1, 1997, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies engaged in the respective businesses conducted by the
Company and its Material Subsidiaries during such time period. Neither the
Company nor any of its Material Subsidiaries has received any notice of
cancellation or termination with respect to any insurance policy material to it.
Each insurance policy that is material to the Company or a Material Subsidiary
is valid and enforceable.
3.17 Brokers. All negotiations relative to this Agreement and the Merger
have been carried out by the Company directly with Buyer, without the
intervention of any person on behalf of the Company in such manner as to give
rise to any valid claim by any person against Buyer, the Company or any of their
respective Material Subsidiaries for a finder's fee, brokerage commission,
advisory fee or similar payment.
3.18 Change in Business Relationships. Except as disclosed in Section
3.18 of the Company Disclosure Schedule, the Company has no knowledge of any
event or circumstance that indicates that, whether on account of the
transactions contemplated by this Agreement or otherwise, any customer, agent,
representative or supplier of the Company or of any of its Material Subsidiaries
intends to discontinue, diminish or change its relationship with the Company or
any of its Material Subsidiaries in any way that would be reasonably likely to
have a Company Material Adverse Effect.
3.19 Material Contracts. Section 3.19 of the Company Disclosure Schedule
lists, unless listed elsewhere in the Company Disclosure Schedule, each written
contract, commitment or arrangement of which the Company has Knowledge that is
of a material nature (or that assumes materiality because of its continuing
nature) and under which the Company or any of its Material Subsidiaries is
obligated on the date hereof, including the following:
3.19.1 All consulting arrangements and contracts for professional,
advisory and other services in excess of $200,000, including (a) contracts
under which the Company or any of its Material Subsidiaries performs
services for others other than accounting, legal and other arrangements and
contracts made in the ordinary course of business and that are terminable
upon not more than 60 days' notice, and (b) contracts for the investigation
and/or remediation of the Release or threatened Release of Hazardous
Materials or violations or threatened violations of Environmental Law;
3.19.2 All leases of real or personal property, other than leases of
personal property whereunder total future rentals are, in each instance,
less than $200,000;
3.19.3 All contracts, commitments and agreements for the acquisition,
development or disposition of real or personal property, other than
transactions in the ordinary course of business and agreements whereunder
total future payments are, in each instance, less than $200,000;
3.19.4 All contracts relating to the employment, engagement,
compensation or termination of directors, officers, employees or agents of
the Company or any of its Subsidiaries under which payments in excess of
$200,000 could be incurred under any circumstance during any one calendar
year, and all pension, retirement, profit sharing, stock option, stock
purchase, stock appreciation, insurance or similar plans or arrangements
for the benefit of any employees, officers or directors of the Company or
any of its Material Subsidiaries;
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3.19.5 All loans, loan commitments, letters of credit or other
financial accommodations or arrangements or evidences of indebtedness,
including modifications or amendments thereof, extended to or for the
benefit of the Company or any of its Material Subsidiaries in each case in
excess of $200,000;
3.19.6 All union and other labor contracts; and
3.19.7 All other material contracts (including administrative and/or
judicial consent orders or settlement agreements entered into with
Government Entity) made other than in the usual or ordinary course of
business of the Company or any of its Material Subsidiaries to which the
Company or any of its Material Subsidiaries is a party or under which the
Company or any of its Material Subsidiaries is obligated.
3.20 No Omissions. None of the information included in the Company
Disclosure Schedule or in the Company SEC Documents (including, without
limitation, the consolidated financial statements included therein) was, as of
the date such information was included in such Company Disclosure Schedule or
such Company SEC Documents, false or misleading in any material respect or
omitted to state a fact therein necessary to make such information not
misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Company as follows:
4.1 Organization, Standing and Corporate Power. Each of Buyer and
Acquisition is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, has the requisite corporate
power to carry on its business as now being conducted, and 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, except where the failure to be so
qualified, licensed or admitted and in good standing could not be expected,
either individually or in the aggregate, to have a material adverse effect on
the validity or enforceability of this Agreement or on the ability of Buyer or
Acquisition to perform its obligations hereunder. Buyer has delivered to the
Company complete and correct copies of its certificate of incorporation and
by-laws, as amended, to the date of this Agreement.
4.2 Authority, Due Execution and Noncontravention. Each of Buyer and
Acquisition has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement by Buyer and Acquisition and the
consummation by Buyer and Acquisition of the Merger have been duly and validly
authorized by all necessary corporate action on the part of Buyer and
Acquisition. This Agreement has been duly executed and delivered by Buyer and
Acquisition and, assuming this Agreement has been duly executed and delivered by
the Company, constitutes a valid and binding obligation of Buyer and
Acquisition, enforceable against each of them in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and by general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; Licenses. Except for (a) approvals required
under the HSR Act, (b) the filing of the certificate of merger with the Delaware
Secretary of State, (c) Company Required Consents, and (d) Company Required
Statutory Approvals, no consent, license, permit, approval or authorization of,
or exemption by, order of, or filing, registration or declaration with, any
Governmental Authority that has not been obtained is required in connection with
the execution, delivery, or performance by Buyer or Acquisition of, or the
validity or enforceability with respect to Buyer or Acquisition of, this
Agreement.
4.4 No Conflicts.
4.4.1 None of the execution and delivery of this Agreement by Buyer
or Acquisition, the performance by Buyer or Acquisition of their
obligations hereunder or the consummation by Buyer or
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Acquisition of the Merger will (a) violate, or result in the breach or
termination of, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or
require the consent (the "Buyer Required Consents") of any person under, or
constitute a default (by way of substitution, novation or otherwise) or an
event that with notice or lapse of time or both could constitute a default
under the terms of, any mortgage, lease, bond, indenture or other
agreement, permit, concession, franchise, license or similar instrument or
obligation to which Buyer, Acquisition or any of their respective
Subsidiaries is a party or by which Buyer, Acquisition or any of their
respective assets or properties is bound and that would have an adverse
effect on the ability of Buyer to consummate the Merger; (b) result in the
creation of any lien, charge or encumbrance on any such mortgage, bond,
indenture, agreement, franchise or other instrument or obligation the
creation of which would have an adverse effect on the ability of Buyer or
Acquisition to consummate the Merger; (c) violate any judgment, order,
injunction, decree or award of any court, arbitrator or Governmental
Authority against or binding upon Buyer, Acquisition or any of their
respective Subsidiaries or any of their respective assets or properties;
(d) constitute a violation of any law, rule or regulation of any state or
of the United States or any foreign country or any political subdivision
thereof or therein as such law, rule or regulation relates to Buyer,
Acquisition or any of their respective Subsidiaries except where such
violation would not have an adverse effect on the ability of Buyer or
Acquisition to consummate the Merger; or (e) result in a breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of Buyer, Acquisition or any of their respective Subsidiaries.
4.4.2 None of Buyer, Acquisition or any of their respective
Subsidiaries is subject to, or a party to, any charter, by-law, mortgage,
lien, lease, license, permit, agreement, contract or instrument or to any
law, rule, regulation, ordinance, order, judgment, or decree, or any
restriction of any kind or character, that would adversely affect the
execution, delivery and performance of this Agreement by Buyer or
Acquisition or the consummation by Buyer or Acquisition of the Merger.
4.4.3 There is no civil, criminal or administrative action, suit,
arbitration, claim, hearing, investigation or proceeding pending that has
been commenced nor, to the knowledge of Buyer or Acquisition, threatened
against Buyer or Acquisition or any of their respective Subsidiaries and
that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, the execution, delivery and
performance of this Agreement by Buyer or Acquisition or the consummation
by Buyer or Acquisition of the Merger.
4.5 No Brokers. All negotiations relative to this Agreement and the
Merger have been carried out by Buyer directly with Company, without the
intervention of any person on behalf of Buyer in such manner as to give rise to
any valid claim by any person against a Company for a finder's fee, brokerage
commission, advisory fee or similar payment.
4.6 Receipt of Information. Buyer and Acquisition have been furnished
access to the business information and documents of the Company as Buyer and
Acquisition have requested and have been afforded an opportunity to ask
questions of and receive answers from representatives of the Company concerning
the terms and conditions of this Agreement and the consummation of the
transactions contemplated hereby.
4.7 Business and Activity. Neither Buyer nor Acquisition has engaged in
any business or activity of any type or kind whatsoever, entered into any
agreements or arrangements with any person or entity, or is subject to or bound
by any obligation or undertaking that is not contemplated by this Agreement or
was not incurred in connection with its incorporation.
4.8 Liabilities and Obligations. Acquisition has no liabilities or
obligations as of the date hereof and will not have any liabilities or
obligations as of the Closing Date, other than liabilities or obligations
incurred in connection with this Agreement and the transactions contemplated
hereby.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Consent Solicitation and Change of Control.
5.1.1 Consent Solicitation. As promptly as practicable after the
date of this Agreement, the Company shall prepare a consent solicitation
(the "Consent Solicitation") requesting from the holders of the Company's
11% Senior Notes due 2007 (the "Notes") their consents (the "Consents") to
a waiver under the Indenture pursuant to which the Notes were issued of the
requirement for a Change of Control Offer (as defined in the Indenture)
following the Merger ("Waiver") and to an amendment of the definition of
"Permitted Holders" under the Indenture to reflect the Merger and such
other amendments to the Indenture as may be required to permit the Merger
(collectively, the "Amendment"). The Company shall request of each officer
and director of the Company and their affiliates that such officer,
director or affiliate consent to such Waiver and Amendment.
5.1.2 Change of Control Offer. If the requisite number of Consents
has not been received prior to the termination of the Consent Solicitation,
the Company shall assist Buyer in preparing a Change of Control Offer (the
"Offer"). In connection therewith the Company shall furnish all information
concerning the Company as may be reasonably requested by Buyer.
5.1.3 Company Information. The Company agrees that none of the
information supplied or to be supplied by the Company specifically for
inclusion or incorporation by reference in the Consent Solicitation shall,
as of the Closing Date, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
5.2 Preparation of Information Statement.
5.2.1 Information Statement. If required by applicable law, as soon
as reasonably practicable following the date of this Agreement, the Company
shall prepare for mailing or delivery to the Company's shareholders as
promptly as reasonably practicable an information statement or a request
for written consents of the Company's Shareholders, containing the
recommendation of the board of directors of the Company (the "Company
Board") that the shareholders of the Company vote in favor of or consent to
the approval of this Agreement and the Merger.
5.2.2 Company Information. The Company agrees that none of the
information supplied by the Company for delivery to its shareholders
pursuant to Section 5.2.1, at the date first mailed or delivered to the
Company's shareholders or at the time of the Shareholder Consents (as
defined in Section 5.3), will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and that such
information will comply in all material respects with the requirements of
state and federal law.
5.2.3 Buyer Information. Buyer agrees that none of the written
information with respect to Buyer that was furnished by Buyer to the
Company specifically for use in the information statement described in
Section 5.2.1 or in reports filed by the Company with the SEC with regard
to the Merger and the other transactions contemplated by this Agreement,
and that was used by the Company in such information statement or in such
reports in reliance upon and in conformity with such written information,
at the date first mailed or delivered to the Company's shareholders or at
the time of the Shareholder Consents, will contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading and that such
information will comply in all material respects with the requirements of
state and federal law.
5.3 Meeting of the Company's Shareholders; Consents of Shareholders. The
Company shall take all action necessary in accordance with applicable law and
its certificate of incorporation and by-laws (a) to convene a meeting of its
shareholders as promptly as practicable to consider and vote upon the approval
of this
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Agreement and the Merger or (b) in lieu of a meeting, to obtain the written
consents of its shareholders, in accordance with Section 228 of the DGCL,
sufficient to approve this Agreement and the Merger (the "Shareholder
Consents"). Subject to Section 5.8, the Company shall, through the Company
Board, recommend to its shareholders approval of the Merger. Without limiting
the generality of the foregoing, the Company agrees that, subject to its right
to terminate this Agreement pursuant to Section 10.1.2(d), its obligations
pursuant to the first sentence of this Section 5.3 shall not be affected by (i)
the commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal (as defined in Section 5.7) or (ii) the
withdrawal or modification by the Company Board of its approval or
recommendation of this Agreement or the Merger. Subject to Sections 5.7 and 5.8,
the Company shall use commercially reasonable efforts to obtain the favorable
vote or consent of its shareholders with respect to this Agreement and the
Merger as soon as reasonably practicable after the date hereof.
5.4 Offering Memorandum. Buyer agrees that it will provide to the Company
copies of any offering memorandum prepared in connection with the financing of
the Merger. The Company agrees that none of the information supplied by the
Company specifically for inclusion in such offering memorandum will contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Buyer agrees that none
of the information with respect to Buyer included in such offering memorandum
will contain an untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.5 Access to Information; Confidentiality. Upon reasonable notice, the
Company shall, and shall cause its Material Subsidiaries to, afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Buyer, reasonable access during normal business hours during
the period prior to the Closing Date to all its properties, books, contracts,
commitments, personnel and records but only to the extent that such access does
not unreasonably interfere with the business and operations of the Company and
its Material Subsidiaries. Prior to the Closing Date, the Company shall furnish
promptly to Buyer a copy of each Company SEC Document filed by it (including by
any separate Material Subsidiary) during such period, and all material
correspondence or written communication with any securities rating agency.
During such period, the Company shall furnish to Buyer such other financial,
operating, environmental, health and safety and other data as may be reasonably
required by Buyer in order to perform its investigation (including but not
limited to any environmental site assessments, environmental remediation
assessments, and regulatory compliance audits) regarding the Company. The
Company and Buyer shall hold any nonpublic information obtained from the other
party in confidence in accordance with the provisions of the confidentiality
agreement, dated as of April 8, 1998, as amended, by and between the Company and
Safeguard International Fund, L.P. (the "Confidentiality Agreement").
5.6 Public Announcements. Buyer and the Company shall consult with each
other before issuing, and shall provide each other a reasonable opportunity to
review and comment upon, any press release or public statement with respect to
this Agreement or the Merger, except to the extent disclosure prior to such
consultation, review and comment may be required by applicable law or court
process.
5.7 Acquisition Proposals. The Company shall not, nor shall it authorize
or permit any officer, director or employee of, or any investment banker,
attorney or other advisor or representative of, the Company or any of its
Subsidiaries to, directly or indirectly, (a) solicit, initiate or encourage the
submission of any Acquisition Proposal (as defined below) or (b) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that nothing
contained in this Section 5.7 shall prohibit the Company Board from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal after the date hereof if,
and only to the extent that, (i) the Company Board, after consultation with and
based upon the advice of outside counsel, concludes in good faith that a failure
to do so would result in a breach of its fiduciary duties to the shareholders of
the Company under applicable law and (ii) the Company (y) provides reasonable
notice to Buyer to the effect that it is taking such action and (z) receives
from such person or entity an executed confidentiality agreement not less
favorable to the
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Company than the Confidentiality Agreement, except that such confidentiality
agreement shall not prohibit such person or entity from making an unsolicited
Acquisition Proposal to the Company Board. Notwithstanding anything in this
Agreement to the contrary, the Company shall promptly advise Buyer orally and in
writing of the receipt by it (or by any of the other entities or persons
referred to above) after the date hereof of any Acquisition Proposal, or any
inquiry that could reasonably be expected to lead to an Acquisition Proposal,
the material terms and conditions of such Acquisition Proposal or inquiry, and
the identity of the person or entity making any such Acquisition Proposal or
inquiry, provided that the Company shall have no obligation to disclose the
identity of such person or entity if such disclosure would violate the terms of
any agreement outstanding on the date hereof with such person or entity, or the
Company Board, after consultation with and based upon the advice of outside
counsel, concludes in good faith that such disclosure would violate its
fiduciary duties or would be otherwise inconsistent with applicable law. As used
in this Agreement, "Acquisition Proposal" shall mean any bona fide proposal with
respect to a merger, consolidation, share exchange or similar transaction
involving the Company or any of its Material Subsidiaries, or any purchase of
all or a substantial portion of the assets or shares of the Company or any of
its Material Subsidiaries, or any other business combination (including without
limitation the acquisition of an equity interest therein) involving the Company
or any of its Material Subsidiaries, other than the transactions contemplated
hereby.
5.8 Fiduciary Duties. The Company Board shall not (a) withdraw or modify
its approval or recommendation of this Agreement or the Merger, (b) approve or
recommend an Acquisition Proposal or (c) enter into any agreement with respect
to any Acquisition Proposal, unless the Company receives an Acquisition Proposal
and the Company Board concludes in good faith, after consultation with and based
upon the advice of outside counsel, that a failure to do so would result in a
breach of its fiduciary duties to the shareholders of the Company under
applicable law and it is necessary for the Company Board to withdraw or modify
its approval or recommendation of this Agreement or the Merger, approve or
recommend such Acquisition Proposal or enter into an agreement with respect to
such Acquisition Proposal.
5.9 Filings; Other Action.
5.9.1 HSR Act. Buyer and the Company shall cooperate in filing and
causing to be filed with the Federal Trade Commission and the Department of
Justice any notifications required to be filed under the HSR Act and the
rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby. The parties shall use all commercially
reasonable efforts to make such filings promptly and to respond on a timely
basis to any requests for additional information made by either of such
agencies. Each party shall bear its own expenses with respect to any such
filings.
5.9.2 Other Regulatory Approvals. Buyer and the Company shall
cooperate and use all reasonable efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all commercially
reasonable efforts to obtain (and shall cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of,
or any exemption or nonopposition by, any Governmental Entity required to
be obtained or made by Buyer, any of its Subsidiaries, the Company or any
of its Material Subsidiaries in connection with any action contemplated
hereby.
5.9.3 Other Approvals. The Company shall, and shall cause its
Material Subsidiaries to, take all reasonable actions necessary to obtain
all Company Required Consents. Buyer shall take all reasonable actions
necessary to obtain all Buyer Required Consents.
5.10 Cooperation, Notification. Officers of the Company shall (a) confer
on a regular and frequent basis with officers of Buyer to discuss the general
status of the operations of the Company and (b) promptly notify Buyer of any
significant changes in its business, properties, financial condition or results
of operations. The Company shall advise Buyer of any change or event that has
had or is reasonably likely to result in a Company Material Adverse Effect; and
promptly provide Buyer with copies of all filings made by it or any of its
Material Subsidiaries with any Governmental Entity in connection with the
Merger.
5.11 Best Efforts. Upon the terms and subject to the conditions and other
agreements set forth in this Agreement, each of the parties agrees to use
commercially reasonable efforts to take, or cause to be taken, all
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actions, and to do, or cause to be done, and to assist and cooperate with the
other party in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger.
5.12 Recapitalization Accounting. The Company shall cooperate with any
reasonable requests of Buyer or the SEC related to recording the Merger as a
recapitalization for financial reporting purposes. In furtherance of the
foregoing, the Company shall provide to Acquisition for the prior review of
Buyer's advisors any description of the transactions contemplated by this
Agreement that the Company intends to disseminate.
5.13 Indemnification. Each of Buyer and Acquisition, on the one hand, and
the Company, on the other hand, agrees to indemnify and hold harmless the other
of them and their respective directors, officers, employees, shareholders and
agents from and against any and all liabilities, losses, damages, deficiencies,
costs and expenses (including, without limitation, the reasonable fees and
expenses of counsel) relating to or arising from any failure by the Company, on
the one hand, or Buyer and Acquisition, on the other hand, to comply with its
obligations under Sections 5.2.2 and 5.2.3.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 Conduct of Business of Company Prior to Merger. During the period
from the date of this Agreement and continuing until the Closing Date or the
earlier termination of this Agreement, the Company agrees as to itself and its
Material Subsidiaries, except as expressly contemplated or permitted by this
Agreement, that if a particular activity is permissible as a result of its being
disclosed and, where applicable, approved by Buyer under any one of the Article
VI sections of the Company Disclosure Schedule, that activity will not be
prohibited under any of the sections of this Article VI:
6.1.1 Ordinary Course of Business. The Company shall, and shall
cause its Material Subsidiaries to, carry on their respective businesses in
the usual, regular and ordinary course consistent with past practice and
use all commercially reasonable efforts to preserve intact their present
business organizations and goodwill, keep available the services of their
key officers and key employees, endeavor to preserve the goodwill and
relationships with regulators, customers, suppliers and others having
material business dealings with them.
6.1.2 Dividends; Changes in Stock. The Company shall not, and it
shall not permit any of its Material Subsidiaries, to: (a) declare or pay
any dividends on or make other distributions in respect of any of its
capital stock except for dividends payable by a Material Subsidiary to the
Company or to a wholly owned Material Subsidiary; (b) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (c) repurchase, redeem or
otherwise acquire, or permit any of its Material Subsidiaries to purchase,
redeem or otherwise acquire, any shares of its capital stock or other
voting securities or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, shares of capital
stock or other voting securities of the Company or any of its Material
Subsidiaries.
6.1.3 Issuance of Securities. The Company shall not, and shall not
permit any of its Material Subsidiaries to, issue, deliver, sell, pledge,
dispose of or encumber, or authorize or propose to issue, deliver, sell,
pledge, dispose of or encumber, any shares of its capital stock of any
class or other voting securities or any securities convertible into, or any
rights, warrants, calls, subscriptions or options to acquire, any shares of
capital stock or other voting securities or convertible securities of the
Company or any of its Material Subsidiaries, other than: the issuance of
Company Shares pursuant to Company Stock Options made prior to the date
hereof pursuant to the Company SASOP in accordance with the present terms
of the Company SASOP and issuances of stock by a Material Subsidiary to its
direct or indirect parent.
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6.1.4 Capital Expenditures. The Company shall not, nor shall the
Company permit any of its Material Subsidiaries to, make capital
expenditures (including capital lease obligations) in excess of the amounts
budgeted for capital expenditures as set forth in the Company capital
budget previously delivered to Buyer, except for capital expenditures made
in the ordinary course of the Company's business and except for
non-ordinary course capital expenditures that have been budgeted for and
described in a capital expenditure budget previously delivered to Buyer.
6.1.5 No Acquisitions. Except as disclosed in Section 6.1.5 of the
Company Disclosure Schedule, the Company shall not, and shall not permit
any of its Material Subsidiaries to, acquire or agree to acquire by merging
or consolidating with, or by purchasing an interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof.
6.1.6 No Dispositions. Except as disclosed in Section 6.1.6 of the
Company Disclosure Schedule and except for dispositions in the ordinary
course of business, the Company shall not, and it shall not permit any of
its Material Subsidiaries to, sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets.
6.1.7 No Dissolution, Etc. The Company shall not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Material Subsidiaries; provided that nothing in this Section 6.1.7 preclude
any such transaction that involves only wholly owned Material Subsidiaries
of the Company.
6.1.8 Limitation on Investment in Joint Ventures. Except as
disclosed in Section 6.1.8 of the Company Disclosure Schedule, the Company
will not make, and will not permit any of its Material Subsidiaries to
make, any material investments in, or loans or capital contributions to, or
to undertake any guarantees or other obligations with respect to any joint
venture or partnership, except to the extent contemplated by the joint
venture or partnership agreements relating thereto as currently in effect.
6.1.9 Certain Employee Matters. Except as may be required by
applicable law or any agreement to which the Company or any of its Material
Subsidiaries is a party on the date hereof or as set forth in Section 6.1.9
of the Company Disclosure Schedule, the Company shall not, nor shall it
permit any of its Material Subsidiaries to:
(a) except in the ordinary course of business consistent with past
practice and except as required by existing arrangements, contracts or
plans, increase the amount of (or accelerate the payment or vesting of)
any benefit or amount payable under, any employee benefit plan or any
other contract, agreement, commitment, arrangement, plan or policy
providing for compensation or benefits to any former, present or future
director or executive officer of the Company or any of its Material
Subsidiaries and maintained by, contributed to or entered into by, the
Company or any of its Material Subsidiaries on or prior to the date
hereof, including, without limitation, any Plan outstanding on the date
hereof;
(b) except in the ordinary course of business consistent with past
practice, increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe
benefits, or otherwise extend, expand or enhance the engagement,
employment or any related rights, of any former, present or future
director or executive officer of the Company or any of its Material
Subsidiaries, except for (i) normal increases in the ordinary course of
business consistent with past practice, or (ii) increases required under
existing arrangements, contracts or plans, or under applicable law; or
(c) adopt, establish, enter into, implement or amend any plan,
policy, employment agreement, severance agreement, or other contract,
agreement or other arrangement providing for any form of benefits or
other compensation to any former, present or future director or
executive officer or
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employee of the Company or any of its Material Subsidiaries, other than
in the ordinary course of business consistent with past practice.
6.1.10 Indebtedness; Leases. Except as disclosed in Section 6.1.10
of the Company Disclosure Schedule, the Company shall not, nor shall the
Company permit any of its Material Subsidiaries to, (a) incur any
indebtedness for borrowed money or guarantee, or enter into a "keepwell" or
similar arrangement with respect to, any such indebtedness (including,
without limitation, issuances or sales of any debt securities or warrants
or rights to acquire any debt securities) other than indebtedness between
the Company or any of its Material Subsidiaries and another of its Material
Subsidiaries and other than borrowings in the ordinary course of business
consistent in nature and amount with past practice; or (b) enter into any
material operating lease or create any mortgages, liens, security interests
or other encumbrances on the property of the Company or any of its Material
Subsidiaries in connection with any indebtedness thereof.
6.1.11 Governing Documents. Neither the Company nor any of its
Material Subsidiaries shall amend or propose to amend its certificate of
incorporation or by-laws (or similar governing documents).
6.1.12 Accounting. The Company shall not, nor shall it permit any of
its Material Subsidiaries to, make any changes in their accounting methods,
except as required by law, rule, regulation or GAAP.
6.1.13 Contracts. Except in the ordinary course of business
consistent with past practice, the Company shall not, nor shall it permit
any of its Material Subsidiaries to, modify, amend or terminate any
material contract or agreement to which the Company or any of its Material
Subsidiaries is a party or waive, release or assign any material rights or
claims under any such contract or agreement, which modification, amendment
or termination or waiver, release or assignment would have a material
adverse effect on the Company or a Material Subsidiary.
6.1.14 Insurance. The Company shall, and shall cause its Material
Subsidiaries to, maintain with financially responsible insurance companies
(or through self-insurance) insurance in such amounts and against such
risks and losses as are customary for companies engaged in their respective
businesses.
6.1.15 Permits. The Company shall, and shall cause its Material
Subsidiaries to, maintain in effect all existing governmental permits
(including Environmental Permits) that are material to their respective
operations, except where the failure to maintain a governmental permit
would not result in a material adverse effect on the Company or a Material
Subsidiary.
6.1.16 Discharge of Liabilities. The Company shall not, nor shall it
permit any of its Material Subsidiaries to, prepay, discharge or satisfy
any material indebtedness or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than (a) the prepayment,
discharge or satisfaction, in the ordinary course of business consistent
with past practice (which includes the payment of final and unappealable
judgments and the refinancing of existing indebtedness for borrowed money
either at its stated maturity or at a lower cost of funds), as required by
their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed Company SEC Documents,
or incurred in the ordinary course of business consistent with past
practice or (b) payments consistent with past practice under revolving
credit facilities.
6.2 Environmental Matters. The Company and its Subsidiaries shall use
best efforts to: (a) diligently discharge their environmental obligations under
the Settlement Agreements (as defined in Section 3.11.12); (b) maintain all
Environmental Permits in good standing; (c) comply with all applicable
Environmental Laws; and (d) refrain from making any unreasonable or excessive
expenditures which may result in untimely depletion of funds reserved pursuant
to the Financial Assurance Measures.
6.3 Other Actions. The Company shall not, and shall not permit any of its
Material Subsidiaries to, take any action that would, or that could reasonably
be expected to, result in (a) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue in any material respect or
(b) any of the conditions of the Closing not being satisfied on or prior to the
Closing Date.
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ARTICLE VII
COVENANTS OF BUYER
7.1 Indemnification for Prior Acts. The Surviving Corporation shall honor
in accordance with their respective terms and maintain in full force and effect
without limitation as to time all indemnification, contribution or similar
rights with respect to matters occurring on or prior to the Effective Time
existing in favor of those individuals who were directors, officers or employees
of the Company or any of its Subsidiaries at any time at or prior to the
Effective Time (collectively, the "Covered Parties") as provided in the
certificate of incorporation or by-laws of the Company or the Surviving
Corporation or any of its Subsidiaries or in any of the indemnification
agreements with the Company or any of its Subsidiaries or otherwise listed on
Section 7.1 of the Company Disclosure Schedule. The Surviving Corporation shall
maintain in effect for not less than six years after the Effective Time the
Company's policies of directors and officers liability insurance in effect at
the date of this Agreement, which policies are listed on Section 7.1 of the
Company Disclosure Schedule (notwithstanding any provision of such policies that
such policies terminate as a result of the Merger), and from and after the
Effective Time shall continue to include as insureds thereunder on the terms
thereof the current and former officers, directors and employees of the Company
or any of its Subsidiaries who are covered by those policies at the date of this
Agreement with respect to all matters occurring on or prior to the Effective
Time. For a period of six years after the Effective Time, the Surviving
Corporation will not amend, alter or modify Article Seventh of the Surviving
Corporation's Certificate of Incorporation. The Surviving Corporation will also
maintain in effect for at least three years after the Effective Time, directors
and officers liability insurance comparable to that maintained by the Company as
of the date hereof with respect to matters occurring after the Effective Time
(notwithstanding any provision of such policies that such policies terminate as
a result of the Merger). The Surviving Corporation will notify each Covered
Person of each change in insurance coverage and each amendment to the Surviving
Corporation's Certificate of Incorporation, whether or not permitted by this
Section, which may affect that Covered Person.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer and Acquisition to consummate the Merger and to
take the other actions required to be taken by Buyer and Acquisition at the
Closing are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which, except for requirements of law, may be
waived by Buyer, in whole or in part):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects and the representations
and warranties of the Company set forth in this Agreement that are not qualified
as to materiality shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date. The Company shall have delivered to Buyer a certificate, dated as
of the Closing Date, signed on behalf of the Company by an executive officer of
the Company to the effect set forth in this Section 8.1.
8.2 Performance of Covenants and Obligations of the Company. The Company
shall have performed in all material respects all covenants and obligations
required to be performed by it under this Agreement at or prior to the Closing
Date. The Company shall have delivered to Buyer a certificate, dated as of the
Closing Date, signed on behalf of the Company by an executive officer of the
Company to the effect set forth in this Section 8.2.
8.3 Material Adverse Change. There shall not have occurred any material
adverse change in the business, financial condition or operations of the Company
and its Subsidiaries, taken as a whole, nor any destruction or significant
damage to any material assets of the Company and its Subsidiaries, taken as a
whole. The Company shall have delivered to Buyer a certificate, dated as of the
Closing Date, signed on behalf of the Company by the chief financial officer of
the Company to the effect set forth in this Section 8.3.
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8.4 Opinion of Counsel. Buyer shall have received an opinion of Rogers &
Wells LLP, counsel to the Company, in the form attached hereto as Exhibit 8.4,
dated the Closing Date.
8.5 Opinion of Accountants. The Company has received from its accountants
an opinion in form and substance reasonably satisfactory to Buyer that the
Merger will receive recapitalization accounting treatment and such opinion has
not been withdrawn or modified.
8.6 Additional Documents. The Company shall have caused to be delivered
to Buyer such other documents and instruments as Buyer may reasonably request,
including opinions as to the good standing of the Material Subsidiaries
domiciled in England and Germany and as to title in the Company of the
outstanding capital stock such Material Subsidiaries.
8.7 Consents. All Company Required Consents, all Company Required
Statutory Approvals and all similar consents required by Buyer shall have been
duly obtained or completed, and approval under the HSR Act for the formation of
Buyer shall have been obtained.
8.8 No Government Prohibition. There must not be in effect any federal,
state, local, municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, common law, regulation,
statute, or treaty or any injunction or other award, decision, injunction,
judgment, order, ruling, subpoena or verdict entered, issued, made, rendered or
threatened by any court or other Governmental Authority or arbitrator that (a)
prohibits the consummation of the Merger or would have a material adverse effect
on the business, or operations of the Company or any of its Material
Subsidiaries, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
8.9 Company Notes. The Company shall have prepared the Consent
Solicitation and requested the Consents described in Section 5.1.1, and no
officer or director of the Company, or any of their affiliates, shall have
failed to provide such Consents.
8.10 ISRA Compliance. To the degree required under the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. ("ISRA"), the Company
and/or Subsidiaries shall, prior to Closing, use their best efforts to obtain or
receive: (i) documented evidence from the New Jersey Department of Environmental
Protection ("NJDEP") of compliance with the requirements of ISRA; (ii) a
Remediation Agreement from the NJDEP authorizing consummation of the transaction
contemplated hereby pending full compliance with the requirements of ISRA; or
(iii) a Letter of Non-Applicability, in each case in a form reasonably
satisfactory to Buyer; provided, however, that Buyer shall have no obligation to
close unless and until the Company and its Material Subsidiaries have fulfilled
their obligations under this Section 8.10.
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
The Company's obligations to consummate the Merger and to take the other
actions required to be taken by the Company at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which, except for requirements of law, may be waived by the Company, in
whole or in part):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer and Acquisition set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects and the
representations and warranties of Buyer set forth in this Agreement that are not
qualified as to materiality shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date. Each of Buyer and Acquisition shall
have delivered to the Company a certificate, dated as of the Closing Date,
signed on behalf of Buyer and Acquisition, respectively, by an executive officer
of Buyer and Acquisition, respectively, to the effect set forth in this Section
9.1.
9.2 Performance of Covenants and Obligations of Buyer. Buyer shall have
performed in all material respects all covenants and obligations required to be
performed by it under this Agreement at or prior to the
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Closing Date. Each of Buyer and Acquisition, respectively shall have delivered
to the Company a certificate, dated as of the Closing Date, signed on behalf of
Buyer by an executive officer of Buyer and Acquisition, respectively to the
effect set forth in this Section 9.2.
9.3 Fairness Opinion. The Company shall have received an opinion of
Houlihan Lokey Howard & Zukin Financial Advisors to the effect that the
consideration to be received by the shareholders of the Company in the Merger is
fair to such shareholders from a financial point of view.
9.4 Opinion of Counsel. The Company shall have received an opinion of
LLG&M, in the form attached hereto as Exhibit 9.4, dated the Effective Time.
9.5 No Government Prohibition. There must not be in effect any federal,
state, local, municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, common law, regulation,
statute, or treaty or any injunction or other award, decision, injunction,
judgment, order, ruling, subpoena or verdict entered, issued, made, rendered or,
to the knowledge of the parties, threatened by any court or other Governmental
Authority or arbitrator that (a) prohibits the consummation of the Merger and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
9.6 Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by an affirmative vote of, or by the written consent of,
the holders of the requisite number of shares sufficient to approve this
Agreement and the Merger.
9.7 Consents. All Company Required Statutory Approvals and Company
Required Consents shall have been duly obtained or completed.
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
10.1.1 by mutual written consent of Buyer and the Company;
10.1.2 by either Buyer or the Company, upon 24 hours' written notice
to the other:
(a) if the Shareholder Consents have not been obtained;
(b) if the Effective Time shall not have occurred on or before July
31, 1998;
(c) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action, including threatened in writing or
commencing a proceeding to enjoin, restrain or otherwise prohibit the
Merger or the operations of the Company and its Material Subsidiaries
taken together after the Merger as a whole; or
(d) if the Company Board shall have exercised its rights set forth
in Section 5.8 of this Agreement;
10.1.3 by the Company if there shall have been any material breach of
any representation or warranty, or any material breach of any covenant or
agreement, of Buyer or Acquisition hereunder and such breach shall not have
been remedied within 20 days after receipt by Buyer of notice in writing
from the Company, specifying the nature of such breach and requesting that
it be remedied; or 10.1.4 by Buyer if there shall have been any material
breach of any representation or warranty, or any material breach of any
covenant or agreement, of the Company hereunder and such breach shall not
have been remedied within 20 days after receipt by the Company of notice in
writing from Buyer, specifying the nature of such breach and requesting
that it be remedied.
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10.2 Effect of Termination.
10.2.1 In the event of termination of this Agreement by either the
Company or Buyer as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, other than this Section 10.2,
Section 12.1 and the last sentence of Section 5.5.
10.2.2 In the event of termination of this Agreement by either Buyer
or the Company pursuant to Section 10.1.2(d), the Company shall pay to
Buyer, as liquidated damages and not as a penalty, an amount in cash equal
to the reasonable out-of-pocket expenses and fees incurred by Buyer arising
out of, in connection with or related to the Merger or the transactions
contemplated by this Agreement up to a maximum amount of $750,000, within
60 days of such termination, provided that Buyer shall not be in material
breach of its obligations under this Agreement.
10.2.3 Notwithstanding anything to the contrary contained in this
Agreement, in the event of termination of this Agreement for any reason,
other than a termination by either the Company or Buyer pursuant to Section
10.1.2(d), the Company shall have no liability to Buyer or Acquisition for
any losses, damages or liabilities suffered by Buyer or Acquisition arising
from or relating in any way to such termination or otherwise under this
Agreement.
10.2.4 Notwithstanding anything to the contrary contained in this
Agreement, in the event of termination of this Agreement for any reason,
neither Buyer nor Acquisition shall have any liability to the Company for
any losses, damages or liabilities suffered by the Company arising from or
relating in any way to such termination or otherwise under this Agreement.
ARTICLE XI
SURVIVAL OF PROVISIONS
11.1 Survival. The representations and warranties respectively made by
the Company and Buyer in this Agreement shall terminate at the Effective Time
and be of no further force or effect. This Section 11.1 shall not limit any
covenant or agreement of the parties that by its terms contemplates performance
after the Effective Time, including but not limited to Sections 5.13 and 7.1 and
Article 10.
ARTICLE XII
GENERAL PROVISIONS
12.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants.
12.2 Notices. (a) Any notice or other communication given pursuant to
this Agreement must be in writing and shall be deemed to have been duly given if
mailed (by registered or certified mail, postage prepaid, return receipt
requested), transmitted by facsimile or delivered by courier, as follows:
If to Buyer or Acquisition, to:
Metallurg Holdings, Inc.
c/o Safeguard International Partners, L.L.C.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Attention: Diana Wechsler Kerekes
Telephone: (610) 254-4128
Facsimile: (610) 293-0854
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If to the Company, to:
Metallurg, Inc.
6 East 43rd Street
New York, New York 10017
Attention: Eric L. Schondorf
Telephone: (212) 835-0200
Facsimile: (212) 687-9621
or to such other address as hereafter shall be furnished by any of the parties
hereto to the other parties hereto.
(b) All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 12.2 shall, whether
sent by mail, facsimile or courier, be deemed given upon the first Business Day
after actual delivery to the party to whom such notice or other communication is
sent (as evidenced by the return receipt or shipping invoice signed by a
representative of such party or by facsimile confirmation). Either party from
time to time may change its address for the purpose of notices to that party by
giving a similar notice specifying a new address, but no such notice shall be
deemed to have been given until it is actually received by the party sought to
be charged with the contents thereof. For purposes of this Section 12.2,
"Business Day" shall mean a day other than Saturday, Sunday or any day on which
the principal commercial banks located in New York or Pennsylvania are
authorized or obligated to close under the applicable laws.
12.3 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. No waiver
that may be given by a party will be applicable except in the specific instance
for which it is given.
12.4 Entire Agreement. Except as set forth in any contemporaneous written
instruments signed by each of the parties hereto, this Agreement sets forth the
entire understanding and agreement between the parties hereto as to the matters
covered herein and supersedes and replaces any prior understanding, agreement or
statement (written or oral) of intent. This Agreement may not be amended, except
pursuant to a written agreement executed by all of the parties.
12.5 Assignments, Successors and No Third-Party Rights. This Agreement
may not be assigned by either party without the prior written consent of the
other party, except that Buyer may assign any of its rights under this Agreement
to its parent, subsidiaries of its parent or any of its Subsidiaries. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.6 Severability. If any provision of this Agreement, or the application
of any such provision to any person or circumstance, shall be held invalid by a
court of competent jurisdiction, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those as to
which it is held invalid, shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to the other parties. Upon any
such determination of invalidity, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.
12.7 Governing Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Delaware without giving effect to the
choice of law provisions thereof.
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12.8 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.9 Definitions. Words of any gender used in this Agreement shall be
held and construed to include any other gender, and words in the singular shall
be held to include the plural and vice versa, unless this Agreement requires
otherwise.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
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METALLURG, INC.
6 EAST 43RD STREET
NEW YORK, N.Y. 10017
TELEPHONE (212) 627-0670 / (212) 885-9899
FACSIMILE (212) 687-9691
FOR IMMEDIATE RELEASE
METALLURG ANNOUNCES ACQUISITION
BY SAFEGUARD INTERNATIONAL FUND, L.P.
New York, NY -- June 15, 1998 -- Metallurg, Inc. (OTC Bulletin Board: MEAL)
announced that it was being acquired for $30.00 per share in cash by a group of
institutional co-investors led by Safeguard International Fund, L.P. On June 15,
1998, Metallurg signed a definitive merger agreement pursuant to which Safeguard
International would acquire all of Metallurg's outstanding common stock
including the assumption of Metallurg's outstanding indebtedness. The
transaction is valued at approximately $300 million.
The Board of Directors of Metallurg has unanimously approved the proposed
merger. The transaction is subject to a number of customary conditions including
the receipt of required third-party approvals and approval by Metallurg's
stockholders. The merger is expected to be completed in July 1998.
Safeguard International Fund, L.P. is an international private equity fund based
in Wayne, Pennsylvania. Safeguard International seeks to make successful
investments by partnering with existing management to build businesses through
both internal growth and strategic acquisitions. Safeguard International,
through its investment team which has in-depth industry expertise, provides its
portfolio companies with operational and strategic advice.
Michael A. Standen, the chief executive officer of Metallurg said, "This
alliance will give Metallurg a tremendous opportunity to continue the
development of the Metallurg Group into an international force in the specialty
metals area. We are very excited about this new opportunity and look forward to
the challenges ahead."
Metallurg, founded in 1911, is an international producer and seller of high
quality metal alloys and specialty metals used by manufacturers of steel,
aluminum, superalloys and titanium and other metal consuming products.
For More Information Contact:
Metallurg, Inc., New York
J. Richard Budd III or Michael A. Banks
(212) 835-0200
