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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): May 26, 1998
Commission File No. 1-4289
GTI CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 05-0278990
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9715 BUSINESS PARK AVENUE 92131
SAN DIEGO, CALIFORNIA (Zip Code)
(Address of principal executive office)
(619) 537-2500
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On May 26, 1998, GTI Corporation (the "Company") executed an Agreement and Plan
of Merger (the "Agreement") with Technitrol International, Inc. ("Parent," a
wholly-owned subsidiary of Technitrol, Inc., NYSE TNL) and Technitrol
Acquisition, Inc.] ("Acquisition," a wholly-owned subsidiary of Parent) whereby
Acquisition will be merged with and into the Company (the "Merger").
By the terms of the Agreement, holders of the Company's outstanding common
stock, including the common stock that will be issued upon conversion of the
Company's outstanding preferred stock, will be entitled to receive $3.10 per
share, for an aggregate purchase price of approximately $34 million. The Company
will become a wholly-owned subsidiary of Parent. Technitrol has guaranteed (the
"Guaranty") the obligation of Parent to fund the transaction with respect to the
merger consideration and certain other payments. The Company has agreed to pay a
break-up fee plus out-of-pocket expenses, totaling $2 million, in case the
Company terminates the Agreement in certain circumstances and, within twelve
months, enters into a transaction with another party for the sale of the
Company. The Company is obligated to pay Technitrol's out-of-pocket fees and
expenses, up to a maximum of $750,000, if the merger agreement is terminated in
certain other circumstances.
The closing of the Merger is subject to certain conditions, including, among
others, approval by the Company's stockholders and expiration of the Hart Scott
Rodino waiting period. Telemetrix PLC, a United Kingdom corporation
("Telemetrix"), which directly or indirectly controls approximately 57% of the
voting power of GTI, has entered into an agreement with Technitrol pursuant to
which Telemetrix has agreed to call a meeting of its shareholders to vote upon
the disposition of Telemetrix's shares of GTI capital stock by means of the
Merger (the "Disposition"), Telemetrix's directors will, subject to their
fiduciary duties, recommend a vote in favor of the Disposition and against any
alternative transaction, and, if a majority of the votes of Telemetrix stock
cast are voted in favor of the Disposition, Telemetrix will vote its GTI capital
stock in favor of the Merger. Approximately 46% of the outstanding shares of
Telemetrix capital stock are directly or indirectly owned by three trusts, the
trustees of each of which have agreed to vote the Telemetrix stock they so own
in favor of the Disposition.
The terms and conditions of the Merger are detailed in the Agreement, a copy of
which is attached hereto as Exhibit 10.1. The terms and conditions of the
guaranty by Technitrol are contained in the Guaranty, a copy of which is
attached hereto as Exhibit 10.2.
ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired -- Not Applicable
(b) Pro Forma Financial Information -- Not Applicable
<TABLE>
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(c) Exhibits:
<S> <C>
Exhibit 10.1 Agreement and Plan of Merger
Exhibit 10.2 Guaranty
Exhibit 10.3 Joint Press Release of Technitrol, Inc. and GTI Corporation
released on May 26, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GTI CORPORATION
June 3, 1998 /s/ BRUCE C. MYERS
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Date Bruce C. Myers
Vice President of Finance and
Chief Financial Officer
3
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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 26,
1998 is by and among GTI CORPORATION, a Delaware corporation ("Company"),
TECHNITROL INTERNATIONAL, INC., a Delaware corporation ("Parent"), and
TECHNITROL ACQUISITION, INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition").
WHEREAS the Boards of Directors of the Company, Parent and Acquisition have
each (i) determined that the Merger (as defined in Section 1.1) is fair and in
the best interests of their respective stockholders and (ii) approved the Merger
in accordance with this Agreement.
NOW THEREFORE in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby the Company, Parent and Acquisition hereby agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section 1.2)
and upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Acquisition
shall be merged with and into the Company (the "Merger"). Following the Merger,
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
Section 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall be
duly executed and acknowledged by Acquisition and the Company and thereafter
delivered to the Secretary of State of the State of Delaware for filing pursuant
to the DGCL on the Closing Date (as defined in Section 1.3). The Merger shall
become effective at such time as a properly executed and certified copy of the
Merger Certificate is duly filed with the Secretary of State of the State of
Delaware in accordance with the DGCL or such later time as Parent and the
Company may agree upon and set forth in the Merger Certificate (the time the
Merger becomes effective being referred to herein as the "Effective Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction or waiver of the latest to occur of the conditions set forth
in Section 5.1, 5.2 and 5.3 at the offices of Stradley, Ronon, Stevens & Young,
LLP, 2005 Market Street, Philadelphia, Pennsylvania 19103 unless another time,
date or place is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of in the DGCL. Without
limiting the generality of the foregoing and subject thereto, at the Effective
Time all the properties, rights, privileges,
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powers and franchises of the Company and Acquisition shall vest in the Surviving
Corporation and all debts, liabilities and duties of the Company and Acquisition
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.5. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Acquisition in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Acquisition in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 1.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
Section 1.7. Officers. The officers of Acquisition at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
Section 1.8. Conversion of Shares.
(a) At the Effective Time, each share of the Company's First Series
Cumulative Convertible Preferred Stock, par value $1.00 per share (individually
a "Preferred Share" and collectively the "Preferred Shares"), issued and
outstanding immediately prior to the Effective Time (other than (i) Preferred
Shares held in the Company's treasury or by any of the Company's subsidiaries
and (ii) Preferred Shares held by Parent, Acquisition or any other subsidiary of
Parent) shall, by virtue of the Merger and without any action on the part of
Parent, Acquisition, the Company, or the holder thereof, be converted into and
shall become the right to receive the product of (i) 234.314 multiplied by (ii)
$3.10 in cash, without interest (the "Preferred Merger Consideration").
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time, the Preferred Shares shall have been changed into a different
number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares then the Merger Consideration contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) At the Effective Time, each share of the Company's common stock,
par value $0.04 per share (individually a "Common Share" and collectively the
"Common Shares"; together with the Preferred Shares, the "Shares"), issued and
outstanding at the Effective Time, (other than (i) Common Shares held in the
Company's treasury or by any of the Company's subsidiaries and (ii) Common
Shares held by Parent, Acquisition or any other subsidiary of Parent) shall, by
virtue of the Merger and without any action on the part of Parent, Acquisition,
the Company or the holder thereof, be converted into and shall become the right
to receive $3.10 in cash, without interest (the "Common Merger Consideration,"
which together with the Preferred Merger Consideration, the "Merger
Consideration"). Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time, the Common Shares shall have been changed into
a different number of shares or a different class by reason of any stock
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dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares then the Merger Consideration contemplated by the Merger
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(c) At the Effective Time, each outstanding share of the common
stock, par value $0.01 per share, of Acquisition shall be converted into one
share of common stock, par value $0.04 per share, of the Surviving Corporation.
(d) At the Effective Time, each Common Share held in the treasury of
the Company and each Common Share held by Parent, Acquisition or any subsidiary
of Parent, Acquisition or the Company immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be canceled, retired and cease
to exist and no payment shall be made with respect thereto.
Section 1.9. Shares of Dissenting Holders.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which dissenters' rights, if
any, are granted by reason of the Merger under the DGCL and who does not vote in
favor of or consent in writing to the Merger and who otherwise complies with the
DGCL ("Company Dissenting Shares") shall not be entitled to receive any Merger
Consideration pursuant to Section 1.8 (a) or (b), but shall be entitled to
receive payment of the appraised value of such shares held by such holder in
accordance with the provisions of Section 262 of the DGCL, unless such holder
fails to perfect, effectively withdraws or loses his or her right to dissent
from the Merger under the DGCL. If any such holder so fails to perfect,
effectively withdraws or loses his or her dissenters' rights under the DGCL,
each Company Dissenting Share of such holder shall thereupon be deemed to have
been converted, as of the Effective Time, into the right to receive the Merger
Consideration pursuant to Section 1.8(a) and/or (b).
(b) Any payments relating to Company Dissenting Shares shall be made
solely by the Surviving Corporation and no funds or other property have been or
will be provided by Acquisition, Parent or any of Parent's other direct or
indirect subsidiaries for such payment, nor shall the Company make any payment
with respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Acquisition (i) prompt notice of any
demands received by the Company for the payment of fair value for shares,
withdrawals of such demands and any other instruments served pursuant to the
DGCL and received by the Company which relate to such demand for appraisal, and
(ii) the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
the Acquisition, voluntarily make any payment with respect to any demands for
appraisal of the Shares or offer to settle or settle any such demands.
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Section 1.10. Payment of Merger Consideration.
(a) No later than the Effective Time, as required by subsection (b)
below, Parent shall deposit with Registrar and Transfer Company or such other
agent or agents as may be appointed by Parent and Acquisition (the "Payment
Agent") for the benefit of the holders of Shares in cash the aggregate amount
necessary to pay the Merger Consideration (such cash is hereinafter referred to
as the "Merger Fund") payable pursuant to Section 1.8 in exchange for
outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.8: (i) a letter
of transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Payment Agent, together with such letter of transmittal duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
a check representing the Merger Consideration which such holder has the right to
receive pursuant to the provisions of this Article 1 and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company,
payment of the Merger Consideration may be made to a transferee if the
Certificate representing such Shares is presented to the Payment Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.10, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration as contemplated by this
Section 1.10. No interest shall be paid on the Merger Consideration.
(c) In the event that any Certificate for Shares shall have been
lost, stolen or destroyed, the Payment Agent shall issue in exchange therefor,
upon the making of an affidavit of that fact by the holder thereof, such Merger
Consideration as may be required pursuant to this Agreement; provided, however,
that Parent or its Payment Agent may, in its discretion, require as a condition
precedent thereto the delivery of a suitable bond or indemnity.
(d) All Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares; subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
this Agreement, or prior to the date hereof and which remain unpaid at the
Effective Time, and at the Effective Time there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
Shares which were outstanding immediately prior to the Effective Time. If after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason they shall be canceled and exchanged as provided in this Article 1.
(e) Neither Parent nor the Company shall be liable to any holder of
Shares for
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cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) Any portion of the Merger Fund which remains undistributed to the
holders of Shares for one (1) year after the Effective Time shall be delivered
to Parent, upon demand, and any holders of Shares who have not theretofore
complied with this Article 1 shall thereafter look only to Parent for the Merger
Consideration to which they are entitled.
(g) Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent and paid by Parent to the appropriate
Governmental Entity (as described below), such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by Parent.
(h) If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and
Acquisition, the officers and directors of the Company and Acquisition are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
consistent with this Agreement.
Section 1.11. Stock Options. At the Effective Time, each outstanding option
to purchase Shares (a "Company Stock Option" or collectively "Company Stock
Options"), whether vested or unvested, issued pursuant to any of the Company's
stock option plans (the "Company Plans") (including by reason of the
transactions contemplated by this Agreement), and each outstanding Warrant to
purchase shares of the Company's capital stock, shall be canceled, and each
holder of a Company Stock Option shall be entitled to receive in exchange
therefor cash in an amount equal to the product of (x) the amount, if any, by
which $3.10 exceeds the exercise price of such Company Stock Option, multiplied
by (y) the number of Shares subject to such Company Stock Option, less
applicable tax withholding. At or before the Effective Time, the Company shall
cause to be effected any necessary amendments to the Company Plans to give
effect to the provisions of this Section 1.11.
Section 1.12. Payment of Note. Immediately prior to the Effective Time, the
Company shall repay in full to Telemetrix PLC, a corporation organized under the
laws of England and Wales ("Telemetrix") or its designee, that certain Note,
made by Valor Electronics, Inc. to Telemetrix in the original principal amount
of $2.5 million, dated February 10, 1997, together with all accrued but unpaid
interest through the date of payment.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached hereto (the
"Company Disclosure Schedule") or in the Company SEC Reports (as defined in
Section 2.4(a)), the Company hereby represents and warrants to each of Parent
and Acquisition as follows:
Section 2.1. Organization and Qualification; Subsidiaries.
(a) Schedule 2.1 identifies each subsidiary of the Company as of the
date hereof and its respective jurisdiction of incorporation or organization, as
the case may be. Except as set forth in Schedule 2.1, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any interest in, any
corporation, partnership, joint venture or other business association or entity
other than the securities of any publicly-traded entity held for investment only
and constituting less than 5% of the outstanding capital stock of any such
entity. Each of the Company and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted. The Company has heretofore delivered to Acquisition or Parent
accurate and complete copies of the Certificate of Incorporation and Bylaws (or
similar governing documents), as currently in effect, of the Company and its
subsidiaries.
(b) Each of the Company and its subsidiaries 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 jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect (as defined below) on the Company. When used
in connection with the Company or its subsidiaries, the term "Material Adverse
Effect" means any material adverse change or effect (i) on the business, results
of operations or condition (financial or otherwise) of the Company and its
subsidiaries, taken as whole, other than any change or effect arising out of
general economic conditions (including, without limitation, levels of aggregate
demand, interest rates, currency exchange rates and applicable tax laws), or
(ii) that would impair the ability of the Company to consummate the transactions
contemplated hereby.
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Section 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of
12,000,000 Common Shares, of which, as of May 25, 1998, 8,973,475 Shares were
issued and outstanding and 1,000,000 Preferred Shares of which, as of May 25,
1998, 8,110 Preferred Shares were issued and outstanding. All of the outstanding
Common Shares and Preferred Shares have been duly authorized, validly issued and
are fully paid, nonassessable and free of preemptive rights. As of May 25, 1998,
approximately 984,250 Common Shares were reserved for issuance and issuable upon
or otherwise deliverable in connection with the exercise of outstanding Company
Stock Options issued pursuant to the Company Plans. Schedule 2.2(a) sets forth a
list of each outstanding option as of May 25, 1998, the name of the holder, the
vesting date, and if exercisability or vesting will be accelerated in any way in
connection with the consummation of the transactions contemplated in this
Agreement. Between January 1, 1998 and the date hereof, no shares of the
Company's capital stock have been issued other than pursuant to Company Stock
Options already in existence on such date, and between January 1, 1998 and the
date hereof no stock options have been granted. Except as set forth above, as of
the date hereof, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company except for the Preferred Shares, (iii) no
options, warrants (other than warrants issued to Telemetrix and described in the
Company's annual report on Form 10-K/A for the fiscal year ended December 31,
1997) or other rights to acquire from the Company or its subsidiaries and,
except as described in Schedule 2.2(a), no obligations of the Company or its
subsidiaries to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company or to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend any such options, warrants (other than warrants issued to
Telemetrix and described in the Company's annual report on Form 10-K/A for the
fiscal year ended December 31, 1997), calls, rights, commitments or agreements
and (iv) no equity equivalent interests in the ownership or earnings of the
Company or its subsidiaries or other similar rights (collectively "Company
Securities"). As of the date hereof, there are no outstanding obligations of the
Company or its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities. Except as set forth on Schedule 2.2(a), there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company. Since March 31, 1998
there have been no changes in the capital structure of the Company other than
issuances of Common Shares upon exercise of outstanding options granted under
the Company Plans.
(b) Except as set forth on Schedule 2.2(b), all of the outstanding
capital stock of the Company's subsidiaries (other than director's qualifying
shares in the case of foreign subsidiaries) is owned by the Company, directly or
indirectly, free and clear of any Lien (as defined below) or any other
limitation or restriction (including any restriction on the right to vote or
sell the same except as may be provided as a matter of law). Except as set forth
on Schedule 2.2(b), there are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options, warrants or other rights to
acquire from the Company or its subsidiaries and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for, the issuance or sale, directly or indirectly, of any capital stock or other
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ownership interests in or any other securities of any subsidiary of the Company.
Except as set forth on Schedule 2.2(b), there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
(c) The Common Shares constitute the only class of equity securities
of the Company or its subsidiaries registered or required to be registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Section 2.3. Authority Relative to this Agreement, Recommendation.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board") and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
except the approval and adoption of this Agreement by the holders of a majority
of the outstanding Common Shares and two-thirds of the outstanding Preferred
Shares, voting as a separate class. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company enforceable against the Company in accordance with its
terms.
(b) The Company Board has voted to recommend that the stockholders of
the Company approve and adopt this Agreement.
Section 2.4. SEC Reports, Financial Statements.
(a) The Company has filed all required forms, reports and documents
and all amendments and supplements thereto with the Securities and Exchange
Commission (the "SEC") since December 31, 1995 and will file with the SEC after
the date of this Agreement through the Effective Time all required forms,
reports and documents and amendments and supplements thereto, (collectively,
"Company SEC Reports"), each of which has complied or when filed, will comply,
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the Exchange Act and the rules
and regulations promulgated thereunder, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports,
including, without limitation, any financial statements (and the related notes
thereto) or schedules included or incorporated by reference therein, contained
or will contain when filed any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein in light of the
circumstances under which they were made not misleading. The audited
consolidated financial statements of the Company included in the Company SEC
Reports fairly present in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended. None of the Company's
subsidiaries is required to file any reports or other documents with the SEC.
(b) The Company has heretofore furnished to Acquisition or Parent a
complete
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and correct copy of any amendments or modifications which are required to be
filed with the SEC but have not yet been filed with the SEC to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or Exchange Act.
Section 2.5. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
proxy statement relating to the meeting of the Company's stockholders to be held
in connection with the Merger (the "Proxy Statement") will, at the date mailed
to stockholders of the Company and at the time of the meeting of stockholders of
the Company to be held in connection with the Merger, 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.
Section 2.6. Consents and Approvals, No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Exchange Act, state securities or blue sky
laws, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and the filing and recordation of the Merger Certificate as required
by the DGCL, no filing with or notice to and no permit, authorization, consent
or approval of any court or tribunal, or administrative governmental or
regulatory body, agency or authority, domestic or, to the Company's knowledge,
foreign, (a "Governmental Entity") is necessary for the execution and delivery
by the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect on the Company. Neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of the
Company or any of its subsidiaries, (ii) except as set forth in Schedule 2.6,
result in a violation or breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration of any obligation or loss of any
benefits or creation of any Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets except, in the case
of (ii) or (iii), for violations, breaches or defaults which would not have a
Material Adverse Effect on the Company.
Section 2.7. No Default. Except as set forth in Schedule 2.7, none of the
Company or its subsidiaries is in breach, default or violation (and no event has
occurred which with notice or the lapse of time or both would constitute a
breach, default or violation) of any term, condition or provision of (i) its
Certificate of Incorporation or Bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is now a party or by which any of them or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree, law, statute,
rule or regulation applicable to the Company or any of its
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<PAGE> 10
subsidiaries or any of their respective properties or assets except, in the case
of (ii) or (iii), for violations, breaches or defaults that would not have a
Material Adverse Effect on the Company.
Section 2.8. No Undisclosed Liabilities, Absence of Changes. Except as and
to the extent publicly disclosed by the Company in the Company SEC Reports, as
of December 31, 1997, none of the Company or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that would be required by generally accepted accounting principles to
be reflected on a consolidated balance sheet of the Company (including the notes
thereto) or that would have a Material Adverse Effect on the Company. Except as
publicly disclosed by the Company in the Company SEC Reports or in the
disclosure schedules hereto, since March 28, 1998, the Company and its
subsidiaries have conducted their business only in the ordinary course and in a
manner consistent with past practices and none of the Company or its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, and there have been no events, changes or effects with
respect to the Company or its subsidiaries, having a Material Adverse Effect on
the Company.
Section 2.9. Litigation. Except as publicly disclosed by the Company in the
Company SEC Reports, there is no suit, claim, action, proceeding, arbitration or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity or arbitrator which individually or in the
aggregate would have a Material Adverse Effect on the Company or seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement. Except as publicly disclosed by the Company in the Company SEC
Reports, none of the Company or its subsidiaries is subject to any outstanding
order, writ, injunction or decree which has a Material Adverse Effect on the
Company or would prevent or delay the consummation of the transactions
contemplated hereby.
Section 2.10. Compliance with Applicable Law. Except as set forth in
Schedule 2.10, the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits") except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not have a Material Adverse Effect
on the Company. The Company and its subsidiaries are in compliance with the
terms of the Company Permits except where the failure so to comply would not
have a Material Adverse Effect on the Company. The businesses of the Company and
its subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except that no representation or warranty
is made in this Section 2.10 with respect to Environmental Laws (as defined in
Section 2.12 below) and except for violations or possible violations which do
not and, insofar as reasonably can be foreseen will not, have a Material Adverse
Effect on the Company. There are no products now being manufactured, assembled
or sold by the Company or any of its subsidiaries which at the date hereof would
require any approval of any governmental body, whether federal, state, local or
foreign for the purpose for which they are being manufactured, assembled or sold
by the Company or any of its subsidiaries, for which such approval has not been
obtained, except where the failure to obtain such approval does not,
collectively, have a Material Adverse Effect on the Company. All products now
being commercially distributed by the Company or any of its subsidiaries in any
jurisdiction meet the applicable legal requirements of such jurisdiction and all
requisite governmental approvals have been duly obtained and are in full force
and effect, and there is no basis known to the Company or any of its
subsidiaries for
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<PAGE> 11
any governmental body to deny or rescind any approval for any of their
commercially distributed products for the purpose for which they are being
manufactured, assembled or sold or for any products that the Company or any of
its subsidiaries proposes to commercially distribute in the future, except where
the failure to meet such requirements, the failure to obtain such approvals or
the failure of such approvals to be in full force and effect, does not,
collectively, have, and such denial or rescission, insofar as reasonably can be
foreseen would not, collectively, have a Material Adverse Effect on the Company.
No investigation or review by any Governmental Entity with respect to the
Company or its subsidiaries is pending or, to the knowledge of the Company,
threatened nor, to the knowledge of the Company, has any Governmental Entity
indicated an intention to conduct the same, other than such investigations or
reviews as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 2.11. Employee Benefit Plans, Labor Matters.
(a) Schedule 2.11(a) lists all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements and any current or former
employment, executive compensation or severance agreements, written or
otherwise, maintained or contributed to, for the benefit of or relating to any
employee of the Company, any trade or business (whether or not incorporated)
which is a member of a controlled group including the Company or which is under
common control with the Company within the meaning of Section 414 of the Code
(an "ERISA Affiliate") as well as each plan with respect to which the Company or
an ERISA Affiliate could incur liability under Section 4069 (if such plan has
been or were terminated) or Section 4212(c) of ERISA (together the "Employee
Plans"), excluding former agreements under which the Company has no remaining
material obligations and any of the foregoing that are required to be maintained
by the Company under the laws of any foreign jurisdiction. The Company has made
available to Parent a copy of (i) the most recent annual report on Form 5500
filed with the Internal Revenue Service (the "IRS") for each disclosed Employee
Plan where such report is required, (ii) the documents and instruments governing
each such Employee Plan (other than those referred to in Section 4(b)(4) of
ERISA) and (iii) the summary plan description for each Employee Plan which is
subject to ERISA. Except as set forth in Schedule 2.11(a), no event has occurred
and, to the knowledge of the Company, there currently exists no condition or set
of circumstances in connection with which the Company or any of its subsidiaries
could be subject to any liability under the terms of any Employee Plans, ERISA,
the Code or any other applicable law, including, without limitation, any
liability under Title IV of ERISA, which would have a Material Adverse Effect on
the Company.
(b) Schedule 2.11(b) sets forth a list of (i) all employment
agreements with officers of the Company and its subsidiaries; (ii) all
agreements with consultants who are individuals obligating the Company or any of
its subsidiaries to make annual cash payments in an amount exceeding $50,000;
(iii) all severance agreements, programs and policies of the Company and its
subsidiaries with or relating to its employees except programs and policies
required to be maintained by law; and (vi) plans, programs agreements and other
arrangements of the Company and its subsidiaries with or relating to its
employees which contain change in control provisions. The Company has made
available to Parent copies (or descriptions in detail reasonably satisfactory to
Parent) of all such agreements, plans, programs and other arrangements.
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<PAGE> 12
(c) Except as disclosed in Schedule 2.11(c) of the Company Disclosure
Schedule, there will be no payment, accrual of additional benefits, acceleration
of payments or vesting in any benefit under any Employee Plan or any agreement
or arrangement disclosed under this Section 2.11 solely by reason of entering
into or in connection with the transactions contemplated by this Agreement. No
such payment will constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
(d) No Employee Plan provides post-retirement medical or welfare
benefits to former employees of the Company or its ERISA Affiliates other than
pursuant to Section 4980B of the Code.
(e) There are no controversies pending or, to the knowledge of the
Company, threatened between the Company or any of its subsidiaries and any of
their respective employees, or involving any Employee Plan, which controversies
have a Material Adverse Effect on the Company. Neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries except as disclosed in Schedule 2.11(e) nor does the Company know
of any activities or proceedings of any labor union to organize any such
employees. The Company has no knowledge of any strikes, slowdowns, work
stoppages, lockouts or threats thereof by or with respect to any employees of
the Company or any of its subsidiaries.
(f) Each Employee Plan has been maintained in material compliance
with all applicable laws, including, without limitation, ERISA and the Code.
Each Employee Plan has been maintained in material conformance with the terms
and provisions of such Plan.
(g) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code, and exempt from tax under Section 501(a) of the
ode, is the subject of an unrevoked favorable determination letter from the
Internal Revenue Service. To the best knowledge of Company, nothing has occurred
since the date of any such letter which may adversely affect such qualification
or exemption (other than changes in applicable law that have occurred since the
date of such letter and for which the remedial amendment period of Section
401(b) of the Code has not expired as of the date hereof).
(h) The Company and its ERISA Affiliates have made all payments and
contributions to the Employee Plans on a timely basis as required by the terms
of each such Employee Plan and any applicable law.
(i) The Company and its ERISA Affiliates have filed or caused to be
filed with the Internal Revenue Service annual reports on the applicable Form
5500 series for each Employee Plan for all years and periods for which such
reports were required and within the time period required by ERISA and the Code.
(j) No "prohibited transaction", as defined in Section 406 of ERISA
and Section 4975 of the Code, has occurred with respect to any Employee Plan,
and, to the best knowledge of the Company, no civil or criminal action brought
pursuant to Part V, Title I of ERISA is pending or threatened in writing or
orally against any fiduciary of any such Employee Plan.
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<PAGE> 13
(k) Neither the Company nor any ERISA Affiliate currently maintains
any Employee Plan that is subject to Title IV of ERISA (other than a
multi-employer plan, within the meaning of Section 3(37) or 4001(a)3 of ERISA)
nor has previously maintained any such Plan that has resulted in any liability
or potential liability for the Company or its ERISA Affiliates under said Title
IV.
(l) Neither the Company nor any ERISA Affiliate maintains, or has
contributed to within the past five years, any multi-employer plan, within the
meaning of Section 3(37) or 4001(a)3 of ERISA. Neither the Company nor any ERISA
Affiliate has any liability to make withdrawal liability payments to any
multi-employer plan.
(m) Each Employee Plan that is a group health plan sponsored or
maintained by the Company or any ERISA Affiliate has been operated in material
compliance with the applicable requirements of Parts 6 and 7 of Subtitle B of
Title I of ERISA and Sections 4980(B)(f), 9801 and 9802 of the Code. The Company
has not contributed to a non-conforming group health plan, as that term is
defined in Section 5000(c) of the Code or incurred any tax liability under
Section 5000(a) of the Code that would have a Material Adverse Affect.
(n) Neither the Company nor any ERISA Affiliate has incurred any
excise tax liability with respect to any Employee Plan which has not been
satisfied.
Section 2.12. Environmental Laws and Regulations.
(a) (i) Except as publicly disclosed by the Company in the Company
SEC Reports or in Schedule 2.12 to this Agreement, (i) each of the Company and
its subsidiaries is in material compliance with all U.S. Environmental Laws (as
defined below) and, to the actual knowledge of the Company, all Foreign
Environmental Laws (as defined below), except for non-compliance that would not
have a Material Adverse Effect on the Company, which compliance includes but is
not limited to, the possession by the Company and its subsidiaries of all
material permits and other governmental authorizations required under applicable
U.S. Environmental Laws and, to the actual knowledge of the Company, Foreign
Environmental Laws and compliance with the terms and conditions thereof, (ii)
none of the Company or its subsidiaries have knowledge of an existing or
potential Environmental Claim (as defined below) against the Company or its
subsidiaries or, to the knowledge of the Company, against any person or entity
whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law, that have or would reasonably be expected to have a Material
Adverse Effect on the Company; and (iii) to the best knowledge of the Company,
there are no circumstances that are reasonably likely to prevent or interfere
with such material compliance in the future.
(b) Except as disclosed in the Company SEC Reports, or except as
would not have a Material Adverse Effect on the Company, (i) there have been no
releases (i.e., any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) of Hazardous Substances (as defined below) by the Company
or its current or former subsidiaries on, under, upon or into any real
properties owned or leased currently or in the past by the Company or its
current or former subsidiaries, (ii) no underground tank for Hazardous
Substances or relating piping has leaked and (iii) to the best knowledge of the
Company, there have been no such releases of Hazardous Substances on,
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<PAGE> 14
under, upon or into any real property in the vicinity of real property of the
Company or its current or former subsidiaries which has flowed, seeped or
migrated on or under the real property of the Company or its subsidiaries.
(c) Except as disclosed on Schedule 2.12, there are no PCBs or
asbestos located in any premises currently owned, operated or leased by the
Company or its subsidiaries in the United States, or to the actual knowledge of
the Company, elsewhere.
(d) No environmental lien has attached to any real property owned or
leased by the Company or its subsidiaries in the United States, or to the actual
knowledge of the Company, elsewhere.
(e) Definitions.
(i) For purposes of this Agreement, "U.S. Environmental Laws"
shall mean all federal, state, district and local laws, all rules or regulations
promulgated thereunder, and all orders, consent orders, judgments, written
notices, permits or demand letters issued, promulgated or entered pursuant
thereto, relating to pollution or protection of the environments (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), all as in effect as of the Effective Date, including,
without limitation, (i) laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or other
handling of Hazardous Substances. U.S. Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Atomic Energy Act of 1954, as amended, the Occupational Safety and Health Act,
as amended, the New Jersey Industrial Site Recovery Act ("ISRA") and all
analogous laws promulgated or issued by any governmental authority, all as in
effect as of the Closing Date.
(ii) For purposes of this Agreement, "Foreign Environmental Laws"
shall mean all foreign laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, written notices, permits or demand
letters issued, promulgated or entered pursuant thereto, relating to pollution
or protection of the environments (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), all as in effect
as of the Effective Date, including, without limitation, (i) laws relating to
emissions, discharges, releases, or threatened releases of Hazardous Substances
into the environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of Hazardous Substances.
(iii) For purposes of this Agreement, "Environmental Claims"
shall mean all notice of violations, liens, written claims, written demands,
investigations, written notices, or suits, of any damage, including, without
limitation, personal injury, property damage (including any depreciation of
property values), lost use of property or consequential damages, arising out of
Environmental Conditions or U.S. Environmental Laws or Foreign Environmental
Laws. (By way of example only, Environmental Claims include (i) actual or
threatened damages to natural resources, (ii) claims for nuisance or its
statutory equivalent, (iii) claims for the recovery of response costs or
administrative or judicial orders directing the performance of
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<PAGE> 15
investigations, response or remedial actions under any U.S. Environmental Laws
or Foreign Environmental Laws, (iv) a requirement to implement "corrective
action" pursuant to any order or permit issued pursuant to the Resource
Conservation and Recovery Act, as amended or similar provisions of applicable
state law or Foreign Environmental Laws, (v) claims for restitution,
contribution or indemnity, (vi) fines, penalties or liens of any kind arising
under U.S. Environmental Law or Foreign Environmental Laws, (vii) claims for
injunctive relief or other orders of notices of violation from federal, state or
local agencies or courts arising under U.S. Environmental Law or Foreign
Environmental Laws, and (viii) with regard to any present or former employees,
claims relating to exposure to or injury from Environmental Conditions.)
(iv) For purposes of this Agreement, "Environmental Conditions"
shall mean the state of the environment, including natural resources (e.g.,
flora and fauna), soil, surface water, groundwater, any present or potential
drinking water supply, subsurface strata, ambient air, relating to or arising
out of the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharge, injecting, escaping, leaching, disposing or dumping or threatened
release of Hazardous Substances by the Company and its subsidiaries. With
respect to Environmental Claims by third parties, Environmental Claims also
include the exposure of persons to Hazardous Substances at the work place or the
exposure of persons or property to Hazardous Substances migrating from or
otherwise emanating from or located on property owned by the Company or its
subsidiaries.
(v) For purposes of this Agreement, "Hazardous Substances" shall
mean all pollutants, contaminants, chemicals, wastes and any other carcinogenic,
ignitable, corrosive, reactive, toxic or otherwise hazardous substances or
materials (whether solids, liquids or gases), including, but not limited to, any
substances, materials or wastes subject to regulation, control or remediation
under U.S. Environmental Laws or Foreign Environmental Laws. By way of example
only, the term "Hazardous Substances" includes petroleum, urea formaldehyde,
flammable, explosive and radioactive materials, PCBs, pesticides, herbicides,
asbestos or waste waters.
Section 2.13. Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state local and foreign taxes,
assessments and other governmental charges, customs, duties, impositions, and
liabilities relating to taxes, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity or of a consolidated or unitary
group for which there is joint and several liability.
(b) Tax Returns and Audits. Except as set forth on Schedule 2.13:
(i) Company and each of its subsidiaries has timely filed all
federal, state, local and foreign returns, estimates, information statements and
reports ("Returns") relating to Taxes, required to be filed by Company and each
of its subsidiaries and has paid all Taxes shown to be due on such Returns or is
contesting them in good faith.
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<PAGE> 16
(ii) Company and each of its subsidiaries has established (and
until the Effective Time will establish) on its books and records reserves
(taking into account the potential future use of the Company's net operating
losses) that are adequate for the payment of all Taxes incurred, but not yet due
and payable.
(iii) Company and each of its subsidiaries as of the Effective
Time will have withheld with respect to its employees all federal, state, local
and foreign income Taxes, FICA, FUTA and other Taxes required to be withheld,
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under all applicable laws.
(iv) Neither Company nor any of its subsidiaries has been
delinquent in the payment of any Tax (for the period during which any statute of
limitations is still open) nor is there any Tax deficiency outstanding, proposed
or assessed against Company or any of its subsidiaries, nor has Company or any
of its subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(v) No audit or other examination of any return of Company or
any of its subsidiaries is presently in progress, nor has Company or any of its
subsidiaries been notified of any request for such an audit or other
examination.
(vi) Neither Company nor any of its subsidiaries has any
liability for unpaid federal, state, local or foreign Taxes which have not been
accrued for or reserved (taking into account the potential future use of the
Company's net operating losses) on the Company's books and records, whether
asserted or unasserted, contingent or otherwise.
(vii) There is no contract, agreement, plan or arrangement,
including, but not limited to, the provisions of this Agreement, covering any
employee or former employee of Company or any of its subsidiaries that,
individually, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Internal Revenue Code
of 1987, as amended (the "Code").
(viii) Company is not, and has not been at any time, a "United
States real property holding corporation", within the meaning of Section
897(c)(2) of the Code.
(ix) Company and its subsidiaries have not participated (and will
not participate prior to the Effective Time) in or cooperated with an
international boycott within the meaning of Section 999 of the Code.
(x) There are no rulings, requests for rulings or closing
agreements with any taxing authority which could affect the Taxes of Company or
any of its subsidiaries for any period after the Effective Time.
(xi) There are no liens for Taxes upon any property or assets of
Company or its subsidiaries except liens for Taxes not yet due.
(xii) An "ownership change" within the meaning of Section 382 of
the Code and the regulations thereunder has not occurred since December 31, 1993
(and will not occur prior to the Effective Time) such that the Tax attributes of
the Company and its
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<PAGE> 17
subsidiaries has been (or would be) limited under Section 382 of the Code.
(xiii) The Company and each subsidiary has complied with all
information reporting requirements of, and has maintained all required records
and supporting information with respect to, Section 6038A of the Code and the
regulations thereunder pertaining to information with respect to certain
foreign-owned corporations.
Section 2.14. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares and two-thirds of the outstanding Preferred
Shares, voting as a separate class, are the only votes of the holders of any
class or series of the Company's capital stock necessary to approve and adopt
this Agreement.
Section 2.15. Opinion of Financial Adviser. Cowen & Co. (the "Company
Financial Adviser") has delivered to the Company Board its written opinion dated
the date of this Agreement to the effect that as of such date the Merger
Consideration is fair to the holders of Common Shares from a financial point of
view.
Section 2.16. Brokers. No broker, finder or investment banker (other than
the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Acquisition or Parent) is entitled to any
brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.17. Absence of Restrictions on Business Activities. There is no
agreement, judgment, injunction, order or decree binding upon the Company or its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material current business practice of
the Company or its subsidiaries, any acquisition of material property by the
Company or its subsidiaries or the conduct of business by the Company or its
subsidiaries as currently conducted or as proposed to be conducted by the
Company or its subsidiaries.
Section 2.18. Absence of Liens and Encumbrances. The Company and each of
its subsidiaries has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens or encumbrances except as reflected in the Company
Financial Statements included in the Company's SEC Reports and except for liens
for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
Section 2.19. Intellectual Property. The Company and each of its
subsidiaries, directly or indirectly, owns, or is licensed or otherwise
possesses legal enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material that are material to its business as currently conducted
or as proposed to be conducted by the Company and its subsidiaries (the "Company
Intellectual Property Rights"). Schedule 2.19 hereto sets forth a complete list
of all patents, trademarks, registered copyrights,
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<PAGE> 18
trade names and service marks, and any applications therefor, included in the
Company Intellectual Property Rights, and specifies, where applicable, the
jurisdictions in which each such the Company Intellectual Property Right has
been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Schedule 2.19 also
sets forth a complete list of all material licenses, sublicenses and other
agreements as to which the Company or its subsidiaries is a party and pursuant
to which the Company or its subsidiaries or any other person is authorized to
use any Company Intellectual Property Rights or other trade secret that is
material to the Company or its subsidiaries, and includes the identity of all
parties thereto and a description of the nature and subject matter thereof; the
copies of such licenses, sublicenses and other agreements provided to Parent
contain a description of the applicable royalty and the term thereof. The
Company is not in violation of any license, sublicense or agreement described on
such list except such violations as do not materially impair the Company's
rights under such license, sublicense or agreement or do not, collectively,
constitute a Material Adverse Effect on the Company. The execution and delivery
of this Agreement by the Company, and the consummation of the transactions
contemplated hereby, will neither cause the Company nor any of its subsidiaries
to be in violation or default under any such license, sublicense or agreement,
nor entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement, except as set forth
in Schedule 2.19 or except for such violations, defaults, terminations and
modifications that do not, collectively, constitute a Material Adverse Effect on
the Company. No claims have been asserted or, to the knowledge of the Company,
are threatened by any person nor are there any valid grounds, to the knowledge
of the Company, for any bona fide claims (i) to the effect that the manufacture,
sale, licensing or use of any of the products of the Company or any of its
subsidiaries as now manufactured, sold or licensed or used or proposed for
manufacture, use, sale or licensing by the Company or any of its subsidiaries
infringes on any copyright, patent, trade mark, service mark or trade secret,
(ii) against the use by the Company or any of its subsidiaries of any
trademarks, service marks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications used in the
Company's or any of its subsidiaries' business as currently conducted or as
proposed to be conducted, or (iii) challenging the ownership by the Company or
any of its subsidiaries, validity or effectiveness of any Company Intellectual
Property Rights, except in each of clauses (i), (ii) and (iii) as disclosed in
Schedule 2.19. All material registered trademarks, service marks and copyrights
held by the Company or any of its subsidiaries are valid and subsisting. To the
knowledge of the Company, there is no material unauthorized use, infringement or
misappropriation of any Company Intellectual Property Rights by any third party,
including any employee or former employee of the Company or any of its
subsidiaries. No Company Intellectual Property Right or product of the Company
or any of its subsidiaries is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has entered into any agreement under which the Company or its
subsidiaries is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market. The Company and each subsidiary
has a policy requiring each key employee to execute a proprietary information
and confidentiality agreement (the "Confidentiality Agreement") substantially in
the Company's standard form, a copy of which is attached to Schedule 2.19. All
current employees of the Company in San Diego, California and all current
employees of the Company and its subsidiaries at the director level at
facilities in the Peoples' Republic of China and the managing director at the
Company's facility in the Phillipines have signed a Confidentiality Agreement.
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Section 2.20. Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.20, neither the Company nor any of its subsidiaries has, nor is it a
party to nor is it bound by, any of the following:
(a) any material product distribution agreement,
(b) any material joint marketing agreement or product development
agreement,
(c) any material agreement relating to the performance of product
evaluation or testing or regulatory compliance by other parties with respect to
products of the Company or its subsidiaries,
(d) any material agreement with or order by any Government Entity
relating to the testing, manufacture, registration, labeling, marketing or sale
of products manufactured, marketed or sold by the Company or its subsidiaries,
(e) any material agreement with or order by any Government Entity
relating to the providing by such government of employees related to the
manufacture of products,
(f) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements,
(g) any employment or consulting agreement, or any other similar type
of contract or commitment for an amount in excess of Fifty Thousand Dollars
($50,000.00) in any one year, which in any of such cases is not terminable by
the Company on thirty (30) days notice without liability,
(h) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,
(i) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than such agreements or guarantees between
the Company and any of its subsidiaries,
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of One Hundred Thousand
Dollars ($100,000.00) singularly or Five Hundred Thousand Dollars ($500,000.00)
in the aggregate,
(k) any agreement, contract or commitment relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture or other business
enterprise,
(l) any mortgage, indenture, loan or credit agreement, grant
agreement, security agreement or other agreement or instrument relating to the
borrowing of money,
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extension of credit, or receipt of money,
(m) any collective bargaining agreement,
(n) any real property or personal property lease requiring aggregate
future payments by the Company or its subsidiaries in excess of One Hundred
Thousand Dollars ($100,000.00),
(o) any material joint venture or partnership agreement or
arrangement,
(p) any material consignment or similar agreement relating to
inventory or equipment, or
(q) any other agreement, contract or commitment which involves
payment by the Company of One Hundred Thousand ($100,000.00) or more and is not
cancelable without penalty within thirty (30) days.
Each of the agreements, contracts and commitments referred to in clauses
above that has not expired or been terminated in accordance with its terms is in
full force and effect, except where the failure to be in full force and effect
does not, collectively, have a Material Adverse Effect on the Company, and,
except as otherwise disclosed, is not subject to any material default thereunder
of which the Company is aware by any party obligated to the Company pursuant
thereto.
Section 2.21. Non-Public Information Provided to Parent. The non-public
written information contained in the data room in San Diego, California
regarding the business of the Company and its subsidiaries, including product
and historical financial information, did not, to the actual knowledge (without
any obligation to conduct an inquiry) of the Company's executive officers,
contain any material misstatement of a material fact. The written projections of
the Company's future financial performance provided by the Company to Parent
were prepared in good faith based on assumptions believed by the Company to be
reasonable as of the date such projections were provided to Parent and as of the
date of this Agreement; however no other representation is made or to be implied
concerning such projections, and Parent and Acquisition acknowledge the
inherently uncertain, risky and speculative nature of such projections.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
Section 3.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and the State of [Delaware], respectively, and has all requisite power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. Parent has heretofore delivered to the
Company accurate and complete copies of the Certificate of Incorporation and
Bylaws as currently in effect of Parent and Acquisition.
(b) Each of Parent and Acquisition 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 duly qualified or licensed and in good standing would
not have a Material Adverse Effect on Parent. When used in connection with
Parent or Acquisition the term "Material Adverse Effect" means any material
adverse change or effect (i) on the business, results of operations or condition
(financial or otherwise) of Parent and its subsidiaries, taken as a whole, other
than any change or effect arising out of general economic conditions (including,
without limitation, levels of aggregate demand, interest rates, currency
exchange rates and applicable tax laws), or (ii) that may impair the ability of
Parent and/or Acquisition to consummate the transactions contemplated hereby.
Section 3.2. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition and by Parent as the sole
stockholder of Acquisition and no other corporate proceedings on the part of
Parent or Acquisition are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition enforceable
against each of Parent and Acquisition in accordance with its terms.
Section 3.3. No Default. None of Parent or its subsidiaries is in breach,
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a breach, default or violation) of any term,
condition or provision of (i) its Certificate of Incorporation or Bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is now a party or by which any of injunction, decree,
law, statute, rule or regulation applicable to Parent or any of its subsidiaries
or any of their respective properties or assets except, in the case of (ii) or
(iii), for violations, breaches or defaults that would not have a
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Material Adverse Effect on Parent.
Section 3.4. Litigation. Except as disclosed in Schedule 3.4, there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
Parent, threatened against Parent or any of its subsidiaries which seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed in Schedule 3.4, none of Parent or its
subsidiaries is subject to any outstanding order, writ, injunction or decree
that would prevent or delay the consummation of the transactions contemplated
hereby.
Section 3.5. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Exchange Act, the HSR Act and the filing
and recordation of the Merger Certificate as required by the DGCL, no filing
with or notice to, and no permit authorization, consent or approval of, any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not materially impair the likelihood of the consummation of
the transactions contemplated hereby and the likelihood that such transactions
would not be rescinded or undone. Neither the execution, delivery and
performance of this Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of Parent or
Acquisition or any of Parent's other subsidiaries, (ii) result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Acquisition or any of Parent's other
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Parent or Acquisition or
any of Parent's other subsidiaries or any of their respective properties or
assets except, in the case of (ii) or (iii), for violations breaches or defaults
which would not materially impair the likelihood of the consummation of the
transactions contemplated hereby and the likelihood that such transactions would
not be rescinded or undone.
Section 3.6. Availability of Funds. Parent has or will have available to it
as of the Closing, not less then $35.15 million for completion of the Merger.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Schedule 4.1, during the period from the date
hereof to the Effective Time, the Company will and will cause each of its
subsidiaries to conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement. Without limiting the generality of the foregoing, except as otherwise
expressly
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provided in this Agreement or as described in Schedule 4.1, prior to the
Effective Time, neither the Company nor any of its subsidiaries will, without
the prior written consent of Parent and Acquisition (which consent shall not
unreasonably be withheld):
(a) amend its Certificate of Incorporation or Bylaws (or other
similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (except bank loans) or equity equivalents
(including, without limitation, any stock options or stock appreciation rights)
except for the issuance and sale of Shares pursuant to options previously
granted under the Company Plans and the issuance of Shares pursuant to the
conversion of any Preferred Shares;
(c) split, combine or reclassify or repurchase any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, make any other actual, constructive or deemed distribution in
respect of its capital stock or otherwise make any payments to stockholders in
their capacity as such, or redeem or otherwise acquire any of its securities or
any securities of any of subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring
or any other fashion the corporate structure of ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities, except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practices and except for obligations of subsidiaries of the
Company incurred in the ordinary course of business consistent with past
practices; (iii) make any loans or advances (other than in the ordinary course
of business consistent with past practices) or capital contributions to or
investments in any other person (other than to subsidiaries of the Company or
customary loans or advances to employees, in each case in the ordinary course of
business consistent with past practice); (iv) pledge or otherwise encumber
shares of capital stock of the Company or its subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien thereupon (other than Tax Liens for Taxes not yet
due);
(g) except as may be required by law, enter into, adopt or amend or
terminate any employment agreement or any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee in any manner or increase in any
manner the
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<PAGE> 24
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan and arrangement as in effect as of the date
hereof (including, without limitation, the granting of stock appreciation rights
or performance units); provided, however, that this paragraph (g) shall not
prevent the Company or its subsidiaries from (i) entering into employment
agreements with new employees in the ordinary course of business and consistent
with past practice which are terminable without liability upon thirty (30) days
notice or (ii) increasing annual compensation and/or providing for or amending
bonus arrangements for employees for fiscal 1998 in the ordinary course of
year-end compensation reviews consistent with past practice (to the extent that
such compensation increases and new or amended bonus arrangements do not result
in a material increase in benefits or compensation expense to the Company);
(h) enter into or amend any agreement or take any action which
reasonably would be expected to have a Material Adverse Effect on the Company or
enter into any agreement, order, consent or commitment relating to the Company's
property in Leesburg, Indiana;
(i) transfer or license to any person or entity or otherwise
materially extend, amend or modify any rights to the Company's Intellectual
Property Rights or enter into grants to future patent rights, other than
licenses in connection with the sale or purchase of goods or services entered
into in the ordinary course of business consistent with past practices (except
that past practices shall not control with respect to arrangements made
necessary or economical by the closure of certain facilities operated by or on
behalf of the Company or its subsidiaries);
(j) grant any severance or termination (i) to any executive officer
or (ii) to any other employee except payments made in connection with the
termination of employees in amounts consistent with the Company's policies and
past practices or pursuant to written agreements outstanding and disclosed in
the Schedules hereto, or policies existing on the date hereof and as disclosed
in the Schedules hereto;
(k) commence any litigation other than (i) for the routine collection
of bills, or (ii) where the Company in good faith determines that failure to
commence suit would result in the material impairment of a valuable asset of the
Company's business, provided that the Company consults with Parent prior to the
filing of such a suit;
(l) acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets that are material, individually or in the
aggregate, to the business of the Company, except for equipment, inventory and
supplies acquired in the ordinary course of business consistent with past
practice;
(m) sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
its business, except in the ordinary course of business consistent with past
practice;
(n) materially revalue any of the Company's or its subsidiaries'
tangible assets, including without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business consistent with past practice;
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<PAGE> 25
(o) pay, discharge or satisfy in an amount in excess of One Hundred
Thousand Dollars ($100,000.00) (in any one case) or Three Hundred and Fifty
Thousand Dollars ($350,000.00) (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of a liability of the type reflected or reserved in the Company's
financial statements in the Company SEC Reports (including the notes thereto);
(p) make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes (except
settlements effected solely through payment of immaterial sums of money), or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes; or
(q) take, or agree (in writing or otherwise) to take, any of the
actions described in clauses (a) through (p) of this Section 4.1.
Section 4.2. Preparation of the Proxy Statement. The Company shall, as
promptly as practicable prepare and file with the SEC the Proxy Statement. The
Proxy Statement shall also include the recommendation of the Board of Directors
of the Company in favor of the Merger, which shall not be withdrawn, modified or
withheld except in compliance with the fiduciary duties of the Company's Board
under applicable law or in compliance with Section 4.4 hereof. To Company's best
knowledge, at the time the Proxy Statement is mailed to the stockholders of the
Company, the Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any information relating
to the Company or any of its affiliates, officers or directors should be
disclosed by the Company in an amendment or a supplement to the Proxy Statement,
the Company shall promptly inform Parent.
Section 4.3. SEC Filings. At all times prior to the Closing, the Company
shall:
(a) Make all filings with the SEC required to be made by it, in a
timely manner and in accordance with the applicable rules and regulations of the
SEC;
(b) Promptly notify Parent of any communications received from the
SEC with respect to any such filings, or with respect to any similar filings
made prior to the date of this Agreement, or with respect to the Proxy
Statement; and
(c) Promptly provide to Parent copies of all such SEC filings, and
SEC written communications, as well as copies of all written communications with
stockholders generally.
Section 4.4. Other Potential Acquirers.
(a) Neither the Company nor any of its subsidiaries shall, nor shall
the Company authorize or permit any of its or their respective officers,
directors, employees representatives, agents, investment bankers, subsidiaries
and affiliates to, directly or indirectly, solicit, initiate, engage or
participate in discussions or negotiations with, or disclose or afford
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<PAGE> 26
access to non-public information concerning the Company and its subsidiaries to
or otherwise assist, encourage or cooperate with or enter into any agreement or
understanding with any person or group (other than Parent and Acquisition or any
designees of Parent and Acquisition) concerning any Third Party Acquisition
Proposal; provided, however, that nothing herein shall prevent the Company Board
from taking and disclosing to the Company's stockholders a position contemplated
by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender offer. The Company Board shall not withdraw or amend its recommendation
of the transactions contemplated hereby or approve or recommend, or cause the
Company to enter into any agreement with respect to, any Third Party Acquisition
Proposal and the Company shall and shall cause its respective officers,
directors, employees, representatives, agents, investment bankers, subsidiaries
and affiliates not to make or authorize any statement, recommendation or
solicitation in support of any Third Party Acquisition Proposal.
(b) Not withstanding anything to the contrary provided in this
Agreement, the Company Board may participate in negotiations with a Third Party
(as defined below), furnish information (other than documents or reports filed
with the Securities and Exchange Commission) to a Third Party or amend or
withdraw its recommendation of the transactions contemplated hereby or approve
or recommend a Superior Proposal (as defined below), but only after a Third
Party shall have delivered to the Company in writing an unsolicited, bona fide
Third Party Acquisition Proposal that the Company Board by a majority vote
determines in its good faith judgment (after consultation with its principal
advisers, including a financial adviser of nationally recognized reputation),
which shall be deemed to include Cowen & Co.) to be more favorable to the
Company's stockholders than the Merger (a "Superior Proposal") and for which
financing, to the extent required, is then committed or which, in the good faith
reasonable judgment of the Company Board (based on the advice of a financial
adviser of nationally recognized reputation) is reasonably capable of being
financed by such Third Party and which is probable to be consummated in
accordance with its terms.
(c) In the event the Company receives a Superior Proposal, the
Company will (i) immediately give written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Company Board has received an
unsolicited bona fide Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal and (ii) give Parent five business days from its receipt of
the Notice of Superior Proposal to make an offer which the Company Board by a
majority vote determines in its good faith judgment (after consultation with its
principal advisers, including a financial adviser of nationally recognized
reputation) to be at least as favorable to the Company's stockholders as such
Superior Proposal, in which event the Company Board shall accept such offer from
Parent unless, within five business days of the Company's receipt of such offer
from Parent, the Company receives a Third Party Acquisition Proposal that the
Company Board, by a majority vote, determines in its good faith judgment (after
consultation with its principal advisers, including a financial adviser of
nationally recognized reputation, which shall be deemed to include Cowen & Co.)
to be more favorable to the Company's stockholders than such offer from Parent.
For the purposes of this Agreement, "Third Party" means any person, entity or
group (which includes a "person" as such term is defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) other than Parent, Acquisition
or any affiliate thereof. For the purposes of this Agreement, "Third Party
Acquisition Proposal" means a proposal to the Company by a Third Party for a
transaction that would include any of the following events: (i) the acquisition
of the Company by merger or otherwise by any Third Party; (ii) the acquisition
by a Third Party of more than 50% of the total assets of the Company and its
subsidiaries taken as a
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whole; or (iii) the acquisition by a Third Party of 50% or more of the
outstanding Common Shares or Preferred Shares.
Section 4.5. Comfort Letter. The Company shall use all reasonable efforts
to cause Arthur Andersen LLP to deliver a letter dated not more than five days
prior to the date on which the Proxy Statement shall be mailed to the
stockholders of the Company and addressed to the Company and Parent and their
respective Boards of Directors customary in scope for agreed-upon procedures
letters delivered by independent public accountants in connection with proxy
statements similar to the Proxy Statement. The language in such letter shall in
no event constitute a separate or independent basis on which Parent or
Acquisition can terminate this Agreement or refuse to consummate the
transactions contemplated hereby.
Section 4.6. Meeting of Stockholders. The Company shall take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
bylaws to duly call, give notice of, convene and hold a meeting of its
stockholders as promptly as practicable to consider and vote upon the adoption
and approval of this Agreement and the transactions contemplated hereby. The
stockholder votes required for the adoption and approval of the transactions
contemplated by this Agreement shall be the vote required by the DGCL and the
Company's Certificate of Incorporation and bylaws. The Company will, through its
Board of Directors, recommend to its stockholders approval of such matters,
provided, however, the Company Board may amend or withdraw its recommendation if
permitted by Section 4.4 hereof.
Section 4.7. Access to Information.
(a) Subject to the provisions of applicable law, between the date
hereof and the Effective Time, the Company will give Parent and its authorized
representatives reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of itself and its
subsidiaries, will permit Parent to make such inspections as Parent may
reasonably require and will cause its officers and those of its subsidiaries to
furnish Parent with such financial and operating data and other information with
respect to the business and properties of the Company and its subsidiaries as
Parent may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent within 25 business days after the end of each calendar month
(commencing with the month of May) an unaudited balance sheet of the Company as
of the end of the such month and the related statements of earnings,
stockholders' equity (deficit) and within 25 business days after the end of each
calendar quarter cash flows for the quarter then ended, each prepared in
accordance with generally accepted accounting principles in conformity with the
practices consistently applied by such party with respect to its monthly
financial statements. All the foregoing shall be in accordance with the books
and records of the Company and shall fairly present its financial position
(taking into account the differences between the monthly and quarterly
statements prepared by the Company in conformity with its past practices) as of
the last day of the period then ended.
(c) Each of the parties hereto will hold and will cause its
consultants and advisers to hold in confidence all documents and information
furnished to it in connection with the transactions contemplated by this
Agreement pursuant to the terms of that certain
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Confidentiality Agreement entered into between the Company and Parent dated
March 18, 1998.
Section 4.8. Additional Agreements, Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
all reasonable efforts to take or cause to be taken all action and to do or
cause to be done all things reasonably necessary, proper or advisable under
applicable laws and regulations to fulfill the conditions to closing under this
Agreement and to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) cooperating in the
preparation and filing of the Proxy Statement, any filings that may be required
under the HSR Act and any amendments to any thereof, (ii) obtaining consents of
all third parties and Governmental Entities necessary proper or advisable for
the consummation of the transactions contemplated by this Agreement; (iii)
contesting any legal proceeding relating to the Merger and (iv) executing any
additional instruments necessary to consummate the transactions contemplated
hereby. Subject to the terms and conditions of this Agreement, Parent and
Acquisition agree to use all reasonable efforts to cause the Effective Time to
occur as soon as practicable after the meeting of the Company's stockholders
with respect to the Merger. If at any time after the Effective Time any further
action is necessary to carry out the purposes of this Agreement, the proper
officers and directors of each party hereto shall take all such necessary
action.
Section 4.9. Employee Benefits.
(a) After the Closing, Parent shall cause the Surviving Corporation
to, honor in accordance with their terms, all employment, severance, consulting
and other compensation contracts between the Company or any of its subsidiaries
and any current or former director, officer or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Closing under any plans described in Section 2.11 of this Agreement (other
than stock option or other plans involving the potential issuance or purchase on
the open market of securities of the Company or of Parent). Parent agrees and
will cause the Surviving Corporation to honor any "change of control" or similar
provisions relating to employees contained in any existing contracts, and all
termination or severance agreements with executive officers identified in
Schedule 2.11 (c) (subject to Section 1.11 hereof) will be honored in accordance
with their terms as of the date hereof.
(b) Parent covenants that for a period of one year after the Closing,
it will cause Surviving Corporation to extend to employees of Surviving
Corporation and its subsidiaries benefit plans which, when viewed in the
aggregate, shall be substantially similar to the Employee Plans in effect with
respect to employees of the Company and its subsidiaries immediately before the
Closing. Notwithstanding the foregoing, nothing in this Agreement, express or
implied, shall (i) obligate the Surviving Corporation or any of its subsidiaries
or Parent to continue to employ any of the employees of the Surviving
Corporation or any of its subsidiaries after the Closing Date (except for those
employees who are parties to employment agreements as disclosed in Schedule
2.11(b) and then only in accordance with the terms of such employment
agreements) or (ii) operate so as to make any employees of the Company or any of
its subsidiaries third party beneficiaries of any of the provisions of this
Agreement (except for the indemnification obligations under Section 4.11).
Section 4.10. Public Announcements. Parent, Acquisition and the Company, as
the case may be, will consult with one another before issuing any press release
or otherwise making any
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public statements with respect to the transactions contemplated by this
Agreement, including, without limitation, the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation
except as may be required by applicable law or by obligations pursuant to any
listing agreement with the New York Stock Exchange or NASDAQ National Market
System as determined by Parent, Acquisition or the Company, as the case may be.
Section 4.11. Indemnification, Directors' and Officers' Insurance.
(a) After the Effective Time, Parent and the Surviving Corporation
jointly and severally shall indemnify and hold harmless (and shall also advance
expenses as incurred to the fullest extent permitted under applicable law, upon
receipt from such indemnified party of the undertaking to repay such advances
contemplated by Section 145 of the DGCL, to) each person who is now or has been
prior to the date hereof or who becomes prior to the Effective Time an officer
or director of the Company or any of the Company's subsidiaries (the
"Indemnified Persons") against (i) all losses, claims, damages, costs, expenses
(including, without limitation, counsel fees and expenses), settlement payments
(provided Parent and the Surviving Corporation have approved such settlement,
which approval shall not be unreasonably withheld) or liabilities arising out of
or in connection with any claim, demand, action, suit, proceeding or
investigation (a "Claim") based in whole or in part on or arising in whole or in
part out of the fact that such person is or was an officer or director of the
Company or any of its subsidiaries whether or not pertaining to any matter
existing or occurring at or prior to the Effective Time and whether or not
asserted or claimed prior to or at or after the Effective Time ("Indemnified
Liabilities") to the fullest extent permitted by applicable law and (ii) all
Indemnified Liabilities based in whole or in part on or arising in whole or in
part out of or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent required or permitted under
applicable law or under the Surviving Corporation's Certificate of Incorporation
or bylaws. The parties hereto intend, to the extent not prohibited by applicable
law, that the indemnification provided for in this Section 4.11 shall apply
without limitation to negligent acts or omissions by an Indemnified Person.
Parent hereby guarantees the payment and performance of the Surviving
Corporation's obligations in this Section 4.11. Each Indemnified Person is
intended to be a third party beneficiary of this Section 4.11 and may
specifically enforce its terms. This Section 4.11 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's Certificate of Incorporation or Bylaws.
(b) Any Indemnified Party wishing to claim indemnification under this
Section 4.11, upon learning of any such Claim, shall notify Parent and the
Surviving Corporation (although the failure so to notify Parent and the
Surviving Corporation shall not relieve Parent and the Surviving Corporation
from any liability which Parent and the Surviving Corporation may have under
this Section 4.11 except to the extent such failure prejudices Parent and the
Surviving Corporation), and shall deliver to Parent and the Surviving
Corporation the undertaking as contemplated by Section 145 of the DGCL. The
Indemnified Parties as a group shall retain one law firm (in addition to local
counsel) to represent them with respect to each such matter unless (i) there is,
under applicable standards of professional conduct (as determined by counsel to
the Indemnified Parties), a conflict or potential conflict between the positions
of any two or more Indemnified Parties, or (ii) an Indemnified Party reasonably
concludes (based upon advice of counsel) that there may be legal defenses
available to the Indemnified Party that are different from or in addition to
those available to the other Indemnified Parties, in which events, such
additional counsel as may be required may be retained by the Indemnified
Parties.
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(c) Parent shall cause the Surviving Corporation to maintain in
effect for not less than six (6) years from the Effective Time the policies of
the directors' and officers' liability and fiduciary insurance most recently
maintained by the Company with aggregate liability coverage not less than the
coverage provided by the insurance most recently maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous to the beneficiaries thereof so long as such substitution does not
result in gaps or lapses in coverage) with respect to matters occurring prior to
the Effective Time; provided, however, that in satisfying its obligation under
this Section, the Surviving Corporation shall not be obligated to pay premiums
in excess of 150% of the amount per annum incurred by the Company in the twelve
months ended December 31, 1997 with respect to such insurance, which amount has
been disclosed to Parent.
(d) In the event the Surviving Corporation or its successor (i) is
consolidated with or merges into another person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any other
person in a single transaction or a series of related transactions, then in each
such case Parent shall make or cause to be made proper provision so that the
successor or transferee of the Surviving Corporation shall comply in all
material respect with the terms of this Section 4.11.
Section 4.12. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, and (ii)
any material failure of the Company, Parent or Acquisition, as the case may be
to comply with or satisfy any covenant condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 4.12 shall not cure such breach or
non-compliance or limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
Section 4.13. Information Supplied. None of the information supplied or to
be supplied by Parent or Acquisition specifically for inclusion or incorporation
by reference to the Proxy Statement will, at the date mailed to stockholders and
at the times of the meeting or meetings of stockholders of the Company to be
held in connection with the Merger, 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.
Section 4.14. GTI Tax Matters. With respect to any income tax Return
required to be filed by Company and its subsidiaries from the date of this
Agreement through the Effective Time, Company shall provide to Parent and its
authorized representatives with copies of such completed Return at least fifteen
(15) business days prior to the due date (or extended due date if an extension
has been obtained) for the filing of such Return. Parent and its authorized
representatives shall have the right to review such Return prior to the filing
of such Return. Company and Parent agree to consult and resolve in good faith
any issues arising as a result of the review of such Return by Parent and its
authorized representatives.
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ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive, order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger; and
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received.
Section 5.2. Conditions to the Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) the representations of Parent and Acquisition contained in this
Agreement or in any other document delivered pursuant hereto shall be true and
correct at and as of the Effective Time with the same effect as if made at and
as of the Effective Time (except to the extent such representations specifically
related to an earlier date, in which case such representations shall be true and
correct as of such earlier date), provided that the representations of Parent
and Acquisition which are not qualified by materiality or Material Adverse
Effect shall be deemed for all purposes of this Agreement to be true and correct
if, in the aggregate the breaches of all such representations, if any, do not
have a Material Adverse Effect on Parent or Acquisition or the validity of the
Merger, and, at the Closing, Parent and Acquisition shall have delivered to the
Company a certificate to that effect;
(b) each of the covenants and obligations of Parent and Acquisition
to be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(c) Parent shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or Acquisition or the
validity of the Merger; and
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(d) the Directors of the Company and the Company shall have received
the opinion of legal counsel to Parent as to the matters set forth in Exhibit A.
Section 5.3. Conditions to the Obligations of Parent and Acquisition. The
respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of the Company contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct at and
as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent the representations specifically related to
an earlier date, in which case such representations shall be true and correct as
of such earlier date), provided that the representations of the Company and its
subsidiaries which are not qualified by materiality or Material Adverse Effect
shall be deemed for all purposes of this Agreement to be true and correct if, in
the aggregate the breach of all such representations, if any, do not have a
Material Adverse Effect on the Company or the validity of the Merger, and, at
the Closing, the Company shall have delivered to Parent and Acquisition a
certificate to that effect;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect;
(c) the Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, license,
note, mortgage, indenture, lease, or other agreement or instrument, except those
for which failure to obtain such consents and approvals would not individually
or in the aggregate, have a Material Adverse Effect on the Company or the
validity of the Merger;
(d) Parent shall have received the opinion of legal counsel to the
Company as to the matters set forth in Exhibit B; and
(e) The Company Dissenting Shares, if any, shall not exceed ten
percent (10%) of the issued and outstanding Shares at the Effective Time.
Section 5.4. Business MAC. Notwithstanding anything to the contrary
contained in this Agreement, conditions (a), (b) and (c) of Section 5.3 shall be
deemed to be satisfied if, between the date of this Agreement and the Closing
Date: (i) a reduction occurs, compared to the first quarter of fiscal year 1998,
in the earnings before interest, taxes, depreciation and amortization of the
Company and its subsidiaries, on a consolidated basis ("EBITDA"), that has a
Material Adverse Effect on the Company, and the business and financial events
resulting in such reduction in EBITDA were not themselves initiated by one or
more independent breaches by the Company of the representations and covenants of
the Company contained herein (such a reduction in EBITDA is a "Business MAC"),
and (ii) one or more of conditions (a), (b) or (c) of Section 5.3 is not
satisfied because of such Business MAC, in the sense that, absent such Business
MAC, such conditions would have been satisfied.
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ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time whether before or after
approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent, Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States Governmental
Entity shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable;
(ii) the Merger has not been consummated by November 30, 1998; provided that no
party may terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have been
the reason that the Effective Time shall not have occurred on or before said
date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case such that the conditions set forth in
Section 5.2(a) or Section 5.2(c) would be incapable of being satisfied by
November 30, 1998 (or as otherwise extended); (ii) there shall have been a
breach by Parent or Acquisition of any of their respective covenants or
agreements hereunder materially adversely affecting (or materially delaying) the
consummation of the Merger, such that the conditions set forth in Section 5.2(b)
or 5.2(c) would be incapable of being satisfied by November 30, 1998, and Parent
or Acquisition, as the case may be, has not cured such breach within twenty
business days after notice by the Company thereof, provided, with respect to
clauses (i) and (ii) of this Section 6.1(c), that the Company is not then in
material breach of any of its covenants or agreements hereunder having a
Material Adverse Effect on the Company or materially adversely affecting (or
materially delaying) the consummation of the Merger, such that the conditions
set forth in Sections 5.3(a), 5.3(b) or 5.3(c) would be incapable of being
satisfied by November 30, 1998 and the Company has not cured such breach within
twenty business days after notice by Parent or Acquisition thereof; or (iii) the
Company Board does so in accordance with Section 4.4; or
(d) by Parent and Acquisition if (i) there shall have been a breach
of any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Company shall have become
untrue in either case such that the conditions set forth in Section 5.3 (a) or
5.3(c) would be incapable of being satisfied by November 30, 1998 (or as
otherwise extended); (ii) there shall have been a breach by the Company of its
covenants or agreements hereunder having a Material Adverse Effect on the
Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, such that the conditions set forth in Section 5.3(b)
or 5.3(c) would be incapable of being satisfied by November 30, 1998 and the
Company has not cured such breach within twenty business days after notice by
Parent or Acquisition thereof provided, with respect to clauses (i) and (ii) of
this Section 6.1(d), that Parent and Acquisition are not then in material breach
of any
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<PAGE> 34
of their covenants or agreements hereunder materially adversely affecting (or
materially delaying) the consummation of the Merger, and Parent and Acquisition
have not cured such breach within twenty business days after notice by the
Company thereof; (iii) the Company Board shall have recommended to the Company's
stockholders a Superior Proposal and the Company's stockholders shall not have
approved and adopted the Merger instead by vote or action by written consent by
November 30, 1998; (iv) the Company Board shall have withheld, withdrawn,
modified or changed its approval or recommendation of this Agreement or the
Merger and the Company's stockholders shall not have approved or adopted the
Merger instead by vote or action by written consent by November 30, 1998; or (v)
the Company Dissenting Shares exceed ten percent (10%) of the outstanding
Shares, or (vi) the Company shall have convened a meeting of its stockholders to
vote upon the Merger and shall have failed to obtain the requisite vote or
written consents of its stockholders.
Section 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Sections 6.1(a) or (b), this Agreement
shall forthwith become void and of no effect, without any liability on the part
of any party hereto or its affiliates, directors, officers or stockholders.
Nothing contained in this Section 6.2 shall relieve any party from liability for
any breach of this Agreement.
Section 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Sections 6.1(c)(iii) or 6.1(d)(iii) or (iv) and within
twelve months thereafter the Company consummates a transaction with respect to a
Third Party Acquisition Proposal or the Company enters into an option, agreement
or letter of intent with respect to any Third Party Acquisition Proposal or
other arrangement intended to transfer the Company or control of the Company to
a Third Party, or the stockholders of the Company, in response to a tender offer
or exchange offer by any person, tender Shares representing a 50% or greater
voting interest in the Company or give options or rights to any person to
acquire such Shares; or
(ii) Section 6.1(d)(vi) and within twelve months thereafter the
Company consummates a transaction with respect to a Third Party Acquisition
Proposal, and at the time of the Company stockholders' meeting at which the
Company failed to obtain the requisite vote, there shall be outstanding an offer
by a Third Party to consummate, or there shall have been under consideration by
the Company, or there shall have been publicly announced a plan or proposal with
respect, to a Third Party Acquisition Proposal;
the Company shall pay to Parent a break-up fee in the amount of $1.25 million
plus an amount equal to $750,000 minus the Transaction Expenses (as defined
below) immediately upon consummation of the Third Party Acquisition Proposal as
provided under 6.3(a)(i) or (ii) above.
(b) At the earlier to occur of the consummation of a transaction with
respect to a Third Party Acquisition Proposal or thirty (30) days after the
termination of this Agreement pursuant to Sections 6.1(c)(iii) or 6.1(d)(iii),
(iv) or (vi), the Company shall reimburse Parent, Acquisition and their
affiliates for $750,000 of the documented out-of-pocket fees and expenses
actually incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation,
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fees and expenses payable to investment bankers, counsel and accountants to any
of the foregoing (the "Transaction Expenses").
(c) Upon the termination of this Agreement pursuant to Sections
6.1(c)(i) or (ii), the Company shall have full legal rights and remedies under
applicable law to recover all damages resulting from such termination.
Notwithstanding the foregoing, but not in lieu thereof, Parent shall reimburse
the Company and its affiliates (not later than ten business days after
submission of statements therefor) for $750,000 of the documented out-of-pocket
fees and expenses actually incurred by any of them or on their behalf in
connection with the Merger and the consummation of all transactions contemplated
by this Agreement (including, without limitation, fees and expenses payable to
investment bankers, counsel and accountants to any of the foregoing).
(d) Upon the termination of this Agreement pursuant to Sections
6.1(d)(i) or (ii), Parent and Acquisition shall have full legal rights and
remedies under applicable law to recover all damages resulting from such
termination. Notwithstanding the foregoing, but not in lieu thereof, the Company
shall reimburse Parent, Acquisition and their affiliates (not later than ten
business days after submission of statements therefor) for $750,000 of the
documented out-of-pocket fees and expenses actually incurred by any of them or
on their behalf in connection with the Merger and the consummation of all
transactions contemplated by this Agreement (including, without limitation, fees
and expenses payable to investment bankers, counsel and accountants to any of
the foregoing).
(e) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time before or after approval of the
Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement (including the Company
Disclosure Schedule) may be amended only by an instrument in writing signed on
behalf of the parties hereto.
Section 6.5. Extension, Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
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ARTICLE 7
MISCELLANEOUS
Section 7.1. Non-survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2. [Reserved.]
Section 7.3. Entire Agreement, Assignment. This Agreement (including the
Company Disclosure Schedules) (a) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior or contemporaneous agreements and understandings both written and
oral between the parties with respect to the subject matter hereof and (b) shall
not be assigned by operation of law or otherwise; provided, however, that
Acquisition may assign any or all of its rights and obligations under this
Agreement to any subsidiary of Parent, but no such assignment shall relieve
Acquisition of its obligations hereunder if such assignee does not perform such
obligations.
Section 7.4. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 7.5. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
to each other party as follows:
if to Parent or Acquisition:
c/o Technitrol Inc.
1210 Northbrook Drive, Suite 385
Trevose, PA 19053
Telecopier: (215) 355-7397
Attention: Thomas J. Flakoll
with a copy to:
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pa 19103-7098
Telecopier: (215) 564-8120
Attention: James M. Papada, III, Esquire
if to the Company to:
GTI Corporation
9715 Business Park
San Diego, CA 92131
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<PAGE> 37
Telecopier: (619) 537-2740
Attention: Albert Hugo Martinez
with a copy to:
Gibson Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier: (213) 229-7520
Attention: Bruce D. Meyer, Esquire
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
Section 7.7. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 7.8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as provided in Sections 4.11 and 7.3, nothing in
this Agreement express or implied is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 7.9. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common control
with the first-mentioned person;
(b) "business day" means any day other than a day on which the New
York Stock Exchange is closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "Code" means the Internal Revenue Code of 1986, as amended;
(e) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of an officer of the Company and its subsidiaries
or Parent, as the case may be;
(f) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
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(g) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other person, as the case may be, (either alone or through or together
with any other subsidiary) owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
Section 7.10. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
Section 7.11. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if a party
hereto is entitled to receive payment or reimbursement of expenses pursuant to
Sections 6.3(a), or 6.3(b), (c) or (d) it shall not be entitled to specific
performance to compel the consummation of the Merger.
Section 7.12. Consent to Jurisdiction. The parties hereto submit to and
consent to the jurisdiction of the state and Federal courts located in the State
of Delaware and agree that the venue shall be proper and the forum shall be
proper.
Section 7.13. Limitation on Damages. Under no circumstances shall any party
be liable to any other party, either for indirect, special, consequential or
punitive damages arising out of or in connection with this Agreement. This
Section 7.13 shall have no application to indemnification pursuant to Section
4.11 arising out of any third-party claim.
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Section 7.14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
TECHNITROL INTERNATIONAL, INC.
By: /s/ ALBERT THORP III
-------------------------------------
Name: Albert Thorp III
-----------------------------------
Title: President
----------------------------------
GTI CORPORATION
By: /s/ ALBERT J. HUGO-MARTINEZ
-------------------------------------
Name: Albert J. Hugo-Martinez
-----------------------------------
Title: President CEO
----------------------------------
TECHNITROL ACQUISITION, INC.
By: /s/ ALBERT THORP III
-------------------------------------
Name: Albert Thorp III
-----------------------------------
Title: President
----------------------------------
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EXHIBIT 10.2
GUARANTY
This Guaranty is made as of the 26th day of May, 1998, by Technitrol, Inc.
("Guarantor") in favor of GTI Corporation. ("GTI").
Background
WHEREAS, Technitrol International, Inc. ("Teco International"), a wholly
owned subsidiary of Guarantor, entered into an Agreement and Plan of Merger with
Technitrol Acquisition, Inc., a Delaware corporation ("Teco Sub") and GTI on May
26, 1998 (the "Merger Agreement") pursuant to which Teco Sub will be merged with
and into GTI;
WHEREAS, in order to induce GTI to enter into the Merger Agreement,
Guarantor agreed to enter into and deliver this Guaranty to GTI;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, Guarantor hereby agrees as follows:
1. In order to induce GTI to enter into the Merger Agreement, Guarantor
hereby, unconditionally and irrevocably guarantees to (i) GTI the prompt and
complete payment and performance, when due, of all liabilities and obligations
of Teco International to GTI arising under, pursuant to or in connection with
the Merger Agreement (the "GTI Guaranteed Liabilities") and (ii) the Indemnified
Persons (as defined in Section 4.11 of the Merger Agreement) the prompt and
complete payment and performance, when due, of all liabilities and obligations
of Teco International to GTI arising under, pursuant to or in connection with
Section 4.11 of the Merger Agreement (the "Indemnified Persons Guaranteed
Liabilities" and together with the GTI Guaranteed Liabilities, the "Guaranteed
Liabilities") . The guaranty provided for herein constitutes a guaranty of
payment and not of collection.
2. Guarantor hereby waives notice of acceptance of this Guaranty and notice
of any Guaranteed Liability to which it may apply, and waives presentment,
demand for payment, protest, notice of dishonor or non-payment of any other such
Guaranteed Liability, notice of any suit or the taking of other action by GTI
against, and any other notice to, Teco International. Until all of the
Guaranteed Liabilities shall have been irrevocably paid in full, the Guarantor
shall have no right of subrogation.
3. GTI may at any time and from time to time without notice to or consent
of Guarantor and without impairing or releasing the absolute and unconditional
obligations of Guarantor hereunder: (i) agree to any change in the terms of any
<PAGE> 2
Guaranteed Liability pursuant to the terms of the Merger Agreement, (ii) take or
fail to take any action of any kind in respect of any security for any
Guaranteed Liability, (iii) exercise or refrain from exercising any rights
against Teco International or others, or (iv) compromise or subordinate any
Guaranteed Liability including any security therefor. In addition, the liability
of Guarantor hereunder shall be absolute and unconditional irrespective of: (A)
any lack of validity or enforceability of any Guaranteed Liability or any
agreement or instrument relating to any Guaranteed Liability, (B) any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of the terms of the Guaranteed Liability or GTI's rights hereunder or (C) any
other circumstances, not referred to earlier in this Guaranty, which might
otherwise constitute a defense available to, or a discharge of, Guarantor in
respect of this Guaranty.
4. This Guaranty shall continue in full force and effect until all
Guaranteed Liabilities have been irrevocably satisfied in full. Guarantor agrees
that this Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time payment or performance (or any part thereof) of any
Guaranteed Liability, or interest thereon, is rescinded or must otherwise be
restored or returned by GTI or an Indemnified Person due to any bankruptcy,
insolvency, reorganization, liquidation or receivership laws or otherwise.
5. This Guaranty will be governed by Delaware law (excluding laws with
respect to choice of laws).
<PAGE> 3
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and
year first above written.
TECHNITROL, INC.
By: /s/ THOMAS J. FLAKOLL
------------------------------------
Thomas J. Flakoll
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.3
[TECHNITROL GTI CORPORATION LETTERHEAD]
FOR IMMEDIATE RELEASE CONTACT:
May 27, 1998 Technitrol: David Stakun (215) 355-2900
GTI: Bruce Myers (619) 537-2500
Lori Squier (619) 537-2500
TECHNITROL, GTI ANNOUNCE
DEFINITIVE MERGER AGREEMENT
PHILADELPHIA - Technitrol, Inc. (NYSE: TNL) and GTI Corporation (NASDAQ:
GGTI) announced today that they have signed a definitive agreement for GTI and
its principal operating unit, Valor Electronics, Inc. to be acquired by Pulse, a
wholly-owned subsidiary of Technitrol. Technitrol anticipates that all existing
GTI-Valor facilities will be integrated into existing Pulse facilities.
Under the terms of the agreement, each common share of GTI will be
converted into $3.10 in cash, and each preferred share will be converted into
$726.37 in cash, for an aggregate purchase price of approximately $34 million.
Closing, which is expected by mid-September of 1998, is subject to required
regulatory approvals, the approval of GTI shareholders, and other terms and
conditions normally found in agreements of this type.
"This acquisition affords Pulse a very attractive opportunity to solidify
its leadership in the local area network magnetics market and to create
significant long-term value for Technitrol shareholders," said Chairman James M.
Papada, III.
Added Technitrol President and Chief Executive Officer Thomas J. Flakoll,
"We feel the integration of Valor's product lines with those of Pulse will
create considerable customer value as well. We eagerly look forward to
completing this acquisition and getting under way."
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<PAGE> 2
Technitrol, GTI Sign Derfinitive Merger Agreement -- two
GTI President and Chief Executive Officer Albert J. Hugo-Martinez said, "In
addition to being fair to our shareholders, we believe this agreement will
produce a strong business combination that will greatly benefit our customers."
Based in Philadelphia, Technitrol is a worldwide producer of electronic
components, electrical contacts and assemblies and other precision-engineered
parts and materials for manufacturers of networking, telecommunications and
computer equipment, electrical switching devices, and other products. For more
information, visit Technitrol's Web site at http://www.technitrol.com.
Through Valor Electronics, Inc., GTI Corporation is a multinational
manufacturer and leading supplier of magnetics-based components for signal
processing and power transfer functions primarily in local area networking and
also in telecommunications and broadband products.
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