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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 22, 1998
(December 17, 1998)
KUHLMAN CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-7695 58-2058047
(State or other (Commission File Number) (IRS Employer Identification No.)
Jurisdiction or
Incorporation)
3 SKIDAWAY VILLAGE SQUARE, SAVANNAH, GEORGIA 31411
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (912) 598-7809
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On December 17, 1998, Kuhlman Corporation ("Kuhlman"), a Delaware
corporation, Borg-Warner Automotive, Inc., a Delaware corporation
("Borg-Warner"), and BWA Merger Corp., a Delaware corporation and a wholly-owned
subsidiary of Borg-Warner ("Merger Subsidiary"), entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement and
subject to the terms and conditions set forth therein, Merger Subsidiary will be
merged with and into Kuhlman, with Kuhlman being the surviving corporation of
such merger (the "Merger"), and as a result of the Merger, Kuhlman will become a
wholly-owned subsidiary of Borg-Warner. In the proposed Merger, the outstanding
shares of Kuhlman common stock, par value $1.00 per share ("Kuhlman Common
Stock"), will be exchanged for (i) shares of Borg-Warner common stock, par value
$.01 per share ("Borg-Warner Common Stock") with an aggregate value of
$150,000,000; and (ii) cash. Holders of shares of Kuhlman Common Stock may
elect to receive, in exchange for each of their shares, either (i) $39 in cash
or (ii) $39 in shares of Borg-Warner Common Stock, subject to the calculation
and proration provisions set forth in the Merger Agreement.
The Merger is subject to, among other things, approval by Kuhlman's
stockholders, normal governmental reviews and other customary conditions.
Effective as of December 17, 1998, Kuhlman amended its Rights
Agreement, dated as of April 30, 1997 (the "Rights Agreement"), by and between
Kuhlman and Harris Trust and Savings Bank, as Rights Agent, with the effect of
exempting the Merger, the Merger Agreement and the events and the transactions
contemplated thereby from the application of the Rights Agreement.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and
the First Amendment to the Rights Agreement is filed as Exhibit 4.1. The
foregoing description is qualified in its entirety by reference to the full text
of such exhibits. Kuhlman's press release announcing the execution of the Merger
Agreement was issued on December 18, 1998, a copy of which is attached hereto as
Exhibit 99.1. Such exhibits are incorporated herein by reference.
Certain statements contained in this report, which can be identified by
the use of forward-looking terminology such as "proposed" and "will," or the
negative thereof or other variations thereon or comparable terminology,
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
These statements should be considered as subject to the many risks and
uncertainties that exist in the Company's operations and business environment.
Such risks and uncertainties could cause actual results to differ materially
from those projected. These uncertainties include, but are not limited to,
failure to obtain required approvals, economic conditions, market demand and
pricing, competitive and cost factors, raw material prices, global interest
rates, foreign exchange rates, and other risk factors.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) EXHIBITS
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2.1 Agreement and Plan of Merger, dated as of December 17,
1998, among Borg-Warner, Merger Subsidiary and Kuhlman
4.1 First Amendment, dated as of December 17, 1998, to the
Rights Agreement, dated as of April 30, 1997, by and
between Kuhlman and Harris Trust and Savings Bank, as
Rights Agent [Incorporated by reference to Exhibit (2)
to the Registration Statement on Form 8A/A (Amendment
No. 1) of Kuhlman Corporation filed with the Securities
and Exchange Commission on December 22, 1998 (SEC File
No. 1-7695)]
99.1 Press Release, dated December 18, 1998, issued by
Kuhlman
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KUHLMAN CORPORATION
(Registrant)
By: /s/ Robert S. Jepson, Jr.
------------------------------
Robert S. Jepson, Jr.
Chairman of the Board and
Chief Executive Officer
Dated: December 22, 1998
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of December 17, 1998,
among Borg-Warner, Merger Subsidiary and Kuhlman
4.1 First Amendment, dated as of December 17, 1998, to the Rights
Agreement, dated as of April 30, 1997, by and between Kuhlman and
Harris Trust and Savings Bank, as Rights Agent [Incorporated by
reference to Exhibit (2) to the Registration Statement on Form
8A/A (Amendment No. 1) of Kuhlman Corporation filed with the
Securities and Exchange Commission on December 22, 1998 (SEC File
No. 1-7695)]
99.1 Press Release, dated December 18, 1998, issued by Kuhlman
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EXHIBIT 2.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AMONG
BORG-WARNER AUTOMOTIVE, INC.
("Purchaser"),
BWA MERGER CORP.
a wholly owned direct subsidiary of Purchaser
("Subcorp"),
and
KUHLMAN CORPORATION
("target")
December 17, 1998
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TABLE OF CONTENTS
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PAGE
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PRELIMINARY STATEMENTS....................................................................................... 1
AGREEMENT ....................................................................................... 1
ARTICLE I. THE MERGER.............................................................................. 1
1.1 The Merger................................................................................. 1
1.2 Effective Time............................................................................. 1
1.3 Effects of the Merger...................................................................... 2
1.4 Certificate of Incorporation and By-Laws................................................... 2
1.5 Directors and Officers of the Surviving Corporation........................................ 2
ARTICLE II. CONVERSION OF SECURITIES ............................................................... 2
2.1 Conversion of Capital Stock................................................................ 2
2.2 Election Procedures........................................................................ 3
2.3 Exchange Ratio; Fractional Shares; Adjustments............................................. 6
2.4 Exchange of Certificates................................................................... 7
(a) Exchange Agent................................................................ 7
(b) Exchange Procedures........................................................... 7
(c) Distributions with Respect to Unexchanged Shares.............................. 8
(d) No Further Ownership Rights in Target Common Stock............................ 8
(e) Termination of Exchange Fund.................................................. 9
(f) No Liability.................................................................. 9
(g) Investment of Exchange Fund................................................... 9
(h) Withholding Rights............................................................ 9
2.5 Treatment of Stock Options................................................................. 10
2.6 Treatment of Stock Appreciation Rights..................................................... 10
2.7 Treatment of Awards Under Long-Term Incentive Plan......................................... 10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
SUBCORP ................................................................................ 11
3.1 Organization and Standing.................................................................. 11
3.2 Corporate Power and Authority.............................................................. 11
3.3 Capitalization of Purchaser and Subcorp.................................................... 11
3.4 Conflicts; Consents and Approvals.......................................................... 12
3.5 Purchaser SEC Documents.................................................................... 13
3.6 Compliance with Law........................................................................ 14
3.7 Registration Statement; Proxy Statement.................................................... 14
3.8 Litigation; Products Liability............................................................. 14
3.9 No Material Adverse Change................................................................. 14
3.10 Environmental Compliance................................................................... 15
3.11 Board Recommendation....................................................................... 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET ............................................... 16
4.1 Organization and Standing................................................................. 16
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4.2 Subsidiaries............................................................................... 16
4.3 Corporate Power and Authority.............................................................. 17
4.4 Capitalization of Target................................................................... 17
4.5 Conflicts; Consents and Approvals.......................................................... 18
4.6 No Material Adverse Change................................................................. 18
4.7 Target SEC Documents....................................................................... 18
4.8 Taxes...................................................................................... 19
4.9 Compliance with Law........................................................................ 20
4.10 Intellectual Property...................................................................... 20
4.11 Registration Statement; Proxy Statement.................................................... 21
4.12 Litigation; Products Liability............................................................. 21
4.13 Employee Benefit Plans..................................................................... 21
4.14 Contracts.................................................................................. 25
4.15 Labor Matters.............................................................................. 26
4.16 Permits.................................................................................... 26
4.17 Reserved................................................................................... 27
4.18 Title to Properties and Assets............................................................. 27
4.19 Environmental Compliance................................................................... 27
4.20 Opinion of Financial Advisor............................................................... 27
4.21 Board Recommendation; Required Vote........................................................ 28
4.22 Section 203 of DGCL; Rights Agreement...................................................... 28
4.23 Brokerage and Finder's Fees................................................................ 28
ARTICLE V. COVENANTS OF THE PARTIES ............................................................... 29
5.1 Mutual Covenants........................................................................... 29
(a) HSR Act Filings; Reasonable Best Efforts; Notification........................ 29
(b) Public Announcements.......................................................... 31
(c) Registration Statement/Proxy Statement........................................ 31
(d) Change of Control............................................................. 32
5.2 Covenants of Purchaser..................................................................... 32
(a) Conduct of Purchaser's Operations............................................. 32
(b) Indemnification; Directors'and Officers'Insurance............................. 32
(c) Merger Sub.................................................................... 33
(d) NYSE Listing.................................................................. 33
(e) Employees and Employee Benefits............................................... 33
(f) Contacts with Target's Customers and Suppliers................................ 33
5.3 Covenants of Target........................................................................ 34
(a) Target Stockholders Meeting................................................... 34
(b) Conduct of Target's Operations................................................ 34
(c) No Solicitation............................................................... 37
(d) Access........................................................................ 38
(e) Subsequent Financial Statements............................................... 39
(f) Affiliates of Target.......................................................... 39
ARTICLE VI. CONDITIONS ............................................................................. 39
6.1 Conditions to the Obligations of Each Party................................................ 39
6.2 Conditions to Obligations of Target........................................................ 40
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6.3 Conditions to Obligations of Purchaser and Subcorp......................................... 40
ARTICLE VII. TERMINATION AND AMENDMENT .............................................................. 42
7.1 Termination................................................................................ 42
7.2 Effect of Termination...................................................................... 43
7.3 Amendment.................................................................................. 44
7.4 Extension; Waiver.......................................................................... 44
ARTICLE VIII. MISCELLANEOUS .......................................................................... 45
8.1 Survival of Representations and Warranties................................................. 45
8.2 Notices.................................................................................... 45
8.3 Interpretation............................................................................. 46
8.4 Counterparts............................................................................... 47
8.5 Entire Agreement........................................................................... 47
8.6 Third-Party Beneficiaries.................................................................. 47
8.7 Governing Law.............................................................................. 47
8.8 Consent to Jurisdiction; Venue............................................................. 47
8.9 Specific Performance....................................................................... 48
8.10 Assignment................................................................................. 48
8.11 Expenses................................................................................... 48
Exhibit A - Form of Affiliate Letter......................................................................... A-1
Exhibit B - Form of Subcorp Bylaws........................................................................... B-1
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into as of the 17th day of December, 1998, by and among Borg-Warner
Corporation, a Delaware corporation ("Purchaser"), BWA Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Purchaser ("Subcorp"), and Kuhlman
Corporation, a Delaware corporation ("Target").
PRELIMINARY STATEMENTS
A. Purchaser desires to combine its businesses with the
businesses operated by Target through the merger of Subcorp with and into
Target, with Target as the surviving corporation (the "Merger"), pursuant to
which each share of Target Common Stock (as defined in Section 4.4(a))
outstanding at the Effective Time (as defined in Section 1.2) will be converted
into the right to receive the Merger Consideration (as defined in Section
2.4(b)) as more fully provided herein.
B. Target desires to combine its businesses with the
businesses operated by Purchaser and for the holders of shares of Target Common
Stock ("Target Stockholders") to receive the Merger Consideration and to have a
continuing equity interest in the combined Purchaser/Target businesses through
the ownership of Purchaser Common Shares (as defined in Section 3.3(a)).
C. The respective Boards of Directors of Purchaser, Subcorp
and Target have determined the Merger to be desirable and in the best interests
of their respective shareholders and, by resolutions duly adopted, have approved
and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the
mutual and dependent promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), Subcorp shall be merged with and into Target at
the Effective Time. As a result of the Merger, the separate corporate existence
of Subcorp shall cease and Target shall continue its existence under the laws of
the State of Delaware. Target, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
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1.2 Effective Time. As promptly as possible on the Closing Date
(as defined below), the parties shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") a certificate of merger (the "Certificate of Merger") in
such form as is required by and executed in accordance with Section 251 of the
DGCL. The Merger shall become effective (the "Effective Time") when the
Certificate of Merger has been filed with the Delaware Secretary of State or at
such later time as shall be agreed upon by Purchaser and Target and specified in
the Certificate of Merger. The date on which the Effective Time occurs is herein
referred to as the "Effective Date." Prior to the filing referred to in this
Section 1.2, a closing (the "Closing") shall be held at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, or such
other place as the parties may agree as soon as practicable (but in any event
within ten business days) following the date upon which all conditions set forth
in Article VI have been satisfied or waived, or at such other date as Purchaser
and Target may agree; provided, that the conditions set forth in Article VI have
been satisfied or waived at or prior to such date. The date on which the Closing
takes place is referred to herein as the "Closing Date."
1.3 Effects of the Merger. From and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and By-Laws. The Certificate of
Merger shall provide that at the Effective Time (i) the Certificate of
Incorporation of the Surviving Corporation as in effect immediately prior to the
Effective Time shall be amended as of the Effective Time so as to contain the
provisions, and only the provisions, contained immediately prior thereto in the
Certificate of Incorporation of Subcorp, except for Article I thereof, which
shall continue to read "The name of the corporation is `Kuhlman Corporation'",
and (ii) the By-Laws of Subcorp in effect immediately prior to the Effective
Time, which shall be in the form attached as Exhibit A hereto, shall be the
By-Laws of the Surviving Corporation; in each case, until amended in accordance
with the DGCL.
1.5 Directors and Officers of the Surviving Corporation. From and
after the Effective Time, the officers of Target shall be the officers of the
Surviving Corporation and the directors of Subcorp shall be the directors of the
Surviving Corporation, in each case, until their respective successors are duly
elected and qualified. On or prior to the Closing Date, Target shall deliver to
Purchaser evidence satisfactory to Purchaser of the resignations of the
directors of Target, such resignations to be effective as of the Effective Time.
ARTICLE II.
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Purchaser, Subcorp or Target
or their respective shareholders:
(a) Each share of common stock, $0.01 par value, of Subcorp
("Subcorp Common
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Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, $0.01 par value, of the Surviving
Corporation. Such newly issued shares shall thereafter constitute all of the
issued and outstanding capital stock of the Surviving Corporation.
(b) Each share of capital stock of Target held in the treasury of
Target shall be cancelled and retired and no payment shall be made in respect
thereof.
(c) Each outstanding share of Target Common Stock which under the
terms of Section 2.2 is to be converted into the right to receive Purchaser
Common Shares shall, subject to Section 2.3, be converted into and become the
right to receive a number of Purchaser Common Shares equal to the Exchange Ratio
(as defined in Section 2.3) (the "Stock Consideration").
(d) Each outstanding share of Target Common Stock which under the
terms of Section 2.2 is to be converted into the right to receive cash shall be
converted into the right to receive $39.00 in cash (the "Cash Consideration");
(e) Each outstanding share of Target Common Stock the holder of
which has perfected his right to dissent under applicable law and has not
effectively withdrawn or lost such right as of the Effective Date (the
"Dissenting Shares") shall not be converted into or represent a right to receive
Purchaser Common Shares and/or cash hereunder, and the holder thereof shall be
entitled only to such rights as are granted by applicable law. Target shall give
Purchaser prompt notice upon receipt by Target of any such written demands for
payment of the fair value of such shares of Target Common Stock and of
withdrawals of such notice and any other instruments provided pursuant to
applicable law (any shareholder duly making such demand being hereinafter called
a "Dissenting Shareholder"). Any payments made in respect of Dissenting Shares
shall be made by the Surviving Corporation.
(f) If any Dissenting Shareholder shall effectively withdraw or
lose (through failure to perfect or otherwise) his right to such payment at or
prior to the Effective Date, such holder's shares of Target Common Stock shall
be converted into a right to receive cash and/or Purchaser Common Shares in
accordance with the applicable provisions of this Agreement. If such holder
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to such payment after the Effective Date, each share of Target Common
Stock of such holder shall be converted on a share by share basis into the right
to receive the Cash Consideration.
2.2 Election Procedures.
(a) Subject to the allocation and election procedures set forth in
this Section 2.2, each record holder (or beneficial owner through appropriate
and customary documentation and instructions) immediately prior to the Effective
Time of shares of Target Common Stock shall be entitled either (i) to elect to
receive the Cash Consideration for each such share of Target Common Stock ("Cash
Election Shares"), or (ii) to elect to receive the Stock
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Consideration for each such share of Target Common Stock ("Stock Election
Shares"), or (iii) to indicate that such record holder has no preference as to
the receipt of cash or Purchaser Common Shares for each such share of Target
Common Stock ("Non-Election Shares"). All such elections shall be made on a form
furnished by Purchaser for that purpose (a "Form of Election") and reasonably
satisfactory to Target. If more than one Certificate shall be surrendered for
the account of the same holder, the number of Purchaser Common Shares, if any,
to be issued to such holder in exchange for the certificates representing the
shares of Target Common Stock (the "Certificates") which have been surrendered
shall be computed on the basis of the aggregate number of shares of Target
Common Stock represented by all of the Certificates surrendered for the account
of such holder. Holders of record of shares of Target Common Stock who hold such
shares as nominees, trustees or in other representative capacities (each, a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all shares of
Target Common Stock held by such Representative for a particular beneficial
owner.
(b) Not later than the 25th business day prior to the anticipated
Effective Date or such date as the parties agree in writing, Purchaser shall
mail a Form of Election and a letter of transmittal to record holders of Target
Common Stock as of the record date for the Target Stockholders Meeting (as
defined below). Elections shall be made by holders of shares of Target Common
Stock by delivering the Form of Election to Harris Trust and Savings Bank, or
such other bank or trust company designated by Purchaser and who is reasonably
satisfactory to Target (the "Exchange Agent"). To be effective, a Form of
Election must be properly completed, signed and submitted to the Exchange Agent
by 5:00 p.m. (New York City time) on the last business day prior to the date of
the Target Stockholders Meeting (as defined below) or such other time and date
as Purchaser and Target may mutually agree (the "Election Deadline"), and
accompanied by (1)(x) the Certificates as to which the election is being made or
(y) an appropriate guarantee of delivery of such Certificates as set forth in
such Form of Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such Stock Certificates are in fact delivered to the
Exchange Agent within three New York Stock Exchange ("NYSE") trading days after
the date of execution of such guarantee of delivery (a "Guarantee of Delivery")
and (2) a properly completed and signed letter of transmittal. Failure to
deliver Certificates covered by any Guarantee of Delivery within three NYSE
trading days after the date of execution of such Guarantee of Delivery shall be
deemed to invalidate any otherwise properly made election. Purchaser will have
the discretion, which it may delegate in whole or in part to the Exchange Agent,
to determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of Election.
The good faith decision of Purchaser (or the Exchange Agent) in such matters
shall be conclusive and binding. Neither Purchaser nor the Exchange Agent will
be under any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by Section 2.2(c) and all such computations shall be
conclusive and binding on the Target Stockholders in the
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absence of manifest error. Any Form of Election may be changed or revoked prior
to the Election Deadline. In the event a Form of Election is revoked prior to
the Election Deadline, Purchaser shall, or shall cause the Exchange Agent to,
cause the Certificates representing the shares of Target Common Stock covered by
such Form of Election to be promptly returned without charge to the person
submitting the Form of Election upon written request to that effect from such
person. For purposes hereof, if a Target Stockholder does not submit a Form of
Election which is received by the Exchange Agent prior to the Election Deadline
(including a holder who submits and then revokes his or her Form of Election and
does not resubmit a Form of Election which is timely received by the Exchange
Agent), or if a Target Stockholder submits a Form of Election without the
corresponding Certificates or a Guarantee of Delivery, then such Target
Stockholder's shares of Target Common Stock shall be deemed to be Non-Election
Shares. If any Form of Election is defective in any manner that the Exchange
Agent cannot reasonably determine the election preference of the stockholder
submitting such Form of Election, the purported election set forth therein shall
be deemed to be of no force and effect and then such Target Stockholder's shares
of Target Common Stock shall, for purposes hereof, be deemed to be Non-Election
Shares.
(c) Within five business days after the Election Deadline (the
"Measurement Date"), the Exchange Agent shall effectuate the allocation among
holders of Target Common Stock of rights to receive Purchaser Common Shares or
cash in the Merger in accordance with the Forms of Election as follows:
(i) If the number of Stock Election Shares is less than or equal to
3,846,154 (the "Stock Conversion Number"), then:
(1) all Stock Election Shares will be converted into
the right to receive Purchaser Common
Shares,
(2) the Exchange Agent will select first from among the
Non-Election Shares by a random selection
process as shall be mutually determined by
Purchaser and Target as shall be further
described in the Election Form, then (if
necessary) will allocate pro rata from
among the Cash Election Shares (provided
that each holder of such Cash Election
Shares holds 1,000 or more shares of
Target Common Stock), and then (if
necessary) will allocate pro rata from
among the remaining Cash Election Shares,
a sufficient number of such shares ("Stock
Designated Shares") such that the number
of Stock Designated Shares will, when
added to the number of Stock Election
Shares, equal as closely as practicable
the Stock Conversion Number, and all Stock
Designated Shares will be converted into
the right to receive Purchaser Common
Shares, and
(3) the Cash Election Shares (subject to the provisions
of Sections 2.1(e)
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and (f) with respect to any Dissenting
Shares) and the Non-Election Shares which
are not Stock Designated Shares will be
converted into the right to receive cash;
or
(ii) If the number of Stock Election Shares is greater than the Stock
Conversion Number, then:
(1) the Exchange Agent will allocate pro rata first
from among the Stock Election Shares
(provided that each holder of such Stock
Election Shares holds less than 1,000
shares of Target Common Stock) and then
(if necessary) will allocate pro rata from
among the remaining Stock Election Shares,
a sufficient number of such shares ("Cash
Designated Shares") such that when the
number of Cash Designated Shares is
subtracted from the number of Stock
Election Shares, the remaining Stock
Election Shares will equal as closely as
practicable the Stock Conversion Number
and all such remaining Stock Election
Shares will be converted into the right to
receive Purchaser Common Shares, and
(2) the Cash Election Shares, Non-Election Shares, and
Cash Designated Shares will be converted
into the right to receive cash.
2.3 Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall mean the quotient (rounded to the
nearest 1/100,000) obtained by dividing (i) $39.00 by (ii) the average of
the high and low sales prices of Purchaser Common Stock as reported on the
New York Stock Exchange ("NYSE") Composite Tape (the "NYSE Composite Tape")
on each of the twenty consecutive trading days immediately preceding the
third trading date prior to the Closing Date (the "Purchaser Share Price").
(b) No certificates for fractional Purchaser Common Shares shall
be issued as a result of the conversion provided for in Section 2.1(c) and
such fractional share interests will not entitle the owner thereof to vote
or have any rights of a holder of Purchaser Common Shares. In lieu of any
such fractional Purchaser Common Shares, the holder of a certificate
previously evidencing Target Common Stock, upon presentation of such
fractional interest represented by an appropriate certificate for Target
Common Stock to the Exchange Agent pursuant to Section 2.3, shall be
entitled to receive a cash payment therefor in an amount equal to the value
(determined with reference to the Purchaser Share Price) of such fractional
interest. Such payment with respect to fractional shares is merely intended
to provide a mechanical rounding off of, and is not a separately bargained
for, consideration. If more than one certificate representing shares of
Target Common Stock shall be surrendered for the account of the same
holder, the number of Purchaser Common Shares for which certificates have
been surrendered shall be computed on the basis of the aggregate number of
shares represented by the certificates so surrendered.
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(c) In the event that prior to the Effective Time Purchaser shall
declare a stock dividend or other distribution payable in Purchaser Common
Shares or securities convertible into Purchaser Common Shares, or effect a
stock split, reclassification, combination or other change with respect to
Purchaser Common Shares, the Exchange Ratio and Cash Consideration set
forth in this Article II shall be adjusted to reflect such dividend,
distribution, stock split, reclassification, combination or other change.
2.4 Exchange of Certificates.
(a) Exchange Agent. Immediately prior to the Effective Time,
Purchaser shall deposit with the Exchange Agent for the benefit of Target
Stockholders, for exchange in accordance with this Section 2.4, (i)
certificates representing the aggregate Stock Consideration issuable
pursuant to Sections 2.1 and 2.2, (ii) cash representing the aggregate Cash
Consideration to which Target Stockholders who have properly completed,
signed and submitted Forms of Election shall be entitled pursuant to
Sections 2.1 and 2.2 and (iii) from time to time, (X) cash representing the
aggregate Cash Consideration to which Target Stockholders who submit
letters of transmittal after the Effective Time shall be entitled pursuant
to Sections 2.1 and 2.2 and (Y) cash in an amount reasonably expected to be
paid pursuant to Section 2.3(b) (such Purchaser Common Shares and cash,
together with any dividends or distributions with respect thereto, the
"Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates which prior thereto represented Target Common
Stock who did not submit such Certificate or Certificates to the Exchange
Agent with such holder's properly submitted Form of Election: (i) a letter
of transmittal (which shall specify, as shall the Form of Election, that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent,
and shall be in such form and have such other customary provisions as
Purchaser may reasonably specify) and (ii) instructions for effecting the
surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor (i) a
certificate or certificates representing that whole number of Purchaser
Common Shares which such holder has the right to receive pursuant to
Sections 2.1 or 2.2 in such denominations and registered in such names as
such holder may request and/or a check representing the Cash Consideration
which such holder has the right to receive pursuant to Sections 2.1 or 2.2
plus (ii) the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right
to receive pursuant to the provisions of this Article II, after giving
effect to any required withholding tax (the Purchaser Common Shares and
cash referred to in clause (i) being collectively referred to as the
"Merger Consideration"). The shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or
accrued on the Cash Consideration or the cash in lieu of fractional shares,
if any, and unpaid dividends and distributions, if any, payable to holders
of shares of Target Common Stock. In the event of a transfer of ownership
of shares of Target Common Stock that is
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not registered on the transfer records of Target, a certificate
representing the proper number of Purchaser Common Shares, and/or a check
for the Cash Consideration which such holder has the right to receive
pursuant to Sections 2.1 or 2.2 plus the cash to be paid in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any,
may be issued to such transferee if the Certificate representing such
shares of Target Common Stock held by such transferee is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section
2.4, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon surrender the Merger
Consideration plus the cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, as provided in this Article II.
If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by Purchaser, the posting
by such person of a bond in such reasonable amount as Purchaser may direct
as indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificate, a certificate representing the
proper number of Purchaser Common Shares, and/or check for the Cash
Consideration which such holder has the right to receive pursuant to
Sections 2.1 or 2.2 plus the cash to be paid in lieu of fractional shares,
if any, with respect to the shares of Target Common Stock formerly
represented thereby, and unpaid dividends and distributions on Purchaser
Common Shares, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time with respect
to Purchaser Common Shares having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate, and no cash
payment in lieu of fractional shares shall be paid to any such holder,
until the holder shall surrender such Certificate as provided in this
Section 2.4. Subject to the effect of Applicable Laws (as defined in
Section 4.9), following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole Purchaser Common
Shares issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to
such whole Purchaser Common Shares and not paid, less the amount of any
withholding taxes that may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect
to such whole Purchaser Common Shares, less the amount of any withholding
taxes which may be required thereon.
(d) No Further Ownership Rights in Target Common Stock. All
Purchaser Common Shares issued and/or Cash Consideration paid upon
surrender of Certificates in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of
Target Common Stock represented thereby, and, as of the Effective Time, the
stock transfer books
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of Target shall be closed and there shall be no further registration of
transfers on the stock transfer books of Target of shares of Target Common
Stock 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 cancelled and exchanged as provided in this
Section 2.4. Certificates surrendered for exchange by any person identified
as an "affiliate" in the letter provided to Purchaser pursuant to Section
5.3(f) shall not be exchanged until Purchaser has received written
undertakings from such person in the form attached as Exhibit B to this
Agreement.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to Target Stockholders six months after the date
of the mailing required by Section 2.4(b) shall be delivered to Purchaser,
upon demand thereby, and holders of Certificates previously representing
shares of Target Common Stock who have not theretofore complied with this
Section 2.4 shall thereafter look only to Purchaser for payment of any
claim to the Merger Consideration and cash in lieu of fractional shares
thereof, or dividends or distributions, if any, in respect thereof.
(f) No Liability. None of Purchaser, the Surviving Corporation or
the Exchange Agent shall be liable to any person in respect of any shares
of Target Common Stock (or dividends or distributions with respect thereto)
or cash from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any
cash, any cash in lieu of fractional shares or any dividends or
distributions with respect to whole shares of Target Common Stock in
respect of such Certificate would otherwise escheat to or become the
property of any Governmental Authority (as defined in Section 3.4(d)), any
such cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by Applicable Laws, become the property of
Purchaser, free and clear of all claims or interest of any person
previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Purchaser, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Purchaser upon termination of the Exchange Fund pursuant
to Section 2.4(e). In the event the cash in the Exchange Fund shall be
insufficient to fully satisfy all of the payment obligations to be made by
the Exchange Agent hereunder, then Purchaser shall promptly deposit cash
into the Exchange Fund in an amount which is equal to the deficiency in the
amount of cash required to fully satisfy such payment obligations.
(h) Withholding Rights. Each of the Surviving Corporation, Subcorp
and Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Target Common Stock such amounts as it 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") and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax
law. To the extent
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that amounts are so withheld by the Surviving Corporation, Subcorp or
Purchaser, as the case may be, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the
shares of Target Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation, Subcorp or Purchaser, as
the case may be.
2.5 Treatment of Stock Options. (a) Prior to the Effective Time,
the Board of Directors of Target (or, if appropriate, any committee thereof)
shall adopt appropriate resolutions and take all other actions necessary
(including obtaining the consent of holders) to provide for the cancellation,
effective at the Effective Time, of all the outstanding stock options (the
"Options") outstanding immediately prior to the Effective Time heretofore
granted under any stock option or similar plan of Target or under any agreement,
without any payment therefor except as otherwise provided in this Section 2.5.
Immediately prior to the Effective Time, all Options (whether vested or
unvested) which are listed in Section 2.5 of the disclosure schedule delivered
by Target to Purchaser and dated the date hereof (the "Target Disclosure
Schedule") shall be cancelled (and to the extent formerly so exercisable shall
no longer be exercisable) and shall entitle each holder thereof, in cancellation
and settlement therefor, to a payment, if any, in cash by Target (less any
applicable withholding taxes), promptly following the Effective Time, equal to
the product of (i) the total number of shares of Target Common Stock subject to
such Option (whether vested or unvested) and (ii) the excess, if any, of $39.00
over the exercise price per share of Target Common Stock subject to such Option.
2.6 Treatment of Stock Appreciation Rights. Prior to the Effective
Time, the Board of Directors of Target (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary (including obtaining the consent of holders) to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
appreciation rights (the "SARs") outstanding immediately prior to the Effective
Time heretofore granted under any compensation, incentive, employee or similar
plan of Target or under any agreement, without any payment therefor except as
otherwise provided in this Section 2.6. Immediately prior to the Effective Time,
all SARs (whether vested or unvested) which are listed in Section 2.6 of the
Target Disclosure Schedule shall be cancelled (and to the extent formerly so
exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in cash
by Target (less any applicable withholding taxes), immediately prior to the
Effective Time, equal to the excess, if any, of $39.00 over the price of Target
Common Stock on the date of grant of such SAR.
2.7 Treatment of Awards Under Long-Term Incentive Plan. Prior to
the Effective Time, the Board of Directors of Target (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary (including obtaining the consent of holders) to provide, with
respect to all currently outstanding Awards (as defined in the Target Long-Term
Incentive Plan dated August 8, 1996, as amended January 1, 1998 and November 20,
1998) (other than Options) granted prior to the Effective Time, that (i) each
such Award that is listed on Section 2.7 of the Target Disclosure Schedule shall
be canceled, immediately prior to the Effective Time, and shall entitle the
holder thereof to the immediate payment of the amount of cash set forth in
Section 2.7 of the Target Disclosure Schedule, which amount constitutes the
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<PAGE> 15
full payment of any consideration due under such Awards, and (ii) all other such
Awards (including any Awards granted pursuant to the New Two-Year Management
Incentive Arrangement $56 Target) shall be canceled immediately prior to the
Effective Time with no further consideration.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUBCORP
In order to induce Target to enter into this Agreement,
Purchaser and Subcorp hereby represent and warrant to Target that the statements
contained in this Article III are true, correct and complete.
3.1 Organization and Standing. Each of Purchaser and Subcorp is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation with full corporate power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of Purchaser and Subcorp
is duly qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns, leases
or operates, requires it to so qualify, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect (as defined in Section 8.3) on Purchaser or Subcorp, as the case
may be. Purchaser is not in default in the performance, observance or
fulfillment of any provision of the Purchaser Restated Certificate of
Incorporation, as amended (the "Purchaser Articles"), or the Purchaser By-Laws
(the "Purchaser By-Laws"), and Subcorp is not in default in the performance,
observance or fulfillment of any provisions of its Certificate of Incorporation
or By-Laws. Purchaser has heretofore made available or furnished to Target a
complete and correct copy of (i) the Purchaser Articles and the Purchaser
By-Laws, each as in effect as of the date of this Agreement and (ii) the
Certificate of Incorporation of Subcorp.
3.2 Corporate Power and Authority. Each of Purchaser and Subcorp
has all requisite corporate power and authority to enter into and deliver this
Agreement to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by
Purchaser and Subcorp have been duly authorized by all necessary corporate
action on the part of each of Purchaser and Subcorp. This Agreement has been
duly executed and delivered by each of Purchaser and Subcorp, and constitutes
the legal, valid and binding obligation of each of Subcorp and Purchaser
enforceable against each of them in accordance with its terms.
3.3 Capitalization of Purchaser and Subcorp.
(a) As of December 1, 1998, Purchaser's authorized capital stock
consisted solely of (A) 50,000,000 shares of common stock, $0.01 par value
("Purchaser Common Shares"), of which (i) 23,381,373 shares were issued and
outstanding, (ii) 371,992 shares were
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\
issued and held in treasury (which does not include Purchaser Common Shares
reserved for issuance as set forth in clause (a)(iii) below) and (iii)
1,400,050 shares were reserved for issuance upon the exercise or conversion
of options, warrants or convertible securities granted or issuable by
Purchaser, (B) 25,000,000 shares of non-voting common stock, $0.01 par
value ("Purchaser Non-Voting Common Shares"), of which (i) 1,500 shares
were issued and outstanding and (ii) none were reserved for issuance, and
(C) 5,000,000 shares of Preferred Stock, $0.01 par value, of which (i) none
was issued and outstanding and (ii) 500,000 shares were designated as
Series A Junior Participating Preferred Stock reserved for issuance under
the Rights Agreement, dated as of July 22, 1998, between Purchaser and
ChaseMellon Shareholder Services, LLC, as rights agent (the "Purchaser
Rights Agreement"). Each outstanding share of Purchaser capital stock is,
and all Purchaser Common Shares to be issued in connection with the Merger
will be, duly authorized and validly issued, fully paid and nonassessable,
and each outstanding share of Purchaser capital stock has not been, and all
Purchaser Common Shares to be issued in connection with the Merger will not
be, issued in violation of any preemptive or similar rights. Section 3.3 to
the disclosure schedule delivered by Purchaser to Target and dated the date
hereof (the "Purchaser Disclosure Schedule") sets forth the aggregate
amount of outstanding options relating to the issuance by Purchaser of any
equity securities of Purchaser, together with the average weighted exercise
price thereof. The issuance and sale of all of the shares of capital stock
described in this Section 3.3 have been in material compliance with federal
and state securities laws. The Purchaser Common Shares to be issued in the
Merger in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable with preferred
share purchase rights issuable pursuant to the Purchaser Rights Agreement
attached thereto. As of the date hereof, Purchaser has not agreed to
register any securities under the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the "Securities Act")
or under any state securities law or granted registration rights to any
person or entity (which rights are currently exercisable or will become
exercisable between the date hereof and December 31, 2000).
(b) Subcorp's authorized capital stock consists solely of 1,000
shares of Subcorp Common Stock, of which, as of the date hereof, 100 were
issued and outstanding and none were reserved for issuance. As of the date
hereof, all of the outstanding shares of Subcorp Common Stock are owned
free and clear of any liens, claims or encumbrances by Purchaser.
3.4 Conflicts; Consents and Approvals. Except as set forth in
Section 3.4 to the Purchaser Disclosure Schedule, neither the execution and
delivery of this Agreement by Purchaser or Subcorp nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the
Purchaser Articles or the Purchaser By-Laws or the Certificate of
Incorporation or By-Laws of Subcorp;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving of
notice, the passage of time or otherwise, would
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constitute a default) under, or entitle any party (with the giving of
notice, the passage of time or otherwise) to terminate, accelerate, modify
or call a default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Purchaser or any of its subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation
to which Purchaser or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any of its subsidiaries or any of
their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Purchaser or any of its affiliates with, any
third party or any local, domestic, foreign or multi-national court,
arbitral tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or authority (a
"Governmental Authority"), other than (i) authorization for inclusion of
the Purchaser Common Shares to be issued in the Merger and the transactions
contemplated hereby on the NYSE, subject to official notice of issuance,
(ii) actions required by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (together with the rules and regulations thereunder,
the "HSR Act"), (iii) registrations or other actions required under federal
and state securities laws as are contemplated by this Agreement, or (iv)
consents or approvals of any Governmental Authority set forth in Section
3.4 to the Purchaser Disclosure Schedule;
except in the case of clauses (b), (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser or a material adverse effect on the ability of the parties to
consummate the transactions contemplated hereby.
3.5 Purchaser SEC Documents. Purchaser has timely filed with the
Securities and Exchange Commission (the "Commission") all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1996 under the Exchange Act or the Securities Act (such documents, as
supplemented and amended since the time of filing, collectively, the "Purchaser
SEC Documents"). The Purchaser SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively and, in the case of any
Purchaser SEC Document amended or superseded by a filing prior to the date of
this Agreement, then on the date of such amending or superseding filing) (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934 (together with the rules and
regulations thereunder, the "Exchange Act") and the Securities Act, as the case
may be. The financial statements of Purchaser included in the Purchaser SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any Purchaser
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SEC Document amended or superseded by a filing prior to the date of this
Agreement, then on the date of such amending or superseding filing) complied as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission), and fairly present (subject, in the
case of unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of Purchaser and its consolidated subsidiaries
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended. No subsidiary of Purchaser is subject to
the periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the Commission, the NYSE, any other stock
exchange or any other comparable Governmental Authority.
3.6 Compliance with Law. Purchaser and each of its subsidiaries is
in compliance, and at all times since January 1, 1996 has been in compliance,
with all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority (collectively, "Applicable Laws") relating to Purchaser
and each of its subsidiaries or their respective business or properties, except
where the failure to be in compliance with such Applicable Laws (individually or
in the aggregate) would not have a Material Adverse Effect on Purchaser. No
investigation or review by any Governmental Authority with respect to Purchaser
or any of its subsidiaries is pending, or, to the knowledge of Purchaser,
threatened, nor has any Governmental Authority indicated in writing an intention
to conduct the same, other than those the outcome of which would not have a
Material Adverse Effect on Purchaser.
3.7 Registration Statement; Proxy Statement. None of the
information provided in writing by Purchaser for inclusion in the registration
statement on Form S-4 (such registration statement as amended, supplemented or
modified, the "Registration Statement") to be filed with the Commission by
Purchaser under the Securities Act, including the prospectus relating to
Purchaser Common Shares to be issued in the Merger (as amended, supplemented or
modified, the "Prospectus") and the proxy statement and form of proxies relating
to the vote of Target Stockholders with respect to the Merger (as amended,
supplemented or modified, the "Proxy Statement"), at the time the Registration
Statement becomes effective or, in the case of the Proxy Statement, at the date
of mailing and at the date of the Target Stockholders Meeting (as defined in
Section 5.3(a)) to consider the Merger and the transactions contemplated
thereby, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement and Proxy Statement, except for such
portions thereof that relate only to Target, will each comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act.
3.8 Litigation; Products Liability. There is no suit, claim,
action, proceeding, hearing, notice of violation, demand letter or investigation
(an "Action") pending or, to the knowledge of Purchaser (or its executive
officers or directors), threatened against Purchaser, any
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<PAGE> 19
of its subsidiaries or any of their respective executive officers or directors
that, individually or in the aggregate, would have a Material Adverse Effect on
Purchaser or a material adverse effect on the ability of Purchaser to consummate
the transactions contemplated hereby. Neither Purchaser nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, that would have a Material Adverse
Effect on Purchaser or a material adverse effect on the ability of Purchaser to
consummate the transactions contemplated hereby. There is no Action presently
pending or, to the knowledge of Purchaser (or its executive officers or
directors), threatened against Purchaser or any of its subsidiaries relating to
any alleged hazard or alleged defect in design, manufacture, materials or
workmanship, including, without limitation, any failure to warn or alleged
breach of express or implied warranty or representation, relating to any product
manufactured, distributed or sold by or on behalf of Purchaser or any of its
subsidiaries, which if adversely determined, would have a Material Adverse
Effect on Purchaser.
3.9 No Material Adverse Change. Since January 1, 1998, there has
been no material adverse change in the business, results of operations or
financial condition of Purchaser other than any events, occurrences or
developments that would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Purchaser or a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby.
3.10 Environmental Compliance.
(a) To the knowledge of Purchaser, each of Purchaser and its
subsidiaries is, and has been, and each of Purchaser's former subsidiaries,
while subsidiaries of Purchaser, was in compliance with all applicable
Environmental Laws, except for possible noncompliance which individually or
in the aggregate would not have a Material Adverse Effect on Purchaser. The
term "Environmental Laws" means any federal, state, local or foreign
statute, code, ordinance, rule, regulation, policy, guideline, permit,
consent, approval, license, judgment, order, writ, decree, injunction or
other authorization, including the requirement to register underground
storage tanks, relating to: (A) emissions, discharges, releases or
threatened releases of Hazardous Material (as defined below) into the
environment, including, without limitation, into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly-owned treatment works, septic systems or land;
or (B) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material.
(b) During the period of ownership or operation by Purchaser and
its subsidiaries of any of their respective current or previously-owned
properties, there have been no releases of Hazardous Material in, on, under
or affecting such properties or, to the knowledge of Purchaser, any
surrounding site, except in each case for those which individually or in
the aggregate would not have a Material Adverse Effect on Purchaser. Prior
to the period of ownership or operation by Purchaser and its subsidiaries
of any of their respective current or previously-owned properties, to the
knowledge of Purchaser, there were no releases of Hazardous Material in,
on, under or affecting any such property or any surrounding site, except in
each case for those which individually or in the
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aggregate would not have a Material Adverse Effect on Purchaser. The term
"Hazardous Material" means (1) hazardous materials, contaminants,
constituents, medical wastes, hazardous or infectious wastes and hazardous
substances as those terms are defined in the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq.,
the Clean Air Act, 42 U.S.C. Section 7401 et seq., or any other statute
relating to the protection of the environment or human health or safety, or
in any regulation promulgated thereunder, (2) petroleum, including crude
oil and any fractions thereof, (3) natural gas, synthetic gas and any
mixtures thereof, (4) asbestos and/or asbestos-containing material and (5)
PCBs, or materials or fluids containing PCBs in excess of 50 ppm.
3.11 Board Recommendation. The Board of Directors of Purchaser, at
a meeting duly called and held, has by unanimous vote determined that this
Agreement and the transactions contemplated hereby, including the Merger, taken
together, are fair to and in the best interests of Purchaser and its
stockholders.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF TARGET
In order to induce Subcorp and Purchaser to enter into this
Agreement, Target hereby represents and warrants to Purchaser and Subcorp that
the statements contained in this Article IV are true, correct and complete.
4.1 Organization and Standing. Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease, use and operate
its properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Target and each subsidiary of Target is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to be so qualified
or in good standing in such jurisdiction would not have a Material Adverse
Effect on Target. Target is not in default in the performance, observance or
fulfillment of any provision of its Certificate of Incorporation (the "Target
Certificate"), or its By-Laws, as in effect on the date hereof (the "Target
By-Laws"). Target has heretofore furnished or made available to Purchaser a
complete and correct copy of the Target Certificate and the Target By-Laws.
Listed in Section 4.1 to the Target Disclosure Schedule is each jurisdiction in
which Target or a subsidiary of Target is qualified to do business and, whether
Target (or the subsidiaries of Target) is in good standing as of the date of the
Agreement.
4.2 Subsidiaries. Target does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise,
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except for the subsidiaries set forth in Section 4.2 to the Target Disclosure
Schedule. Target is not subject to any obligation or requirement to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such entity or any other person. Except as set forth in
Section 4.2 to the Target Disclosure Schedule, Target owns, directly or
indirectly, each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
subsidiary) of each of Target's subsidiaries. Except as set forth in Section 4.2
to the Target Disclosure Schedule, each of the outstanding shares of capital
stock of each of Target's subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by Target free and
clear of all liens, pledges, security interests, claims or other encumbrances.
The following information for each subsidiary of Target is set forth in Section
4.2 to the Target Disclosure Schedule, as applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital stock
or share capital; and (iii) the number of issued and outstanding shares of
capital stock or share capital and the record owner(s) thereof. Other than as
set forth in Section 4.2 to the Target Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of Target nor
are there outstanding any securities that are convertible into or exchangeable
for any shares of capital stock of any subsidiary of Target, and neither Target
nor any subsidiary of Target has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of any
subsidiary of Target or any predecessor thereof.
4.3 Corporate Power and Authority. Target has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to authorization of the Merger
and the transactions contemplated hereby by Target Stockholders, to consummate
the transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Target have been duly authorized by all necessary corporate
action on the part of Target, subject to authorization of the Merger and the
transactions contemplated hereby by Target Stockholders. This Agreement has been
duly executed and delivered by Target and constitutes the legal, valid and
binding obligation of Target enforceable against it in accordance with its
terms.
4.4 Capitalization of Target. As of November 30, 1998, Target's
authorized capital stock consisted solely of (a) 40,000,000 shares of common
stock, par value $1.00 per share ("Target Common Stock"), of which (i)
16,851,870 shares were issued and outstanding, (ii) 72,388 shares were issued
and held in treasury (which does not include shares of Target Common Stock
reserved for issuance set forth in clause (iii) below), (iii) 2,085,215 shares
were reserved for issuance upon the exercise of outstanding Target Options, and
(iv) 95,877 shares were reserved for issuance pursuant to outstanding grants
under Target's Long-Term Incentive Plan, and (b) 2,000,000 shares of preferred
stock, par value $1.00 per share ("Target Preferred Stock"), of which (i) none
was issued and outstanding, and (ii) 200,000 shares were designated as Series A
Junior Participating Preferred Stock (the "Series A Preferred Stock") reserved
for issuance pursuant to the rights issued under the Target Rights Agreement (as
defined in Section 4.22). Since November 30, 1998, Target has not issued any
additional shares of capital stock
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except for the issuance of Target Common Stock in connection with the exercise
of Target Options. Each outstanding share of Target capital stock is duly
authorized and validly issued, fully paid and nonassessable, and has not been
issued in violation of any preemptive or similar rights. Other than as set forth
in the first sentence hereof or in Section 4.4 to the Target Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale, repurchase or transfer of any securities of
Target, nor are there outstanding any securities which are convertible into or
exchangeable for any shares of capital stock of Target, and neither Target nor
any subsidiary of Target has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of Target or any
predecessor. The issuance and sale of all of the shares of capital stock
described in this Section 4.4 have been in material compliance with federal and
state securities laws. Target has previously provided Purchaser with schedules
setting forth the names of, and the number of shares of each class (including
the number of shares issuable upon exercise of Target Options and the exercise
price and vesting schedule with respect thereto) and the number of options held
by, all holders of options to purchase Target capital stock. Section 4.4 to the
Target Disclosure Schedule sets forth the average exercise price for outstanding
Target Options. Except as set forth in Section 4.4 to the Target Disclosure
Schedule, Target has not agreed to register any securities under the Securities
Act or under any state securities law or granted registration rights to any
person or entity; copies of all such agreements have previously been provided to
Purchaser. No Purchase Rights have been granted pursuant to the Kuhlman
Corporation Employee Stock Purchase Plan (as that term is defined in such plan),
and there exists no obligation to grant any such Purchase Rights.
4.5 Conflicts; Consents and Approvals. Except as set forth in
Section 4.5 to the Target Disclosure Schedule, neither the execution and
delivery of this Agreement by Target, nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of, the
Target Certificate or the Target By-Laws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving of
notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Target or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Target or any
of its subsidiaries is a party involving more than $500,000;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Target or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing
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by Target or any of its affiliates with, any third party or any
Governmental Authority, other than (i) authorization of the Merger and the
transactions contemplated hereby by Target Stockholders, (ii) actions
required by the HSR Act, (iii) registrations or other actions required
under federal and state securities laws as are contemplated by this
Agreement and (iv) consents or approvals of any Governmental Authority set
forth in Section 4.5 to the Target Disclosure Schedule;
except in the case of clauses (c) and (d) for any of the foregoing that would
not, individually or in the aggregate, have a Material Adverse Effect on Target
or a material adverse effect on the ability of the parties to consummate the
transaction contemplated hereby.
4.6 No Material Adverse Change. Since January 1, 1998, there has
been no material adverse change in the business, results of operations or
financial condition of Target other than any events, occurrences or developments
that would not, individually or in the aggregate, have or reasonably be expected
to have a Material Adverse Effect on Target or a material adverse effect on the
ability of Target to consummate the transactions contemplated hereby.
4.7 Target SEC Documents. Target has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since June 1, 1996 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Target SEC Documents"). The Target SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any Target SEC Document amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amending or superseding filing) (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of Target included in the
Target SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and, in the case of any Target SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the Commission), and present fairly (subject, in the case of unaudited
statements, to normal, year-end adjustments), in all material respects, the
financial position of Target and its consolidated subsidiaries as at the dates
thereof and the results of their operations and their cash flows for the periods
then ended. No subsidiary of Target is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the Commission, the NYSE, any other stock exchange or any other
comparable Governmental Authority.
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4.8 Taxes.
(a) Each of Target and its subsidiaries has duly and timely filed
or caused to be duly and timely filed all federal, state, local and foreign
Tax Returns required to be filed by them, and has paid or withheld or
caused to be paid or withheld all Taxes of any nature whatsoever, with any
related penalties, interest and liabilities that are either shown on those
Tax Returns as due and payable or are or were otherwise required to be
paid, other than Taxes being contested in good faith and for which adequate
reserves have been established and reflected in the Target SEC Documents,
except where the failure to file, pay or withhold would not, individually
or in the aggregate, have a Material Adverse Effect. All such Tax Returns
are complete and accurate, except for failures that would not, individually
or in the aggregate, have a Material Adverse Effect. There are no claims,
assessments or audits pending or threatened against Target or any of its
subsidiaries for any alleged deficiency in any Tax that, if upheld, would,
individually or in the aggregate, have a Material Adverse Effect, and there
are no threatened Tax claims or assessments against Target or any of its
subsidiaries that, if upheld, would, individually or in the aggregate, have
a Material Adverse Effect. Except as set forth in Section 4.8(a) to the
Target Disclosure Schedule, there are no waivers or extensions of any
applicable statute of limitations to assess any Taxes. Except as set forth
in Section 4.8(a) to the Target Disclosure Schedule, there are no
outstanding requests for any extension of time within which to file any Tax
Return or within which to pay any Taxes shown to be due on any Tax Return.
There are no liens for any Taxes upon the assets of Target or any of its
subsidiaries (other than statutory liens for Taxes not yet due and payable)
which would, individually or in the aggregate, have a Material Adverse
Effect on Target. Except as set forth in Section 4.8(a) to the Target
Disclosure Schedule, the federal income Tax Returns of Target and each of
its subsidiaries consolidated in such Tax Returns have been examined by and
settled with the IRS for all years through and including the year ended
December 31, 1995. Neither Target nor any of its subsidiaries has ever
filed an election under Section 341(f) of the Code to be treated as a
consenting corporation.
(b) Neither Target nor any of its subsidiaries has any liability
for Taxes of any person (other than Target and its subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any comparable provision of state,
local or foreign law). Except as set forth in Section 4.8(b) to the Target
Disclosure Schedule, neither Target nor any of its subsidiaries is or,
since December 31, 1988, has ever been a party to, or bound by, any Tax
sharing, Tax indemnity, cost sharing, or similar agreement or policy
relating to Taxes.
(c) Target and its subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or
other third party, except where the failure to withhold or pay would not,
individually or in the aggregate, have a Material Adverse Effect on Target.
(d) For purposes of this Agreement, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise,
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property, sales, use, transfer, license, payroll, withholding, export,
import, customs, capital stock and franchise taxes or duties, imposed by
the United States or any state, local or foreign government or subdivision
or agency thereof, including any interest, penalties or additions thereto.
For purposes of this Agreement, the term "Tax Return" means any report,
return or other information or document required to be supplied to a Tax
authority in connection with Taxes.
4.9 Compliance with Law. Target and each of its subsidiaries is in
compliance, and at all times since January 1, 1996 has been in compliance, with
all Applicable Laws relating to Target and each of its subsidiaries or their
respective business or properties, except where the failure to be in compliance
with such Applicable Laws (individually or in the aggregate) would not have a
Material Adverse Effect on Target. No investigation or review by any
Governmental Authority with respect to Target or any of its subsidiaries is
pending, or, to the knowledge of Target, threatened, nor has any Governmental
Authority indicated in writing an intention to conduct the same, other than
those the outcome of which would not have a Material Adverse Effect on Target.
4.10 Intellectual Property. To Target's knowledge, there is no
infringement or unlawful use by any person or entity of any of the Intellectual
Property, other than any infringement or use that would not have a Material
Adverse Effect on Target. Except as would not have a Material Adverse Effect on
Target, Target has the defensible right to use, whether through ownership,
licensing or otherwise, all Intellectual Property necessary for the operation of
the business of Target and its subsidiaries in substantially the same manner as
such business is presently conducted. Except as would not have a Material
Adverse Effect on Target, the making, using, selling, manufacturing, marketing,
licensing, reproduction, distribution, or publishing of any process, machine,
manufacture, composition of matter, or material that was, within the last six
(6) years, that is currently or that is planned to be manufactured, used or sold
by Target or its subsidiaries, did not, does not and will not infringe any
domestic or foreign patent, trademark, service mark, trade name, copyright or
other intellectual property right of any third party, and does not and will not
involve the misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any third party. For purposes of this
Section 4.10, "Intellectual Property" shall mean all intellectual property or
other proprietary rights of Target or any of its subsidiaries of every kind,
including, all domestic or foreign patents, domestic or foreign patent
applications, inventions (whether or not patentable), processes, products,
technologies, discoveries, copyrightable and copyrighted works, apparatus, trade
secrets, trademarks, trademark registrations and applications, service marks,
service mark registrations and applications, trade names, trade dress, copyright
registrations, customer lists, marketing and customer information, licenses,
technical information (whether confidential or otherwise), software, and all
documentation thereof.
4.11 Registration Statement; Proxy Statement. None of the
information provided in writing by Target for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Proxy
Statement, at the date of mailing and at the date of the Target Stockholders
Meeting, will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in
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light of the circumstances under which they were made, not misleading. The
Registration Statement and Proxy Statement, except for such portions thereof
that relate only to Purchaser and its subsidiaries, will each comply as to form
in all material respects with the provisions of the Securities Act and the
Exchange Act.
4.12 Litigation; Products Liability. There is no Action pending or,
to the knowledge of Target, threatened against Target, any of its subsidiaries
or any of their respective executive officers or directors that, individually or
in the aggregate, would have a Material Adverse Effect on Target or a material
adverse effect on the ability of Target to consummate the transactions
contemplated hereby. Neither Target nor any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree that, individually or in the
aggregate, that would have a Material Adverse Effect on Target or a material
adverse effect on the ability of Target to consummate the transactions
contemplated hereby. There is no Action presently pending or, to the knowledge
of Target, threatened against Target or any of its subsidiaries relating to any
alleged hazard or alleged defect in design, manufacture, materials or
workmanship, including, without limitation, any failure to warn or alleged
breach of express or implied warranty or representation, relating to any product
manufactured, distributed or sold by or on behalf of Target or any of its
subsidiaries, which if adversely determined, would have a Material Adverse
Effect on Target.
4.13 Employee Benefit Plans.
(a) Each "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
and all other employee benefit, bonus, incentive, stock option (or other
equity-based), severance, change in control, welfare (including
post-retirement medical and life insurance), deferred compensation, and
fringe benefit plans, programs, policies and arrangements (whether or not
subject to ERISA) maintained, sponsored, contributed to, or required to be
contributed to, by Target or any of its subsidiaries or any trade or
business, whether or not incorporated, that would be deemed a "single
employer" within the meaning of Section 4001 of ERISA with, or part of the
same group described in Section 414(b), (c), (m) or (o) as, Target or any
of its subsidiaries (an "ERISA Affiliate") for the benefit of any employee
or former employee of Target or any of its subsidiaries or any of their
respective ERISA Affiliates (collectively, the "Plans") has been operated
in accordance with its terms and is in compliance (including the making of
governmental filings) with all applicable laws, including ERISA and the
applicable provisions of the Code, except for failures that would not have
a Material Adverse Effect. Each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code (the "Qualified Plans")
has been determined by the Internal Revenue Service to be so qualified or
has been or will be submitted to the Internal Revenue Service for a
determination within the remedial amendment period, and since the date of
such determination, no event has occurred except for changes for which the
remedial amendment period under Section 401(b) of the Code has not expired
that would adversely affect a Qualified Plan's qualified status. No
"reportable event," as that term is defined in Section 4043(c) of ERISA
(for which the 30-day notice requirement to the Pension Benefit Guaranty
Corporation ("PBGC") has not been waived), has occurred with respect to any
plan that is subject to Title IV of ERISA that presents a risk of liability
to
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any governmental entity or other person that would have a Material Adverse
Effect. There are no pending or, to Target's knowledge, threatened claims
(other than routine claims for benefits), audits, investigations or
litigation by, on behalf of, against or relating to, any of the Plans or
any trusts related thereto or fiduciaries thereof that would have a
Material Adverse Effect. Except as disclosed in Section 4.13(a)(i) to the
Target Disclosure Schedule, no Plan is a "multiemployer plan" (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan")
or a plan that has two or more contributing sponsors at least two of whom
are not under common control, within the meaning of Section 4063 of ERISA
(a "Multiple Employer Plan") and none of Target, its subsidiaries nor any
of their respective ERISA Affiliates has, at any time since January 1,
1993, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. With respect to each Plan that is a
Multiemployer Plan, except as set forth in Section 4.13(a)(ii) of the
Target Disclosure Schedule or as would not have a Material Adverse Effect:
(i) if Target or any of its subsidiaries or any of their respective ERISA
Affiliates were to experience a withdrawal or partial withdrawal from such
plan, no withdrawal liability under Title IV of ERISA would be incurred;
and (ii) none of Target and its subsidiaries, nor any of their respective
ERISA Affiliates has received any notification, nor has any reason to
believe, that any such Plan is in reorganization, has been terminated, is
insolvent, or could reasonably be expected to be in reorganization, to be
insolvent, or to be terminated.
(b) No Plan has incurred an "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived that (either alone or together with any other such claims) presents
a risk of liability that would have a Material Adverse Effect on Target.
Neither Target nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA except for required premium payments to the PBGC, which
payments have been made when due, and no events have occurred (i) that
could reasonably be expected to give rise to any liability of Target or any
of its subsidiaries or any of their respective ERISA Affiliates under Title
IV of ERISA, under section 302 of ERISA, under sections 412 and 4971 of the
Code, or for a violation of the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the Code that (either
alone or together with any other such claims) presents a risk of liability
that would have a Material Adverse Effect on Target or (ii) that could
reasonably be expected to result in any claim being made against the
Purchaser, Target or any of its subsidiaries, or any of their respective
ERISA Affiliates by the PBGC that (either alone or together with any other
such claims) presents a risk of liability that would have a Material
Adverse Effect on Target.
(c) With respect to each Plan that is subject to Title IV of
ERISA, (i) Target has made available to Purchaser copies of the most recent
actuarial valuation report prepared for the Plan before the date of this
Agreement, (ii) the assets and liabilities in respect of the accrued
benefits as set forth in the most recent actuarial valuation report
prepared by the Plan's actuary fairly presented the funded status of the
Plan in all material respects as at the valuation date stated in said
report, (iii) since the date of the valuation report there has been no
adverse change in the funded status of any of those Plans that would have a
Material
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Adverse Effect and (iv) the PBGC has not instituted proceedings to
terminate any such Plan and no condition exists that presents a material
risk that such proceedings will be instituted or which would constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.
(d) Neither Target nor any of its subsidiaries nor any of their
respective ERISA Affiliates has failed to make any contribution or payment
to any Plan, or committed any other action or failure to act, that has
resulted or could result in the imposition of a lien or the posting of a
bond or other security under ERISA or the Code that would have a Material
Adverse Effect on Target.
(e) Section 4.13(e) to the Target Disclosure Schedule lists all
material Plans covering individuals who are or were employed in the United
States. With respect to each material Plan maintained or sponsored by
Target or any of its subsidiaries, Target has made available to Purchaser a
true, correct and complete copy of the following (where applicable), except
to the extent filed with the Commission: (i) each writing constituting a
part of such Plan, including without limitation all plan documents, benefit
schedules, trust agreements, and insurance contracts and other funding
vehicles; (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (iii) the current summary plan description,
if any; (iv) the most recent annual financial report, if any; and (v) the
most recent determination letter from the Internal Revenue Service, if any.
(f) Except for contributions or premiums that would not, in the
aggregate, have a Material Adverse Effect on Target all contributions
required to be made to any Plan and all premiums due or payable with
respect to insurance policies funding any Plan, for any period through the
date hereof have been timely made or paid in full and through the Closing
Date will be timely made or paid in full.
(g) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title 1 of ERISA and except as set forth in
Section 4.13(g)(i) to the Target Disclosure Schedule, neither Target nor
any of its subsidiaries has any material liability for life, health,
medical or other welfare benefits to retirees, former employees or
beneficiaries or dependents thereof which are not reflected in the
financial statement included in the Target SEC Documents. Except as set
forth in Section 4.13(g)(ii) to the Target Disclosure Schedule, to the
knowledge of Target there has been no communication to employees of Target
or its subsidiaries that could reasonably be expected to promise or
guarantee such employees retiree health or life insurance benefits or other
retiree death benefits on a permanent basis.
(h) Section 4.13(h) to the Target Disclosure Schedule sets forth,
for each executive officer of Target and for all other employees of and
consultants to Target and its subsidiaries as a group, (i) the amount of
severance pay and a reasonable good faith estimate of other benefits that
would be due to each such executive officer and the terms and conditions of
such severance pay and other benefits that would be due to such other
employees, in each case upon an involuntary termination of employment as of
the Closing,
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and (ii) with respect to all other payments and benefits that will or could
become payable, the vesting, payment or delivery of which will or could be
accelerated, or the amount or value of which will or could be increased, as
a result of the execution and delivery of this Agreement, or shareholder
approval or consummation of the transactions contemplated hereby, either
alone or as a result of one or more such events together with any other
events, the amount of such payments, a reasonable good faith estimate of
the amount of such benefits and the timing of such payments and benefits. A
copy of all agreements and documents providing for any payments or benefits
disclosed pursuant to this Section 4.13(h) has been provided or made
available to Purchaser. Section 4.13(h) to the Target Disclosure Schedule
incorporates a report setting forth Target's reasonable good faith
estimate, based upon the information available to Target as of the date
hereof and the assumptions set forth in such report, of all amounts, paid
or payable by Target or any of its subsidiaries in connection with the
transactions contemplated hereby either solely as a result thereof or as a
result of such transactions in conjunction with any other events that will
be "excess parachute payments" within the meaning of Section 280G of the
Code.
(i) Except as set forth in Section 4.13(i) to the Target
Disclosure Schedule, to the knowledge of Target no officer, director, or
employee of Target or any of its subsidiaries or affiliates, or any
immediate family member of any of the foregoing or any party in interest
under ERISA, has engaged in a nonexempt prohibited transaction under ERISA
with respect to Target Plans.
(j) All Plans subject to the laws of any jurisdiction outside of
the United States (i) have been maintained in accordance with all material
applicable requirements of local law, (ii) if they are intended to qualify
for special tax treatment under local law, meet all requirements for such
treatment, and (iii) if they are intended to be funded and/or
book-reserved, are funded in accordance with all material requirements of
local law and/or book reserved, as appropriate, based upon reasonable
actuarial assumptions.
(k) The Change in Control Agreements dated as of February 20,
1996, between Target and the individuals listed on Schedule 4.13(k) to the
Target Disclosure Schedule, respectively (each such agreement, a "Change in
Control Agreement" and collectively, the "Change in Control Agreements,"
and each such individual, an "Executive") each provide, or have been
amended effective no later than the date hereof to provide, the following:
(i) it shall be a condition to the right of the Executive who is a party to
the Change in Control Agreement to receive payments and benefits thereunder
that (A) such Executive exercise stock options after the date hereof and on
or before December 31, 1998, as contemplated by the Change in Control
Analysis incorporated in Section 4.13(h) of the Target Disclosure Schedule
(such stock options, the "Exercised Options"), and (B) the Executive not
voluntarily terminate employment with Target prior to the end of the first
day immediately following the Effective Date (for these purposes, a
termination of employment due to death or disability shall not constitute a
voluntary termination of employment); (ii) the Company shall make a loan to
the
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Executive in an amount equal to the exercise price for the Exercised
Options, payable at the Effective Time and otherwise as contemplated by the
Change in Control Analysis; (iii) provided there is no attempt to amend or
terminate the Change in Control Agreements after the Effective Time, no
cash payments shall be made to the Executive pursuant to the Change in
Control Agreement until the 91st day following the Effective Date (other
than any required gross-up payments with respect to any taxes that are due
or required to be withheld before such 91st day); (iv) the Executive shall
not be entitled to any severance pay or severance benefits under any plan,
program, policy, arrangement or agreement other than his Change in Control
Agreement, the Company's automobile policy and benefits under the Directors
and Officers Health Incentive Plan; and (v) the benefits to which the
Executive is entitled under the Change in Control Agreement shall include
only life, health, accidental death and disability benefits under plans in
which the Executive was participating at the time of the change in control.
4.14 Contracts. Section 4.14 to the Target Disclosure Schedule
lists as of the date hereof all written or oral contracts, agreements,
guarantees, leases and executory commitments other than Plans (each a
"Contract") to which Target or any of its subsidiaries is a party and that fall
within any of the following categories: (a) joint venture, partnership and like
agreements, (b) Contracts containing covenants purporting to limit the freedom
of Target or any of its subsidiaries to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (c) Contracts
that after the Effective Time would have the effect of limiting the freedom of
Purchaser or its subsidiaries (other than Target and its subsidiaries) to
compete in any line of business in any geographic area or to hire any individual
or group of individuals, (d) Contracts providing for "earn-outs", (e) any
Contract providing for "savings guarantees", "performance guarantees", or other
contingent payments by Target or any of its subsidiaries, other than normal
product warranties, involving more than $1 million, (f) Contracts with or for
the benefit of any affiliate of Target or immediate family member thereof (other
than subsidiaries of Target) involving more than $50,000 in the aggregate per
affiliate, (g) any Contract for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Target and each of its subsidiaries or otherwise related to the
businesses of Target and each of its subsidiaries, which is not cancellable by
Target or such subsidiary without penalty in excess of 2% of the aggregate of
all amounts payable under such Contract, and under the terms of which Target or
any of its subsidiaries: (i) is likely to pay or otherwise give consideration of
more than $1,000,000 during the calendar year ended December 31, 1998, (ii) is
likely to pay or otherwise give consideration of more than $2,000,000 over the
remaining term of such Contract, or (iii) is a party for a term of five (5)
years or more and which involves more than $1,000,000 over such term, (h) any
Contract for the sale of inventory or other personal property or for the
furnishing of services by Target or any of its subsidiaries which is not
cancellable by Target or such subsidiary without penalty in excess of 2% of the
aggregate of all amounts payable under such Contract and which: (i) is likely to
involve consideration of more than $3,000,000 during the calendar year ended
December 31, 1998, (ii) is likely to involve consideration of more than
$6,000,000 over the remaining term of the Contract, or (iii) has a term of five
(5) years or more and involves more than $1,000,000 over such term, (i) any
Contract or agreement relating to indebtedness for borrowed money of Target or
any of its subsidiaries or to any direct or indirect guaranty by Target or any
of its subsidiaries of
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indebtedness for borrowed money of any other person in excess of $1 million, and
(j) any other Contract or agreement, whether or not made in the ordinary course
of business, which is material to Target or the conduct of the business of
Target or the absence of which would have a Material Adverse Effect on Target.
All such Contracts are valid and binding obligations of Target and, to the
knowledge of Target, the valid and binding obligation of each other party
thereto and is in full force and effect and shall continue in full force and
effect without penalty, acceleration, termination or other adverse consequence
except to the extent that any consents set forth in Section 4.14 to the Target
Disclosure Schedule are not obtained. Neither Target nor, to the knowledge of
Target, any other party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition that with the passage of time or
giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract except such violations or defaults under or
terminations that, individually or in the aggregate, would not have a Material
Adverse Effect on Target. Set forth in Section 4.14 to the Target Disclosure
Schedule is the amount of the annual premium currently paid by Target for its
directors' and officers' liability insurance.
4.15 Labor Matters. Except as set forth in Section 4.15 of the
Target Disclosure Schedule, (i) neither Target nor any of its subsidiaries have
any labor contracts or collective bargaining agreements with any persons
employed by Target or any of its subsidiaries or any persons otherwise
performing services primarily for Target or any of its subsidiaries, (ii) there
is no labor strike, dispute or stoppage pending or, to the knowledge of Target,
threatened against Target or any of its subsidiaries, and neither Target nor any
of its subsidiaries has experienced any labor strike, dispute or stoppage or
other material labor difficulty involving its employees since January 1, 1996
which would have a Material Adverse Effect on Target, and (iii) since January 1,
1996, no campaign or other attempt for recognition has been made by any labor
organization or employees with respect to employees of Target or any of its
subsidiaries.
4.16 Permits. Target and its subsidiaries are in possession of all
material franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary to
own, lease and operate its properties and to carry on their respective
businesses as they are now being conducted (collectively, the "Target Permits"),
and there is no Action pending or, to the knowledge of Target, threatened
regarding any of the Target Permits. Neither Target nor any of its subsidiaries
is in conflict with, or in default or violation of any of the Target Permits,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not have a Material Adverse Effect on Target.
4.17 Reserved.
4.18 Title to Properties and Assets.
(a) Target and its subsidiaries have good and marketable title to,
or valid leasehold interests in, all their material properties and material
assets except for such as are no longer used or useful in the conduct of
their businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants
and similar encumbrances or impediments that, in the aggregate, would not
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have a Material Adverse Effect on Target. All such material properties and
assets, other than properties and assets in which Target or any of its
subsidiaries has leasehold interests, are free and clear of all liens,
encumbrances, leases, options, charges, covenants, easements and
restrictions of any kind ("Liens"), except for Liens that, in the
aggregate, would not have a Material Adverse Effect on Target.
(b) Each of Target and each of its subsidiaries has complied in
all material respects with the terms of all material leases to which it is
a party and under which it is in occupancy, and all such leases are in full
force and effect. Each of Target and each of its subsidiaries enjoys
peaceful and undisturbed possession under all such material leases.
(c) All real and personal property and fixtures of Target and its
subsidiaries (exclusive of inventories) that are significant to the
operations of Target and its subsidiaries are in good condition and repair,
ordinary wear and tear excepted, or are currently being repaired or
replaced in a manner that will ensure the continuing and normal operations
of Target and its subsidiaries.
4.19 Environmental Compliance.
(a) To the knowledge of Target, each of Target and its
subsidiaries is, and has been, and each of Target's former subsidiaries,
while subsidiaries of Target, was in compliance with all applicable
Environmental Laws, except for possible noncompliance which individually or
in the aggregate would not have a Material Adverse Effect on Target.
(b) During the period of ownership or operation by Target and its
subsidiaries of any of their respective current or previously-owned
properties, there have been no releases of Hazardous Material in, on, under
or affecting such properties or, to the knowledge of Target, any
surrounding site, except in each case for those which individually or in
the aggregate would not have a Material Adverse Effect on Target. Prior to
the period of ownership or operation by Target and its subsidiaries of any
of their respective current or previously-owned properties, to the
knowledge of Target, there were no releases of Hazardous Material in, on,
under or affecting any such property or any surrounding site, except in
each case for those which individually or in the aggregate would not have a
Material Adverse Effect on Target.
4.20 Opinion of Financial Advisor. Target has received the written
opinion of The Robinson-Humphrey Company, LLC (the "Financial Advisor"), to the
effect that, as of the date of this Agreement, the Merger Consideration is fair
to the Target Stockholders from a financial point of view, and such opinion has
not been withdrawn or revoked or modified in any material respect.
4.21 Board Recommendation; Required Vote. The Board of Directors of
Target, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together are fair to and in the best interests of
the Target Stockholders, and (ii) resolved to recommend that the holders of the
shares of Target
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Common Stock approve this Agreement and the transactions contemplated herein,
including the Merger (the "Target Board Recommendation"). The affirmative vote
of holders of a majority of the outstanding shares of Target Common Stock to
approve the Merger is the only vote of the holders of any class or series of
Target Common Stock necessary to adopt the Agreement and approve the
transactions contemplated hereby.
4.22 Section 203 of DGCL; Rights Agreement. Prior to the date
hereof, the Board of Directors of Target has taken all action necessary to
exempt under or make not subject to (x) the provisions of Section 203 of the
DGCL and (y) any other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares: (i) the
execution of this Agreement, (ii) the Merger and (iii) the transactions
contemplated hereby. The Rights Agreement, dated as of April 30, 1997 (the
"Target Rights Agreement"), between Target and Harris Trust Savings Bank as
rights agent, has been amended so that Purchaser and Subcorp are each exempt
from the definition of "Acquiring Person" contained in the Target Rights
Agreement, no "Stock Acquisition Date" or "Distribution Date" or "Triggering
Event" (as such terms are defined in the Target Rights Agreement) will occur as
a result of the execution of this Agreement or the consummation of the Merger
pursuant to this Agreement and the Target Rights Agreement will expire
immediately prior to the Effective Time, and the Target Rights Agreement, as so
amended, has not been further amended or modified. Copies of all such amendments
to the Target Rights Agreement have been previously provided to Purchaser.
4.23 Brokerage and Finder's Fees. Except for Target's obligations
to the Financial Advisor (copies of all agreements relating to such obligations
having previously been provided to Purchaser), neither Target nor any of its
subsidiaries nor any stockholder, director, officer or employee thereof, has
incurred or will incur on behalf of Target or any of its subsidiaries, any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Mutual Covenants.
(a) HSR Act Filings; Reasonable Best Efforts; Notification.
(i) Each of Purchaser and Target shall (A) make or cause to be made
the filings required of such party or any of its subsidiaries or
affiliates under the HSR Act with respect to the transactions
contemplated hereby as promptly as practicable, (B) comply at the
earliest practicable date with any request for further
information or documents received by such party or any of its
subsidiaries from Federal Trade Commission, the Department of
Justice or any other Governmental Authority in respect of such
filings
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or such transactions, including without limitation a request for
additional information and documents under the HSR Act, and (C)
cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing
copies of all such documents to the non-filing party and its
advisors prior to filing (other than documents containing
confidential business information that shall be shared only with
outside counsel to the non-filing party) and, if requested, to
accept all reasonable additions, deletions or changes suggested
in connection therewith) and in connection with resolving any
investigation or other inquiry of any such agency or other
Governmental Authority under any Antitrust Laws (as defined in
Section 5.1(a)(ii)) with respect to any such filing or any such
transaction. Each party shall use its reasonable best efforts to
furnish to each other all information required for any
application or other filing to be made pursuant to any Applicable
Law in connection with the Merger and the other transactions
contemplated by this Agreement. Each party shall promptly inform
the other party of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental
Authority regarding any such filings or any such transaction.
Neither party shall independently participate in any meeting with
any Governmental Authority in respect of any such filings,
investigation, or other inquiry without giving the other party
prior notice of the meeting and, to the extent permitted by such
Governmental Authority, the opportunity to attend and/or
participate. The parties hereto will consult and cooperate with
one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto
in connection with proceedings under or relating to the HSR Act
or other Antitrust Laws.
(ii) Each of Purchaser and Target shall use its reasonable best
efforts to resolve such objections, if any, as may be asserted by
any Governmental Authority with respect to the transaction
contemplated by this Agreement under the HSR Act, the Sherman
Act, as amended, the Clayton Act, as amended, the Federal Trade
Commission Act, as amended, and any other federal, state or
foreign statues, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are
designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade
(collectively, "Antitrust Laws"). In connection therewith, if any
administrative or judicial action or proceeding is instituted (or
threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law,
each of Purchaser and Target shall cooperate and use its
reasonable best efforts vigorously to contest and resist any such
action or proceeding, including any legislative, administrative
or judicial action, and to have vacated, lifted, reversed, or
overturned any decree, judgment, injunction or other order
whether temporary, preliminary or permanent (each an "Order"),
that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any other transactions contemplated
by this Agreement, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial
appeal and all available legislative action, unless by mutual
agreement Purchaser and Target decide that litigation is not in
their respective best interests. Notwithstanding the
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foregoing or any other provision of this Agreement, nothing in
this Section 5.1(a) shall limit a party's right to terminate this
Agreement pursuant to Section 7.1, so long as such party has up
to then complied in all material respects with its obligations
under this Section 5.1(a). Each of Purchaser and Target shall use
all reasonable best efforts to take such action as may be
required to cause the expiration of the notice periods under the
HSR Act or other Antitrust Laws with respect to such transactions
as promptly as possible after the execution of this Agreement.
(iii) Each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this
Agreement, including (A) the obtaining of all other necessary
actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental
Authorities and the making of all other necessary registrations
and filings (including other filings with Governmental
Authorities, if any), (B) the obtaining of all consents,
approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the
Merger and the transactions contemplated by this Agreement or
required to prevent a Material Adverse Effect on Purchaser or
Target from occurring prior to or after the Effective Time, (C)
the preparation of the Proxy Statement, the Prospectus and the
Registration Statement, and (D) the execution and delivery of any
additional instruments necessary to consummate the transaction
contemplated by, and to fully carry out the purposes of, this
Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement, (A)
neither Purchaser nor any of its subsidiaries shall be required
to hold separate (including by trust or otherwise) or to divest
any of their respective businesses or assets, or to take or agree
to take any action or agree to any limitation that would
reasonably be expected to have a Material Adverse Effect on
either Purchaser or Target or a material adverse effect on the
assets, liabilities, results of operations or financial condition
of either Purchaser or Target, (B) prior to the Effective Time,
neither Target nor its subsidiaries shall be required to hold
separate (including by trust or otherwise) or to divest any of
their respective businesses or assets, or to take or agree to
take any other action or agree to any limitation that would
reasonably be expected to have a Material Adverse Effect on
Target and its subsidiaries taken as a whole, (C) Purchaser shall
not be required to take any action that would reasonably be
expected to substantially impair the overall benefits expected,
as of the date hereof, to be realized from consummation of the
Merger and (D) neither party shall be required to waive any of
the conditions to the Merger set forth in Article VI as they
apply to such party.
(b) Public Announcements. Unless otherwise required (as advised by
counsel) by Applicable Laws or requirements of the NYSE (and, in that
event, only if time does not permit), at all times prior to the earlier of
the Effective Time or termination of this
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Agreement pursuant to Section 7.1, Purchaser and Target shall consult with
each other before issuing any press release or similar communication or
making any public filing with the Commission or other Governmental
Authority with respect to the Merger and shall not issue any such press
release or communication or make such filing prior to such consultation.
(c) Registration Statement/Proxy Statement. (i) As promptly as
practicable after the execution of this Merger Agreement, Target and
Purchaser shall prepare and Target shall file with the Commission
preliminary proxy materials which shall constitute the preliminary Proxy
Statement and a preliminary prospectus with respect to the Purchaser Common
Shares to be issued in connection with the Merger. Each party will notify
the other promptly of the receipt of any comments from the Commission and
of any request by the Commission for amendments or supplements to the
Registration Statement or the Proxy Statement or for additional
information, and will supply the other with copies of all correspondence
between such party or any of its representatives and the Commission, with
respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy Statement shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Purchaser or Target, as the
case may be, shall promptly inform the other of such occurrences and
cooperate in filing with the Commission and/or mailing to the shareholders
of Target such amendment or supplement to the Proxy Statement. As promptly
as practicable after comments are received from the Commission with respect
to the preliminary proxy materials and after the furnishing by Target and
Purchaser of all information required to be contained therein, Target shall
file with the Commission the definitive Proxy Statement and Purchaser shall
file with the Commission the Registration Statement and Purchaser and
Target shall use all reasonable efforts to cause the Registration Statement
to become effective as soon thereafter as practicable.
(ii) Target and Purchaser shall make all necessary filings with
respect to the Merger, under the Securities Act and the Exchange Act and the
rules and regulations thereunder, under applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto.
(d) Change of Control. Target and Purchaser mutually acknowledge
and agree that the consummation of the Merger will constitute a change of
control for purposes of all plans and agreements of Target and its
subsidiaries which provide for payments or benefits to employees of Target
and its subsidiaries upon a change of control of Target and which have been
disclosed to Purchaser. Target and Purchaser further acknowledge and agree
that upon consummation of the Merger, Target or Purchaser will be obligated
to honor all severance or Change in Control Agreement payment obligations
of Target that are listed on Section 5.1(d) to the Target Disclosure
Schedule, and that neither Target or Purchaser shall seek to amend or
terminate these obligations following the Effective Time. Target shall
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use, and shall cause its subsidiaries to use, reasonable best efforts in
consultation with Purchaser to minimize the amounts paid or payable by
Target and its subsidiaries that will be "excess parachute payments" within
the meaning of Section 280G of the Code; provided, that: (i) any actions to
implement the foregoing covenant shall be taken only with the consent of
Purchaser; (ii) such actions shall include paying bonuses with respect to
1998 on or before December 31, 1998, if and to the extent requested by
Purchaser; and (iii) such reasonable best efforts shall not include
reducing or eliminating any severance or bonus payments that would
otherwise be paid to any executive officer or other employee of Target or
any of its subsidiaries.
5.2 Covenants of Purchaser.
(a) Conduct of Purchaser's Operations. During the period from the
date of this Agreement to the Effective Time, Purchaser shall use its
reasonable best efforts to maintain and preserve its business organization
and to retain the services of its officers and key employees and maintain
relationships with customers, suppliers and other third parties to the end
that their goodwill and ongoing business shall not be impaired in any
material respect. During the period from the date of this Agreement to the
Effective Time, Purchaser shall not (i) make any amendment to the Purchaser
Articles that changes the fundamental attributes of the Purchaser Common
Shares, (ii) make any material changes to the Certificate of Incorporation
of Subcorp, (iii) make, declare or pay any extraordinary cash dividend,
other than extraordinary dividends between Purchaser and a subsidiary of
Purchaser, (iv) take any action that is material and adverse to the Target
Stockholders as prospective stockholders of Purchaser and that affects
Target Stockholders disproportionately as compared to the current
stockholders of Purchaser, (v) permit or cause any subsidiaries to do any
of the foregoing or agree or commit to any of the foregoing, or (vi) agree
in writing or otherwise to take any of the foregoing actions.
(b) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Purchaser shall cause, the
Surviving Corporation to indemnify and hold harmless the present
and former officers and directors of Target in respect of acts or
omissions occurring prior to the Effective Time to the extent
provided under the Target Certificate or the Target By-Laws, and,
in any event, to the fullest extent permitted by law, and
(ii) To the extent not obtained by Target prior to the Effective Time,
Purchaser shall use its best efforts to cause the Surviving
Corporation or Purchaser to obtain and maintain in effect for a
period of six years after the Effective Time policies of
directors' and officers' liability (including fiduciary and
crime) insurance at no cost to the beneficiaries thereof with
respect to acts or omissions occurring prior to the Effective
Time with substantially the same coverage and containing
substantially similar terms and conditions as existing policies;
provided, however, that neither the Surviving Corporation nor
Purchaser shall be required to pay an aggregate premium for such
insurance coverage in excess of 125% of the amount set forth in
Section
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4.14 to the Target Disclosure Schedule. In the event that Target
determines to obtain such coverage prior to the Effective Time,
it will not spend more than 125% of the amount set forth in
Section 4.14 to the Target Disclosure Schedule.
(c) Merger Sub. Prior to the Effective Time, Subcorp shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a
de minimis amount of cash paid to Subcorp for the issuance of its stock to
Purchaser) or any material liabilities. Purchaser will take all action
necessary to cause Subcorp to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
(d) NYSE Listing. As promptly as practicable after the execution
of this Agreement, Purchaser shall prepare and file with the NYSE a listing
application covering the Purchaser Common Shares to be issued in connection
with the Merger. Purchaser shall use its reasonable best efforts to cause
the Purchaser Common Shares issuable pursuant to the Merger to be approved
for listing on the NYSE, subject to official notice of issuance, prior to
the Effective Time.
(e) Employees and Employee Benefits. For a period of six months
after the Effective Date, Purchaser shall provide, or shall cause the
Surviving Corporation to provide, generally to the officers and employees
of the Surviving Corporation and its subsidiaries health and welfare
benefits on terms and conditions in the aggregate that are no less
favorable as those provided under Target's health and welfare plans as of
the date hereof.
(f) Contacts with Target's Customers and Suppliers. Purchaser and
Target acknowledge the need for a smooth transition of ownership of the
businesses of Target and its subsidiaries and that contact with the
customers or suppliers of Target or its subsidiaries during the period from
the date of this Agreement to the Effective Time may be desirable to ensure
such a transition. From the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement, Purchaser shall not,
without the prior written consent of Target (which may be withheld or
delayed in the sole discretion of Target), contact customers or suppliers
of Target or any of its subsidiaries. On a case by case basis, Target shall
consider requests by Purchaser for joint Purchaser and Target contacts with
customers or suppliers of Target or its subsidiaries but Target shall have
no obligation to consent to any such request. Notwithstanding the
foregoing, Purchaser shall be entitled to contact its current and
prospective customers to conduct its business in the ordinary course.
5.3 Covenants of Target.
(a) Target Stockholders Meeting. Target shall take all action in
accordance with the federal securities laws, the DGCL and the Target
Certificate and the Target By-Laws necessary to duly call, give notice of,
convene and hold a special meeting of Target Stockholders (the "Target
Stockholders Meeting") to be held on the earliest practicable date
determined in consultation with Purchaser to consider and vote upon
approval of the Merger, this Agreement and the transactions contemplated
hereby. Target shall solicit the approval of the Merger, this Agreement and
the transactions contemplated hereby, by the
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Target Stockholders, and the Board of Directors of Target shall recommend
approval of the Merger, this Agreement and the transactions contemplated
hereby by the Target Stockholders (to the extent such recommendation has
not been previously withdrawn pursuant to Section 5.3(c)).
(b) Conduct of Target's Operations. During the period from the
date of this Agreement to the earlier of the Effective Time or the
termination of this Agreement, Target shall conduct its operations in
the ordinary course of business consistent with past practice and shall
use its reasonable best efforts to maintain and preserve its business
organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships
with customers, suppliers, lessees, licensees and other third parties,
and to maintain all of its material operating assets in their current
condition (normal wear and tear excepted), to the end that its goodwill
and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, Target shall not,
except as otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby or as set forth in Section 5.3(b) to
the Target Disclosure Schedule, without the prior written consent of
Purchaser:
(i) do or effect any of the following actions with respect to its or
its subsidiaries' securities: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or, directly or indirectly, redeem,
purchase or otherwise acquire, any shares of its capital stock or
any securities or obligations convertible into or exchangeable
for any shares of its capital stock, other than regular quarterly
dividends on Target Common Stock and dividends declared and paid
by any of Target's directly or indirectly wholly owned
subsidiaries, (C) grant any person any right or option to acquire
any shares of its capital stock, (D) issue, deliver or sell or
agree to issue, deliver or sell any additional shares of its
capital stock or any securities or obligations convertible into
or exchangeable or exercisable for any shares of its capital
stock or such securities, including pursuant to any employee
stock purchase plans (except pursuant to the exercise of Target
Options that are outstanding as of the date hereof and disclosed
in Section 4.4 hereof), (E) reprice any Target Options, or (F)
enter into any agreement, understanding or arrangement with
respect to the sale, voting, registration or repurchase of its
capital stock;
(ii) except for the asset sales on the terms and subject to the
conditions as set forth in Section 5.3(b)(ii) to the Target
Disclosure Schedule, directly or indirectly sell, transfer,
lease, pledge, mortgage, encumber or otherwise dispose of any of
its property or assets other than in the ordinary course of
business or as part of an asset replacement or retirement program
which is out of the ordinary course of business but consistent
with past practice;
(iii) make or propose any changes in the Target Certificate or the
Target By-Laws;
(iv) merge or consolidate with any other person;
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(v) acquire a material amount of assets or capital stock of any other
person;
(vi) amend or modify, or propose to amend or modify, the Target Rights
Agreement, as amended as of the date hereof;
(vii) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for
the obligations of any other individual, corporation or other
entity, other than in the ordinary course of business, consistent
with past practice;
(viii) create any subsidiaries, except in connection with the
restructuring of Target's fuel tank division as previously
disclosed to Purchaser;
(ix) increase the compensation or benefits payable or to become
payable to its directors, officers or, except in the ordinary
course of business consistent with past practice, other employees
(whether from Target or any of its subsidiaries), or pay or award
any benefit not required by any existing plan or arrangement to
any officer, director or employee (including, without limitation,
the granting of stock options, stock appreciation rights, shares
of restricted stock or performance units pursuant to the Plans or
otherwise), or grant any severance or termination pay to any
officer, director or other employee of Target or any of its
subsidiaries (other than as required by existing agreements or
policies described in Section 5.3(b)(ix) to the Target Disclosure
Schedule), or enter into any employment or severance agreement
with, any director, officer or other employee of Target or any of
its subsidiaries or establish, adopt, enter into, amend, or waive
any performance or vesting criteria under any Plan for the
benefit or welfare of any current or former directors, officers
or employees of Target or its subsidiaries or their beneficiaries
or dependents, except, in each case to the extent required by
applicable law or regulation;
(x) change any method or principle of tax or financial accounting in
a manner that is inconsistent with past practice except to the
extent required by United States generally accepted accounting
principles as advised by Target's regular independent
accountants; make any Tax election (unless required by law),
settle or compromise any Tax liability of Target or any of its
subsidiaries or any pending or threatened suit, action or claim
relating to any potential or actual Tax liability of Target or
any of its subsidiaries, change any method of accounting for Tax
purposes or file (other than in a manner consistent with past
practice) any Tax Return;
(xi) settle any Actions, whether now pending or hereafter made or
brought involving, individually or in the aggregate, an amount in
excess of $100,000;
(xii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to any confidentiality
agreement to which Target is a party;
(xiii) enter into any confidentiality agreements or arrangements other
than in the ordinary course of business consistent with past
practice (other than as permitted, in each case,
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by Section 5.3(c));
(xiv) write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $100,000 except
for depreciation and amortization in accordance with generally
accepted accounting principles consistently applied;
(xv) incur or commit to any capital expenditures individually in
excess of (x) $1,000,000, provided that such capital expenditure
is reflected in the budget previously provided to Purchaser (the
"Budget") or (y) $100,000 if such capital expenditure is not
reflected in the Budget, or in the aggregate in excess of
$5,000,000;
(xvi) except as permitted in Section 5.2(b)(ii), make any payments in
respect of policies of directors' and officers' liability
insurance (premiums or otherwise) other than premiums paid in
respect of its current policies not in excess of the amount paid
prior to the date of this Agreement;
(xvii) materially accelerate or delay collection of notes or accounts
receivable in advance of or beyond their regular due dates or
dates when the same would have been collected in the ordinary
course of business consistent with past practice or otherwise
change the terms thereof including by offering discounts other
than in the ordinary course of business and consistent with past
practice;
(xviii) materially delay or accelerate payment of accounts payable beyond
or in advance of its due date or the date such liability would
have been paid in the ordinary course consistent with past
practice;
(xix) take any action to exempt or make not subject to (x) the
provisions of Section 203 of the DGCL or (y) any other state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares,
any person or entity (other than Purchaser or its subsidiaries)
or any action taken thereby, which person, entity or action would
have otherwise been subject to the restrictive provisions thereof
and not exempt therefrom;
(xx) enter into any transaction or agreement, or amend any existing
agreement between Target or any of its subsidiaries and any
director or executive officer of Target;
(xxi) take any action that would reasonably be likely to result in the
representations and warranties set forth in Article IV becoming
false or inaccurate in any material respect;
(xxii) enter into or carry out any other material transaction other than
in the ordinary and usual course of business;
(xxiii) permit or cause any subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing; or
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(xxiv) agree in writing or otherwise to take any of the foregoing
actions.
(c) No Solicitation. Target agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to solicit,
initiate, encourage or knowingly facilitate, or furnish or disclose
non-public information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger, consolidation or
other business combination involving Target, or acquisition of any capital
stock (other than upon exercise of Target Options that are outstanding as
of the date hereof) or all or any material portion of the assets of Target
and its subsidiaries, taken as a whole, in a single transaction or a series
of related transactions, or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions
with any person (other than Purchaser, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect to
any Competing Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement; provided
that, at any time prior to the approval of the Merger by the Target
Stockholders, notwithstanding any restriction contained in Section 5.3(b),
Target may furnish information to, and negotiate or otherwise engage in
discussions with, any party who delivers a written proposal for a Competing
Transaction which was not solicited, initiated, knowingly facilitated or
encouraged after the date of this Agreement if and so long as the Board of
Directors of Target determines in good faith, after consultation with and
receipt of advice from its outside counsel (who may be its regularly
engaged outside counsel) that the failure to take such action would likely
constitute a breach of its fiduciary duties under Applicable Law. Target
will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any
proposal for a Competing Transaction and request the return of all
confidential information regarding Target provided to any such parties
prior to the date hereof pursuant to the terms of any confidentiality
agreements or otherwise. In the event that prior to the approval of the
Merger by the Target Stockholders the Board of Directors of Target receives
a Superior Proposal (as defined below) that was not solicited, initiated,
knowingly facilitated or encouraged after the date of this Agreement, and
the Board of Directors of Target determines in good faith after
consultation with its outside counsel (who may be its regularly engaged
outside counsel) that the failure to take such action would likely
constitute a breach of its fiduciary duties under Applicable Law, the Board
of Directors of Target may (subject to this and the following sentences)
withdraw, modify or change, in a manner adverse to Purchaser, the Target
Board Recommendation and/or recommend a Superior Proposal to the Target
Stockholders and/or comply with Rule 14e-2 promulgated under the Exchange
Act with respect to a Competing Transaction, provided that it gives
Purchaser five business days' prior written notice of its intention to do
so (provided that the foregoing shall in no way limit or otherwise affect
Purchaser's right to terminate this Agreement pursuant to Section 7.1(d) at
such time as the requirements of such subsection have been met). Any such
withdrawal, modification or change of the Target Board Recommendation shall
not change the approval of the Board of Directors of Target for purposes of
causing any state takeover statute or other state law to
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be inapplicable to the transactions contemplated hereby, including the
Merger. From and after the execution of this Agreement, Target shall
promptly (but in any event within two calendar days) advise Purchaser in
writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to a Competing Transaction
(including the specific terms thereof and the identity of the other party
or parties involved) and promptly furnish to Purchaser a copy of any such
written proposal in addition to any information provided to or by any third
party relating thereto. In addition, Target shall promptly (but in any
event within two calendar days) advise Purchaser, in writing, if the Board
of Directors of Target shall make any determination as to any Competing
Transaction as contemplated by the proviso to the first sentence of this
Section 5.3(c). As used herein, the term "Superior Proposal" means a
Competing Transaction that the Board of Directors of Target determines is,
after consulting with and receipt of advice from the Financial Advisor (or
any other nationally recognized investment banking firm), more favorable to
Target Stockholders from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions proposed by Purchaser in response to such Competing
Transaction), and that sufficient financing commitments have been obtained
with respect to such Competing Transaction that it reasonably expects a
transaction pursuant to such proposal could be consummated.
(d) Access. Target shall permit representatives of Purchaser to
have appropriate access at all reasonable times to Target's premises,
properties, books, records, contracts and documents. In addition to the
foregoing, with respect to environmental investigations, Purchaser shall at
all reasonable times and in all reasonable respects (i) have access to
Target's facilities, (ii) be entitled to interview Target's personnel
located at such facilities or located at any of Target's other premises,
(iii) be entitled to interview any of Target's consultants hired in
connection with any environmental matters, (iv) be entitled to review
environmental documents (including the results of any phase one or phase
two environmental assessments), and (v) be entitled to conduct phase one
environmental assessments where existing phase one environmental
assessments are not, in the reasonable judgment of Purchaser, complete or
timely. Purchaser and Target agree to use their reasonable best efforts to
share information that might otherwise be subject to attorney/client
privilege in a manner which would not waive any such attorney/client
privilege. Information obtained by Purchaser pursuant to this Section
5.3(d) shall be subject to the provisions of the confidentiality agreement
between Purchaser and Target dated August 28, 1998 (the "Confidentiality
Agreement"), which agreement remains in full force and effect. No
investigation conducted pursuant to this Section 5.3(d) shall affect or be
deemed to modify any representation or warranty made in this Agreement.
(e) Subsequent Financial Statements. Target shall provide to
Purchaser a copy of Target's financial statements for any period ending
after the date of this Agreement prior to making publicly available its
financial results for any such period and prior to filing any Target SEC
Documents after the date of this Agreement.
(f) Affiliates of Target. Target shall use its reasonable best
efforts to cause each such person who may be at the date of the Target
Stockholders Meeting an "affiliate" of Target
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for purposes of Rule 145 under the Securities Act to execute and deliver to
Purchaser at or prior to the Closing the written undertakings in the form
attached hereto as Exhibit A (the "Target Affiliate Letter"). No later than
10 days prior to such date, Target, after consultation with its outside
counsel, shall provide Purchaser with a letter (reasonably satisfactory to
outside counsel to Purchaser) specifying all of the persons or entities
who, in Target's opinion, may be deemed to be "affiliates" of Target under
the preceding sentence. The foregoing notwithstanding, the Purchaser shall
be entitled to place legends as specified in the Target Affiliate Letter on
the certificates evidencing any of the Purchaser Common Shares to be
received by any such "affiliate" of Target specified in such letter
pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Purchaser Common
Shares, consistent with the terms of the Target Affiliate Letter,
regardless of whether such person has executed the Target Affiliate Letter.
ARTICLE VI.
CONDITIONS
6.1 Conditions to the Obligations of Each Party. The obligations
of Target, Purchaser and Subcorp to consummate the Merger shall be subject to
the satisfaction of the following conditions:
(a) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Target Stockholders in
the manner required by any Applicable Law.
(b) Any applicable waiting periods under the HSR Act or similar
foreign laws relating to the Merger and the transactions contemplated by
this Agreement shall have expired or been terminated and any other
approvals of any Governmental Authority shall have been obtained.
(c) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit or enjoin the
consummation of the Merger or the transactions contemplated by this
Agreement or limit the ownership or operation by Purchaser, Target or any
of their respective subsidiaries of any material portion of the business or
assets of Purchaser or Target.
(d) There shall not be pending any Action instituted by any
Governmental Authority challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement.
(e) The Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the Commission or any state securities
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administrator.
(f) The Purchaser Common Shares to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
6.2 Conditions to Obligations of Target. The obligations of Target
to consummate the Merger and the transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by Target:
(a) Each of the representations and warranties of each of
Purchaser and Subcorp set forth in Article III shall be true and correct in
all respects (but without regard to any materiality qualifications or
references to Material Adverse Effect contained in any specific
representation or warranty) on the date of this Agreement and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except where any such
failure of the representations and warranties in the aggregate to be true
and correct in all respects would not reasonably be expected to have a
Material Adverse Effect on Purchaser.
(b) Each of Purchaser and Subcorp shall have performed in all
material respects all obligations and agreements and shall have complied in
all material respects with all covenants to be performed and complied with
by it hereunder at or prior to the Effective Time.
(c) Each of Purchaser and Subcorp shall have furnished Target with
a certificate dated the Closing Date signed on behalf of it by the Chief
Executive Officer or Treasurer to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
6.3 Conditions to Obligations of Purchaser and Subcorp. The
obligations of Purchaser and Subcorp to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by Purchaser:
(a) Each of the representations and warranties of Target set forth
in Article IV (other than the representations and warranties of Target set
forth in Section 4.4) shall be true and correct in all respects (but
without regard to any materiality qualifications or references to Material
Adverse Effect contained in any specific representation or warranty) on the
date of this Agreement and on and as of the Closing Date as though made on
and as of the Closing Date (except for representations and warranties made
as of a specified date, the accuracy of which will be determined as of the
specified date), except where any such failure of the representations and
warranties in the aggregate to be true and correct in all respects would
not reasonably be expected to have a Material Adverse Effect on Target. The
representations and warranties of Target set forth in Sections 4.4 of this
Agreement shall be true and correct in all respects on the date of this
Agreement and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, the accuracy of which will be determined as of the
specified date).
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(b) The representations and warranties of Target set forth in
Section 4.19 shall be true and correct in all respects (but without regard
to any materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) on the date of this
Agreement and on and as of the Closing Date as though made on and as of the
Closing Date, except where such failure of the representations and
warranties in the aggregate to be true and correct in all respects would
not in the reasonable judgment of Purchaser result in cost, expense or
liability ("Environmental Liability") exceeding Target's and its
subsidiaries' aggregate amount of reserves for environmental matters by
more than $10 million on an after-tax basis. In determining Target's
Environmental Liability, an item of cost, expense or liability shall be
disregarded to the extent that such item is covered by (i) existing
insurance where the insurance carrier has acknowledged the coverage or (ii)
environmental insurance purchased by Target from an insurance carrier
reasonably acceptable to Purchaser after the date hereof and prior to the
Effective Time. In the event that Target purchases such coverage prior to
the Effective Time, it will not spend more than $2 million in premiums and
such premiums shall be included in any determination of Target's
Environmental Liabilities pursuant to this Section 6.3(b). Purchaser's
determination of Target's Environmental Liability shall be substantially
consistent with the written assessment of an independent consulting firm to
be mutually selected from the following: Dames and Moore, Karemida
Environmental, or Montgomery Watson.
(c) Target shall have performed in all material respects all
obligations and agreements and shall have complied in all material respects
with all covenants to be performed and complied with by it hereunder at or
prior to the Effective Time.
(d) The agreement for purchase and sale of real property (the
"Real Estate Agreement") which is contemplated to be entered into pursuant
to the letter agreement of even date herewith among Target, Purchaser, and
Subcorp shall have been entered into, the closing under the Real Estate
Agreement shall have occurred, and Target shall have received final payment
of the $1,957,000 cash purchase price (net of any closing costs or other
expenses) pursuant to the terms of the Real Estate Agreement.
(e) Target shall have furnished Purchaser with a certificate dated
the Closing Date signed on its behalf by its Chairman and Chief Executive
Officer, President or Chief Financial Officer to the effect that the
conditions set forth in Sections 6.3(a), (b) and (d) have been satisfied.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by Target Stockholders):
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(a) by mutual written consent of Purchaser and Target;
(b) by either Purchaser or Target if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if any judgment, injunction, order or decree of a court or
other competent Governmental Authority (which the parties shall have used
all reasonable efforts to resist, resolve or lift, as applicable, in
accordance with Section 5.1(a)) enjoining Purchaser or Target from
consummating the Merger shall have been entered and such judgment,
injunction, order or decree shall have become final and nonappealable;
(c) by either Purchaser or Target if the Merger shall not have
been consummated before the later of May 31, 1999 or thirty (30) days after
the receipt of all required approvals of any Governmental Authority,
provided, however, that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party whose failure or whose
affiliate's failure to perform any material covenant or obligation under
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date;
(d) by Purchaser if (i) the Board of Directors of Target shall
withdraw, modify or change the Target Board Recommendation in a manner
adverse to Purchaser, (ii) if the Board of Directors of Target approves or
recommends any Competing Transaction, or (iii) Target shall have exercised
a right with respect to a Superior Proposal referenced in Section 5.3(c)
and shall, directly or through its representatives, continue discussions
with any third party concerning a Superior Proposal for more than 10
business days after the date of receipt of such Superior Proposal;
(e) by Purchaser or Target if at the Target Stockholders Meeting
(including any adjournment or postponement thereof) the requisite vote of
the Target Stockholders to approve the Merger and the transactions
contemplated hereby shall not have been obtained;
(f) by Purchaser or Target if there shall have been a breach by
the other of any of its representations and warranties, covenants or
agreements contained in this Agreement, which under Section 6.3(a) or
6.2(a) excuses Purchaser or Target, respectively, from its obligation to
complete the Merger, and such breach shall not have been cured within 30
days after notice thereof shall have been received by the party alleged to
be in breach;
(g) by Purchaser if on the date on which the Closing would
otherwise occur, the Purchaser Share Price shall be less than $40; provided
that Target shall receive at least two business days' prior written notice
of its intent to effect such termination pursuant to this Section 7.1(g);
or
(h) by Target in order to permit Target to enter into an agreement
providing for a Competing Transaction that the Board of Directors of Target
has determined to be a Superior Proposal; provided, however that the
obligation of Target to pay to Purchaser the fees and expenses provided for
in Sections 7.2(b) and (e) shall survive any such termination.
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7.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement, except for the provisions of the second
sentence of Section 5.3(d) and the provisions of Sections 7.2 and 8.11,
shall become void and have no effect, without any liability on the part of
any party or its directors, officers or stockholders. Notwithstanding the
foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this
Agreement and provided, further, however, that if it shall be judicially
determined that termination of this Agreement was caused by an intentional
breach of this Agreement, then, in addition to other remedies at law or
equity for breach of this Agreement, the party so found to have
intentionally breached this Agreement shall indemnify and hold harmless the
other parties for their respective out-of-pocket costs, fees and expenses
of their counsel, accountants, financial advisors and other experts and
advisors as well as fees and expenses incident to negotiation, preparation
and execution of this Agreement and related documentation and shareholders'
meetings and consents ("Costs").
(b) In the event that (i) this Agreement is terminated pursuant to
Section 7.1(c) and the Target Stockholders Meeting has not been held prior
to May 31, 1999 and at any time prior to such termination there shall have
been made to Target or publicly disclosed a Competing Transaction with
respect to Target, or (ii) this Agreement is terminated pursuant to Section
7.1(d)(i), 7.1(d)(ii) or 7.1(h), then Target will, in the case of a
termination by Purchaser, within three business days following any such
termination or, in the case of a termination by Target concurrently with
such termination, pay to Purchaser in cash by wire transfer in immediately
available funds to an account designated by Purchaser (i) in reimbursement
for Purchaser's expenses an amount equal to the aggregate amount of
Purchaser's Costs incurred in connection with pursuing the transactions
contemplated by this Agreement, including, without limitation, legal,
accounting and investment banking fees, up to but not in excess of $4
million in the aggregate and (ii) a termination fee in an amount equal to
$15 million.
(c) In the event that this Agreement is terminated pursuant to
Section 7.1(e) and no event has occurred that would permit Purchaser to
terminate this Agreement under Sections 7.1(d)(i), 7.1(d)(ii) or 7.1(h),
then Target shall pay to Purchaser in cash by wire transfer in immediately
available funds to an account designated by Purchaser in reimbursement for
Purchaser's expenses an amount equal to the aggregate amount of Purchaser's
Costs incurred in connection with pursuing the transactions contemplated by
this Agreement, including, without limitation, legal, accounting and
investment banking fees, up to but not in excess of $4 million in the
aggregate.
(d) In the event that this Agreement is terminated pursuant to
Section 7.1(c) (and the Target Stockholders Meeting has not been held prior
to May 31, 1999), 7.1(d) or 7.1(h) and prior to 18 months after the date of
such termination Target consummates a Competing Transaction with a party
who made to Target or publicly disclosed a proposal with respect to a
Competing Transaction prior to the termination of this Agreement, then in
addition to
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any amounts payable pursuant to Section 7.2(b) or 7.2(c), Target will
concurrently with the consummation of such transaction, pay to Purchaser in
cash by wire transfer in immediately available funds to an account
designated by Purchaser an additional termination fee in an amount equal to
$10 million.
(e) In the event that this Agreement is terminated pursuant to
Section 7.1(g), then Purchaser shall pay to Target in cash by wire transfer
in immediately available funds to an account designated by Target in
reimbursement for Target's expenses an amount equal to the aggregate amount
of Target's Costs incurred in connection with pursuing the transactions
contemplated by this Agreement, including, without limitation, legal,
accounting and investment banking fees, up to but not in excess of $4
million in the aggregate and, for purposes hereof, shall also be deemed to
include reimbursement by Target to its executive employees for taxes paid
in connection with the exercise of stock options in December 1998.
(f) In the event that this Agreement is terminated pursuant to one
or more provisions of Section 7.1 and a termination fee is payable pursuant
to one or more provisions of Section 7.2, any such termination fee shall
not exceed $25 million in the aggregate, not including reimbursement of
Costs.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after adoption of this Agreement by Target Stockholders,
but after any such approval, no amendment shall be made which by law requires
further approval or authorization by the Target Stockholders without such
further approval or authorization. Notwithstanding the foregoing, this Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time,
Purchaser (with respect to Target) and Target (with respect to Purchaser and
Subcorp) by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of such party, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after the Effective Time or after the termination of this Agreement.
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8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or dispatched by a nationally recognized overnight courier
service to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Purchaser or Subcorp:
Borg-Warner Automotive, Inc.
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: Laurene H. Horiszny
Telecopy No.: (312) 322-8621
with a copy to
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Elliott V. Stein, Esq.
Telecopy No.: (212) 403-2000
(b) if to Target:
Kuhlman Corporation
3 Skidaway Village Square
Savannah, Georgia 31411
Attention: Richard A. Walker
Telecopy No.: (912) 598-0737
with a copy to
Rudnick & Wolfe
203 N. LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Stephen A. Landsman, Esq.
Telecopy No.: (312) 236-7516
8.3 Interpretation.
(a) When a reference is made in this Agreement to an Article or
Section, such reference shall be to an Article or Section of this Agreement
unless otherwise indicated.
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The headings and the table of contents contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(b) For the purposes of any provision of this Agreement, "Material
Adverse Change" or "Material Adverse Effect" means, when used with respect
to Target or Purchaser, any change or effect that is, or would reasonably
be expected to be, materially adverse to the business, assets, condition
(financial or otherwise) or results of operations of Target and its
subsidiaries, taken as a whole, or Purchaser and its subsidiaries, taken as
a whole, as the case may be. In determining whether a Material Adverse
Change or Material Adverse Effect has occurred such determination shall be
made on an after-tax basis and in addition, an item of loss, expenses or
liability shall be disregarded to the extent (i) of the aggregate reserve
for the category of such item established in the financial statements of
Target most recently filed with the Commission prior to the date of this
Agreement, (ii) such item is covered by insurance or any other third party
indemnification, contribution or reimbursement obligation and the insurance
carrier or third party, as the case may be, has acknowledged the coverage
or indemnification, contribution or reimbursement obligation, as the case
may be, (iii) disclosure of such item has been made in the Target SEC
Documents filed prior to the date of this Agreement, (iv) disclosure of
such item has been made in the Target Disclosure Schedule or (v) such item
represents professional and advisory fees and similar expenses incurred in
connection with the Merger provided such amounts are less than $2 million
in the aggregate.
(c) For purposes of this Agreement, a "subsidiary" when used with
respect to any party means any corporation or other organization,
incorporated or unincorporated, (i) of which such party or another
subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any subsidiary
of such party do not have 50% or more of the voting interests in such
partnership) or (ii) 50% or more of the securities or other interests of
which having by their terms ordinary voting power to elect at least 50% of
the Board of Directors or others performing similar functions with respect
to such corporation or other organization is directly or indirectly owned
or controlled by such party or one or more of its subsidiaries (or if there
are no such voting securities or interests, 50% or more of the equity
interests of which is directly or indirectly owned or controlled by such
party or one or more of its subsidiaries).
(d) For purposes of this Agreement, "knowledge" or any similar
phrase when used (i) in relation to Target means the actual knowledge
(excluding thereby any implied imputed, constructive or other type of
knowledge) of any executive officer of Target and the presidents of each of
Kuhlman Electric Corporation, Coleman Cable Systems, Inc., Transpro Group,
Inc., and Schwitzer, Inc. and (ii) in relation to Purchaser means the
knowledge of any executive officer of Purchaser.
8.4 Counterparts. This Agreement may be executed in counterparts,
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of the Agreement, each of which shall constitute an
original.
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8.5 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein), the Confidentiality Agreement and the
confidentiality agreement between Purchaser and Target dated December 1, 1998
constitute the entire agreement among the parties and supersede all prior
agreements and understandings, agreements or representations by or among the
parties, written and oral, with respect to the subject matter hereof and
thereof.
8.6 Third-Party Beneficiaries. Except for the agreement set forth
in Section 5.1(d) or 5.2(b), nothing in this Agreement, express or implied, is
intended or shall be construed to create any third-party beneficiaries.
8.7 Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court
sitting in the City of Wilmington, Delaware.
8.8 Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of
Delaware, for the purpose of any action or proceeding arising out of or
relating to this Agreement and each of the parties hereto irrevocably
agrees that all claims in respect to such action or proceeding may be heard
and determined exclusively in any Delaware state or federal court sitting
in the City of Wilmington, Delaware. Each of the parties hereto agrees that
a final judgment in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service
of any summons and complaint and any other process in any other action or
proceeding relating to the Merger, on behalf of itself or its property, by
the personal delivery of copies of such process to such party. Nothing in
this Section 8.8 shall affect the right of any party hereto to serve legal
process in any other manner permitted by law.
8.9 Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance, provided such
party is not in material default hereunder.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign its rights,
interests or obligations hereunder to any of its subsidiaries or affiliates.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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8.11 Expenses. Subject to the provisions of Section 7.2, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with filing,
printing and mailing the Registration Statement and the Proxy Statement
(including filing fees related thereto) will be shared equally by Purchaser and
Target.
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IN WITNESS WHEREOF, Purchaser, Subcorp and Target have signed
this Agreement as of the date first written above.
BORG-WARNER AUTOMOTIVE, INC.
By: /s/ John F. Fiedler
-------------------------
Name: John F. Fiedler
Title: Chairman of the Board and
Chief Executive Officer
BWA MERGER CORP.
By: /s/ John F. Fiedler
-------------------------
Name: John F. Fiedler
Title: Chairman of the Board and
Chief Executive Officer
KUHLMAN CORPORATION
By: /s/ Robert S. Jepson, Jr.
-------------------------
Name: Robert S. Jepson, Jr.
Title: Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
For Immediate Release: December 18, 1998
KUHLMAN TO BE ACQUIRED BY BORG-WARNER AUTOMOTIVE
Kuhlman Corporation (NYSE:KUH) and Borg-Warner Automotive, Inc. (NYSE:BWA)
jointly announced today that they have signed a definitive merger agreement
providing for the acquisition of Kuhlman by Borg-Warner Automotive for $39.00
per share in cash and stock of Borg-Warner Automotive. In the transaction, Borg-
Warner Automotive will be issuing $150 million worth of its stock to Kuhlman
shareholders. The acquisition is subject to certain customary closing conditions
including the approval of the shareholders of Kuhlman. It is anticipated that
the transaction will close in the first quarter of 1999.
Borg-Warner Automotive, whose 1997 annual sales were approximately $1.8 billion,
is a leading, global Tier I supplier of highly engineered systems and
components, primarily for automotive powertrain applications. Its products are
manufactured and sold worldwide, primarily to original equipment manufacturers
("OEMs") of passenger cars, sport utility vehicles and light trucks. Borg-Warner
Automotive operates 36 manufacturing facilities in 12 countries and is an
original equipment supplier to every major OEM in the world. Its AG Kuhnle, Kopp
& Kausch division, based in Germany, is a manufacturer of turbochargers for use
in the passenger car and commercial vehicle markets as well as for industrial
locomotive and marine engines. Kuhlman's Schwitzer Group is a leading worldwide
manufacturer of proprietary engine components including turbochargers, fuel
tanks, instrumentation and other products used on light, medium and heavy-duty
trucks, and on construction, agricultural, mining, power generation and marine
equipment.
In making the announcement, Robert S. Jepson, Jr., Chairman and Chief Executive
Officer of Kuhlman Corporation, stated that, "We, at Kuhlman Corporation, found
Borg-Warner Automotive's offer attractive and felt compelled to accept it as
being in the best interests of our shareholders. Recent and continuing changes
in the transportation and automotive industries favor larger and
internationally-based organizations. Our Schwitzer Group and its employees will
now be part of a much larger organization which will be well-positioned to
thrive and to be more responsive to the global needs of its customers."
Kuhlman Corporation is a diversified industrial manufacturing company operating
in two business segments: 1) Electrical Products - which manufactures power,
distribution and instrument transformers for electrical utilities and industrial
users, and electrical and electronic wire and cable products for use in
consumer, commercial and industrial applications; and 2) Industrial Products -
which manufactures proprietary engine components, fuel tanks and other products
used on light, medium and heavy-duty trucks, and on construction, agricultural,
mining, power generation and marine equipment.
For further information, contact:
Investor Relations
Kuhlman Corporation
<PAGE> 2
3 Skidaway Village Square
Savannah, Georgia 31411
Telephone (912) 598-7809
