Exhibit 2.1
EXECUTION COPY
--------- ----
AGREEMENT AND PLAN OF MERGER
dated as of
June 23, 2000
by and
among
LILLY INDUSTRIES, INC.,
THE VALSPAR CORPORATION
and
VAL ACQUISITION CORP.
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER........................................................1
SECTION 1.01. The Merger.......................................1
SECTION 1.02. Conversion of Shares.............................1
SECTION 1.03. Payment for Shares...............................2
SECTION 1.04. Stock Options....................................4
ARTICLE II SURVIVING CORPORATION; DIRECTORS AND OFFICERS.....................4
SECTION 2.01. Articles of Incorporation........................4
SECTION 2.02. By-Laws..........................................4
SECTION 2.03. Directors and Officers...........................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........5
SECTION 3.01. Organization and Qualification...................5
SECTION 3.02. Authority; Non-Contravention; Approvals..........5
SECTION 3.03. Proxy Statement..................................6
SECTION 3.04. Ownership of Company Common Stock................6
SECTION 3.05. Financing........................................6
SECTION 3.06. Brokers and Finders..............................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7
SECTION 4.01. Organization and Qualification...................7
SECTION 4.02. Capitalization...................................7
SECTION 4.03. Subsidiaries.....................................8
SECTION 4.04. Authority; Non-Contravention; Approvals..........9
SECTION 4.05. Reports and Financial Statements................10
SECTION 4.06. Absence of Undisclosed Liabilities..............11
SECTION 4.07. Absence of Certain Changes or Events............11
SECTION 4.08. Litigation......................................11
SECTION 4.09. Proxy Statement.................................11
SECTION 4.10. No Violation of Law.............................12
SECTION 4.11. Material Contracts; Compliance with Agreements..12
SECTION 4.12. Taxes...........................................13
SECTION 4.13. Employee Benefit Plans; ERISA...................13
SECTION 4.14. Collective Bargaining Agreements; Labor
Controversies...................................15
SECTION 4.15. Environmental Matters...........................16
SECTION 4.16. Intellectual Property...........................17
SECTION 4.17. Company Shareholders' Approval..................17
SECTION 4.18. Opinion of Financial Advisor....................17
SECTION 4.19. Brokers and Finders.............................17
ARTICLE V COVENANTS........................................................17
SECTION 5.01. Conduct of Business by the Company Pending
the Merger......................................17
SECTION 5.02. Control of the Company's Operations.............20
SECTION 5.03. Acquisition Transactions........................20
SECTION 5.04. Access to Information; Confidentiality..........21
SECTION 5.05. Notices of Certain Events.......................22
SECTION 5.06. Merger Sub......................................23
SECTION 5.07. Employee Benefits...............................23
SECTION 5.08. Meeting of the Company's Shareholders...........24
SECTION 5.09. Proxy Statement.................................24
SECTION 5.10. Public Announcements............................25
SECTION 5.11. Expenses and Fees...............................25
SECTION 5.12. Agreement to Cooperate..........................25
SECTION 5.13. Directors' and Officers' Indemnification........27
SECTION 5.14. State Takeover Laws.............................28
SECTION 5.15. Employee Stock Purchase Plan....................28
ARTICLE VI CONDITIONS TO THE MERGER.........................................29
SECTION 6.01. Conditions to the Obligations of Each Party.....29
SECTION 6.02. Conditions to Obligation of the Company to
Effect the Merger...............................29
SECTION 6.03. Conditions to Obligations of Parent and
Subsidiary to Effect the Merger.................30
ARTICLE VII TERMINATION......................................................30
SECTION 7.01. Termination.....................................30
ARTICLE VIII MISCELLANEOUS....................................................32
SECTION 8.01. Effect of Termination...........................32
SECTION 8.02. Non-Survival of Representations and Warranties..32
SECTION 8.03. Notices.........................................32
SECTION 8.04. Interpretation..................................33
SECTION 8.05. Miscellaneous...................................33
SECTION 8.06. Counterparts....................................34
SECTION 8.07. Amendments; Extensions..........................34
SECTION 8.08. Entire Agreement................................34
SECTION 8.09. Severability....................................34
SECTION 8.10. Specific Performance............................34
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
23, 2000, among Lilly Industries, Inc., an Indiana corporation (the "Company"),
The Valspar Corporation, a Delaware corporation ("Parent"), and Val Acquisition
Corp., an Indiana corporation and a wholly-owned subsidiary of Parent ("Merger
Sub").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have each approved the merger of Merger Sub with and into the
Company on the terms and subject to the conditions set forth in this Agreement
and have adopted this Agreement as a plan of merger pursuant to the Business
Corporation Law of the State of Indiana (the "IBCL"); and
WHEREAS, the Merger is subject to approval by the Company's
stockholders, as provided herein, and the Board of Directors of the Company has
agreed to recommend such approval, on the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. (a) Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the IBCL, Merger Sub
shall be merged with and into the Company (the "Merger") at the Effective Time.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation"), and the separate corporate existence of Merger
Sub shall cease.
(b) The Merger shall be consummated by filing with the Secretary of State
of the State of Indiana articles of merger (the "Articles of Merger") in
accordance with the IBCL. The Merger shall become effective at such time as the
Articles of Merger are duly filed, or at such later time after the Articles of
Merger are so filed as Merger Sub and the Company shall agree and specify in the
Articles of Merger (the time the Merger becomes effective being the "Effective
Time").
(c) The Merger shall have the effects specified under the IBCL.
SECTION 1.02. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or
the holders of any of the following securities:
(a) Each issued and outstanding share of the Company's Class A Common
Stock, without par value (the "Class A Common Stock"), and of the Company's
Class B Common Stock, without par value (the "Class B
Common
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Stock," and together with the Class A Common Stock, the "Company Common Stock"),
held by the Company as treasury stock and each issued and outstanding share of
Company Common Stock owned by any wholly owned subsidiary of the Company or of
Parent shall be cancelled and retired and shall cease to exist, and no payment
or consideration shall be made with respect thereto.
(b) Each issued and outstanding share of Company Common Stock, other than
shares of Company Common Stock referred to in paragraph (a) above, shall be
converted into the right to receive an amount in cash, without interest, equal
to $31.75 (the "Merger Consideration"). At the Effective Time, all such shares
of Company Common Stock shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest, applicable thereto.
(c) Each issued and outstanding share of capital stock of Merger Sub shall
be converted into one fully paid and nonassessable share of common stock, par
value $0.01, of the Surviving Corporation.
SECTION 1.03. Payment for Shares. (a) Prior to the Effective Time, Parent
shall appoint a bank or trust company reasonably satisfactory to the Company to
act as disbursing agent (the "Disbursing Agent") for the payment of Merger
Consideration upon surrender of certificates representing shares of Company
Common Stock and shall enter into a disbursing agent agreement with the
Disbursing Agent in form and substance reasonably acceptable to the Company. At
or prior to the Effective Time, Parent shall deposit or cause to be deposited
with the Disbursing Agent in trust for the benefit of the Company's shareholders
cash in an aggregate amount necessary to make the payments pursuant to Section
1.02 to all holders of shares of Company Common Stock (such amounts being
hereinafter referred to as the "Exchange Fund"). The Disbursing Agent shall
invest the Exchange Fund as the Surviving Corporation directs in direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of all principal and interest or commercial paper obligations receiving
the highest rating from either Moody's Investors Service, Inc. or Standard &
Poor's, a division of The McGraw Hill Companies, or a combination thereof,
provided that, in any such case, no such instrument shall have a maturity
exceeding three months. Any net profit resulting from, or interest or income
produced by, such investments shall be held in the Exchange Fund. The Exchange
Fund shall not be used for any other purpose except as provided in this
Agreement.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Disbursing Agent to mail to each person who was a record holder as of
the Effective Time of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Company Common
Stock (the "Certificates"), and whose shares were converted into the right to
receive Merger Consideration pursuant to Section 1.02, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use in effecting the
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surrender of the Certificates in exchange for payment of the applicable Merger
Consideration. Upon surrender to the Disbursing Agent of a Certificate, together
with such letter of transmittal duly executed and such other documents as may be
reasonably required by the Disbursing Agent, the holder of such Certificate
shall be paid promptly in exchange therefor cash in an amount equal to the
product of the number of shares of Company Common Stock represented by such
Certificate multiplied by the Merger Consideration, and such Certificate shall
forthwith be cancelled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. Notwithstanding anything to the
contrary, in the event that prior to the Effective Time the Company shall
declare any dividend or distribution with respect to shares of Company Common
Stock, and such dividend or distribution shall have a record date on or prior to
the Effective Time and shall not have been paid prior to the Effective Time,
each holder of shares of Company Common Stock on the record date shall be
entitled to receive such dividend or distribution from the Surviving
Corporation. If payment is to be made to a person other than the person in whose
name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered be properly endorsed or otherwise be
in proper form for transfer and that the person requesting such payment pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
1.03, each Certificate (other than Certificates representing shares of Company
Common Stock which have been cancelled) shall represent for all purposes only
the right to receive in cash the Merger Consideration multiplied by the number
of shares of Company Common Stock evidenced by such Certificate, without any
interest thereon.
(c) At and after the Effective Time, there shall be no registration of
transfers of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time on the stock transfer books of the Surviving
Corporation. From and after the Effective Time, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except as
otherwise provided in this Agreement or by applicable law. All cash paid upon
the surrender of Certificates in accordance with the terms of this Agreement
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock previously represented by such
Certificates. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, such Certificates shall be cancelled and
exchanged for cash as provided in this Agreement. At the close of business on
the day of the Effective Time the stock ledger of the Company shall be closed.
(d) At any time more than six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Disbursing Agent to
deliver to it any funds which had been made available to the Disbursing Agent
and not disbursed in exchange for Certificates (including, without limitation,
any interest and other income received by the Disbursing Agent in respect of all
such funds). Thereafter, holders of shares of Company Common Stock shall look
only to Parent (subject to the terms of this Agreement, abandoned property,
escheat and other similar laws) as general creditors
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thereof with respect to any Merger Consideration that may be payable, without
interest, upon due surrender of the Certificates held by them. If any
Certificates shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such time on which any payment in
respect hereof would otherwise escheat or become the property of any
governmental unit or agency), the payment in respect of such Certificates shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto. Notwithstanding the foregoing, none of Parent, the Company,
the Surviving Corporation nor the Disbursing Agent shall be liable to any holder
of a share of Company Common Stock for any Merger Consideration delivered in
respect of such share of Company Common Stock to a public official to the extent
required by any abandoned property, escheat or other similar law.
SECTION 1.04. Stock Options. The Company shall (a) terminate the Company's
1991 Director Stock Option Plan and 1992 Stock Option Plan (collectively, the
"Company Option Plans") immediately prior to the Effective Time without
prejudice to the rights of the holders of options (the "Options") awarded
pursuant thereto and (b) following such termination grant no additional Options
under the Company Option Plans. Prior to the Effective Time, the Company shall
use its reasonable efforts to take all actions necessary (including obtaining
any consents necessary from holders of Options), so that, as of the Effective
Time, each outstanding Option shall be cancelled in return for a lump sum cash
payment to the holder thereof by Parent or the Surviving Corporation, equal to
the product of (i) the total number of shares of Company Common Stock subject to
the Option immediately prior to the Effective Time (whether or not vested) and
(ii) the excess of the Merger Consideration over the exercise price per share of
Company Common Stock subject to such Company Option, plus, to holders of
non-qualified options (other than non-employee directors), an amount equal to
35% of the foregoing lump sum cash payment; less in each case any applicable
withholding.
ARTICLE II
SURVIVING CORPORATION; DIRECTORS AND OFFICERS
SECTION 2.01. Articles of Incorporation. The Articles of Incorporation of
the Merger Sub in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law.
SECTION 2.02. By-Laws. The By-Laws of Merger Sub in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation until thereafter amended
in accordance with applicable law and the Surviving Corporation's Articles of
Incorporation.
SECTION 2.03. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
as of the Effective Time.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company that, except as set forth in the Disclosure Schedule dated and delivered
by Parent to the Company as of the date hereof (the "Parent Disclosure
Schedule"):
SECTION 3.01. Organization and Qualification. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of Parent and Merger Sub is
qualified to transact business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except as would not
reasonably be expected to have a material adverse effect on the business,
properties, operations, assets, financial condition or results of operations of
Parent and its subsidiaries, taken as a whole (a "Parent Material Adverse
Effect").
SECTION 3.02. Authority; Non-Contravention; Approvals. (a) Parent and
Merger Sub each have full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been approved by the Boards of Directors of Parent and Merger Sub and the
sole shareholder of Merger Sub, and no other corporate proceedings (including
any shareholder approval) on the part of Parent or Merger Sub are necessary to
authorize the execution and delivery of this Agreement or the consummation by
Parent and Merger Sub of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent and Merger
Sub enforceable against each of them in accordance with its terms, except that
such enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
(b) The execution, delivery and performance of this Agreement by each of
Parent and Merger Sub and the consummation of the Merger and the transactions
contemplated hereby do not and will not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective certificates of incorporation or by-laws of
Parent or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to Parent or any of its subsidiaries
or any of their respective properties or assets, subject, in the case of
consummation, to obtaining (prior to the Effective Time) the Parent Required
Statutory Approvals, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind
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(each a "Contract" and collectively "Contracts") to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or any of
their respective properties or assets may be bound or affected, subject, in the
case of consummation, to obtaining and/or giving (prior to the Effective Time)
consents required from and/or notices required to third parties as specified in
Section 3.02(b) of the Parent Disclosure Schedule (the "Parent Third Party
Approvals") and other than, in the case of (ii) and (iii) above, such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests or encumbrances that would not reasonably
be expected to have a Parent Material Adverse Effect or prevent or materially
delay the consummation of the Merger.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) applicable
filings, if any, with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) filing of the Articles of Merger with the Secretary of State of the
State of Indiana in connection with the Merger and (iv) any required filings
with or approvals from authorities of any state or foreign country in which the
Company or its subsidiaries conduct any business or own any assets (the filings
and approvals referred to in clauses (i) through (iv) are collectively referred
to as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Parent or Merger Sub or the consummation by Parent
or Merger Sub of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of the Merger.
SECTION 3.03. Proxy Statement. None of the information to be supplied by
Parent or its subsidiaries for inclusion in any proxy statement or information
statement to be distributed in connection with the Company Meeting (the "Proxy
Statement") will, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Company Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
SECTION 3.04. Ownership of Company Common Stock. Neither Parent nor any of
its subsidiaries beneficially owns any shares
of Company Common Stock as of the date hereof.
SECTION 3.05. Financing. Without prejudice to the fact that this Agreement
does not provide for any financing condition or contingency, Parent has provided
to the Company a true and complete copy (not including schedules or exhibits) of
a financing commitment letter signed by the lender for the financing necessary
to consummate the Merger and to pay all associated costs and expenses (including
any refinancing of indebtedness of Parent or the Company required in connection
therewith). Parent will, at the Effective Time, have available cash in an amount
sufficient to consummate the transactions contemplated hereby, including,
without limitation, to pay the aggregate Merger Consideration to be paid to the
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Company's shareholders in the Merger and the aggregate consideration to be paid
to holders of Options.
SECTION 3.06. Brokers and Finders. Except as disclosed in the Parent
Disclosure Schedule, Parent has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Company to pay any investment banking fees, finder's fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the Company SEC Reports or the disclosure schedule dated and
delivered by the Company to Parent as of the date hereof (the "Company
Disclosure Schedule"):
SECTION 4.01. Organization and Qualification. The Company is a corporation
duly organized and validly existing under the laws of the State of Indiana and
has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
The Company is qualified to transact business and, where applicable, is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except as would not reasonably be expected to have a Company Material
Adverse Effect. True, accurate and complete copies of the Company's Amended and
Restated Articles of Incorporation and Code of By-Laws, in each case as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Parent.
SECTION 4.02. Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock of which
97,000,000 are shares of Class A Common Stock and 3,000,000 are shares of Class
B Common Stock. As of May 31, 2000, (i) 22,715,254 shares of Class A Common
Stock, and 501,766 shares of Class B Common Stock, including in each case the
associated Rights (as defined in Section 4.02(b)), were issued and outstanding,
all of which shares of Company Common Stock were validly issued and are fully
paid, nonassessable and free of preemptive rights, (ii) 5,290,008 shares of
Class A Common Stock and 38,234 shares of Class B Common Stock were held in the
treasury of the Company and (iii) 2,738,933 shares of Class A Common Stock and
no shares of Class B Common Stock were reserved for issuance upon exercise of
options issued and outstanding. Since May 31, 2000 through the date hereof,
except as permitted by the Agreement, (i) no shares of Company Common Stock have
been issued except in connection with the exercise of options issued and
outstanding and except for shares of Company Common Stock required to be issued
in connection with the Company's existing Dividend Reinvestment Plan (the
"DRP"), Employee Savings 401(k) Plan (the "401(k) Plan") or Employee Stock
Purchase Plan (the "ESPP") and (ii) no options, warrants, securities convertible
into, or commitments with respect to the issuance of, shares of capital stock of
the Company have been issued, granted or made except Rights in accordance with
the terms of the Rights Agreement.
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(b) Except for the Common Share Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement"), dated as of January
12, 1996, by and between the Company and National City Bank (the "Rights
Agent"), or for options issued and outstanding, as of the date hereof, there
were no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other antitakeover
agreement, obligating the Company or any subsidiary of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
Company Common Stock or obligating the Company or any subsidiary of the Company
to grant, extend or enter into any such agreement or commitment. As of the date
hereof, there are no obligations, contingent or otherwise, of the Company to (i)
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock or other equity interests of any subsidiary of the Company
except in connection with the exercise of options issued and outstanding or (ii)
(other than advances to subsidiaries in the ordinary course of business) provide
material funds to, or make any material investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of, any subsidiary of the Company or any other person. There are no
outstanding stock appreciation rights or similar derivative securities or rights
of the Company or any of its subsidiaries. There are no bonds, debentures, notes
or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which shareholders of the Company may vote. Except as otherwise contemplated
by this Agreement there are no voting trusts, irrevocable proxies or other
agreements or understandings to which the Company or any subsidiary of the
Company is a party or is bound with respect to the voting of any shares of
Company Common Stock. The Board of Directors of the Company has taken all action
to amend the Rights Agreement (subject only to the execution of such amendment
by the Rights Agent) to provide that (i) none of the Parent and its subsidiaries
shall become an "Acquiring Person" and no "Share Acquisition Date" shall occur
as a result of the execution, delivery and performance of this Agreement and the
consummation of the Merger, (ii) no "Distribution Date" shall occur as a result
of the announcement of or the execution of this Agreement or any of the
transactions contemplated hereby and (iii) the Rights will expire without any
further force or effect as of immediately prior to the consummation of the
Merger. Upon execution of such amendment to the Rights Agreement by the Rights
Agent, such amendment to the Rights Agreement shall become effective and shall
remain in full force and effect until immediately following the termination of
this Agreement in accordance with its terms.
(c) The Company has previously made available to Parent complete and
correct copies of the Company Option Plans, including all amendments thereto.
The Company has previously made available to Parent a complete and correct list
setting forth as of May 31, 2000, (i) the number of Options outstanding and (ii)
the weighted average exercise price for all outstanding Options. Since May 31,
2000, the Company has not granted or agreed to grant any Options.
SECTION 4.03. Subsidiaries. Each direct and indirect subsidiary of the
Company is duly organized, validly existing and, where applicable, in good
standing under the
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laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted and each subsidiary of the Company is
qualified to transact business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all cases
as would not reasonably be expected to have a Company Material Adverse Effect.
All of the outstanding shares of capital stock of each subsidiary of the Company
are validly issued, fully paid, nonassessable and free of preemptive rights and
are owned directly or indirectly by the Company free and clear of any liens
(other than liens arising by operation of law), claims, encumbrances, security
interests, equities and options of any nature whatsoever. There are no
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions or arrangements
relating to the issuance, sale, voting, transfer, ownership or other rights with
respect to any shares of capital stock of any subsidiary of the Company,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. The Company has no material investment in any entity
other than its subsidiaries.
SECTION 4.04. Authority; Non-Contravention; Approvals. (a) The Company has
full corporate power and authority to enter into this Agreement and, subject to
the Company Shareholder Approval, to consummate the transactions contemplated
hereby. This Agreement has been approved by the Board of Directors of the
Company, and no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or, except
for the Company Shareholder Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Merger Sub, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger and the transactions contemplated
hereby do not and will not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, contractually require any offer to purchase
or any prepayment of any debt or result in the creation of any lien, security
interest or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions or provisions of (i)
the respective articles or certificates of incorporation or by-laws of the
Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, subject in the
case of consummation, to obtaining (prior to the Effective Time) the Company
Required Statutory Approvals and the Company Shareholder Approval, or (iii) any
Contract to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or any of their respective properties or
assets may be
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bound or affected, subject, in the case of consummation, to obtaining and/or
giving (prior to the Effective Time) consents required from and/or notices
required to third parties as specified in Section 4.04(b) of the Company
Disclosure Schedule (the "Company Third Party Approvals") and other than, in the
case of (ii) and (iii) above, such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests or
encumbrances that would not reasonably be expected to have a Company Material
Adverse Effect or prevent or materially delay the consummation of the Merger.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Proxy Statement with the SEC pursuant to the Exchange Act,
(iii) the filing of the Articles of Merger with the Secretary of State of the
State of Indiana in connection with the Merger, (iv) any filings with or
approvals from authorities required solely by virtue of the jurisdictions in
which Parent or its subsidiaries conduct any business or own any assets and (v)
any required filings with or approvals from applicable domestic or foreign
environmental authorities, public service commissions and public utility
commissions (the filings and approvals referred to in clauses (i) through (v)
and those disclosed in Section 4.04(c) of the Company Disclosure Schedule are
collectively referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not
reasonably be expected to have a Company Material Adverse Effect or prevent or
materially delay the consummation of the Merger.
(d) The Board of Directors of the Company has adopted resolutions to exempt
the Merger, this Agreement and the transactions contemplated hereby from the
restrictions of Sections 23-1-42-1 to 11 and Sections 23-1-43-1 to 24 of the
IBCL, and, accordingly, none of such Sections applies to any such transactions.
SECTION 4.05. Reports and Financial Statements. Since January 1, 1998, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, posteffective amendments and supplements
thereto) (the "Company SEC Reports") required to be filed by it under each of
the Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. As of their respective dates except as amended or
supplemented prior to the date hereof, the Company SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the twelve months ended November 30,
1999 and the unaudited financial statements of the Company included in the
Company's Quarterly Report on Form 10-Q (the "Company 10-Q") for the quarterly
period ended February 29, 2000 (collectively, the "Company Financial
Statements") have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be
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indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended (subject, in the case of the unaudited
financial statements, to normal year-end adjustments).
SECTION 4.06. Absence of Undisclosed Liabilities. Except as disclosed in
the Company Financial Statements or the notes thereto, neither the Company nor
any of its subsidiaries had at February 29, 2000, or has incurred since that
date through the date hereof, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against in the
Company Financial Statements or reflected in the notes thereto or (ii) which
were incurred in the ordinary course of business and consistent with past
practices and (b) liabilities, obligations or contingencies which would not
reasonably be expected to have a Company Material Adverse Effect, and (c)
liabilities, obligations and contingencies which are of a nature not required to
be reflected in the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied which are not, excluding all matters set forth
on the Company Disclosure Schedules, material to the Company and its
subsidiaries taken as a whole.
SECTION 4.07. Absence of Certain Changes or Events. Since February 29,
2000, there has not been any Company Material Adverse Effect. From February 29,
2000 through the date hereof, the Company and its subsidiaries have conducted
their business and operations in the ordinary course of business and consistent
with past practice and there has not been any amendment to the Company's charter
or bylaws.
SECTION 4.08. Litigation. As of the date hereof, there are no claims,
suits, actions or proceedings ("Claims") pending or, to the knowledge of the
Company, threatened against, relating to or affecting the Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that would reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
of its subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or authority, or any arbitrator which prohibits the consummation of the
transactions contemplated hereby or would reasonably be expected to have a
Company Material Adverse Effect. As of the date hereof, there are no Claims
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator or mediator, alleging
that the Company or any of its subsidiaries has liability arising from the
presence of lead in any product sold by the Company or any of its subsidiaries.
SECTION 4.09. Proxy Statement. None of the information to be supplied by
the Company or its subsidiaries for inclusion in the Proxy Statement will, at
the time of the mailing thereof and any amendments or supplements thereto, and
at the time of the Company Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply, as of its mailing date, as to form in all material respects with
all applicable laws,
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including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to information supplied by Parent, Merger Sub or any stockholder of
Parent for inclusion therein.
SECTION 4.10. No Violation of Law. As of the date hereof, neither the
Company nor any of its subsidiaries is in violation of or has been given written
notice of any violation of, any law, statute, order, rule, regulation, ordinance
or judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) or other legal requirement of any governmental or
regulatory body or authority, except for violations which would not reasonably
be expected to have a Company Material Adverse Effect. No investigation or
review by any governmental or regulatory body or authority is pending as to
which the Company has received notice or, to the knowledge of the Company,
threatened, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same, as of the date hereof other than, in each
case, those the outcome of which, as far as reasonably can be foreseen, would
not reasonably be expected to have a Company Material Adverse Effect. The
Company and its subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted (collectively, the
"Company Permits"), except for permits, licenses, franchises, variances,
exemptions, orders, authorizations, consents and approvals the absence of which
would not reasonably be expected to have a Company Material Adverse Effect. The
Company and its subsidiaries are not in violation of the terms of any Company
Permit, except for delays in filing reports or violations which would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.11. Material Contracts; Compliance with Agreements. (a) Except
for those agreements and other documents filed as exhibits to the Company SEC
Reports, none of the Company or its subsidiaries is a party to, bound by or
subject to any Contract that (i) is a "material contract" within the meaning of
Item 601(b)(10) of Regulation S-K of the SEC or (ii) restricts the Company to
from conducting its business in any geographical regions or selling any lines of
product.
(b) Since January 1, 1998 through the date hereof, neither the Company nor
any of its subsidiaries has entered into any Contract (other than any Contract
entered into in the ordinary course or for current assets or fixed or capital
assets) (i) to acquire (including by way of merger, consolidation or acquisition
of stock or assets) any company or business or any division thereof or material
portion of the assets thereof for over $7,500,000 in value or (ii) to sell or
commit to sell, transfer or otherwise dispose of (including by way of merger,
consolidation or acquisition of stock or assets) any business or assets of the
Company or such subsidiary for over $7,500,000 in value.
(c) The Company and each of its subsidiaries are not in breach or violation
of or in default in the performance or observance of any term or provision of,
and no event has occurred which, with lapse of time or action by a third party,
would result in a default under, (i) the respective articles or certificates of
incorporation, by-laws or similar organizational instruments of the Company or
any of its subsidiaries or (ii) any Contract to which the Company or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, other than as would not reasonably be expected
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to have a Company Material Adverse Effect. To the Company's knowledge, there has
been no material default, cancellation or breach by any other party to any
material Contract to which the Company or any of its subsidiaries is a party.
SECTION 4.12. Taxes. (a) The Company and its subsidiaries have (i) duly
filed with the appropriate governmental authorities all Tax Returns required to
be filed by them, and such Tax Returns are true, correct and complete in all
material respects, and (ii) duly paid in full all taxes shown as due on such Tax
Returns, except in each case where the failure to file such Tax Returns or pay
such Tax would not, individually or in the aggregate, have a Company Material
Adverse Effect. The liabilities and reserves for Taxes reflected in the
Company's latest balance sheet included in the Company 10-Q to cover all Taxes
for all periods ending at or prior to the date of such balance sheet have been
determined in accordance with generally accepted accounting principles, and
there is no material liability for Taxes for any period beginning after such
date other than Taxes arising in the ordinary course of business. There are no
material liens for Taxes upon any property or asset of the Company or any
subsidiary thereof, except for liens for Taxes not yet due or Taxes contested in
good faith and reserved against in accordance with generally accepted accounting
principles. As of the date hereof, there are no unresolved issues of law or fact
arising out of a notice of deficiency, proposed deficiency or assessment from
the Internal Revenue Service (the "IRS") or any other governmental taxing
authority with respect to Taxes of the Company or any of its subsidiaries which
would reasonably be expected to be material to the Company. Neither the Company
nor any of its subsidiaries is a party to any agreement providing for the
allocation or sharing of material Taxes with any entity that is not, directly or
indirectly, a wholly-owned corporate subsidiary of the Company.
(b) The Company and each of its subsidiaries have withheld or collected and
have paid over to the appropriate governmental entities (or are properly holding
for such payment) all material Taxes required to be collected or withheld.
(c) For purposes of this Agreement, "Tax" (including, with correlative
meaning, the terms "Taxes") includes all federal, state, local and foreign
income, profits, franchise, gross receipts, environmental, customs duty, capital
stock, communications services, severance, stamp, sales, unemployment,
disability, use, property, withholding, excise, production, value added,
occupancy and other taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts and any interest in respect to such penalties and additions, and
includes any liability for Taxes of another person by contract, as a transferee
or successor, under Treas. Reg. 1.1502-6 or analogous state, local or foreign
law provision or otherwise, and "Tax Return" means any return, report or similar
statement (including attached schedules) required to be filed with respect to
any Tax, including without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
SECTION 4.13. Employee Benefit Plans; ERISA. (a) Section 4.13(a) of the
Disclosure Schedule includes a complete list of (i) each material employee
benefit plan, program or policy providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries or any
beneficiary or dependent thereof that is sponsored or maintained by the Company
or any of its subsidiaries or to which the Company or any of its subsidiaries
contributes or is obligated to contribute (other than employee benefit plans,
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programs or policies providing benefits to non-U.S. employees of the Company),
including without limitation any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA,
and including any "multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA (a "Multiemployer Plan")) and any bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, severance, employment,
change of control or fringe benefit plan, program or policy (collectively, the
"Employee Benefit Plans") and (ii) each employment and severance agreement
pursuant to which the Company or any of its subsidiaries has or would have any
obligation to provide compensation and/or benefits in an amount or having a
value in excess of $250,000 per year or $500,000 in the aggregate (each, a
"Material Employment Agreement").
(b) With respect to each Employee Benefit Plan other than a Multiemployer
Plan (a "Plan"), the Company has delivered or made available to Parent a true,
correct and complete copy of: (i) all plan documents and trust agreements; (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; (v) the most recent actuarial report, if any;
and (vi) the most recent determination letter from the IRS, if any. The Company
has delivered or made available to Parent a true, correct and complete copy of
each Material Employment Agreement. Except as specifically provided in the
foregoing documents, or in other documents, delivered or made available to
Parent, there are no amendments to any Plan or Material Employment Agreement
that have been adopted or approved nor has the Company or any of its
subsidiaries undertaken to make any such amendments or to adopt or approve any
new Plan or Material Employment Agreement.
(c) The IRS has issued a favorable determination letter with respect to
each Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Plan") and the related trust that has
not been revoked, and there are no circumstances and no events have occurred
that could adversely affect the qualified status of any Qualified Plan or the
related trust, which cannot be cured without a Company Material Adverse Effect.
For purposes of this Agreement, "Code" means the Internal Revenue Code of 1986,
as amended.
(d) Except as would not have a Company Material Adverse Effect: (i) the
Company and its subsidiaries have complied, and are now in compliance, with all
provisions of ERISA, the Code and all laws and regulations applicable to the
Employee Benefit Plans and each Plan has been administered in all material
respects in accordance with its terms; (ii) none of the Company and its
subsidiaries nor any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could subject any of the Employee Benefit Plans or their
related trusts, the Company, any of its subsidiaries or any person that the
Company or any of its subsidiaries has an obligation to indemnify, to any
material tax or penalty imposed under Section 4975 of the Code or Section 502 of
ERISA; (iii) there are no pending or, to the Company's knowledge, threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans
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or the assets of any of the trusts under any of the Plans which could reasonably
be expected to result in any liability of the Company or any of its subsidiaries
to the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor, any Multiemployer Plan, any Plan or any participant in a
Plan.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of the Company or any of its
subsidiaries, or result in any limitation on the right of the Company or any of
its subsidiaries to amend, merge, terminate or receive a reversion of assets
from any Employee Benefit Plan or related trust or any Material Employment
Agreement or related trust. Without limiting the generality of the foregoing, no
amount paid or payable (whether in cash, in property, or in the form of
benefits) by the Company 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 event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(f) With respect to each Plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code, except as would not have a Company
Material Adverse Effect: (i) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (ii) no reportable event within the meaning of
Section 4043(c) of ERISA for which the 30-day notice requirement has not been
waived has occurred; (iii) all premiums to the Pension Benefit Guaranty
Corporation have been timely paid in full; (iv) no liability (other than for
premiums to the PBGC) under Title IV of ERISA has been or is expected to be
incurred by the Company or any of its subsidiaries; and (v) the PBGC has not
instituted proceedings to terminate any such Plan and, to the Company's
knowledge, no condition exists that presents a 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.
(g) No Employee Benefit Plan is a Multiemployer Plan, none of the Company
and its subsidiaries nor any of their respective ERISA Affiliates has, at any
time during the last six years, contributed to or been obligated to contribute
to any Multiemployer Plan, and none of the Company and its subsidiaries nor any
ERISA Affiliates has incurred any withdrawal liability to a Multiemployer Plan
that has not been satisfied in full.
SECTION 4.14. Collective Bargaining Agreements; Labor Controversies. As of
the date hereof, none of Seller or its Subsidiaries is a party to or bound by
any collective bargaining agreement or other agreement with a labor union or
labor organization. There are no controversies pending or, to the knowledge of
the Company, threatened between the Company or its subsidiaries and any
representatives (including unions) of any of their employees that would
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, there are no material organizational efforts presently
being made involving any of the
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presently unorganized employees of the Company or its subsidiaries, except for
such organizational efforts which would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 4.15. Environmental Matters. (a) (i) The Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws, including, without limitation, having and
complying with all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (ii) there has been no release or threatened release, and none of the
properties owned or, to the Company's knowledge, operated by the Company or any
of its subsidiaries contain any Hazardous Substance in violation of or requiring
remediation, corrective action, removal, response or cleanup under any
Environmental Law as a result of any activity of the Company or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) since January 1, 1997, neither the Company nor any of
its subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity
indicating that the Company or any of its subsidiaries may be in violation of,
or liable under, any Environmental Law in connection with the ownership or
operation of their businesses or real property, (iv) there are no civil,
criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against the Company or any
of its subsidiaries relating to any violation, or alleged violation, of any
Environmental Law or claims for remedial action or any injury or damage to human
health, property, natural resources or the environment, (v) no Hazardous
Substance has been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned by the Company or any of
its subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries and (vi) neither the Company, its
subsidiaries nor any of their respective properties are subject to any material
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (i) through (vi) that would not reasonably be expected
to have a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, common law, license,
permit, authorization, approval, consent, order, judgment, decree, injunction,
requirement or agreement with any governmental entity relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource) or to human health or safety, or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each case
as amended and as in effect at the date hereof.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any
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Environmental Law including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or byproduct thereof,
radon, radioactive material, asbestos, or asbestos containing material, urea
formaldehyde foam insulation or polychlorinated biphenyls.
SECTION 4.16. Intellectual Property. The Company and its subsidiaries have
through ownership or licensing or otherwise all intellectual property rights
necessary for the conduct of the business of the Company and its subsidiaries as
it is presently being conducted. Neither the Company nor any of its subsidiaries
has infringed any intellectual property rights of any third party other than any
infringements that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 4.17. Company Shareholders' Approval. The affirmative vote of
shareholders of the Company required for approval and adoption of this Agreement
and the Merger is a majority of all votes entitled to be cast by the holders of
the outstanding shares of Company Common Stock, having equal voting rights,
share for share, voting as one class.
SECTION 4.18. Opinion of Financial Advisor. As of the date hereof, the
Company's financial advisor, Wasserstein Perella & Co., Inc. (the "Company
Financial Advisor"), has delivered to the Board of Directors of the Company an
oral opinion, to be confirmed in writing (the "Fairness Opinion"), to the effect
that, as of the date of this Agreement, the consideration to be received by the
holders of Company Common Stock in the Merger is fair to such holders from a
financial point of view. Subject to the prior review and consent by the Company
Financial Advisor, the Fairness Opinion shall be available for inclusion in its
entirety in the Proxy Statement.
SECTION 4.19. Brokers and Finders. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of the Company to pay any investment banking fees, finder's
fees, brokerage or agent commissions or other like payments in connection with
the transactions contemplated hereby, other than fees payable to the Company
Financial Advisor. The Company has previously disclosed the fee schedule for the
Company Financial Advisor to Parent.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Merger. Except
as otherwise contemplated by this Agreement or disclosed in Section 5.01 of the
Company Disclosure Schedule, after the date hereof and prior to the Effective
Time, without Parent's prior consent (which shall not be unreasonably withheld),
the Company shall, and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
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(b) not (i) amend or propose to amend their respective articles of
incorporation or by-laws or equivalent constitutional documents, (ii)
split, combine or reclassify their outstanding capital stock, (iii) effect
any merger, corporate restructuring or liquidation of the Company or any of
its subsidiaries, or (iv) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions to the Company or its subsidiary by a
subsidiary of the Company and regular quarterly dividends on Company Common
Stock of not more than $.08 per share declared and paid at times consistent
with past practice;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that the Company may issue shares upon exercise
of Options outstanding on the date hereof;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business consistent with past practice up to the amount of the
existing borrowing limit of the Company's existing credit facilities on the
date hereof (which is $150 million) and (B) borrowings to refinance
existing indebtedness on market terms, (ii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital stock or any
options, warrants or rights to acquire any of its capital stock or any
security convertible into or exchangeable for its capital stock other than
in connection with the exercise of outstanding Options pursuant to the
terms of the Company Option Plans, or to use for the 401(k) Plan, the DRP
or the ESPP, (iii) make any acquisition of any assets or businesses in
excess of the amounts set forth in Section 5.01 of the Company Disclosure
Schedule other than expenditures for current assets in the ordinary course
of business and expenditures for fixed or capital assets in the ordinary
course of business consistent with Section 5.01(i) below, or (iv) sell,
pledge, lease, dispose of or encumber any material assets or businesses
other than (A) sales of businesses or assets disclosed in the Company
Disclosure Schedule, (B) pledges or encumbrances pursuant to Existing
Credit Facilities or other permitted borrowings, (C) sales or dispositions
of businesses or assets as may be required by applicable law, or (D) sales
of idle facilities and related assets;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers, suppliers and others having
business relationships with them other than as contemplated by the terms of
this Agreement;
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(f) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees or
with any other persons, except (i) as required to comply with applicable
law, (ii) pursuant to previously existing contractual arrangements or
policies or (iii) employment agreements entered into with a person who is
hired by the Company or one of its subsidiaries after the date hereof in
the ordinary course of business, provided that such employment agreement
would not qualify as a Material Employment Agreement;
(g) not increase the salary or monetary compensation of any person
except for increases in the ordinary course of business consistent with
past practice or except as required to comply with applicable law or
pursuant to previously existing contractual arrangements;
(h) not adopt, enter into or amend to increase benefits or obligations
of any Plan or Material Employment Agreement, except (i) as required to
comply with changes in applicable law, (ii) any of the foregoing involving
any such then existing plans, agreements, trusts, funds or arrangements of
any company acquired after the date hereof or (iii) as required pursuant to
existing contractual arrangements;
(i) not make capital expenditures, or enter into any binding
commitment or contract to make such expenditures in excess of the amount
specified for years 2000 and 2001 in Section 5.01 of the Company Disclosure
Schedules;
(j) not enter into any contract or commitment (i) providing for the
provision of products by the Company or any of its subsidiaries that has a
term of more than three years and which is reasonably expected to generate
more than $25 million in revenues over its term or more than $10 million in
revenues per year or (ii) providing for the purchase of services by the
Company or any of its subsidiaries that has a term of more than one year
and which is reasonably expected to involve payments of more than $25
million over its term;
(k) not make, change or revoke any material Tax election unless
required by law or make any agreement or settlement with any taxing
authority regarding any material amount of Taxes or which would reasonably
be expected to materially increase the obligations of the Company or the
Surviving Corporation to pay Taxes in the future;
(l) (i) prepare or file any Tax Return inconsistent with past practice
or (ii) on such Tax Return, take any position, make any election or adopt
any method that is inconsistent with position taken, elections made or
methods used in preparing and filing similar Tax Returns in prior years,
other than, in either case, as required by law and other than in the
ordinary course;
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(m) make any change in accounting policies, procedures, methods,
assumptions or principles (other than changes required by law or generally
accepted accounting principles);
(n) amend or modify in any material respect any existing material
Contract except in the ordinary course of business and except for
extensions of existing agreements;
(o) enter into any settlement or similar agreement with respect to any
Claim to which the Company or any of its subsidiaries is a party, which
settlement or agreement, involves the payment by the Company of an amount
in excess of the amount set forth in Section 5.01 of the Company Disclosure
Schedule; or
(p) enter into any agreement to do any of the foregoing.
SECTION 5.02. Control of the Company's Operations. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its business
and operations.
SECTION 5.03. Acquisition Transactions. (a) After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to, initiate, solicit or
negotiate or provide nonpublic or confidential information to facilitate, and
the Company shall use its reasonable best efforts to cause any officer, director
or employee of the Company, and any attorney, accountant, investment banker,
financial advisor or other agent retained by it or any of its subsidiaries, not
to initiate, solicit or negotiate or provide nonpublic or confidential
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business, properties or capital stock of the Company,
whether by merger, purchase of assets, tender offer or otherwise, whether for
cash, securities or any other consideration or combination thereof (any such
transactions being referred to herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above or any other
provision of this Agreement, the Company may, in response to an unsolicited bona
fide written offer or proposal with respect to an Acquisition Transaction (an
"Acquisition Proposal") from a corporation, partnership, person or other entity
or group (a "Potential Acquirer") which the Company's Board of Directors
determines, in good faith and after consultation with and consideration of the
views of its independent financial advisor and legal counsel, could reasonably
likely lead to a Superior Proposal, furnish confidential or nonpublic
information to, and engage in discussions and negotiate with, such Potential
Acquirer. For purposes of this Agreement, "Superior Proposal" means an
Acquisition Proposal which the Company's Board of Directors determines, taking
into account all legal, financial, regulatory and other aspects of the proposal,
in its good faith judgment and after consultation with and consideration of the
views of its independent financial advisor
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and legal counsel, is (i) reasonably likely to be consummated and (ii) would, if
consummated, be more favorable to the Company's stockholders than the Merger.
(c) The Company shall as promptly as practicable notify Parent after
receipt of any Acquisition Proposal, or for access to the properties, books or
records of the Company or any subsidiary by any person or entity that informs
the Board of Directors of the Company or such subsidiary that it is considering
making, or has made, an Acquisition Proposal. Such notice to Parent shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the material terms and conditions of such proposal, inquiry
or contact to the extent known.
SECTION 5.04. Access to Information; Confidentiality.
(a) Except for competitively sensitive information as to which access, use
and treatment is covered by Section 5.04(b), and subject to applicable law, the
Company and its subsidiaries shall afford to Parent and Merger Sub and their
respective accountants, counsel, financial advisors and other representatives
(the "Parent Representatives") reasonable access during normal business hours
upon reasonable notice throughout the period prior to the Effective Time to
their respective properties, books, contracts, commitments and records and,
during such period, shall furnish promptly (i) a copy of each report, schedule
and other document filed or received by any of them pursuant to the requirements
of federal or state securities laws or filed by any of them with the SEC in
connection with the transactions contemplated by this Agreement and (ii) such
other information concerning its businesses, properties and personnel as Parent
or Merger Sub shall reasonably request and will use reasonable best efforts to
cause the cooperation of the Company's officers, employees, counsel,
accountants, consultants and financial advisors in connection with the
investigation of the Company by Parent and the Parent Representatives; provided,
however, such investigation shall not unreasonably disrupt the Company's
operations. All nonpublic information provided to, or obtained by, Parent in
connection with the transactions contemplated hereby shall be "Evaluation
Material" for purposes of the Confidentiality Agreement previously entered into
between Parent and the Company (the "Confidentiality Agreement"), and, as
applicable, "Common Interest Material" or "Confidential Information" for
purposes of the Joint Defense, Common Interest and Confidentiality Agreement
among the parties thereto, previously entered into (the "Joint Defense
Agreement"), the terms of each of which shall continue in force until the
Effective Time provided that Parent, Merger Sub and the Company may disclose
such information as may be necessary in connection with seeking the Parent
Required Statutory Approvals, the Company Required Statutory Approvals and the
Company Shareholder Approval. Notwithstanding the foregoing, the Company shall
not be required to provide any information which (in consultation with outside
counsel) (i) it reasonably believes it may not provide to Parent by reason of
applicable law, rules or regulations, (ii) constitutes information protected by
attorney/client privilege, or (iii) the Company or any subsidiary is required to
keep confidential by reason of contract, agreement or understanding with third
parties. No investigation pursuant to this Section
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5.04(a) shall affect any representation or warranty in this Agreement of any
party hereto or any condition to the obligations of the parties hereto.
(b) As promptly as possible following the date hereof the parties intend to
establish an appropriate protocol which shall remain in place until the
expiration of the applicable waiting periods under the HSR Act pursuant to which
the Company may disclose to a limited number of representatives of the Parent
confidential information which is competitively sensitive in nature for the
purpose of preparing filings required under the HSR Act, and otherwise
consistent with the advice of the parties outside antitrust counsel. Any such
information shall be "Evaluation Material" for purposes of the Confidentiality
Agreement. The Company and Parent may, as each deems advisable and necessary,
reasonably designate any competitively sensitive material provided to the other
under this Section as "outside counsel only." Such materials and the information
contained therein shall be given only to the outside legal counsel of the
recipient and will not be disclosed by such outside counsel to employees,
officers or directors of the recipient unless express permission is obtained in
advance from the source of such materials (the Company or Parent as the case may
be) or its legal counsel.
(c) The Company shall make reasonable best efforts to segregate and
preserve unchanged in a secure location until the Effective Time all
documentation contained in the data room to which Parent Representatives were
given access prior to the date hereof, and as soon as practicable after the
Closing such documentation shall be transferred to the possession of the
Company. Parent Representatives shall be given access to such documentation in
accordance with Section 5.04(a).
SECTION 5.05. Notices of Certain Events. (a) The Company shall promptly
after any of the 16 executive officers of the Company acquire knowledge thereof,
notify Parent of: (i) any notice or other communication from any person alleging
that the consent of such person (or another person) is or may be required in
connection with the transactions contemplated by this Agreement which consent
relates to a material Contract to which the Company or any of its subsidiaries
is a party or the failure of which to obtain would materially delay consummation
of the Merger; (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iii) any actions, suits, claims, investigations or
proceedings commenced against the Company or any of its subsidiaries that relate
to the consummation of the transactions contemplated by this Agreement.
(b) Each of Parent and Merger Sub shall promptly after any of the executive
officers of the Parent acquire knowledge thereof, notify the Company of: (i) any
notice or other communication from any person alleging that the consent of such
person (or other person) is or may be required in connection with the
transactions contemplated by this Agreement which consent relates to a material
Contract to which Parent or its subsidiaries are a party or the failure of which
to obtain would materially delay the Merger, (ii) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement, and (iii) any
actions, suits, claims, investigations or proceedings commenced against Parent
or Merger Sub that relate to consummation of the transactions contemplated by
this Agreement.
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(c) Subject to the provisions of Section 5.03, each of the Company, Parent
and Merger Sub agrees to give prompt notice to each other of (i) the occurrence
or failure to occur of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate at the Effective Time unless such failure or occurrence
would not have a Company Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be, and (ii) any failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder unless such failure or occurrence would not have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section
5.05(c) shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 5.06. Merger Sub. Parent will take all action necessary (a) to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement
and (b) to ensure that, prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement, or incur or guarantee any indebtedness.
SECTION 5.07. Employee Benefits. (a) From and after the Effective Time,
Parent and its affiliates shall assume and honor all Employee Benefit Plans and
Material Employment Agreements in accordance with their terms as in effect
immediately before the Effective Time, including the Company's severance plan
(the "Severance Plan"), subject to any amendment or termination thereof that may
be permitted by such terms. For a period of not less than two years following
the Effective Time, Parent shall provide, or shall cause to be provided, to
current employees of the Company and its Subsidiaries (the "Company Employees")
compensation and employee benefits that are, in the aggregate, not less
favorable than those provided to similarly situated employees of Parent and its
affiliates. Without limiting the generality of the foregoing, the Lilly
Industries, Inc. Severance Plan, as amended as of June 23, 2000, shall remain in
effect, without any amendments that are adverse to eligible employees
thereunder, for the benefit of Company Employees, for not less than two years
following the Effective Time. The foregoing shall not be construed to prevent
the termination of employment of any Company Employee or the amendment or
termination of any particular Employee Benefit Plan to the extent permitted by
its terms as in effect immediately before the Effective Time.
(b) For all purposes under the employee benefit plans of Parent and its
affiliates providing benefits to any Company Employees after the Effective Time
(the "New Plans"), each Company Employee shall be credited with his or her years
of service with the Company and its affiliates before the Effective Time, to the
same extent as such Company Employee was entitled, before the Effective Time, to
credit for such service under any similar Company Employee Plans, except to the
extent such credit would result in a duplication of benefits. In addition, and
without limiting the generality of the foregoing: (i) each Company Employee
shall be immediately eligible to participate, without any waiting time, in any
and all New Plans to the extent coverage under such New Plan replaces coverage
under a comparable Company Employee Plan in which such Company Employee
participated immediately before the Effective Time (such plans, collectively,
the "Old Plans"); and (ii) for purposes of each New Plan providing medical,
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dental, pharmaceutical and/or vision benefits to any Company Employee, Parent
shall cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and his or her
covered dependents, and Parent shall cause any eligible expenses incurred by
such employee and his or her covered dependents during the portion of the plan
year of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
(c) Without limited the generality of the foregoing, Parent shall cause
Company Employees whose employment is involuntarily terminated after the
Effective Time to be provided with outplacement services consistent with
Parent's current practices for its employees.
(d) For so long after the Effective Time as the Company maintains the cash
or deferred arrangement under Section 401(k) of the Code in which Company
Employees participate immediately prior to the Effective Time and Parent's
401(k) plans have a loan feature, Parent shall cause the plan to retain the loan
feature of such plan.
SECTION 5.08. Meeting of the Company's Shareholders. The Company shall on a
timely basis take all action necessary in accordance with the IBCL and its
Amended and Restated Articles of Incorporation and Code of By-Laws to convene a
meeting of the Company's shareholders (the "Company Meeting") to vote on the
Merger and on this Agreement. The Board of Directors of the Company shall
recommend that the Company's shareholders vote to approve and adopt this
Agreement and the Merger, and use its reasonable best efforts to solicit from
shareholders of the Company proxies in favor of the Merger and this Agreement
and to take all other action in its judgment necessary and appropriate to secure
the vote of shareholders required by the IBCL to effect the Merger; provided,
however, that the Board of Directors may change or withdraw such recommendation
in any respect and not take such efforts to solicit proxies if the Board of
Directors determines in good faith, based on the advice of outside counsel, that
the failure to take such action would likely result in a violation of the Board
of Directors' fiduciary duties. Nothing herein shall impair the Company's
ability to take and disclose a position contemplated by Rule 14e-2 under the
Exchange Act or otherwise to comply with applicable securities laws.
SECTION 5.09. Proxy Statement. Reasonably promptly after execution of this
Agreement, the Company shall prepare the Proxy Statement, file it with the SEC
under the Exchange Act, and use reasonable best efforts to have the Proxy
Statement cleared by the SEC. Parent, Merger Sub and the Company shall cooperate
with each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent reasonably
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses
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to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Merger
Sub agrees to use its reasonable best efforts, after consultation with the other
parties hereto, to respond promptly to all such comments of and requests by the
SEC. As promptly as practicable after the Proxy Statement has been cleared by
the SEC, the Company shall mail the Proxy Statement to the shareholders of the
Company. Prior to the date of approval of the Merger by the Company's
shareholders, each of the Company, Parent and Merger Sub shall correct promptly
any information provided by it and used in the Proxy Statement that shall have
become false or misleading in any material respect and the Company shall take
all steps necessary to file with the SEC and cleared by the SEC any amendment or
supplement to the Proxy Statement so as to correct the same and to cause the
Proxy Statement as so corrected to be disseminated to the shareholders of the
Company, in each case to the extent required by applicable law.
SECTION 5.10. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with the
NYSE, will not issue any such press release or make any such public statement
prior to such consultation.
SECTION 5.11. Expenses and Fees. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing and filing the Proxy Statement shall be shared
equally by Parent and the Company.
(b) If this Agreement shall be terminated:
(i) by Parent pursuant to clause (f) of Section 7.01, the Company
shall pay to Parent the Company Termination Fee upon termination of this
Agreement;
(ii) by either party pursuant to (g) of Section 7.01 and (A) at any
time after the date of this Agreement and prior to the time of the vote of
the shareholders of the Company an Acquisition Proposal has been made to
the Company and (B) within 12 months of termination the Company enters into
a binding written agreement with respect to such Acquisition Proposal, the
Company shall pay the Company Termination Fee within two business days of
entry into such binding written agreement; or
(iii) by the Company pursuant to clause (e) of Section 7.01, the
Company shall pay the Company Termination Fee upon termination of this
Agreement.
For purposes of the foregoing, "Company Termination Fee" shall mean an
amount equal to $25 million in cash.
SECTION 5.12. Agreement to Cooperate. (a) Subject to the terms and
conditions of this Agreement Parent shall use reasonable best efforts to take,
or cause to be
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taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including to obtain
all necessary or appropriate waivers, consents or approvals of third parties
required in order to preserve material contractual relationships of Parent and
the Company and their respective subsidiaries, all necessary or appropriate
waivers, consents and approvals to effect all necessary registrations, filings
and submissions and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible),
including through all possible appeals. The Company shall cooperate with
Parent's efforts pursuant to the foregoing sentence. In addition, subject to the
terms and conditions herein provided and subject to the fiduciary duties of the
respective boards of directors of the Company and Parent, none of the parties
hereto shall knowingly take or cause to be taken any action which would
reasonably be expected to materially delay or prevent consummation of the
Merger.
(b) In addition to and without limitation of the foregoing, each of Parent
and the Company undertakes and agrees to file as soon as practicable, and in any
event prior to 3 business days after the date hereof, a Notification and Report
Form under the HSR Act with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice (and shall file as
soon as practicable any form or report required by any other Governmental Agency
relate to antitrust matters). Each of Parent and the Company shall (i) respond
as promptly as practicable to any inquiries or requests received from any
domestic or foreign government or governmental agency or authority (each, a
"Governmental Agency") for additional information or documentation, (ii) (A)
promptly notify the other party of any written communication to that party from
any Governmental Agency and, subject to applicable law, permit the other party
to review in advance any proposed written communication to any of the foregoing,
(B) to the extent practicable, permit the other party to review and discuss in
advance and consider in good faith the views of one another in connection with,
any proposed written (or any material oral) communication with any Governmental
Entity; (C) not agree to participate in any substantive meeting or discussion
with any Governmental Agency in respect of any filings, investigation or inquiry
concerning this Agreement or the Merger unless it consults with the other party
in advance and, to the extent permitted by such Governmental Agency, gives the
other party the opportunity to attend and participate thereat, and (D) furnish
the other party with copies of all correspondence, filings and communications
(and memoranda, if any, setting forth the substance thereof) between them and
their affiliates and their respective representatives on the one hand, and any
government or regulatory authority or members or their respective staffs on the
other hand, with respect to this Agreement and the Merger, and (iii) not extend
any waiting period under the HSR Act or enter into any agreement with any
Governmental Agency not to consummate the transactions contemplated by this
Agreement, except with the prior consent of the other parties hereto (which
shall not be unreasonably withheld). Parent shall offer to take (and if such
offer is accepted, commit to take) all steps that it is capable of taking to
avoid or eliminate impediments under any antitrust, competition, or trade
regulation law that may be asserted by any Governmental Agency with respect to
the Merger so as to enable the Effective Time to occur prior to June 30, 2001
(the "Outside Date") and shall defend through litigation on the merits any claim
asserted in any court by any party, including appeals. In addition to and
without limiting the foregoing, Parent shall propose, negotiate,
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offer to commit and effect (and if such offer is accepted, commit to and
effect), by consent decree, hold separate order, or otherwise, the sale,
divestiture or disposition of such assets or businesses of Parent or, effective
as of the Effective Time, the Surviving Corporation, or their respective
subsidiaries or otherwise offer to take or offer to commit to take any action
which it is capable of taking and if the offer is accepted, take or commit to
take such action that limits its freedom of action with respect to, or its
ability to retain, any of the businesses, services or assets of Parent, the
Surviving Corporation or their respective subsidiaries, in order to avoid the
filing of any suit or proceeding or the entry of, or to effect the dissolution
of, any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying the
Effective Time beyond the Outside Date, or which may be necessary to allow the
Effective Time to occur prior to the Outside Date. At the request of Parent, the
Company shall agree to divest, hold separate or otherwise take or commit to take
any action that limits its freedom of action with respect to, or its ability to
retain, any of the businesses, services, or assets of the Company or any of its
subsidiaries, provided that any such action may be conditioned upon the
consummation of the Merger and the transactions contemplated hereby.
Notwithstanding anything to the contrary in this Section 5.12, Parent shall not
be required to take any actions in connection with, or agree to, any hold
separate order, sale, divestiture, or disposition of plants, assets and
businesses of Parent and its Subsidiaries or the Company and its Subsidiaries
that accounted in the aggregate for more than $60,000,000 of the combined sales
of Parent and the Company in fiscal year 1999. The Company and Parent may, as
each deems advisable and necessary, reasonably designate any competitively
sensitive material provided to the other under this Section as "outside counsel
only." Such materials and the information contained therein shall be given only
to the outside legal counsel of the recipient and, in the case of Parent, its
General Counsel (provided that the General Counsel of Parent enter into an
agreement with the Company covenanting that he will not disclose any such
competitively sensitive material to employees, officers or directors of Parent
or its subsidiaries unless express permission is obtained in advance from the
Company) and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient unless express permission is obtained in
advance from the source of the materials (the Company or Parent, as the case may
be) or its legal counsel.
SECTION 5.13. Directors' and Officers' Indemnification. (a) The
indemnification provisions of the Amended and Restated Articles of Incorporation
or Code of By-Laws of the Company as in effect at the Effective Time shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees or
agents of the Company relating to service prior to Effective Time. Parent shall
assume, be jointly and severally liable for, and honor, guaranty and stand
surety for, and shall cause the Surviving Corporation to honor, in accordance
with their respective terms each of the covenants contained in this Section 5.13
without limit as to time.
(b) After the Effective Time for a period of six years from the Effective
Time, each of Parent and the Surviving Corporation shall, to the fullest extent
permitted under applicable law, indemnify and hold harmless, each present and
former director, officer, employee and agent of the Company or any of its
subsidiaries (each, together with
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such person's heirs, executors or administrators, an "Indemnified Party" and
collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any actual or
threatened claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of, relating to or in
connection with any action or omission occurring or alleged to occur prior to
the Effective Time (including, without limitation, acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) or the Merger or the other transactions contemplated by this Agreement
or arising out of or pertaining to the transactions contemplated by this
Agreement to the extent that any such Indemnified Party is indemnified by the
Company pursuant to the Amended and Restated Articles of Incorporation or Code
of By-Laws of the Company, any other indemnification arrangement, the IBCL or
otherwise existing immediately prior to the Effective Time.
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous to the
Indemnified Parties, and which coverages and amounts shall be no less than the
coverages and amounts provided at that time for Parent's directors and officers)
with respect to matters arising on or before the Effective Time; provided,
however, that Parent shall not be required to expend in any year an amount in
excess of 250% of the annual aggregate premiums currently paid by the Company
for such insurance; and provided, further, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy reasonably determined by Parent to have the greatest coverage available
for a cost not exceeding such amount.
(d) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 5.13.
(e) The rights of each Indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such Indemnified Party may have under
the Amended and Restated Articles of Incorporation or Code of By-Laws of the
Company, any other indemnification arrangement, the IBCL or otherwise. The
provisions of this Section 5.13 shall survive the consummation of the Merger and
expressly are intended to benefit each of the Indemnified Parties.
SECTION 5.14. State Takeover Laws. The Board of Directors of the Company
shall, upon the request of Parent, adopt such resolutions as may be necessary to
render any applicable state anti-takeover law inapplicable to the Merger, this
Agreement and the transactions contemplated hereby.
SECTION 5.15. Employee Stock Purchase Plan. The Company shall ensure that
no purchases May be made under the ESPP after the
Effective Time.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the
requisite vote of the shareholders of the Company in accordance with IBCL
(the "Company Shareholder Approval");
(b) (i) the Company Statutory Approvals and the Parent Statutory
Approvals shall have been obtained and (ii) no provision of any applicable
domestic (whether federal, state or local) or foreign law or regulation and
no judgment, injunction, order or decree of a court or governmental agency
or authority of competent jurisdiction shall be in effect which has the
effect of making the Merger illegal or shall otherwise restrain or prohibit
the consummation of the Merger (each party agreeing to use its reasonable
best efforts, including appeals to higher courts, to have any judgment,
injunction, order or decree lifted), except in the case of (i) or (ii) for
any approval the failure of which to obtain or any law or regulation the
violation of which would not, singly or in the aggregate, reasonably be
expected to (i) have a Parent Material Adverse Effect (after giving effect
to the Merger) or (ii) result in a criminal violation (other than a
misdemeanor the only penalty for which is a monetary fine); and
(c) the waiting period applicable to consummation of the Merger under
the HSR Act shall have expired or been terminated.
SECTION 6.02. Conditions to Obligation of the Company to Effect the Merger.
Unless waived by the Company, the obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional condition:
(a) Parent and Merger Sub shall have performed their agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct on and as of the
Effective Time as if made at and as of such date (except to the extent that
such representations and warranties speak as of an earlier date, which
shall be true and correct as of such earlier date), except for such
failures to perform or to be true and correct (without giving effect to any
qualification in such representations and warranties relating to Parent
Material Adverse Effect or knowledge or, except for any representation and
warranty that calls for a list, materiality) that would not reasonably be
expected to have a Parent Material Adverse Effect, and the Company shall
have received a certificate of the Chief Executive Officer, the President
or a Vice President of Parent and of the Chief
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Executive Officer, the President or a Vice President of Merger Sub to that
effect.
SECTION 6.03. Conditions to Obligations of Parent and Subsidiary to Effect
the Merger. Unless waived by Parent and Merger Sub, the obligations of Parent
and Merger Sub to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Effective Time and
the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the Effective Time as if
made at and as of such date (except to the extent that such representations
and warranties speak as of an earlier date, which shall be true and correct
as of such earlier date), except for such failures to perform and to be
true and correct (without giving effect to any qualification in such
representations and warranties relating to Company Material Adverse Effect
or knowledge or, except for any representation and warranty that calls for
a list, materiality) that would not reasonably be expected to have a
Company Material Adverse Effect, and Parent shall have received a
Certificate of the Chief Executive Officer, the President or a Vice
President of the Company to that effect; and
(b) all Company Third Party Approvals shall have been obtained, except
for approvals the failure of which to obtain would not, singly or in the
aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(c) since the date hereof, there shall not have occurred any Company
Material Adverse Effect except for the matters disclosed on the Company
Disclosure Schedule.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the shareholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger has not been
consummated by June 30, 2001; provided that the right to terminate this
Agreement under this clause (b) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement has been the
cause of or resulted in the failure to consummate the Merger by such date;
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(c) by either the Company or Parent if any judgment, injunction, order
or decree of a court or governmental agency or authority of competent
jurisdiction shall restrain or prohibit the consummation of the Merger, and
such judgment, injunction, order or decree shall become final and
nonappealable and was not entered at the request of the terminating party;
(d) by either the Company or Parent, if (x) there has been an
uncurable breach by the other party of any representation or warranty
contained in this Agreement which would reasonably be expected to have a
Company Material Adverse Effect or a Parent Material Adverse Effect, as the
case may be, or (y) there has been an uncurable breach of any of the
covenants or agreements set forth in this Agreement on the part of the
other party, which would reasonably be expected to have a Parent Material
Adverse Effect or a Company Material Adverse Effect, as the case may be;
(e) by the Company, if any person shall have made a bona fide written
offer for an Acquisition Transaction provided that the Board of Directors
determines in good faith (I) that such Acquisition Transaction is a
Superior Proposal and (II) that, based upon the advice of outside counsel,
failure to take such action would likely violate its fiduciary duties under
applicable law; provided, however, that (i) not less than four business
days prior to such termination the Company shall notify Parent of its
intention to terminate this Agreement pursuant to this Section 7.01(e) and
(ii) to the extent reasonably requested by Parent, shall cause its
respective financial and legal advisors to negotiate during such
four-business-day period with Parent concerning adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed
with the transactions contemplated herein on adjusted terms, and (iii) if
Parent makes a bona fide written offer of any such adjustments prior to the
expiration of such four-business-day period, the Board of Directors of the
Company concludes in good faith that the transactions contemplated herein
on such adjusted terms are not more favorable to the shareholders of the
Company than such offer; provided, further, that any termination under this
Section 7.01(e) shall not be effective until the Company has made payment
of any fee required by Section 5.11(b).
(f) by the Parent, if the Board of Directors of the Company shall have
failed to recommend, or shall have withdrawn, adversely modified or
adversely amended in any material respects its approval or recommendation
of the Merger and this Agreement to the Company's shareholders; or
(g) by Parent or the Company if the shareholders of the Company fail
to approve the Merger after a vote is taken at a duly held meeting of the
Company's shareholders called for such purpose or any adjournment or
postponement thereof.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
7.01, this Agreement shall forthwith become void and there shall be no liability
or further obligation on the part of the Company, Parent, Merger Sub or their
respective officers or directors (except as set forth in this section, in the
second sentence Section 5.04 and in Sections 5.11 and 8.05, all of which shall
survive the termination). Nothing in this Section 8.01 shall relieve any party
from liability for any willful or material breach of any covenant or agreement
of such party contained in this Agreement, except that the payment of any fee
pursuant to Section 5.11(b) shall be liquidated damages and shall discharge any
liability of the payer thereof relating to this Agreement.
SECTION 8.02. Non-Survival of Representations and Warranties. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger.
SECTION 8.03. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile 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 Parent or Merger Sub, to:
The Valspar Corporation
1101 South Third Street
Minneapolis, Minnesota 55415
Attention: General Counsel
Facsimile: (612) 375-7313
(b) With copies to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Jay L. Swanson, Esq.
Facsimile: (612) 340-8738
(c) If to the Company, to:
Lilly Industries, Inc.
200 West 103rd Street
Indianapolis, Indiana
Attention: Chief Financial Officer
Facsimile: (312) 814-8710
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(d) with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Steven A. Cohen, Esq.
Facsimile: (212) 403-2000
SECTION 8.04. Interpretation. (a) The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, (ii) "knowledge" shall mean actual
knowledge of the top five executive officers of the Company or the executive
officers of Parent, as the case may be, or the knowledge of a prudent person
acting in such capacity, (iii) "subsidiary" means, with respect to any person,
any corporation which such person has, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through ownership of voting securities, by contract or
otherwise, (iv) "affiliate" has the meaning set forth in Rule 405 of the SEC,
(v) "person" means any individual, corporation, general or limited partnership,
limited liability company, governmental entity, joint venture, state, trust,
association, organization or other entity of any kind or nature, and (vi)
reference to any Article or Section means such Article or Section hereof. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
(b) "Company Material Adverse Effect" means any effect that is materially
adverse to the business, properties, operations, assets, financial condition or
results of operations of the Company and its subsidiaries taken as a whole,
other than any effect relating to (1) the economy or financial markets in
general or the industries in which the Company operates in general, or (2) the
announcement or pendency of the Merger. For purposes of determining whether any
fact or circumstance involves a material adverse effect on the results of
operations of a party, any special transaction charges, costs or expenses
incurred by such party as a result of the consummation of transactions
contemplated by this Agreement shall not be considered.
SECTION 8.05. Miscellaneous. This Agreement (including the documents and
instruments referred to herein) shall not be assigned by operation of law or
otherwise except that Merger Sub may assign its obligations under this Agreement
to any other wholly-owned subsidiary of Parent subject to the terms of this
Agreement. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF INDIANA APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
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SECTION 8.06. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.07. Amendments; Extensions. (a) 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 approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
(b) At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) 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. The failure or delay of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 8.08. Entire Agreement. This Agreement, the Confidentiality
Agreement and the Joint Defense Agreement constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any person
other than the parties hereto any rights or remedies hereunder except for the
provisions of Section 5.13, which is intended for the benefit of the Company's
former and present officers, directors, employees and agents, and the provisions
of Articles I and II, which are intended for the benefit of the Company's
shareholders, including holders of Options, in the event of consummation of the
Merger.
SECTION 8.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 8.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
Name: Douglas W. Huemme
Title: Chairman and Chief Executive Officer
THE VALSPAR CORPORATION
By: /s/ Rolf Engh
Name: Rolf Engh
Title: Senior Vice President
VAL ACQUISITION CORP.
By: /s/ Rolf Engh
Name: Rolf Engh
Title: Senior Vice President
