<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 21, 1999
Armco Inc.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Ohio
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(State or other jurisdiction of incorporation or organization)
1-873-2 31-0200500
- ------------------------ --------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
One Oxford Centre, 301 Grant Street, Pittsburgh, Pennsylvania 15219-1415
- ------------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/255-9800
------------
<PAGE>
Item 5. Other Events.
On May 21, 1999, Armco Inc. ("Armco") announced that it, AK Steel Holding
Corporation ("AK Holding") and AK Steel Corporation ("AK Corp.") had entered
into an Agreement and Plan of Merger, dated as of May 20, 1999 (the "Merger
Agreement"), pursuant to which Armco will be merged with and into AK Corp., a
wholly owned subsidiary of AK Holding (the "Merger"), the separate corporate
existence of Armco will cease and the existing shareholders of Armco will
receive stock of AK Holding and/or cash in accordance with the terms of the
Merger Agreement.
Under the terms of the merger agreement, common shareholders of Armco
will receive .2836 shares of common stock of AK Steel Holding for each common
share of Armco, subject to adjustment.
The exchange ratio is subject to adjustment, within limits of a collar,
based upon the average closing price of AK Steel Holding common stock during
the ten-day trading period ending six days before the meeting at which Armco
shareholders vote on the transaction. Under the terms of the collar, Armco
common shareholders will receive AK Steel Holding shares having a value of
$7.50 per Armco share so long as the average closing price of AK Steel Holding
common stock during that trading period is between $22.00 and $26.44 per
share. If the average closing price of AK Steel Holding common stock during
that period is higher than $26.44 Armco common shareholders will receive AK
Steel Holding shares having a value greater than $7.50 per Armco share, but in
no event more than $8.00 per share.
If the average closing price of AK Steel Holding Corporation common stock
during the trading period is less than $22.00, the exchange ratio will
nonetheless be fixed at .3409 AK Steel Holding shares per Armco common share
(so that the value received by Armco common shareholders would be less than
$7.50). However, in that event, Armco will have the right to terminate the
merger agreement prior to the meeting of the Armco shareholders, in which
event AK Steel may elect to deliver additional shares of its common stock in
order to assure a value of $7.50 per Armco common share. Holders of Armco's
$3.625 Preferred Stock will receive an equal amount of a newly issued series
of preferred stock of AK Steel Holding Corporation having the same terms as
the $3.625 Preferred Stock. Holders of each of the other series of Armco's
outstanding preferred stock would receive cash in an amount equal to the
redemption price of their shares.
Closing of the transaction is expected in the third quarter of 1999,
subject to customary closing conditions, including expiration of the Hart-
Scott-Rodino waiting period and approval by the shareholders of AK Steel and
Armco. It is intended that the merger will qualify as a pooling of interests
for accounting purposes. If, for any reason, the merger cannot be accounted
for as a pooling of interests, AK Steel has reserved the right to pay up to
25% of the amount due Armco common shareholders in cash.
In connection with the approval by the Armco Board of Directors of the
proposed Merger, and as required by the terms of the Merger Agreement, the
Armco Board approved amendments to Armco's Rights Agreement to provide for its
non-application to AK Holding and AK Corp. in the transactions contemplated by
the Merger Agreement.
<PAGE>
The statements herein describing the terms of this amendment are qualified in
their entirety by reference to such amendment, a copy of which is included in
this Report as an Exhibit.
The statements herein describing the terms of the Merger are qualified in
their entirety by reference to the Merger Agreement, a copy of which is
included in this Report as an Exhibit.
Item 7. Information And Exhibits
Exhibit 2 Agreement and Plan of Merger, dated as of May 20, 1999, by and
among Armco Inc., AK Steel Holding Corporation and AK Steel
Corporation.
Exhibit 4 First Amendment to Rights Agreement, dated as of May 26, 1999,
between Armco Inc. and Fifth Third Bank, as Rights Agent.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARMCO INC.
Date: June 1, 1999 By: /s/ Gary R. Hildreth
-----------------------
Name: Gary R. Hildreth
Title: Vice President
<PAGE>
Exhibit 2
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AGREEMENT AND PLAN OF MERGER
dated as of May 20, 1999
among
ARMCO INC.
AK STEEL HOLDING CORPORATION
And
AK STEEL CORPORATION
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<PAGE>
TABLE OF CONTENTS
PAGE
Article I THE MERGER 1
SECTION 1.1 The Merger 1
SECTION 1.2 Effective Time 1
SECTION 1.3 Closing of the Merger 2
SECTION 1.4 Effects of the Merger 2
SECTION 1.5 Certificate of Incorporation and Bylaws 2
SECTION 1.6 Directors 2
SECTION 1.7 Officers 2
Article II CONVERSION OF SECURITIES 3
SECTION 2.1 Conversion of Securities 3
SECTION 2.3 Exchange Funds 9
SECTION 2.4 Exchange and Election Procedures 9
SECTION 2.5 Distributions with Respect to Unsurrendered
Certificates 11
SECTION 2.6 No Further Ownership Rights 11
SECTION 2.7 No Fractional Shares of Parent Common Stock 11
SECTION 2.8 Dissenting Shares 13
SECTION 2.9 Termination of Exchange Fund 14
SECTION 2.10 No Liability 14
SECTION 2.11 Investment of the Exchange Funds 14
SECTION 2.12 Lost Certificates 14
SECTION 2.13 Withholding Rights 15
SECTION 2.14 Stock Transfer Books 15
SECTION 2.15 Affiliates 15
Article III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY 15
SECTION 3.1 Organization and Qualification;
Subsidiaries 16
SECTION 3.2 Capitalization of the Company and Its
Subsidiaries 16
SECTION 3.3 Authority Relative to This Agreement;
Consents and Approvals 18
i
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
SECTION 3.4 SEC Reports; Financial Statements 19
SECTION 3.5 No Undisclosed Liabilities 20
SECTION 3.6 Absence of Changes 21
SECTION 3.7 Information Supplied 22
SECTION 3.8 Consents and Approvals; No Violations 23
SECTION 3.9 No Default 24
SECTION 3.10 Real Property 24
SECTION 3.11 Litigation 25
SECTION 3.12 Company Permits; Compliance with Applicable
Laws 25
SECTION 3.13 Employee Plans 26
SECTION 3.14 Labor Matters 27
SECTION 3.15 Environmental Matters 28
SECTION 3.16 Taxes 31
SECTION 3.17 Absence of Questionable Payments 33
SECTION 3.18 Material Contracts 33
SECTION 3.19 Insurance 34
SECTION 3.20 Insurance Business 34
SECTION 3.21 Intellectual Property 35
SECTION 3.22 Year 2000 36
SECTION 3.23 Opinion of Financial Advisor 37
SECTION 3.24 Brokers 37
SECTION 3.25 Accounting Matters; Tax Treatment 37
SECTION 3.26 Takeover Statutes 37
SECTION 3.27 Amendment to the Company Rights Agreement 37
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUBSIDIARY 38
SECTION 4.1 Organization 38
SECTION 4.2 Capitalization of Parent 38
SECTION 4.3 Authority Relative to This Agreement 39
SECTION 4.4 SEC Reports; Financial Statements 40
ii
<page
TABLE OF CONTENTS
(continued)
PAGE
SECTION 4.5 No Undisclosed Liabilities 41
SECTION 4.6 Absence of Certain Changes or Events 41
SECTION 4.7 Information Supplied 41
SECTION 4.8 Consents and Approvals; No Violations 41
SECTION 4.9 Compliance with Applicable Laws 42
SECTION 4.10 Absence of Questionable Payments 42
SECTION 4.11 Year 2000 43
SECTION 4.12 Opinion of Financial Advisor 43
SECTION 4.13 Brokers 43
SECTION 4.14 Accounting Matters; Tax Treatment 43
Article V COVENANTS RELATED TO CONDUCT OF BUSINESS 44
SECTION 5.1 Conduct of Business of the Company 44
SECTION 5.2 Conduct of Business of Parent 47
SECTION 5.3 Access to Information 48
Article VI ADDITIONAL AGREEMENTS 49
SECTION 6.1 Preparation of S-4 and the Proxy Statement 49
SECTION 6.2 Letter of Accountants 49
SECTION 6.3 Meetings 50
SECTION 6.4 Reasonable Best Efforts 50
SECTION 6.5 No Solicitation; Acquisition Proposals 52
SECTION 6.6 Public Announcements 54
SECTION 6.7 Indemnification; Directors' and Officers'
Insurance 54
SECTION 6.8 Notification of Certain Matters 55
SECTION 6.9 Pooling 56
SECTION 6.10 Tax-Free Reorganization Treatment 56
SECTION 6.11 Employee Matters 57
SECTION 6.12 Affiliate Letters 57
SECTION 6.13 SEC Filings 57
SECTION 6.14 Fees and Expenses 58
iii
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
SECTION 6.15 Listing of Stock 58
SECTION 6.16 Antitakeover Statutes 58
SECTION 6.17 Combined Operations 59
Article VII CONDITIONS TO CONSUMMATION OF THE MERGER 59
SECTION 7.1 Conditions to Each Party's Obligations to
Effect the Merger 59
SECTION 7.2 Conditions to the Obligations of the Parent
and the Operating Company 60
SECTION 7.3 Conditions to the Obligations of the
Company 62
Article VIII TERMINATION; AMENDMENT; WAIVER 63
SECTION 8.1 Termination by Mutual Agreement 63
SECTION 8.2 Termination by Either Parent or the
Company 63
SECTION 8.3 Termination by the Company 64
SECTION 8.4 Termination by Parent 65
SECTION 8.5 Effect of Termination and Abandonment 65
SECTION 8.6 Amendment 67
SECTION 8.7 Extension; Waiver 67
Article IX MISCELLANEOUS 67
SECTION 9.1 Nonsurvival of Representations and
Warranties 67
SECTION 9.2 Entire Agreement; Assignment 67
SECTION 9.3 Notices 68
SECTION 9.4 Governing Law 69
SECTION 9.5 Descriptive Headings 69
SECTION 9.6 Parties in Interest 69
SECTION 9.7 Severability 69
SECTION 9.8 Specific Performance 70
SECTION 9.9 Counterparts 70
SECTION 9.10 Interpretation 70
SECTION 9.11 Definitions 71
SECTION 9.12 Certain Ohio Matters. 72
iv
<PAGE>
Defined Terms Defined on Page
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1998 Stock Incentive Plan 39
Acquiring Person 38
Acquiring Person Statement 49
Acquisition Proposal 71
Antitrust Law 51
APB 16 56
Assumed Stock Option 8
Audit Date 21
Average Parent Stock Price 4
beneficial ownership 71
beneficially own 71
Cash Election 6
Cash Election Notice 6
Cash Election Percentage 6
CERCLA 29
Certificates 9
Certificates of Merger 1
Change of Control Provisions 5
Class A Preferred Stock 4
Class B Preferred Stock 4
Closing 2
Closing Date 2
Code 1
Common Exchange Fund 9
Common Merger Consideration 4
Common Shares Trust 12
Company 1
Company Agreements 23
Company Board 18
Company Common Stock 3
Company Disclosure Schedule 15
Company Option Plans 8
Company Permits 25
Company Preferred Stock 4
Company Required Approvals 23
Company Requisite Vote 18
Company Rights Agreement 17
Company SEC Reports 19
Company Stock Option 8
Company Stockholder Meeting 50
Company Year 2000 Plan 36
Confidentiality Agreement 49
Control Shares Acquisition Law 37
Covered Transactions 37
v
<PAGE>
Defined Terms Defined on Page
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Current Premium 54
Delaware Certificate of Merger 1
DGCL 1
Dissenters Shares 13
Distribution Date 38
DOJ 51
Effective Time 2
Election Form 10
Election Shares Trust 12
Employee Benefit Plan 26
Employee Benefit Plans 26
Environmental Costs and Liabilities 29
Environmental Law 29
Excess Common Shares 12
Excess Election Shares 12
Exchange Act 19
Exchange Agent 9
Exchange Ratio 3
Excluded Shares 3
Expenses 58
Expiration Date 38
Final Conversion Date 5
Financial Advisor 37
FTC 51
GAAP 19
Governmental Entity 23
Guaranty 20
Hazardous Material 29
HSR Act 23
Incentive Program 7
Indemnified Parties 54
Insurance Departments 23
Insurance Laws 35
Insurance Subsidiaries 34
Intellectual Property 36
know 71
knowledge 71
Law 24
Lien 17
Lower Collar 4
Material Adverse Effect 71
Material Contracts 34
Measurement Period 4
Merger 1
Merger Consideration 5
Multiemployer Plan 26
vi
<PAGE>
Defined Terms Defined on Page
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Multiple Employer Plans 26
NNIC 20
NYSE 4
OCI 20
OGCL 1
Ohio Certificate of Merger 1
Operating Company 1
Orders 20
OSHA 29
Parent 1
Parent $3.625 Preferred Stock 5
Parent and Operating Company Agreements 42
Parent Board 40
Parent Common Stock 3
Parent Disclosure Schedule 38
Parent Expenses 66
Parent Preferred Stock 38
Parent Required Approvals 42
Parent Requisite Vote 40
Parent Rights 3
Parent Rights Agreement 3
Parent SEC Reports 40
Parent Stockholder Meeting 50
Parent Year 2000 Plan 43
Permits 35
person 71
Preferred Exchange Fund 9
Preferred Merger Consideration 5
Proxy Statement 22
Real Property Leases 24
Release 29
Remedial Action 29
Representative 10
Rights 38
S-4 22
SAP Financial Statements 19
SEC 1
Securities Act 15
Share 3
Share Issuance 22
Shares 3
Stat 19
subsidiary 71
Superior Proposal 52
Surviving Corporation 1
Takeover Statutes 37
vii
<PAGE>
Defined Terms Defined on Page
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Tax Returns 32
Taxes 32
Termination Date 63
Termination Notice 4
Top-Up Intent Notice 4
Voting Shares 18
WARN Act 28
viii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 20, 1999 is among
ARMCO INC., an Ohio corporation (the "Company"), AK STEEL HOLDING CORPORATION,
a Delaware corporation ("Parent"), and AK STEEL CORPORATION, a Delaware
corporation and a direct wholly owned subsidiary (as hereinafter defined) of
Parent (the "Operating Company").
WHEREAS, the respective Boards of Directors of the Company, Parent and
the Operating Company, and Parent as the sole stockholder of the Operating
Company, each have, in light of and subject to the terms and conditions set
forth herein, resolved to deem this Agreement and the transactions
contemplated hereby, including the Merger (as defined in Section 1.1), taken
together, advisable and fair to, and in the best interests of, their
respective stockholders;
WHEREAS, for federal income Tax (as defined in Section 3.16) purposes, it
is intended that the Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling of interests" under APB 16 (as defined in Section
6.9(a)) and the applicable rules and regulations of the Securities and
Exchange Commission (the "SEC"); and
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and the Operating Company hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. At the Effective Time (as
----------
defined in Section 1.2), upon the terms and subject to the conditions of this
Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Ohio General Corporation Law (the "OGCL"), the Company shall
be merged with and into the Operating Company (the "Merger"). Following the
Merger, the Operating Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall continue its corporate existence under the
DGCL, and the separate corporate existence of the Company shall cease.
SECTION 1.2 Effective Time. Subject to the provisions of
--------------
this Agreement, Parent, the Operating Company and the Company shall cause the
Merger to be consummated by (i) filing a certificate of merger complying with
the DGCL with the Secretary of State of the State of Delaware (the "Delaware
Certificate of Merger") and (ii) filing a certificate of merger (the "Ohio
Certificate of Merger" and, together with the Delaware Certificate of Merger,
the "Certificates of Merger") complying with the
<PAGE>
OGCL with the Secretary of State of the State of Ohio, in each case as soon as
practicable on or after the Closing Date (as defined in Section 1.3). The
Merger shall become effective upon the later of such filings or at such time
thereafter as is provided in the Certificates of Merger (the "Effective
Time").
SECTION 1.3 Closing of the Merger. The closing of the
---------------------
Merger (the "Closing") will take place at a time and on a date (the "Closing
Date") to be specified by the parties, which shall be no later than the tenth
business day (or such fewer number of business days as Parent shall determine
(upon not less than two business days' notice to the Company)) after
satisfaction or waiver of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), at the offices of
Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, unless
another time, date or place is agreed to in writing by the parties hereto.
SECTION 1.4 Effects of the Merger. The Merger shall have
---------------------
the effects set forth in the DGCL and the OGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, immunities, powers and franchises of the
Company and the Operating Company shall vest in the Surviving Corporation, and
all debts, liabilities, obligations and duties of the Company and the
Operating Company shall become the debts, liabilities, obligations and duties
of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws. The
---------------------------------------
Certificate of Incorporation of the Operating Company in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until amended in accordance with such Certificate of
Incorporation and the DGCL. The Bylaws of the Operating Company in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation, until amended in accordance with such Bylaws, the Certificate of
Incorporation and the DGCL.
SECTION 1.6 Directors. The directors of the Operating
---------
Company immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
such director's successor is duly elected or appointed and qualified.
SECTION 1.7 Officers. The officers of the Operating
--------
Company at the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until such officer's
successor is duly elected or appointed and qualified.
2
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Conversion of Securities. At the Effective
------------------------
Time, by virtue of the Merger and without any action on the part of any of the
parties hereto or any holder of shares of Company Common Stock (as defined in
Section 2.1(c)) or Company Preferred Stock (as defined in Section 2.1(d)):
(a) Securities of the Operating Company and Parent.
----------------------------------------------
The issued and outstanding securities of the Operating Company shall remain
outstanding and shall be unchanged as a result of the Merger. The issued and
outstanding securities of Parent shall remain outstanding and shall be
unchanged as a result of the Merger.
(b) Cancellation of Treasury Shares and Parent-Owned
------------------------------------------------
Shares. Each share of Company Common Stock issued and
- ------
outstanding immediately prior to the Effective Time that is owned by the
Company, or by Parent, the Operating Company or any other subsidiary of Parent
(other than shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties) shall automatically be
cancelled and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to
----------------------------------
the provisions of Section 2.1(e), each share of common stock, par value $.01
per share, of the Company (including the associated Rights (as defined in the
Company Rights Agreement referred to in Section 3.2(a)), "Company Common
Stock") issued and outstanding immediately prior to the Effective Time
(individually, a "Share" and collectively, the "Shares") (other than Shares to
be cancelled in accordance with Section 2.1(b) and any Dissenters Shares (as
defined in Section 2.8) (collectively, "Excluded Shares")), shall be converted
into and be exchangeable for the right to receive a fraction (rounded to the
nearest ten thousandth) of a fully paid and non-assessable share of common
stock, par value $.01 per share, of Parent (including the associated rights
(the "Parent Rights") to purchase shares of Series A Junior Preferred Stock
pursuant to the Rights Agreement, dated as of January 23, 1996, between Parent
and The Bank of New York as predecessor to The Fifth Third Bank, as Rights
Agent (the "Parent Rights Agreement"), "Parent Common Stock"), such fraction
to be in the ratio provided below (the "Exchange Ratio"). If the Average
Parent Stock Price (as hereinafter defined) is:
(i) greater than $28.21, the Exchange Ratio shall be $8.00
divided by the Average Parent Stock Price;
(ii) equal to or greater than $26.44 but less than or equal
to $28.21, the Exchange Ratio shall be fixed at 0.2836;
(iii) equal to or greater than $22.00 but less than $26.44,
the Exchange Ratio shall be $7.50 divided by the Average Parent Stock Price;
or
3
<PAGE>
(iv) less than $22.00 (the "Lower Collar"), the Exchange
Ratio shall be fixed at 0.3409;
provided that if the Average Parent Stock Price is less than the Lower Collar,
the Company shall have the right to give written notice to Parent (a
"Termination Notice") that the Company elects to terminate this Agreement.
Any Termination Notice shall be delivered to Parent no later than 5:00 p.m.
New York City time on the first business day following the last day of the
Measurement Period (as hereinafter defined). If the Company delivers a timely
Termination Notice, Parent shall have the right to give written notice to the
Company (the "Top-Up Intent Notice") that Parent elects to increase the
Exchange Ratio such that the product of the Exchange Ratio as so increased and
the Average Parent Stock Price shall equal $7.50. Any Top-Up Intent Notice
shall be delivered to the Company no later than 5:00 p.m. New York City time
on the third business day prior to the date of the Company Stockholder Meeting
(as defined in Section 6.3(a)). As used herein, the "Average Parent Stock
Price" shall mean the average of the per share closing prices of Parent Common
Stock (rounded to the nearest ten thousandth) on the New York Stock Exchange,
Inc. ("NYSE") (as reported in the New York City edition of The Wall Street
Journal or, if not reported thereby, another nationally recognized source)
during the ten consecutive trading day period (the "Measurement Period")
ending on the sixth trading day prior to the Company Stockholder Meeting).
All shares of Parent Common Stock issued pursuant to this Section 2.1(c),
together with the cash (if any) to be delivered pursuant to Section 2.1(e)(i)
and any cash in lieu of fractional shares to be paid in respect of such Parent
Common Stock pursuant to Section 2.7, is referred to herein as the "Common
Merger Consideration".
(d) Conversion of Company Preferred Stock.
-------------------------------------
(i) Each share of Class A Preferred Stock of the Company, no
par value ( "Class A Preferred Stock"), other than the $3.625 Cumulative
Convertible Preferred Stock of the Company (the "$3.625 Preferred Stock"), and
each share of Class B Preferred Stock of the Company, par value $1.00 per
share ( "Class B Preferred Stock" and collectively with the Class A Preferred
Stock, the "Company Preferred Stock") issued and outstanding immediately prior
to the Effective Time (other than shares of Company Preferred Stock held by
the Company, Parent or the Operating Company) shall be converted into and be
exchangeable for the right to receive, at the election of the holder of such
share made in accordance with Section 2.4(b), (x) cash in an amount equal to
the redemption price of such class or series of the Company Preferred Stock,
if such share of Company Preferred Stock were redeemed by the Company
immediately prior to the Effective Time in accordance with the Amended
Articles of Incorporation of the Company (plus an amount equal to the
dividends that would have accrued on such Company Preferred Stock from the
Effective Time through the Final Conversion Date (as hereinafter defined)) or
(y) the number of shares of Parent Common Stock such holder would have been
entitled to receive pursuant to Section 2.1(c) if such holder had converted
such Company Preferred Stock into shares of Company Common Stock immediately
prior to the Effective Time in
4
<PAGE>
accordance with the Amended Articles of Incorporation of the Company, plus a
cash payment in the amount of any accrued and unpaid dividend which such
holder would have been entitled to receive upon the conversion of such shares
of Company Preferred Stock in accordance with the Amended Articles of
Incorporation of the Company if the date of the conversion was the date of the
holder's election to take shares of Parent Common Stock under this clause (y);
provided, that if such holder fails to make such
election in accordance with Section 2.4(b) within 30 days following the
mailing by the Surviving Corporation of a notice to each such holder that the
Effective Time has occurred (such 30th day following such mailing being
referred to herein as the "Final Conversion Date"), each such share of Company
Preferred Stock held by such holder shall be converted into and be
exchangeable for the right to receive cash in accordance with clause (x) of
this Section 2.1(d)(i).
(ii) Subject to the provisions of Section 2.1(e), each share
of $3.625 Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares of $3.625 Preferred Stock held by the
Company, Parent or the Operating Company) shall be converted into and be
exchangeable for the right to receive one share of Parent Preferred Stock (as
defined in Section 4.2(a)), designated as Parent's $3.625 Cumulative
Convertible Preferred Stock ( "Parent $3.625 Preferred Stock"), which stock
shall have the same rights, preferences, privileges, qualifications,
limitations and restrictions as the $3.625 Preferred Stock, except that,
subject to the provisions of paragraph 8 of Subdivision E of Section 2 of
Article Fourth of the Amended Articles of Incorporation of the Company (the
"Change of Control Provisions"), the rate at which the $3.625 Preferred Stock
of the Company is convertible into Company Common Stock immediately prior to
the Effective Time shall be multiplied by the Exchange Ratio to determine the
initial rate at which Parent $3.625 Preferred Stock shall be convertible into
Parent Common Stock following the Effective Time.
The cash to be delivered pursuant to Section 2.1(d)(i) and, if
applicable, Section 2.1(e)(ii), the shares of Parent $3.625 Preferred Stock to
be issued pursuant to Section 2.1(d)(ii) and, if applicable, the shares of
Parent Common Stock to be issued pursuant to Section 2.1(d)(i) or 2.1(e)(ii),
together with any cash in lieu of fractional shares to be paid in respect of
such Parent Common Stock pursuant to Section 2.7, is referred to herein as the
"Preferred Merger Consideration" and, together with the Common Merger
Consideration, is referred to as the "Merger Consideration".
(e) Parent Cash Election. Notwithstanding the
--------------------
provisions of Sections 2.1(c) and 2.1(d)(ii), if Parent's independent
accountants do not deliver the letter contemplated by Section 6.9(b) hereof as
of the date the S-4 (as defined in Section 3.7) is declared effective:
5
<PAGE>
(i) Parent shall have the right (the "Cash Election"), by written
notice (the "Cash Election Notice") to the Company delivered prior to the date
the S-4 is declared effective, to cause up to 25% of the Shares to be
converted into the right to receive cash in lieu of Parent Common Stock. The
Cash Election Notice shall specify the percentage (expressed as a fraction,
the "Cash Election Percentage") of the Shares to be so converted into cash.
If a Cash Election Notice is delivered, each Share (other than Excluded
Shares) shall be converted into and be exchangeable for the right to receive
(x) cash in an amount equal to the product of (A) the Per Share Value (as
hereunder defined) and (B) the Cash Election Percentage and (y) a fraction of
a share of Parent Common Stock equal to the product of (C) the Exchange Ratio
and (D) one (1) minus the Cash Election Percentage. For purposes of this
Section 2.1(e)(i), "Per Share Value" shall mean: if the Average Parent Stock
Price is (q) greater than $28.21, $8.00; (r) equal to or greater than $26.44
but less than or equal to $28.21, the Average Parent Stock Price multiplied by
the Exchange Ratio; (s) equal to or greater than $22.00 but less than $26.44,
$7.50; or (t) less than $22.00, the Average Parent Stock Price multiplied by
the Exchange Ratio (unless the Company gives a Termination Notice and Parent
gives a Top-Up Intent Notice, in which case the Per Share Value shall be
$7.50); and
(ii) each share of $3.625 Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than shares of $3.625 Preferred
Stock held by the Company, Parent or the Operating Company) shall be converted
into and be exchangeable for the right to receive, at the election of the
holder of such share made in accordance with Section 2.4(b), (x) cash in an
amount equal to the redemption price of the $3.625 Preferred Stock, if such
share of $3.625 Preferred Stock were redeemed by the Company immediately prior
to the Effective Time in accordance with the Amended Articles of Incorporation
of the Company (plus an amount equal to the dividends that would have accrued
on such $3.625 Preferred Stock from the Effective Time through the Final
Conversion Date) or (y) the greater of (A) the number of shares of Parent
Common Stock such holder would have been entitled to receive pursuant to
Section 2.1(c) if such holder had converted such $3.625 Preferred Stock into
shares of Company Common Stock immediately prior to the Effective Time in
accordance with the Amended Articles of Incorporation of the Company and (B)
the number of shares of Parent Common Stock such holder would have been
entitled to receive pursuant to Section 2.1(c) if such holder had converted
such $3.625 Preferred Stock into shares of Company Common Stock pursuant to
the Change of Control Provisions plus a cash payment in the amount of any
accrued and unpaid dividend which such holder would have been entitled to
receive upon the conversion of such $3.625 Preferred Stock in accordance with
the Amended Articles of Incorporation of the Company if the date of conversion
was the date of the holder's election to take shares of Parent Common Stock
under this clause (y); provided, that if
such holder fails to make such election in accordance with Section 2.4(b)
within 45 days following the mailing by the Surviving Corporation of a notice
to each such holder that the Effective Time has occurred, each share of $3.625
Preferred Stock held by such holder shall be converted into and be
exchangeable for the right to receive cash in accordance with clause (x) of
this Section 2.1(e)(ii).
6
<PAGE>
(f) Certain Adjustments. If between the date of this
-------------------
Agreement and the Effective Time the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or a different class
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or any similar
event, the amount of shares of Parent Common Stock constituting the Exchange
Ratio shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares or such similar event.
(g) Tax Opinion Adjustment. If, based on the Merger
----------------------
Consideration payable pursuant to Sections 2.1(c) and 2.1(d), and taking into
account Section 2.1(e), the tax opinions referred to in Sections 7.2(d) and
7.3(d) hereof cannot be delivered as a result of the Merger potentially
failing to satisfy continuity of interest requirements under applicable
Federal income tax principles relating to reorganizations under Section 368(a)
of the Code (as reasonably determined by Weil, Gotshal & Manges LLP and Arnold
& Porter, such determination to be made (v) assuming that each share of
Company Preferred Stock, other than the $3.625 Preferred Stock and shares of
Company Preferred Stock held by the Company, Parent or the Operating Company,
shall be converted into cash, (w) if the provisions of Section 2.1(e) are
applicable, by taking into account the Cash Election Percentage and assuming
that each share of $3.625 Preferred Stock, other than shares of $3.625
Preferred Stock held by the Company, Parent or the Operating Company, shall be
converted into cash (x) taking into account Dissenters Shares and cash issued
in lieu of fractional shares, if any, (y) using the Closing Date Price (as
hereinafter defined) as the measure of value of the shares of Parent Common
Stock issued as Merger Consideration and (z) requiring that the total value of
such Parent Common Stock issued as Merger Consideration represent no less than
45% of the total consideration issued and to be issued in the Merger to all
holders of Shares), then the Common Merger Consideration shall be adjusted by
reducing, to the extent necessary to enable the tax opinions to be rendered,
the amount of cash to be delivered to the holders of Shares, for each Share
converted, and in lieu thereof delivering to such holders such number of
shares of Parent Common Stock equal to (x) the amount by which the cash
component of the Common Merger Consideration is reduced, pursuant to this
clause, in order to enable the rendering of the tax opinions, divided by (y)
the Closing Date Price.
For purposes hereof, the "Closing Date Price" of a share of Parent Common
Stock shall be the closing sales price of Parent Common Stock as reported on
the NYSE as of the close of the trading day immediately prior to the Closing
Date.
SECTION 2.2 Stock Options
-------------
(a) As soon as practicable following the date of this Agreement,
Parent and the Company (or, if appropriate, any committee of the Board of
Directors of the Company administering Company's 1988 Stock Option Plan, 1993
Long-Term Incentive Plan, Amended 1993 Long-Term Incentive Plan, 1996
Incentive Plan and 1997-1999 Long-Term Incentive Program (the "Incentive
Program") (collectively, the "Company
7
<PAGE>
Option Plans")) shall take such action as may be required to effect the
following provisions of this Section 2.2(a). Subject to the provisions of
Section 16 of the Exchange Act (as defined in Section 3.4), as of the
Effective Time each option to purchase Shares pursuant to the Company Option
Plans (a "Company Stock Option") which is then outstanding shall be converted
into an option (or a new substitute option shall be granted) (an "Assumed
Stock Option") to purchase the number of shares of Parent Common Stock
(rounded up to the nearest whole share) equal to (x) the number of Shares
subject to such option multiplied by (y) the Exchange Ratio, at an exercise
price per share of Parent Common Stock (rounded down to the nearest penny)
equal to (A) the former exercise price per share of Company Common Stock under
such option immediately prior to the Effective Time divided by (B) the
Exchange Ratio; provided, however, that in the case of any Company Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code, the conversion formula shall be adjusted, if
necessary, to comply with Section 424(a) of the Code. Except as provided
above, the Assumed Stock Options shall be subject to the same terms and
conditions (including expiration date and exercise provisions) as were
applicable to the converted Company Stock Option immediately prior to the
Effective Time. The Company (including any committee of the Board of
Directors administering the Company Option Plans) shall take such action as
may be necessary to provide that the vesting of the exercisability of any
Company Stock Option will not be accelerated through the Merger or this
Agreement, except as otherwise provided in the Company Option Plans or in any
agreement in effect on the date hereof between the Company and any holder of a
Company Stock Option.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Company Option Plans and
the agreements evidencing the grants of such Company Stock Options and that
such Company Stock Options and agreements shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 2.2)
after giving effect to the Merger and the provisions set forth above. Parent
shall comply with the terms of the Company Option Plans.
(c) Parent shall take such actions as are reasonably necessary for
the conversion of the Company Option Plans or the Company Stock Options
pursuant to this Section 2.2, including the reservation, issuance and listing
of Parent Common Stock as is necessary to effectuate the transactions
contemplated by this Section 2.2. Parent shall prepare and file with the SEC,
and use its reasonable best efforts to cause to become effective, on or prior
to the date of the Effective Time a registration statement on Form S-8 or
other appropriate form with respect to shares of Parent Common Stock subject
to the Assumed Stock Options and shall maintain the effectiveness of such
registration statement or registration statements covering such Assumed Stock
Options (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Assumed Stock Options remain
outstanding. With respect to those individuals, if any, who subsequent to the
Effective Time will be subject to the reporting requirements under Section
16(a) of the Exchange Act, where applicable, Parent shall use all reasonable
8
<PAGE>
efforts to administer the Company Option Plans assumed pursuant to this
Section 2.2 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the applicable Company Option Plan complied with
such Rule prior to the Merger.
SECTION 2.3 Exchange Funds.
--------------
(a) Prior to the Effective Time, Parent shall appoint a commercial
bank or trust company reasonably acceptable to the Company to act as exchange
agent hereunder for the purpose of exchanging Shares for the Common Merger
Consideration and Company Preferred Stock for the Preferred Merger
Consideration (the "Exchange Agent").
(b) At or prior to the Effective Time, Parent shall deposit with
the Exchange Agent, in trust for the benefit of holders of Shares,
certificates representing the Parent Common Stock issuable pursuant to Section
2.1 in exchange for outstanding Shares. Parent agrees to make available to
the Exchange Agent from time to time as needed, cash sufficient to pay cash in
lieu of fractional shares pursuant to Section 2.7 and any dividends and other
distributions pursuant to Section 2.5. Any cash and certificates of Parent
Common Stock deposited with the Exchange Agent pursuant to this Section 2.3(b)
shall hereinafter be referred to as the "Common Exchange Fund."
(c) At or prior to the Effective Time, Parent shall deposit with
the Exchange Agent, in trust for the benefit of holders of the Company
Preferred Stock, cash payable pursuant to Section 2.1(d)(i) or 2.1(e)(ii) in
exchange for outstanding shares of Company Preferred Stock, and certificates
representing the Parent Common Stock and/or Parent $3.625 Preferred Stock
issuable pursuant to Section 2.1(d). Parent agrees to make available to the
Exchange Agent from time to time as needed, cash sufficient to pay cash in
lieu of fractional shares pursuant to Section 2.7 and any dividends and other
distributions pursuant to Section 2.5. Any cash and certificates of Parent
Common Stock deposited with the Exchange Agent pursuant to this Section 2.3(c)
shall hereinafter be referred to as the "Preferred Exchange Fund."
SECTION 2.4 Exchange and Election Procedures.
--------------------------------
(a) Subject to Section 2.4(b), as soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares or
outstanding shares of Company Preferred Stock (the "Certificates") (i) a
letter of transmittal which shall specify that delivery shall be effective,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent, and which letter shall be in
customary form and have such other provisions as Parent may reasonably
specify; and (ii) instructions for effecting the surrender of such
Certificates in exchange for the applicable Merger Consideration. Upon
surrender of a Certificate to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the
Exchange Agent, the holder
9
<PAGE>
of such Certificate shall be entitled to receive in exchange therefor, as
applicable, (A) shares of Parent Common Stock or Parent $3.625 Preferred Stock
representing, in the aggregate, the whole number of shares that such holder
has the right to receive pursuant to Section 2.1 (after taking into account
all Shares or shares of Company Preferred Stock then held by such holder) and
(B) a check in the amount equal to the cash that such holder has the right to
receive pursuant to the provisions of this Article II, including cash in lieu
of any fractional shares of Parent Common Stock pursuant to Section 2.7 and
any dividends and other distributions pursuant to Section 2.5. No interest
will be paid or will accrue on any cash payable pursuant to Section 2.1, 2.5
or 2.7. In the event of a transfer of ownership of Company Common Stock or
Company Preferred Stock which is not registered in the transfer records of the
Company, shares of Parent Common Stock evidencing, in the aggregate, the
proper number of shares of Parent Common Stock or Parent $3.625 Preferred
Stock, a check in the proper amount of cash in lieu of any fractional shares
of Parent Common Stock pursuant to Section 2.7 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.5, may be
issued with respect to such Shares or shares of Company Preferred Stock to
such a transferee if the Certificate representing such Shares or shares of
Company Preferred Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer Taxes have been paid.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
a Certificate representing Company Preferred Stock, in addition to the letter
of transmittal and instructions referred to in Section 2.4(a), an election
form in such form as Parent and Company shall mutually agree (each, an
"Election Form"), together with instructions for effecting the election to be
made by such holder pursuant to Section 2.1(d) or 2.1(e). Each Election Form
shall permit the holder (or the beneficial owner through appropriate and
customary documentation and instructions) to choose to receive the alternate
forms of consideration set forth in Section 2.1(d) or 2.1(e) for all (but not
less than all) such holder's shares of Company Preferred Stock. Holders of
record of shares of Company Preferred Stock who hold such shares as nominees,
trustees or in other representative capacities (each, a "Representative") may
submit multiple Election Forms, provided that such Representative certifies
that each such Election Form covers all of the shares of Company Preferred
Stock held by such Representative for a particular beneficial owner. Election
Forms in respect of Company Preferred Stock (other than $3.625 Preferred
Stock) must be properly completed and submitted on or before 5:00 p.m. (New
York City time) on the 30th day following the mailing of the Election Form and
accompanying instructions by the Exchange Agent. Election Forms in respect of
$3.625 Preferred Stock must be properly completed and submitted on or before
5:00 p.m. (New York City time) on the 45th day following the mailing of the
Election Form and accompanying instructions by the Exchange Agent. An
Election Form shall be deemed properly completed only if accompanied by one or
more Certificates and the letter of transmittal contemplated by Section
2.4(a). Any Election Form may be revoked or changed by the person submitting
such Election Form on or prior to the applicable election deadline.
10
<PAGE>
Parent will have the discretion, which it may delegate in whole or in
part to the Exchange Agent, to determine whether Election Forms have been
properly completed, signed and submitted or revoked and to disregard
immaterial defects in forms of election. If Parent (or the Exchange Agent)
shall determine that any purported Election was not properly made, such
purported Election shall have no force or effect. The decision of Parent (or
the Exchange Agent) in all such matters shall be conclusive and binding.
Neither Parent nor the Exchange Agent will be under any obligation to notify
any person of any defect in an Election Form submitted to the Exchange Agent.
SECTION 2.5 Distributions with Respect to Unsurrendered
-------------------------------------------
Certificates. No dividends or other distributions declared or
- -----------
made with respect to shares of Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate representing Shares of Company Common Stock with respect to the
shares of Parent Common Stock that such holder would be entitled to receive
upon surrender of such Certificate and no cash payment in lieu of fractional
shares of Parent Common Stock shall be paid to any such holder pursuant to
Section 2.7 until such holder shall surrender such Certificate in accordance
with Section 2.4. Subject to the effect of applicable Laws (as defined in
Section 3.9), following surrender of any such Certificate, there shall be paid
to such holder of shares of Parent Common Stock issuable in exchange therefor,
without interest, (a) promptly after the time of such surrender, the amount of
any cash payable in lieu of fractional shares of Parent Common Stock to which
such holder is entitled pursuant to Section 2.7 and the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock, and (b) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares
of Parent Common Stock.
SECTION 2.6 No Further Ownership Rights. From and
---------------------------
after the Effective Time, dividends shall cease to accrue on the Company
Preferred Stock. All shares of Parent Common Stock and Parent $3.625
Preferred Stock issued and cash paid upon conversion of the Shares and the
shares of Company Preferred Stock in accordance with the terms of this Article
II (including any cash paid pursuant to Sections 2.5 and 2.7) shall be deemed
to have been issued or paid in full satisfaction of all rights pertaining to
the Shares and the shares of Company Preferred Stock.
SECTION 2.7 No Fractional Shares of Parent Common
-------------------------------------
Stock.
-----
(a) No certificates or scrip of shares of Parent Common Stock
representing fractional shares of Parent Common Stock or book-entry credit of
the same shall be issued upon the surrender for exchange of Certificates and
such fractional share interests will not entitle the owner thereof to vote or
to have any rights of a shareholder of Parent or a holder of shares of Parent
Common Stock.
11
<PAGE>
(b) Notwithstanding any other provision of this Agreement, each
holder of Shares or Company Preferred Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount and in the manner described below:
(i) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (A) the number of full
shares of Parent Common Stock that would be issuable pursuant to Section
2.1(c) but for the operation of this Section 2.7 over (B) the aggregate number
of full shares of Parent Common Stock to be distributed to holders of Shares
giving effect to the operation of this Section 2.7 (such excess being herein
called the "Excess Common Shares"). Following the Effective Time, the
Exchange Agent, as agent for the holders of Shares, shall sell the Excess
Common Shares at then prevailing prices on the NYSE, all in the manner
provided in subsection (iii) of this Section 2.7.
(ii) As promptly as practicable following the 30-day
election period referred to in Section 2.1(d)(i) and the 45-day election
period referred to in Section 2.1(e)(ii), the Exchange Agent shall determine
the excess of (A) the number of full shares of Parent Common Stock that would
be issuable pursuant to Section 2.1(d) but for the operation of this Section
2.7 over (B) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Shares giving effect to the operation of this
Section 2.7 (such excess being herein called the "Excess Election Shares").
Following the applicable election period, the Exchange Agent, as agent for the
holders of the Company Preferred Stock, shall sell the Excess Election Shares
at then prevailing prices on the NYSE, all in the manner provided in
subsection (iii) of this Section 2.7.
(iii) The sale of the Excess Common Shares and Excess
Elected Shares by the Exchange Agent shall be executed on the NYSE through one
or more member firms of the NYSE and shall be executed in round lots to the
extent practicable. The Exchange Agent shall use all reasonable efforts to
complete the sale of the Excess Common Shares as promptly following the
Effective Time and the Excess Election Shares following the applicable
election period as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in
light of prevailing market conditions. Until the net proceeds of such sale or
sales have been distributed to the holders of Shares or the holders of the
Company Preferred Stock, the Exchange Agent will hold such proceeds in trust
for such holders (the "Common Shares Trust" and the "Election Shares Trust,"
respectively). The Exchange Agent shall determine the portion of the Common
Shares Trust to which each holder of Shares shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of fractional
share interests to which such holder is entitled (after taking into account
all Shares held at the Effective Time by such holder) and the
12
<PAGE>
denominator of which is the aggregate amount of fractional share interests to
which all holders of Shares are entitled. The Exchange Agent shall determine
the portion of the Election Shares Trust to which each applicable holder of
shares of Company Preferred Stock shall be entitled, if any, by multiplying
the amount of the aggregate net proceeds comprising the Election Shares Trust
by a fraction, the numerator of which is the amount of fractional share
interests to which such holder of applicable Company Preferred Stock is
entitled (after taking into account all Company Preferred Stock held at the
end of the applicable election period by such holder) and the denominator of
which is the aggregate amount of fractional share interests to which all
holders of applicable Company Preferred Stock are entitled.
(iv) Notwithstanding the provisions of subsections (i)
and (ii) of this Section 2.7, Parent may elect prior to the Effective Time, in
lieu of the issuance and sale of Excess Common Shares and Excess Election
Shares and the making of the payments contemplated in such subsections, to pay
to the Exchange Agent an amount sufficient for the Exchange Agent to pay each
holder of Shares and Company Preferred Stock an amount in cash equal to the
product of (A) such fractional part of a share of Parent Common Stock
multiplied by (B) the closing price on the NYSE (as reported in the New York
City edition of The Wall Street Journal or, if not reported thereby, another
nationally recognized source) for a share of Parent Common Stock on the date
of the Effective Time, and, in such case, all references herein to the cash
proceeds of the sale of the Excess Common Shares, Excess Election Shares and
similar references shall be deemed to mean and refer to the payments
calculated as set forth in this subsection (iv). In such event, Excess Common
Shares and Excess Election Shares shall not be issued or otherwise transferred
to the Exchange Agent pursuant to Section 2.7.
(v) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Shares with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding (and without interest), to such
holders.
SECTION 2.8 Dissenting Shares. Notwithstanding
-----------------
anything in this Agreement to the contrary, shares of Company Common Stock and
Company Preferred Stock outstanding immediately prior to the Effective Time
and held by a holder who has not voted in favor of the Merger and who has
exercised dissenters' rights in respect of such shares of Company Common Stock
or Company Preferred Stock in accordance with the OGCL ( "Dissenters Shares")
shall not be converted into a right to receive the applicable Merger
Consideration unless such holder fails to perfect or withdraws or otherwise
loses his dissenters' or objecting shareholders' rights. Dissenters Shares
shall be treated in accordance with Section 1701.85 of the OGCL. If after the
Effective Time such holder fails to perfect or withdraws or otherwise loses
his right to demand the payment of fair value for Dissenters Shares under the
OGCL, such shares of Company Common Stock or Company Preferred Stock, as the
case may be, shall be treated as if they had been converted as of the
Effective Time into a right to receive the applicable
13
<PAGE>
Merger Consideration without interest. The Company shall give Parent prompt
notice of any demands received by the Company for the exercise of dissenters'
rights with respect to shares of Company Common Stock or Company Preferred
Stock and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to, or
settle or offer to settle, any such demands. In the event any amounts shall
become due and payable in respect of such demands, such amounts shall be paid
by the Company.
SECTION 2.9 Termination of Exchange Fund. Any portion
----------------------------
of the Common Exchange Fund or the Preferred Exchange Fund which remains
undistributed to the holders of Certificates for six months after the
Effective Time (and any portion of either Exchange Fund that is not required
to be distributed by reason of stockholders' elections (or the absence
thereof) pursuant to Section 2.1) shall be delivered to Parent or otherwise on
the instruction of Parent, and any holders of the Certificates who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and Parent for the Merger Consideration exchangeable for
such Certificates to which such holders are entitled pursuant to Section 2.1
and Section 2.4, any cash in lieu of fractional shares of Parent Common Stock
to which such holders are entitled pursuant to Section 2.7 and any dividends
or distributions with respect to shares of Parent Common Stock to which such
holders are entitled pursuant to Section 2.5. Any such portion of the Common
Exchange Fund or the Preferred Exchange Fund remaining unclaimed by holders of
Shares or shares of Preferred Stock five years after the Effective Time (or
such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any Governmental Entity (as defined
in Section 3.8)) shall, to the extent permitted by Law, become the property of
Parent, free and clear of any claims or interest of any person previously
entitled thereto.
SECTION 2.10 No Liability. None of Parent, the
-----------
Operating Company, the Company, the Surviving Corporation or the Exchange
Agent shall be liable to any person in respect of any Merger Consideration
from the Common Exchange Fund or the Preferred Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
SECTION 2.11 Investment of the Exchange Funds. The
--------------------------------
Exchange Agent shall invest any cash included in the Common Exchange Fund or
the Preferred Exchange Fund as directed by Parent on a daily basis. Any
interest and other income resulting from such investments shall promptly be
paid to Parent, and any loss will be restored promptly by Parent.
SECTION 2.12 Lost Certificates. If any Certificate
-----------------
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made
14
<PAGE>
against it with respect to such Certificate, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration with respect to the Shares formerly represented thereby,
any cash in lieu of fractional shares of Parent Common Stock and unpaid
dividends and distributions on shares of Parent Common Stock deliverable in
respect thereof, pursuant to this Agreement.
SECTION 2.13 Withholding Rights. Each of the
------------------
Surviving Corporation and Parent shall be entitled to deduct and withhold from
the Merger Consideration otherwise payable pursuant to this Agreement to any
holder of Shares or shares of Preferred Stock of such amounts as it is
required to deduct and withhold with respect to the making of such payment
under the Code and the rules and regulations promulgated thereunder, or any
provision of a Tax Law. To the extent that amounts are so withheld by the
Surviving Corporation or Parent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect to which such deduction and withholding was
made by the Surviving Corporation or Parent, as the case may be.
SECTION 2.14 Stock Transfer Books. The stock transfer
--------------------
books of the Company shall be closed immediately upon the Effective Time and
there shall be no further registration of transfers of Shares thereafter on
the records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be converted
into the Merger Consideration with respect to the Shares or shares of Company
Preferred Stock formerly represented thereby, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled
pursuant to Section 2.7 and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.5.
SECTION 2.15 Affiliates. Notwithstanding anything to
----------
the contrary herein, no shares of Parent Common Stock, Parent $3.625 Preferred
Stock or cash shall be delivered to a person who may be deemed an "affiliate"
of the Company in accordance with Section 6.12 hereof for purposes of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"), or for
purposes of qualifying the Merger for "pooling of interests" under APB 16 and
the applicable SEC rules and regulations, until such person has executed and
delivered to Parent the written agreement contemplated by Section 6.12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company
to Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") (each Section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), the
Company hereby represents and warrants to each of Parent and the Operating
Company as follows:
15
<PAGE>
SECTION 3.1 Organization and Qualification;
------------------------------
Subsidiaries
------------
(a) The Company and each of its subsidiaries is a corporation or
legal entity duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its businesses as now conducted and proposed by the
Company to be conducted.
(b) Section 3.1 of the Company Disclosure Schedule sets forth a
list of all subsidiaries of the Company. Except as listed in Section 3.1 of
the Company Disclosure Schedule, the Company does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
(c) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing does not
and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(d) The Company has heretofore delivered to Parent accurate and
complete copies of the articles or certificate of incorporation and codes of
regulations, bylaws or other similar organizational documents, as currently in
effect, of each of the Company and each of its subsidiaries.
SECTION 3.2 Capitalization of the Company and Its
-------------------------------------
Subsidiaries.
------------
(a) The authorized capital stock of the Company consists of (i)
150,000,000 shares of Company Common Stock, and (ii) 6,697,231 shares of Class
A Preferred Stock and 5,000,000 shares of Class B Preferred Stock. As of
April 30, 1999, (i) 108,704,326 shares of Company Common Stock were issued and
outstanding (of which 2,028,873 shares of Company Common Stock were
"Restricted Shares" under the Company's benefit plans); (ii) 5,261,520 shares
of Company Common Stock were subject to outstanding options issued pursuant to
the Company's benefit plans; (iii) 22,681,261 shares of Company Common Stock
were reserved for issuance upon conversion of Company Preferred Stock; (iv)
34,081 shares of Company Common Stock were reserved for issuance pursuant to
the outstanding stock unit grants under the 1995 Directors Stock Purchase and
Deferred Compensation Plan; and (v) no shares of Company Common Stock were
issued and held in the treasury of the Company. As of the date hereof, (i)
1,697,231 shares of Class A $2.10 Cumulative Convertible Preferred Stock,
2,700,000 shares of Class A $3.625 Cumulative Convertible Preferred Stock, and
no shares of Participating Preferred Stock, are issued and outstanding and
990,000 shares of Class B $4.50 Cumulative Convertible Preferred Stock are
issued and outstanding; and (ii) 750,000 shares of Participating Preferred
Stock are reserved for issuance upon exercise of the rights pursuant to the
Rights Agreement (as hereinafter defined). Section
16
<PAGE>
3.2 of the Company Disclosure Schedule sets forth a complete and correct list
of all holders of options to acquire Shares, including such person's name, the
number of options (vested, unvested and total) held by such person and the
exercise price for each such option. All the outstanding shares of Company
Common Stock are, and all shares of Common Stock issuable upon the exercise of
outstanding options described in the third sentence of this Section 3.2 will
be, when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid and non-assessable. Except as set forth above or in
Section 3.2(a) of the Company Disclosure Schedule and except for the Company's
obligations under the Rights Agreement, dated as of February 23, 1996 (the
"Company Rights Agreement"), between the Company and The Fifth Third Bank, as
rights agent, and except for the transactions contemplated by this Agreement,
(1) there are no shares of capital stock or other voting securities of the
Company authorized, issued or outstanding, (2) there are no outstanding
options, warrants, calls, preemptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock or other voting securities of the Company or
any of its subsidiaries, obligating the Company or any of its subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock, voting securities or other equity interest in the Company or
any of its subsidiaries or securities convertible into or exchangeable for
such shares or equity interests, or obligating the Company or any of its
subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment, or (3)
there are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Shares or other
capital stock of the Company or any subsidiary or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
subsidiary or any other entity other than loans to Subsidiaries in the
ordinary course of business. There are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company or any of
its subsidiaries is a party or by which it is bound relating to the voting of
any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear
of any Lien (as hereinafter defined) or any other limitation or restriction
(including any restriction on the right to vote, transfer or sell the same,
except as may be provided as a matter of Law) except for (i) any limitations
under the Orders (as defined in Section 3.4(b) hereof) and (ii) any directors'
qualifying shares. There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire
from the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the
issuance or sale, directly or indirectly of, any capital stock or other
ownership interests in, or any other securities of, any subsidiary of the
Company. There are no outstanding contractual obligations of the Company or
its subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any subsidiary of the
Company. For purposes of this Agreement, "Lien" means, with respect to any
asset (including,
17
<PAGE>
without limitation, any security) any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
SECTION 3.3 Authority Relative to This Agreement;
------------------------------------
Consents and Approvals.
----------------------
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger and
this Agreement, the Company Requisite Vote (as hereinafter defined)). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by each of
Parent and the Operating Company, constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.
(b) The Board of Directors of the Company (the "Company Board") has
duly and validly authorized the execution and delivery of this Agreement and
approved the consummation of the transactions contemplated hereby, and taken
all corporate actions required to be taken by the Company Board for the
consummation of the transactions, including the Merger, contemplated hereby
and has resolved (i) to deem this Agreement and the transactions contemplated
hereby, including the Merger, taken together, advisable and fair to, and in
the best interests of, the Company and its stockholders; and (ii) to recommend
that the stockholders of the Company approve and adopt this Agreement. The
Company Board has directed that this Agreement be submitted to the
stockholders of the Company for their approval at a meeting to be held for
that purpose. The affirmative vote of the holders of a majority of the voting
stock of the Company (which is comprised solely of the Company Common Stock
and the Class A Preferred Stock (collectively, the "Voting Shares")) (voting
as a single class) as of the record date for the Company Stockholders Meeting,
and the affirmative vote of the holders of a majority of the Voting Shares,
excluding such shares which are Interested Shares (as defined by Section
1701.01(CC) of the OGCL) of the Company (voting as a single class) (together,
the "Company Requisite Vote") are the only votes of the holders of any class
or series of capital stock of the Company necessary to adopt this Agreement
and approve the transactions contemplated hereby, including the Merger. No
other vote of the stockholders of the Company is required by law, the articles
of incorporation or the code of regulations of the Company or otherwise in
order for the Company to approve and adopt this Agreement or to consummate the
transactions contemplated hereby. The Company Board has also approved this
Agreement and the transactions contemplated hereby, including the Merger, for
the purposes of Chapter 1704 of the Ohio Revised Code if and to the extent
that Chapter 1704 is applicable thereto.
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SECTION 3.4 SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and documents
with SEC since January 1, 1996, each of which has complied in all material
respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), each as in
effect on the dates such forms, reports and documents were filed. The Company
has heretofore delivered to Parent, in the form filed with the SEC (including
any amendments thereto), (i) its Annual Reports on Form 10-K for each of the
fiscal years ended December 31, 1996, 1997 and 1998; (ii) all definitive proxy
statements relating to the Company's meetings of stockholders (whether annual
or special) held since January 1, 1996; and (iii) all other reports or
registration statements filed by the Company with the SEC since January 1,
1996 (the "Company SEC Reports"). None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included
or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Reports complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
Except as set forth in Section 3.4(a) of the Company Disclosure Schedule,
since January 1, 1999, there has not been any change, or any application or
request for any change, by the Company or any of its subsidiaries in
accounting principles, methods or policies for financial accounting or Tax
purposes (subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments).
(b) The Company has previously furnished Parent with copies of
audited annual and unaudited quarterly convention statements as filed with the
domiciliary state insurance department of each Insurance Subsidiary (as
defined in Section 3.9(b)) as of and for the years ended December 31, 1998,
1997, and 1996, and the quarter ended March 31, 1999, prepared in conformity
with accounting practices prescribed or permitted (including, without
limitation, accounting practices permitted by OCI in connection with the
Orders, each as defined below) by the National Association of Insurance
Commissioners or the insurance regulatory authority in the states in which the
Insurance Subsidiaries (as defined in Section 3.20(a)) are domiciled (
"Stat"), consistently applied throughout the specified period, except as
permitted by OCI in the Orders or as set forth in Section 3.18(xi) of the
Company Disclosure Schedule (collectively, the "SAP Financial Statements").
Each of the SAP Financial Statements fairly presents in all material respects
the financial position of the applicable Insurance Subsidiary as of its date
and each of the statements of operation included in the SAP Financial
Statements
19
<PAGE>
fairly presents in all material respects the respective statutory financial
positions and the result of operations of the applicable Insurance Subsidiary
for the period therein set forth, in each case in accordance with Stat,
consistently applied throughout the specified period, except as permitted by
OCI in the Orders or as set forth in Section 3.18(xi) of the Company
Disclosure Schedule. Except as set forth in Section 3.4(b) of the Company
Disclosure Schedule, each of the SAP Financial Statements was correct in all
material respects when filed and there were no material omissions therefrom.
The exhibits and schedules included in the SAP Financial Statements, when
considered in relation to the basic statutory financial statements included
therein, present fairly in all material respects the information shown therein
in accordance with Stat and the SAP Financial Statements comply in all
material respects with all applicable regulatory requirements, as modified or
waived by the applicable insurance regulatory authority. "Orders" shall mean
the orders issued by OCI in connection with the run-off of Northwestern
National Insurance Company ( "NNIC") including, without limitation, the Orders
in case numbers 93-C23510, 94-C23861, 95-C24204, 96-C24597 and 97-C25031, and
the documents and other orders referred to therein. "OCI" shall mean the
Office of the Commissioner of Insurance of the State of Wisconsin.
(c) Except for the Guaranty (as hereinafter defined), neither the
Company nor any of its subsidiaries (i) has entered into any agreement,
commitment or understanding, written or otherwise (that is in effect on the
date hereof or will be in effect on the Closing Date), with any Governmental
Entity or Insurance Department which would obligate them to provide any form
of financial or balance sheet support of any nature whatsoever to Armco
Financial Services Corporation, Armco Insurance Group, Inc. and/or the
Insurance Subsidiaries, (ii) has any liabilities or obligations of any nature
whatsoever, whether or not accrued, contingent or otherwise, to any Person to
provide any form of financial or balance sheet support to Armco Financial
Services Corporation, Armco Insurance Group, Inc, and/or the Insurance
Subsidiaries, (iii) has knowledge of any claims, allegations, disputes or
assertions by any Person, including Insurance Departments, that any agreement
or obligation of the type referred to in subsection (i) or (ii) of this
Section exist. "Guaranty" shall mean the "Run-Off and Surplus Agreement,"
dated December 30, 1993 between Armco Financial Services Corporation, Armco
Insurance Group, Inc. and Northwest National Insurance Company of Milwaukee
which constitutes Exhibit A to the Order of the Office of the Commissioner of
Insurance of the State of Wisconsin, dated December 30, 1993 (Case No. 93-
C23510) as amended by the Orders, and the agreements referred to therein,
pursuant to which Armco Financial Services Corporation and Armco Insurance
Group, Inc. agreed to, among other things, maintain the policyholder surplus
of Northwestern National Insurance Company at prescribed levels.
SECTION 3.5 No Undisclosed Liabilities. Neither the
--------------------------
Company nor any of its subsidiaries has any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
and there is no existing condition, situation or set of circumstances known to
the Company which could be expected to result in such a liability or
obligation, except (a) liabilities or obligations reflected in the Company SEC
Reports filed prior to the date hereof and (b) liabilities or obligations
incurred in the
20
<PAGE>
ordinary course of business which do not and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 3.6 Absence of Changes. Except as and to the
------------------
extent publicly disclosed in the Company SEC Reports filed prior to the date
hereof, as set forth in Section 3.6 of the Company Disclosure Schedule or as
permitted by Section 5.1, since December 31, 1998 (the "Audit Date") the
Company and its subsidiaries have conducted their business in the ordinary and
usual course consistent with past practice and there has not been:
(a) any event, change, occurrence or development which does or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (other than any event, occurrence,
development or state of circumstances or facts resulting primarily from (i)
changes in general economic conditions or (ii) events or developments
generally affecting the industry in which the Company and its subsidiaries
operate);
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company
(other than payment of the Company's regular quarterly cash dividend on
Preferred Stock), or any repurchase, redemption or other acquisition by the
Company or any subsidiary of any Company securities;
(c) any amendment of any term of any outstanding security of the
Company or any subsidiary;
(d)(i) any incurrence or assumption by the Company or any
subsidiary of any indebtedness for borrowed money (A) other than in the
ordinary and usual course of business consistent with past practice (it being
understood that any indebtedness incurred prior to the date hereof in respect
of capital expenditures shall be considered to have been in the ordinary and
usual course of business consistent with past practice) or (B) in connection
with any acquisition or capital expenditure permitted by Section 5.1 or (ii)
any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by the Company or any subsidiary
for the obligations of any other person (other than any wholly owned
subsidiary of the Company), other than in the ordinary and usual course of
business consistent with past practice;
(e) any creation or assumption by the Company or any subsidiary of
any Lien on any material asset of the Company or any subsidiary other than in
the ordinary and usual course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any subsidiary other than (i) any
acquisition permitted by Section 5.1, (ii) loans, advances or capital
contributions to or investments in wholly owned subsidiaries of the Company or
(iii) loans or advances to employees of the
21
<PAGE>
Company or any subsidiary made in the ordinary and usual course of business
consistent with past practice;
(g)(i) any contract or agreement entered into by the Company or any
subsidiary on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by the Company or any subsidiary of
any contract, license or other right (including any insurance policy naming it
as a beneficiary or a loss payable payee) that does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company, other than, in the case of (i) and (ii), transactions,
commitments, contracts or agreements in the ordinary and usual course of
business consistent with past practice and those contemplated by this
Agreement;
(h) any material change in any method of accounting or accounting
principles or practice by the Company or any subsidiary, except for any such
change required by reason of a change in GAAP; or
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any of its subsidiaries; (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any of its subsidiaries (it being
acknowledged and agreed that the hiring of employees in the ordinary course of
business on an at-will basis shall not be deemed the entering into of an
employment or similar agreement); (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements; or
(iv) increase in compensation, bonus or other benefits payable to directors,
officers or employees of the Company or any of its subsidiaries other than, in
the case of clause (iv) only, increases in compensation, bonus or other
benefits payable to employees of the Company or any of its subsidiaries in the
ordinary and usual course of business consistent with past practice or merit
increases in salaries of employees at regularly scheduled times in customary
amounts consistent with past practices.
SECTION 3.7 Information Supplied. None of the
--------------------
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of Parent Common
Stock as required by the terms of this Agreement (the "Share Issuance")
pursuant to the Merger (the "S-4"), at the time the S-4 is filed with the SEC
and at the time it becomes effective under the Securities Act, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (ii) the proxy statement relating to the Company Stockholder
Meeting (as hereinafter defined) and the Parent Stockholder Meeting (as
defined in Section 4.5) to be held in connection with the Merger and the Share
Issuance (the "Proxy Statement") will, at the date mailed to stockholders and
at the times of the meetings of stockholders to be held in connection with the
Merger or the Share Issuance, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in
22
<PAGE>
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any
of its subsidiaries should occur which is required to be described in an
amendment of, or a supplement to, the S-4 or the Proxy Statement, the Company
shall promptly so advise Parent and such event shall be so described, and such
amendment or supplement (which Parent shall have a reasonable opportunity to
review) shall be promptly filed with the SEC and, as required by Law,
disseminated to the stockholders of the Company. The Proxy Statement, insofar
as it relates to the Company Stockholder Meeting, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
SECTION 3.8 Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the NYSE, the Securities
Act, the Exchange Act, state securities or blue sky Laws, the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the New
York State Insurance Department, the Wisconsin Insurance Department and any
other applicable state insurance and regulatory agency (collectively, the
"Insurance Departments"), the filing and recordation of the Certificates of
Merger as required by the DGCL and the OGCL, filings under Environmental Laws
(as defined in Section 3.15) and as otherwise set forth in Section 3.8 to the
Company Disclosure Schedule (collectively, the "Company Required Approvals"),
no filing with or notice to, and no permit, authorization, consent or approval
of, any court or tribunal or administrative, governmental or regulatory body,
agency or authority, including Insurance Departments (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement
or the consummation by the Company of the transactions contemplated hereby,
except (other than in respect those to be obtained from Insurance Departments)
where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective articles or
certificate of incorporation or code of regulations or bylaws (or similar
governing documents) of the Company or any of its subsidiaries, (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound (collectively, the
"Company Agreements"), or (iii) violate any Law applicable to the Company or
any of its subsidiaries or any of their respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults which
do not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse
23
<PAGE>
Effect on the Company. Section 3.8 of the Company Disclosure Schedule sets
forth a list of all material third party consents and approvals required to be
obtained under the Company Agreements prior to the consummation of the
transactions contemplated by this Agreement.
SECTION 3.9 No Default. Neither the Company nor any
----------
of its subsidiaries is in violation of any term of (i) its articles or
certificate of incorporation, code of regulations, bylaws or other
organizational documents, (ii) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party
or by which it is bound, or (iii) any foreign or domestic law, order, writ,
injunction, decree, ordinance, award, stipulation, statute, judicial or
administrative doctrine, rule or regulation entered by a Governmental Entity
("Law") applicable to the Company, its subsidiaries or any of their respective
properties or assets, except, in the case of (ii) and (iii), for violations
which do not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or to prevent or
materially delay the performance of this Agreement by the Company.
SECTION 3.10 Real Property.
-------------
(a) Section 3.10(a) of the Company Disclosure Schedule sets forth
all of the real property owned in fee by the Company and its subsidiaries that
is used as a manufacturing or office facility or is otherwise material to the
conduct of the business of the Company and its subsidiaries, taken as a whole.
Each of the Company and its subsidiaries has good and marketable title to each
parcel of real property owned by it free and clear of all Liens, except (i)
Taxes and general and special assessments not in default and payable without
penalty and interest, and (ii) other liens, mortgages, pledges, encumbrances
and security interests which do not materially interfere with the Company's of
any of its subsidiaries' use and enjoyment of such real property or materially
detract from or diminish the value thereof.
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth
all leases, subleases and other agreements (the "Real Property Leases") under
which the Company or any of its subsidiaries uses or occupies or has the right
to use or occupy, now or in the future, any real property that is used as a
manufacturing or office facility or is otherwise material to the conduct of
the business of the Company and its subsidiaries, taken as a whole. The
Company has heretofore delivered to Parent true, correct and complete copies
of all Real Property Leases (and all modifications, amendments and supplements
thereto and all side letters to which the Company or any of its subsidiaries
is a party affecting the obligations of any party thereunder). Each Real
Property Lease constitutes the valid and legally binding obligation of the
Company or its subsidiaries, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. All rent and other sums and
charges payable by the Company and its subsidiaries as tenants under each Real
Property Lease are current, no termination event or condition or uncured
default of a material
24
<PAGE>
nature on the part of the Company or any such subsidiary or, to the Company's
knowledge, the landlord, exists under any Real Property Lease. Each of the
Company and its subsidiaries has a good and valid leasehold interest in each
parcel of real property leased by it free and clear of all Liens, except (i)
Taxes and general and special assessments not in default and payable without
penalty and interest, and (ii) other liens, mortgages, pledges, encumbrances
and security interests which do not materially interfere with the Company's or
any of its subsidiaries' use and enjoyment of such real property or materially
detract from or diminish the value thereof.
(c) No party to any such Real Property Leases has given notice to
the Company or any of its subsidiaries of or made a claim against the Company
or any of its subsidiaries with respect to any material breach or default
thereunder.
SECTION 3.11 Litigation. Except as and to the extent
----------
publicly disclosed by the Company in the Company SEC Reports filed prior to
the date hereof or as set forth in Section 3.11 of the Company Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the Company's knowledge, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets which (a) does or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or (b) as of the date hereof, questions
the validity of this Agreement or any action to be taken by the Company in
connection with the consummation of the transactions contemplated hereby or
could otherwise prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as and to the extent publicly
disclosed by the Company in the Company SEC Reports filed prior to the date
hereof, there is no judgment, order, writ, injunction or decree outstanding
against the Company or its subsidiaries which does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
SECTION 3.12 Company Permits; Compliance with
--------------------------------
Applicable Laws. The Company and its subsidiaries hold all
- ---------------
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Company Permits"), except (other than in respect of the
Company Permits of the Insurance Subsidiaries) for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company and its subsidiaries are
in compliance in all material aspects with the terms of the Company Permits,
except where the failure to so comply does not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. The businesses of the Company and its subsidiaries are not
being conducted in violation of any Law applicable to the Company or its
subsidiaries, except that no representation or warranty is made in this
Section 3.12 with respect to Environmental Laws and except for violations or
possible violations which do not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
To the Company's knowledge, no investigation or review by any Governmental
Entity with respect to the
25
<PAGE>
Company or its subsidiaries is pending or threatened, nor, to the Company's
knowledge, has any Governmental Entity indicated an intention to conduct the
same.
SECTION 3.13 Employee Plans.
--------------
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
list of all "employee benefit plans," as defined in Section 3(3) of ERISA, all
employment, executive compensation, consulting or other compensation
agreements, and all stock option, stock award, stock purchase or other equity-
based compensation, deferred compensation, severance, salary continuation,
life insurance, bonus or other incentive compensation programs or
arrangements, and directors' benefit, bonus or other incentive compensation
arrangements, for which the Company or any of its subsidiaries has any
obligation to or liability, contingent or otherwise, (each, an "Employee
Benefit Plan" and collectively, the "Employee Benefit Plans"); other than
Employee Benefit Plans which do not cover any of the Company's employees whose
annual compensation exceeds $100,000, officers or directors, have been in
existence for at least two years without material modification, and which (i)
are fully funded through insurance policies or assets held in trusts, (ii) are
welfare benefit plans covering only bargaining unit employees during their
employment and their eligible dependents for which the costs of all accrued
liabilities have been properly reflected in the Company's financial
statements, or (iii) are terminable at will without more than 60 days' prior
notice or consent and without any penalty or additional payment in excess of
benefits accrued prior to the date of termination (and such accrued benefits
have been properly reflected as liabilities in the Company's financial
statements). Section 3.13(a) of the Company Disclosure Schedule separately
identifies each Employee Benefit Plan which is subject to Title IV of ERISA.
None of the Employee Benefit Plans is a multiemployer plan, as defined in
Section 3(37) of ERISA ( "Multiemployer Plan"), or is or has been subject to
Sections 4063 or 4064 of ERISA ( "Multiple Employer Plans").
(b) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans set forth in Section
3.13(a) of the Disclosure Schedule have been delivered to Parent by the
Company (i) any plans and related trust documents, and amendments thereto;
(ii) the most recent Form 5500 and schedules thereto; (iii) the most recent
financial actuarial valuation, if applicable; and (iv) summary plan
descriptions. Company has made available to Parent the actuary or actuaries
who are responsible for each Employee Benefit Plan that is (i) a welfare plan
providing for post-employment medical or death benefit coverage or (ii)
subject to Title IV of ERISA.
(c) As of the date hereof, (i) all contributions or other payments
required to be made by or under any Employee Benefit Plan, any related trusts,
or any collective bargaining agreement or pursuant to Law have been made by
the due date therefor (including any valid extension); (ii) the Company and
its subsidiaries have performed all obligations required to be performed by
them under any Employee Benefit Plan; (iii) the Employee Benefit Plans have
been administered in compliance with their terms and the requirements of
ERISA, the Code and other applicable Laws; and (iv) there are no
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material actions, suits, arbitrations or claims (other than routine claims for
benefit) pending or, to the knowledge of the Company, threatened with respect
to any Employee Benefit Plan, except for such events, acts or omissions that
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(d) Except as set forth in Section 3.13(d) of the Company Disclosure
Schedule or could not reasonably be expected to have a Material Adverse Effect
on the Company:
(i) Neither the Company nor any ERISA Affiliate has
terminated any Title IV Plan for which there is any outstanding liability
under Title IV of ERISA, and no event has occurred that could reasonably be
expected to result in any liability under Title IV of ERISA (other than
payment of PBGC premiums which are not overdue).
(ii) Neither the Company nor any ERISA Affiliate or any
organization to which the Company or any ERISA Affiliate is a successor or
Parent corporation, within the meaning of Section 4069(b) of ERISA, has
engaged in any transaction within the last five years which might be alleged
to come within the meaning of Section 4069 of ERISA.
(e) Each of the Employee Benefit Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so "qualified" and the trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the Code,
and the Company knows of no fact which would adversely affect the qualified
status of any such Pension Plan or the exemption of such trust.
(f) Except as set forth in Section 3.13(f) or 6.11 of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will by itself or in
combination with any other event (i) result in any payment becoming due, or
increase the amount of compensation due, to any current or former employee of
the Company or any of its subsidiaries; (ii) increase any benefits otherwise
payable under any Employee Benefit Plan; or (iii) result in the acceleration
of the time of payment or vesting of any such benefits.
SECTION 3.14 Labor Matters.
-------------
(a) Section 3.14(a) of the Company Disclosure sets forth a list of
all employment, labor or collective bargaining agreements to which the Company
or any subsidiary is party and except as set forth therein, there are no
employment, labor or collective bargaining agreements which pertain to
employees of the Company or any of its subsidiaries. The Company has
heretofore delivered to Parent true and complete copies of (i) the employment
agreements listed on
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Section 3.14(a) of the Company Disclosure Schedule and (ii) the labor or
collective bargaining agreements listed on Section 3.14(a) of the Company
Disclosure Schedule, together with all material amendments, modifications and
supplements thereto and side letters materially affecting the duties, rights
and obligations of any party thereunder.
(b) No labor organization or group of employees of the Company or
any of its subsidiaries has made a pending demand for recognition or
certification; and, to the Company's knowledge, there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To the Company's knowledge, there are no organizing activities
involving the Company or any of its Subsidiaries pending with any labor
organization or group of employees of the Company or any of its subsidiaries.
(c) Except as set forth in Section 3.14(c) of the Company
Disclosure Schedule, there are no unfair labor practice charges, grievances or
complaints pending or threatened in writing by or on behalf of any employee or
group of employees of the Company or any of its Subsidiaries which do or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the operations of the Company.
(d) Except as set forth in Section 3.14(d) of the Company
Disclosure Schedule, there are no complaints, charges or claims against the
Company or any of its subsidiaries pending, or threatened in writing to be
brought or filed, with any Governmental Entity or arbitrator based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any of its
subsidiaries.
(e) The Company and each of its subsidiaries is in compliance in
all material respects with all Laws relating to the employment of labor,
including all such Laws and orders relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health workers'
compensation and the collection and payment of withholding and/or Social
Security Taxes and similar Taxes.
(f) Except as set forth in Section 3.14(f) of the Company
Disclosure Schedule, since the enactment of the Worker Adjustment and
Retraining Notification Act (the "WARN Act"), neither the Company nor any of
its subsidiaries has effectuated (i) a "plant closing" (as defined in the WARN
Act, or any similar state, local or foreign Law) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any of its Subsidiaries; or (ii) a
"mass layoff" (as defined in the WARN Act, or any similar state, local or
foreign Law) affecting any site of employment or facility of the Company or
any of its subsidiaries.
SECTION 3.15 Environmental Matters.
---------------------
(a) For purposes of this Agreement:
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(i) "Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages (including compensatory, punitive
and consequential damages), fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and clean up, remove, treat, or in any
other way address any Hazardous Materials (as hereinafter defined)) arising
from, under or pursuant to any Environmental Law (as hereinafter defined);
(ii) "Environmental Law" means any applicable federal, state,
local or foreign Law (including common Law), statute, rule, regulation,
ordinance, decree or other legal requirement relating to the protection of
natural resources, the environment and public and employee health and safety
or pollution or the release or exposure to Hazardous Materials (as hereinafter
defined) and shall include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act ( "CERCLA") (42 U.S.C.
section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.), the Clean Water Act (33 U.S.C. section 1251 et seq.),
the Clean Air Act (33 U.S.C. section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. section 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. section 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. section 651 et seq.) ( "OSHA")
and the regulations promulgated pursuant thereto, and any such applicable
state or local statutes, and the regulations promulgated pursuant thereto, as
such Laws have been and may be amended or supplemented through the Closing
Date;
(iii) "Hazardous Material" means any substance, material or
waste which is regulated, classified or otherwise characterized as hazardous,
toxic, pollutant, contaminant or words of similar meaning or regulatory effect
by any Governmental Entity or the United States, and includes, without
limitation, petroleum, petroleum by-products and wastes, asbestos and
polychlorinated biphenyls;
(iv) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment, or into or out
of any property owned, operated or leased by the applicable party or its
subsidiaries; and
(v) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Entity or
required under or taken pursuant to any Environmental Law, or voluntarily
undertaken to (A) clean up, remove, treat, or in any other way, ameliorate or
address any Hazardous Materials or other substance in the indoor or outdoor
environment; (B) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not endanger or threaten
to endanger the public health or welfare of the indoor or outdoor environment;
29
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(C) perform pre-remedial studies and investigations or post-remedial
monitoring and care pertaining or relating to a Release; or (D) bring the
applicable party into compliance with any Environmental Law.
(b) Except as set forth in Section 3.15 of the Company Disclosure
Schedule:
(i) The operations of the Company and its subsidiaries have
been and, as of the Closing Date, will be, in compliance with all
Environmental Laws, except for noncompliance that does not and would not
reasonably be expected to result in the Company and its subsidiaries incurring
material Environmental Costs and Liabilities, and the Company is not aware of
any facts, circumstances or conditions, which without significant capital
expenditures, would prevent material compliance in the future;
(ii) The Company and its subsidiaries have obtained and will,
as of the Closing Date, maintain all material permits, authorizations,
licenses or similar approvals required under applicable Environmental Laws for
the continued operations of their respective businesses;
(iii) The Company and its subsidiaries are not subject to any
outstanding written orders or material contracts with any Governmental Entity
or other person respecting (A) Environmental Laws, (B) Remedial Action or (C)
any Release or threatened Release of a Hazardous Material;
(iv) The Company and its subsidiaries have not received any
written communication alleging, with respect to any such party, the material
violation of or material liabilities (real or potential), in each case,
individually or in the aggregate, under any Environmental Law;
(v) Neither the Company nor any of its subsidiaries has any
material contingent liability in connection with the Release of any Hazardous
Material (whether on-site or off-site);
(vi) The operations of the Company or its subsidiaries do not
involve the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in
effect as of the date of this Agreement) or any state equivalent;
(vii) There is not now, nor to the Company's knowledge, has
there been in the past, on or in any property of the Company or its
subsidiaries any of the following: (A) any underground storage tanks or
surface impoundments, (B) any asbestos-containing materials, or (C) any
polychlorinated biphenyls; and
(viii) No judicial or administrative proceedings are pending
or, to the Company's knowledge, threatened against the Company and its
subsidiaries
30
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alleging the violation of or seeking to impose liability pursuant to any
Environmental Law and there are no investigations pending or, to the Company's
knowledge, threatened against the Company or any of its subsidiaries under
Environmental Laws.
(c) None of the exceptions set forth in Section 3.15 of the Company
Disclosure Schedule is reasonably likely to result in the Company and its
subsidiaries incurring Environmental Costs and Liabilities which would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(d) The Company has provided Parent and Purchaser with copies of
all environmentally related assessments, audits, investigations, sampling or
similar reports relating to the Company or its subsidiaries or any real
property currently or formerly owned, operated or leased by or for the Company
and its subsidiaries.
SECTION 3.16 Taxes. Except as disclosed on Section
-----
3.16 of the Company Disclosure Schedule:
(a) Each of the Company and each subsidiary of the Company has
timely filed, or has caused to be timely filed on its behalf (taking into
account any extension of time within which to file), all Tax Returns (as
hereinafter defined) required to be filed by it, and all such filed Tax
Returns are true, complete and accurate in all material respects. All Taxes
shown to be due on such Tax Returns, or otherwise required to be paid by the
Company or a subsidiary of the Company, have been timely paid.
(b) The most recent financial statements contained in the Company
SEC Reports reflect an adequate reserve for all Taxes payable by the Company
and its subsidiaries for all Taxable periods and portions thereof through the
date of such financial statements. No deficiency with respect to Taxes has
been proposed, asserted or assessed against the Company or any subsidiary of
the Company. No liens for Taxes exist with respect to any asset of the
Company or any subsidiary of the Company, except for statutory liens for Tax
not yet due.
(c)The Federal income Tax Returns of the Company and each subsidiary
of the Company have been examined by and settled with the United States
Internal Revenue Service (or the applicable statute of limitations has
expired) for all years through 1994, and the material state income and
franchise Tax Returns of the Company and each subsidiary of the Company have
been examined by and settled with the applicable state Tax authorities for the
years specified in Section 3.16(c) of the Company Disclosure Schedule. All
assessments for Taxes due with respect to such completed and settled
examinations or any concluded litigation have been fully paid.
(d) Neither the Company nor any subsidiary of the Company has any
obligation under any agreement (either with any person or any taxing
authority) with respect to Taxes.
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(e) Neither the Company nor any subsidiary of the Company has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code.
(f) Neither the Company nor any subsidiary of the Company has been
a member of an affiliated group of corporations within the meaning of Section
1504 of the Code, other than the affiliated group of which the Company is the
common parent.
(g) No audit or other administrative or court proceedings are
pending with respect to Federal income or state income or franchise Taxes of
the Company or any subsidiary of the Company and no notice thereof has been
received. No issue has been raised by any taxing authority in any presently
pending Federal income or state income or franchise Tax audit that could be
material and adverse to the Company or any subsidiary of the Company for any
period after the Effective Time.
(h) No claim has been made by a taxing authority in a jurisdiction
where neither the Company nor any subsidiary of the Company files state income
or franchise Tax Returns that the Company or any subsidiary of the Company is
or may be subject to income or franchise taxation in that jurisdiction.
(i) Neither the Company nor any subsidiary of the Company is a
party to any contract, agreement or other arrangement which provides for the
payment of any amount which would not be deductible by reason of Section
162(m) or Section 280G of the Code.
(j) The Company has made available to Parent true and complete
copies of (i) all Federal income and all material state income and franchise
Tax Returns of the Company and its subsidiaries filed for the preceding three
taxable years for which filings have been made and (ii) any audit report
issued within the last three years (or otherwise with respect to any audit or
proceeding in progress) relating to Taxes of the Company or any subsidiary of
the Company.
(k) No subsidiary of the Company owns any Shares.
(l) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by
a local, municipal, governmental, state, foreign, Federal or other
Governmental Entity, or in connection with any agreement with respect to Taxes
including all interest, penalties and additions imposed with respect to such
amounts.
"Tax Returns" means all Federal, state, local, provincial and
foreign Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
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SECTION 3.17 Absence of Questionable Payments.
--------------------------------
(a) Neither the Company nor any of its subsidiaries nor, to the
Company's knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company or any of its subsidiaries, has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or unrecorded funds in violation of Section 30A of the Exchange Act.
Neither the Company nor any of its subsidiaries nor, to the Company's
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company or any of its subsidiaries, has accepted or received any
unlawful contributions, payments, gifts, or expenditures. To the Company's
knowledge, the Company and each of its subsidiaries which is required to file
reports pursuant to Section 12 or 15(d) of the Exchange Act is in compliance
with the provisions of Section 13(b) of the Exchange Act.
SECTION 3.18 Material Contracts.
------------------
(a) Section 3.18 of the Company Disclosure Schedule sets forth a
list of all Material Contracts (as hereinafter defined). The Company has
heretofore made available to Parent true, correct and complete copies of all
written or oral contracts and agreements (and all material amendments,
modifications and supplements thereto and all side letters to which the
Company or any of its subsidiaries is a party materially affecting the
obligations of any party thereunder) to which the Company or any of its
subsidiaries is a party or by which any of its properties or assets are bound
that are material to the business, properties or assets of the Company and its
subsidiaries taken as a whole, including, without limitation, all: (i)
employment, severance, personal services or consulting contracts (other than
any such contracts that are terminable without penalty upon not more than 90
days notice), and all non-competition or indemnification contracts with
current or former directors, officers or employees of the Company or any of
its subsidiaries (including, without limitation, any contract to which the
Company or any of its subsidiaries is a party involving employees of the
Company); (ii) material license agreements relating to Intellectual Property
(as defined in Section 3.21) granting to the Company a license to practice
technology used in the conduct of its current operations; (iii) contracts
granting a right of first refusal or first negotiation for essential
properties, services or supplies, or material sales not in the ordinary
course; (iv) partnership or joint venture agreements; (v) agreements for the
acquisition, sale or lease (including leases in connection with financing
transactions) of any properties or assets of the Company with a value in
excess of $3 million (by merger, purchase or sale of assets or stock or
otherwise) entered into since January 1, 1996; (vi) material contracts or
agreements with any Governmental Entity; (vii) loan or credit agreements,
mortgages, indentures or other agreements or instruments evidencing (A)
indebtedness for borrowed money by the Company or any of its subsidiaries or
any such agreement pursuant to which indebtedness for borrowed money may be
incurred (including guaranties) or (B) Liens securing any such indebtedness;
(viii) agreements that purport to limit, curtail or restrict the ability of
the Company or any of its subsidiaries, or would restrict the ability of
Parent or any of its subsidiaries, to compete in any geographic area or line
of business;
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(ix) agreements or arrangements, including but not limited to hedges, options,
swaps, caps and collars, designed to protect the Company or any of its
subsidiaries against fluctuations in interest rates, currency exchange rates
or the prices of certain commodities and raw materials; (x) to the extent not
otherwise required to be disclosed pursuant to any other clause of this
Section 3.18(a), contracts or agreements that would be required to be filed as
an exhibit to a Form 10-K filed by the Company with the SEC on the date
hereof; (xi) contracts, agreements or understandings with Insurance
Departments; and (xii) commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered into in
accordance with Section 5.1 hereof, the "Material Contracts"). Except as set
forth in Section 3.18 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries is a party to or bound by any severance or other
agreement with any employee or consultant pursuant to which such person would
be entitled to receive any additional compensation or an accelerated payment
of compensation as a result of (x) the consummation of the transactions
contemplated hereby or (y) the termination of such employment or consulting
following such consummation.
(b) Each of the Material Contracts is in full force and effect.
There is no breach or default under any Material Contract either by the
Company or, to the Company's knowledge, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a breach or default thereunder by the Company or, to the
Company's knowledge, any other party, except for any such breach or default as
does not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(c) No party to any such Material Contract has given notice to the
Company of or made a claim against the Company with respect to any breach or
default thereunder, except for any such breach or default as does not or would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
SECTION 3.19 Insurance. Section 3.19 of the Company
---------
Disclosure Schedule sets forth a list of insurance policies (including
information on the scope and amount of the coverage and deductibles provided
thereunder) maintained by the Company or any of its subsidiaries which
policies have been issued by insurers, which, to the Company's knowledge, are
reputable and financially sound and provide coverage for the operations
conducted by the Company and its subsidiaries of a scope and coverage
consistent with customary industry practice. The Company has delivered to
Parent a true and correct copy of the claims history under such policies from
January 1, 1998 through the date hereof.
SECTION 3.20 Insurance Business.
------------------
(a) Set forth in Section 3.20(a) of the Company Disclosure Schedule
is a list of all subsidiaries of the Company engaged in the insurance business
(the "Insurance Subsidiaries") and each jurisdiction in which the regular
conduct of the business of each
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Insurance Subsidiary requires it to be qualified as an insurer. Except as set
forth in Section 3.20(a) of the Company Disclosure Schedule, no certificate of
authority with respect to any jurisdiction set forth in Section 3.20(a) of the
Company Disclosure Schedule has been revoked, restricted, suspended, limited
or modified nor is any such certificate of authority the subject of a
proceeding for revocation, restriction, suspension, limitation or
modification, nor is any Insurance Subsidiary operating under any formal or
informal agreement or understanding with the licensing authority of any state
which restricts its authority to do business or requires any Insurance
Subsidiary to take, or refrain from taking, any action.
(b) Except as set forth in Section 3.20(b) of the Company
Disclosure Schedule, each of the Insurance Subsidiaries holds in full force
and effect all licenses, franchises, permits and authorizations ( "Permits")
necessary for the conduct of their respective businesses as currently
conducted under and pursuant to any applicable Insurance Law (as defined
below) relating to the Company and the Subsidiaries, and there has been no
violation of any Permit nor has it received written notice asserting any such
violation. "Insurance Laws" means any statute, rule or regulation issued by
any governmental agency (including, without limitation, any insurance
regulatory agency or body) that relates to the business conducted by the
Insurance Subsidiaries.
SECTION 3.21 Intellectual Property.
---------------------
(a) Section 3.21 of the Company Disclosure Schedule sets forth a
list of all patents, patent rights, invention disclosure statements,
trademarks, trademark rights, trade names, trade name rights, service marks,
and all applications for any of the foregoing, of the Company and its
subsidiaries the absence of which would reasonably be expected to have a
Material Adverse Effect with respect to the Company. Except as set forth in
Section 3.21 of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is entitled to receive or obligated to pay any royalties
or similar payments in respect of Intellectual Property.
(b) The Company and its subsidiaries own or possess adequate
licenses or other valid rights to use (in each case, free and clear of any
Liens), all Intellectual Property (as hereinafter defined) used or held for
use in connection with the business of the Company and its subsidiaries as
currently conducted or as contemplated to be conducted and the absence of
which ownership or rights would reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(c) The use of any Intellectual Property by the Company and its
subsidiaries does not infringe on, or otherwise violate the rights of any
person and is in accordance with any applicable license pursuant to which the
Company or any of its subsidiaries acquired the right to use any material
Intellectual Property, except where the result of such infringement, violation
or failure does not and would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to the
Company.
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(d) No person is challenging or, to the knowledge of the Company,
infringing on or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by and/or
licensed to the Company or its subsidiaries, except where the result of such
challenge, infringement or violation does not and would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
with respect to the Company.
(e) Neither the Company nor any of its subsidiaries has received
any notice (written or otherwise) of any assertion or claim, pending or not,
with respect to any Intellectual Property used by the Company or its
subsidiaries, except where the result of such assertion or claim does not and
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(f) No material Intellectual Property owned/or licensed by the
Company or its subsidiaries is being used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of such
Intellectual Property, other than as does not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
For purposes of this Agreement, "Intellectual Property" means (i) all
trademarks, trademark rights, trade names, trade name rights, trade dress and
other indications of origin, corporate names, brand names, logos,
certification rights, service marks, applications for trademarks and for
service marks, know-how and other proprietary rights and information, the
goodwill associated with the foregoing and registration in any jurisdiction
of, and applications in any jurisdictions to register, the foregoing,
including any extension, modification or renewal of any such registration or
application; (ii) all inventions, discoveries and ideas (whether patentable or
unpatentable and whether or not reduced to practice), in any jurisdiction, all
improvements thereto, and all patents, patent rights, applications for patents
(including, without limitation, divisions, continuations, continuations in
part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; (iii) all licenses (whether the Company is
licensor or licensee) and other agreements relating to any Intellectual
Property described in (i) or (ii); (iv) nonpublic information, trade secrets
and confidential information and rights in any jurisdiction to limit the use
or disclosure thereof by any person; (v) writings and other works, whether
copyrightable or not, in any jurisdiction, and all registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; (vi) all mask works and all applications,
registrations and renewals in connection therewith, in any jurisdiction; (vii)
all computer software (including data and related documentation); (viii) any
similar intellectual property or proprietary rights; and (ix) all copies and
tangible documentation thereof and any claims or causes of action arising out
of or relating to any infringement or misappropriation of any of the
foregoing.
SECTION 3.22 Year 2000. The Company and its
---------
subsidiaries have developed and are executing a plan with respect to Year 2000
readiness (the "Company Year 2000 Plan"). The Company has provided Parent
with a copy of the Company Year 2000 Plan and has provided a report on the
status of the Company Year 2000 Plan
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<PAGE>
through April 30, 1999 that is accurate in all material respects. The Company
Year 2000 Plan addresses the Year 2000 issues which, to the knowledge of the
Company, are material to the Company and its subsidiaries, including internal
information systems and process control risks, embedded circuitry risks and
third party risks.
SECTION 3.23 Opinion of Financial Advisor. Salomon
----------------------------
Smith Barney Inc. (the "Financial Advisor") has delivered to the Company Board
its opinion, dated the date of this Agreement, to the effect that, as of such
date, the consideration to be received by the holders of Shares in the Merger
is fair to such holders from a financial point of view, and, as of the date
hereof, such opinion has not been withdrawn or modified.
SECTION 3.24 Brokers. No broker, finder or investment
-------
banker (other than the Financial Advisor, a true and correct copy of whose
engagement agreement has been provided to Parent) is entitled to any
brokerage, finder's or other fee or commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company or any of its affiliates.
SECTION 3.25 Accounting Matters; Tax Treatment.
---------------------------------
Neither the Company nor any of its affiliates or stockholders has taken or
agreed to take any action or is aware of any fact or circumstance that would
(i) prevent the Merger from qualifying as a "pooling of interests" under APB
16 and the applicable SEC rules and regulations (except that no representation
is made to the effect that the transactions contemplated by this Agreement
will so qualify) or (ii) prevent the Merger from qualifying as a
reorganization under Section 368 of the Code. The Company has not failed to
bring to the attention of Parent any actions, agreements or understandings,
whether written or oral, that would be reasonably likely to prevent Parent
from accounting for the Merger as a "pooling of interests" under APB 16 and
the applicable SEC rules and regulations.
SECTION 3.26 Takeover Statutes. The Company has taken
-----------------
all action required to be taken by it in order to exempt this Agreement and
the transactions contemplated hereby from, and this Agreement and the
transactions contemplated hereby (the "Covered Transactions") are exempt from,
the requirements of any "moratorium", "control share," "fair price,"
"affiliate transaction," "business combination" or other antitakeover Laws and
regulations of any state (collectively, "Takeover Statutes"), including,
without limitation, any antitakeover provision in the Company's articles of
incorporation or code of regulations, other than the provisions of Section
1701.831 of the OGCL (the "Control Shares Acquisition Law"). The requirements
of the Control Shares Acquisitions Law will be satisfied upon delivery to the
stockholders of the Company of the Acquiring Person Statement (as defined in
Section 6.1 hereof) and receipt of the Company Requisite Vote.
SECTION 3.27 Amendment to the Company Rights
-------------------------------
Agreement. The Company Board has taken all necessary action
- ---------
(including any amendment thereof) under the Company Rights Agreement so that
(a) none of the execution or delivery of this Agreement, the exchange of the
shares of Parent Common Stock for the Shares in
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accordance with Article II, or any other transaction contemplated hereby will
cause (i) the rights (the "Rights") issued pursuant to the Company Rights
Agreement to become exercisable under the Company Rights Agreement, or a
Distribution Date (as defined on the Company Rights Agreement), (ii) Parent or
the Operating Company to be deemed an Acquiring Person (as defined in the
Company Rights Agreement), or (iii) the Distribution Date (as defined in the
Company Rights Agreement) to occur upon any such event; and (b) the Expiration
Date (as defined in the Company Rights Agreement) of the Rights shall occur
immediately prior to the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Except as set forth in the disclosure schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule") (each Section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein),
Parent and the Operating Company hereby represent and warrant to the Company
as follows:
SECTION 4.1 Organization.
------------
(a) Each of Parent and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
businesses as now conducted or proposed by Parent or the Operating Company to
be conducted, except where the failure to be duly organized, existing and in
good standing or to have such power and authority would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
(b) Each of Parent and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing does not
and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
(c) Parent has heretofore delivered to the Company accurate and
complete copies of the articles of incorporation and bylaws of Parent as
currently in effect.
SECTION 4.2 Capitalization of Parent.
------------------------
(a) The authorized capital stock of the Parent consists of
200,000,000 shares of Parent Common Stock and 25,000,000 shares of preferred
stock, par value $.01 per share ( "Parent Preferred Stock"). As of April 30,
1999 (i) 59,413,295 shares of
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Parent Common Stock are issued and outstanding; (ii) 2,111,482 shares of
Parent Common Stock were subject to outstanding options issued pursuant to
Parent's 1998 Stock Incentive Plan (the "1998 Stock Incentive Plan"), and
4,539,159 shares of Parent Common Stock were reserved for issuance under the
1998 Stock Incentive Plan; and (iii) 4,877,625 shares of Parent Common Stock
were issued and held in the treasury of the Parent. As of the date hereof, no
shares of Parent Preferred Stock are issued and outstanding and 297,066 shares
of Parent Preferred Stock are reserved for issuance upon exercise of the
Parent Rights pursuant to the Parent Rights Agreement. All the outstanding
shares of Parent Common Stock are, and all shares to be issued as part of the
Common Merger Consideration will be, when issued in accordance with the terms
hereof, duly authorized, validly issued, fully paid and non-assessable.
Except as set forth above, and except for the transactions contemplated by
this Agreement and Parent's obligations under the Parent Rights Agreement, as
of the date of this Agreement (1) there are no shares of capital stock or
other voting securities of Parent authorized, issued or outstanding, (2) there
are no authorized or outstanding options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock or other voting
securities of Parent, obligating Parent to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock, voting securities
or other equity interest in Parent or securities convertible into or
exchangeable for such shares or equity interests, or obligating Parent to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment, (3) there are no
outstanding contractual obligations of Parent to repurchase, redeem or
otherwise acquire any capital stock of Parent. There are no stockholder
agreements, voting trusts or other agreements or understandings to which
Parent is a party or by which it is bound relating to the voting of any shares
of capital stock of Parent.
(b) All of the outstanding capital stock of Parent's subsidiaries
(including the Operating Company) is owned by Parent, directly or indirectly,
free and clear of any Lien or any other limitation or restriction (including
any restriction on the right to vote or sell the same, except as may be
provided as a matter of Law). There are no securities of Parent or its
subsidiaries convertible into or exchangeable for, no options or other rights
to acquire from Parent or its subsidiaries, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or
other ownership interests in, or any other securities of, any subsidiary of
Parent. There are no outstanding contractual obligations of Parent or its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any subsidiary of Parent.
SECTION 4.3 Authority Relative to This Agreement.
------------------------------------
(a) Each of Parent and the Operating Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. No other corporate
proceedings on the part of Parent or the Operating Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, with respect to the Share Issuance, the
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Parent Requisite Vote (as hereinafter defined)). This Agreement has been duly
and validly executed and delivered by each of Parent and the Operating Company
and, assuming the due authorization, execution and delivery hereof by the
Company, constitutes a valid, legal and binding agreement of each of Parent
and the Operating Company, enforceable against each of Parent and the
Operating Company in accordance with its terms.
(b) The Boards of Directors of Parent (the "Parent Board") and the
Operating Company and Parent as the sole stockholder of the Operating Company
have duly and validly authorized the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and taken all
corporate actions required to be taken by such Boards of Directors and Parent
as the sole stockholder of the Operating Company for the consummation of the
transactions. The affirmative approval of the holders of Parent Common Stock
representing a majority vote of stockholders present at the Parent
Stockholders Meeting (as hereinafter defined) (the "Parent Requisite Vote") is
the only vote of the holders of any class or series of capital stock of Parent
necessary to approve the Share Issuance.
SECTION 4.4 SEC Reports; Financial Statements. Parent
---------------------------------
has filed all required forms, reports and documents with the SEC since January
1, 1996, each of which has complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. Parent has
heretofore delivered to the Company, in the form filed with the SEC (including
any amendments thereto), (i) its Annual Reports on Form 10-K for the fiscal
year ended December 31, 1996, 1997 and 1998, (ii) all definitive proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) held since January 1, 1996 and (iii) all other reports or
registration statements filed by Parent with the SEC since January 1, 1996
(the "Parent SEC Reports"). None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included
or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Parent
included in the Parent SEC Reports complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and fairly present, in conformity
with GAAP on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments). Since January 1, 1999, there has not been any change,
or any application or request for any change, by Parent or any of its
subsidiaries in accounting principles, methods or policies for financial
accounting or Tax purposes.
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SECTION 4.5 No Undisclosed Liabilities. Neither the
--------------------------
Parent nor any of its subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances known to Parent which
could be expected to result in such a liability or obligation, except (a)
liabilities or obligations reflected in the Parent SEC Reports filed prior to
the date hereof, (b) liabilities or obligations incurred in the ordinary
course of business which do not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Parent and
(c) liabilities or obligations incurred in connection with the transactions
contemplated hereby.
SECTION 4.6 Absence of Certain Changes or Events.
------------------------------------
Except as disclosed in the Parent SEC Reports filed prior to the date hereof
or as set forth in Section 4.6 of the Parent Disclosure Schedule, since
December 31, 1998 (a) the businesses of the Parent and its Subsidiaries have
been conducted in the ordinary course consistent with past practice, and (b)
there has not been any event, change, occurrence or development that has had,
or is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Parent (other than any event, occurrence, development or
state of circumstances or facts resulting primarily from (i) changes in
general economic conditions or (ii) events or developments generally affecting
the industry in which the Parent and its subsidiaries operate).
SECTION 4.7 Information Supplied. None of the
--------------------
information supplied or to be supplied by Parent or the Operating Company for
inclusion or incorporation by reference in (i) the S-4 will, at the time the
S-4 is filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement will, at the
date mailed to stockholders and at the times of the Company Stockholder
Meeting and the Parent Stockholder 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 light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to Parent, its officers and
directors or any of its subsidiaries should occur which is required to be
described in an amendment of, or a supplement to, the S-4 or the Proxy
Statement, Parent shall promptly so advise the Company and such event shall be
so described, and such amendment or supplement (which the Company shall have a
reasonable opportunity to review) shall be promptly filed with the SEC and, as
required by Law, disseminated to the stockholders of Parent. The S-4 and,
insofar as it relates to the Parent Stockholder Meeting, the Proxy Statement
will comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act, respectively, and the respective rules
and regulations thereunder.
SECTION 4.8 Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky Laws, the HSR Act, the Insurance
Departments, the filing and recordation of
41
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certificates of merger as required by the DGCL and the OGCL and as otherwise
set forth in Section 4.8 to the Parent Disclosure Schedule (the "Parent
Required Approvals"), no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary
for the execution and delivery by Parent or the Operating Company of this
Agreement or the consummation by Parent or the Operating Company of the
transactions contemplated hereby, except (other than in respect of those to be
obtained from Insurance Departments) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice do not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither the execution,
delivery and performance of this Agreement by Parent or the Operating Company
nor the consummation by Parent or the Operating Company of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the respective articles of incorporation or bylaws (or similar
governing documents) of Parent or the Operating Company or any of Parent's
subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or the Operating Company or any of Parent's
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound (collectively, the "Parent and Operating
Company Agreements" or (iii) violate any Law applicable to Parent or the
Operating Company or any of Parent's subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
Section 4.8 of the Parent Disclosure Schedule sets forth a list of all
material third party consents and approvals required to be obtained under the
Parent and Operating Company Agreements prior to the consummation of the
transactions contemplated by this Agreement.
SECTION 4.9 Compliance with Applicable Laws. Except
-------------------------------
as and to the extent publicly disclosed by Parent in the Parent SEC Reports
filed prior to the date hereof, the businesses of Parent and its subsidiaries
are not being conducted in violation of any Law, ordinance or regulation of
any Governmental Entity, except for violations or possible violations which do
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. To Parent's knowledge, no
investigation or review by any Governmental Entity with respect to Parent or
its subsidiaries is pending or threatened, nor, to Parent's knowledge, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those which Parent reasonably believes do not or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
SECTION 4.10 Absence of Questionable Payments.
--------------------------------
Neither Parent nor any of its subsidiaries nor, to Parent's knowledge, any
director, officer, agent, employee or other person acting on behalf of Parent
or any of its subsidiaries, has used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or
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made any unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Section 30A of the Exchange Act. Neither Parent nor any
of its subsidiaries nor, to Parent's knowledge, any director, officer, agent,
employee or other person acting on behalf of Parent or any of its
subsidiaries, has accepted or received any unlawful contributions, payments,
gifts, or expenditures. To Parent's knowledge, Parent and each of its
subsidiaries which is required to file reports pursuant to Section 12 or 15(d)
of the Exchange Act is in compliance with the provisions of Section 13(b) of
the Exchange Act.
SECTION 4.11 Year 2000. Parent and its subsidiaries
---------
have developed and are executing a plan with respect to Year 2000 readiness
(the "Parent Year 2000 Plan"). Parent has provided the Company with a copy of
the Parent Year 2000 Plan and has provided a report on the status of the
Parent Year 2000 Plan through April 30, 1999 that is accurate in all material
respects. The Parent Year 2000 Plan addresses the Year 2000 issues which, to
the knowledge of Parent, are material to Parent and its subsidiaries,
including internal information systems and process control risks, embedded
circuitry risks and third party risks.
SECTION 4.12 Opinion of Financial Advisor. The Board
----------------------------
of Directors of the Parent has received the opinion of Credit Suisse First
Boston Corporation, dated the date of this Agreement, to the effect that, as
of such date, the Common Merger Consideration is fair to the Parent from a
financial point of view and, as of the date hereof, such opinion has not been
withdrawn or modified in a manner adverse to Parent.
SECTION 4.13 Brokers. No broker, finder or investment
-------
banker (other than Credit Suisse First Boston Corporation) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of Parent or the Operating Company or any of their affiliates.
SECTION 4.14 Accounting Matters; Tax Treatment.
---------------------------------
Neither Parent nor any of its affiliates has taken or agreed to take any
action or is aware of any fact or circumstance that would (a) prevent the
Merger from qualifying as a "pooling of interests" under APB 16 and the
applicable SEC rules and regulations (except that no representation is made to
the effect that the transactions contemplated by this Agreement will so
qualify) or (b) prevent the Merger from qualifying as a reorganization under
Section 368 of the Code. Parent has not failed to bring to the attention of
the Company any actions, agreements or understandings, whether written or
oral, that would be reasonably likely to prevent Parent from accounting for
the Merger as a "pooling of interests" under APB 16 and the applicable SEC
rules and regulations.
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ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of Business of the Company.
----------------------------------
Except as contemplated by this Agreement, during the period from the date
hereof to the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary and usual course of
business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact its current business
organizations, seek to keep available the service of its current officers and
employees and seek to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this Agreement or in Section 5.1 of the Company Disclosure Schedule, prior to
the Effective Time, neither the Company nor any of its subsidiaries will,
without the prior written consent of Parent,
(a) amend its certificate of incorporation or bylaws (or other
similar governing instrument) or amend, modify or terminate the Company Rights
Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities convertible into or
exchangeable for any stock or any equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
issuance or sale of Shares pursuant to Company Stock Options outstanding on
the date of this Agreement or the issuance of Shares pursuant to stock unit
grants outstanding on the date of this Agreement under the 1995 Directors'
Stock Purchase Plan, pursuant to the Incentive Program (pursuant to
irrevocable elections made prior to the date of this Agreement) or upon
conversion of the Company Preferred Stock outstanding on the date of this
Agreement or the issuance of stock options under the Incentive Program
(pursuant to irrevocable elections made prior to the date of this Agreement);
(c)(i) split, combine or reclassify any shares of its capital
stock; (ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock except the declaration and payment of regular quarterly cash
dividends on the Company Preferred Stock in accordance with their respective
terms with usual record and payments dates in accordance with past dividend
practice; (iii) make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such; or (iv) redeem, repurchase or
otherwise acquire any of its securities or any securities of any of its
subsidiaries (including redeeming any Rights);
44
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(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary;
(f)(i) incur or assume any long-term or short-term debt or issue
any debt securities, except for borrowings under existing lines of credit in
the ordinary and usual course of business consistent with past practice (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
except in the ordinary and usual course of business consistent with past
practice and in amounts not material to the Company and its subsidiaries,
taken as a whole, and except for obligations of the wholly owned subsidiaries
of the Company; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to the wholly owned subsidiaries
of the Company or customary loans or advances to employees in the ordinary and
usual course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of capital stock of the Company or its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to be created any material Lien thereupon;
(g) except as may be required by Law, enter into, adopt, amend,
extend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, labor, collective bargaining, employment,
severance or other employee benefit agreement, trust, plan, fund, award or
other arrangement for the benefit or welfare of any director, officer or
employee in any manner, or increase in any manner the compensation or fringe
benefits of any director, officer or (except as required under agreements
existing on the date hereof and except for increases in compensation, bonus or
other benefits payable to employees of the Company or any of its subsidiaries
in the ordinary and usual course of business consistent with past practice or
merit increases in salaries of employees at regularly scheduled times in
customary amounts consistent with past practices) employee or pay any benefit
not required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units);
(h) acquire, sell, lease or dispose of any assets outside the
ordinary and usual course of business consistent with past practice or any
assets which in the aggregate are material to the Company and its subsidiaries
taken as a whole, enter into any commitment or transaction outside the
ordinary and usual course of business consistent with past practice or grant
any exclusive distribution rights;
(i) except as may be required as a result of a change in Law or in
GAAP, change any of the accounting principles or practices used by it and,
except as may be
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required as a result of a change in law or statutory accounting practices of
New York or Wisconsin, as applicable, permit any Insurance Subsidiary to make,
any material change in the reinsurance, claim processing and payment,
reserving, financial or accounting practices or policies of any Insurance
Subsidiary;
(j) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off notes
or accounts receivable other than in the ordinary and usual course of business
consistent with past practice or as required by GAAP;
(k) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any material
contract or agreement, other than in the ordinary and usual course of business
consistent with past practice or amend in any material respect any of the
Material Contracts or the agreements referred to in Section 3.18; (iii)
authorize any new capital expenditure or expenditures which, individually, is
in excess of $10 million or, in the aggregate, are in excess of $67 million;
or (iv) enter into or amend any contract, agreement, commitment or arrangement
providing for the taking of any action that would be prohibited hereunder;
(l) make or revoke any Tax election, or settle or compromise any
Tax liability in excess of amounts reserved therefor on the consolidated
balance sheet of the Company as at the Audit Date, or change (or make a
request to any Taxing authority to change) any aspect of its method of
accounting for Tax purposes;
(m) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
and usual course of business consistent with past practice of liabilities
reflected or reserved against in, or contemplated by, the Company's
consolidated balance sheet as of March 31, 1999 (or the notes thereto) as
included in the Company SEC Reports, or incurred in the ordinary and usual
course of business consistent with past practice;
(n) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any
of its subsidiaries is a party;
(o)settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(p) take any action (including any action otherwise permitted by
this Section 5.1) that would prevent or impede the Merger from qualifying as a
"pooling of interests" under APB 16 and the applicable SEC rules and
regulations or as a reorganization under Section 368(a) of the Code;
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(q) enter into any agreement or arrangement that limits or
otherwise restricts the Company or any of its subsidiaries or any successor
thereto or that could, after the Effective Time, limit or restrict the
Surviving Corporation and its affiliates (including Parent) or any successor
thereto, from engaging or competing in any line of business or in any
geographic area;
(r) permit any Insurance Subsidiary to enter into or modify any
reinsurance or retrocession agreement by any Insurance Subsidiary other than
in the ordinary course of business consistent with past practice, or terminate
or commute any reinsurance or retrocession agreement legally carried on the
books of the Insurance Subsidiary at the time of such termination or
commutation;
(s) enter into any new agreement, commitment or understanding with
the Insurance Departments, or amend any existing agreement, commitment or
understanding with the Insurance Departments, including the Guaranty; or
(t) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through 5.1(s) or any
action which would (y) make any of the representations or warranties of the
Company contained in this Agreement (i) which are qualified as to materiality
untrue or incorrect or (ii) which are not so qualified untrue or incorrect in
any material respect or (z) result in any of the conditions to the Merger set
forth in Article VII hereof not being satisfied.
SECTION 5.2 Conduct of Business of Parent. Except as
-----------------------------
otherwise expressly provided in this Agreement or as set forth in Section 5.2
of the Parent Disclosure Schedule, prior to the Effective Time, neither Parent
nor any of its subsidiaries will, without the prior written consent of the
Company:
(a) amend its certificate of incorporation (or other similar
governing instrument) in any manner that would be materially adverse to the
holders of Parent Common Stock;
(b)(i) declare, set aside or pay any dividend or other distribution
in respect of its capital stock except the declaration and payment of regular
quarterly cash dividends not in excess of $0.125 per share of Parent Common
Stock, (ii) make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such or (iii) redeem, repurchase or
otherwise acquire any shares of Parent Common Stock;
(c) take any action (including any action otherwise permitted by
this Section 5.2) that would prevent or impede the Merger from qualifying as a
"pooling of interests" under APB 16 and the applicable SEC rules and
regulations or as a reorganization under Section 368(a) of the Code; or
(d) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Section 2.1(e) or Sections 5.2(a)
through 5.2(c) or any action
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which (y) would make the representations or warranties of Parent and the
Operating Company in this Agreement (i) which are qualified as to materiality
untrue or incorrect or (ii) which are not so qualified untrue in any material
respect or (z) result in any of the conditions to the Merger set forth in
Article VII hereof not being satisfied.
SECTION 5.3 Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company
will give Parent and the Operating Company and their authorized
representatives (including counsel, financial advisors and auditors)
reasonable access during normal business hours to all employees, plants,
offices, warehouses and other facilities and to all books and records of the
Company and its subsidiaries, will permit Parent and the Operating Company to
make such inspections as Parent and the Operating Company may reasonably
require and will cause the Company's officers and those of its subsidiaries to
furnish Parent and the Operating Company with such financial and operating
data and other information with respect to the business, properties and
personnel of the Company and its subsidiaries as Parent or the Operating
Company may from time to time reasonably request, provided that no
investigation pursuant to this Section 5.3(a) shall affect or be deemed to
modify any of the representations or warranties made by the Company in this
Agreement. The Company will keep Parent and the Operating Company fully
informed, and consult with Parent and the Operating Company on a regular basis
concerning, all matters pertaining to the Company's collective bargaining
agreements and any and all negotiations in connection therewith.
(a) Between the date hereof and the Effective Time, Parent and the
Operating Company will give the Company and its authorized representatives
(including counsel, financial advisors and auditors) reasonable access during
normal business hours to all employees, plants, offices, warehouses and other
facilities and to all books and records of Parent and its subsidiaries, will
permit the Company to make such inspections as the Company may reasonably
require and will cause Parent's officers and those of its subsidiaries to
furnish the Company with such financial and operating data and other
information with respect to the business, properties and personnel of Parent
and its subsidiaries as the Company may from time to time reasonably request,
provided that no investigation pursuant to this Section 5.3(b) shall affect or
be deemed to modify any of the representations or warranties made by Parent or
the Operating Company in this Agreement.
(c) Between the date hereof and the Effective Time, the Company
shall furnish to Parent and the Operating Company, (i) concurrently with the
deliveries thereof to management or the Company Board, such monthly financial
statements and data as are regularly prepared for distribution to Company
management or the Company Board and (ii) at the earliest time they are
available, such quarterly and annual financial statements as are prepared for
the Company's SEC filings, which (in the case of this clause (ii)), shall be
in accordance with the books and records of the Company.
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(d) Each of Parent and the Operating Company will hold and will
cause its authorized representatives to hold in confidence all documents and
information concerning the Company and its subsidiaries furnished to Parent or
the Operating Company in connection with the transactions contemplated by this
Agreement pursuant to the terms of that certain Confidentiality Agreement
entered into between the Company and Parent dated April 23, 1999 (the
"Confidentiality Agreement").
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of S-4 and the Proxy
--------------------------------
Statement. Parent and the Company will, as promptly as
- ---------
practicable, jointly prepare and file with the SEC the Proxy Statement in
connection with the vote of the stockholders of the Company with respect to
the Merger and the vote of the stockholders of Parent with respect to the
Share Issuance. Parent will, as promptly as practicable, prepare, following
receipt of notification from the SEC that it has no further comments on the
Proxy Statement, and file with the SEC the S-4, containing a joint proxy
statement/prospectus, which shall also include all information required in
order for such proxy statement to constitute an Acquiring Person Statement (as
defined by Section 1701.01 (BB) of the OGCL), and forms of proxy, in
connection with the registration under the Securities Act of the shares of
Parent Common Stock issuable upon conversion of the Shares and the other
transactions contemplated hereby. Parent and the Company will, and will cause
their accountants and lawyers to, use all reasonable best efforts to have or
cause the S-4 declared effective as promptly as practicable after filing with
the SEC, including, without limitation, causing their accountants to deliver
necessary or required instruments such as opinions, consents and certificates,
and will take any other action required or necessary to be taken under federal
or state securities Laws or otherwise in connection with the registration
process (other than qualifying to do business in any jurisdiction which it is
not now so qualified or to file a general consent to service of process in any
jurisdiction). The Company and Parent shall, as promptly as practicable after
the receipt thereof, provide to the other party copies of any written comments
and advise the other party of any oral comments, with respect to the Proxy
Statement or the S-4 received from the staff of the SEC. The Company will
provide Parent with a reasonable opportunity to review and comment on any
amendment or supplement to the Proxy Statement prior to filing with the SEC
and will provide Parent with a copy of all such filings with the SEC. Each of
Parent and the Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to its stockholders (including, in the case of the
Company, the holders of the Company Preferred Stock) at the earliest
practicable date.
SECTION 6.2 Letter of Accountants.
---------------------
(a) The Company shall use all reasonable best efforts to cause to
be delivered to Parent a letter of Deloitte & Touche LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory
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to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4.
(b) Parent shall use all reasonable best efforts to cause to be
delivered to the Company a letter of Deloitte & Touche LLP, Parent's
independent auditors, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
SECTION 6.3 Meetings.
--------
(a) The Company shall take all lawful action to (i) cause a special
meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as practicable after the date of this Agreement for
the purpose of voting on the approval and adoption of this Agreement and (ii)
solicit proxies from its stockholders to obtain the Company Requisite Vote for
the approval and adoption of this Agreement. The Company Board shall
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders and, except as permitted by Section 6.5, the Company
Board shall not withdraw, amend or modify in a manner adverse to Parent such
recommendation (or announce publicly its intention to do so).
(b) Parent shall take all lawful action to (i) cause a special
meeting of its stockholders (the "Parent Stockholder Meeting") to be duly
called and held as soon as practicable after the date of this Agreement for
the purpose of voting on the approval of the Share Issuance and (ii) solicit
proxies from its stockholders to obtain the Parent Requisite Vote. The Parent
Board shall recommend approval of the Share Issuance by Parent's stockholders
and, except as required to comply with their fiduciary duty under applicable
Law, the Parent Board shall not be permitted to withdraw, amend or modify in a
manner adverse to the Company such recommendation (or announce publicly its
intention to do so).
SECTION 6.4 Reasonable Best Efforts.
-----------------------
(a) Subject to the terms and conditions of this Agreement, each
party will use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate the Merger and the other
transactions contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect
to the transactions contemplated hereby as promptly as practicable and in any
event within ten (10) business days of the date hereof and to supply as
promptly as practicable any additional information and documentary material
that may be requested pursuant to the HSR Act and use its reasonable best
efforts to take, or cause to be taken, all other actions consistent with this
Section 6.4 necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
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(b) Each of Parent and the Company shall, in connection with the
efforts referenced in Section 6.4(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under the
HSR Act or any other Antitrust Law (as hereunder defined), use its reasonable
best efforts to (i) cooperate in all respects with each other in connection
with any filing or submission and in connection with any investigation or
other inquiry, including any proceeding initiated by a private party; and (ii)
keep the other party informed in all material respects of any material
communication received by such party from, or given by such party to, the
Federal Trade Commission (the "FTC"), the Antitrust Division of the Department
of Justice (the "DOJ") or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby; and
(iii) permit the other party to review any material communication given by it
to, and consult with each other in advance of any meeting or conference with,
the FTC, the DOJ or any such other Governmental Entity or, in connection with
any proceeding by a private party, with any other person, and to the extent
permitted by the FTC, the DOJ or such other applicable Governmental Entity or
other person, give the other party the opportunity to attend and participate
in such meetings and conferences. For purposes of this Agreement, "Antitrust
Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the Federal Trade Commission Act, as amended, and all other Laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition through merger or acquisition.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 6.4(a) and 6.4(b), each of Parent and the
Company shall use its reasonable best efforts to resolve such objections if
any, as may be asserted a Governmental Entity or other person with respect to
the transactions contemplated hereby under any Antitrust Law. In connection
with the foregoing, if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to
be instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Parent and the Company shall cooperate
in all respects with each other and use its respective reasonable best efforts
to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other
order, whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement. Notwithstanding the foregoing or any other provision of
this Agreement, nothing in this Section 6.4 shall (i) limit a party's right to
terminate this Agreement pursuant to Section 8.2 (a), (d) or (e) so long as
such party has up to then complied in all material respects with its
obligations under this Section 6.4, or (ii) require Parent or the Operating
Company to (x) enter into any "hold-separate" agreement or other agreement
with respect to the disposition of any assets or businesses of the Parent or
any of its subsidiaries or the Company or any of its subsidiaries in order to
obtain clearance from the Federal Trade Commission or the Antitrust Division
of the Department of Justice or any state antitrust or competition authorities
to proceed with the consummation of the transactions contemplated hereby; (y)
consummate the transactions
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contemplated hereby in the event that any consent, approval or authorization
of any Governmental Entity obtained or sought to be obtained in connection
with this Agreement is conditioned upon the imposition of any other
significant restrictions upon, or the making of any material accommodation
(financial or otherwise) in respect of the transactions contemplated hereby or
the conduct of the business of the Surviving Corporation or the Parent
(including any agreement not to compete in any geographic area or line of
business) or results, or would result in, the abrogation or diminishment of
any authority or license granted by any Governmental Entity; or (z) enter into
negotiations with any labor organization representing employees of the Company
or any of its subsidiaries as a condition to consummation of the transactions
contemplated by this Agreement.
SECTION 6.5 No Solicitation; Acquisition Proposals.
--------------------------------------
(a) From the date hereof until the termination hereof, and except
as expressly permitted by the following provisions of this Section 6.5, the
Company will not, nor will it permit any of its subsidiaries to, nor will it
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other advisor or representative of, the
Company or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as defined
in Section 9.11(a)), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to
the Company or any of its subsidiaries, or take any other action to
facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (iii) enter into any agreement with respect to an
Acquisition Proposal (other than a confidentiality agreement as described
below); provided, however, that nothing contained in this Section 6.5(a) shall
prohibit the Company Board from, prior to receipt of the Company Requisite
Vote, furnishing information to, or entering into discussions or negotiations
with, any person that makes an unsolicited bona fide written Acquisition
Proposal if, and only to the extent that (A) the Company Board, after
considering applicable provisions of state law and after consultation with
outside legal counsel, determines in good faith that such action is necessary
for the Company Board to discharge properly its fiduciary duties to the
Company's stockholders under applicable Law, (B) the Company Board determines
in good faith that such Acquisition Proposal, if accepted, is reasonably
likely to be consummated taking into account all legal, financial, regulatory
and other aspects of the proposal and the person making the proposal, and
believes in good faith, after consultation with an independent, nationally
recognized financial advisor and after taking into account the strategic
benefits to be derived from the Merger and the long term prospects of Parent
and its subsidiaries, would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than
the Merger, and for which the Company Board determines in its good faith
judgment (after such consultation) that financing, to the event required, is
then committed or reasonably available (any such more favorable Acquisition
Proposal being referred to herein as a "Superior Proposal"), and (C) prior to
taking such action, the Company (x) provides reasonable notice to Parent to
the effect that it is taking such action and (y) receives from
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such person an executed confidentiality/standstill agreement in reasonably
customary form and in any event containing terms at least as stringent in all
material respects as those contained in the Confidentiality Agreement between
Parent and the Company as of the date hereof. Prior to providing any
information to or entering into discussions or negotiations with any person in
connection with an Acquisition Proposal by such person, the Company shall
notify Parent of any Acquisition Proposal (including, without limitation, the
material terms and conditions thereof or amendments or supplements thereto and
the identity of the person making it) as promptly as practicable (but in no
case later than 24 hours) after its receipt thereof, and shall thereafter
inform Parent on a prompt basis of the status of any discussions or
negotiations with such a third party, and any material changes to the terms
and conditions of such Acquisition Proposal. Immediately after the execution
and delivery of this Agreement, the Company will, and will cause its
subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
cease and terminate any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any possible Acquisition
Proposal. The Company agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.5(a).
(b) From the date hereof until the termination hereof, the Company
will not (A) amend or grant any waiver or release under any standstill or
similar agreement with respect to any class of equity securities of the
Company, or (B) (except as expressly contemplated by this Agreement) amend, or
approve any transaction or redeem rights under, the Company Rights Agreement.
(c) Except as expressly permitted by this Section 6.5 or in
connection with its termination of this Agreement in accordance with the terms
and conditions of Section 8.3(a), the Company Board will not withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, its approval or recommendation of this Agreement or the Merger unless
(i) the Company has complied with the terms of Section 6.5(a), (ii) a Superior
Proposal is pending at the time the Company Board determines to take any such
action, (iii) the Company Board, after considering applicable provisions of
state law and after consultation with outside legal counsel, determines in
good faith that such action is necessary for the Company Board to discharge
properly its fiduciary duties to the Company's stockholders under applicable
Law and (iv) the Company shall have delivered to Parent a prior written notice
advising Parent that it intends to take such action and describing its reasons
for taking such action (such notice to be delivered not less than two days
prior to the time such action is taken); provided, however, the Company Board
may not approve or recommend (and in connection therewith, withdraw or modify
its approval or recommendation of this Agreement or the Merger) an Acquisition
Proposal unless such an Acquisition Proposal is a Superior Proposal (and the
Company shall have first complied with its obligations set forth in Section
8.3(a) and the time period referred to in the last sentence of Section 8.3(a)
has expired) and unless it shall have first consulted with outside legal
counsel, and have determined that such action is necessary for the Company
Board to comply with its fiduciary duties to the Company's stockholders.
Nothing contained in this Section 6.5 shall prohibit the Company from
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taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith judgment of the Company Board,
after considering applicable provisions of state law and after consultation
with outside legal counsel is required under applicable Law; provided, that
except in accordance with this Section 6.5(c) or in connection with its
termination of this Agreement in accordance with the terms and conditions of
Section 8.3(a), the Board of Directors of the Company shall not withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal.
(d) Notwithstanding anything contained in this Agreement to the
contrary, any action by the Company Board permitted by, and taken in
accordance with, this Section 6.5 shall not constitute a breach of this
Agreement by the Company. Nothing in this Section 6.5 shall (i) permit the
Company to terminate this Agreement (except as provided in Article VIII
hereof) or (ii) affect any other obligations of the Company under this
Agreement.
SECTION 6.6 Public Announcements. Each of Parent, the
--------------------
Operating Company and the Company will consult with one another before issuing
any press release or otherwise making any public statements with respect to
the transactions contemplated by this Agreement, including, without
limitation, the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with the
New York Stock Exchange, as determined by Parent, the Operating Company or the
Company, as the case may be.
SECTION 6.7 Indemnification; Directors' and Officers'
----------------------------------------
Insurance.
- ---------
(a) The Parent agrees that all rights to exculpation and
indemnification for acts or omissions occurring prior to the Effective Time
now existing in favor of the current or former directors or officers (the
"Indemnified Parties") of the Company as provided in its articles of
incorporation or code of regulations or in any agreement between the Company
and any of the Indemnified Parties shall survive the Merger and shall continue
in full force and effect in accordance with their terms for a period of six
years following the Effective Time, and accordingly during such period, the
Surviving Corporation shall indemnify the Indemnified Parties to the same
extent as such Indemnified Parties are entitled to indemnification pursuant to
the preceding sentence.
(b) For a period of three (3) years after the Effective Time,
Parent shall cause to be maintained in effect the policies of directors' and
officers' liability insurance maintained by the Company for the benefit of
those persons who are covered by such policies at the Effective Time (or
Parent may substitute therefor policies of at least the same coverage with
respect to matters occurring prior to the Effective Time), to the extent that
such liability insurance can be maintained annually at a cost to Parent not
greater than 250 percent of the annual premium (the "Current Premium") for the
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current Company directors' and officers' liability insurance; provided that if
such insurance cannot be so maintained or obtained at such costs, Parent shall
maintain or obtain as much of such insurance as can be so maintained or
obtained at a cost equal to 250 percent of the current annual premiums of the
Company for such insurance. The Company represents and warrants to Parent
that the Current Premium is $315,000.
(c) To the fullest extent permitted by Law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of the Company and its subsidiaries
with respect to their activities as such prior to the Effective Time, as
provided in the Company's article of incorporation or code of regulations, in
effect on the date thereof or otherwise in effect on the date hereof, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time.
(d) The rights of each Indemnified Party under this Section 6.7 are
intended to benefit, and shall be enforceable by, each Indemnified Party.
SECTION 6.8 Notification of Certain Matters. The
-------------------------------
Company shall, upon obtaining knowledge of any of the following, give prompt
notice to Parent and the Operating Company, and Parent and the Operating
Company shall, upon obtaining knowledge of any of the following, give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement, which is qualified as
to materiality, to be untrue or inaccurate, or any representation or warranty
not so qualified, to be untrue or inaccurate in any material respect at or
prior to the Effective Time, (ii) any material failure of the Company, Parent
or the Operating Company, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, (iii) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any condition to the
obligations of any party to the effect of the transactions contemplated hereby
not to be satisfied, (iv) any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become a
default, received by it or any of its subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract or
agreement material to the financial condition, properties, businesses, results
of operations or prospects of it and its subsidiaries taken as a whole to
which it or any of its subsidiaries is a party or is subject, (v) any notice
or other communication from any Governmental Entity in connection with the
Merger or Guaranty, (vi) any actions, suits, claims, investigations or other
proceedings (or communications indicating that the same may be contemplated)
commenced or threatened against the Company or any of its subsidiaries which,
if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.20 or which relate to the consummation of
the Merger, (vii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, or (viii) any
Material Adverse Effect in their respective financial condition, properties,
businesses, results of operations or prospects, taken as a whole; provided,
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however, that the delivery of any notice pursuant to this Section 6.8 shall
not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.9 Pooling.
-------
(a) The Company shall use its reasonable best efforts to cause to
be delivered to Parent letters from its independent auditors, Deloitte &
Touche LLP, dated as of the date the S-4 is declared effective and dated as of
the Closing Date, stating that the accounting of the Merger as a "pooling of
interests" under Opinion 16 of the Accounting Principles Board ("APB 16") and
the applicable SEC rules and regulations is appropriate if the Merger is
consummated as contemplated by this Agreement (it being understood and agreed
that the delivery of such letters shall not constitute a condition to the
parties' obligations to consummate the transactions contemplated by this
Agreement).
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company letters from its independent auditors, Deloitte &
Touche LLP, dated as of the date the S-4 is declared effective and dated as of
the Closing Date, stating that the accounting of the Merger as a "pooling of
interests" under APB 16 and the applicable SEC rules and regulations is
appropriate if the Merger is consummated as contemplated by this Agreement (it
being understood and agreed that the delivery of such letters shall not
constitute a condition to the parties' obligations to consummate the
transactions contemplated by this Agreement).
(c) Each party hereto shall use its reasonable best efforts to take
such actions (including seeking necessary waivers from employees under Company
benefit plans or agreements with the Company) as are within its reasonable
control so that the Merger will be accounted for as a "pooling of interests"
under APB 16 and the applicable SEC rules and regulations (it being understood
and agreed that the qualification of the Merger as a "pooling of interests"
shall not constitute a condition to the parties' obligations to consummate the
transactions contemplated by this Agreement); provided, that the parties shall
have no further obligations under this Section 6.9(c) following the date the
S-4 is declared effective if Parent's accountants do not deliver the letter
contemplated by Section 6.9(b) as of the date the S-4 is declared effective.
SECTION 6.10 Tax-Free Reorganization Treatment. The
---------------------------------
Company, Parent and the Operating Company shall execute and deliver to Arnold
& Porter, counsel to the Company, and Weil, Gotshal & Manges LLP, counsel to
Parent and the Operating Company, certificates substantially in the forms
agreed to on or prior to the date hereof at such time or times as reasonably
requested by such law firms in connection with their respective deliveries of
opinions with respect to the transactions contemplated hereby. Prior to the
Effective Time, none of the Company, Parent or the Operating Company shall
take or cause to be taken any action which would cause to be untrue (or fail
to take or cause not to be taken any action which would cause to be untrue)
any of the representations in such certificates.
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SECTION 6.11 Employee Matters
---------------
(a) Parent will cause the Surviving Corporation to honor the
obligations of the Company or any of its subsidiaries under the provisions of
all employment, consulting, termination, severance, change in control and
indemnification agreements disclosed in Section 6.11 of the Company Disclosure
Schedule between and among the Company or any of its subsidiaries and any
current or former officer, director, consultant or employee of the Company or
any of its subsidiaries; provided, however, that nothing in this Agreement
shall preclude Parent or any of its affiliates from having the right to
terminate the employment of any employee of the Company or any of its
subsidiaries, with or without cause, or amend or terminate any Employee
Benefit Plan, in each case after the Effective Time.
(b) The Company Board shall have adopted prior to the Closing Date
an amendment to each of the 1993 Long-Term Incentive Plan of Armco Inc. and
the 1996 Incentive Plan of Armco Inc. in the form attached hereto as Schedule
6.11(b).
SECTION 6.12 Affiliate Letters. Section 6.12 of the
-----------------
Company Disclosure Schedule (which shall be delivered not later than June 4,
1999) will set forth a list of all persons who are, and all persons who to the
Company's knowledge will be at the Closing Date, "affiliates" of the Company
for purposes of Rule 145 under the Securities Act or for purposes of
qualifying the Merger for "pooling of interests" accounting treatment under
APB 16 and applicable SEC rules, and Section 6.12 of the Parent Disclosure
Schedule (which shall be delivered not later than June 4, 1999) will set forth
a list of all persons who are, and all persons who to Parent's knowledge will
be at the Closing Date, "affiliates" of Parent for purposes of qualifying the
Merger for "pooling of interests" under APB 16 and the applicable SEC rules
and regulations. The Company and Parent will each respectively cause such
lists to be updated promptly through the Closing Date. Not later than 45 days
prior to the date of the Company Stockholder Meeting, the Company shall cause
its "affiliates" to deliver to Parent a written agreement substantially in the
form attached as Exhibit A, and Parent shall cause its "affiliates" to deliver
to the Company a written agreement substantially in the form attached as
Exhibit B.
SECTION 6.13 SEC Filings.
-----------
(a) The Company shall furnish to the Parent copies of all reports,
proxy statements and prospectuses of the type referred to in Section 3.4 which
it files with the SEC on or after the date hereof, and the Company represents
and warrants that as of the respective dates thereof, such reports will 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 light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and the unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present the financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
results of operations and cash
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flows or other information included therein for the periods or as of the date
then ended (subject, in the case of the interim financial statements, to
normal, recurring year-end adjustments), in each the case of the interim
financial statements, to normal, recurring year-end adjustments), in each case
in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto.)
(b) Parent shall furnish to the Company copies of all reports,
proxy statements and prospectuses of the type referred to in Section 4.4
which it files with the SEC on or after the date hereof, and Parent represents
and warrants that as of the respective dates thereof, such reports will 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 light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and the unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present the financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and the
results of operations and cash flows or other information included therein for
the periods or as of the date then ended (subject, in the case of the interim
financial statements, to normal, recurring year-end adjustments), in each case
in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto).
SECTION 6.14 Fees and Expenses. Whether or not the
-----------------
Merger is consummated, all Expenses (as hereinafter defined) incurred in
connection with this Agreement, and the transactions contemplated hereby shall
be paid by the party incurring such Expenses, except (a) Expenses incurred in
connection with the filing, printing and mailing of the Proxy Statement and
the S-4, which shall be shared equally by the Company and Parent, and (b), if
applicable, as provided in Section 8.5. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including, without limitation, all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with, or related to, the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, filing, printing and mailing
of the Proxy Statement and the S-4 and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
hereby.
SECTION 6.15 Listing of Stock. Parent shall use its
----------------
best efforts to cause the shares of Parent Common Stock to be issued in
connection with the Merger to be approved for listing on the NYSE on or prior
to the Closing Date, subject to official notice of issuance.
SECTION 6.16 Antitakeover Statutes. If any Takeover
---------------------
Statute is or may become applicable to the Merger, each of Parent and Company
shall take such actions as are necessary so that the transactions contemplated
by this Agreement may be
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consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of any Takeover Statute on
the Merger.
SECTION 6.17 Combined Operations. Parent agrees to
-------------------
use its reasonable best efforts to make publicly available, promptly following
the Closing, consolidated financial results (including combined sales and net
income) covering at least 30 days of post-merger combined operations of Parent
and the Company, pursuant to the requirements of APB 16.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions to Each Party's Obligations to
-----------------------------------------
Effect the Merger. The respective obligations of each party to
- -----------------
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions, any or all of which may be waived in whole or in part by the party
being benefited thereby, to the extent permitted by applicable Law:
(a) This Agreement shall have been approved and adopted by the
Company Requisite Vote and the Share Issuance shall have been approved by the
Parent Requisite Vote;
(b) Any waiting period applicable to the Merger under the HSR Act
shall have expired or early termination thereof shall have been granted
without limitation, restriction or condition;
(c) There shall not be in effect any Law of any Governmental Entity
of competent jurisdiction, restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement or permitting
such consummation only subject to any condition or restriction that has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (or an effect on Parent and its
subsidiaries that, were such effect applied to the Company and its
subsidiaries, has or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company) and no Governmental
Entity shall have instituted any proceeding which continues to be pending
seeking any such Law.
(d) The S-4 shall have been declared effective by the SEC and shall
be effective at the Effective Time, and no stop order suspending effectiveness
shall have been issued, no action, suit, proceeding or investigation by the
SEC to suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities Laws or the
Securities Act or Exchange Act relating to the issuance or trading of the
Parent Common Stock shall have been received.
(e) The Parent Common Stock required to be issued hereunder shall
have been approved for listing on the NYSE, subject only to official notice of
issuance.
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SECTION 7.2 Conditions to the Obligations of the
------------------------------------
Parent and the Operating Company. The respective obligations of
- --------------------------------
Parent and the Operating Company to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following additional conditions, any or all of which may
be waived in whole or part by Parent and the Operating Company, as the case
may be, to the extent permitted by applicable Law:
(a) The representations and warranties of the Company contained
herein or otherwise required to be made after the date hereof in a writing
expressly referred to herein by or on behalf of the Company pursuant to this
Agreement, to the extent qualified by materiality or Material Adverse Effect,
shall have been true and, to the extent not qualified by materiality or
Material Adverse Effect, shall have been true in all material respects, in
each case when made and on and as of the Closing Date as though made on and as
of the Closing Date (except for representations and warranties made as of a
specified date, which need be true, or true in all material respects, as the
case may be, only as of the specified date).
(b) The Company shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) The Company shall have delivered to Parent a certificate,
dated the date of the Closing, signed by the President or any Vice President
of the Company (but without personal liability thereto), certifying as to the
fulfillment of the conditions specified in Sections 7.2(a) and 7.2(b).
(d) Parent shall have received an opinion of Weil, Gotshal & Manges
LLP, dated the Effective Time, based on the representations of Parent, the
Operating Company and the Company, referred to in Section 6.10, to the effect
that the Merger will be treated for Federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
(e)(i) All authorizations, consents or approvals of a Governmental
Entity (other than those specified in Section 7.1(b) hereof) required in
connection with the execution and delivery of this Agreement and the
performance of the obligations hereunder shall have been made or obtained,
without any limitation, restriction or condition that has or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company (or an effect on Parent and its subsidiaries that, were
such effect applied to the Company and its subsidiaries, would have or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company), except for such authorizations, consents or
approvals, the failure of which to have been made or obtained does not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (or an effect on Parent and its
subsidiaries that, were such effect applied to the Company and its
subsidiaries, would have or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company).
60
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(ii) There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (A) seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from the Company or Parent
any damages that are material in relation to the Company and its subsidiaries
taken as a whole or Parent and its subsidiaries taken as a whole, as
applicable, (B) seeking to (1) prohibit or limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of any material
portion of the business or assets of the Company and its subsidiaries, taken
as a whole, or Parent and its subsidiaries, taken as a whole, as applicable,
(2) compel the Company, Parent or any of their respective subsidiaries to
dispose of or "hold separate" any material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as applicable, as a result of the Merger or
any of the other transactions contemplated by this Agreement or (3) impose any
other significant restrictions upon, or the making of any material
accommodation (financial or otherwise) in respect of, the transactions
contemplated hereby or the conduct of the business of the Surviving
Corporation or the Parent (including any agreement not to compete in any
geographic area or line of business), (C) seeking to impose limitations on the
ability of Parent to acquire or hold, or exercise full rights of ownership of,
any shares of capital stock of the Company or the Surviving Corporation,
including the right to vote the common stock of the Surviving Corporation, on
all matters properly presented to the stockholders of the Surviving
Corporation, (D) seeking to prohibit Parent and its subsidiaries from
effectively controlling in any material respect the business or operations of
the Company and its subsidiaries, taken as a whole, (E) which would result in
the abrogation or diminishment of any authority or license granted by any
Governmental Entity or (F) which otherwise could reasonably be expected to
have a Material Adverse Effect on the Company or Material Adverse Effect on
Parent.
(iii) Parent, the Operating Company and the Company
shall have obtained from or filed with, as appropriate, the relevant Insurance
Departments such material consents, approvals, orders, authorizations,
registrations, declarations, permits or filings in connection with this
Agreement and the transactions contemplated by this Agreement for the conduct
of their businesses as currently conducted or as expected to be conducted.
All orders, consents, permits, authorizations, approvals, and waivers
necessary to be obtained from Insurance Departments for the consummation of
the Closing of the transactions contemplated hereby shall have been obtained
and shall be in full force and effect, in each case (A) without the abrogation
or diminishment of the authority or license currently held by any Insurance
Subsidiary, or the imposition of significant restrictions upon the
transactions contemplated hereby or the conduct of the business of such
Insurance Subsidiaries, following the Effective Time, (B) without any
limitation, requirement or condition on Parent, the Operating Company, the
Company or any subsidiary of the Company (other than the Insurance
Subsidiaries), (C) without any limitation, requirement or condition on the
Insurance Subsidiaries (except as and to the extent any such limitation,
requirement or condition may exist on the date hereof in the Orders or as
described in Section 3.18(xi) of the Company Disclosure Schedule), (D) without
the imposition (either directly, indirectly or by virtue of the transactions
61
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contemplated by this Agreement) on Parent or the Operating Company of any
guaranty relating to the obligations of any subsidiary of the Company,
including, without limitation, the Insurance Subsidiaries, and (E) without
requiring Parent, the Operating Company or the Company to vary the financial
or other terms of the transactions contemplated hereby.
(f) The Company shall have obtained (i) the consents and approvals
set forth in Sections 3.3 and 3.8 of the Company Disclosure Schedule and (ii)
the consent or approval of each person whose consent or approval shall be
required under any Material Contract, Real Property Lease or other obligation
to which the Company or any of its subsidiaries is a party, except those for
which the failure to obtain such consents or approvals does not or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and would not prevent or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement.
(g) Not later than 45 days prior to the Company Stockholder
Meeting, Parent shall have received from Company's "affiliates" a written
agreement substantially in the form attached as Exhibit A.
(h) The Company Board shall have adopted the amendments to
certain of its incentive plans, as provided in Section 6.11(b).
SECTION 7.3 Conditions to the Obligations of the
------------------------------------
Company. The obligations of the Company to consummate the
- -------
transactions contemplated by this Agreement are subject to the fulfillment at
or prior to the Effective Time of each of the following conditions, any or all
of which may be waived in whole or in part by the Company to the extent
permitted by applicable Law:
(a) The representations and warranties of Parent and the Operating
Company contained herein or otherwise required to be made after the date
hereof in a writing expressly referred to herein by or on behalf of Parent and
the Operating Company pursuant to this Agreement, to the extent qualified by
materiality or Material Adverse Effect, shall have been true and, to the
extent not qualified by materiality or Material Adverse Effect, shall have
been true in all material respects, in each case when made and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need be
true, or true in all material respects, as the case may be, only as of the
specified date).
(b) Parent shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) Parent shall have delivered to the Company a certificate, dated
the date of the Closing, signed by the President or any Vice President of
Parent (but without
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personal liability thereto), certifying as to the fulfillment of the
conditions specified in Section 7.3(a) and 7.3(b).
(d) The Company shall have received an opinion of Arnold & Porter,
dated the Effective Time, based on the representations of Parent, the
Operating Company and the Company, referred to in Section 6.10 hereof, to the
effect that the Merger will be treated for Federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
(e) Not later than 45 days prior to the date of the Company
Stockholder Meeting, the Company shall have received from Parent's
"affiliates" a written agreement substantially in the form attached as Exhibit
B; provided, that this condition shall be of no force or effect if Parent's
accountants do not deliver the letter contemplated by Section 6.9(b) hereof as
of the date the S-4 is declared effective.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination by Mutual Agreement. This
-------------------------------
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or after the approval of the Merger by
the Company Requisite Vote and the approval of the Shares Issuance by the
Parent Requisite Vote referred to in Section 7.1(a), by mutual written consent
of the Company and Parent by action of their respective Boards of Directors.
SECTION 8.2 Termination by Either Parent or the
-----------------------------------
Company. This Agreement may be terminated and the Merger may be
- -------
abandoned at any time prior to the Effective Time by action of the Board of
Directors of either Parent or the Company if:
(a) the Merger shall not have been consummated by December 31,
1999, whether such date is before or after the date of approval of the Merger
by the Company Requisite Vote or of the Share Issuance by the Parent Requisite
Vote (the "Termination Date"); provided, however, that if either Parent or the
Company determines that additional time is necessary in connection with
obtaining any consent, registration, approval, permit or authorization
required to be obtained from any Governmental Entity, the Termination Date may
be extended by Parent or the Company from time to time by written notice to
the other party to a date not beyond March 31, 2000;
(b) the Company Requisite Vote shall not have been obtained at the
Company Stockholder Meeting or at any adjournment or postponement thereof;
(c) the Parent Requisite Vote shall not have been obtained at the
Parent Stockholder Meeting or at any adjournment or postponement thereof;
(d) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or
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after the approval of the Merger by the Company Requisite Vote or of the Share
Issuance by the Parent Requisite Vote); or
(e) any Governmental Entity shall have failed to issue an order,
decree or ruling or to take any other action which is necessary to fulfill the
conditions set forth in Sections 7.1(b), and 7.2(e), as applicable, and such
denial of a request to issue such order, decree, ruling or take such other
action shall have been final and nonappealable; provided, that the right to
terminate this Agreement pursuant to this Section 8.2 shall not be available
to any party that has breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure of the Merger to be consummated.
SECTION 8.3 Termination by the Company. This
--------------------------
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or after the approval of the Merger by
the Company Requisite Vote referred to in Section 7.1(a), by action of the
Company Board:
(a) prior to receipt of the Company Requisite Vote, if (i) the
Company is not in breach of Section 6.5, (ii) the Company Board shall have
determined in good faith, after considering applicable provisions of state law
and after consultation with outside legal counsel, that it is necessary for
the Company Board to discharge properly its fiduciary duties to the Company's
stockholders under applicable law, to terminate this Agreement to enter into
an agreement with respect to or to consummate a transaction constituting a
Superior Proposal, and (iii) the Company Board authorizes the Company, subject
to complying with the terms of this Agreement, to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal and
the Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such
notice, but only if during the five business day period after the Company's
notice, (A) the Company shall have offered to negotiate with (and, if such
offer is accepted, or if requested by Parent, shall have negotiated with), and
shall have caused its respective financial and legal advisors to negotiate
with, Parent to attempt to make such commercially reasonable adjustments in
the terms and conditions of this Agreement as would enable the Company to
proceed with the transactions contemplated herein and (B) the Board of
Directors of the Company shall thereafter have concluded, after considering
the results of such negotiations and the revised proposals made by Parent, if
any, that any Superior Proposal giving rise to the Company's notice continues
to be a Superior Proposal. The Company may not effect such termination unless
(i) prior thereto the Company pays to Parent in immediately available funds
the fees required to be paid pursuant to Section 8.5 and (ii) such termination
is within two business days after the termination of the five business day
period referred to in clause (iii) above. The Company agrees (x) that it will
not enter into a binding agreement referred to in clause (ii) above until at
least the sixth business day after it has provided the notice to Parent
required thereby and (y) to notify Parent promptly if its intention to enter
into a written agreement referred to in its notification shall change at any
time after giving such notification;
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(b) if there is a breach by Parent or the Operating Company of any
representation, warranty, covenant or agreement contained in this Agreement
that would give rise to a failure of a condition set forth in Section 7.3(a)
or 7.3(b), which has not been cured within 15 business days following receipt
by Parent of written notice of such breach;
(c) pursuant to Section 2.1(c) if, under the circumstances set
forth therein, the Company has delivered a timely Termination Notice; provided
that such termination shall not be effective unless and until Parent has
failed to deliver a timely Top-Up Intent Notice in accordance with Section
2.1(c); or
(d) the Parent Board, whether or not permitted to do so by this
Agreement, shall have withdrawn or adversely modified its approval of the
Share Issuance, or shall have failed to call the Parent Stockholder Meeting in
accordance with Section 6.3(b).
SECTION 8.4 Termination by Parent. This Agreement may
---------------------
be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval of the Share Issuance by
the Parent Requisite Vote referred to in Section 7.1(a) if:
(a) the Company enters into a binding agreement for a Superior
Proposal, or the Company Board, whether or not permitted to do so by this
Agreement, shall have withdrawn or adversely modified its approval or
recommendation of this Agreement or the Merger, or shall have failed to call
the Company Stockholder Meeting in accordance with Section 6.3(a);
(b) there is a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement that would give
rise to a failure of a condition set forth in Section 7.2(a) or 7.2(b), which
has not been cured within 15 business days following receipt by the Company of
written notice of such breach; or
(c) the Company enters into, adopts, amends or extends (without the
prior written consent of Parent, whether or not the same is required under
this Agreement) any labor or collective bargaining agreement with respect to
employees of the Company or its subsidiaries which agreement, amendment or
modification is on terms that (i) are different from those in effect on the
date hereof and (ii) Parent believes, in its sole discretion (exercised in
good faith) do, or would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company and its subsidiaries
or Parent and its subsidiaries (it being understood that if the Company takes
any of the foregoing actions, the same shall be deemed a material breach by
the Company of this Agreement).
SECTION 8.5 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, this Agreement (other
than this Section 8.5 and
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Sections 5.3(d), 6.14 and Article IX) shall become void and of no effect with
no liability on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or other
representatives); provided, however, except as otherwise provided in this
Section 8.5, no such termination shall relieve any party hereto of any
liability or damages resulting from (i) any willful breach of any
representations or warranties contained in this Agreement or (ii) any breach
of any covenant or agreement contained in this Agreement.
(b) In the event that (i) this Agreement is terminated by the
Company pursuant to Section 8.3(a), or (ii) this Agreement is terminated by
Parent pursuant to Section 8.4(a), or (iii) if within 18 months of the
termination of this Agreement pursuant to Section 8.2(b) or by Parent pursuant
to Section 8.4(b) any Acquisition Proposal by a third party is entered into,
agreed to or consummated by the Company, then the Company shall pay Parent (by
wire transfer of immediately available funds to an account designated by
Parent) a termination fee of $30,000,000 plus, subject to the last sentence of
this Section 8.5(b), the reimbursement of all of Parent's actual and
documented expenses up to a maximum reimbursed amount of $5,000,000 (the
"Parent Expenses"), on the date of such termination, in the case of clauses
(i) or (ii), or on the earlier of the date an agreement is entered into with
respect to an Acquisition Proposal or an Acquisition Proposal is consummated
in the case of clause (iii). In addition, if an Acquisition Proposal shall
have been made to the Company or any of its stockholders or any person shall
have publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to the Company and thereafter this Agreement
is terminated by either Parent or the Company pursuant to Section 8.2(b), the
Company shall promptly on demand reimburse all of the Parent Expenses and
thereafter be obligated to pay the termination fee only in the event such fee
is payable pursuant to this Section 8.5(b).
(c) In the event that this Agreement is terminated by the Company
pursuant to Section 8.3(d) and, at the time of such termination, (i) Parent
would not have been entitled to terminate this Agreement pursuant to Section
8.2 or 8.4, (ii) all conditions set forth in Sections 7.1 and 7.2 (other than
Section 7.1(a), Section 7.1(d) (to the extent such condition is not satisfied
by reason of any breach by Parent) and those conditions that by their nature
are to be satisfied at the Closing) have been satisfied or waived or shall
remain capable of being satisfied on or prior to the Termination Date and
(iii) the Company shall not have sold its Sawhill Tubular Division, Parent
shall pay to the Company, promptly on demand, $3,500,000 in respect of the
Company's expenses in connection with the transactions contemplated by this
Agreement; provided that if, within 18 months of the termination of this
Agreement pursuant to Section 8.3(d), the Company consummates a sale of its
Sawhill Tubular Division, the Company shall, promptly on demand, repay such
$3,500,000 to Parent.
(d) Each of the Company and Parent acknowledges that the agreements
contained in Sections 8.5(b) and 8.5(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, the Company, Parent and the Operating Company would not have
entered into this Agreement;
66
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accordingly, if the Company or Parent fails to promptly pay the amount due
pursuant to Section 8.5(b), and, in order to obtain such payment, Parent or
the Company commences a suit which results in a judgment against the Company
or Parent for the fee set forth in this Section 8.5, the Company or Parent, as
the case may be, shall pay to the other its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest from the
date of termination of this Agreement on the amounts owed at the prime rate of
The Fifth Third Bank in effect from time to time during such period plus two
percent (2%).
SECTION 8.6 Amendment. This Agreement may be amended
---------
by action taken by the Company, Parent and the Operating Company at any time
before or after approval of the Merger by the Company Requisite Vote and the
approval of the Share Issuance by the Parent Requisite Vote but, after any
such approval, no amendment shall be made which requires the approval of such
stockholders under applicable Law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
SECTION 8.7 Extension; Waiver. At any time prior to
-----------------
the Effective Time, each party hereto (for these purposes, Parent and the
Operating Company shall together be deemed one party and the Company shall be
deemed the other party) may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies
in the representations and warranties of the other party contained herein or
in any document, certificate or writing delivered pursuant hereto, or (iii)
waive compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of either party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of either party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations and
----------------------------------
Warranties. None of the representations, warranties, covenants
- ----------
and agreements in this Agreement or in any exhibit, schedule or instrument
delivered pursuant to this Agreement shall survive beyond the Effective Time,
except for those covenants and agreements contained herein and therein that by
their terms apply or are to be performed in whole or in part after the
Effective Time and this Article IX. This Section 9.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
SECTION 9.2 Entire Agreement; Assignment.
----------------------------
(a) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements
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and understandings, both written and oral, between the parties with respect
to the subject matter hereof, other than the Confidentiality Agreement.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including, but
not limited to, by merger or consolidation) or otherwise; provided, however,
that the Operating Company may assign, in its sole discretion, any or all of
its rights, interests and obligations under this Agreement to any direct
wholly owned subsidiary of Parent, but no such assignment shall relieve Parent
or the Operating Company of its obligations hereunder if such assignee does
not perform such obligations. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 9.3 Notices. All notices, requests,
-------
instructions or other documents to be given under this Agreement shall be in
writing and shall be deemed given, (i) five business days following sending by
registered or certified mail, postage prepaid, (ii) when sent if sent by
facsimile; provided that the fax is promptly confirmed by telephone
confirmation thereof, (iii) when delivered, if delivered personally to the
intended recipient and (iv) one business day following sending by overnight
delivery via a national courier service, and in each case, addressed to a
party at the following address for such party:
if to Parent or to Merger Sub, to:
AK Steel Holding Corporation
703 Curtis Street
Middletown, Ohio 45043-0001
Attention: General Counsel
Facsimile: (513) 425-5607
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Howard Chatzinoff, Esq.
and Stephen H. Cooper, Esq.
Facsimile: (212) 310-8007
if to the Company, to:
Armco Inc.
Legal Department
One Oxford Center
301 Grant Street
Pittsburgh, PA 15219-1415
Attention: General Counsel
Facsimile: (412) 255-9985
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with a copy to:
Arnold & Porter
399 Park Avenue
New York, NY 10022
Attention: Jonathan C.
Stapleton, Esq.
Facsimile (212) 715-1399
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 9.4 Governing Law. Except to the extent that
-------------
Delaware Law or Ohio Law is mandatorily applicable to the Merger and for the
rights of the shareholders of the Company, this Agreement shall be governed by
and construed in accordance with the Laws of the State of New York, without
regard to the principles of conflicts of Law thereof.
SECTION 9.5 Descriptive Headings. The descriptive
--------------------
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
SECTION 9.6 Parties in Interest. This Agreement
-------------------
shall be binding upon and except as provided in Section 6.7(c) inure solely to
the benefit of each party hereto and its successors and permitted assigns,
and, except as provided in Section 6.7(c), nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.7 Severability. The provisions of this
------------
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and purpose of
such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected by such invalidity or unenforceability,
nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other
jurisdiction.
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SECTION 9.8 Specific Performance. The parties agree
--------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the Southern District of the State of
New York or in New York state court, this being in addition to any other
remedy to which they are entitled at Law or in equity. In addition, each of
the parties hereto (a) consents to submit itself to the personal jurisdiction
of the courts of the United States for the Southern District of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any other court.
SECTION 9.9 Counterparts. This Agreement may be
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executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
SECTION 9.10 Interpretation.
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(a) The words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." All terms defined in this Agreement shall
have the defined meanings contained herein when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time, amended, qualified or supplemented, including
(in the case of agreements and instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and all
attachments thereto and instruments incorporated therein. References to a
person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to May 20, 1999. The phrase "made available" in this
agreement shall mean that the information
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referred to has been actually delivered to the party to whom such information
is to be made available.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
SECTION 9.11 Definitions.
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(a) "Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by
this Agreement) involving the Company: (i) any merger, consolidation, share
exchange, recapitalization, business combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or substantially all the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for 20 percent or more
of the outstanding Shares or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(b) "beneficial ownership" or "beneficially own" shall have the
meaning provided in Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
(c) "know" or "knowledge" means, with respect to any party, the
knowledge of such party's executive officers after due inquiry, including
inquiry of such party's counsel and other officers or employees of such party
responsible for the relevant matter.
(d) "Material Adverse Effect" means with respect to any entity,
any change, circumstance or effect that, individually or in the aggregate with
all other changes, circumstances and effects, is or is reasonably likely to be
materially adverse to (i) the assets, properties, business, condition
(financial or otherwise) or results of operations of such entity and its
subsidiaries taken as a whole or (ii) the ability of such party to consummate
the transactions contemplated by this Agreement.
(e) "person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(f) "subsidiary" means, when used with reference to any entity,
any corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other subsidiary of such party is a general or
managing partner or (ii) the outstanding voting securities or interests of,
which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar
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functions with respect to such corporation or other organization, is directly
or indirectly owned or controlled by such party or by any one or more of its
subsidiaries.
SECTION 9.12 Certain Ohio Matters. The Operating
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Company hereby represents, warrants and agrees as follows:
(a) The principal office of the Operating Company in Delaware, its
state of incorporation, is c/o The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware.
(b) The Operating Company hereby consents to be sued and served
with process in the State of Ohio and hereby irrevocably appoints the
Secretary of State of Ohio as its agent to accept service of process in any
proceeding in Ohio to enforce against the Operating Company any obligation of
the Company or to enforce the rights of a dissenting shareholder of the
Company.
(c) The Operating Company desires to transact business in Ohio as a
foreign corporation and has previously qualified to do so. The Operating
Company has appointed CT Corporation System, Carew Tower, Cincinnati, Ohio
45202 as its statutory agent for service of process.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
AK STEEL HOLDING CORPORATION
By: / s / Richard M. Wardrop, Jr.
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Name: Richard M. Wardrop, Jr.
Title: Chairman and Chief
Executive Officer
AK STEEL CORPORATION
By: / s / Richard M. Wardrop, Jr.
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Name: Richard M. Wardrop, Jr.
Title: Chairman and Chief
Executive Officer
ARMCO INC.
By: / s / James F. Will
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Name: James F. Will
Title: President and Chief
Executive Officer
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Exhibit 4
FIRST AMENDMENT TO RIGHTS AGREEMENT
This FIRST AMENDMENT TO RIGHTS AGREEMENT is made and entered into as of
the 27th day of May 1999 by and between Armco Inc., an Ohio corporation (the
"Company"), and Fifth Third Bank (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and the Rights Agent entered into a Rights Agreement
dated as of February 23, 1996 (the "Rights Agreement");
WHEREAS, the Company has entered into an Agreement and Plan of Merger
dated as of May 20, 1999 with AK Steel Holding Corporation and AK Steel
Corporation (the "Merger Agreement"), pursuant to which the Company shall be
merged with and into AK Steel Corporation, which shall be the surviving
corporation;
WHEREAS, it is a requirement under the Merger Agreement that the Board of
Directors of the Company take all necessary action so that (a) neither the
execution or delivery of the Merger Agreement, nor the actions contemplated
thereby, cause (i) the rights issued pursuant to the Rights Agreement to
become exercisable under the Company Rights Agreement or a Distribution Date
(as defined in the Rights Agreement), (ii) AK Steel Holding Corporation or AK
Steel Corporation to be deemed an Acquiring Person (as defined in the Rights
Agreement), or (iii) the Distribution Date (as defined in the Company Rights
Agreement) to occur upon any such event; and (b) the Expiration Date (as
defined in the Rights Agreement) of the rights shall occur immediately prior
to the consummation of the merger under the Merger Agreement.
NOW, THEREFORE, in consideration of the agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. The recitals set forth hereinabove are incorporated by reference with
the same force and effect as if fully set forth herein;
2. The Rights Agreement shall be amended as set forth below:
(a) The definition of "Acquiring Person" in Section 1(d) is hereby
amended by adding the following proviso the end of such section:
provided, however, that the definition of "Acquiring Person" shall not
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include either AK Steel Holding Corporation ("AK Holding") or AK Steel
Corporation ("AK Corp."), so long as both companies consummate the
transactions contemplated by, and consistent with the terms provided under,
the Agreement and Plan of Merger dated as of May 20, 1999 among the Company,
AK Holding and AK Corp. (as it may be amended in accordance with its terms
with the approval of the Board of Directors of the Company) on or before March
31, 2000.
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(b) Section 7(a) shall be amended in its entirety such that it shall
read in its entirety as follows:
(a) Subject to Section 7(e) hereof, the registered holder of any
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Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of
one two-hundredths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the Final Expiration Date,
(ii) the time at which the Rights are redeemed as provided in Section 23
hereof and (iii) the time that is immediately prior to the Effective Time as
such term is defined in the Agreement and Plan of Merger dated as of May 20,
1999 among the Company, AK Steel Holding Corporation and AK Steel Corporation
(the earliest of (i), (ii) and (iii) being herein referred to as the
"Expiration Date").
3. Except as amended hereby, the Rights Agreement shall remain in full
force and effect in accordance with the provisions thereof.
4. This Amendment may be executed in counterparts, each of which shall
be an original but which together shall constitute one instrument
IN WITNESS WHEREOF, the undersigned have executed this First Amendment to
Rights Agreement as of the day and year first hereinabove written.
ARMCO INC.
By: /s/ Jerry W. Albright
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Name: Jerry W. Albright
Title: Vice President
FIFTH THIRD BANK
By: /s/ Dana S. Hushak
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Name: Dana S. Hushak
Title: Vice President
