<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) to Rule 14a-12
Central Sprinkler Corporation
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(1)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $.01 par value per share
2) Aggregate number of securities to which transaction applies:
3,864,137 Shares of Common Stock, plus options to purchase 1,001,500
shares of common stock
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee was determined based upon: (a) the purchase of 3,864,137
issued and outstanding shares of Common Stock, as of July 12, 1999, at
a price of $30.00 in cash per share and (b) the cancellation of options
to purchase an aggregate of 1,001,500 shares of Common Stock, which
options have exercise prices ranging from $7.81 to $50.00, in
consideration for a payment equal to the exercise price of such options
multiplied by the number of shares subject to such options. The amount
of the filing fee, calculated in accordance with Exchange Act Rule
0-11(c)(1) equals 1/50th of one percent of the proposed cash payment to
the holders of Common Stock and options.
4) Proposed maximum aggregate value of transaction: $125,119,820.00
5) Total Fee Paid: $25,023.97
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
<PAGE>
1) Amount Previously Paid:
___________________________________________
2) Form, Schedule or Registration Statement No.
___________________________________________
3) Filing Party:
___________________________________________
4) Dated Filed:
___________________________________________
<PAGE>
CENTRAL SPRINKLER CORPORATION
451 North Cannon Avenue
Lansdale, PA 19446
(215) 362-0700
[______], 1999
Dear Shareholders:
You are cordially invited to attend a special meeting of shareholders
of Central Sprinkler Corporation to be held at [_______________________________]
on August 25, 1999 at [____] a.m. local time.
At this meeting, you will be asked to vote on the acquisition, by means
of a merger, of Central Sprinkler Corporation by Tyco International Ltd. In the
merger, you will be entitled to receive $30.00 in cash for each share of Central
Sprinkler Corporation common stock that you own.
A merger agreement with certain wholly owned subsidiaries of Tyco
International Ltd. has been approved by your Board of Directors. In deciding to
approve the merger agreement, your Board of Directors received the opinion of
Schroder & Co. Inc., its investment banker, dated June 15, 1999, to the effect
that, based upon the assumptions made, matters considered and the limitations on
the review undertaken in connection therewith, the consideration to be received
by Central Sprinkler Corporation shareholders in the merger, as of such date,
was fair to such shareholders from a financial point of view. The Board of
Directors has concluded that the proposed merger is in the best interests of
Central Sprinkler Corporation's shareholders and, therefore, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER AGREEMENT.
The attached notice of meeting and proxy statement explain the proposed
merger and provide specific information concerning the special meeting. Please
read these materials carefully.
Whether or not you plan to attend the special meeting, we urge you to
complete, sign and promptly return the enclosed proxy card to assure that your
shares will be voted at the meeting. The merger is an important step for Central
Sprinkler Corporation and its shareholders. THE MERGER CANNOT BE COMPLETED
UNLESS CENTRAL SPRINKLER CORPORATION SHAREHOLDERS APPROVE THE MERGER AGREEMENT.
On behalf of the Board of Directors, I thank you for your support and
urge you to vote FOR approval of the merger agreement.
Sincerely,
/s/ E. Talbot Briddell
E. Talbot Briddell
Chairman of the Board of Directors and
Chief Executive Officer
<PAGE>
CENTRAL SPRINKLER CORPORATION
451 North Cannon Avenue
Lansdale, PA 19446
(215) 362-0700
NOTICE AND PROXY STATEMENT
--------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 1999
To the shareholders of Central Sprinkler Corporation:
This notice is provided to inform you that a Special Meeting of
Shareholders of Central Sprinkler Corporation ("Central") will be held at
[________________________________] on August 25, 1999 at _____ a.m. local time
(the "Meeting"), for the following purposes:
1. To consider and vote on a proposal (the "Proposal") to approve an
Agreement and Plan of Merger, dated as of June 15, 1999 (the "Merger
Agreement"), by and among Central, Tyco Acquisition Corp. VI ("Parent"), a
wholly-owned subsidiary of Tyco International Ltd. ("Tyco International"), Alpha
Acquisition Corp., a wholly-owned subsidiary of Parent ("Merger Sub"; and
together with Parent, collectively, "Tyco"), which includes the Guarantee of
Tyco's obligations by Tyco International. Pursuant to the Merger Agreement,
Merger Sub will be merged into Central (the "Merger"), with Central continuing
as the surviving corporation (the "Surviving Corporation"). If the Merger
Agreement is approved and the Merger approved by the shareholders and the other
conditions to the Merger are satisfied or waived, each share of common stock of
Central ("Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (other than (i) shares of Common Stock held by
Central as treasury stock, which shares shall be canceled, and (ii) shares as to
which statutory appraisal rights have been exercised) will be converted into the
right to receive $30.00 in cash, without interest (the "Merger Consideration").
The actual terms of the Merger are contained in the Merger Agreement. The Merger
Agreement is included in the Proxy Statement as Appendix A.
2. To transact such other business as may properly come before the
Meeting and any postponement or adjournment thereof, and matters incident to the
conduct of the Meeting.
The Board of Directors has fixed the close of business on July 23, 1999
as the record date for the determination of shareholders of Central entitled to
notice of, and to vote at, the Meeting and any postponement or adjournment
thereof. Shareholders may vote in person or by proxy. In the event that there is
not a quorum present at the Meeting, in person or by proxy, Central expects that
the Meeting will be postponed or adjourned in order to permit further
solicitation of proxies by Central. If the Meeting is adjourned for one or more
periods aggregating at least 15 days because of the absence of a quorum with
respect to the Proposal, then those shareholders entitled to vote who are
present at the adjourned Meeting in person or by proxy shall nevertheless
constitute a quorum for the purpose of acting upon such Proposal. The Proxy
Statement and the accompanying proxy card will first be sent to shareholders on
or about [______], 1999.
<PAGE>
Whether or not you plan to attend the Meeting in person, please mark,
date and sign your proxy, and mail it in the stamped envelope enclosed for your
convenience. In order to avoid the additional expense to Central of further
solicitation, we ask your cooperation in mailing your proxy promptly. Returning
the proxy does not affect your right to vote in person on all matters brought
before the Meeting, but will help assure a quorum if you do not attend.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ E. Talbot Briddell
E. Talbot Briddell
Chairman of the Board of Directors and
Chief Executive Officer
Lansdale, PA
[_______], 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER....................................................................
SUMMARY...................................................................................................
TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING............................................................
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA.............................................
VOTING SECURITIES OF THE COMPANY..........................................................................
SOLICITATION OF PROXIES...................................................................................
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE...........................................................
THE MERGER................................................................................................
Purpose, Structure and Effect of the Merger..........................................................
Background of the Merger.............................................................................
Central's Reasons for the Merger; Recommendation of the Board of Directors...........................
Opinion of Schroder & Co. Inc. ......................................................................
Interests of Certain Persons in the Merger...........................................................
Merger Agreement
Terms of the Merger................................................................................
Conversion of Common Stock in the Merger...........................................................
Appraisal Rights...................................................................................
Equity Based Incentive Awards......................................................................
Payment of Shares..................................................................................
Representations and Warranties.....................................................................
Conduct of Business by Central.....................................................................
No Solicitation....................................................................................
Consents; Approvals................................................................................
Indemnification and Insurance......................................................................
Notification of Certain Matters....................................................................
Further Action/Tax Treatment.......................................................................
Public Announcements...............................................................................
Employee Matters...................................................................................
Conditions to the Obligations of Each Party to Effect the Merger...................................
Additional Conditions to Obligations of Tyco.......................................................
Additional Conditions to Obligations of Central....................................................
Conditions to Termination..........................................................................
Fees and Expenses..................................................................................
Amendment and Waiver; Parties in Interest..........................................................
Accounting Treatment.................................................................................
Certain Effects of the Merger........................................................................
Federal Income Tax Consequences......................................................................
Regulatory Compliance................................................................................
APPRAISAL RIGHTS..........................................................................................
INFORMATION REGARDING CENTRAL.............................................................................
INFORMATION REGARDING TYCO................................................................................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MARKET PRICE FOR THE CENTRAL COMMON STOCK................................................................
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF OFFICERS AND DIRECTORS.............................................
INDEPENDENT ACCOUNTANTS...................................................................................
WHERE YOU CAN FIND ADDITIONAL INFORMATION.................................................................
OTHER BUSINESS............................................................................................
</TABLE>
Appendix A - Agreement and Plan of Merger
Appendix B - Opinion of Schroder & Co. Inc.
Appendix C - Appraisal Rights Statute
ii
<PAGE>
Central Sprinkler Corporation
451 North Cannon Avenue
Lansdale, PA 19446
(215) 362-0700
PROXY STATEMENT
---------------
SPECIAL MEETING OF SHAREHOLDERS
OF CENTRAL SPRINKLER CORPORATION ("Central")
AUGUST 25, 1999
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is Central recommending the Merger Agreement?
A: In the opinion of your Board of Directors, in order for Central to
compete more effectively and increase its per share value, it would be necessary
to become a larger, diversified and better capitalized enterprise. Your Board of
Directors, therefore, concluded that a sale of Central at the current time is in
the best interests of Central's shareholders. In addition, your Board of
Directors received the opinion of Schroder & Co. Inc. ("Schroders"), its
investment banker, dated June 15, 1999, to the effect that, based upon the
assumptions made, matters considered and the limitations on the review
undertaken in connection therewith, the Merger Consideration, as of such date,
was fair, from a financial point of view, to the Central shareholders, other
than Tyco, Tyco International and their affiliates. The actual text of the
opinion of Schroders is included in this Proxy Statement as Appendix B. The
price of $30.00 per share represents an 84% premium over the average closing
market price of the shares over the three month period ended June 15, 1999.
Q: What will I receive in the Merger?
A: If the Merger is completed, the Central shareholders will have the
right to receive $30.00 in cash for each share of Central's common stock they
own.
Q: Do I have the option to receive common stock of Tyco International in
the Merger?
A: No.
Q: What is the required vote?
A: The affirmative vote of the holders of a majority of the votes cast at
the Meeting is required to approve the Merger Agreement.
Q: What do I need to do now? Should I send in my stock certificates now?
A: Please mail your signed proxy card in the enclosed return envelope as
soon as possible, so that your shares may be represented at the Meeting. In
addition, you may attend and vote at the Meeting in person, whether or not you
have signed and mailed your proxy card. DO NOT SEND IN YOUR STOCK CERTIFICATES
NOW. If the Merger is completed, you will receive written instructions on how to
exchange them.
Q: What if I want to change my vote?
A: Just send in a later-dated, signed proxy card before the Meeting or
attend the Meeting in person and vote.
1
<PAGE>
Q: If my shares are held in "street name" by my broker, will my broker
vote my shares for me?
A: Your broker will vote your shares ONLY if you instruct your broker how
to vote. Your broker should mail information to you that will explain how to
give instructions to your broker. If you do not instruct your broker how to
vote, your shares will not be counted as a vote cast.
Q: When do you expect the Merger to be completed?
A: Central and Tyco are working toward completing the Merger as quickly as
possible. We hope to complete the Merger on or prior to November 30, 1999.
Q: Whom should I call with questions?
A. If you have any questions about the Merger, please call Central
Investor Relations at (215) 362-0700.
2
<PAGE>
SUMMARY
This summary highlights selected information from this document. This
summary may not contain all of the information that is important to you. To
understand the Merger fully and for a more complete description of the legal
terms of the Merger, you should read carefully this entire document and the
other documents to which we have referred you. See "Where You Can Find
Additional Information" at page 37 of this Proxy Statement. The actual terms of
the Merger are contained in the Merger Agreement. The Merger Agreement is
included in this Proxy Statement as Appendix A.
Central's Business
Central is a leading manufacturer of automatic fire sprinkler heads,
valves, grooved couplings and fittings, CPVC plastic pipe and fittings, steel
pipe, and other sprinkler system components as well as a distributor of
component parts of complete automatic fire sprinkler systems that are either
manufactured by Central or purchased by Central for resale to its customers.
Approximately 82% of Central's fiscal 1998 annual net sales are derived from
products manufactured by Central and approximately 18% are purchased by Central
for resale to its customers.
Central's wide variety of products are marketed for commercial,
industrial, residential and institutional uses throughout the world. Central
sells its products to more than 3,000 customers, most of which are sprinkler
installation contractors.
The Merger Consideration
In the Merger, Central Shareholders will receive $30.00 per share in
cash for their common stock. Holders of stock options will receive $30.00 less
the exercise price of their options. The total amount to be paid to all holders
of common stock (assuming no shareholders exercise their statutory appraisal
rights) and holders of stock options will be approximately $125.1 million.
Voting
At the Meeting, the holders of common stock will vote on a proposal to
approve the Merger Agreement. Each share of common stock is entitled to one
vote. In order to be approved, a majority of all the votes cast must be voted in
favor of approving the Merger Agreement. On the record date, there were
[__________] shares of common stock outstanding and entitled to vote which were
held by approximately [___] shareholders of record.
Members of the Central Board of Directors and officers of Central,
including the Chairman of the Board and Chief Executive Officer, who have the
power to vote approximately 12.9% of the outstanding shares of common stock,
have indicated that they intend to vote their shares in favor of the Merger.
Record Date
The close of business on July 23, 1999 is the record date for
determining who is entitled to vote at the Meeting.
Recommendation of the Central Board of Directors
The Central Board of Directors has approved the Merger Agreement and
unanimously recommends that you vote to approve the Merger Agreement. The
Central Board of Directors believes that the Merger is fair to, and in the best
interests of, Central shareholders.
Factors Considered by the Central Board of Directors
In reaching its decision to recommend approval of the Merger Agreement,
the Central Board of Directors considered a number of factors. These included
the following:
o The Central Board of Directors believed that in order for
Central to compete more
3
<PAGE>
effectively in its market and increase shareholder value, it
is necessary to become or to combine with a larger,
diversified and better capitalized enterprise. Accordingly,
the Central Board of Directors concluded that a sale of
Central at the current time is in the best interests of the
shareholders of Central.
o The Central Board of Directors believes that $30.00 per share
is the highest price that Tyco or another third party would be
willing to pay for Central at this time. The Central Board of
Directors formed this belief after substantial efforts to
identify interested parties and substantial negotiations with
Tyco to obtain the highest possible price.
o The Central Board of Directors compared the historical market
prices of the Common Stock with the Merger Consideration. The
Merger Consideration represents an 84% premium over the
average closing market price of the shares over the three
month period ended June 15, 1999.
o The Merger Agreement allows third parties to make bona fide
offers to acquire Central and specifically permits the Central
Board of Directors to provide information to and negotiate
with third parties. A termination fee may be owed to Tyco if
Central accepts a financially superior proposal.
Opinion of Schroder & Co. Inc.
On June 15, 1999, Schroders delivered to the Central Board of Directors
its oral opinion, which opinion was subsequently confirmed in a written opinion
dated as of such date, to the effect that, based upon the assumptions made,
matters considered and the limitations on the review undertaken in connection
therewith, the Merger Consideration, as of such date, was fair, from a financial
point of view, to the Central shareholders, other than Tyco, Tyco International
and their affiliates. The opinion of Schroders is included in this Proxy
Statement as Appendix B. Shareholders of Central are urged to read the opinion
of Schroders in its entirety.
Interests of Central Management in the Merger
All members of the Central Board of Directors and officers of Central
own stock options and/or common stock of Central and, to that extent, their
interest in the Merger is the same as yours. However, some of the officers and
directors of Central have interests in the Merger that are different from your
interests as a shareholder. Some of these interests are set forth below. The
Central Board of Directors was aware of these interests and considered them in
recommending and approving the Merger.
o Certain Central officers will be entitled to deferred
compensation, severance payments or other consideration as a
result of the Merger.
o The Merger Agreement provides that all rights to
indemnification in favor of any present or former director or
officer of Central as provided in the Central Bylaws and
Articles of Incorporation or certain applicable
indemnification agreements shall survive for six years after
the date of the Merger Agreement with respect to matters
occurring at or prior to the effective time of the Merger.
Tyco, subject to certain limitations, will provide for a
period of no less than six years after the Merger to directors
and officers of Central an insurance and indemnification
policy that provides coverage for events occurring at or prior
to the effective time of the Merger that is no less favorable
than Central's existing policy.
Appraisal Rights
Any shareholder who does not wish to accept the Merger Consideration
has the right under Pennsylvania law to receive the "fair value" of his or her
shares as determined by a Pennsylvania court. This "right of appraisal" is
subject to a number of restrictions and technical requirements. Generally, in
order to exercise appraisal rights:
4
<PAGE>
o you must not vote in favor of the Merger; and
o you must make a written demand for appraisal before
the vote on the Merger.
Merely voting against the Merger will not protect your right of
appraisal. Appendix C to this proxy statement contains the applicable provisions
of the Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL")
relating to appraisal rights.
Conditions to the Merger
The obligations of Central and Tyco to complete the Merger are subject
to a number of conditions. If these conditions are not satisfied or waived, the
Merger will not be completed. The most important of the mutual conditions are:
o approval of the Merger Agreement by the Central
shareholders;
o expiration or earlier termination of the waiting
period under the federal antitrust pre-merger
notification law;
o absence of any statute, rule, regulation or order
that would prevent completion of the Merger; and
o absence of legal restraints or prohibitions that
would prevent completion of the Merger.
Several additional conditions exist that must be met in order to
require Tyco to complete the Merger. The most important of these conditions are:
o Central's compliance with the Merger Agreement;
o accuracy in all material respects of the
representations and warranties made by Central in the
Merger Agreement;
o absence of a material adverse change with respect to
Central; and
o obtaining all material consents, waivers, approvals
or orders necessary to be obtained by Central to
complete the Merger.
Additional conditions exist that must be met in order to require
Central to complete the Merger. The most important of these conditions are:
o Tyco's compliance with the Merger Agreement;
o accuracy in all material respects of the
representations and warranties made by Tyco in the
Merger Agreement; and
o obtaining all material consents, waivers, approvals
or orders necessary to be obtained by Tyco to
complete the Merger.
Termination of the Merger Agreement
Either Tyco or Central may terminate the Merger Agreement if:
o they mutually agree to terminate the Merger Agreement
before or after shareholder approval;
5
<PAGE>
o the Merger has not been consummated by November 30,
1999, unless the terminating party has caused the
failure to meet the closing conditions by wrongful
action or a failure to act;
o there exist legal restraints preventing the Merger;
o the shareholders of Central do not approve the
Merger; or
o the other party materially breaches its
representations, warranties, covenants or agreements
and that breach is not or cannot be remedied.
In addition, Tyco may terminate the Merger Agreement if the Board of
Directors of Central has withdrawn or adversely modified its approval or
recommendation of the Merger or recommends an alternative acquisition
transaction with a third party. Subject to certain conditions, Central may
terminate the Merger Agreement to accept an acquisition proposal deemed by the
Central Board of Directors to be more favorable to Central and its shareholders
than the proposed Merger with Tyco.
Non-solicitation Provisions
Central has agreed that it will not solicit or encourage the initiation
of any inquiries or proposals regarding any alternative acquisition transactions
with third parties. Central may respond to unsolicited transaction proposals if
required by the Central Board of Directors' fiduciary duties. Central must
promptly notify Tyco if it receives proposals for any such alternative
acquisition transactions.
Termination Fees
If the Merger is terminated under specified circumstances, Central may
be required to pay a termination fee of $6.0 million to Tyco and pay Tyco's
reasonable out-of-pocket expenses of up to $300,000 to Tyco. Tyco may be
required to pay to Central a termination fee of up to $6.0 million and pay
Central's reasonable out-of-pocket expenses of up to $300,000 if the Merger is
terminated under certain circumstances.
Federal Income Tax Consequences
You will be taxed for federal income tax purposes on your receipt of
the Merger Consideration to the extent that the amount you receive exceeds your
tax basis in your Central Common Stock. Because determining the tax consequences
of the Merger can be complicated, especially in light of recent changes to the
federal tax laws governing capital gains, and because state tax laws may apply
as well, you should consult your tax advisor in order to understand fully how
the Merger will affect you.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
(Amounts in thousands, except per share data)
The following table sets forth Central's selected consolidated
historical financial data. Central's statement of operations data for fiscal
1996, 1997 and 1998 and the balance sheet data as of the end of fiscal 1996,
1997 and 1998 have been derived from Central's consolidated financial
statements, which have been audited by Arthur Andersen LLP, independent public
accountants, and are incorporated by reference in this Proxy Statement. The
statement of operations data for fiscal 1994 and 1995 and the selected balance
sheet data as of the end of fiscal 1994 and 1995 have been derived from
consolidated financial statements which have been audited by Arthur Andersen
LLP, independent public accountants, and are not included in this Proxy
Statement. The selected financial data as of April 30, 1999 and 1998 and for the
six months ended April 30, 1999 and 1998 have been derived from unaudited
interim financial statements and, in management's opinion, include all
adjustments necessary for a fair presentation of the financial position and the
results of operations for those periods.
6
<PAGE>
<TABLE>
<CAPTION>
Diluted Net Cash
Operating Net Income (Loss) Dividends
CONSOLIDATED Net Income Income Per Common Per Common
OPERATIONS Sales (Loss) (1) (Loss) Share Share
- - - ------------ ----- -------- --- ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended April 30, 1999 $108,768 $7,206 $3,181 $ .95 $ -
Six Months Ended April 30, 1998 110,273 4,325 1,233 .37 -
Year Ended October 31, 1998 224,930 (27,288) (2) (22,604) (2) (6.89) (2) -
Year Ended October 31, 1997 221,990 745 (2) (2,542) (2) (.78) (2) -
Year Ended October 31, 1996 187,220 8,999 (2) 3,763 (2) 1.13 (2) -
Year Ended October 31, 1995 158,849 15,305 8,458 2.50 -
Year Ended October 31, 1994 116,249 6,428 4,018 (3) .80 (3) -
</TABLE>
<TABLE>
<CAPTION>
Net Book
CONSOLIDATED Long- Total Value Per
FINANCIAL Total Term Long-Term Shareholders' Per Common
POSITION Assets Debt Obligations (4) Equity Share
- - - ------------ ------ ---- ----------- --- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of April 30, 1999 $165,389 $69,381 $85,044 $34,005 $ 8.84
As of April 30, 1998 179,306 78,852 85,439 54,386 14.14
As of October 31, 1998 177,104 76,807 100,244 30,767 8.00
As of October 31, 1997 188,027 79,918 89,124 52,898 13.76
As of October 31, 1996 150,918 24,674 26,911 54,392 14.34
As of October 31, 1995 117,360 27,516 29,669 49,550 13.07
As of October 31, 1994 99,061 19,391 21,458 51,101 10.31
</TABLE>
SELECTED FINANCIAL DATA FOOTNOTES
(1) Operating income (loss) represents income before income taxes
and interest expense (income), net.
(2) After an unusual third quarter Omega(TM) charge of $38,015
($26,610 net of tax or $8.10 per share) in fiscal 1998 and
unusual fourth quarter Omega(TM) charges of $13,200 ($8,976
net of tax or $2.74 per share) in fiscal 1997 and $3,750
($2,362 net of tax or $.72 per share) in fiscal 1996.
(3) After favorable cumulative effect of $238 ($.05 per share) due to
accounting change for income taxes.
(4) Includes long-term debt, the long-term portion of Omega(TM)
liabilities, long-term deferred income taxes and other
noncurrent liabilities.
TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
The proxy statement and the accompanying proxy card are solicited by
the Board of Directors of Central. These proxies will be used at the Special
Meeting of Shareholders (the "Meeting") to be held at [____] a.m. local time, on
August 25, 1999 at [________________________], and at any and all adjournments
thereof. The purpose of the Meeting is to consider and vote on a proposal to
approve the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will
be merged into Central, with Central continuing as the Surviving Corporation.
The Board of Directors of Central unanimously approved the Merger Agreement. The
Board of Directors of Central unanimously recommends that the Central
shareholders vote FOR approval of the Merger Agreement and the Merger. See "The
Merger--Background of the Merger."
7
<PAGE>
VOTING SECURITIES OF THE COMPANY
Only holders of record of Central's Common Stock at the close of
business on July 23, 1999 (the "Record Date") are entitled to notice of, and to
vote at, the Meeting. At the close of business on the Record Date, [__________]
shares of Common Stock were outstanding. Each share of Common Stock is entitled
to one vote on all matters presented at the Meeting. This Proxy Statement and
the proxy card will be sent to shareholders beginning on or about [_______],
1999. If you give a proxy, you may revoke it at any time before the proxy is
voted. You may revoke your proxy before it is voted by executing another proxy
at a later date, by notifying the secretary of Central in writing of your
revocation, or by attending in person and voting at the Meeting.
THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE VOTES CAST BY SHAREHOLDERS
PRESENT IN PERSON OR BY PROXY AND ENTITLED TO VOTE AT THE MEETING IS REQUIRED TO
APPROVE THE MERGER AGREEMENT.
Members of the Board of Directors and officers of Central, including
Central's Chairman of the Board and Chief Executive Officer, who have the power
to vote approximately 12.9% of the outstanding shares of Common Stock, have
indicated that they intend to vote their shares in favor of the Merger.
If the enclosed proxy is duly executed and received in time for the
Meeting, and if no contrary instructions are included on the proxy, it is the
intention of the persons named as proxies to vote the shares of Common Stock
represented thereby in favor of the proposal to approve the Merger Agreement,
and in the discretion of the persons named as proxies in connection with any
other business that may properly come before the Meeting or any adjournment
thereof. At this time, Central knows of no other matters that may be presented
for shareholder action at the Meeting.
Under Pennsylvania law and the bylaws of Central, the presence at the
Meeting, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the Meeting shall constitute a quorum. All valid
proxies returned will be included in the determination of whether a quorum is
present at the Meeting. In the event that there is not a quorum present at the
meeting, in person or by proxy, it is expected that the Meeting will be
postponed or adjourned in order to permit further solicitation of proxies by
Central. If the Meeting is adjourned for one or more periods aggregating at
least 15 days because of the absence of a quorum with respect to the Proposal,
then those shareholders entitled to vote who are present at the adjourned
Meeting in person or by proxy shall nevertheless constitute a quorum for the
purpose of acting upon such Proposal. Votes withheld, abstentions and "broker
non-votes" will not be counted as votes cast and will not be voted.
THE CENTRAL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE MERGER AGREEMENT.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH CENTRAL'S SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CENTRAL
OR ANY OTHER PERSON.
The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that the information contained herein is
correct after the date hereof, ________, 1999.
SOLICITATION OF PROXIES
Central has retained [_________________] (the "Proxy Agent") to assist
in the solicitation of proxies. Central will pay the Proxy Agent a fee of
approximately $[_____] for its services, plus reimbursement for its
out-of-pocket expenses. Central will pay all additional expenses of the
solicitation of proxies for the Meeting, including the cost of mailing. In
addition to solicitation by mail and the services performed by the Proxy Agent,
officers and regular employees of Central may solicit proxies from shareholders
by telephone, telegram, facsimile or in person. Central will not pay these
individuals any additional compensation for such services, except for the
reimbursement of any reasonable out-of-pocket expenses that they incur.
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FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Some statements contained or incorporated by reference in this Proxy
Statement regarding future financial performance and results and other
statements that are not historical facts are forward-looking statements. The
words "expect," "project," "estimate," "predict," "anticipate," "believes" and
similar expressions are also intended to identify forward-looking statements.
Such statements and Central's results are subject to numerous risks,
uncertainties and assumptions, including but not limited to the risk factors
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Forward Looking Statements" in Central's 10-K for the
year ended October 31, 1998.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those indicated.
THE MERGER
This section, as well as the next section "The Merger Agreement,"
describe the material aspects of the proposed Merger. These discussions are
qualified in their entirety by reference to the Merger Agreement, which is
attached as an Annex to this document, and to the other documents that are
discussed in this document. YOU SHOULD READ THE MERGER AGREEMENT IN ITS ENTIRETY
AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
Purpose, Structure and Effect of the Merger
The purpose of the Merger is for Tyco International to acquire all of
the outstanding capital stock of Central and to provide Central shareholders
with $30.00 in cash for each share of Common Stock that they hold. In connection
with the Merger: (i) Central as the surviving corporation in the Merger will
become a wholly-owned subsidiary of Tyco; and (ii) the holders of Common Stock
(other than holders of Common Stock who perfect their statutory appraisal
rights) will receive $30.00 per share, in cash (the "Merger Consideration"). See
"Background of the Merger."
If the Merger is consummated, the shareholders of Central will no
longer have any equity interest in such company, and therefore will not share in
its future earnings and growth. Instead, each shareholder (other than
shareholders who perfect statutory appraisal rights) will receive, upon
surrender of the certificate or certificates evidencing the Common Stock, the
Merger Consideration.
Background of the Merger
In December of 1998, Central was approached by Tyco regarding a
potential acquisition of Central by Tyco. After consultation with Schroders and
legal counsel, Central declined Tyco's invitation to discuss a potential
acquisition. At that time, Central declined Tyco's invitation due to
uncertainties affecting Central's business resulting from the institution of
seven class action lawsuits as well as an administrative lawsuit filed on March
4, 1998 by the United States Consumer Product Safety Commission ("CPSC").
On March 22, 1999, representatives of Central were contacted by
Schroders and advised that Tyco continued to be interested in meeting with
representatives of Central to discuss Tyco's interest in acquiring Central.
At a meeting on April 5, 1999 between representatives of Central and
Tyco, Tyco indicated that it was interested, subject to due diligence, in
acquiring Central, and suggested that further meetings between representatives
of Central and Tyco would be appropriate. At this meeting, Central indicated
that it was interested in pursuing discussions regarding a potential
acquisition, but that Central's Board of Directors would have to be consulted
before proceeding with further discussions.
On April 9, 1999, Central convened a telephonic meeting of the
Executive Committee of its Board of Directors. At this meeting, the Executive
Committee authorized Central to enter into a confidentiality agreement with Tyco
and to begin initial discussions with Tyco regarding a potential acquisition of
Central.
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On April 14, 1999, Tyco entered into a confidentiality and
non-disclosure agreement in favor of Central, and on April 21, 1999, Central
delivered certain non-public information to Tyco for review.
On April 29, 1999, at a meeting between representatives of Central and
Tyco, Tyco stated that, subject to satisfactory conclusion of its diligence
investigation, Tyco was prepared to pay $28.00 per share, in cash for Central.
A meeting of the Board of Directors of Central was held on May 5, 1999
(the "May 5 Meeting") to discuss the proposed acquisition of Central by Tyco.
Present at this meeting were a majority of the Board of Directors, as well as
Peter Hicks and Robert Burns from Schroders. At this meeting, Schroders reviewed
various aspects of a possible sale, by merger or otherwise, of all or
substantially all of the assets or stock of Central. Schroders also advised the
Board of Directors that a second company (the "Second Bidder") had expressed an
interest in acquiring Central.
At the May 5 Meeting, the Board of Directors discussed the advisability
of granting Tyco an exclusive right to acquire Central for the proposed price of
$28.00 per share. After discussion, the Board of Directors determined that the
price of $28.00 was not sufficient to warrant granting Tyco the exclusive right
to acquire Central. At this meeting, the Board of Directors directed Central's
management to proceed with negotiations for the sale of Central with both Tyco
and the Second Bidder. The Board of Directors also directed Schroders to develop
a list of other potential strategic and financial buyers, and, with the approval
of Central's management, to solicit interest from such potential buyers in
acquiring Central.
Following the May 5 Meeting, Schroders began contacting select
strategic and financial buyers. In this process, Schroders contacted 11
strategic buyers and 3 financial buyers. However, no indication of interest from
any such potential strategic or financial buyers was competitive with Tyco's
latest bid.
On May 7, 1999, representatives of Central and the Second Bidder met to
discuss a possible acquisition of Central. This meeting did not result in an
offer from the Second Bidder. However, representatives of Central encouraged the
Second Bidder to make an offer after consideration of the potential synergies
between the two companies.
On May 14, 1999, representatives of Central and Tyco met at Tyco's
headquarters in New Hampshire. At this meeting, Central advised Tyco that
Central was in discussions with another company regarding the sale of Central.
Following this meeting, Tyco raised its offer for Central to $30.00 per share,
in cash.
During the week of May 24, 1999, representatives of Central continued
to negotiate with Tyco about increasing its offer above $30.00 per share.
At a meeting of the Board of Directors of Central on June 4, 1999,
Schroders reported that it had received no viable offers or indications of
interest from any of the strategic or financial buyers it had contacted. At this
meeting, the Board of Directors directed management to continue to pursue
potential acquisitions with both Tyco and the Second Bidder.
During the week of June 7, 1999, Central received a draft merger
agreement from Tyco, and began to negotiate the terms of such agreement.
On the morning of June 10, 1999, Central received a letter from the
Second Bidder which stated that such Second Bidder was willing to acquire
Central for $24.00 per share, subject to an extension of the due diligence
period and an exclusivity agreement. The Second Bidder also indicated that it
would be willing to increase its offer under certain circumstances.
At a meeting of the Board of Directors on June 10, 1999, the Board of
Directors discussed the offers from both Tyco and the Second Bidder. The Board
of Directors determined that it was not willing to agree to an exclusive
arrangement with the Second Bidder. In response to the offer from the Second
Bidder, the Board of Directors directed Central's management to forward the
current draft of the merger agreement received from Tyco to the Second Bidder,
and to advise the Second Bidder to complete its due diligence and to submit a
final offer, based on the draft merger agreement, to Central by the following
Monday, June 14, 1999. The Board of Directors also directed Central's management
to continue to negotiate the merger agreement with Tyco.
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On June 14, 1999, the Second Bidder advised Central that it was not
willing to comply with Central's request for an offer, and further requested
that Central postpone any contemplated transaction until the end of June, 1999
in order to provide the Second Bidder with sufficient time to complete its due
diligence.
At a meeting of the Board of Directors on June 14, 1999, Schroders
reported that it had not received any satisfactory offers or other indications
of interest from any other potential strategic or financial Buyers. The Board of
Directors then reviewed both the outstanding offer with Tyco and the status of
the discussions with the Second Bidder. The Board decided to reject the proposal
from the Second Bidder because of the uncertainties associated with such
proposal, and elected to proceed with the offer from Tyco.
Schroders then made a presentation to the Board of Directors regarding
the proposal from Tyco. In this presentation, Schroders discussed its valuation
methodologies and analyses used in evaluating the proposal from Tyco. Schroders
then delivered its oral opinion to the effect that, based upon the assumptions
made, matters considered and the limitations on the review undertaken in
connection therewith, the offer from Tyco to acquire Central for $30.00 per
share, in cash, was fair to the Central shareholders from a financial point of
view.
After discussion and with the recommendation of Central's senior
management, the Board of Directors determined that the Merger was fair to, and
in the best interests of the Central shareholders, approved the Merger and
authorized and directed the execution of the Merger Agreement, as conclusively
negotiated by management.
Thereafter, negotiations continued by telephone among management of
Central and Tyco, and their respective counsel. After the close of business on
June 15, 1999, Central and Tyco reached an agreement on all outstanding issues
and entered into the Merger Agreement. Prior to the commencement of trading of
the Central Common Stock on June 16, 1999, the parties issued a press release
announcing the execution of the Merger Agreement.
Central's Reasons for the Merger; Recommendation of the Board of Directors
The Central Board of Directors has determined that the Merger is fair
to, and in the best interests of, the shareholders of Central, and has approved
the Merger Agreement. Accordingly, the Board of Directors of Central recommends
that the shareholders vote to approve the Merger Agreement and approve the
Merger. In reaching its conclusion, Central's Board of Directors considered a
number of factors, including:
o Discussions with Central's senior management and financial
advisers concerning the financial condition, results of
operation and business of Central on both an historical and
prospective basis, and current industry, economic and market
conditions.
o The determination by Central's management and the Board of
Directors of Central that, in order for Central to compete
more effectively and increase materially its per share value
it would be necessary to become a larger, more diversified and
better capitalized enterprise. Further, it was their
assessment that it would be difficult for Central to achieve
this either by acquisition or through internal growth within a
reasonable period of time, due in part to Central's limited
financial resources especially when compared with the
financial resources of many of Central's competitors.
Accordingly, the directors concluded that a sale of Central at
a premium to current and historical market prices offers
shareholders the best opportunity for realizing value on their
investment in Central in the foreseeable future.
o A comparison of the historical market prices of the Common
Stock with the Merger Consideration and the observation that
the Merger Consideration represents an 84% premium over the
average closing market price of the shares over the three
month period ended June 15, 1999.
o The substantial efforts of Schroders and Central in seeking
potential acquirors and the conclusion of the Central Board of
Directors based on such effort that a merger could not be
structured with another purchaser that would offer greater
value to Central shareholders.
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o The financial presentation of Schroders and delivery of its
oral opinion to the Central Board of Directors on June 15,
1999, which opinion was subsequently confirmed in a written
opinion dated as of such date, to the effect that, based upon
the assumptions made, matters considered and the limitations
on the review undertaken in connection therewith, the Merger
Consideration, as of such date, was fair, from a financial
point of view, to the Central shareholders other than Tyco,
Tyco International and their affiliates. See "Opinion of
Schroder & Co. Inc." below and the written opinion of
Schroders attached as Appendix B.
o The terms and conditions of the Merger Agreement include the
right of Central's Board of Directors to terminate the Merger
Agreement under certain circumstances in the exercise of its
fiduciary duties.
o The recommendation of Central's management that the Merger be
approved.
The foregoing discussion of the factors considered by Central's Board
of Directors is not intended to be all-inclusive. In view of the variety of
factors considered in connection with its evaluation of the Merger, Central's
Board of Directors did not find it practicable to and did not attempt to rank or
assign relative weights to the foregoing factors.
The Central Board of Directors recommends that the shareholders vote
FOR approval of the Merger Agreement and Merger.
Opinion of Schroder & Co. Inc.
On June 15, 1999, Schroders delivered its oral opinion to the Central
Board of Directors, which opinion was subsequently confirmed in a written
opinion dated as of such date, to the effect that, as of such date and based
upon the assumptions made, matters considered and the limitations of the review
undertaken in connection therewith, the Merger Consideration was fair to the
holders of Common Stock, other than Tyco and its affiliates and subsidiaries,
from a financial point of view.
A COPY OF THE FULL TEXT OF THE OPINION OF SCHRODERS DATED JUNE 15,
1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX B. THIS SUMMARY DISCUSSION OF SUCH OPINION OF SCHRODERS IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. THE ENGAGEMENT OF
SCHRODERS AND ITS OPINION ARE FOR THE BENEFIT OF THE CENTRAL BOARD OF DIRECTORS,
AND ITS OPINION WAS RENDERED TO THE CENTRAL BOARD OF DIRECTORS IN CONNECTION
WITH ITS CONSIDERATION OF THE MERGER. SCHRODERS OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE CENTRAL MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO
HOLDERS OF THE COMMON STOCK AND DOES NOT ADDRESS ANY OTHER ASPECTS OF THE
MERGER. THE OPINION IS NOT INTENDED TO, AND DOES NOT CONSTITUTE, A
RECOMMENDATION TO ANY HOLDER OF COMMON STOCK AS TO WHETHER SUCH HOLDER SHOULD
VOTE FOR THE MERGER. HOLDERS OF COMMON STOCK ARE URGED TO READ THE OPINION OF
SCHRODERS IN ITS ENTIRETY.
No limitations were imposed by the Board on the scope of Schroders'
investigation or the procedures to be followed by Schroders in tendering its
opinion. In arriving at its opinion, Schroders, among other things, (i) reviewed
a draft, dated June 15, 1999, of the Merger Agreement; (ii) reviewed Central's
Annual Reports on Form 10-K for the fiscal years ended October 31, 1994 through
1998, including the audited consolidated financial statements contained therein;
(iii) reviewed Central's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1999, including the unaudited consolidated financial statements
contained therein; (iv) reviewed historical financial results of Central and its
subsidiaries prepared by management; (v) had discussions with the senior
management of Central regarding the business, operations and prospects of
Central and its subsidiaries; (vi) reviewed projections of Central prepared by
management; (vii) performed various analyses, as Schroders deemed appropriate,
using generally accepted analytical methodologies, including (a) an analysis of
premiums paid in public merger and acquisition transactions; (b) the application
to the financial results of Central of the public trading multiples of companies
which Schroders deemed comparable to Central; (c) the application to the
financial results of Central of the multiples reflected in recent merger and
acquisition transactions involving businesses which
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Schroders deemed comparable to the financial results of Central; and (d)
discounting the projected cash flows of Central's operations, (viii) reviewed
historical trading prices and volume of Central's common stock; and (ix)
performed such other of the financial studies, analyses, inquiries and
investigations, as deemed appropriate. In addition, Schroders took into account
the results of its solicitations of indications of interest on behalf of Central
from persons thought likely to have a possible interest in acquiring Central.
Schroders also held discussions with members of senior management of
Central to discuss the information reviewed by Schroders. Schroders also
considered such other information, financial studies, analyses, investigations
and financial, economic and market criteria which it deemed relevant, including
Schroders' assessment of general economic, monetary and market conditions.
In preparing its opinion, Schroders assumed and relied upon the
accuracy and completeness of all information supplied or otherwise made
available to Schroders or discussed with or reviewed by or for Schroders by
Central, or otherwise publicly available, and did not independently verify any
such information. With respect to the financial forecast information made
available to Schroders by Central, Schroders assumed that such forecasts had
been reasonably prepared and reflected the best currently available estimates
and judgments of Central management as to the expected future financial
performance of Central. Schroders expresses no opinion with respect to such
forecasts or the assumptions upon which they are based.
The matters considered by Schroders in arriving at its opinion are
necessarily based upon financial, economic, market and other conditions as they
existed and could be evaluated by Schroders on, and the information made
available to it as of, the date of its opinion. Schroders has disclaimed any
undertaking or obligation to advise any person of any change in any fact or
matter affecting its opinion that is brought to its attention after the date of
its opinion. Although Schroders evaluated the merger consideration from a
financial point of view, Schroders was not asked to and did not recommend the
specific consideration payable in the merger, which was determined through
negotiations between Central and Tyco and was approved by Central's Board.
The engagement of Schroders and its opinion were for the benefit of
Central's Board of Directors and its opinion was rendered to the Board for its
use in connection with its consideration of the merger. Schroders' opinion is
directed only to the fairness, from a financial point of view, of the merger
consideration to the shareholders of Central other than Tyco International,
Alpha Acquisition Corp. and their affiliates. Such opinion does not constitute a
recommendation as to any action the Board of Directors or any shareholder of
Central should take in connection with the merger or any aspect thereof.
Schroders' opinion is not an opinion as to the structure, terms or effect of any
other aspect of the merger or of any of the transactions contemplated in
connection therewith or as to the merits of the underlying decision of Central
to enter into the merger or any such transaction or any alternative potential
transaction.
In preparing its opinion, Schroders performed a variety of financial
and comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying Schroders' opinion or of the presentation by Schroders to Centrals'
Board of directors. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Schroders did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Schroders believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying the preparation of
its opinion. In its analyses, Schroders made numerous assumptions with respect
to the Company, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Central. The estimates contained in such analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values of predictive of future results or values, which may be significantly
more less favorable than those suggested by such analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Schroders' opinion and analyses were only one of many
factors considered by Central's Board in its evaluation of the merger and should
not be viewed as determinative of the view of the Board or management of Central
with respect to the merger consideration or the merger.
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The following is a summary of certain financial and comparative
analyses performed by Schroders in connection with its opinion.
Analysis of Comparable Publicly Traded Companies
Using publicly available information, Schroders compared selected
historical and projected financial data, and selected stock market data of
Central to the corresponding data of the following six publicly- traded
companies that Schroders deemed to be reasonably comparable to Central
(collectively the "Comparable Companies"):
o Denison International plc
o Flowserve Corporation
o Graco Inc.
o IDEX Corporation
o Robbins & Myers Inc.
o Watts Industries, Inc.
Schroders compared (i) the stock prices (ii) market capitalization
(defined as share price times total shares outstanding) (iii) stock price to
Latest Twelve Months ("LTM") EPS (iv) stock price to calendar year ("CY") 1999
EPS (iv) enterprise values (defined as market capitalization plus total debt,
preferred stock and minority interest, and capitalized leases less cash and cash
equivalents) (v) enterprise values to LTM earnings before interest and taxes
("EBIT") (vi) enterprise values to CY 1999 EBIT (vii) enterprise values to LTM
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
(viii) enterprise values to CY 1999 EBITDA for each of Central and the selected
Comparable Companies.
Discounted Cash Flow ("DCF") Analysis
Schroders performed a DCF analysis using financial forecasts supplied
to Schroders by management of Central for the fiscal years ("FY") October 31,
1999 and October 31, 2000 in the context of Central's historical operating
performance. Schroders used these projections and assumptions provided by
management, projections for the years ending October 31, 2001 through October
31, 2004. The DCF was calculated as the sum of the present values, using a range
of discount rates from 10% to 14% of (i) the projected unleveraged free cash
flows from FYs 2000-2004, and (ii) the FY 2004 terminal value based upon a range
of multiples from 6.0x to 8.0x projected EBITDA for FY 2004. Schroders then
adjusted the enterprise values thus obtained by subtracting existing debt and
adding existing cash to get a range of equity values for Central.
Comparable Transaction Analysis
Using publicly available information, Schroders analyzed certain
financial and operating information relating to the following fourteen selected
transactions in the flow control industry, each of which were consummated after
January 1, 1997 (the purchaser is listed first and is followed by the seller):
Tinicum Capital Partners/ Haskel International, Inc.
Code Hennessey & Simmons / Hunt Valve Company
Watts Industries / Hoke Inc.
Dover Corporation / Wilden Pump & Engineering
Cooper Cameron Corporation / Orbit Valve
IDEX Corporation / Gast Manufacturing
IDEX Corporation / Knight Equipment International, Inc.
David Brown Group / Union Pump Company
Robbins & Myers Inc. / the flow control equipment division of
J.M. Huber Corporation
Parker Hannifin Corporation / Honeywell Inc.'s flow business
Danaher Corporation / Gems Sensors
Pentair, Inc. / the pump group of General Signal Corporation
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Durco International / BW/IP Inc.
Culligan Water Technologies / Ametek's water filtration business
With respect to each of the transactions analyzed, Schroders computed
the equity costs (where applicable, the offer price per share multiplied by
total common shares outstanding (the "Equity Cost")) and the adjusted price (the
Equity Cost plus latest reported total debt, capitalized leases, preferred stock
and minority interest minus total cash and cash equivalents) paid in such
transactions and divided the adjusted price by the acquired company's EBIT and
EBITDA, for the LTM period corresponding to the date the transaction was
announced and the acquired company's projected EBIT and EBITDA for the next
fiscal year ending subsequent to the date the transaction was announced.
Premium Analysis
Schroders analyzed the premiums paid over the stock price of acquired
companies in selected merger transactions since 1995, based on stock prices one
day, one week, and four weeks prior to the announcement of the transaction. This
analysis demonstrated that, on average, the acquired company received a 39%, 33%
and 28% premium over its stock price one day, one week and four weeks prior to
the announcement of the transaction, respectively. Schroders noted that the
$30.00 per share consideration implied by the Merger represents premiums of
approximately 34%, 59%, and 75% to Central's closing stock price one day, one
week, and four weeks prior to the date (June 16, 1999) the Merger was announced.
Based on the above analyses, Schroders derived a range of values for
Central's common stock from $14.00 to $38.00 per share.
Pursuant to the terms of Schroders' engagement by Central, Central has
agreed, among other things, to pay Schroders for its services in connection with
the Merger a financial advisory fee of $1.6 million, a substantial portion of
which is contingent on consummation of the Merger. Central has also agreed to
reimburse Schroders for reasonable out-of-pocket expenses incurred by Schroders
in performing its services, including the reasonable fees and expenses of its
outside legal counsel, and to indemnify Schroders and related persons against
certain liabilities relating to or arising out of its engagement, including
certain liabilities under the federal securities laws.
Schroders, as part of its investment banking business, is continually
engaged in the valuation of businesses or their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Schroders has in the past provided investment
banking services to Central for which it has received customary fees. Schroders
was selected to act as investment bankers to Central's Board of Directors
because of its expertise and its reputation in investment banking and mergers
and acquisitions.
Schroders, in the normal course of its business, may trade in
securities of Central for its own account and for the accounts of its customers
and, accordingly, may hold a long or short position in such securities.
Interests of Certain Persons in the Merger
Certain Central executive officers and certain members of Central's
Board of Directors will receive benefits as a result of the Merger that will be
in addition to or different from their interests as shareholders of Central
generally. These include, among other things, provisions in the Merger Agreement
relating to indemnification and the acceleration and/or payout of benefits under
certain agreements and employee benefit plans. Central's Board of Directors was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the Merger.
Stock Ownership
Central's directors and executive officers collectively beneficially
own as of June 30, 1999, 499,641 shares of Central Common Stock, not including
options, which are described below. See "Principal Shareholders and Holdings of
Officers and Directors."
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Severance and Employment Arrangements
Central's severance policy provides for severance consisting of salary
continuation, benefits on the same basis as active employees during the
severance period and vacation in accordance with applicable policy upon
termination of an employee's employment. For officers and other employees with
employment agreements, the severance provided is set forth in the individual
employment agreements, as described below. For managers and professionals,
severance consists of four weeks of basic severance, plus one week for each year
of service. For supervisors, severance consists of two weeks of basic severance,
plus one week for each year of service. For all other employees, severance
consists of one week of basic severance, plus one week for each year of service.
Messrs. George G. Meyer, Central's President, and Stephen J. Meyer,
Central's Senior Executive Vice President, are each party to an employment
agreement with Central and its subsidiary, Central Sprinkler Company. Each of
the employment agreements, as amended, for Messrs. Meyer and Meyer provides that
if the executive is removed from his position by Central Sprinkler Company
without his consent, the executive may terminate his employment and receive his
base salary, incentive compensation, and fringe benefits as set forth in the
employment agreement until April 29, 2003. If the foregoing requirements are
satisfied, Mr. George Meyer will also receive his bonus as set forth in the
employment agreement until April 29, 2003. If Mr. George Meyer fulfills all
requirements of his employment agreement and continues in employment through
August 1, 1999 and October 1, 1999, he will receive $60,840 and $54,080,
respectively on the applicable date. If Mr. Stephen Meyer fulfills all of the
requirements of his employment agreement and continues in employment through
August 1, 1999 and October 1, 1999, he will receive $45,630 and $40,560,
respectively on the applicable date.
Messrs. James R. Buchanan, Central's Executive Vice President, Sales,
and James Golinveaux, Central's Senior Vice President, Engineering, are each
party to an employment agreement with Central that provides for payments to each
executive officer of $300,000 and $100,000 respectively, within 180 days after a
Change of Control (as defined in the employment agreements). If Messrs. Buchanan
and Golinveaux terminate employment by giving Central 30 days notice, they will
each receive 12 months of severance equal to their salary and incentive
compensation for the fiscal year immediately before their termination of
employment and will continue to receive fringe benefits during the 12-month
period. If Mr. Golinveaux's employment is terminated by Central without cause
and no Change of Control (as defined in the employment agreements) has occurred
within six months before the his termination of employment, he will receive 12
months of the severance benefits described above. If Mr. Golinveaux's employment
is terminated by Central without cause within six months of a Change of Control
(as defined in the employment agreements), he will receive 24 months of the
severance benefits described above. If Mr. Buchanan's employment is terminated
by Central without cause, he will receive 24 months of the severance benefits
described above.
Mr. Albert T. Sabol, Central's Vice President, Financial Reporting and
Control, is party to an agreement with Central and certain of its subsidiaries.
Mr. Sabol's agreement provides that if his employment is terminated without
cause, he will receive severance pay equal to 12 months of his current base
salary or payment in accordance with the severance policy then in effect for
vice presidents, whichever is greater, and continuation of family health and
life insurance for the 12-month period at the same costs as for active
employees, his stock options will continue to vest and remain exercisable during
the 12-month period and he will receive prepaid out placement services for one
year similar to those services received by other executives upon their
termination of employment from Central. If prior to October 31, 1999, Mr. Sabol
determines that the reporting relationship or his responsibilities are
unsatisfactory for any reason, he may elect to receive the severance package
described above. However, to receive the severance package, he must remain
actively employed and effectively assist with a transition for up to three
months, at Central's discretion, after notice of his separation. The three-month
transition period is considered part of the 12-month severance period. If Mr.
Sabol's compensation (base salary and bonus level), is reduced below the level
in force on the date of his agreement, his role as second highest financial
officer of reporting are further reduced or diminished beyond that contemplated
in the agreement, or his assigned office and workplace in Lansdale, Pennsylvania
does not remain comparable to what it was on the date of his agreement, Mr.
Sabol will receive the severance package described above, if he provides notice
of his resignation within two weeks of the event causing his resignation. If
there is a change of ownership within the year following the date of his
agreement and Mr. Sabol remains with the company and cooperates effectively and
satisfactorily (as determined by the CEO and CFO) for a period of six months
after such change of ownership, he will receive a bonus of $50,000.
Pursuant to a letter agreement, Mathias J. Barton, Senior Vice
President Finance and Chief Financial Officer, will receive one year of
severance if he loses his job because of a change of ownership.
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Equity-Based Incentive Awards
Pursuant to the terms of the Merger Agreement, at the time the Merger
is completed, each outstanding option to purchase shares of Central's common
stock issued to employees and directors of Central whether or not then vested or
exercisable, shall constitute the right to receive an amount in cash equal to
the positive difference, if any, between the exercise price of the option, and
the amount of $30.00.
The conversion of Central options into cash pursuant to the Merger
Agreement is more fully described below in "Merger Agreement -- Equity Based
Incentive Awards."
In addition, each non-employee director may elect during the 60-day
period following the public announcement of a Change of Control (as defined in
the 1993 Non-Employee Director Stock Option Plan) to surrender all or a portion
of his stock options in exchange for a cash payment equal to the Surrender Price
(as defined below) multiplied by the number of shares covered by his stock
options. The Surrender Price is equal to the difference between the stock option
exercise price and the higher of the highest price paid for a share of Central
Common Stock in connection with the Change of Control or the highest price paid
for a share of Central Common Stock during the 60-day period immediately before
the Change of Control. This option surrender right applies only to stock options
that have been outstanding for six months or more, and if exercised reduces the
related stock option on a share for share basis. As of June 30, 1999,
non-employee directors of Central owned option surrender rights in connection
with 24,000 shares of Central Common Stock.
As of June 30, 1999, directors and executive officers of Central owned
options to purchase an aggregate of 915,000 shares of Central Common Stock, at
an average exercise price of $26.07.
Indemnification
The Merger Agreement provides that individuals who have served as
officers or directors of Central shall be indemnified, for a period of six years
after the date of the Merger Agreement, as set forth by the articles of
incorporation and by-laws of Central prior to the Effective Time of the Merger.
Tyco has also agreed to provide, for at least six years after the Merger, a
directors and officers insurance and indemnification policy that is no less
favorable than the existing policy provided by Central with respect to acts
occurring prior to or at the Effective Time of the Merger, subject to certain
limitations.
Other
Thomas J. Sharbaugh, a member of the Central Board of Directors, a
shareholder of Central and a holder of Central stock options, is a partner in
the law firm of Morgan, Lewis & Bockius LLP, which provides legal services to
Central, including legal services relating to the Merger, subject to certain
limitations.
Merger Agreement
The following summary of the Merger Agreement is subject to, and
qualified in its entirety by, the complete text of the Merger Agreement which is
attached to this Proxy Statement as Appendix A. The terms of the Merger
Agreement are the result of arms' length negotiations between Central and Tyco.
Terms of the Merger
At the Effective Time, and subject to and upon the terms and conditions
of the Merger Agreement and the PBCL, Merger Sub will be merged with and into
Central, the separate corporate existence of Merger Sub will cease, and Central
will continue as the Surviving Corporation.
Subject to and immediately following the receipt of the vote of
shareholders of Central and the satisfaction or waiver of the conditions to the
consummation of the Merger set forth in the Merger Agreement, the parties shall
cause the Merger to be consummated by filing articles of merger as contemplated
by the PBCL (the "Articles of Merger"). The Merger shall be effective at the
time the Articles of Merger are filed with the Pennsylvania Secretary of State
or such other time as specified in the Articles of Merger.
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The Merger Agreement provides that the Articles of Incorporation of
Central, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, subject to an amendment
reducing the authorized capital stock of the Surviving Corporation. The Merger
Agreement provides that the bylaws of Central, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation.
The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation.
Conversion of Common Stock in the Merger
At the Effective Time, each share of Common Stock which is issued and
outstanding immediately prior to the Effective Time (other than (i) shares of
Common Stock as to which appraisal rights are exercised and (ii) shares of
Common Stock held of record by Tyco International or any direct or indirect
subsidiary of Tyco International) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive the Merger Consideration.
At the Effective Time, the 100 shares of common stock of Merger Sub,
par value $0.01 per share (the "Acquisition Common Stock"), which are issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become the number of shares of Common Stock issued and outstanding at
the Effective Time and those shares shall constitute the only issued and
outstanding shares of capital stock of the Surviving Corporation immediately
after the Effective Time.
At the Effective Time, each share of Common Stock held in the treasury
of Central or by Tyco International or any direct or indirect subsidiary of Tyco
International immediately prior to the Effective Time shall be canceled and
cease to exist, and no payment shall be made with respect thereto.
Appraisal Rights
Notwithstanding any provision of the Merger Agreement to the contrary,
any shares of Common Stock outstanding immediately prior to the Effective Time
held by a holder who has demanded and perfected the right of appraisal of those
shares in accordance with the provisions of Sections 1571-1580 of the PBCL and
as of the Effective Time has not withdrawn or lost such right to such appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive a cash payment pursuant to the Merger Agreement, but the holder shall
only be entitled to such rights as are granted by the PBCL. See "Appraisal
Rights." If a holder of shares of Common Stock who demands appraisal of those
shares under the PBCL effectively withdraws or loses (through failure to perfect
or otherwise) the right of appraisal, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, those shares shall be converted
into and represent only the right to receive the Merger Consideration, as the
case may be, as provided in the Merger Agreement, without interest, upon
compliance with the provisions, and subject to the limitations, of the Merger
Agreement. The Merger Agreement requires that Central shall give Tyco (a) prompt
notice of any written demands for appraisal of any shares of Common Stock,
attempted withdrawals of such demands, and any other instrument served pursuant
to the PBCL and received by Central relating to shareholders' rights of
appraisal, and (b) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the PBCL. Central shall not, except
with the prior written consent of Tyco, voluntarily make any payment with
respect to any demands for appraisal of Common Stock, offer to settle or settle
any such demands or approve any withdrawal of any such demands.
Equity Based Incentive Awards
At or immediately prior to the Effective Time, all options (the
"Central Stock Rights") to purchase shares of Common Stock that were granted
under any employee stock option plan, non-employee director stock option plan or
other compensation plan, shall be entitled to receive in cancellation of such
Central Stock Right, a cash payment from Tyco equal to the amount, if any, by
which the Merger Consideration exceeds the per share exercise price of such
Central Stock Right, multiplied by the number of shares of Common Stock then
subject to such Central Stock Right (the "Central Option Consideration"), but
subject to all required tax withholdings by Central. Each Central Stock Right
shall be canceled upon payment of the Central Option Consideration. As the
outstanding Central Stock Rights do not automatically cancel upon consummation
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of the Merger, the Merger Agreement provides that the Central Stock Rights will
remain outstanding after the Merger and shall entitle the holder thereof to
convert them for the Central Option Consideration at any time in the future
during the term of the particular Central Stock Right.
Payment of Shares
At the Effective Time, Tyco shall deposit, in immediately available
funds, with ChaseMellon Shareholders LLC (the "Exchange Agent"), cash in an
amount necessary to pay the Merger Consideration to be paid to the holders of
each share of Common Stock then entitled to be so paid (such sum being
hereinafter referred to as the "Fund"). Out of the Fund, the Exchange Agent
shall, pursuant to instructions from the holders of Common Stock, make the
payments of the Merger Consideration referred to in the Merger Agreement. Any
amount remaining in the Fund twelve months after the Effective Time shall be
refunded to the Surviving Corporation and the Surviving Corporation shall remain
liable for payment of the Merger Consideration.
In the event any certificate or certificates representing Common Stock
are lost, stolen or destroyed, then the person claiming such fact must provide
(i) an affidavit to that effect to the Exchange Agent and (ii) if required by
Tyco, a written indemnity agreement in form and substance satisfactory to Tyco
or a bond in such sum as Tyco may direct as indemnity against any claim that may
be made against the Surviving Corporation with respect to the certificate or
certificates of Common Stock alleged to have been lost, stolen or destroyed.
Upon receipt and processing of such documents, the amount owing to such person
shall be paid to such person.
At and after the Effective Time, all shares of Common Stock issued and
outstanding immediately prior to the Effective Time shall be canceled and cease
to exist, and each holder of a certificate or certificates that represented
shares of Common Stock issued and outstanding immediately prior to the Effective
Time shall cease to have any rights as a shareholder of Central with respect to
the shares of Common Stock represented by such certificate or certificates,
except for the right to surrender such holder's certificate or certificates in
exchange for the payment provided pursuant to the Merger Agreement or to perfect
such holder's right to receive payment for such holder's shares pursuant to the
PBCL if such holder has validly exercised and not withdrawn or lost such
holder's right to receive payment for such holder's shares pursuant to the PBCL,
and no transfer of shares of Common Stock issued and outstanding immediately
prior to the Effective Time shall be made on the stock transfer books of the
Surviving Corporation.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED
TO SHAREHOLDERS AND HOLDERS OF CENTRAL STOCK RIGHTS PROMPTLY FOLLOWING THE
EFFECTIVE TIME AS TO THE METHOD OF EXCHANGING CERTIFICATES FORMERLY REPRESENTING
SHARES OF COMMON STOCK FOR THE CENTRAL MERGER CONSIDERATION OR FOR OBTAINING THE
CENTRAL OPTION CONSIDERATION, AS APPLICABLE. SHAREHOLDERS AND HOLDERS OF CENTRAL
STOCK RIGHTS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES OF COMMON
STOCK OR STOCK RIGHTS TO THE DISBURSING AGENT OR CENTRAL PRIOR TO RECEIPT OF THE
TRANSMITTAL LETTER.
Representations and Warranties
Central and Tyco have each made various customary representations in
the Merger Agreement about themselves and their subsidiaries. None of the
representations or warranties of any of Central or Tyco survive the consummation
of the Merger. All of the representations, warranties, covenants, agreements and
other obligations of Tyco under the Merger Agreement have been guaranteed by
Tyco International.
Conduct of Business by Central
Central has agreed that, prior to the consummation of the Merger, it
will conduct its business, and that of its subsidiaries, only in the ordinary
course of business and in a manner consistent with past practice; and Central
will use reasonable commercial efforts to preserve substantially intact the
business organization of Central and its subsidiaries, to keep available the
services of the present officers, employees and consultants of Central and its
subsidiaries and to preserve the present relationships of Central and its
subsidiaries with customers, suppliers and other persons with which Central or
any of its subsidiaries has significant business relations. In particular,
unless the Merger Agreement provides otherwise or as previously disclosed to
Tyco by Central, Central has agreed that
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neither it nor any of its subsidiaries, without the prior written consent of
Tyco, will, subject in certain cases to specified exceptions:
1. amend or otherwise change Central's Amended and
Restated Articles of Incorporation or By-laws;
2. issue, dispose or encumber any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any ownership interest in Central
or any of its subsidiaries or affiliates, subject to certain exceptions
in the case of Central's equity-based incentive plans;
3. sell, pledge, dispose of or encumber any assets of
Central or any of its subsidiaries out of the ordinary course of
business, subject to certain exceptions;
4. o declare, set aside, make or pay any dividend
or other distribution on any of its capital
stock,
o split, combine or reclassify any of its
capital stock or permit or propose the
issuance of any other securities in respect
of, in lieu of or in substitution for shares
of its capital stock,
o amend the terms or change the period of
exercisability of, acquire, or permit any
subsidiary to amend the terms of or to
acquire, any of its or its subsidiaries'
securities, or
o settle or discharge any action brought or
threatened against Central arising out of a
shareholder equity interest in Central;
5. o make any acquisitions,
o incur any indebtedness other than pursuant
to credit facilities previously disclosed to
Tyco,
o authorize capital expenditures or purchases
of fixed assets which are, in the aggregate,
in excess of $1,000,000, or
o enter into or amend any contract, agreement,
commitment or arrangement to do any of the
above;
6. o increase the compensation or severance
payable or to become payable to its
directors, officers or employees except in
accordance with past practice,
o grant severance or termination pay to any
director, officer or employee,
o enter into any employment or severance
agreement with any new employee of Central
which provides for annual base and bonus
compensation in excess of $50,000,
o enter into or modify any agreement with a
director of Central, or
o establish, adopt, enter into or amend any
collective bargaining, employment,
termination, severance or benefit plan,
agreement, trust, fund, policy or
arrangement for any current or former
directors, officers or employees;
7. change accounting policies or procedures;
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8. make any tax election or settle or compromise any
United States federal, state, local or non-United States tax liability;
9. satisfy claims, liabilities or obligations in excess
of $100,000 out of the ordinary course of business;
10. cause or permit any loans owed by Central's Employee
Stock Ownership or Employee Stock Ownership Plan Trust to be prepaid in
whole or in part, or
11. take, or agree to take, any of the above actions or
take or agree to take, any action which would make any of the
representations or warranties of Central contained in the Merger
Agreement untrue or incorrect or prevent Central from performing its
covenants under the Merger Agreement.
Non Solicitation
Central has agreed that it will not solicit or encourage the initiation
of any inquiries or proposals regarding any other consolidation, business
combination, recapitalization or similar transaction, including any transaction
with a third party in which such party would acquire more than a 15% interest in
any class of Central's's equity securities or in the outstanding equity of the
surviving entity in a merger with Central or would acquire more than 15% of the
fair market value of Central's assets. Any of the foregoing transactions are
referred to in this document as an "Alternative Transaction" and any proposal
from a third party to effect an Alternative Transaction is referred to as an
"Acquisition Proposal."
Until the Central shareholders approve the Merger Agreement, if the
Central Board of Directors, following consultation with independent legal
counsel, determines that such action is reasonably likely to be required to
discharge properly its fiduciary duties, the Central, after notice to Tyco, is
permitted to:
1. furnish information to a third party which has made, but was not
solicited to make in violation of the Merger Agreement, a "Superior Proposal." A
"Superior Proposal" is defined as a bona fide Acquisition Proposal to acquire
for cash and/or securities, all of the voting equity securities of Central or
all or substantially all of Central's assets, on terms which the Central Board
of Directors reasonably believes are more favorable than the Merger:
o from a financial point of view to Central shareholders,
after consultation with a nationally recognized financial
advisor, taking into account at the time of determination
any changes to the financial terms of the Merger proposed
by Tyco, and
o to Central, taking into account all pertinent factors
deemed relevant by the Central Board of Directors under the
laws of the Commonwealth of Pennsylvania; and
2. consider and negotiate such Superior Proposal.
Notwithstanding the foregoing points 1 and 2, Central and the Central
Board of Directors, except to the extent that the Central Board of Directors
reasonably determines in good faith and after consultation with independent
legal counsel that it is reasonably likely to be required to act to the contrary
in order to properly discharge its fiduciary duties, may not withdraw or modify
in a manner adverse to Tyco its approval of the Merger.
In addition, unless the Merger Agreement has been terminated in
accordance with its terms, the Merger Agreement must be submitted for approval
by the Central shareholders at the Central Special Meeting, and the Central
Board of Directors may not recommend that shareholders vote against approval of
the Merger and the Merger Agreement.
The Merger Agreement expressly provides that the foregoing covenants
shall not prohibit Central from taking or disclosing to its shareholders a
position regarding an Alternative Transaction or Acquisition Proposal
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required by the rules of the Securities and Exchange Commission regarding tender
offers or from making any other disclosure to its shareholders required by law.
Central has agreed:
1. to cease any discussions or negotiations with any third party that
were ongoing at the time of the execution of the Merger Agreement; and
2. not to release any third party from the confidentiality and
standstill provisions of any agreement to which Central is a party.
Central will ensure that the officers and directors of Central and its
subsidiaries and any investment banker or other advisor or representative
retained by Central are aware of the non-solicitation restrictions described in
the Merger Agreement.
Consents; Approvals
Tyco and Central will each use commercially reasonable efforts to
obtain all consents, waivers, approvals, authorizations or orders, and Tyco and
Central will make all filings, required in connection with the authorization,
execution and delivery of the Merger Agreement and the consummation by each of
them of the transactions contemplated thereby.
Indemnification and Insurance
Tyco and Central have agreed that for six years following consummation
of the Merger, the Articles of Incorporation and By-laws of the Surviving
Corporation will contain the same indemnification provisions as currently in the
Articles of Incorporation and By-laws of Central and such provisions will not be
modified in any manner adverse to those individuals who were directors, officers
or employees of Central at the consummation of the Merger.
After consummation of the Merger, Tyco will, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Articles of
Incorporation or By-laws, indemnify and hold harmless each present and former
director, officer or employee of Central or any of its subsidiaries against any
costs or expenses, judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the transactions contemplated by
the Merger Agreement, or otherwise with respect to any acts or omissions
occurring at or prior to the consummation of the Merger, to the same extent as
provided in Central's's Articles of Incorporation or By-laws or any applicable
contract or agreement as in effect on the date of the Merger Agreement, in each
case for a period of six years after the date of the Merger Agreement.
Following the Merger, Tyco will continue to honor in all respects
Central's obligations under the indemnification agreements and employment
agreements with Central's officers and directors existing at or before
consummation of the Merger.
Tyco will provide for a period of not less than six years after
consummation of the Merger, Central's current directors and officers an
insurance and indemnification policy for events occurring at or prior to
consummation of the Merger that is no less favorable than Central's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that Tyco will not be required to
pay an annual insurance premium in excess of 200% of the annual premium
currently paid by Central for such insurance, but in such case will purchase as
much coverage as possible for such amount.
Notification of Certain Matters
Tyco and Central will each give each other prompt notice of the
occurrence or nonoccurrence of any event which would be reasonably expected to
cause any representation or warranty of the notifying party contained in the
Merger Agreement to be materially untrue or inaccurate, or any failure of the
notifying party materially to comply with or satisfy, or the occurrence or
non-occurrence, of any event, the occurrence or non-occurrence of which would
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reasonably be expected to cause failure by such party to materially comply with
or satisfy, any covenant, condition or agreement in the Merger Agreement.
Further Action
Tyco and Central will use all reasonable efforts to take, or cause to
be taken, all actions and do other things necessary, proper or advisable to
consummate as promptly as practicable the transactions contemplated by the
Merger Agreement, to obtain in a timely manner all necessary waivers, consents
and approvals and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to each
of their obligations under the Merger Agreement. Nothing contained in the Merger
Agreement shall require Tyco International to divest, abandon, or take similar
action with respect to its, Central's or any of their respective subsidiaries'
assets (tangible or intangible).
Public Announcements
Tyco and Central will not issue any press release or make any public
written statement with respect to the Merger or the Merger Agreement without the
prior consent of the other party, which consent will not be unreasonably
withheld, except as required by law or the regulations of the New York Stock
Exchange or the National Association of Securities Dealers.
Employee Matters
Subject to the limitations contained in the Merger Agreement, Tyco and
Central have respectively agreed to a number of covenants regarding the
treatment of employee and retiree benefits following the consummation of the
Merger, including the following:
Through December 31, 1999, Tyco will provide:
1. those persons who, immediately prior to the Merger, were employees
of Central or its subsidiaries, employee benefits that in the aggregate are
substantially similar to those benefits provided by Central immediately prior to
the Merger. For this purpose, service accrued by these employees with Central or
its subsidiaries prior to the Merger will be recognized except to the extent
necessary to prevent duplication of benefits.
2. any person who immediately prior to the Merger is a retiree under a
Central retiree medical program with retiree medical benefits that are in
accordance with Central's practice prior to the Merger.
Subject to 1 and 2 above, Tyco can amend or modify any Central employee
benefit plan with respect to any Central employee or other person or terminate
or modify the terms and conditions of employment of any employee or any other
person.
The Merger Agreement provides that the foregoing provisions are not
enforceable by persons not parties to the Merger Agreement.
Conditions to Obligation of Each Party to Effect the Merger
Each of Tyco's and Central's respective obligations to complete the
Merger are subject to the satisfaction at or prior to the consummation of the
Merger of the following conditions:
1. Shareholder Approval. The Central shareholders have approved the
Merger Agreement;
2. Antitrust. All waiting periods applicable to the consummation of the
Merger under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act") have expired
or terminated, and all necessary clearances and approvals for the Merger under
any non-U.S. anti-trust laws have been obtained, other than for clearances and
approvals under any non-U.S. antitrust laws which, if not obtained, would not be
reasonably expected to have a material adverse effect on Central, Tyco
International, Tyco or the fire and security business or the flow control
business of Tyco International.
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3. Governmental Actions. No action or proceeding has been instituted,
pending or threatened by any governmental authority or administrative agency
before any governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, that is reasonably likely to result in an
order, nor is any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction or other legal
restraint in effect, which, in either case, prevents or seeks to prevent or
limits or seeks to prohibit the consummation of the Merger or to limit Tyco from
exercising all material rights and privileges pertaining to its ownership of
Central following the Merger or the ownership or operation by Tyco or Tyco
International or any of its subsidiaries of all or a material portion of the
business or assets of Central or any of its subsidiaries following the Merger,
or compels or seeks to compel Tyco International or any of its subsidiaries to
dispose of or hold separate all or any material portion of the business or
assets of Tyco International or any of its subsidiaries, as a result of the
Merger or the transactions contemplated by the Merger Agreement; and
4. Illegality. No statute, rule, regulation or order is enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
Additional Conditions to Obligations of Tyco
The obligations of Tyco to complete the Merger are also subject to the
following conditions:
1. Representations and Warranties. Except as would not reasonably be
expected to have a material adverse effect on Central, the representations and
warranties of Central in the Merger Agreement are true and correct in all
respects on and as of the date of the consummation of the Merger, with the same
force and effect as if made on and as of the date of the consummation of the
Merger, and Tyco has received a certificate to such effect signed by the Chief
Executive Officer or Chief Financial Officer of Central;
2. Agreements and Covenants. Central has performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement, and Tyco has received a certificate to such effect signed by the
Chief Executive Officer or Chief Financial Officer of Central; and
3. Consents Obtained. Central has obtained all material consents,
waivers, approvals, authorizations or orders required to be obtained, and has
made all filings required by Central for the authorization, execution and
delivery of the Merger Agreement and the consummation by it of the Merger except
as would not reasonably be expected to have a material adverse effect on Central
or Tyco.
Additional Conditions to Obligation of Central
The obligation of Central to complete the Merger is also subject to the
following conditions:
1. Representations and Warranties. Except as would not reasonably be
expected to have a material adverse effect on Tyco, the representations and
warranties of Tyco contained in the Merger Agreement are true and correct in all
respects at and as of the consummation of the Merger, with the same force and
effect as if made on and as of the date of the consummation of the Merger, and
Central has received a certificate to such effect signed by the President or
Chief Financial Officer of Parent;
2. Agreements and Covenants. Tyco has performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement, and Central has received a certificate to such effect signed by the
President or Chief Financial Officer of Parent; and
3. Consents Obtained. Tyco has obtained all material consents, waivers,
approvals, authorizations or orders required to be obtained, and have made all
filings required for the authorization, execution and delivery of the Merger
Agreement and the consummation by them of the transactions contemplated except
as would not reasonably be expected to have a material adverse effect on Central
or Tyco.
Conditions to Termination
The Merger Agreement may be terminated at any time prior to the
consummation of the Merger, notwithstanding the approval of the Merger and the
Merger Agreement by the Central shareholders:
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1. by mutual written consent duly authorized by the Board of Directors
of both Central and Tyco; or
2. by either of Tyco or Central, if the Merger has not been consummated
by November 30, 1999, other than for reasons set forth in 4 below, provided,
however, that this right to terminate is not available to any party whose
failure to fulfill any of its obligations under the Merger Agreement caused the
Merger not to be consummated on or before November 30, 1999; or
3. by either of Tyco or Central, if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission issues a
nonappealable final order, decree or ruling or takes any other action which
permanently prohibits the Merger; or
4. by either of Tyco or Central, if the requisite vote of Central's
shareholders shall not have been obtained by November 30, 1999, or if the
shareholders do not approve the Merger,
5. by Tyco, if, whether or not permitted to do so by the Merger
Agreement, Central or its Board of Directors:
o withdraws or changes its approval or recommendation of the
Merger Agreement or the Merger in a manner adverse to Tyco,
o approves or recommends to the shareholders of Central an
Acquisition Proposal or Alternative Transaction,
o approves or recommends that the Central shareholders tender
their shares in any tender offer or exchange offer that is
an Alternative Transaction, or
o takes any position or makes any disclosures required by law
that has the effect of any of the foregoing;
6. by Central, in order to accept a Superior Proposal, provided that:
o the Merger Agreement has not already been approved by the
Central shareholders at the Central special meeting,
o the Central Board of Directors reasonably determines in
good faith, following consultation with independent legal
counsel, that it is reasonably likely to be required to
accept such proposal in order to discharge properly its
fiduciary duties,
o Central in fact accepts the Superior Proposal, and
o Central complies in all material respects with its no
solicitation obligations as described on page 21;
7. by either of Tyco or Central:
o if any representation or warranty of the other party set
forth in the Merger Agreement shall be untrue when made,
o if any representation or warranty of the other party set
forth in the Merger Agreement becomes untrue, or
o upon a breach of any covenant or agreement set forth in the
Merger Agreement by the other party
such that in either case, the conditions to the terminating party's obligation
to complete the Merger described above under "Conditions to the Merger" would
not be satisfied, provided that, if such misrepresentation or breach is curable
prior to November 30, 1999 and the party in breach exercises its reasonable best
efforts to cure the same,
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the Merger Agreement may not be terminated under this clause while such party
continues to exercise such efforts.
Fees and Expenses
Except as set forth below, Tyco and Central will pay their own
respective fees and expenses incurred in connection with the Merger Agreement
and the Merger, whether or not the Merger is completed, provided that Tyco and
Central will share equally all filing fees and printing expenses incurred in
connection with the printing and filing of this document.
Central will pay Tyco a fee of $6 million, and will pay Tyco's actual,
documented and reasonable out-of-pocket expenses relating to the Merger of up to
$300,000, upon the first to occur of any of the following events:
1. the termination of the Merger Agreement by Tyco or Central because
the meeting of shareholders of Central to approve the Merger Agreement has not
been held by November 30, 1999, or due to the failure of the Central
shareholders to approve the Merger Agreement at the Meeting; provided, that such
fee and expenses shall only be payable upon the failure of the shareholders to
approve the Merger Agreement if,
o at the time of the Meeting, an Acquisition Proposal is made
directly to the Central shareholders or otherwise becomes
publicly known or a credible third party has announced a
bona fide intention to make such an Acquisition Proposal,
or
o within 12 months following the date of termination of the
Merger Agreement, an Alternative Transaction is publicly
announced by Central or any third party and such
transaction is at any time thereafter consummated on
substantially the terms previously announced.
2. the termination of the Merger Agreement by Tyco as permitted by the
Merger Agreement and as described in paragraph 5 under "Conditions to
Termination;"
3. the termination of the Merger Agreement by Central due to the
Central Board of Directors accepting a Superior Proposal as permitted by the
Merger Agreement and as described in paragraph 6 under "Conditions to
Termination;" and
4. the termination of the Merger Agreement by Tyco upon a breach by
Central of any covenant or agreement set forth in the Merger Agreement as
permitted by the Merger Agreement and as described in paragraph 7 under
"Conditions to Termination."
Central is required to pay to Tyco its respective expenses relating to
the Merger, but in no event more than $300,000 upon a termination of the Merger
Agreement by Tyco as a result of a representation or warranty of Central being
untrue when made, as described in paragraph 7 under "Conditions to Termination"
above.
Tyco will pay Central a fee of $6 million, and will pay Central's
actual, documented and reasonable out-of-pocket expenses relating to the Merger
of up to $300,000, upon the first to occur of any of the following events:
1. the termination of the Merger Agreement by Central or Tyco if the
Merger shall not have been consummated by November 30, 1999, unless the reason
is Central's failure to fulfill any of its obligations under the Merger
Agreement; and
2. the termination of the Merger Agreement by Central or Tyco in the
event that a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued a nonappealable final
order, decree or ruling or taken any other nonappealable final action having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger.
The fee and/or expenses are payable within one business day after a
demand for payment following the occurrence of the event requiring such payment,
provided that, in no event will a party be required to pay such fee
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and/or expenses to the other if, immediately prior to the termination of the
Merger Agreement, the party to receive the fee and/or expenses was in material
breach of its obligations, representations or warranties under the Merger
Agreement.
The fee payable under certain circumstances by each party to the other
party is intended, among other things, to compensate such other party for its
costs, including lost opportunity costs, if certain actions or inactions by the
first party or its shareholders lead to the abandonment of the Merger. The fee
payable under certain circumstances by Central may have the effect of increasing
the likelihood of consummation of the Merger in accordance with the terms of the
Merger Agreement. The fee payable by Central may also have the effect of
discouraging persons from making an offer to acquire all of or a significant
interest in Central by increasing the cost of any such acquisition.
Amendment and Waiver; Parties in Interest
Tyco and Central may amend the Merger Agreement in writing by action
taken by or on behalf of their respective Boards of Directors at any time prior
to consummation of the Merger, provided, however, that after approval of the
Merger by the shareholders of Central, the Merger Agreement cannot be amended
without shareholder approval if shareholder approval of such amendment is
required by law.
At any time prior to consummation of the Merger, any of Tyco and
Central may extend the time for the performance of any of the obligations or
other acts by the other, waive any inaccuracies in the representations and
warranties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement, or, to the extent allowed by law, waive
compliance with any of the agreements or conditions contained in the Merger
Agreement. Any such extension or waiver will be valid if set forth in writing by
the party or parties granting such extension or waiver.
The Merger Agreement is binding upon and inures solely to the benefit
of the parties thereto, and nothing in the Merger Agreement confers upon any
other person any right, benefit, remedy or obligation, other than certain
indemnification, employment and insurance obligations of Tyco and Central
following consummation of the Merger which are intended for the benefit of
certain specified officers, directors and employees of Central and may be
enforced by such individuals.
Accounting Treatment
The Merger will be accounted for under the purchase method of
accounting. A final determination of required purchase accounting adjustments of
the fair value of the assets and liabilities of Central has not yet been made.
Federal Income Tax Consequences
Upon consummation of the Merger, each outstanding share of Common Stock
(except for Central's treasury shares, shares held by Tyco International or its
subsidiaries and shares with respect to which statutory appraisal rights are
exercised) will be converted into the right to receive the Merger Consideration.
The following discussion is a summary of the principal federal income
tax consequences of the Merger to shareholders of Central whose shares of Common
Stock are surrendered pursuant to the Merger (including any cash amounts
received by dissenting shareholders pursuant to the exercise of appraisal
rights). The discussion applies only to shareholders in whose hands shares of
Common Stock are capital assets, and may not apply to shares of Common Stock
received pursuant to the exercise of employee stock options or otherwise as
compensation or to shareholders who are not citizens or residents of the United
States.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU ARE URGED TO CONSULT YOUR OWN TAX
ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO YOU AND
THE PARTICULAR TAX EFFECTS OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL AND OTHER TAX LAWS.
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The receipt of cash pursuant to the Merger (including any cash amounts
received by dissenting shareholders pursuant to the exercise of appraisal
rights) will be a taxable transaction for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"). In general, for federal
income tax purposes, a shareholder will recognize gain or loss equal to the
difference between the cash received by the shareholder pursuant to the Merger
Agreement and the shareholder's adjusted tax basis in the shares of Common Stock
surrendered pursuant to the Merger Agreement. Such gain or loss will be a
capital gain or loss and will be a long-term gain or loss if, at the Effective
Time, the shares of Common Stock were held for more than one year. Certain
limitations apply with respect to the deductibility of capital losses.
Payments in connection with the Merger may be subject to "backup
withholding" at a 31% rate. Backup withholding generally applies if the
shareholder fails to furnish such shareholder's social security number or other
taxpayer identification number ("TIN"), or furnishes an incorrect TIN. Backup
withholding is not an additional tax but merely a creditable advance payment,
which may be refunded to the extent it results in an overpayment of tax. Certain
persons generally are exempt from backup withholding, including corporations and
financial institutions. Certain penalties apply for failure to furnish correct
information and for failure to include reportable payments in income.
Shareholders should consult with their own tax advisors as to the qualifications
and procedures for exemption from backup withholding.
Regulatory Compliance
The Merger is subject to review by the Federal Trade Commission and the
Antitrust Division of the Department of Justice under the HSR Act. The
applicable waiting period under the HSR Act will expire on July 20, 1999 unless
extended or terminated early by such agencies pursuant to the HSR Act.
Articles of Merger must be filed on behalf of Central and Merger Sub
with the Secretary of State of the Commonwealth of Pennsylvania in order to
effect the Merger.
Except as described above, Central is not aware of any licenses or
regulatory permits that are material to its business that might be adversely
affected by the Merger, or of any approval or other action by any governmental,
administrative or regulatory agency or authority which would be required prior
to the Effective Time.
APPRAISAL RIGHTS
If the Merger is consummated, shareholders who fully comply with the
statutory procedures for exercising appraisal rights set forth in the PBCL will
be entitled to receive cash for the fair value of their Common Stock as
determined pursuant to the procedures prescribed by the PBCL. Merely voting
against the Merger Agreement will not perfect a shareholder's appraisal rights.
Shareholders are urged to review carefully the dissenting shareholders' rights
provisions of the PBCL, a description of which is provided below and the full
text of which is attached to this Proxy Statement as Appendix C and incorporated
herein by reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE
APPLICABLE PROCEDURES WILL FORFEIT THEIR APPRAISAL RIGHTS IN CONNECTION WITH THE
Merger.
Sections 1571-80 of the PBCL ("Subchapter D") and 1930(a) of the PBCL,
copies of which are attached to this Proxy Statement as Appendix C, entitle any
holder of record of Common Stock who objects to the Merger, in lieu of receiving
the consideration for such Common Stock provided under the Merger Agreement, to
demand in writing that he be paid in cash the fair value of his Common Stock.
Section 1572 of the PBCL defines "fair value" as: "The fair value of shares
immediately before the effectuation of the corporate action to which the
dissenter objects, taking into account all relevant factors, but excluding any
appreciation or depreciation in anticipation of the corporate action."
Any shareholder contemplating making demand for fair value is urged to
review carefully the provisions of Subchapter D, particularly the procedural
steps required to perfect his appraisal rights thereunder. APPRAISAL RIGHTS WILL
BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D ARE NOT FULLY AND
PRECISELY SATISFIED. The following summary does not purport to be a complete
statement of the provisions of Subchapter D of the PBCL and is qualified in its
entirety by reference to Appendix C and the PBCL.
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Filing Notice of Intention to Demand Fair Value
If you wish to exercise your appraisal right or to preserve the right
to do so, before the vote of the shareholders is taken on the Merger you must
deliver to Central a written notice of intention to demand that you be paid the
fair value of your Common Stock if the Merger is effected. Such written notice
must be sent to [___________________________] at [________________________]. A
vote against the Merger is not sufficient to satisfy the requirement of
delivering a written notice to Central. In addition, you must continuously hold
your Common Stock from the date of filing the notice with Central through the
consummation of the Merger, and you must not vote your Common Stock in favor of
the Merger. Your failure to comply with any of the foregoing will result in the
forfeiture of any right to payment of fair value for your Common Stock. Once the
demand has been properly made, the determination of "fair value" will be made
pursuant to the provisions of Pennsylvania law, including an ultimate court
determination if applicable.
Notice to Demand Payment
If the Merger is approved by the shareholders, Central will mail you a
further notice if you gave due notice of your intention to exercise your
statutory appraisal right and you refrained from voting in favor of the Merger.
This notice will provide you with certain instructions for demanding payment and
will notify you of a date by which such right must be exercised.
Record Owners and Beneficial Owners
If you are a record holder of Common Stock held in whole or in part
for the benefit of another person, you may assert appraisal rights as to fewer
than all of the Common Stock registered in your name only if you dissent with
respect to all the Common Stock beneficially owned by such person and disclose
the name and address of the person or persons on whose behalf you dissent. If
you are a beneficial owner of Common Stock and are not the record holder, you
may assert appraisal rights with respect to Common Stock held on your behalf if
you submit to Central the written consent of the record holder not later than
the time of assertion of appraisal rights. If you are a beneficial owner, you
may not dissent with respect to fewer than all of your Common Stock, whether or
not such Common Stock is registered in your name.
INFORMATION REGARDING CENTRAL
General
Central is a leading manufacturer of automatic fire sprinkler heads,
valves, grooved couplings and fittings, CPVC plastic pipe and fittings, steel
pipe, and other sprinkler system components as well as a distributor of
component parts of complete automatic fire sprinkler systems that are either
manufactured by Central or purchased by Central for resale to its customers.
Approximately 82% of Central's fiscal 1998 annual net sales are derived from
products manufactured by Central and approximately 18% are purchased by Central
for resale to its customers.
Central's wide variety of products are marketed for commercial,
industrial, residential and institutional uses throughout the world. Central
sells its products to more than 3,000 customers, most of which are sprinkler
installation contractors.
Products
The principal components of a sprinkler system are the sprinkler heads
and the valves, both of which are manufactured and marketed by Central and
represented approximately 49% of Central's sales in fiscal 1998 and 51% in
fiscal 1997 and fiscal 1996. Central also manufactures and distributes other
sprinkler system component parts which are sold under Central's various trade
names. The success of Central's product line expansion and diversification
efforts has resulted in sprinkler heads and valves becoming a lower percentage
of consolidated sales than in prior years.
Sprinkler Heads
The sprinkler head is the mechanism that is activated by heat and
discharges a water spray. The sprinkler head is composed principally of copper,
brass and other corrosion resistant materials. Central presently produces and
markets five basic types of sprinkler heads: the standard commercial sprinkler,
the residential/life-safety sprinkler, the extended coverage commercial
sprinkler, the early suppression fast response sprinkler and specific
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application series sprinklers. In addition, Central manufactures its own line of
glass bulb ampules for use as activating mechanisms in sprinkler heads. Central
currently manufactures several varieties of these glass bulb ampules for
internal use. Such products are not sold to customers outside Central. Central
also supplements its own production with glass bulb ampules purchased from
several outside suppliers.
Valves
Central markets a wide variety of sprinkler system valves which are
used specifically in fire sprinkler installations. A sprinkler system valve is
the mechanical device by which the water supply is controlled. When the
sprinkler head is activated, the valve allows water to flow into and through the
system. Several of these valves are manufactured by Central (alarm valve,
butterfly valve, check valve, deluge valve and dry pipe valve), while certain
other valves are manufactured by others and marketed by Central.
CPVC Plastic Pipe and Fittings
Central manufactures a line of BlazeMaster(TM) CPVC plastic pipe and
fittings for use in residential and light commercial applications. Central has
expanded its CPVC product lines and manufacturing capacity in each of the last
several fiscal years. Central built a new manufacturing facility for
BlazeMaster(TM) CPVC pipe and fittings components that commenced production in
May 1997. Prior to this date, Central manufactured the BlazeMaster(TM) CPVC pipe
and fittings using principally Central owned machinery and equipment under a
production supply contract whereby Central used facilities and certain personnel
of an unaffiliated plastic manufacturer.
Steel Pipe
Central produces its proprietary line of steel sprinkler pipe through a
production supply contract in which Central procures the semi-processed steel
coils from domestic producers and provides it to the supplier for processing.
The production supply contract allows Central to control the majority of
production time and produce a full line of electric resistance welded steel pipe
for sprinkler systems. Central owns all raw materials, work in process, finished
goods, selected tooling and product approvals and listings. Approximately 80% of
the products are delivered directly to Central Sprinkler's contractor customer
base and 20% is sold through Central's distribution network to customers.
Grooved Fittings and Couplings
The Central Grooved Piping product line was expanded in each of the
last several fiscal years and is principally domestic with some product lines
from imports including threaded fittings. The grooved method provides a
cost-effective way to attach pipe ends together, primarily in two inch and above
sizing. The method is readily accepted in the fire protection, mechanical,
industrial, original equipment manufacturing and heating, ventilation and air
conditioning markets which provide Central with sales growth opportunities.
Other
Central also distributes a wide variety of other parts used in
sprinkler system installations. The majority of the other components include
fittings, control valves, electric switches, hangers and a variety of other
items. Central also develops and markets computer aided design ("CAD") systems
to architects, designers, and contractors for use in the design and installation
of sprinkler systems. Central also provides other CAD related services through
its SprinkCAD division.
Marketing and Customers
Central's products are marketed by its own sales and marketing staff.
The sales, marketing and distribution staff consists of approximately 220 people
and operates from fifteen domestic regional sales office/distribution centers
located near Boston, Atlanta, Miami, Dallas, Chicago, Los Angeles, San
Francisco, Seattle, Philadelphia, Baltimore, Salt Lake City, Greensboro,
Portland, Cleveland, Kansas City and from one distribution center in the United
Kingdom, one in Singapore and one in China. Unlike the majority of the industry,
which markets its products primarily through wholesale distributors, Central
sells most of its products directly to sprinkler installation contractors. This
places Central in direct contact with its customers and allows it to respond
effectively to customer demands and suggestions.
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Central's products are not marketed pursuant to long-term purchase
agreements, but are sold pursuant to individual purchase orders. Often,
Central's published sales terms sheet is the controlling purchase document.
Central is affected by seasonal factors and the weather as well as the
level of new construction activity, remodeling and retrofitting of older
properties in the commercial, industrial, residential and institutional real
estate markets. Central's sales tend to increase the most when there is a high
level of new construction activity in all such real estate markets and decline
when there is a slowdown in new construction activity. In addition, as a result
of relatively higher levels of new construction during warmer spring and summer
months, the demand for sprinkler system components tends to be greater during
the summer and fall than during other seasons.
Competition
Central competes on the basis of price, service, product quality,
design and performance characteristics. Central encounters competition worldwide
primarily from approximately six domestic manufacturers of sprinkler heads and
valves and a large number of manufacturers and/or distributors of other
sprinkler system component parts.
Research and Development
Research and development has contributed significantly to Central's
success over the years and will be a major factor in Central's ability to
continue its future growth. Central maintains a staff of approximately
fifty-five engineers and support staff who devote their time to research and
development activities. During the 1998 fiscal year, Central spent $6.4 million
on research and development compared to $7.4 million in fiscal 1997 and $5.5
million in fiscal 1996. Central's efforts in this area are primarily focused on
sprinkler head and valve design and development, and are directed toward both
new product development and further refinement of the quick response technology
designed for residential/life-safety purposes, extended coverage sprinklers,
enhancements to dry pendent and Optima sprinklers, and the specific application
sprinkler series.
Patents and Trademarks
Central holds a number of patents which it believes to be very
important to its business. These patents include the K-25 ESFR sprinkler head, a
patent on directional sprinklers for usage in attics under pitched roofs, hipped
roofs, dormers, interior cathedral ceilings and other pitched overhead interior
walls, and patents on various models of extended coverage sprinklers. In
addition, Central has also filed for patent protection on numerous other
products. Central has a number of trademarks on various product names and
selected product components.
Sources of Supply
Central uses a number of component parts in its manufacture of
sprinkler heads and valves. Materials, parts and components purchased by Central
for the production of its sprinkler heads, valves, ductile iron and steel pipe
products are generally available from a large number of suppliers. The vast
majority of items are manufactured specifically for Central's needs from molds,
dies and patterns owned by Central. Central has not experienced any shortages or
significant delays in delivery of these materials in the recent past, and
management believes that adequate supplies will continue to be available.
Central also has a non-exclusive supply contract with the B.F. Goodrich
Company to supply the resin that Central uses to produce BlazeMaster(TM) CPVC
plastic pipe and fittings. This supply contract, which expires in December 2002,
provides Central with a source of resin that is not generally available. Other
products manufactured by Central such as steel pipe, fittings and couplings and
other piping system components use raw materials that are available from a wide
variety of suppliers. Other component parts purchased by Central for
distribution purposes are generally available from a number of manufacturers.
Effect of Environmental Protection Regulations
Central is subject to compliance with various federal, state and local
regulations relating to protection of the environment. Central has not made nor
does it currently expect to make any material capital expenditures for
environmental protection and control equipment for its current operations.
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Employees
Central employs approximately 1,350 people, of whom approximately 950
are production or shipping employees, with the remainder serving in executive,
administrative or sales capacities. Central's sprinkler and valve production and
shipping employees are covered by a collective bargaining agreement with the
International Association of Machinists & Aerospace Workers that expires in
October 2000. All of the covered employees are located at Central's primary
manufacturing plant in Lansdale, Pennsylvania.
Foreign and Domestic Operations and Export Sales
Central operates in one business segment and engages in business
activity outside the United States. During fiscal 1998, 1997 and 1996, the
combined export and foreign sales represented approximately 11.4%, 13.6% and
12.5%, respectively, of Central's net sales. Included in foreign sales are the
sales of Central's United Kingdom subsidiary (Spraysafe). Spraysafe primarily
manufactures sprinkler heads and distributes them and other products in Europe
and other foreign countries. Significant financial information about Spraysafe's
operations consists of the following in thousands of dollars:
Year Ended October 31,
1998 1997 1996
---- ---- ----
Sales $15,099 $17,254 $16,807
Operating Income 996 1,264 1,390
Net Income 445 495 789
Total Assets 10,406 12,382 10,803
Total Liabilities 5,221 7,747 6,799
Properties
Central's primary manufacturing plant and executive offices are located
in Lansdale, Pennsylvania which is owned by Central. It is comprised of several
buildings which contain approximately 166 thousand square feet of floor space on
a parcel of about 7 acres. In fiscal 1996, Central purchased a building and land
for additional offices in Lansdale, Pennsylvania which contains approximately 14
thousand square feet. Central also owns a separate fire sprinkler component
manufacturing facility of approximately 15 thousand square feet in Pennsylvania.
Central's subsidiary, Castings, owns a piping systems components manufacturing
facility and foundry of approximately 155 thousand square feet on a 67-acre
parcel in Anniston, Alabama purchased in fiscal 1994. Central's Central CPVC
Corporation subsidiary owns a manufacturing plant located in Huntsville, Alabama
containing approximately 79 thousand square feet of floor space on a parcel of
approximately 15 acres. The plant houses offices, manufacturing operations and
inventory.
Central's fifteen domestic sales office/distribution centers are
located in major cities across the United States listed under "Marketing and
Customers." These facilities are leased by Central.
Central's United Kingdom subsidiary owns a manufacturing plant in the
United Kingdom that contains approximately 12 thousand square feet of floor
space on a parcel of about 1-acre. The United Kingdom subsidiary also leases a
distribution center of approximately 5 thousand square feet in the United
Kingdom under a lease that expires in 2000, leases a distribution center of
approximately 3 thousand square feet in Singapore under a lease that expires in
1999, and leases approximately 1 thousand square feet in Beijing, China.
Legal Proceedings
Central has been involved in seven class action lawsuits as well as an
administrative lawsuit filed on March 4,1998, by the United States Consumer
Product Safety Commission ("CPSC") related to Central's Omega(TM) sprinklers.
Central has reached a settlement of the Omega litigation with the CPSC as well
as a definitive settlement agreement with the plaintiffs in the Hart and Santa
Clara class actions. The court granted final approval to the settlement on
February 19, 1999. The agreements with the CPSC and Class Action litigants
generally provide for
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replacement of the Omega sprinkler heads with free replacement sprinklers and
parts, the establishment of a separate trust account for payments to the owners
of Omega(TM) sprinklers, administration of the recall program and a notification
program related to the Omega(TM) sprinkler product recall.
In accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies" and based on current information, Central revised
its estimate of the probable future cost of settling these matters and recorded
a $38.0 million ($26.6 million net of tax) charge in the third quarter of fiscal
1998 to reflect the total estimated additional future cost. In the fourth
quarter of fiscal 1997, a charge of $13.2 million ($9 million net of tax) was
recorded to cover the estimated future costs associated with the expansion of a
voluntary program which was initiated by Central to encourage the testing and
possible replacement of certain Omega(TM) fire sprinklers. A similar Omega(TM)
charge was recorded in fiscal 1996 of $3.8 million ($2.4 million net of tax).
These amounts were based on estimates of the number of Omega(TM) sprinklers, the
action plan Central believed was necessary to remediate these sprinklers and
various other assumptions.
Central discontinued the manufacturing and sale of Omega(TM) sprinklers
in July 1998. The Omega(TM) product line represented less than 3% of Central's
total sales in fiscal year 1997.
Central presently believes that the remaining reserves as of April 30,
1999 will be adequate to cover the total estimated future costs of the Omega(TM)
sprinkler matters. However, it is possible that additional litigation will
ensue. In the event additional information becomes available in the future which
may change management's estimates, future additional provisions may be
necessary.
Central and approximately thirty other local businesses were notified
by the Environmental Protection Agency ("EPA") in August 1991 that they may be a
potentially responsible party with respect to a groundwater contamination
problem in the vicinity of Central's primary manufacturing plant in Lansdale,
Pennsylvania. Central entered into an Administrative Order of Consent for
Remedial Investigation/Feasibility Study ("AOC") effective May 19, 1995 with the
EPA. Pursuant to the AOC, in 1996 Central performed certain tests on Central's
property to determine whether any land owned by Central could be a source of any
of the contamination at the site. Based upon such tests management believes that
Central's operations did not contribute to this contamination problem and
Central has no liability to clean-up this site. Should the EPA mandate Central's
participation in clean-up efforts it is estimated that such costs could
aggregate $2.7 million. Central has not accrued for such clean-up costs.
Central, in the normal course of business, is party to various other
claims and lawsuits with regard to its products and other matters. Management
believes that the ultimate resolution of these other matters will not have a
material impact on Central's financial position, results of operations or
liquidity.
INFORMATION REGARDING TYCO
Tyco International is a diversified manufacturing and service company
that, through its subsidiaries:
o designs, manufactures, installs and services fire detection
and suppression systems and installs, monitors and maintains
electronic security systems;
o designs, manufactures and distributes flow control products;
o designs, manufactures and distributes disposable medical
supplies and other specialty products, and conducts vehicle
auctions and related services; and
o designs, manufactures and distributes electrical and
electronic components and designs, manufactures, installs and
services undersea fiber optic cable communication systems.
Tyco International operates in more than 80 countries around the world
and has expected fiscal 1999 revenues in excess of $22 billion.
Tyco International's registered and principal executive offices are
located at the Gibbons Building, 10 Queen Street, Suite 301, Hamilton, HM 11
Bermuda. The executive offices of Tyco International (US) Inc., Tyco
International's principal United States subsidiary, are located at One Tyco
International Park, Exeter, New Hampshire 03833, and its telephone number is
(603) 778-9700.
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Parent and Merger Sub are both recently organized Delaware
corporations, the sole purpose of which is to perform the Merger Agreement and,
in the case of Merger Sub, consummate the Merger. The executive offices of
Parent and Merger Sub are located at One Tyco International Park, Exeter, New
Hampshire 03833, and the telephone number is (603) 778-9700. Neither Parent nor
Merger Sub has any material assets or has engaged in any activities except in
connection with the Merger Agreement.
MARKET PRICE FOR THE CENTRAL COMMON STOCK
The Common Stock is listed on the Nasdaq Stock Market under the symbol
"CNSP." On June 15, 1999, the last trading day preceding the public announcement
of the Merger Agreement, the high and low sales prices for the Common Stock as
reported by the Nasdaq Stock Market were $22 1/2 and $20 1/2 respectively. Set
forth below is the range of the high and the low sales prices for the Common
Stock as reported by the Nasdaq Stock Market during each fiscal quarter within
the two most recent fiscal years, and the period ended June 15, 1999:
Fiscal 1999:
-----------
High Low
---- ---
First Quarter....... $11 1/2 $7 13/16
Second Quarter...... 18 10
Third Quarter
(through June 15,
1999)............... 22 1/2 16 5/8
Fiscal 1998:
-----------
High Low
---- ---
First Quarter....... $20 $17
Second Quarter...... 20 1/2 9 15/16
Third Quarter....... 11 1/2 5 1/2
Fourth Quarter...... 12 15/16 6 1/16
Fiscal 1997:
-----------
High Low
---- ---
First Quarter....... $28 3/4 $17 1/4
Second Quarter...... 28 1/2 17 3/4
Third Quarter....... 28 1/4 17 1/2
Fourth Quarter...... 22 16 1/2
Central currently intends to retain future earnings, if any, for use in
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.
34
<PAGE>
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of June 30, 1999 by (1) each person
known by Central to own beneficially more than 5% of the outstanding Common
Stock, (2) each director of Central, (3) Central's Chief Executive Officer and
the most highly compensated executive officers of Central for the year ended
October 31, 1998 and (4) all executive officers and directors as a group. Unless
otherwise indicated, the shares listed in the table are owned directly by the
individual or entity, or by both the individual and the individual's spouse, and
the individual or entity has sole voting and investment power as to shares shown
or, in the case of the individual, such power is shared with the individual's
spouse.
<TABLE>
<CAPTION>
Amount and Nature
of
Beneficial
Ownership Percent of Class
--------------- ----------------
<S> <C> <C>
Over 5% Shareholders
Central Sprinkler Corporation Employee Stock
Ownership Plan (the "Central ESOP")(1).............................. 543,000 14.1%
451 North Cannon Avenue, Lansdale, PA 19446
Heartland Advisors, Inc. (2).......................................... 552,300 14.3%
790 N. Milwaukee Street, Milwaukee, WI 53202
Frontier Capital Management Company, Inc. (2)......................... 293,970 7.6%
99 Summer Street, 19th Floor, Boston, MA 02110
Dimensional Fund Advisors, Inc. (2)................................... 276,000 7.1%
1229 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Grace & White, Inc. (2)............................................... 210,150 5.4%
515 Madison Avenue, Suite 1700, New York, NY 10022
William J. Meyer (3).................................................. 211,023 5.4%
George G. Meyer (4).................................................. 393,941 9.5%
Stephen J. Meyer (5).................................................. 335,983 8.3%
451 North Cannon Avenue, Lansdale, PA 19446
Directors
E. Talbot Briddell (6)................................................ 154,375 3.9%
Winston J. Churchill (7).............................................. 16,200 *
Harold B. Hairston (8)................................................ 3,500 *
Barbara M. Henagan (7)................................................ 13,508 *
Corbin A. McNeill, Jr (8)............................................. 3,500 *
Thomas J. Sharbaugh (9)............................................... 13,498 *
Timothy J. Wagg (7)................................................... 14,000 *
Executive Officers
James R. Buchanan (10)................................................ 66,922 1.7%
Albert T. Sabol (11).................................................. 27,422 *
All executive officers and directors as a group (18 persons)(12) 1,323,016 28.2%
</TABLE>
35
<PAGE>
- - - -------
*Less than 1%
(1) The amount shown excludes 205,000 shares that have been allocated to
Central ESOP participants and will be voted by such participants
pursuant to the Central ESOP provisions. Shares that are not voted by
such participants, along with the remaining unallocated shares, will be
voted by the Central ESOP trustees pursuant to the provisions of the
Central ESOP, which provides that such shares shall be voted in
accordance with the directions received with respect to the plurality
of the allocated shares. Messrs Briddell, Sabol, and Mr. George Meyer
are three trustees of the Central ESOP and each of them disclaims
beneficial ownership of the shares owned of record by the Central ESOP.
(2) As reported on Schedules 13G filed with the Securities and Exchange
Commission on: (i) June 7, 1999 in the case of Heartland Advisers, Inc.
(ii) February 12, 1999 in the case of Frontier Capital Management,
Inc., (iii) February 11, 1999 in the case of Dimensional Fund Advisors,
Inc. and (iv) February 9, 1999 in the case of Grace & White, Inc.
Heartland Advisors, Inc. reported sole dispositive and voting power
with respect to 552,300 shares and sole voting power over 515,200
shares. Frontier Capital Management Company, Inc. reported sole
dispositive and voting power over 293,970 shares. Dimensional Fund
Advisors, Inc. has informed Central that as of December 31, 1998, it
had sole voting and dispositive power over 276,000 shares. Grace &
White, Inc. reported sole dispositive and voting power over 31,500
shares and sole dispositive power over 210,150 shares.
(3) The amount shown includes (i) 70,000 shares that may be acquired under
currently exercisable options and (ii) 3,448 shares held for his
account in the Central ESOP.
(4) The amount shown includes (i) 265,750 shares that may be acquired under
currently exercisable options and (ii) 4,953 shares held for his
account in the Central ESOP. The amount shown does not include 11,250
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
if any, between the exercise price of such stock options and the amount
of the Merger Consideration, multiplied by the number of shares for
which such stock option was exercisable.
(5) The amount shown includes (i) 193,125 shares that may be acquired under
currently exercisable options and (ii) 4,920 shares held for his
account in the Central ESOP. The amount shown does not include 9,375
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
if any, between the exercise price of such stock options and the amount
of the Merger Consideration, multiplied by the number of shares for
which such stock option was exercisable.
(6) The amount shown includes 154,375 shares that may be acquired under
currently exercisable options. The amount shown does not include 13,125
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
if any, between the exercise price of such stock options and the amount
of the Merger Consideration multiplied by the number of shares for
which such stock option was exercisable.
(7) The amount shown includes 13,000 shares that may be acquired under
currently exercisable options.
(8) The amount shown includes 3,500 shares that may be acquired under
currently exercisable options.
(9) The amount shown includes (i) 13,000 shares that may be acquired under
currently exercisable options and (ii) 125 shares that are owned by Mr.
Sharbaugh's minor daughter.
(10) The amount shown includes (i) 19,375 shares that may be acquired under
currently exercisable options and (ii) 4,361 shares held for his
account in the Central ESOP. The amount shown does not include 10,625
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
36
<PAGE>
if any, between the exercise price of such stock options and the amount
of the Merger Consideration multiplied by the number of shares for
which such stock option was exercisable.
(11) The amount shown includes (i) 16,875 shares that may be acquired under
currently exercisable options and (ii) 3,722 shares held for his
account in the Central ESOP. The amount shown does not include 10,625
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
if any, between the exercise price of such stock options and the amount
of the Merger Consideration multiplied by the number of shares for
which such stock option was exercisable.
(12) The amount shown includes (i) 823,375 shares that may be acquired under
currently exercisable options and (ii) 33,473 shares held for their
account in the Central ESOP. The amount shown does not include 91,625
shares that may be acquired under options that are not currently
exercisable, but which, upon consummation of the Merger, will be
entitled to receive cash in an amount equal to the positive difference,
if any, between the exercise price of such stock options and the amount
of the Merger Consideration multiplied by the number of shares for
which such stock option was exercisable.
INDEPENDENT ACCOUNTANTS
Representatives of Arthur Andersen LLP, Central's present independent
accountants, are expected to be present at the Meeting, where they will be
available to respond to appropriate questions and have the opportunity to make a
statement if they so desire.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by law, Central files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information contain additional information about Central. You can inspect and
copy these materials at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. For further information concerning the
Commission's public reference rooms, you may call the Commission at
1-800-SEC-0330. Some of this information may also be accessed on the World Wide
Web through the Commission's Internet address at "http://www.sec.gov."
The Commission allows Central to "incorporate by reference" information
into this Proxy Statement, which means that Central can disclose important
information by referring you to another document filed separately with the
Commission. Information incorporated by reference is considered part of this
Proxy Statement, except to the extent that the information is superseded by
information in this Proxy Statement. This Proxy Statement incorporates by
reference the information contained in the following documents previously filed
by Central with the Commission (Commission file number 0-13940):
(a) Central's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998;
(b) Central's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 30, 1999 filed on June 11, 1999;
(c) Central's Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 1999 filed on March 17, 1999; and
(d) Central's Current Report on Form 8-K filed June 30, 1999.
Central also incorporates by reference the information contained in all
other documents Central files with the Commission after the date of this Proxy
Statement and before the Meeting. The information contained in any such document
will be considered part of this Proxy Statement from the date the document is
filed.
If you are a shareholder of Central and would like to receive a copy of
any document incorporated by reference into this Proxy Statement (which will not
include any of the exhibits to the document other than those exhibits that are
themselves specifically incorporated by reference into this Proxy Statement),
you should call or
37
<PAGE>
write to [_______________________________], telephone number [____________]. In
order to ensure timely delivery of the documents you request, you should make
your request by [________], 1999.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN (OR INCORPORATED
BY REFERENCE INTO) THIS PROXY STATEMENT. CENTRAL HAS NOT AUTHORIZED ANYONE TO
GIVE ANY INFORMATION DIFFERENT FROM THE INFORMATION CONTAINED IN (OR
INCORPORATED BY REFERENCE INTO) THIS PROXY STATEMENT. THIS PROXY STATEMENT IS
DATED [__________], 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY LATER DATE, AND THE MAILING OF
THIS PROXY STATEMENT TO SHAREHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
38
<PAGE>
OTHER BUSINESS
Central knows of no other matter to be presented at the Meeting.
However, if other matters should properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy with
respect to such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ E. Talbot Briddell
E. Talbot Briddell
Chairman of the Board and Chief Executive Officer
Lansdale, Pennsylvania
[_______], 1999
39
<PAGE>
CENTRAL SPRINKLER CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints
[______________________] and [__________________], or any of them acting
individually, as the proxy of the undersigned, with full power of substitution,
to vote, as indicated below and in their discretion upon such other matters as
may properly come before the meeting, all shares which the undersigned would be
entitled to vote at the Special Meeting of Central to be held at [____] A.M.,
August 25, 1999, at [____________________], and at any postponement or
adjournment thereof.
1. The approval of the Agreement and Plan of Merger, dated as of June
15, 1999 (the "Merger Agreement"), by and among Central, Tyco Acquisition Corp.
VI ("Parent"), a wholly-owned subsidiary of Tyco International Ltd. ("Tyco
International"), Alpha Acquisition Corp., a wholly-owned subsidiary of Parent
("Merger Sub"; and together with Parent, collectively, "Tyco"), and Tyco
International as guarantor of the obligations of Tyco. Pursuant to the Merger
Agreement, Merger Sub will be merged into Central (the "Merger"), with Central
continuing as the surviving corporation (the "Surviving Corporation").
[ ]For [ ]Against [ ] Abstain
2. In accordance with their best judgement, the Proxies are authorized
to transact and vote upon such other business as may properly come before the
Special Meeting and any postponement or adjournment thereof.
Please date and sign your Proxy on the reverse side and return it
promptly.
40
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF THE MERGER
AND THE MERGER AGREEMENT DESCRIBED ON THE REVERSE SIDE HEREOF. THIS PROXY ALSO
DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
Date:____________________________
_________________________________
Signature of Shareholder
_________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY
EXACTLY AS NAME(S) APPEAR ON YOUR
STOCK CERTIFICATE. WHEN SIGNING
AS ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE ADD YOUR TITLE
AS SUCH, AND IF SIGNER IS A
CORPORATION, PLEASE SIGN WITH
FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER OR OFFICERS
AND AFFIX THE CORPORATE SEAL.
WHERE STOCK IS ISSUED IN THE NAME
OF TWO (2) OR MORE PERSONS, ALL
SUCH PERSONS SHOULD SIGN.
41
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO ACQUISITION CORP. VI
ALPHA ACQUISITION CORP.
and
CENTRAL SPRINKLER CORPORATION
including
GUARANTEE
of
TYCO INTERNATIONAL LTD.
Dated as of June 15, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
<S> <C> <C>
THE MERGER.................................................. 1
SECTION 1.01 The Merger............................................................................... 1
SECTION 1.02 Effective Time........................................................................... 2
SECTION 1.03 Effect of the Merger..................................................................... 2
SECTION 1.04 Articles of Incorporation; Bylaws........................................................ 2
SECTION 1.05 Directors and Officers................................................................... 2
SECTION 1.06 Effect on Securities, Etc................................................................ 3
SECTION 1.07 Dissenting Shares........................................................................ 4
SECTION 1.08 Surrender of Shares...................................................................... 4
SECTION 1.09 Lost, Stolen or Destroyed Certificates................................................... 6
SECTION 1.10 Taking of Necessary Action; Further Action............................................... 6
SECTION 1.11 Material Adverse Effect.................................................................. 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 7
SECTION 2.01 Organization and Qualification; Subsidiaries............................................. 7
SECTION 2.02 Articles of Incorporation and Bylaws..................................................... 7
SECTION 2.03 Capitalization........................................................................... 8
SECTION 2.04 Authority Relative to this Agreement..................................................... 9
SECTION 2.05 No Conflict; Required Filings and Consents............................................... 9
SECTION 2.06 Compliance; Permits...................................................................... 10
SECTION 2.07 SEC Filings; Financial Statements........................................................ 11
SECTION 2.08 Absence of Certain Changes or Events..................................................... 11
SECTION 2.09 No Undisclosed Liabilities............................................................... 12
SECTION 2.10 Absence of Litigation.................................................................... 12
SECTION 2.11 Employee Benefit Plans; Employment Agreements............................................ 12
SECTION 2.12 Labor Matters............................................................................ 16
SECTION 2.13 Proxy Statement.......................................................................... 16
SECTION 2.14 Restrictions on Business Activities...................................................... 16
SECTION 2.15 Title to Property........................................................................ 17
SECTION 2.16 Taxes.................................................................................... 17
SECTION 2.17 Environmental Matters.................................................................... 18
SECTION 2.18 Brokers.................................................................................. 20
SECTION 2.19 Intellectual Property.................................................................... 20
SECTION 2.20 Interested Party Transactions............................................................ 22
SECTION 2.21 Insurance................................................................................ 22
SECTION 2.22 Product Liability and Recalls............................................................ 22
SECTION 2.23 Opinion of Financial Advisor............................................................. 22
</TABLE>
-i-
<PAGE>
ARTICLE III
<TABLE>
<CAPTION>
<S> <C> <C>
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................... 23
SECTION 3.01 Organization and Good Standing........................................................... 23
SECTION 3.02 Authorization; Binding Agreement......................................................... 23
SECTION 3.03 Governmental Approvals................................................................... 23
SECTION 3.04 No Violations............................................................................ 24
SECTION 3.05 Disclosure Documents..................................................................... 24
SECTION 3.06 Finders and Investment Bankers........................................................... 24
SECTION 3.07 Financing Arrangements................................................................... 24
SECTION 3.08 No Prior Activities...................................................................... 25
SECTION 3.09 PBCL Section 2538........................................................................ 25
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................... 25
SECTION 4.01 Conduct of Business by the Company Pending the Merger.................................... 25
SECTION 4.02 No Solicitation.......................................................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS............................................ 29
SECTION 5.01 Proxy Statement.......................................................................... 29
SECTION 5.02 Company Shareholders Meeting............................................................. 29
SECTION 5.03 Access to Information; Confidentiality................................................... 30
SECTION 5.04 Consents; Approvals...................................................................... 30
SECTION 5.05 Indemnification and Insurance............................................................ 30
SECTION 5.06 Notification of Certain Matters.......................................................... 32
SECTION 5.07 Further Action........................................................................... 32
SECTION 5.08 Public Announcements..................................................................... 32
SECTION 5.09 Conveyance Taxes......................................................................... 33
SECTION 5.10 Option Plans and Benefits, etc........................................................... 33
SECTION 5.11 Accountant's Letter...................................................................... 34
SECTION 5.12 Compliance with State Property Transfer Statutes......................................... 34
SECTION 5.13 Consent Agreement and CPSC Order......................................................... 34
SECTION 5.14 Compliance with Requirements for Federal Government
Contractors................................................................................... 34
ARTICLE VI
CONDITIONS TO THE MERGER........................................... 35
SECTION 6.01 Conditions to Obligation of Each Party to Effect the Merger.............................. 35
SECTION 6.02 Additional Conditions to Obligations of Parent and Merger
Sub........................................................................................... 35
-ii-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.03 Additional Conditions to Obligation of the Company....................................... 36
ARTICLE VII
TERMINATION................................................. 37
SECTION 7.01 Termination.............................................................................. 37
SECTION 7.02 Effect of Termination.................................................................... 39
SECTION 7.03 Fees and Expenses........................................................................ 39
ARTICLE VIII
GENERAL PROVISIONS.............................................. 41
SECTION 8.01 Effectiveness of Representations, Warranties and Agreements.............................. 41
SECTION 8.02 Notices.................................................................................. 41
SECTION 8.03 Certain Definitions...................................................................... 43
SECTION 8.04 Amendment................................................................................ 43
SECTION 8.05 Waiver................................................................................... 44
SECTION 8.06 Headings................................................................................. 44
SECTION 8.07 Severability............................................................................. 44
SECTION 8.08 Entire Agreement......................................................................... 44
SECTION 8.09 Assignment............................................................................... 44
SECTION 8.10 Parties in Interest...................................................................... 45
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.................................... 45
SECTION 8.12 Governing Law; Jurisdiction.............................................................. 45
SECTION 8.13 Counterparts............................................................................. 45
SECTION 8.14 WAIVER OF JURY TRIAL..................................................................... 45
GUARANTEE...................................................47
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of June 15, 1999 (this
"Agreement"), among Tyco Acquisition Corp. VI ("Parent"), a Delaware corporation
and an indirect, wholly-owned subsidiary of Tyco International Ltd., a Bermuda
company ("Guarantor"), Alpha Acquisition Corp., a Pennsylvania corporation and a
direct, wholly-owned subsidiary of Parent ("Merger Sub"), and Central Sprinkler
Corporation, a Pennsylvania corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent and the Company
have each approved the acquisition of the Company by Parent through the merger
(the "Merger") of Merger Sub with and into the Company, upon the terms and
subject to the conditions set forth herein and in accordance with the applicable
provisions of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania (the "PBCL"); and
WHEREAS, pursuant to the Merger, each outstanding share (each
a "Share") of the Company's Common Stock, $.01 par value (the "Company Common
Stock"), shall be converted into the right to receive the Merger Consideration
(as defined in Section 1.06(a)), upon the terms and subject to the conditions
set forth herein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition to the Company's willingness to enter into this
Agreement, Guarantor has agreed fully and unconditionally to guarantee the
representations, warranties, covenants, agreements and other obligations of
Parent and Merger Sub in this Agreement; and
WHEREAS, the Board of Directors of the Company has approved
and resolved to recommend approval of the Merger to the holders of Shares and
has determined that the consideration to be paid for each Share in the Merger is
fair to and in the best interest of the holders of Shares.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
----------
SECTION 1.01 The Merger. (a) At the Effective Time (as defined
in Section 1.02), and subject to and upon the terms and conditions of this
Agreement and the PBCL, Merger Sub shall be merged with and into the Company,
the separate corporate existence of
<PAGE>
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation").
SECTION 1.02 Effective Time. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 7.01, as promptly as practicable (and in any event
within two business days) after the satisfaction or waiver of the conditions set
forth in Article VI, the parties hereto shall cause the Merger to be consummated
by filing articles of merger as contemplated by the PBCL (the "Articles of
Merger"), together with any required related certificates, with the Corporation
Bureau, Department of State of the Commonwealth of Pennsylvania, in such form as
required by, and executed in accordance with the relevant provisions of, the
PBCL. The Merger shall become effective at the time of such filing or at such
later time, which will be as soon as reasonably practicable, specified in the
Articles of Merger (the "Effective Time"). Prior to such filing, a closing shall
be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, NY, unless another time or place is agreed to in writing by the
parties hereto, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VI.
SECTION 1.03 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Articles of
Merger and the applicable provisions of the PBCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.04 Articles of Incorporation; Bylaws. (a) Articles
of Incorporation. Except as provided in Section 5.05(a) hereof, unless otherwise
determined by Parent prior to the Effective Time, at the Effective Time, the
Restated Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by the PBCL and such
Articles of Incorporation; provided, however, that Article 5 of the Surviving
Corporation's Articles of Incorporation shall be amended and restated in the
Merger to read in its entirety as follows: "5. The aggregate number of shares
authorized is 1,000 shares of common stock, par value $0.01 per share."
(b) Bylaws. Except as provided in Section 5.05(a) hereof, the
Bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by the PBCL, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
SECTION 1.05 Directors and Officers. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
the Company immediately prior to the
-2-
<PAGE>
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.06 Effect on Securities, Etc. At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Merger
Sub, the Company or the holders of any securities of the Company:
(a) Conversion of Securities. Each Share issued and
outstanding immediately prior to the Effective Time (excluding any Shares to be
canceled pursuant to Section 1.06(b) and any Dissenting Shares (as defined in
Section 1.07)) shall be converted, subject to Section 1.06(e), into the right to
receive $30.00 (the "Merger Consideration").
(b) Cancellation. Each Share held in the treasury of the
Company and each Share owned by Guarantor, Parent, Merger Sub or any direct or
indirect, wholly-owned subsidiary of the Company or Guarantor immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(c) Stock Options. Each option outstanding at the Effective
Time to purchase shares of Company Common Stock (a "Stock Option") under the
Company's 1986 Incentive Stock Option Plan, 1988 Non-Qualified Stock Option
Plan, 1993 Non-Employee Director Stock Option Plan, and Central Sprinkler
Corporation 1996 Equity Compensation Plan, each as amended through the date
hereof (collectively, the "Company Stock Option Plans"), whether or not then
vested or exercisable, shall constitute the right to receive an amount in cash
equal to the positive difference, if any, between the exercise price of the
Stock Option and the amount of the Merger Consideration multiplied by the number
of Shares for which the Stock Option was exercisable immediately prior to the
Effective Time. Any Stock Option the exercise price of which as of the Effective
Time equals or exceeds the amount of the Merger Consideration shall be cancelled
and be of no further force and effect as of the Effective Time. Each of the
Company and Parent shall take all reasonable actions necessary to provide that,
upon consummation of the Merger, all Stock Options outstanding immediately prior
to the Effective Time shall be converted into the right to receive cash or be
cancelled as aforesaid.
(d) Capital Stock of Merger Sub. Each share of common stock,
$0.01 par value per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock, $0.01 par
value, of the Surviving Corporation.
(e) Adjustments to the Merger Consideration. The Merger
Consideration shall be appropriately adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Shares), reorganization,
recapitalization, split up, combination or exchange of shares or other like
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event with respect to the Shares occurring after the date hereof and prior to
the Effective Time.
SECTION 1.07 Dissenting Shares. (a) Notwithstanding any
provision of this Agreement to the contrary, any Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has demanded
and perfected his demand for appraisal of his Shares in accordance with the
PBCL, and as of the Effective Time has neither effectively withdrawn nor lost
his right to such appraisal ("Dissenting Shares"), shall not be converted into
or represent a right to receive the Merger Consideration pursuant to Section
1.06(a) hereof, but the holder thereof shall be entitled to only such rights as
are granted by the PBCL.
(b) Notwithstanding the provisions of Section 1.07(a) hereof,
if any holder of Shares who demands appraisal of his Shares under the PBCL shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then as of the Effective Time or the occurrence of such event,
whichever occurs later, such holder's Shares shall automatically be converted
into and represent only the right to receive cash as provided in Section 1.06(a)
hereof, without interest thereon, upon surrender of the certificate or
certificates representing such Shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands and any other instruments served pursuant to the
PBCL received by the Company after the date hereof and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the PBCL. The Company shall not voluntarily make any payment with respect
to any demands for appraisal and shall not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
SECTION 1.08 Surrender of Shares. (a) Prior to the Effective
Time, Parent shall appoint ChaseMellon Shareholders LLC or such other commercial
bank or trust company designated by Parent and reasonably acceptable to the
Company to act as exchange agent hereunder (the "Exchange Agent") for the
payment of the Merger Consideration upon surrender of certificates representing
the Shares. All of the fees and expenses of the Exchange Agent shall be borne by
the Surviving Corporation.
(b) Parent shall cause the Surviving Corporation to provide
the Exchange Agent with cash in amounts necessary to pay for all of the Shares
pursuant to Section 1.08(c) hereof when and as such amounts are needed by the
Exchange Agent.
(c) Promptly following the Effective Time, the Surviving
Corporation shall instruct the Exchange Agent to mail to each holder of record
of a certificate representing Shares canceled upon the Merger pursuant to
Section 1.06(a) hereof, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates shall
pass, only upon delivery of the certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions
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for use in effecting the surrender of the certificates. Each holder of a
certificate or certificates representing Shares canceled upon the Merger
pursuant to Section 1.06(a) hereof may thereafter surrender such certificate or
certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such certificate or certificates on such holder's behalf for a
period ending one year after the Effective Time. Upon the surrender of
certificates representing the Shares, Parent shall cause the Exchange Agent to
pay the holder of such certificates in exchange therefor cash in an amount equal
to the Merger Consideration multiplied by the number of Shares represented by
such certificate. Until so surrendered, each such certificate (other than
certificates representing Dissenting Shares) shall represent solely the right to
receive the aggregate Merger Consideration relating thereto.
(d) If payment of cash in respect of canceled Shares is to be
made to a person other than the person in whose name a surrendered certificate
is registered, it shall be a condition to such payment that the certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of such payment in a name other than
that of the registered holder of the certificate or instrument surrendered or
shall have established to the satisfaction of Parent or the Exchange Agent that
such tax either has been paid or is not payable.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed, and no transfer of Shares shall be made thereafter,
other than transfers of Shares that have occurred prior to the Effective Time.
In the event that, after the Effective Time, certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in Section 1.06(a).
(f) The Merger Consideration paid in the Merger shall be net
to the holder of Shares in cash, and without interest thereon subject to
reduction only for any applicable United States federal or other back-up
withholding or stock transfer taxes payable by such holder.
(g) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a certificate representing Shares (other
than certificates representing Dissenting Shares and certificates representing
Shares held directly or indirectly by Guarantor, Parent or in the treasury of
the Company) may surrender such certificate to the Surviving Corporation and
(subject to any applicable abandoned property, escheat or similar law) receive
in consideration therefor the aggregate Merger Consideration relating thereto,
without any interest thereon.
(h) None of the Company, Parent, Guarantor, the Surviving
Corporation or the Exchange Agent shall be liable to any holder of Shares for
any cash delivered to a public official pursuant to any abandoned property,
escheat or similar law, rule, regulation, statute, order, judgment or decree.
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SECTION 1.09 Lost, Stolen or Destroyed Certificates. In the
event any certificates representing shares of Company Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall make such payment in
exchange for such lost, stolen or destroyed certificates upon the making of an
affidavit of that fact by the holder thereof; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Parent, Guarantor, the Surviving Corporation, or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
SECTION 1.10 Taking of Necessary Action; Further Action. Each
of Parent, Merger Sub and the Company will take all such reasonable and lawful
actions as may be necessary or appropriate in order to effectuate the Merger and
the other transactions contemplated by this Agreement in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
such further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Merger Sub, the officers and directors of the Company and Merger
Sub immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
SECTION 1.11 Material Adverse Effect. (a) When used in
connection with the Company or any of its subsidiaries or Guarantor or any of
its subsidiaries, as the case may be, the term "Material Adverse Effect" means
any change, effect or circumstance that is or would reasonably be expected to be
materially adverse to the business, assets (including intangible assets),
financial condition, results of operations, or prospects of the Company and its
subsidiaries or Guarantor and its subsidiaries, as the case may be, in each case
taken as a whole; provided, however, that effects of changes that are applicable
to or arise on account of (A) any changes in economic, regulatory, or political
conditions generally, (B) the United States securities markets, (C) this
Agreement or the transactions contemplated by this Agreement, (D) the effect of
the public announcement of the transactions contemplated hereby, including,
without limitation, any effect on current or prospective customers or employees
of the Company, or (E) with respect to the Company, any changes affecting the
fire protection business generally, shall be excluded from the definition of
"Material Adverse Effect" and from any determination as to whether a Material
Adverse Effect has occurred or may occur. For purposes of this Agreement, the
term "prospects" shall mean, at any time, results of future operations which are
reasonably foreseeable based upon the facts and circumstances in existence at
such time.
(b) The failure of a representation or warranty to be true and
correct, either individually or together with the failure of other
representations or warranties to be true and correct, shall be deemed to have a
Material Adverse Effect if (x) the business, assets (including intangible
assets), financial condition, results of operations, or prospects of the Company
and its subsidiaries or Guarantor and its subsidiaries, as the case may be, in
each case taken as a whole, are or would reasonably be expected to be materially
worse than if
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such representation or warranty had been true and correct, (y) in the case of
the Company, such representation or warranty materially misstates the
capitalization of the Company and/or its subsidiaries or (z) the failure of such
representation or warranty to be true and correct materially and adversely
affects the ability of the Company or Parent, as the case may be, to timely
consummate the transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub as follows:
SECTION 2.01 Organization and Qualification; Subsidiaries.
Each of the Company 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 the requisite corporate power and authority necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power or
authority would not reasonably be expected to have a Material Adverse Effect.
Each of the Company and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not reasonably be expected to have a Material Adverse
Effect. A true and complete list of all of the Company's "significant"
subsidiaries, as defined in Regulation S-X, is included as an exhibit to the
Company's 1998 Annual Report on Form 10-K (the "Company Significant
Subsidiaries"). The Company has furnished to Parent a list of all subsidiaries
of the Company together with the jurisdiction of incorporation of each such
subsidiary and the percentage of each such subsidiary's outstanding capital
stock owned by the Company or another subsidiary of the Company in Section 2.01
of the written disclosure schedule previously delivered by the Company to Parent
(the "Company Disclosure Schedule"). Except as set forth in Section 2.01 of the
Company Disclosure Schedule or the Company SEC Reports (as defined in Section
2.07 below), the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which interest the Company has
invested (and currently owns) or is required to invest $100,000 or more,
excluding securities in any publicly-traded company held for investment by the
Company and comprising less than five percent of the outstanding stock of such
company.
SECTION 2.02 Articles of Incorporation and Bylaws. The Company
has heretofore made available to Parent a complete and correct copy of its
Restated Articles of
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Incorporation and Bylaws as amended to date (the "Company Charter Documents"),
and will make available to Parent, as promptly as practicable, the Articles of
Incorporation and Bylaws (or equivalent organizational documents) of each of its
subsidiaries (the "Subsidiary Documents"). Such Company Charter Documents and
Subsidiary Documents are in full force and effect. Neither the Company nor any
of the Company Significant Subsidiaries is in violation of any of the provisions
of its Articles of Incorporation or Bylaws or equivalent organizational
documents, except for violations of the documents which do not and are not
reasonably likely to materially interfere with the operations of such entity.
Neither the Company nor any of its subsidiaries is in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents, except for violations of such documents which,
individually or in the aggregate, do not and would not reasonably be expected to
have a Material Adverse Effect.
SECTION 2.03 Capitalization. The authorized capital stock of
the Company consists of 15,000,000 shares of Company Common Stock and 2,000
shares of Redeemable Preferred Stock, $.01 par value ("Company Preferred
Stock"). As of June 11, 1999, 3,851,637 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable (excluding shares which are issued but not outstanding all of
which are not entitled to vote), (iii) no shares of Company Common Stock were
held by subsidiaries of the Company, (iv) 1,014,000 shares of Company Common
Stock were reserved for existing grants and 7,000 shares were reserved for
future grants pursuant to the Company Stock Option Plans, and (v) no shares of
Company Preferred Stock were issued and outstanding. Except as set forth in
Section 2.03 of the Company Disclosure Schedule, no change in such
capitalization has occurred since June 11, 1999, except for changes resulting
from the exercise of Stock Options. Except as set forth in Section 2.01, this
Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of the Company
Disclosure Schedule or the Company SEC Reports, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
binding on the Company or any of its subsidiaries relating to the issued or
unissued capital stock of the Company or any of its subsidiaries or obligating
the Company or any of its subsidiaries to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any of its subsidiaries.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully-paid
and nonassessable. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of bank obligations of
subsidiaries entered into in the ordinary course of business. Except as set
forth in Sections 2.01 and 2.03 of the Company Disclosure Schedule, all of the
outstanding shares of capital stock (other than directors' qualifying shares) of
each of the Company's subsidiaries are duly authorized, validly issued,
fully-paid and nonassessable, and
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all such shares (other than directors' qualifying shares and a de minimis number
of shares owned by employees of such subsidiaries) are owned by the Company or
another subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in the Company's voting rights, charges or
other encumbrances of any nature whatsoever.
SECTION 2.04 Authority Relative to this Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval of the Merger and this Agreement by the
Company's shareholders in accordance with the PBCL and the Company's Charter
Documents and the filing of the appropriate documents with respect to the Merger
in accordance with the PBCL). As of the date hereof, the Board of Directors of
the Company has determined that it is advisable and in the best interest of the
Company's shareholders for the Company to enter into this Agreement and to
consummate the Merger upon the terms and subject to the conditions of this
Agreement and has adopted resolutions so that Subchapters 25F and Section 2538
of the PBCL are not applicable to Parent or any of its affiliates or to the
Merger or the other transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery hereof by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company.
SECTION 2.05 No Conflict; Required Filings and Consents. (a)
Section 2.05(a) of the Company Disclosure Schedule includes, as of the date
hereof, a list of (i) other than intercompany agreements, all loan agreements,
indentures, mortgages, pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, guaranties, standby letters of
credit, equipment leases or lease purchase agreements, each in an amount equal
to or exceeding $250,000 to which the Company or any of its subsidiaries is a
party or by which any of them is bound; (ii) all contracts, agreements,
commitments or other understandings or arrangements 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 are bound or affected, but excluding contracts,
agreements, commitments or other understandings or arrangements entered into in
the ordinary course of business and involving, in the case of any such contact,
agreement, commitment, or other understanding or arrangement, individual
payments or receipts by the Company or any of its subsidiaries of less than
$250,000 over the term of such contract, commitment, agreement, or other
understanding or arrangement; and (iii) all agreements which are required to be
filed as "material contracts" with the SEC pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, and the SEC's rules and regulations
thereunder (the "Exchange Act") but have not been so filed with the SEC.
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(b) Except as set forth in Section 2.05(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Restated Articles of Incorporation or Bylaws of the
Company, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair the Company's or any of
its subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
(including a right to purchase) any of the properties or assets of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except, in the case of clauses (ii) or (iii),
for any such conflicts, violations, breaches, defaults or other occurrences that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(c) Except as set forth in Section 2.05(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each, a "Governmental Authority"), except (i) for applicable requirements, if
any, of the Exchange Act, state securities laws ("Blue Sky Laws"), the pre-
merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder (the "HSR
Act"), filings and consents under any applicable non-U.S. laws intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade ("Non-U.S. Monopoly Laws"), filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement, and
the filing and recordation of appropriate merger or other documents as required
by the PBCL, (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Merger, or otherwise prevent or
materially delay the Company from performing its material obligations under this
Agreement, or would not otherwise reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, or (iii) as to which any necessary
consents, approvals, authorizations, permits, filings or notifications have
heretofore been obtained or filed, as the case may be, by the Company.
SECTION 2.06 Compliance; Permits. (a) Except as disclosed in
Section 2.06(a) of the Company Disclosure Schedule or the Company SEC Reports,
neither the Company nor any of its subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its
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subsidiaries or by which its or any of their respective properties is bound or
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except in the case of clauses (i) and (ii) for any such conflicts,
defaults or violations which would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.06(b) of the Company
Disclosure Schedule or the Company SEC Reports, the Company and its subsidiaries
hold all permits, licenses, easements, variances, exemptions, consents,
certificates, orders and approvals from governmental authorities which are
material to the operation of the business of the Company and its subsidiaries
taken as a whole as it is now being conducted (collectively, the "Company
Permits"), except where the failure to hold such Company Permits would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. The Company and its subsidiaries are in compliance with the
terms of the Company Permits, except as described in the Company SEC Reports or
where the failure to so comply would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 2.07 SEC Filings; Financial Statements. (a) The
Company has filed all forms, reports and documents required to be filed with the
SEC since October 31, 1996 (all forms, reports and documents filed by the
Company with the SEC since October 31, 1996 are referred to herein as the
"Company SEC Reports"). Except as disclosed in Section 2.07 of the Company
Disclosure Schedule, the Company SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company SEC Reports
was prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Company SEC
Reports), and each fairly presents in all material respects the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount.
SECTION 2.08 Absence of Certain Changes or Events. Except as
set forth in Section 2.08 of the Company Disclosure Schedule or the Company SEC
Reports, since April 30, 1999, the Company has conducted its business in the
ordinary course and there has not
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occurred: (i) any changes, effects or circumstances constituting, individually
or in the aggregate, a Material Adverse Effect; (ii) any amendments or changes
in the Restated Articles of Incorporation or Bylaws of the Company; (iii) any
damage to, destruction or loss of any asset of the Company (whether or not
covered by insurance) that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; (iv) any material change by the
Company in its accounting methods, principles or practices (other than changes
required by GAAP after the date of this Agreement; or (v) other than in the
ordinary course of business, any sale of a material amount of assets of the
Company.
SECTION 2.09 No Undisclosed Liabilities. Except as set forth
in Section 2.09 of the Company Disclosure Schedule or the Company SEC Reports,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in the Company's unaudited balance sheet (including any
related notes thereto) as of April 30, 1999 included in the Company's Quarterly
Report of Form 10-Q for the quarter ended April 30, 1999 (the "1999 Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 1999 Balance Sheet, (c) incurred since April 30,
1999 in the ordinary course of business, (d) incurred in connection with this
Agreement or the Merger or the other transactions contemplated hereby, or (e)
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 2.10 Absence of Litigation. Except as set forth in
Section 2.10 and Section 2.19(c) of the Company Disclosure Schedule or the
Company SEC Reports or arising out of transactions contemplated by this
Agreement, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, overtly threatened against the
Company or any of its subsidiaries, or any properties or rights of the Company
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.11 Employee Benefit Plans; Employment Agreements.
(a) Section 2.11(a) of the Company Disclosure Schedule lists all employee
pension benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare benefit
plans (as defined in Section 3(1) of ERISA), and all other bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements (including those which contain change of control provisions or
pending change of control provisions), and any employment, executive
compensation or severance agreements (including those which contain change of
control provisions or pending change of control provisions), written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer, director or consultant (or any of
their beneficiaries) of the Company or any other entity (whether or not
incorporated) which is a member of a controlled group including the Company or
which is under common control with the Company within the meaning of Sections
414(b), (c), (m) or (o) of the Code or Section 4001(a) (14) or (b) of ERISA (a
"Company ERISA Affiliate"), or
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any subsidiary of the Company, as well as each plan with respect to which the
Company or a Company ERISA Affiliate could incur liability under Title IV of
ERISA or Section 412 of the Code (together for the purposes of this Section
2.11, the "Company Employee Plans"). The Company has made available to Parent,
prior to the date of this Agreement, or the Company will make available not
later than 30 days after the date of this Agreement, copies of (i) each such
written Company Employee Plan (or a written description of any Company Employee
Plan which is not written) and all related trust agreements, insurance and other
contracts (including policies), summary plan descriptions, summaries of material
modifications and communications distributed to plan participants, (ii) the
three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Company Employee Plan
required to make such a filing, (iii) the latest reports which have been filed
with the Department of Labor with respect to each Company Employee Plan required
to make such filing and (iv) the most recent favorable determination letters
issued for each Company Employee Plan and related trust which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such determination).
(b) Except as set forth in Section 2.11(b) of the Company
Disclosure Schedule or the Company SEC Reports, (i) none of the Company Employee
Plans promises or provides retiree medical or other retiree welfare benefits to
any person, and none of the Company Employee Plans is a "multiemployer plan" as
such term is defined in Section 3(37) of ERISA; (ii) to the best knowledge of
the Company, no party in interest or disqualified person (as defined in Section
3(14) of ERISA and Section 4975 of the Code) has at any time engaged in a
transaction with respect to any Company Employee Plan which could subject the
Company or any Company ERISA Affiliate, directly or indirectly, to a material
tax, penalty or other material liability for prohibited transactions under ERISA
or Section 4975 of the Code; (iii) to the best knowledge of the Company, no
fiduciary of any Company Employee Plan has breached any of the responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA, which breach
would reasonably be expected to result in any material liability to the Company
or any Company ERISA Affiliate; (iv) all Company Employee Plans have been
established and maintained substantially in accordance with their terms and have
operated in compliance in all material respects with the requirements of
applicable law (including but not limited to the applicable notification and
other requirements of COBRA, the Health Insurance Portability and Accountability
Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the
Mental Health Parity Act of 1996, and the Women's Health and Cancer Rights Act
of 1998), and may (to the knowledge of the Company without a duty of inquiry) by
their terms be amended and/or terminated at any time to the greatest extent
permitted by applicable law, and the Company and each of its subsidiaries have
performed all material obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Company
Employee Plans; (v) each Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code is the subject of a favorable determination
letter from the IRS, and, to the Company's knowledge, nothing has occurred which
may reasonably be expected to impair such determination; (vi) to the best
knowledge of the Company in the case of each "multiemployer plan" (within the
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meaning of Section 3(37) of ERISA), and without qualification in any other case,
all contributions required to be made with respect to any Company Employee Plan
pursuant to Section 412 of the Code, or the terms of the Company Employee Plan
or any collective bargaining agreement, have been made on or before their due
dates (including any extensions thereof); (vii) to the best knowledge of the
Company in the case of each "multiemployer plan" (within the meaning of Section
3(37) of ERISA), and without qualification in any other case, with respect to
each Company Employee Plan, no "reportable event" within the meaning of Section
4043 of ERISA (excluding any such event for which the 30 day notice requirement
has been waived under the regulations to Section 4043 of ERISA) has occurred for
which there is any material outstanding liability to the Company or any Company
ERISA Affiliate nor would the consummation of the transactions contemplated
hereby (including the execution of this Agreement) constitute a reportable event
for which the 30-day requirement has not been waived; (viii) neither the Company
nor any Company ERISA Affiliate has incurred or reasonably expects to incur and
no facts or conditions exist as a result of which it is reasonable to conclude
that the Company or an ERISA Affilate could incur any material liability under
Title IV of ERISA including, without limitation, with respect to an event
described in Section 4201, 4204 or 4212 of ERISA (or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which the
Company or an ERISA Affiliate has agreed or is required to indemnify any person
against such liability); (ix) other than routine claims for benefits made in the
ordinary course of the operation of the Company Employee Plans, there are no
pending, nor to the Company's knowledge any threatened, claims, investigations
or causes of action with respect to any Company Employee Plan, whether made by a
participant or beneficiary of such a plan, a governmental agency or otherwise,
against the Company, any Company director, officer or employee, any Company
Employee Plan or any fiduciary of a Company Employee Plan; and (x) there are no
communications to any employee, former employee or any other person who may be
entitled to benefits under any Company Employee Plan that are materially
inconsistent with any provision of any Company Employee Plan. The Company shall,
within 45 days after the date of this Agreement, provide a schedule of all
material limitations on the ability of the Company to amend or terminate the
Company Employee Plans, and the Company represents that upon delivery, such
schedule shall be true and complete.
(c) Section 2.11(c) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds (i) any option to
purchase Company Common Stock as of the date hereof, together with the number of
shares of Company Common Stock subject to such option, the option price of such
option (to the extent determined as of the date hereof), whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option; (ii) any
shares of Company Common Stock that are restricted; and (iii) any other right,
directly or indirectly, to receive Company Common Stock, together with the
number of shares of Company Common Stock subject to such right.
(d) To the extent not already included and so labelled in
Section 2.11(a) of the Company Disclosure Schedule, Section 2.11(d) of the
Company Disclosure Schedule sets
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forth a true and complete list of (i) all employment agreements with officers of
the Company or any of its subsidiaries; (ii) all agreements with consultants who
are individuals obligating the Company or any of its subsidiaries to make annual
cash payments in an amount exceeding $75,000; (iii) all agreements with respect
to the services of independent contractors or leased employees whether or not
they participate in any of the Company Employee Plans obligating the Company or
any of its subsidiaries to make annual cash payments in the aggregate exceeding
$75,000; (iv) all officers of the Company or any of its subsidiaries who have
executed a non-competition agreement with the Company or any of its
subsidiaries; (v) all severance agreements, programs and policies of the Company
or any of its subsidiaries with or relating to its employees, in each case with
outstanding commitments exceeding $75,000 excluding programs and policies
required to be maintained by law; and (vi) all plans, programs, agreements and
other arrangements of the Company which contain change of control provisions.
(e) Except as set forth in Section 2.11(e) of the Company
Disclosure Schedule, neither the Company nor any subsidiary of the Company
sponsors, maintains, contributes to, is required to contribute to or has any
liability (whether contingent or otherwise) with respect to or has ever
sponsored, maintained, contributed to, been required to contribute to or had any
liability (whether contingent or otherwise) with respect to, any employee
benefit plan subject to Section 302 of ERISA, Section 412 of the Code or Title
IV of ERISA. To the best knowledge of the Company in the case of each
"multiemployer plan" (within the meaning of Section 3(37) of ERISA), and without
qualification in any other case, with respect to any plan listed in Section
2.11(e) of the Company Disclosure Schedule (i) the Pension Benefit Guaranty
Corporation has not instituted proceedings to terminate any such plans, and (ii)
no such plan has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, and no
extensions of any amortization period within the meaning of Section 412 of the
Code or Section 302 of ERISA been applied for with respect thereto. With respect
to each "multiemployer plan" (within the meaning of Section 3(37) of ERISA)
listed in Section 2.11(e) of the Company Disclosure Schedule, Section 2.11(e) of
the Company Disclosure Schedule specifies the "withdrawal liability" within the
meaning of Section 4201 of ERISA that the Company or an ERISA Affiliate would
have incurred had the Company or such ERISA Affiliate effected a "complete
withdrawal" (within the meaning of Section 4203 of ERISA) as of a recent date
specified on Schedule 2.11(e).
(f) Except as set forth in Section 2.11(f) of the Company
Disclosure Schedule or in the Company SEC Reports, (i) the Company has never
maintained an employee stock ownership plan (within the meaning of Section
4975(e)(7) of the Code) or any other Company Employee Plan that invests in
Company stock; (ii) since October 31, 1998, the Company has not proposed nor
agreed to any increase in benefits under any Company Employee Plan (or the
creation of new benefits) or change in employee coverage which would materially
increase the expense of maintaining any Company Employee Plan; (iii) the
consummation of the transactions contemplated by this Agreement will not result
in an increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits or compensation payable in respect
of any employee; and (iv) no
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person will be entitled to any severance benefits under the terms of any Company
Employee Plan solely by reason of the consummation of the transactions
contemplated by this Agreement.
(g) The Company has fiduciary liability insurance of at least
$1,000,000 in effect covering the fiduciaries of the Company Employee Plans
(including the Company) with respect to whom the Company may have liability.
SECTION 2.12 Labor Matters. Except as set forth in Section
2.12 of the Company Disclosure Schedule or the Company SEC Reports, (i) there
are no controversies, including any strikes, slowdowns, work stoppages,
lockouts, pending or, to the knowledge of the Company, threatened, between the
Company or any of its subsidiaries and any of their respective employees, which
controversies have had, or would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and (ii) neither the Company nor
any of its subsidiaries is in breach of any material collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its subsidiaries which would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, nor does the Company or any
of its subsidiaries know of any activities or proceedings of any labor union to
organize any significant number of such employees.
SECTION 2.13 Proxy Statement. The information supplied by the
Company for inclusion in the proxy statement to be sent to the shareholders of
the Company in connection with the meeting of the shareholders of the Company to
consider the Merger (the "Company Shareholders Meeting") (such proxy statement
as amended or supplemented is referred to herein as the "Proxy Statement") will
not, on the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Company
Shareholders Meeting contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Shareholders Meetings which has become false or misleading. If at any time prior
to the Effective Time any event relating to the Company or any of its respective
affiliates, officers or directors should be discovered by the Company which
should be set forth in a supplement to the Proxy Statement, the Company shall
promptly inform Parent and Merger Sub. The Proxy Statement shall comply in all
material respects with the requirements of the Exchange Act. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained or incorporated
by reference in, or furnished in connection with the preparation of, the Proxy
Statement.
SECTION 2.14 Restrictions on Business Activities. Except for
this Agreement or as set forth in Section 2.14 of the Company Disclosure
Schedule or the Company SEC Reports, to the best of the Company's knowledge,
there is no agreement,
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judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or impairing the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or such subsidiary, except
for any prohibition or impairment as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.15 Title to Property. Except as set forth in
Sections 2.15 and 2.19(b) of the Company Disclosure Schedule or the Company SEC
Reports, the Company and each of its subsidiaries have good title to all of
their real properties and other assets, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially interfere with the
present use of the property affected thereby or which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and except for liens which secure indebtedness reflected in the 1999 Balance
Sheet; and, to the best knowledge of the Company, all leases pursuant to which
the Company or any of its subsidiaries lease from others material amounts of
real or personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the best knowledge
of the Company, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such good standing,
validity and effectiveness or the existence of such default or event of default
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 2.16 Taxes. Except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect:
(a) The Company and each of its subsidiaries has timely and
accurately filed, or caused to be timely and accurately filed, all material Tax
Returns (as hereinafter defined) required to be filed by it, and has paid,
collected or withheld, or caused to be paid, collected or withheld, all material
amounts of Taxes (as hereinafter defined) required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the 1999 Balance
Sheet have been established or which are being contested in good faith. Except
as set forth in Section 2.16(a) of the Company Disclosure Schedule, there are no
material claims or assessments pending against the Company or any of its
subsidiaries for any alleged deficiency in any Tax, there are no pending or
threatened audits or investigations for or relating to any liability in respect
of any Taxes, and the Company has not been notified in writing of any proposed
Tax claims or assessments against the Company or any of its subsidiaries (other
than in each case, claims or assessments for which adequate reserves in the 1999
Balance Sheet have been established or which are being contested in good faith
or are immaterial in amount). Neither the Company nor any of its subsidiaries
has executed any waivers or extensions of any applicable statute of limitations
to assess any material amount of Taxes. The federal income tax returns of the
Company and its subsidiaries have been audited by the IRS for the taxable year
1993. The statute of limitations period for assessment of federal income taxes
has expired for all taxable years through the taxable year ending 1993. There
are no outstanding requests by the Company or any of its subsidiaries for any
extension
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of time within which to file any material Tax Return or within which to pay any
material amounts of Taxes shown to be due on any Tax Return. To the best
knowledge of the Company, there are no liens for material amounts of Taxes on
the assets of the Company or any of its subsidiaries except for statutory liens
for current Taxes not yet due and payable. Other than with respect to the
Company and its subsidiaries, neither the Company nor any of its subsidiaries is
liable for Taxes of any other Person, or is currently under any contractual
obligation to indemnify any person with respect to Taxes (except for customary
agreements to indemnify lenders or security holders in respect of taxes other
than income taxes), or is a party to any tax sharing agreement or any other
agreement providing for payments by the Company or any of its subsidiaries with
respect to Taxes. Neither the Company nor any of its subsidiaries will be
required to include any adjustment in taxable income for any period ending after
the Closing under Section 481 of the Code (or under any similar provision of the
Tax laws of any jurisdiction) as a result of a change in the method of
accounting for a period ending on or before the Closing or pursuant to an
agreement with a Tax authority with regard to the Tax liability of the Company
or any of its subsidiaries for any period ending on or before the Closing. There
are no outstanding powers of attorney enabling any party to represent the
Company or any of its subsidiaries with respect to Tax matters. Neither the
Company nor any of its subsidiaries is a party to any joint venture, partnership
or other arrangement or contract which is or is reasonably likely to be treated
as a partnership for federal income tax purposes. None of the Company's property
is "tax exempt use property" within the meaning of Section 168(h) of the Code.
There are no private letter rulings in respect of any Tax pending between the
Company or its subsidiaries and any taxing authority. The Company is not a party
to any agreement, contract, arrangement or plan that would result (taking into
account the transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(b) For purposes of this Agreement, the term "Tax" shall mean
any United States federal, state, local, non-United States or provincial income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, alternative or add-on minimum, ad valorem, transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment or charge
imposed by any Governmental Authority, together with any interest or penalty
imposed thereon. The term "Tax Return" shall mean a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
Governmental Authority with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
SECTION 2.17 Environmental Matters. (a) Except as set forth in
Section 2.17(a) to the Company Disclosure Schedule or in the Company SEC Reports
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, the operations and properties of the Company and
its subsidiaries are in compliance with applicable Environmental Laws (as
hereinafter defined), which compliance includes the possession by the Company
and its subsidiaries of all permits and governmental authorizations
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required under applicable Environmental Laws, and compliance with the terms and
conditions thereof.
(b) Except as set forth in Section 2.17(b) of the Company
Disclosure Schedule or the Company SEC Reports or as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
there are no Environmental Claims (as hereinafter defined), including claims
based on "arranger liability," pending or, to the knowledge of the Company,
threatened in writing against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has retained or assumed.
(c) Except as set forth on Section 2.17(c) of the Company
Disclosure Schedule or in the Company SEC Reports, there are no past or present
actions, circumstances, conditions, events or incidents, including the release,
emission, discharge, presence or disposal of any Materials of Environmental
Concern (as hereinafter defined), that are reasonably likely to form the basis
of any Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries have retained or assumed, except for such
Environmental Claims that would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect or as set forth in
Section 2.17(d) of the Company Disclosure Schedule or the Company SEC Reports,
(i) there are no off-site locations where the Company or any of its subsidiaries
has stored, disposed or arranged for the disposal of Materials of Environmental
Concern which have been listed on the National Priority List, or any analogous
state site list, and the Company and its subsidiaries have not been notified
that any of them is a potentially responsible party at any such location; (ii)
there are no underground storage tanks located on property owned or leased by
the Company or any of its subsidiaries; (iii) there is no friable asbestos
containing material contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries; and (iv) there are no polychlorinated biphenyls (PCBs)
or PCB-containing items contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of
action, investigation or written notice by any person or entity alleging
potential liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned or operated by the
Company or any of its subsidiaries.
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(ii) "Environmental Laws" means all United States federal,
state, local and non-United States laws, regulations, codes and ordinances,
relating to pollution or protection of human health and the environment
(including ambient air, surface water, ground water, land surface or sub-surface
strata), including but not limited to CERCLA, RCRA, TSCA, OSHA, the Clean Air
Act, the Clean Water Act, each as amended or supplemented, and any applicable
transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, medical waste, toxic substances, petroleum and petroleum
products, asbestos-containing materials, polychlorinated biphenyls, and any
other chemicals, pollutants or substances regulated under any Environmental Law.
SECTION 2.18 Brokers. No broker, finder or investment banker
(other than Schroder & Co. Inc. ("Schroders")), the fees and expenses of each of
whom will be paid by the Company) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and Schroders pursuant to which such firms would
be entitled to any payment relating to the transactions contemplated hereunder.
SECTION 2.19 Intellectual Property. (a) As used herein, the
term "Intellectual Property Assets" shall mean all worldwide intellectual
property rights, including, without limitation, patents, trademarks, service
marks and copyrights, and registrations and applications therefor, trade names,
common law marks, know-how, trade secrets, computer software programs and
proprietary information. As used herein, "Company Intellectual Property Assets"
shall mean the Intellectual Property Assets used or owned by the Company or any
of its subsidiaries.
(b) Except as set forth in Section 2.19(b) of the Company
Disclosure Schedule, the Company and/or each of its subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all
Intellectual Property Assets that are used in and material to the business of
the Company and its subsidiaries as currently conducted, without conflict with
the rights of others.
(c) Except as disclosed in Section 2.19(c) of the Company
Disclosure Schedule or as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened by any person with
respect to the Company Intellectual Property Assets, or (ii) are currently
pending or, to the knowledge of the Company, threatened by any person with
respect to the Intellectual Property Assets of a third party (the "Third Party
Intellectual Property Assets") to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Assets by
or through the Company or any of its subsidiaries.
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(d) Except as disclosed in Section 2.19(d) of the Company
Disclosure Schedule or as would not reasonably be expected to have a Material
Adverse Effect, neither the Company nor any of its subsidiaries knows of any
valid grounds for any bona fide claim to the effect that the manufacture, sale,
licensing or use of any product now used, sold or licensed or proposed for use,
sale, license by the Company or any of its subsidiaries infringes on any Third
Party Intellectual Property Assets.
(e) Section 2.19(e) of the Company Disclosure Schedule sets
forth a list of (i) all patents and patent applications owned by the Company
and/or each of its subsidiaries worldwide; (ii) all trademark and service mark
registrations and all trademark and service mark applications, material common
law trademarks, material trade dress and material slogans, and all trade names
owned by the Company and/or each of its subsidiaries worldwide; (iii) all
copyright registrations and copyright applications owned by the Company and/or
each of its subsidiaries worldwide; and (iv) all licenses owned by the Company
and/or each of its subsidiaries in which the Company and/or each of its
subsidiaries is (A) a licensor with respect to any of the patents, trademarks,
service marks, trade names or copyrights listed in Section 2.19(e) of the
Company Disclosure Schedule; or (B) a licensee of any other person's patents,
trade names, trademarks, service marks or copyrights material to the Company
except for any licenses of software programs that are commercially available
"off the shelf." Except as disclosed in Section 2.19(e)(v) of the Company
Disclosure Schedule, the Company and/or each of its subsidiaries has made all
necessary filings and recordations to protect and maintain its interest in the
patents, patent applications, trademark and service mark registrations,
trademark and service mark applications, copyright registrations and copyright
applications and licenses set forth in Section 2.19(e) of the Company Disclosure
Schedule, except where the failure to so protect or maintain would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(f) Except as set forth in Section 2.19(e)(v) or 2.19(f) of
the Company Disclosure Schedule or the Company SEC Reports: (i) each patent,
patent application, trademark or service mark registration, and trademark or
service mark application and copyright registration or copyright application of
the Company and/or each of its subsidiaries is valid and subsisting and (ii)
each material license of Company Intellectual Property Assets listed on Section
2.19(e) of the Company Disclosure Schedule is valid, subsisting and enforceable.
(g) Except as set forth in Section 2.19(g) of the Company
Disclosure Schedule, there is no material unauthorized use, infringement or
misappropriation of any of the Company's Intellectual Property Assets by any
third party, including any employee, former employee, independent contractor or
consultant of the Company or any of its subsidiaries which would reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
(h) Except as set forth in Section 2.19(h) of the Company
Disclosure Schedule, the disclosure under the heading "Year 2000" contained in
the Company's
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Quarterly Report on Form 10-Q for the period ended April 30, 1999 is accurate
and in compliance with applicable law in all material respects.
SECTION 2.20 Interested Party Transactions. Except as set
forth in Section 2.20 of the Company Disclosure Schedule or the Company SEC
Reports or for events as to which the amounts involved do not, in the aggregate,
exceed $75,000, since the Company's proxy statement dated February 19, 1999, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
SECTION 2.21 Insurance. Except as disclosed in Section 2.21 of
the Company Disclosure Schedule or the Company SEC Reports, all material fire
and casualty, general liability, business interruption, product liability and
sprinkler and water damage insurance policies maintained by the Company or any
of its subsidiaries are with reputable insurance carriers, provide coverage
appropriate in character and amount for the businesses of the Company and its
subsidiaries and their respective properties and assets, except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.22 Product Liability and Recalls. (a) Except as
disclosed in Section 2.22(a) of the Company Disclosure Schedule or the Company
SEC Reports, the Company is not aware of any claim, pending or threatened in
writing, against the Company or any of its subsidiaries for injury to person or
property of employees or any third parties suffered as a result of the sale of
any product or performance of any service by the Company or any of its
subsidiaries, including claims arising out of the defective or unsafe nature of
its products or services, which would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.22(b) of the Company
Disclosure Schedule or the Company SEC Reports, there is no pending or, to the
knowledge of the Company, threatened recall or investigation of any product sold
by the Company, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.23 Opinion of Financial Advisor. The Board of
Directors of the Company has been advised by its financial advisor, Schroders,
to the effect that in its opinion, as of the date of this Agreement, the Merger
Consideration is fair to the holders of Shares from a financial point of view.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent
and warrant to the Company as follows:
SECTION 3.01 Organization and Good Standing. Each of
Guarantor, Parent and Merger Sub 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 business as now being conducted.
SECTION 3.02 Authorization; Binding Agreement. Parent and
Merger Sub have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Guarantor has all requisite corporate power and authority to execute and deliver
the guarantee of this Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement and the guarantee hereof,
and the consummation by Guarantor, Parent, and Merger Sub of the transactions
contemplated hereby (including, but not limited to, the Merger) and thereby,
have been duly and validly authorized by the respective Boards of Directors of
Guarantor, Parent and Merger Sub, as applicable, and no other corporate
proceedings on the part of Guarantor, Parent, Merger Sub or any other subsidiary
of Guarantor are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby (other than the
requisite approval by the sole stockholder of Merger Sub of this Agreement and
the Merger). This Agreement and the guarantee hereof has been duly and validly
executed and delivered by each of Guarantor, Parent and Merger Sub (as
applicable) and, assuming due authorization, execution, and delivery by the
Company, constitute the legal, valid and binding obligations of Guarantor,
Parent and Merger Sub (as applicable).
SECTION 3.03 Governmental Approvals. No Consent from or with
any Governmental Authority on the part of Guarantor, Parent or Merger Sub is
required in connection with the execution or delivery by Parent and Merger Sub
of this Agreement, the execution or delivery by Guarantor of the guarantee
hereof, or the consummation by Guarantor, Parent and Merger Sub (as applicable)
of the transactions contemplated hereby and thereby other than filings with the
SEC, filings under the HSR Act, compliance with applicable Blue Sky-Laws and any
applicable Non-U.S. Monopoly Laws, such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the PBCL.
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SECTION 3.04 No Violations. The execution and delivery of this
Agreement and the guarantee hereof, the consummation of the transactions
contemplated hereby and thereby and compliance by Guarantor, Parent or Merger
Sub with any of the provisions hereof or thereof (each as applicable) will not
(i) conflict with or result in any breach of any provision of the Memorandum of
Association (or Articles of Incorporation) or Bye-laws (or By-laws) or other
governing instruments of Guarantor or any subsidiary of Guarantor, (ii) require
any Consent under or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of, any material note, bond, mortgage, indenture, contract, lease,
license, agreement or instrument to which Guarantor or Parent is a party or by
which Guarantor or Parent or any of their assets or property is subject, (iii)
result in the creation or imposition of any material lien or encumbrance of any
kind upon any of the assets of Guarantor or any subsidiary of Guarantor or (iv)
subject to obtaining the Consents from Governmental Authorities referred to in
Section 3.03 hereof, violate any Law to which Guarantor or any subsidiary of
Guarantor or its assets or properties are subject, except in any such case for
any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or delay consummation of the Merger, or otherwise materially
and adversely affect the ability of Parent or Merger Sub to perform their
respective obligations under this Agreement or the ability of Guarantor to
perform its obligations under the guarantee hereof.
SECTION 3.05 Disclosure Documents. None of the information
supplied by Parent, its officers, directors, representatives, agents or
employees (the "Parent Information") for inclusion in the Proxy Statement will,
at the time the Proxy Statement is filed with the SEC or first mailed to the
Company's stockholders, at the time of the Company Shareholders Meeting or at
the Effective Time, contain any untrue statement of a material fact, or will
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for such shareholders meeting which has become false
or misleading. Notwithstanding the foregoing, neither Parent nor Merger Sub
makes any representation or warranty with respect to any information that has
been supplied by the Company or its accountants, counsel or other authorized
representatives for use in any of the foregoing documents.
SECTION 3.06 Finders and Investment Bankers. None of
Guarantor, Parent, Merger Sub, and their respective officers or directors has
employed any broker, finder or financial advisor or otherwise incurred any
liability for any brokerage fees, commissions or financial advisors' or finders'
fees in connection with the transactions contemplated hereby.
SECTION 3.07 Financing Arrangements. Parent (including for
this purpose one or more of its wholly-owned subsidiaries) has funds available
to it sufficient to enable the Merger Sub to purchase the Shares in accordance
with the terms of this Agreement and to pay all amounts due (or which will, as a
result of the transactions contemplated hereby, become due) in respect of any
indebtedness of the Company for money borrowed.
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SECTION 3.08 No Prior Activities. Except for obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing in connection therewith), Merger Sub has not
incurred any obligations or liabilities and has not engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
SECTION 3.09 PBCL Section 2538. Other than by reason of this
Agreement or the transactions contemplated hereby, Parent is not an "interested
shareholder" of the Company, as that term is defined in Section 2538 of the
PBCL.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01 Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in writing,
and except as set forth in Section 4.01 of the Company Disclosure Schedule, the
Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, and except as set forth in Section 4.01 of the Company
Disclosure Schedule, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent, which in the case of
clauses (c), (d)(v), (e), (f), (h) or (i) will not be unreasonably withheld or
delayed:
(a) amend or otherwise change the Company's Restated Articles
of Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares
of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including, without limitation,
any phantom interest) in the Company, any of its subsidiaries or
affiliates (except for the issuance of shares of Company Common Stock
issuable pursuant to
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Stock Options under the Company Stock Option Plans, which options are
outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the
Company or any of its subsidiaries (except for (i) sales of assets in
the ordinary course of business and in a manner consistent with past
practice, (ii) dispositions of obsolete or worthless assets, and (iii)
sales of immaterial assets not in excess of $100,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a
wholly-owned subsidiary of the Company may declare and pay a dividend
to its parent that is not a cross-border dividend, (ii) declare or
allow any subsidiary of the Company to declare cross-border dividends,
or to make or allow any subsidiary of the Company to make cross-border
capital contributions, (iii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (iv) except as required by the terms of
any security as in effect on the date hereof and set forth in Section
4.01(d) of the Company Disclosure Schedule, amend the terms or change
the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, any of its securities or any securities of its
subsidiaries, including, without limitation, shares of Company Common
Stock, or any option, warrant or right, directly or indirectly, to
acquire any such securities, or propose to do any of the foregoing, or
(v) settle, pay or discharge any claim, suit or other action brought or
threatened against the Company with respect to or arising out of a
shareholder equity interest in the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof other than those listed on Section
4.01(e) of the Company Disclosure Schedule; (ii) incur any indebtedness
for borrowed money, except for borrowings and reborrowing under the
Company's existing credit facilities or other borrowings not in excess
of $50,000 or issue any debt securities or assume, guarantee (other
than guarantees of the Company's subsidiaries entered into in the
ordinary course of business) or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business
consistent with past practice; or (iii) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate,
in excess of $1,000,000 from the date hereof until November 30, 1999;
or (iv) enter into or materially amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by
this Section 4.01(e);
(f) except as set forth in Section 4.01(f) of the Company
Disclosure Schedule, increase the compensation or severance payable or
to become payable to its
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directors, officers or employees, except for increases in salary or
wages of employees of the Company or its subsidiaries (who are not
directors or executive officers of the Company) in accordance with past
practices, or grant any severance or termination pay (except to make
payments required to be made under obligations existing on the date
hereof in accordance with the terms of such obligations) to, or enter
into any employment or severance agreement, with any new employee of
the Company or any of its subsidiaries, except for an agreement entered
into in the ordinary course of business and providing for annual base
and bonus compensation not to exceed $50,000, or establish, adopt,
enter into or amend any collective bargaining agreement, Company
Employee Plan (within the meaning of Section 2.11 of this Agreement),
trust, fund, policy or arrangement for the benefit of any current or
former directors, officers or employees or any of their beneficiaries,
except, in each case, as may be required by law or as would not result
in a material increase in the cost of maintaining such collective
bargaining agreement, Company Employee Plan, trust, fund, policy or
arrangement.
(g) take any action to change accounting policies or
procedures (including, without limitation, procedures with respect to
revenue recognition, payments of accounts payable and collection of
accounts receivable), except as required by a change in GAAP occurring
after the date hereof;
(h) make any tax election or settle or compromise any United
States federal, state, local or non-United States tax liability;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) in excess of $100,000 in the aggregate, other than the
payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of liabilities reflected or reserved
against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement or incurred in the
ordinary course of business and consistent with past practice;
(j) cause or permit any outstanding loans owed by the
Company's Employee Stock Ownership Plan or Employee Stock Ownership
Plan Trust to the Company to be prepaid in whole or in part; or
(k) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.01(a) through (j) above, or any action
which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its
covenants hereunder.
SECTION 4.02 No Solicitation. (a) The Company shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of its subsidiaries, solicit or encourage the
initiation of (including by way of furnishing
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information) any inquiries or proposals regarding any merger, sale of assets,
sale of shares of capital stock (including without limitation by way of a tender
offer) or similar transactions involving the Company or any subsidiaries of the
Company that if consummated would constitute an Alternative Transaction (as
defined in Section 7.01) (any of the foregoing inquiries or proposals being
referred to herein as an "Acquisition Proposal"). Nothing contained in this
Agreement shall prevent the Board of Directors of the Company from (i)
furnishing information to a third party which has made a bona fide Acquisition
Proposal that is a Superior Proposal (as defined below) not solicited in
violation of this Agreement, provided that such third party has executed an
agreement with confidentiality provisions substantially similar to those then in
effect between the Company and Guarantor or (ii) subject to compliance with the
other terms of this Section 4.02, including Sections 4.02(c), considering and
negotiating a bona fide Acquisition Proposal that is a Superior Proposal not
solicited in violation of this Agreement; provided, however, that, as to each of
clauses (i) and (ii), (x) such actions occur at a time prior to approval of the
Merger and this Agreement at the Company Shareholders Meeting and (y) the Board
of Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel, which may be Morgan, Lewis & Bockius
LLP), that it is or is reasonably likely to be required to do so in order to
discharge properly its fiduciary duties. For purposes of this Agreement, a
"Superior Proposal" means any proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
all of the equity securities of the Company entitled to vote generally in the
election of directors or all or substantially all the assets of the Company, on
terms which the Board of Directors of the Company reasonably believes (i) (after
consultation with a financial advisor of nationally recognized reputation) to be
more favorable from a financial point of view to its shareholders than the
Merger and the transactions contemplated by this Agreement taking into account
at the time of determination any changes to the financial terms of this
Agreement proposed by Parent and (ii) to be more favorable to the Company than
the Merger and the transactions contemplated by this Agreement after taking into
account all pertinent factors deemed relevant by the Board of Directors of the
Company under the laws of the Commonwealth of Pennsylvania.
(b) The Company shall immediately notify Parent after receipt
of any Acquisition Proposal, or any modification of or amendment to any
Acquisition Proposal, or any request for nonpublic information relating to the
Company or any of its subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any subsidiary
by any person or entity that informs the Board of Directors of the Company or
such subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to Parent shall be made orally and in writing, and shall
indicate the identity of the person making the Acquisition Proposal or intending
to make an Acquisition Proposal or requesting non-public information or access
to the books and records of the Company, the terms of any such Acquisition
Proposal or modification or amendment to an Acquisition Proposal, and whether
the Company is providing or intends to provide the person making the Acquisition
Proposal with access to information concerning the Company as provided in
Section 4.02(a). The Company shall also immediately notify Parent, orally and in
writing, if it enters into negotiations concerning any Acquisition Proposal.
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(c) Unless this Agreement shall have been terminated in
accordance with its terms, neither the Company nor the Board of Directors of the
Company shall withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval by such Board of Directors of this Agreement or
the Merger.
(d) Nothing contained in this Section 4.02 shall prohibit the
Company from taking and disclosing to its shareholders a position required by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to its shareholders required by applicable law, rule or regulation.
(e) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (other than
Parent and Merger Sub) conducted heretofore with respect to any of the
foregoing. The Company agrees not to release any third party from the
confidentiality and standstill provisions of any agreement to which the Company
is a party.
(f) The Company shall ensure that the officers and directors
of the Company and the Company Significant Subsidiaries and any investment
banker or other advisor or representative retained by the Company are aware of
the restrictions described in this Section 4.02.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Proxy Statement. As promptly as practicable after
the execution of this Agreement, the Company shall prepare and file with the SEC
preliminary proxy materials which shall constitute the Proxy Statement. As
promptly as practicable after final comments received from the SEC thereon and
after the furnishing by the Company and Parent of all information required to be
contained therein, the Company shall file with the SEC the definitive Proxy
Statement relating to the adoption of this Agreement and approval of the
transactions contemplated hereby by the shareholders of the Company pursuant to
this Agreement.
SECTION 5.02 Company Shareholders Meeting. The Company shall
call the Company Shareholders Meeting as promptly as practicable for the purpose
of voting upon the approval of the Merger, and the Company shall use its
reasonable best efforts to hold the Company Shareholders Meeting as soon as
practicable after the date on which the final comments of the SEC on the Proxy
Statement are resolved. The Proxy Statement shall include the recommendation of
the Board of Directors of the Company in favor of this Agreement and the Merger.
The Company shall solicit from its shareholders proxies in favor of approval of
this Agreement and the Merger and shall take all other reasonable action
necessary or advisable to secure the vote or consent of shareholders in favor of
such approval.
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SECTION 5.03 Access to Information; Confidentiality. Upon
reasonable notice and subject to restrictions contained in confidentiality
agreements to which the Company is subject (from which it shall use reasonable
efforts to be released), the Company shall (and shall cause its subsidiaries to)
(i) afford to the officers, employees, accountants, counsel and other
representatives of Parent, reasonable access, during the period after the
execution and delivery of this Agreement and prior to the Effective Time, to its
properties, books, contracts, commitments and records and, (ii) during such
period, furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request, and it shall make
available to Parent the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of the Company's business,
properties and personnel as Parent may reasonably request. Parent shall keep
such information confidential in accordance with the terms of the
confidentiality letter, dated April 12, 1999 (the "Confidentiality Letter"),
between Parent and the Company.
SECTION 5.04 Consents; Approvals. The Company and Parent shall
each use its commercially reasonable efforts to obtain all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and non-United States governmental and regulatory rulings and approvals),
and the Company and Parent shall make (or Parent shall take all action necessary
such that Guarantor will make) all filings (including, without limitation, all
filings with United States and non-United States governmental or regulatory
agencies) required in connection with the authorization, execution and delivery
of this Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company and Parent shall furnish all
information required to be included in the Proxy Statement, or for any
application or other filing to be made pursuant to the rules and regulations of
any United States or non-United States governmental body in connection with the
transactions contemplated by this Agreement. Each party hereto shall each make
an appropriate filing of a notification and report form pursuant to the HSR Act
with respect to the transactions contemplated hereby within ten business days
after the date hereof and shall promptly supply any additional information and
documentary material that may be requested pursuant to the HSR Act. Each party
hereto shall use commercially reasonable efforts to obtain early termination of
the waiting period under the HSR Act. In addition, each party hereto shall
promptly make any other filing that may be required under any antitrust law or
by any antitrust authority.
SECTION 5.05 Indemnification and Insurance. (a) The Articles
of Incorporation and Bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Restated Articles of
Incorporation and the Bylaws of the Company, which provisions shall not be
amended, modified or otherwise repealed for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
as of the Effective Time of individuals who at the Effective Time were
directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Articles of
Incorporation or Bylaws,
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indemnify and hold harmless, each present and former director, officer or
employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the Company's Restated
Articles of Incorporation or Bylaws or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) and subject
to the specific terms of any indemnification contract, (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Corporation, (ii) after the Effective
Time, the Surviving Corporation shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (iii) the
Surviving Corporation will cooperate in the defense of any such matter;
provided, however, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case each Indemnified Person with respect to whom such a conflict exists (or
group of such Indemnified Persons who among them have no such conflict) may
retain one separate law firm in each applicable jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
and employment agreements (the employee parties under such agreements being
referred to as the "Officer Employees") with the Company's directors and
officers existing at or before the Effective Time.
(d) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time (the "D&O Insurance") that is no less favorable than the
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 200% of the annual premium currently paid by the Company
for such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
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(e) From and after the Effective Time, Parent shall
unconditionally guarantee the timely payment of all funds owing by, and the
timely performance of all other obligations of, the Surviving Corporation under
this Section 5.05.
(f) This Section shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
Corporation, the Indemnified Parties, and the Officer Employees, shall be
binding on all successors and assigns of the Surviving Corporation and shall be
enforceable by the Indemnified Parties.
SECTION 5.06 Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would reasonably be expected to cause any representation
or warranty of such party contained in this Agreement to be materially untrue or
inaccurate, (ii) any failure of the Company or Parent or and Merger Sub, as the
case may be, materially to comply with or satisfy, or the occurrence or
nonoccurrence of any event, the occurrence or nonoccurrence of which would
reasonably be expected to cause the failure by such party materially to comply
with or satisfy, any covenant, condition or agreement to be complied with or
satisfied by it hereunder; (iii) the Company obtaining knowledge of a material
breach by Parent or Merger Sub, or Parent obtaining knowledge of a material
breach by the Company, of their respective representations, warranties, or
covenants hereunder of which the breaching party has not already given notice
pursuant to clauses (i) or (ii); provided, however, that the delivery of any
notice pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided further
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.02(b) or 6.03(b) or affect the rights and
remedies of the party obligated to give any notice pursuant to the foregoing
clause (iii) unless the failure to give such notice results in material
prejudice to the other party.
SECTION 5.07 Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement. Nothing contained in this Agreement shall require Guarantor to
divest, abandon, or take similar action with respect to any assets (tangible or
intangible) of Guarantor, the Company or any of their subsidiaries.
SECTION 5.08 Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or making any
written public statement with respect to the Merger or this Agreement and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be unreasonably withheld;
provided, however, that either party may, without the prior consent of the
other, issue such press release or make such public statement as may upon the
advice of
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counsel be required by law or the rules and regulations of the NYSE or the NASD
if it has used all reasonable efforts to consult with the other party.
SECTION 5.09 Conveyance Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time.
SECTION 5.10 Option Plans and Benefits, etc. (a) Prior to the
Effective Time, the parties to this Agreement shall take all such actions as
shall be necessary to effectuate the provisions of Section 1.06(c).
(b) [Intentionally omitted.]
(c) Parent agrees that, effective as of the Effective Time,
and through December 31, 1999 (the "Benefit Continuation Period"), Parent shall,
or shall cause the Surviving Corporation and its subsidiaries and successors to,
provide those persons who, immediately prior to the Effective Time, were
employees of the Company or its subsidiaries ("Retained Employees") with
benefits which are, in the aggregate, substantially similar to those provided to
such Retained Employees immediately prior to the date hereof. With respect to
such benefits, (i) service accrued by such Retained Employees during employment
with the Company and its subsidiaries prior to the Effective Time shall be
recognized for all purposes, except to the extent necessary to prevent
duplication of benefits, (ii) if any Company Employee Plan providing any health
care benefits is replaced during the Benefit Continuation Period: (x) any and
all pre-existing condition limitations and eligibility waiting periods (to the
extent such limitations or waiting periods were not applicable under the
replaced Company Employee Plan) under such replacement group health plan shall
be waived with respect to such Retained Employees and their eligible dependents,
and (y) Retained Employees shall be given credit under the replacement plan for
amounts paid under the replaced Company Employee Plan during the same period for
purposes of applying deductibles, co-payments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms and conditions of
the replacement plan. Without limiting the generality of the foregoing, Parent
shall, or shall cause the Surviving Corporation and its subsidiaries and
successors to, provide to any person who, immediately prior to the Effective
Time, is a retiree under the terms of the Company's retiree medical program
retiree medical benefits in accordance with the Company's current practice.
(d) It is expressly agreed that the provisions of this Section
5.10 are not intended to be for the benefit of or otherwise be enforceable by
any third party, including, without limitation, any Retained Employee or any
collective bargaining unit or employee organization.
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(e) Nothing herein shall prevent Parent or the Surviving
Corporation from amending or modifying any employee benefit plan, program or
arrangement in any respect or terminating or modifying the terms and conditions
of employment of any particular Retained Employee or any other person.
SECTION 5.11 Accountant's Letter. Upon reasonable notice from
Parent, the Company shall use its best efforts to cause Arthur Andersen LLP to
deliver to Parent a letter covering such matters as are reasonably requested by
Parent and as are customarily addressed in accountants' "comfort letters."
SECTION 5.12 Compliance with State Property Transfer Statutes.
The Company agrees that it shall use its reasonable commercial efforts to comply
promptly with all requirements of applicable state property transfer laws as may
be required by the relevant state agency and shall take all action necessary to
cause the transactions contemplated hereby to be effected in compliance with
applicable state property transfer laws. The Company, after consultation with
Parent, shall determine which actions must be taken prior to or after the
Effective Time to comply with applicable state property transfer laws. The
Company agrees to provide Parent with any documents required to be submitted to
the relevant state agency prior to submission, and the Company shall not take
any action to comply with applicable state property transfer laws without
Parent's prior consent, which consent shall not be unreasonably withheld or
delayed. Parent shall provide, and shall take all action necessary such that
Parent shall provide, to the Company any assistance reasonably requested by the
Company with respect to such compliance.
SECTION 5.13 Consent Agreement and CPSC Order. Parent
acknowledges that the Company has provided it with copies of the Consent
Agreement (the "Consent Agreement") by and between the Company and the Staff of
the United States Consumer Product Safety Commission ("CPSC") dated October 1,
1998, and an Order entered by the CPSC dated October 13, 1998 (the "CPSC
Order"). The Surviving Corporation agrees to assume the obligations imposed on
the Company by the Consent Agreement and the CPSC Order and further agrees to
submit to the jurisdiction of the CPSC for purposes of enforcement of the
Consent Agreement and the CPSC Order. This acknowledgment of jurisdiction is
solely for purposes of enforcing the Consent Agreement and the CPSC Order, and
nothing in this agreement shall be construed as an acknowledgment of
jurisdiction for any other purpose.
SECTION 5.14 Compliance with Requirements for Federal
Governmental Contractors. The Company shall use commercially reasonable efforts
to comply with Executive Order 11246, the Rehabiliation Act of 1973, the Vietnam
Era Veterans Readjustment Assistance Act of 1974 (and the OFCCP's implementing
regulations) and all other requirements applicable to federal governmental
contractors and subcontractors, including but not limited to the maintenance of
an appropriate affirmative action/equal employment opportunity plan and
maintenance of an appropriate reporting and auditing system.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved by the requisite vote of the shareholders of the
Company;
(b) Antitrust. All waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and all clearances and approvals required to be obtained in
respect of the Merger prior to the Effective Time under any Non-U.S.
Monopoly Laws shall have been obtained, except where the failure to
have obtained any such clearances or approvals with respect to any Non-
U.S. Monopoly Laws would not reasonably be expected to have a Material
Adverse Effect on the Company, Guarantor, Parent, Guarantor's fire and
security business or Guarantor's flow control business;
(c) Governmental Actions. There shall not have been
instituted, pending or threatened any action or proceeding (or any
investigation or other inquiry that is reasonably likely to result in
such an action or proceeding) by any governmental authority or
administrative agency before any governmental authority, administrative
agency or court of competent jurisdiction, United States or non-United
States, that is reasonably likely to result in an order, nor shall
there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, or
any other legal restraint (i) preventing or seeking to prevent
consummation of the Merger, (ii) prohibiting or seeking to prohibit or
limiting or seeking to limit, Parent from exercising all material
rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Guarantor or any of its
subsidiaries of all or a material portion of the business or assets of
the Surviving Corporation and its subsidiaries, or (iii) compelling or
seeking to compel Guarantor or any of its subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of
Guarantor or any of its subsidiaries (including the Surviving
Corporation and its subsidiaries), as a result of the Merger or the
transactions contemplated by this Agreement; and
(d) Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the Merger which
makes the consummation of the Merger illegal.
SECTION 6.02 Additional Conditions to Obligations of Parent
and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger
are also subject to the following conditions:
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(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all respects (without for this purpose giving effect to
qualifications of materiality contained in such representations and
warranties) on and as of the Effective Time, with the same force and
effect as if made on and as of the Effective Time, except for (i)
changes contemplated by this Agreement, (ii) those representations and
warranties which address matters only as of a particular date (which
shall have been true and correct as of such date, subject to clause
(iii)), or (iii) where the failure to be true and correct would not
reasonably be expected, individually or in the aggregate with all other
such failures, to have a Material Adverse Effect, and Parent and Merger
Sub shall have received a certificate of the Company to such effect
signed by the Chief Executive Officer or Chief Financial Officer of the
Company;
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and Parent and Merger Sub shall have
received a certificate to such effect signed by the Chief Executive
Officer or Chief Financial Officer of the Company; and
(c) Consents Obtained. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all
filings required to be made, by the Company for the authorization,
execution and delivery of this Agreement and the consummation by it of
the transactions contemplated hereby shall have been obtained and made
by the Company, except where the failure to receive such consents,
waivers, approvals, authorizations or orders would not reasonably be
expected, individually or in the aggregate with all other such
failures, to have a Material Adverse Effect on the Company, Parent or
Guarantor.
SECTION 6.03 Additional Conditions to Obligation of the
Company. The obligation of the Company to effect the Merger is also subject to
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall
be true and correct in all respects (without for this purpose giving
effect to qualifications of materiality contained in such
representations and warranties) on and as of the Effective Time, with
the same force and effect as if made on and as of the Effective Time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such
date, subject to clause (iii)), or (iii) where the failure to be true
and correct could not reasonably be expected, individually or in the
aggregate with all other such failures, to have a Material Adverse
Effect, and the Company shall have received a certificate to such
effect signed by the President or Chief Financial Officer of Parent;
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by them on or prior to the Effective Time, and the Company shall have
received a certificate of Parent to such effect signed by the President
or Chief Financial Officer of Parent; and
(c) Consents Obtained. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all
filings required to be made, by Parent or Merger Sub for the
authorization, execution and delivery of this Agreement and the
consummation by them of the transactions contemplated hereby shall have
been obtained and made by Parent or Merger Sub, except where the
failure to receive such consents, waivers, approvals, authorizations or
orders would not reasonably be expected, individually or in the
aggregate with all other such failures, to have a Material Adverse
Effect on the Company, Parent or Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.01 Termination. This Agreement may be terminated at
any time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not
have been consummated by November 30, 1999 (other than for the reasons
set forth in clause (d) below); provided, however, that the right to
terminate this Agreement under this Section 7.01(b) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Merger to be consummated on or prior to such date; or
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action having the effect
of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either Parent or the Company (i) if the requisite vote
of the shareholders of the Company shall not have been obtained by
November 30, 1999, or (ii) if the shareholders of the Company shall not
have approved the Merger and this Agreement at the Company Shareholders
Meeting; provided, however, that the
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Company may not terminate pursuant to this clause if the Company has
not complied with its obligations under Section 5.02; or
(e) by Parent, if, whether or not permitted to do so by this
Agreement, the Board of Directors of the Company or the Company shall
(x) (i) withdraw, modify or change its approval or recommendation of
this Agreement or the Merger in a manner adverse to Parent, (ii)
approve or recommend to the shareholders of the Company an Acquisition
Proposal or Alternative Transaction; or (iii) approve or recommend that
the shareholders of the Company tender their shares in any tender or
exchange offer that is an Alternative Transaction or (y) take any
position or make any disclosures to the Company's shareholders
permitted pursuant to Section 4.02(d) which has the effect of any of
the foregoing; or
(f) by Parent or the Company, if any representation or
warranty of the Company, or Parent and Merger Sub, respectively, set
forth in this Agreement shall be untrue when made, such that the
conditions set forth in Sections 6.02(a) or 6.03(a), as the case may
be, would not be satisfied (a "Terminating Misrepresentation");
provided, that, if such Terminating Misrepresentation is curable prior
to November 30, 1999 by the Company or Parent, as the case may be,
through the exercise of its reasonable best efforts and for so long as
the Company or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company, respectively,
may terminate this Agreement under this Section 7.01(f); or
(g) by Parent, if any representation or warranty of the
Company shall have become untrue such that the condition set forth in
Section 6.02(a) would not be satisfied, or by the Company, if any
representation or warranty of Parent and Merger Sub shall have become
untrue such that the condition set forth in Section 6.03(a) would not
be satisfied (in either case, a "Terminating Change"), in either case
other than by reason of a Terminating Breach (as hereinafter defined);
provided that, if any such Terminating Change is curable prior to
November 30, 1999 by the Company or Parent, as the case may be, through
the exercise of its reasonable best efforts, and for so long as the
Company or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company, respectively,
may terminate this Agreement under this Section 7.01(g); or
(h) by Parent or the Company, upon a breach of any covenant or
agreement on the part of the Company or Parent, respectively, set forth
in this Agreement such that the conditions set forth in Sections
6.02(b) or 6.03(b), as the case may be, would not be satisfied (a
"Terminating Breach"); provided, that, except for any breach of the
Company's obligations under Section 4.02, if such Terminating Breach is
curable prior to November 30, 1999 by the Company or Parent, as the
case may be, through the exercise of its reasonable best efforts and
for so long as the Company or Parent, as the case may be, continues to
exercise such reasonable best efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.01(h);
or
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(i) by the Company, in order to accept a Superior Proposal,
provided that the Merger and this Agreement shall not theretofore have
been approved at the Company Shareholders Meeting; the Board of
Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel, which may be Morgan, Lewis &
Bockius LLP), that it is or is reasonably likely to be required to
accept such proposal in order to discharge properly its fiduciary
duties; the Company has given Parent three business days' advance
notice of the Company's intention to accept such Superior Proposal; the
Company shall in fact accept such proposal; and the Company shall have
complied in all respects with the provisions of Section 4.02.
As used herein, "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "Third Party") acquires or would acquire more than 15% of
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 15% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the Company's
subsidiaries) of the Company, or any of its subsidiaries having a fair market
value (as determined by the Board of Directors of the Company in good faith)
equal to more than 15% of the fair market value of all the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other consolidation, business combination, recapitalization or
similar transaction involving the Company or any of the Company Significant
Subsidiaries, other than the transactions contemplated by this Agreement;
provided, however, that the term Alternative Transaction shall not include any
acquisition of securities by a broker dealer in connection with a bona fide
public offering of such securities.
SECTION 7.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or any of its affiliates, directors, officers or shareholders (i) except
that the Company or Parent or Merger Sub may have liability as set forth in
Section 7.03 and Section 8.01 hereof, and (ii) nothing herein shall relieve the
Company, Parent or Merger Sub from liability for any willful material breach
hereof (it being understood that the mere existence of a Material Adverse
Effect, by itself, shall not constitute such a willful material breach).
SECTION 7.03 Fees and Expenses. (a) Except as set forth in
this Section 7.03, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated; provided,
however, that Parent and the Company shall share equally (i) all SEC filing fees
and printing expenses incurred in connection with the printing and filing of the
Proxy Statement (including any preliminary materials related thereto) and any
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amendments or supplements thereto and (ii) all conveyance and similar taxes
required to be paid prior to the Effective Time under Section 5.09.
(b) The Company shall pay Parent a fee of $6,000,000 (the
"Parent Fee"), and shall pay Parent's actual, documented and reasonable
out-of-pocket expenses, relating to the transactions contemplated by this
Agreement (including, but not limited to, fees and expenses of counsel and
accountants and out-of-pocket expenses (but not fees) of financial advisors)
("Parent Expenses"), such payment of Parent Expenses not to exceed $300,000,
upon the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or
the Company pursuant to Section 7.01(d)(i) as a result of the
failure to receive the requisite vote for approval of the
Merger and this Agreement by the shareholders of the Company
by November 30, 1999 or of the failure of the shareholders of
the Company to approve the Merger and this Agreement at the
Company Shareholders Meeting, provided that (A) at the time of
the Company Stockholders Meeting, there shall be outstanding a
bona fide Acquisition Proposal which has been made directly to
the stockholders of the Company or has otherwise become
publicly known or there shall be outstanding an announcement
by any credible third party of a bona fide intention to make
an Acquisition Proposal (in each case whether or not
conditional and whether or not such proposal shall have been
rejected by the Board of Directors of the Company) or (B) an
Alternative Transaction shall be publicly announced by the
Company or any third party within 12 months following the date
of termination of this Agreement and such transaction shall at
any time thereafter be consummated on substantially the terms
theretofore announced; or
(ii) the termination of this Agreement by Parent
pursuant to Section 7.01(e); or
(iii) the termination of this Agreement by Parent
pursuant to Section 7.01(h); or
(iv) the termination of this Agreement by the Company
pursuant to Section 7.01(i).
(c) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(f), the Company shall pay to Parent and Merger Sub their respective
Parent Expenses relating to the transactions contemplated by this Agreement, but
in no event more than $300,000.
(d) Parent shall pay the Company a fee of $6,000,000 (the
"Company Fee"), and shall pay the Company's actual, documented and reasonable
out-of-pocket expenses, relating to the transactions contemplated by this
Agreement (including, but not limited to, fees and expenses of counsel and
accountants and out-of-pocket expenses (but not
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fees) of financial advisors) ("Company Expenses"), such payment of Company
Expenses not to exceed $300,000, upon the termination of this Agreement by
Parent or the Company pursuant to Section 7.01(b) or (c).
(e) The Parent Fee and/or Parent Expenses payable pursuant to
Section 7.03(b) or Section 7.03(c), and the Company Fee and Company Expenses
payable pursuant to Section 7.03(d), shall be paid within one business day after
a demand for payment following the first to occur of any of the events described
in Section 7.03(b), Section 7.03(c) or Section 7.03(d), as applicable; provided
that, in no event shall the Company be required to pay the Parent Fee and/or
Parent Expenses to Parent, nor shall Parent be required to pay the Company Fee
and Company Expenses to the Company if, immediately prior to the termination of
this Agreement, the entity entitled to receive such fee and/or expenses was in
material breach of its obligations under this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Effectiveness of Representations, Warranties and
Agreements. (a) Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Sections 5.05 and any other agreement in this Agreement
which contemplates performance after the Effective Time shall survive the
Effective Time indefinitely and those set forth in Section 7.03 shall survive
termination indefinitely. The Confidentiality Letter shall survive termination
of this Agreement.
(b) Any disclosure made with reference to one or more Sections
of the Company Disclosure Schedule shall be deemed disclosed with respect to
each other section therein as to which such disclosure is relevant provided that
such relevance is reasonably apparent. Disclosure of any matter in the Company
Disclosure Schedule shall not be deemed an admission that such matter is
material. No statement contained in any certificate or schedule required to be
furnished by any party pursuant to this Agreement, including the Company
Disclosure Schedule, shall contain any untrue statement of a material fact or
omit to state any material facts necessary under the circumstances, in order to
make the other statements contained therein not misleading.
SECTION 8.02 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made if and when delivered personally or by overnight courier
to the parties at the following
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addresses or sent by electronic transmission, with confirmation received, to the
telecopy numbers specified below (or at such other address or telecopy number
for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
One Tyco Park
Exeter, NH 03833
Attn: Mark A. Belnick, Esq.,
Chief Corporate Counsel
Telecopy: (603) 778-7700
Confirm: (603) 778-9700
With a copy to:
Tyco International (US) Inc.
712 Fifth Avenue
New York, NY 10036
Attn: Mark A. Belnick, Esq.,
Chief Corporate Counsel
Telecopy: (212) 424-1354
Confirm: (212) 424-1324
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(b) If to the Company:
Central Sprinkler Corporation
451 North Cannon Avenue
Landsdale, PA 19446
Attn: Mr. E. Talbot Briddell,
Chairman and Chief Executive Officer
Telecopy: (215) 362-6512
Confirm: (215) 393-0223
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With a copy to:
Morgan Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attn: Thomas J. Sharbaugh, Esq.
Telecopy: (215) 963-5299
Confirm: (215) 963-5000
SECTION 8.03 Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliates" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned person;
(b) [Intentionally omitted.]
(c) "business day" means any day other than a day on which
banks in New York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "dollars" or "$" means United States dollars;
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Guarantor, Parent or any other person means any
corporation, partnership, joint venture or other legal entity of which
the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 8.04 Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after approval of the Merger and this
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Agreement by the shareholders of the Company, no amendment may be made which by
law requires further approval by such shareholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.05 Waiver. At any time prior to the Effective Time,
any party hereto may with respect to any other party hereto (a) extend the time
for the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
SECTION 8.06 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.07 Severability. (a) If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
(b) The Company and Parent agree that each of the Parent Fee
provided in Section 7.03(b) and the Company Fee provided in Section 7.03(d) is
fair and reasonable in the circumstances, considering not only the Merger
Consideration but also the outstanding funded indebtedness (including capital
leases) of the Company and its subsidiaries. If a court of competent
jurisdiction shall nonetheless, by a final, non-appealable judgment, determine
that the amount of either the Parent Fee or the Company Fee exceeds the maximum
amount permitted by law, then the amount of such Fee shall be reduced to the
maximum amount permitted by law in the circumstances, as determined by such
court of competent jurisdiction.
SECTION 8.08 Entire Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Letter, except to the extent specifically superseded
hereby), both written and oral, among the parties, or any of them, with respect
to the subject matters hereof and thereof, except as otherwise expressly
provided herein or therein.
SECTION 8.09 Assignment. This Agreement shall not be assigned
by operation of law or otherwise, except that all or any of the rights of Parent
and/or Merger
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Sub hereunder may be assigned to any subsidiary of Guarantor; provided that no
such assignment shall relieve the assigning party of its obligations hereunder.
SECTION 8.10 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of subrogation,
other than Section 5.05 (which is intended to be for the benefit of the
Indemnified Parties and Officer Employees and may be enforced by such
Indemnified Parties and Officer Employees).
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any party hereto in the exercise
of any right hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 8.12 Governing Law; Jurisdiction. (a) This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New York applicable to contracts executed and fully performed within
the State of New York.
(b) Each of the parties hereto submits to the non-exclusive
jurisdiction of the state and federal courts of the United States located in the
City of New York, Borough of Manhattan with respect to any claim or cause of
action arising out of this Agreement or the transactions contemplated hereby.
SECTION 8.13 Counterparts. This Agreement may be executed in
two or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 8.14 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB
AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[The remainder of this page has intentionally been left blank.]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
TYCO ACQUISITION CORP. VI
By
------------------------------------------
Name: Irving Gutin
Title: Vice President
ALPHA ACQUISITION CORP.
By
------------------------------------------
Name: Mark H. Swartz
Title: Vice President
CENTRAL SPRINKLER CORPORATION
By
------------------------------------------
Name: E. Talbot Briddell
Title: Chairman and Chief Executive Officer
<PAGE>
GUARANTEE
Guarantor guarantees each and every representation, warranty,
covenant, agreement and other obligation of Parent and Merger Sub, and/or any of
their respective permitted assigns (and where any such representation or
warranty is made to the knowledge of Parent or Merger Sub, such guarantee shall
be deemed made to the knowledge of Guarantor), and the full and timely
performance of their respective obligations under the provisions of the
foregoing Agreement. This is a guarantee of payment and performance, and not of
collection, and Guarantor acknowledges and agrees that this guarantee is
unconditional, and no release or extinguishment of Parent's and Merger Sub's
obligations or liabilities (other than in accordance with the terms of the
Agreement), whether by decree in any bankruptcy proceeding or otherwise, shall
affect the continuing validity and enforceability of this guarantee, as well as
any provision requiring or contemplating performance by Guarantor.
The provisions of Article VIII of the Agreement are
incorporated herein, mutatis mutandis, except that notices and other
communications hereunder to Guarantor shall be delivered to Tyco International
Ltd., The Gibbons Building, 10 Queen Street, Suite 301, Hamilton HM 11 Bermuda,
Attn: Secretary, Telecopy No. (441) 295-9647, Confirm No. (441) 292-8674 (with a
copy as provided therefor in Section 8.02(a)).
We understand that the Company is relying on this guarantee in
entering into the Agreement and may enforce this guarantee as if Guarantor were
a party thereto.
TYCO INTERNATIONAL LTD.
By
-----------------------------------
Name: Mark A. Belnick
Title: Executive Vice President and
Chief Corporate Counsel
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APPENDIX B
Letterhead of Schroders
June 15, 1999
The Board of Directors
Central Sprinkler Corporation
451 North Cannon Avenue
Lansdale, PA 19446
Members of the Board of Directors:
We understand that Central Sprinkler Corporation ("Central" or the "Company") is
contemplating a transaction pursuant to which Tyco International Ltd. ("Tyco")
would acquire all of the outstanding shares (the "Shares") of Common Stock of
the Company (the "Transaction"). The Transaction will be effected through a
merger (the "Merger") of Merger Subsidiary, Inc. ("Acquisition Corp."), an
indirect wholly-owned subsidiary of Tyco, with and into the Company pursuant to
which, among other things, (i) the Company would become a wholly-owned
subsidiary of Tyco, (ii) each outstanding Share (other than treasury Shares)
would be converted into the right to receive $30.00 in cash (the "Transaction
Consideration"), and (iii) concurrent with the consummation of the Merger, the
holder of each outstanding option to purchase Shares not previously exercised
would receive in cash, upon cancellation of such option, an amount equal to the
positive difference, if any, between $30.00 and the exercise price per Share of
such option multiplied by the number of Shares subject to such option. The terms
and conditions of the Transaction are more fully described in the proposed
Agreement and Plan of Merger (the "Merger Agreement").
You have requested that Schroder & Co. Inc. ("Schroders") render an opinion (the
"Opinion"), as investment bankers, as to the fairness, from a financial point of
view, of the Transaction Consideration to be received by the stockholders of the
Company other than Tyco, Acquisition Corp., and affiliates.
Schroders, as part of its investment banking business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placement and valuations for estate, corporate and
other purposes. Schroders has acted as financial advisor to Central with respect
to the Transaction for which we will receive a fee for our services, a
significant portion of which is contingent upon consummation of the Transaction.
We have in the past provided certain investment banking services to the Company,
for which we received customary fees.
In connection with the Opinion set forth herein we have, among other things:
o reviewed a draft, dated June 15, 1999, of the Merger Agreement;
o reviewed the Company's Annual Reports on Form 10-K for the fiscal years
ended October 31, 1994 through 1998, including the audited consolidated
financial statements contained therein;
o reviewed the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1999, including the unaudited consolidated financial
statements contained therein;
o reviewed historical financial results of the Company and its
subsidiaries prepared by management;
o has discussed with the senior management of the Company regarding the
business, operations and prospects of the Company and its subsidiaries;
o reviewed financial projections of the Company prepared by management;
o performed various analyses, as we deemed appropriate, of the Company
using generally accepted analytical methodologies, including (i) an
analysis of premiums paid in public merger and acquisition
transactions; (ii) the application to the financial results and
projections of the Company of the public trading multiples of companies
which we deemed comparable to the Company; (iii) the application of the
multiples reflected in recent merger and acquisition transactions
involving businesses which we deemed comparable to the financial
results of the Company; and (iv) discounting the projected cash flows
of the Company's operations;
<PAGE>
o solicited indications of interest from other potential buyers;
o reviewed historical trading prices and volume of the Company's common
stock; and
o performed such of the financial studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering the Opinion, we have assumed and relied upon the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company or obtained by us from other sources, and upon the assurance of the
Company's management that they are not aware of any information or facts that
would make the information provided to us incomplete or misleading. We have not
independently verified such information, undertaken an independent appraisal of
the assets or liabilities (contingent or otherwise) of the Company, or been
furnished with any such appraisals. With respect to financial forecasts for the
Company, we have been advised by the Company, and we have assumed, without
independent investigation, that they have been reasonably prepared and reflect
the best currently available estimates and judgment of management as to the
expected future financial performance of the Company.
The Opinion is necessarily based upon financial, economic, market and other
conditions as they exist, and the information made available to us, as of the
date hereof. We disclaim any undertakings or obligations to advise any person of
any change in any fact or matter affecting the Opinion which may come or be
brought to our attention after the date of the Opinion.
In the ordinary course of our business, we may hold and actively trade
securities of the Company (including the Shares) for our own account or for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
The Opinion does not constitute a recommendation as to any action the Board of
Directors of the Company or any stockholder of the Company should take in
connection with the Transaction or any aspect thereof and is not a
recommendation to any person on how such person should vote in the consideration
of the Merger. The Opinion relates solely to the fairness, from a financial
point of view, of the Transaction Consideration to the stockholders of the
Company other than Tyco, Acquisition Corp., and affiliates. We express no
opinion herein as to the relative merits of the Merger and any other
transactions or business strategies discussed by the Board of Directors of the
Company as alternatives to the merger or the decision of the Board of Directors
of the Company to proceed with the Merger, nor, do we express any opinion on the
structure, terms or effect of any other aspect of the Transaction.
This Opinion has been prepared at the request and for the use of the Board of
Directors of the Company in evaluating the fairness from a financial point of
view of the Transaction Consideration to the stockholders of the Company other
than Tyco, Acquisition Corp., and Affiliate, and shall not be reproduced,
summarized, described or referred to, or provided to any other person, or used
for any other purpose, without Schroders' prior written consent, except that
this letter may be reproduced in full, subject to our review and consent to the
manner or reproduction and distribution, in filings with the Securities and
Exchange Commission that are necessary in connection with the Merger.
Based upon and subject to all of the foregoing, we are of the opinion, as
investment bankers, that the Transaction Consideration is fair, from a financial
point of view, to the stockholders of the Company other than Tyco, Acquisition
Corp., and their affiliates.
Very truly yours,
SCHRODER & CO., INC.
<PAGE>
APPENDIX C
15 Pa.C.S.A. Section 1571
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1571 Application and effect of subchapter.--
(a) General rule.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the holders
of the shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to
be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the
fair value of any such shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights
shall be available without regard to the exception provided in that paragraph in
the case of:
(i) Shares converted by a plan if the shares are
not converted solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class
unless the articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the adoption of the
plan or the effectuation of the transaction the affirmative vote of a majority
of the votes cast by all shareholders of the class.
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(iii) Shares entitled to dissenters rights under
section 1906(c) (relating to dissenters
rights upon special treatment).
(3) The shareholders of a corporation that acquires by
purchase, lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the other
corporation and with or without the intervention of another corporation or other
person, shall not be entitled to the rights and remedies of dissenting
shareholders provided in this subchapter regardless of the fact, if it be the
case, that the acquisition was accomplished by the issuance of voting shares of
the corporation to be outstanding immediately after the acquisition sufficient
to elect a majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholder to dissenters
rights.
(d) Notice of dissenters rights.--Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that
the shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective.--This subchapter may
not be relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
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<PAGE>
15 Pa.C.S.A. Section 1572
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1572 Definitions.--
The following words and phrases when used in this subchapter shall have
the meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by Merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed every
act required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking into
account all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
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<PAGE>
15 Pa.C.S.A. Section 1573
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1573 Record and beneficial holders and owners.--
(a) Record holders of shares.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
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<PAGE>
15 Pa.C.S.A. Section 1574
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1574 Notice of intention to dissent.--
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
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<PAGE>
15 Pa.C.S.A. Section 1575
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1575 Notice to demand payment.--
(a) General rule.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a
request for certification of the date on which the shareholder, or the person on
whose behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt
of the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
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<PAGE>
15 Pa.C.S.A. Section 1576
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1576 Failure to comply with notice to demand payment, etc.--
(a) Effect of failure of shareholder to act.--A shareholder who fails
to timely demand payment, or fails (in the case of certificated shares) to
timely deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall retain all
other rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action.
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<PAGE>
15 Pa.C.S.A. Section 1577
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1577 Release of restrictions or payment for shares.--
(a) Failure to effectuate corporate action.--Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment.--When uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.
(c) Payment of fair value of shares.--Promptly after effectuation of
the proposed corporate action, or upon timely receipt of demand for payment if
the corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the
issuer of the shares held or owned by the dissenter for a fiscal year ending not
more than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair
value of the shares.
(3) A notice of the right of the dissenter to demand payment
or supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment.--If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
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<PAGE>
15 Pa.C.S.A. Section 1578
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1578 Estimate by dissenter of fair value of shares.--
(a) General rule.--If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate.--Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
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<PAGE>
15 Pa.C.S.A. Section 1579
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1579 June 18, 1999 Valuation proceedings generally.--
(a) General rule.--Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578
(relating to estimate by dissenter of fair value of shares);
If any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters.--All dissenters, wherever
residing, whose demands have not been settled shall be made parties to the
proceeding as in an action against their shares. A copy of the application shall
be served on each such dissenter. If a dissenter is a nonresident, the copy may
be served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
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<PAGE>
15 Pa.C.S.A. Section 1580
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
ss.1580 Costs and expenses of valuation proceedings.--
(a) General rule.--The costs and expenses of any proceeding under
section 1579 (relating to valuation proceedings generally), including the
reasonable compensation and expenses of the appraiser appointed by the court,
shall be determined by the court and assessed against the business corporation
except that any part of the costs and expenses may be apportioned and assessed
as the court deems appropriate against all or some of the dissenters who are
parties and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears.--Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(c) Award of fees for benefits to other dissenters.--If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
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<PAGE>
15 Pa.C.S.A. Section 1930
PURDON'S PENNSYLVANIA STATUTES AND CONSOLIDATED STATUTES ANNOTATED
PURDON'S PENNSYLVANIA CONSOLIDATED STATUTES ANNOTATED
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 19. FUNDAMENTAL CHANGES
SUBCHAPTER C. MERGER, CONSOLIDATION, SHARE EXCHANGES AND SALE OF ASSETS
ss.1930 Dissenters rights.--
(a) General rule.--If any shareholder of a domestic business
corporation that is to be a party to a Merger or consolidation pursuant to a
plan of Merger or consolidation objects to the plan of Merger or consolidation
and complies with the provisions of Subchapter D of Chapter 15 (relating to
dissenters rights), the shareholder shall be entitled to the rights and remedies
of dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(b) Plans adopted by directors only.--Except as otherwise provided
pursuant to section 1571(c) (relating to grant of optional dissenters rights),
Subchapter D of Chapter 15 shall not apply to any of the shares of a corporation
that is a party to a Merger or consolidation pursuant to section 1924(b)(1)(i)
(relating to adoption by board of directors).
(c) Cross references.--See sections 1571(b) (relating to exceptions)
and 1904 (relating to de facto transaction doctrine abolished).
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