<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 6, 1997
-----------------------
Allwaste, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-11016 74-2427167
- ----------------------------- ----------------------------------
(Commission File Number) (IRS Employer Identification No.)
5151 San Felipe, Suite 1600, Houston, Texas 77056
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 623-8777
---------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On March 6, 1997, Allwaste, Inc. ("Allwaste") issued a press release
announcing that it had entered into a definitive agreement (the "Agreement")
with Philip Environmental Inc. ("Philip") for the merger of Philip/Atlas Merger
Corp., an indirect wholly-owned subsidiary of Philip with and into Allwaste
(the "Merger"), which, subject to stockholder approval, regulatory approvals
and certain other conditions, will result in Allwaste becoming an indirect
wholly-owned subsidiary of Philip. On the consummation of the proposed Merger,
Allwaste stockholders will receive 0.611 shares of Philip common stock for each
share of Allwaste common stock. A copy of the press release is attached hereto
as Exhibit 99.1 and incorporated herein by reference. A copy of the Agreement
is attached hereto as Exhibit 99.2 and incorporated herein by reference.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS. This Current Report
on Form 8-K and the documents incorporated by reference herein (collectively,
the "Report") contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements other than statements of historical fact included in this Report
are forward-looking statements, including, without limitation: (a) the
statement in the joint press release of Allwaste and Philip dated March 6, 1997
(the "Press Release") that the Merger will create the largest integrated
resource recovery and industrial services company in North America; (b) the
statement in the Press Release regarding the anticipated closing date of the
Merger; (c) statements in the Press Release regarding achievement of
operational synergies which are expected to be accretive to earnings during the
first year following the consummation of the Merger; (d) statements regarding
the management and governance of the combined company; (e) the statements by
Allen Fracassi in the Press Release regarding the significant benefits of the
Merger, specifically including the statements regarding the role of the
combined company as the major consolidator in the industry; (f) the statements
by Robert Chiste in the Press Release regarding the synergies to be achieved in
the Merger; (g) the statement by Robert Chiste in the Press Release that the
combined company will be the premier full-service provider to virtually all
major industry sectors in North America; and (h) the statement by Robert Chiste
in the Press Release regarding the value-added nature of the Merger for the
stockholders of both Allwaste and Philip. Although Allwaste believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
Allwaste's expectations (the "Cautionary Statements") include: (i) the timing
and receipt of necessary regulatory and other approvals and other closing
conditions for the Merger; (ii) the ability of the combined company to achieve
administrative cost savings, insurance and bonding cost reductions, lower
interest expense and general economies of scale and generally to capitalize on
the combined asset base and strategic position of the combined entity; and
(iii) the actual results of the combined company which may be influenced by,
among other things, the level and nature of competition from other resource
recovery and industrial services companies, the current regulatory environment
and related costs, the availability of attractive acquisition candidates,
successful integration of acquired businesses, availability of working capital,
the ability to maintain margins and management of costs in a changing
regulatory environment. All related or subsequent written and oral
forward-looking statements attributable to Allwaste or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
Page 2 of 3 Pages
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibits are filed herewith:
99.1 Joint press release of Philip Environmental Inc. and Allwaste, Inc.
dated March 6, 1997.
99.2 Agreement and Plan of Merger dated March 5, 1997, by and among Philip
Environmental Inc., Taro Aggregates Ltd., Philip/Atlas Merger Corp.,
and Allwaste, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALLWASTE, INC.
By: /s/ William L. Fiedler
-------------------------------------
William L. Fiedler,
Vice President, General Counsel and
Secretary
Date: April 4, 1997
Page 3 of 3 Pages
<PAGE> 4
EXHIBIT INDEX
EXHIBIT NUMBER AND DESCRIPTION PAGE
99.1 Joint press release of Philip Environmental Inc. and Allwaste, Inc.
dated March 6, 1997.
99.2 Agreement and Plan of Merger dated March 5, 1997, by and among Philip
Environmental Inc., Taro Aggregates Ltd., Philip/Atlas Merger Corp.,
and Allwaste, Inc.
<PAGE> 1
[PHILIP ENVIRONMENTAL LOGO] [ALLWASTE LOGO]
Philip Environmental Inc. and Allwaste, Inc. To Merge
-----------------------------------------------------
To Create North America's Largest Integrated Industrial Services Company
(Hamilton, ON and Houston, TX) March 6, 1997 Philip Environmental Inc. ("Philip
Environmental") (NYSE: PEV; TSE, ME: PEN) and Allwaste, Inc. (Allwaste")
(NYSE: ALW) jointly announced today that they have signed a definitive
agreement to merge the two companies to create the largest integrated resource
recovery and industrial services company in North America. The combined company
will have annualized revenue in excess of US $1.6 billion, approximately 8,000
employees and 215 operating locations throughout North America, and in Western
Europe and South America.
Under the terms of the agreement, each share of Allwaste stock will be
exchanged for 0.611 shares of Philip Environmental based on a fixed exchange
ratio. Based on the closing price of Philip stock on March 5, 1997, the
transaction values Allwaste at US$540 million including the assumption of an
estimated US$113 million in debt. The transaction is expected to close in June
1997, and is subject to, among other things, U.S. and Canadian regulatory
approval and shareholder approval of both companies.
This combination brings together complementary operational strengths and
creates a portfolio of services to respond to the growing trends for
outsourcing and supplier reduction in the industrial marketplace. The
combination is expected to result in significant operational synergies for the
combined company and is expected to be accretive to earnings in the first year
following the consummation of the transaction. The industrial services market
is estimated by industry sources as approaching US$50 billion. It has emerged
from the traditional environmental services sector to respond to the needs of
large industrial companies which are under pressure to operate in the most cost
competitive and efficient manner. This has led to increased outsourcing
of services that are non-revenue producing, but essential to companies whose
primary source of revenue is a manufactured or processed product.
The newly combined company will organize into two major operating divisions:
Metals Recovery and Industrial Services. The Industrial Services division will
be comprised of the operations of Allwaste and Philip's existing By-Products
Recovery and Environmental Services Groups. The Metals Recovery division will
encompass all of Philip's steel, copper and aluminum processing and mill
services activities. An integration team comprised of key management from both
companies has been formed to steer the integration process.
"With this transaction, we create a company that will be a powerful force in
providing a broad range of industrial and resource recovery services," said
Allen Fracassi, President and Chief Executive Officer of Philip Environmental.
"Allwaste significantly expands our industrial service capabilities and offers
a strong infrastructure. Its 130 locations can collect materials which can be
forwarded to our network of metals and by-products processing and recovery
operations. This is a classic opportunity for two companies with limited
overlap of customers and an array of complementary services and specialized
industry focus to combine forces.
<PAGE> 2
PHILIP ENVIRONMENTAL AND ALLWASTE AGREE TO MERGE
March 6, 1997
Page 2
Together, we will exploit our strengths in serving industrial companies that
recognize the value of third-party solutions to their non-revenue producing
activities.
"Our companies share the same vision, business strategy and corporate culture,"
continued Mr. Fracassi. "These multiple synergies will result in a strong
management team with shared values and broader professional opportunities for
all our employees. We will be the major consolidator in the largely fragmented
industrial services sector."
Commenting on the merger, Robert Chiste, President and Chief Executive Officer
of Allwaste, stated, "Our companies are a perfect fit. I whole heartedly share
Philip's vision of establishing a new standard in the delivery of industrial
services to America's industrial companies. There are powerful synergies in
combining our respective core competencies, markets and geographic strengths.
Allwaste's strength in industrial services and transportation is supported by
Philip's technology leadership and operating strength in the recovery and
reuse of industrial by-products. Together we will be the premier full-service
provider to virtually all major industry sectors throughout North America,
which is in line with the objective we have set under our Target 2000 strategic
plan. We view this as a definitive value-adding event for both companies'
stockholders."
Philip is a fully integrated resource recovery and industrial services company
providing metals processing and mill services, solid and liquid by-products
recovery and industrial and remediation services to all major industry sectors.
Allwaste is a Houston-based, diversified industrial resource and services
company with 130 locations throughout the United States, Canada and Mexico. Its
ALLIES(R) (ALLwaste's Integrated Environmental Services) Program is designed to
provide industrial customers the opportunity to outsource their critical
support functions.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Allen Fracassi Robert Chiste
President & Chief Executive Officer President & Chief Executive Officer
Philip Environmental Inc. Allwaste, Inc.
For 3/6/97: (212) 688-6840 ext.290 For 3/6/97: (212) 688-6840 ext 218
Thereafter: (905) 521-1600 Thereafter: (713) 625-7047
MEDIA
In the USA In Canada
Marissa Moretti Richard Wertheim
Senior Vice President President
Dewe Rogerson, Inc. Wertheim Company
(212) 688-6840 ext. 227 (416) 594-1600
###
<PAGE> 1
EXHIBIT 99.2
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of March 5, 1997,
Among
PHILIP ENVIRONMENTAL INC.,
TARO AGGREGATES LTD.,
PHILIP/ATLAS MERGER CORP.,
and
ALLWASTE, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
The Merger
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.05. Certificate of Incorporation and By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.08. Corporate Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
Effect of the Merger on the Capital Stock
of the Constituent Corporations; Exchange
of Certificates
SECTION 2.01. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.02. Representations and Warranties of Parent, Taro and Sub . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.02. No Solicitation by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form F-4 and the Proxy Statement; Company's Stockholders' Meeting and Parent's
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.02. Letter of the Company's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.03. Letter of Parent's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.04. Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.05. Reasonable Efforts; Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.06. Rights Agreements; Consequences if Rights Triggered . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.07. Company Employee Stock Options and Restricted Stock Grants . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.08. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.09. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.11. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.12. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.13. Gain Recognition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.14. Company Shareholder Tax Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.15. Certificates of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.16. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.17. Execution of Supplementary Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.18. Pooling Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.19. Restricted Shares and Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.20. Executive Severance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.21. Certain Incentive Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.22. Allquest Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.23. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.24. SERP Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.25. Parent Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect The Merger . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.02. Conditions to Obligations of Parent, Taro and Sub . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03. Conditions to Obligation of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.02. Effect of Termination and Other Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.03. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.04. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.05. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.06. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.09. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.10. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
Exhibit A -- Form of Company Affiliate Letter
Exhibit B -- Form of Parent Affiliate Letter
iii
<PAGE> 5
Location of Defined Terms in Agreement
<TABLE>
<CAPTION>
Term Location in Agreement
- ---- ---------------------
<S> <C>
"affiliate" Section 8.03
"Agreement" Preamble
"APB 16" Section 5.18
"Certificate of Merger Section 1.03
"Certificates" Section 2.02(b)
"Closing" Section 1.02
"Closing Date" Section 1.02
"Code" Recitals
"Common Shares Trust" Section 2.02(e)(iii)
"Company" Preamble
"Company Benefit Plans" Section 3.01(i)
"Company Capital Stock" Section 3.01(c)
"Company Common Stock" Recitals
"Company Disclosure Letter" Section 3.01(b)
"Company Designees" Section 1.06
"Company Employee Stock Options" Section 3.01(c)
"Company Employee Stock Plans" Section 3.01(c)
"Company Material Adverse Effect" Section 3.01(a)
"Company Notice" Section 4.02(a)
"Company Restricted Shares" Section 5.19
"Company Rights" Section 3.01(c)
"Company Rights Agreement" Section 3.01(c)
"Company SEC Documents" Section 3.01(e)
"Company Series One Preferred Stock" Section 3.01(c)
"Company Significant Subsidiary" Section 3.01(a)
"Company Stockholder Approval" Section 3.01(k)
"Company's Stockholders' Meeting" Section 5.01(b)
"Company Stock Options" Section 5.19
"Company Subsidiary" Section 3.01(a)
"Company Superior Proposal" Section 4.02(a)
"Company Takeover Proposal" Section 4.02(a)
"Confidentiality Agreements" Section 5.04(a)
"Conversion Number" Recitals
"Convertible Debentures" Section 3.01(c)
"Convertible Notes Section 3.01(c)
"Contract" Section 3.01(d)
"DGCL" Section 1.01
"Effective Time of the Merger" Section 1.03
"Environmental Law" Section 3.01(q)(ii)
"ERISA" Section 3.01(j)
"Excess Shares" Section 2.02(e)(ii)
"Exchange Act" Section 3.01(d)
</TABLE>
1
<PAGE> 6
<TABLE>
<S> <C>
"Exchange Agent" Section 2.02(a)
"Exchange Fund" Section 2.02(a)
"Filed Company SEC Documents" Section 3.01(g)
"Filed Parent OSC Documents" Section 3.02(g)
"Form F-4" Section 3.01(f)
"GAAP" Recitals
"Governmental Entity" Section 3.01(d)
"Hazardous Substance" Section 3.01(q)(iii)
"HSR Act" Section 3.01(d)
"Indemnified Party" Section 5.08(a)
"Indemnified Parties" Section 5.08(a)
"LSARs" Section 4.01(a)(ii)
"Liens" Section 3.01(b)
"Material Breach" Section 7.02(f)
"Maximum Premium" Section 5.08(b)
"Merrill Lynch" Section 3.02(j)
"Morgan Stanley" Section 3.01(l)
"MSE" Section 3.01(d)
"NYSE" Section 2.02(e)(ii)
"Options" Section 3.01(c)
"OSC" Section 3.01(d)
"Other Canadian Securities Authorities" Section 3.02(d)
"Outside Date" Section 7.01(b)(iii)
"Parent" Preamble
"Parent Canadian Documents" Section 3.02(e)(ii)
"Parent Capital Stock" Section 3.02(c)
"Parent Common Stock" Recitals
"Parent Disclosure Letter" Section 3.02(a)
"Parent Material Adverse Effect" Section 3.02(a)
"Parent OSC Documents" Section 3.02(e)(ii)
"Parent SEC Documents" Section 3.02(e)(i)
"Parent Significant Subsidiary" Section 3.02(a)
"Parent Stockholder Approval" Section 3.02(i)
"Parent Stock Options" Section 3.02(c)
"Parent Subsidiary" Section 3.02(a)
"Parent's Stockholders' Meeting" Section 5.01(c)
"Permits" Section 3.01(d)
"person" Section 8.03
"Primary Company Executives" Section 3.01(p)
"Proxy Statement" Section 3.01(d)
"SARs" Section 4.01(a)
"SEC" Section 3.01(a)
"Securities Act" Section 3.01(e)
"SERP" Section 5.24
"Sub" Preamble
"subsidiary" Section 8.03
"Surviving Corporation" Section 1.01
</TABLE>
2
<PAGE> 7
<TABLE>
<S> <C>
"Taro" Preamble
"Tax Returns" Section 3.01(n)
"Taxes" Section 3.01(n)
"Trustee" Section 5.17
"TSE" Section 3.01(d)
</TABLE>
3
<PAGE> 8
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
March 5, 1997, among PHILIP ENVIRONMENTAL INC., an Ontario corporation
("Parent"), TARO AGGREGATES LTD., an Ontario corporation and wholly
owned subsidiary of Parent ("Taro"), PHILIP/ATLAS MERGER CORP., a
Delaware corporation and a wholly owned subsidiary of Taro ("Sub"),
and ALLWASTE, INC., a Delaware corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Taro,
Sub and the Company have approved the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of common stock, par value
$0.01 per share, of the Company (the "Company Common Stock"), not owned
directly or indirectly by Parent or the Company, will be converted into the
right to receive 0.611 (as adjusted pursuant to Sections 2.01(d), the
"Conversion Number") fully paid and nonassessable common shares, no par value,
of Parent (the "Parent Common Stock") on the terms set forth herein;
WHEREAS Parent, Taro, Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
WHEREAS for United States Federal income tax purposes it is
intended that the Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS for accounting purposes, each of the parties hereto
intends to use its reasonable efforts for the Merger be accounted for as a
pooling of interests under United States generally accepted accounting
principles ("GAAP").
<PAGE> 9
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time of the Merger (as defined in Section 1.03).
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights, properties,
liabilities and obligations of Sub in accordance with the DGCL. At the
election of Parent, any direct or indirect wholly owned subsidiary of Parent
may be substituted for Sub as a constituent corporation in the Merger;
provided, however, that such substitution has no adverse impact on the Company
or its stockholders, including, without limitation, the satisfaction of the
conditions set forth in Sections 6.02(d) and 6.03(c). In such event, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect such substitution.
SECTION 1.02. Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the "Closing") shall
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the third business day after satisfaction
of the conditions set forth in Article VI, at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, unless another
time, date or place is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time of the Merger. Upon the
Closing, the parties shall file with the Secretary of State of the State of
Delaware a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all
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other filings, recordings or publications required under the DGCL in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or at
such other time as the parties may agree and specify in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time of the
Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in the applicable provisions of Delaware Law, including
Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The Amended and Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time of the Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The Corrected By-laws of the Company as in effect
immediately prior to the Effective Time of the Merger shall be the By-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.06. Directors. (a) The Board of Directors of
Parent shall take such action as may be necessary to cause Parent's Board of
Directors following the Effective Time to include two members of the Board of
Directors of the Company, such members to be designated by the mutual agreement
of the respective chief executive officers of Parent and the Company (the
"Company Designees"). All of the Company Designees shall serve in accordance
with the Articles of Amalgamation and By-laws of Parent until their respective
successors are duly elected or appointed and qualified or until their earlier
death, resignation or removal, provided that Parent agrees to use its
reasonable best efforts to nominate the Company Designees for reelection at the
next Annual Meeting of Shareholders of Parent following the Closing.
(b) The individuals who are the directors of Sub immediately
prior to the Effective Time of the Merger shall be the directors of the
Surviving Corporation until
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thereafter they cease to be directors in accordance with the DGCL and the
Certificate of Incorporation and By-laws of the Surviving Corporation.
SECTION 1.07. Officers. The individuals who are the officers
of the Company immediately prior to the Effective Time of the Merger shall be
the officers of the Surviving Corporation until thereafter they cease to be
officers in accordance with the DGCL and the Certificate of Incorporation and
By-laws of the Surviving Corporation.
SECTION 1.08. Corporate Offices. Parent shall locate the
Surviving Corporation's principal executive offices in Houston, Texas for at
least one year following the Closing.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective
Time of the Merger, by virtue of the Merger and without any action on the part
of the holder of any shares of Company Common Stock or any shares of capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock that is owned by the Company or by any
wholly owned subsidiary of the Company and each share of Company Common Stock
that is owned by Parent, Sub or any other wholly owned subsidiary of Parent
shall automatically be canceled and retired and shall cease to exist, and no
Parent Common Stock or other consideration shall be delivered in exchange
therefor.
(c) Conversion of Company Common Stock. Subject to Section
2.02(e), each issued and outstanding
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share of Company Common Stock (other than shares to be canceled in accordance
with Section 2.01(b)) shall be converted into the right to receive the
Conversion Number of fully paid and nonassessable shares of Parent Common
Stock. As of the Effective Time of the Merger, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive upon the surrender of
such certificates, certificates representing the shares of Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock and any dividends
to the extent provided in Section 2.02(c) to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.02,
without interest.
(d) Adjustment of Conversion Number. In addition to any
adjustment in the Conversion Number pursuant to Section 5.06, in the event of
any split, combination or reclassification of any Parent Common Stock or the
authorization of any issuance of any other securities in exchange or in
substitution for shares of Parent Common Stock at any time during the period
from the date of this Agreement to the Effective Time of the Merger, the
Company and Parent shall make such adjustment to the Conversion Number as the
Company and Parent shall mutually agree so as to preserve the economic benefits
that the Company and Parent each reasonably expected on the date of this
Agreement to receive as a result of the consummation of the Merger and the
other transactions contemplated by this Agreement.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent.
Immediately following the Effective Time of the Merger, Parent shall deposit
with The Bank of New York or such other bank or trust company as may be
designated by Parent and the Company (the "Exchange Agent"), for the benefit of
the holders of shares of Company Common Stock, for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such shares of Parent Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time of the Merger, being hereinafter referred to as the
"Exchange Fund") issuable
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pursuant to Section 2.01 in exchange for outstanding shares of Company Common
Stock. The Exchange Agent shall, pursuant to mutually agreed instructions,
deliver the Parent Common Stock contemplated to be issued pursuant to Section
2.01.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time of the Merger, Parent shall cause the Exchange Agent
to mail to each holder of record of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time of the Merger
represented outstanding shares of Company Common Stock, other than shares to be
canceled or retired in accordance with Section 2.01(b), (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 customary form and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock and cash in lieu of
fractional shares. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II, cash in lieu of fractional shares of Parent Common Stock, and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.02(e), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock, and cash in
lieu of fractional shares of Parent Common Stock and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(e), may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the issuance of
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shares of Parent Common Stock to a person other than the registered holder of
such Certificate or establish to the satisfaction of Parent that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the certificate representing the appropriate number of whole shares of Parent
Common Stock, cash in lieu of any fractional shares of Parent Common Stock and
any dividends to the extent provided in Section 2.02(c) as contemplated by this
Section 2.02. No interest will be paid or will accrue on any cash payable in
lieu of any fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time of the Merger shall be paid to the holder
of any unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.02(e) until the
surrender of such Certificate in accordance with this Article II. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificate representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and the amount of dividends or other distributions
with a record date after the Effective Time of the Merger theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time of the Merger but prior to such surrender
and a payment date subsequent to such surrender payable with respect to such
whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to Section 2.02(c) or 2.02(e)) shall
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be deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented by
such Certificates, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior
to the Effective Time of the Merger which may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time of the Merger, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder
of Parent.
(ii) As promptly as practicable following the Effective Time
of the Merger, the Exchange Agent shall determine the excess of (x)
the number of shares of Parent Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 2.02(a) over (y) the aggregate
number of whole shares of Parent Common Stock to be distributed to
holders of the Certificates pursuant to Section 2.02(b) (such excess
being herein called the "Excess Shares"). As soon as practicable
after the Effective Time of the Merger, the Exchange Agent, as agent
for the holders of the Certificates, shall sell the Excess Shares at
then prevailing prices on the New York Stock Exchange, Inc. (the
"NYSE"), all in the manner provided in paragraph (iii) of this Section
2.02(e).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the
NYSE and shall be
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executed in round lots to the extent practicable. Parent shall bear
the cost of all related charges and fees of the Exchange Agent,
commissions, transfer taxes and other out-of-pocket transaction costs.
Until the proceeds of such sale or sales have been distributed to the
holders of the Certificates, the Exchange Agent shall hold such
proceeds in trust for the holders of the Certificates (the "Common
Shares Trust"). The Exchange Agent shall determine the portion of the
Common Shares Trust to which each holder of a Certificate shall be
entitled, if any, by multiplying the amount of the aggregate proceeds
comprising the Common Shares Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such
holder of a Certificate is entitled and the denominator of which is
the aggregate amount of fractional share interests to which all
holders of the Certificates are entitled.
(iv) As soon as practicable after the determination of the
amount of cash to be paid to holders of Certificates in lieu of any
fractional share interests, the Exchange Agent shall make available
such amounts, without interest, to such holders of Certificates who
have surrendered their Certificates in accordance with this Article
II.
(f) Termination of Exchange Fund and Common Shares Trust.
Any portion of the Exchange Fund and Common Shares Trust which remains
undistributed to the holders of Certificates for six months after the Effective
Time of the Merger shall be delivered to Parent, upon demand, and any holders
of Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund or the Common Shares Trust delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
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Certificates shall not have been surrendered prior to seven years after the
Effective Time of the Merger (or immediately prior to such earlier date on
which any shares of Parent Common Stock, any cash in lieu of fractional shares
of Parent Common Stock or any dividends or distributions with respect to Parent
Common Stock in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 3.01(d)),
any such shares, cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(h) Investment of Exchange Fund and Common Shares Trust. The
Exchange Agent shall invest any cash included in the Exchange Fund and Common
Shares Trust, as directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and each Company Significant Subsidiary (as hereinafter defined) is a
corporation, partnership or other legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite power and authority to carry on its business as
now being conducted. Each of the Company and each of its subsidiaries (each a
"Company Subsidiary") is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than in
such jurisdictions where the failure to be so qualified (individually or in the
aggregate) would not (i) have a material adverse effect on the business,
properties, condition (financial
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or otherwise) or results of operations of the Company and the Company
Subsidiaries, taken as a whole, or (ii) prevent or materially delay the Company
from performing its obligations under this Agreement (a "Company Material
Adverse Effect"). The Company has made available to Parent complete and
correct copies of its Amended and Restated Certificate of Incorporation and
Corrected By-laws and, to the extent requested by Parent, the certificates of
incorporation and by-laws or comparable organization documents of the Company
Significant Subsidiaries, in each case as amended to the date of this
Agreement. For purposes of this Agreement, a "Company Significant Subsidiary"
means any Company Subsidiary that constitutes a significant subsidiary of the
Company within the meaning of Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "SEC"). The Company is not in violation of any
provision of its Amended and Restated Certificate of Incorporation or Corrected
By-laws, and no Company Subsidiary is in violation of any provisions of its
certificate of incorporation, by-laws or comparable organizational documents,
except to the extent that such violations would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) Company Subsidiaries. Section 3.01(b) of the letter from
the Company, dated the date of this Agreement, addressed to Parent (the
"Company Disclosure Letter") lists each Company Significant Subsidiary and the
ownership or interest therein of the Company. All the outstanding shares of
capital stock of each Company Significant Subsidiary have been validly issued
and are fully paid and nonassessable and are owned by the Company, by another
subsidiary of the Company or by the Company and another Company Subsidiary,
free and clear of all pledges, claims, liens, charges, encumbrances and
security interests (collectively, "Liens"). Except for the capital stock of
the Company Subsidiaries and except for the ownership interests set forth in
Section 3.01(b) of the Company Disclosure Letter, the Company does not own,
directly or indirectly, any capital stock or other ownership interest, with a
fair market value as of the date of this Agreement greater than $5,000,000, in
any person.
(c) Capital Structure. The authorized capital stock of the
Company (the "Company Capital Stock") consists of 100,000,000 shares of Company
Common Stock and
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500,000 shares of preferred stock, par value $0.01 per share. Pursuant to a
Certificate of Designation of Series One Junior Participating Preferred Stock,
on August 2, 1996, the Board of Directors of the Company created a series of
100,000 shares of preferred stock designated as the "Series One Junior
Participating Preferred Stock", par value $0.01 per share (the "Company Series
One Preferred Stock"), which shares are issuable in connection with the rights
to purchase shares of Company Series One Preferred Stock (the "Company Rights")
that were issued pursuant to the Stockholder Rights Agreement dated as of
August 5, 1996 (as amended from time to time, the "Company Rights Agreement"),
between the Company and American Stock Transfer & Trust Company, as Rights
Agent. At the close of business on March 3, 1997: (i) 36,373,522 shares of
Company Common Stock were outstanding, all of which were validly issued, fully
paid and nonassessable, and no shares of Company Series One Preferred Stock, or
of any other series of preferred stock of the Company, were outstanding; (ii)
3,476,207 shares of Company Common Stock were held by the Company in its
treasury; (iii) 4,183,388 shares of Company Common Stock were issuable upon the
exercise of outstanding employee or outside director stock options (the
"Company Employee Stock Options") that were granted pursuant to the Company's
Amended and Restated 1989 Replacement Non-Qualified Stock Option Plan and
948,634 shares of Company Common Stock were issuable upon the exercise of
outstanding stock options under the Company's 1992 Limited Non-Qualified Stock
Option Plan (together with each of the Company's Target 2000: One, Two, Four
Plan, the Company's Interim Deferred Compensation Plan and the Company's
Non-Employee Director Restricted Stock Plan, under which grants of restricted
stock have been made, the "Company Employee Stock Plans"); (iv) 100,000 shares
of Company Series One Junior Participating Preferred Stock were reserved for
issuance in connection with the Company Rights; (v) 2,422,111 shares of
Company Common Stock were reserved for issuance upon the conversion of the
Company's 7 1/4% Convertible Subordinated Debentures due 2014 (the "Convertible
Debentures"); and (vi) 1,295,385 shares of Company Common Stock were reserved
for issuance upon the conversion of the Company's convertible subordinated
notes, all of which were issued to former owners of certain acquired businesses
(the "Convertible Notes"). Except as set forth above, at the close of business
on March 3, 1997, no shares of capital stock or other voting
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securities of the Company were issued, reserved for issuance or outstanding.
Except as set forth above, there are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company must vote. Except as set forth above and except as
set forth in Section 3.01(c) of the Company Disclosure Letter, as of the date
of this Agreement, there are not any options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind
(collectively, "Options") to which the Company or any Company Subsidiary is a
party or by which any of them is bound relating to the issued or unissued
capital stock of the Company or any Company Subsidiary, or obligating the
Company or any Company Subsidiary to issue, transfer, grant or sell any shares
of capital stock or other equity interests in, or securities convertible or
exchangeable for any capital stock or other equity interests in, the Company or
any Company Subsidiary or obligating the Company or any Company Subsidiary to
issue, grant, extend or enter into any such Options. All shares of Company
Common Stock that are subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instrument pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.01(c) of the Company
Disclosure Letter, as of the date of this Agreement, there are not any
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary, or make any investment in excess of $500,000
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other person.
(d) Authority; Noncontravention. The Company has all
requisite corporate power and authority to enter into this Agreement and,
subject to the Company Stockholder Approval (as defined in Section 3.01(k)), to
consummate the transactions contemplated by this Agreement. The Board of
Directors of the Company has duly approved this Agreement and the transactions
contemplated by this Agreement, and has resolved to recommend to the Company's
stockholders that they give the Company Stockholder Approval. The execution
and delivery of this Agreement by the Company and the consummation by the
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Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company,
subject to the Company Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by each of Parent, Taro and Sub, constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms. Except as set forth in Section 3.01(d) of the
Company Disclosure Letter, the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of consent, termination,
purchase, cancellation or acceleration of any obligation or to loss of any
property, rights or benefits under, or result in the imposition of any
additional obligation under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any Company Subsidiary under, (i)
the Amended and Restated Certificate of Incorporation or Corrected By-laws of
the Company or the comparable organizational documents of any Company
Subsidiary, (ii) any contract, instrument, permit, concession, franchise,
license, loan or credit agreement, note, bond, mortgage, indenture, lease or
other property agreement, partnership or joint venture agreement or other
legally binding agreement, whether oral or written (a "Contract"), applicable
to the Company or any Company Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not have a Company Material
Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with, any United States Federal, state or
local government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, including Canada and its
provinces (a "Governmental Entity"), is required by or with respect to the
Company or any Company Subsidiary in
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connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report
form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filing with the SEC of (A) a proxy
statement relating to the meetings of the Company's stockholders and, if
required, the Parent's stockholders to be held in connection with the Merger
and the transactions contemplated by this Agreement (as amended or supplemented
from time to time, the "Proxy Statement"), and (B) such reports under Section
12 or 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) such filings with the NYSE,
the Toronto Stock Exchange (the "TSE"), the Montreal Stock Exchange (the "MSE")
and the Ontario Securities Commission (the "OSC") as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iv) the filing of the Certificate of Merger with the Delaware
Secretary of State, (v) those that may be required solely by reason of Parent's
or Sub's (as opposed to any other third party's) participation in the Merger
and the other transactions contemplated by this Agreement and (vi) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, (x) as may be required under the laws of any foreign country in which
the Company or any Company Subsidiary conducts any business or owns any
property or assets, (y) as are set forth in Section 3.01(d) of the Company
Disclosure Letter or (z) that, if not obtained or made, would not, individually
or in the aggregate, have a Company Material Adverse Effect. Except as set
forth in Section 3.01(d) of the Company Disclosure Letter, the Company and the
Company Subsidiaries possess all certificates, franchises, licenses, permits,
authorizations and approvals issued to or granted by Governmental Entities
(collectively, "Permits") necessary to conduct their business as such business
is currently conducted, except for such Permits, the lack of possession of
which would not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in Section 3.01(d) of the Company Disclosure
Letter, (i) all such Permits are validly held by the Company or the Company
Subsidiaries, and the Company and the Company Subsidiaries have complied in all
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respects with all terms and conditions thereof, except for such instances where
the failure to validly hold such Permits or the failure to have complied with
such Permits has not, and is not reasonably expected to have, a Company
Material Adverse Effect, (ii) none of such Permits will be subject to
suspension, modification, revocation or nonrenewal as a result of the execution
and delivery of this Agreement or the consummation of the Merger, other than
such Permits, the suspension, modification or nonrenewal of which, in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect and (iii) neither the Company nor any Company
Significant Subsidiary has received any written warning, notice, notice of
violation or probable violation, notice of revocation, or other written
communication from or on behalf of any Governmental Entity that remains
unresolved alleging (A) any violation of any such Permit or (B) that the
Company or any Company Significant Subsidiary requires any Permit required for
its business, as such business is currently conducted, that is not currently
held by it, which violation of or failure to hold such permit would have a
material adverse effect on the ability of the Company or any Company
Significant Subsidiary to conduct its business.
(e) SEC Documents; Undisclosed Liabilities. (i) The Company
has filed all required reports, forms and other documents with the SEC since
January 1, 1995 (the "Company SEC Documents"). As of its date, each Company
SEC Document complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents. None of the Company SEC
Documents contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent that such statements have been modified or
superseded by a later filed Company SEC Document.
(ii) The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and the
published
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rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted
accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods indicated (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of the
Company as of the dates thereof and the consolidated results of its
operations and cash flows for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Filed Company SEC
Documents (as defined in Section 3.01(g)), neither the Company nor any
Company Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a
consolidated balance sheet of the Company and the consolidated Company
Subsidiaries or in the notes thereto and which, individually or in the
aggregate, would reasonably be expected to have a Company Material
Adverse Effect, other than any such liabilities or obligations that
were required to be set forth in the Company's Quarterly Report on
Form 10-Q for the quarter ended November 30, 1996. None of the
Company Subsidiaries is subject to the informational reporting
requirements of Section 13 of the Exchange Act.
(f) Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form F-4 (or such other form as deemed
appropriate) to be filed with the SEC by Parent in connection with the issuance
of Parent Common Stock in the Merger (the "Form F-4") will, at the time the
Form F-4 is filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) the Proxy Statement will, at the date the Proxy Statement is first mailed
to the Company's stockholders and Parent's stock-holders or at the time of the
Company's Stockholders' Meeting (as
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defined in Section 5.01(b)) and the Parent's Stockholders' Meeting (as defined
in Section 5.01(c)), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or warranty
is made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Sub for inclusion
or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except as set
forth in Section 3.01(g) of the Company Disclosure Schedule or as disclosed in
the Company SEC Documents filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), from November 30, 1996 to
the date of this Agreement, the Company has conducted its business only in the
ordinary course, and during the period from November 30, 1996, to the date of
this Agreement:
(i) there has not been any event, change, effect or
development which, individually or in the aggregate, has had or is, so
far as reasonably can be foreseen, likely to have, a Company Material
Adverse Effect;
(ii) there has not been any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any shares of Company Capital Stock;
(iii) there has not been any split, combination or
reclassification of any Company Capital Stock or any issuance or the
authorization of any issuance of any other securities in exchange or
in substitution for shares of Company Capital Stock;
(iv) there has not been (A) any granting by the Company or any
Company Subsidiary to any executive officer of the Company or any
Company Subsidiary of any increase in compensation, except in the
ordinary course of business consistent with prior practice or
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<PAGE> 26
as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed
Company SEC Documents, (B) any granting by the Company or any Company
Subsidiary to any such executive officer of any increase in severance
or termination pay, except as was required under any employment,
severance or termination agreements in effect as of the date of the
most recent audited financial statements included in the Filed Company
SEC Documents or (C) any entry by the Company or any Company
Subsidiary into any employment, severance or termination agreement
with any such executive officer; and
(v) there has not been any change in accounting methods,
principles or practices by the Company or any Company Significant
Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in United States
generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed Company SEC
Documents, there is no suit, action or proceeding pending or, to the knowledge
of the Company, threatened against the Company or any Company Subsidiary that,
individually or in the aggregate, would reasonably be expected to have a
Company Material Adverse Effect, and there is not any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Company Subsidiary having, or which would reasonably
be expected to have, any Company Material Adverse Effect. As of the date of
this Agreement, except as disclosed in the Filed Company SEC Documents, there
is no suit, action or proceeding pending, or, to the knowledge of the Company,
threatened, against the Company or any Company Subsidiary that, individually or
in the aggregate, would reasonably be expected to prevent or delay in any
material respect the consummation of the Merger or the transactions
contemplated by this Agreement.
(i) Absence of Changes in Benefit Plans. Except as disclosed
in the Filed Company SEC Documents (and except as contemplated by this
Agreement) or in Section 3.01(i) of the Company Disclosure Letter, since the
date of the most recent audited financial statements
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<PAGE> 27
included in the Filed Company SEC Documents and prior to the date of this
Agreement, there has not been any adoption or amendment in any material respect
by the Company or any Company Subsidiary of any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former employee, officer or
director of the Company or any Company Subsidiary (collectively, "Company
Benefit Plans").
(j) ERISA Compliance. Except as described in the Filed
Company SEC Documents or in Section 3.01(j) of the Company Disclosure Letter or
as would not have a Company Material Adverse Effect, individually or in the
aggregate, (i) all employee benefit plans or programs maintained for the
benefit of the current or former employees or directors of the Company or any
Company Subsidiary that are sponsored, maintained or contributed to by the
Company or any Company Subsidiary, or with respect to which the Company or any
Company Subsidiary has any liability, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), are in compliance with all
applicable requirements of law, including ERISA and the Code, and (ii) neither
the Company nor any Company Subsidiary has any liabilities or obligations with
respect to any such employee benefit plans or programs, whether accrued,
contingent or otherwise, nor to the knowledge of the Company are any such
liabilities or obligations expected to be incurred. Except as set forth in
Section 3.01(j) of the Company Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or in combination with another event) constitute an event under
any benefit or compensation plan, policy, arrangement or agreement or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or compensation or obligation to fund benefits or
compensation with respect to any employee. The only employment, severance or
termination agreements or severance or termination plans, policies or
20
<PAGE> 28
arrangements applicable to the Company or the Company Subsidiaries are those
specifically set forth in Section 3.01(j) of the Company Disclosure Letter.
(k) Voting Requirements. The approval and adoption of this
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock (the "Company Stockholder Approval") is the only vote of the
holders of any class or series of Company Capital Stock necessary to approve
this Agreement and the transactions contemplated by this Agreement.
(l) Brokers; Schedule of Fees and Expenses. Morgan Stanley &
Co. Incorporated ("Morgan Stanley") is the only broker, investment banker,
financial advisor or other person entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. A copy of Morgan Stanley's engagement letter with
the Company has been delivered to Parent.
(m) Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of Morgan Stanley, dated the date of this
Agreement, that, as of such date, the Conversion Number is fair from a
financial point of view to the Company's stockholders, a signed copy of which
has been delivered to Parent.
(n) Taxes. (i) The Company and each Company Subsidiary have
timely filed (or have had timely filed on their behalf) or will file or cause
to be timely filed, all material Tax Returns required by applicable law to be
filed by any of them prior to or as of the Effective Time of the Merger. All
such material Tax Returns are, or will be at the time of filing, true, complete
and correct in all material respects.
(ii) The Company and each Company Subsidiary have paid (or
have had paid on their behalf) or, where payment is not yet due, have
established (or have had established on their behalf and for their
sole benefit and recourse) or will establish or cause to be
established on or before the Effective Time of the Merger an adequate
accrual for the payment of all Taxes due with respect to any period
ending prior to or as of the Effective Time of the
21
<PAGE> 29
Merger, except where the failure to pay or establish adequate reserves
has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(iii) No deficiencies for any material Taxes have been proposed,
asserted or assessed against the Company or any Company Subsidiary,
and no requests for waivers of the time to assess any such material
Taxes are pending. The Federal income Tax Returns of the Company and
each Company Subsidiary consolidated in such Tax Returns are not
currently being examined for years prior to the year ended August 31,
1992 and the statute of limitations has run for years prior to August
31, 1992.
(iv) The Company has no reason to believe that any conditions
exist that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(v) There are no material Liens for Taxes upon the assets of
the Company except Liens for Taxes not yet due.
(vi) There are no material United States federal, state,
local or foreign audits or other administrative proceedings or court
proceedings presently pending with regard to any Taxes or Returns of
the Company.
(vii) Except as set forth in Section 3.02(n)(vii) of the
Company Disclosure Letter, the Company is not a party to any agreement
or arrangement (written or oral) providing for the allocation or
sharing of Taxes.
(viii) The Company has not filed a consent pursuant to Section
341(f)(2) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company.
(ix) The Company is a corporation within the meaning
of Section 7701(a)(3) of the Code.
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<PAGE> 30
(x) For purposes of this Agreement, the following terms
shall have the following meanings:
(A) "Taxes" shall mean all United States and
Canadian Federal, state, provincial, territorial, local and
foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including
any interest, additions to tax, or penalties applicable
thereto.
(B) "Tax Returns" shall mean all United States and
Canadian Federal, state, provincial, territorial, local and
foreign tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended tax
return relating to Taxes.
(o) Compliance with Laws. Except as reflected in the Company
Disclosure Letter, neither the Company nor any Company Subsidiary has violated
or failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable to its business
or operations, except for violations and failures to comply that would not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
(p) No Excess Parachute Payments. Other than payments that
may be made to the persons listed in Section 3.01(p) of the Company Disclosure
Letter (the "Primary Company Executives"), any amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement (whether alone or in
combination with a qualifying termination of employment) by any employee,
officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as an "excess parachute payment" (as such
term is defined in Section 280G(b)(1) of the Code). Set forth in Section
3.01(p) of the Company Disclosure Letter is (i) the estimated maximum amount
that could be paid to each Primary Company Executive as a result of the trans-
23
<PAGE> 31
actions contemplated by this Agreement under all employment, severance and
termination agreements, other compensation arrangements and Company Benefit
Plans currently in effect (together with a qualifying termination of
employment); and (ii) the "base amount" (as such term is defined in Section
280G(b)(3) of the Code) for each Primary Company Executive calculated as of the
date of this Agreement.
(q) Environmental Matters. (i) Except as disclosed in the
Company SEC Documents or as set forth in Section 3.01(q) of the Company
Disclosure Letter, (A) the Company and the Company Subsidiaries have conducted
their respective businesses in compliance with all applicable Environmental
Laws and are currently in compliance with all such laws, including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (B) none of the properties currently or formerly owned or operated
by the Company or any Company Subsidiaries contains any Hazardous Substance in
amounts exceeding the levels permitted by applicable Environmental Laws, (C)
neither the Company nor any Company Subsidiaries has received any notices,
demand letters or requests for information from any Governmental Entity or
third party indicating that the Company or any Company Subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, including, without limitation,
liability relating to sites not owned or operated by the Company or any Company
Subsidiary, (D) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings, pending or
threatened, against the Company or any Company Subsidiaries relating to any
violation of or liability under, or alleged violation of or liability under,
any Environmental Law, (E) all reports that are required to be filed by the
Company or any Company Subsidiaries concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law have
been so filed, (F) no Hazardous Substance has been disposed of, released or
transported in violation of or under circumstances that could create liability
under any applicable Environmental Law from any properties owned by the Company
or any Company Subsidiaries as a result of any activity of the Company or any
Company Subsidiaries during the time such properties were
24
<PAGE> 32
owned, leased or operated by the Company or any Company Subsidiaries, (G)
neither the Company, any of the Company Subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (A) through (G) that, singly or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect, and (H) the Company has
provided Parent with each environmental audit, test or analysis performed
within the last three years of any property currently or formerly owned or
operated by the Company or any Company Subsidiary (x) which involves any
condition of environmental impairment which would give rise to a Company
Material Adverse Effect and (y) of which the Company has knowledge.
(ii) As used herein, "Environmental Law" means any United
States or Canadian Federal, provincial, territorial, state, local or
foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
governmental entity relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances, in each case as amended and as in effect on the
Closing Date. The term "Environmental Law" includes, without
limitation, (i) the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972,
the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal Act and the Federal Toxic Substances Control Act, the Federal
Insecti-
25
<PAGE> 33
cide, Fungicide and Rodenticide Act, and the Federal Occupational
Safety and Health Act of 1970, each as amended and as in
effect on the Closing Date, and (ii) any common law or equitable
doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(iii) As used herein, "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive, or dangerous, or
otherwise regulated, under any Environmental Law. Hazardous Substance
includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, or asbestos containing material, urea
formaldehyde foam insulation, lead or polychlorinated byphenyls.
(r) State Takeover Statutes. The Board of Directors of the
Company has approved the Merger and this Agreement, and such approval is
sufficient to render inapplicable to the Merger, this Agreement and the
transactions contemplated by this Agreement, the provisions of Section 203 of
the DGCL. To the best of the Company's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated by this
Agreement.
(s) Rights Agreement. The Company has taken and will take
all necessary action to (i) render the Company Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement and (ii)
ensure that (x) neither Parent nor any of its affiliates shall become an
Acquiring Person (as defined in the Company Rights Agreement) as a result of
the transactions contemplated hereby, (y) none of a Distribution Date, Shares
Acquisition Date or Section 13 Event (each as de-
26
<PAGE> 34
fined in the Company Rights Agreement) shall occur by reason of the approval,
execution or delivery of this Agreement, the announcement or consummation of
the Merger or the consummation of any of the other transactions contemplated by
this Agreement and (z) the Company Rights shall expire immediately prior to the
Effective Time of the Merger.
SECTION 3.02. Representations and Warranties of Parent, Taro
and Sub. Parent, Taro and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of
Parent, Taro, Sub and each Parent Significant Subsidiary (as hereinafter
defined) is a corporation, partnership or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite power and authority to carry on its
business as now being conducted. Each of Parent, Taro, Sub and each of
Parent's subsidiaries (each a "Parent Subsidiary") is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified (individually or in the aggregate) would not (i) have a
material adverse effect on the business, properties, condition (financial or
otherwise) or results of operations of Parent and the Parent Subsidiaries,
taken as a whole, or (ii) prevent or materially delay Parent from performing
its obligations under this Agreement (a "Parent Material Adverse Effect").
Parent has made available to the Company complete and correct copies of its
Articles of Amalgamation and By-laws, the Certificate of Incorporation and
By-Laws of Taro, the Certificate of Incorporation and By-Laws of Sub and, to
the extent requested by the Company, the certificates of incorporation and
by-laws or comparable organizational documents of the Parent Significant
Subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "Parent Significant Subsidiary" means the Parent
Subsidiaries set forth in Section 3.02(a) of the letter from Parent, dated the
date of this Agreement, addressed to the Company (the "Parent Disclosure
Letter"). Parent has no subsidiaries that constitute a significant subsidiary
of Parent within the meaning of Rule 1-02 of Regulation S-X of the SEC
27
<PAGE> 35
other than those set forth in Section 3.02(a) of the Parent Disclosure Letter.
Parent is not in violation of any provision of its Articles of Amalgamation or
By-laws, neither Taro nor Sub is in violation of its certificate of
incorporation or by-laws, and no Parent Subsidiary is in violation of any
provisions of its certificate of incorporation, by-laws or comparable
organizational documents, except to the extent that such violations would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
(b) Parent Subsidiaries. Section 3.02(b) of the Parent
Disclosure Letter lists each Parent Significant Subsidiary and the ownership or
interest therein of Parent. All the outstanding shares of capital stock of
each Parent Significant Subsidiary have been validly issued and are fully paid
and nonassessable and, except as set forth in Section 3.02(b) of the Parent
Disclosure Letter, are owned by Parent, by another subsidiary of Parent or by
Parent and another Parent Subsidiary, free and clear of all Liens. Except for
the capital stock of the Parent Subsidiaries and except for the ownership
interests set forth in Section 3.02(b) of the Parent Disclosure Letter or in
the Parent OSC Documents (as defined in Section 3.02(e)(ii)), Parent does not
own, directly or indirectly, any capital stock or other ownership interest,
with a fair market value as of the date of this Agreement greater than
$15,000,000, in any person.
(c) Capital Structure. The authorized capital stock of
Parent (the "Parent Capital Stock") consists of an unlimited number of shares
of Parent Common Stock. At the close of business on February 28, 1997: (i)
71,498,847 shares of Parent Common Stock were outstanding, all of which were
validly issued, fully paid and nonassessable; and (ii) 5,243,535 shares of
Parent Common Stock were reserved for issuance upon the exercise of outstanding
stock options (the "Parent Stock Options") pursuant to plans or arrangements
previously described to the Company. Except as set forth above, at the close
of business on February 28, 1997, no shares of capital stock or other voting
securities of Parent were issued, reserved for issuance or outstanding. Except
as set forth above, there are not any bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Parent must vote. Except as set forth above and
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<PAGE> 36
except as set forth in Section 3.02(c) of the Parent Disclosure Letter, as of
the date of this Agreement, there are not any Options to which Parent or any
Parent Subsidiary is a party or by which any of them is bound relating to the
issued or unissued capital stock of Parent or any Parent Subsidiary, or
obligating Parent or any Parent Subsidiary to issue, transfer, grant or sell
any shares of capital stock or other equity interests in, or securities
convertible or exchangeable for any capital stock or other equity interests in,
Parent or any Parent Subsidiary or obligating Parent or any Parent Subsidiary
to issue, grant, extend or enter into any such Options. All shares of Parent
Common Stock that are subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instrument pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable. All shares of Parent Common Stock that are subject to issuance
pursuant to the Merger, upon issuance pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable. Except as set forth
in Section 3.02(c) of the Parent Disclosure Letter, as of the date of this
Agreement, there are not any outstanding contractual obligations of Parent or
any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent or any Parent Subsidiary, or make any investment in
excess of $500,000 (in the form of a loan, capital contribution or otherwise)
in, any Parent Subsidiary or any other person. As of the date of this
Agreement, the authorized capital stock of Sub consists of 100 shares of common
stock, par value $0.01 per share, all of which have been validly issued, are
fully paid and nonassessable and are owned by Parent free and clear of any
Lien.
(d) Authority; Noncontravention. Parent, Taro and Sub have
all requisite corporate power and authority to enter into this Agreement and,
subject to the Parent Stockholder Approval (as defined in Section 3.02(j)), to
consummate the transactions contemplated by this Agreement. The Board of
Directors of Parent has approved this Agreement and the transactions
contemplated by this Agreement, and has resolved to recommend to Parent's
stockholders that they give the Parent Stockholder Approval, if required. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, in each case by Parent or by
Parent, Taro and Sub, as the case may be, have been duly authorized by all
necessary corporate action on the part
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<PAGE> 37
of Parent, Taro and Sub, subject to the Parent Stockholder Approval. This
Agreement has been duly executed and delivered by Parent, Taro and Sub,
respectively, and, assuming the due authorization, execution and delivery by
the Company, constitutes a valid and binding obligation of Parent, Taro and
Sub, respectively, enforceable against each such party in accordance with its
terms. Except as set forth in Section 3.02(d) of the Parent Disclosure Letter,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of consent, termination, purchase, cancellation
or acceleration of any obligation or to loss of any property, rights or
benefits under, or result in the imposition of any additional obligation under,
or result in the creation of any Lien upon any of the properties or assets of
Parent, Taro, Sub or any other Parent Subsidiary under, (i) Articles of
Amalgamation or By-laws of Parent, the articles or certificates of
incorporation and by-laws of Taro or Sub, or the comparable organizational
documents of any Parent Subsidiary, (ii) any Contract applicable to Parent,
Taro, Sub or any other Parent Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Taro, Sub or any other
Parent Subsidiary or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not have a Parent
Material Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent, Taro, Sub or any other Parent Subsidiary in
connection with the execution and delivery of this Agreement by Parent, Taro or
Sub, as the case may be, or the consummation by Parent, Taro or Sub, as the
case may be, of the transactions contemplated by this Agreement, except for (i)
the filing of a premerger notification and report form by Parent under the HSR
Act, (ii) such filings as may be required to obtain approvals under premerger
notification provisions of the Competition Act (Canada), (iii) the filing with
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<PAGE> 38
the SEC of (A) the Form F-4 and the Proxy Statement and (B) such reports under
Section 13(a) of the Exchange Act, as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (iv) the filing
with the Ontario Securities Commission (the "OSC") and other relevant Canadian
securities regulatory authorities (the "Other Canadian Securities Authorities")
of (A) the Proxy Statement and (B) such reports under Section 75(2) of the
Securities Act (Ontario)and other Canadian securities laws, as may be required
in connection with this Agreement and the transactions contemplated by this
Agreement, (v) such filings with the NYSE, the TSE and the MSE as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (vi) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other jurisdictions in which Parent is qualified to do business, (vii) those
that may be required solely by reason of the Company's (as opposed to any other
third party's) participation in the Merger and the other transactions
contemplated by this Agreement and (viii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings, (x) as may be
required under the laws of any foreign country in which Parent or any Parent
Subsidiary conducts any business or owns any property or assets, (y) as are set
forth in Section 3.02(d) of the Parent Disclosure Letter or (z) that, if not
obtained or made, would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Except as set forth in Section 3.02(d) of the Parent
Disclosure Letter, Parent and the Parent Subsidiaries possess all Permits
necessary to conduct their business as such business is currently conducted,
except for such Permits, the lack of possession of which would not reasonably
be expected to have, a Parent Material Adverse Effect. Except as set forth in
Section 3.02(d) of the Parent Disclosure Letter, (i) all such Permits are
validly held by Parent or the Parent Subsidiaries, and Parent and the Parent
Subsidiaries have complied in all respects with all terms and conditions
thereof, except for such instances where the failure to validly hold such
Permits or the failure to have complied with such Permits has not, and is not
reasonably expected to have, a Parent Material Adverse Effect, (ii) none of
such Permits will be subject to suspension, modification, revocation or
nonrenewal as a result of the execution and delivery of this Agreement or the
consummation of the
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Merger, other than such Permits the suspension, modification or nonrenewal of
which, in the aggregate, have not had and would not reasonably be expected to
have a Parent Material Adverse Effect and (iii) since December 31, 1995,
neither Parent nor any Parent Subsidiary has received any written warning,
notice, notice of violation or probable violation, notice of revocation, or
other written communication that could have a Parent Material Adverse Effect
from or on behalf of any Governmental Entity that remains unresolved, alleging
(A) any violation of such Permit or (B) that Parent or any Parent Subsidiary
requires any Permit required for its business, as such business is currently
conducted, that is not currently held by it which violation of or failure to
hold such permit would have a material adverse effect on the ability of Parent
or any Parent Subsidiary to conduct its business.
(e) Publicly Filed Documents; Undisclosed Liabilities. (i)
Parent has filed all required reports, forms, and other documents with the SEC
since January 1, 1995 (the "Parent SEC Documents"). As of its date, each
Parent SEC Document complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder, applicable to such Parent SEC
Documents. None of the Parent SEC Documents contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
that such statements have been modified or superseded by a later filed Parent
SEC Document.
(ii) Since January 1, 1995, Parent has filed all required
reports, forms, and other documents with the OSC (the "Parent OSC
Documents") and with Other Canadian Securities Authorities
(collectively with the Parent OSC Documents, the "Parent Canadian
Documents"). As of its date, each Parent Canadian Document complied
in all material respects with the requirements of the Securities Act
(Ontario) and other relevant Canadian securities laws and the
regulations and policy statements of the OSC and the Other Canadian
Securities Authorities promulgated thereunder, applicable to such
Parent Canadian Docu-
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ments. None of the Parent Canadian Documents contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except to the extent that such statements
have been modified or superseded by a later filed Parent Canadian
Document.
(iii) The consolidated financial statements of Parent
included in the Parent OSC Documents comply as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the OSC with respect thereto, have been
prepared in accordance with the accounting principles generally
accepted in Canada (except, in the case of unaudited statements,
applied on a consistent basis during the periods indicated (except as
may be indicated in the notes thereto)) and fairly present the
consolidated financial position of Parent as of the dates thereof and
the consolidated results of its operations and cash flows for the
respective periods indicated therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments). The
audited consolidated financial statements and unaudited interim
consolidated financial statements of Parent included in the Parent OSC
Documents have been prepared in accordance with Canadian generally
accepted accounting principles and have been reconciled to United
States generally accepted accounting principles through a note
reconciliation described in the audited financial statements, in each
case applied on a consistent basis throughout the periods involved
(except as may be indicated therein or in the notes thereto) and
fairly present the financial position of Parent and its subsidiaries
as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended, in the case
of the unaudited interim financial statements, to normal year-end and
audit adjustments (including reconciliation of Canadian generally
accepted accounting principles to United States generally accepted
accounting principles) and any other adjustments described therein.
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(iv) Except as set forth in the Filed Parent OSC Documents
(as defined in Section 3.02(g)), neither Parent nor any Parent
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by the applicable
generally accepted accounting principles to be set forth on a
consolidated balance sheet of Parent and the consolidated Parent
Subsidiaries or in the notes thereto and which, individually or in the
aggregate, would reasonably be expected to have a Parent Material
Adverse Effect. None of the Parent Subsidiaries is subject to the
informational reporting requirements of the Securities Act (Ontario),
other Canadian securities laws or the Exchange Act.
(f) Information Supplied. None of the information supplied
or to be supplied by Parent, Taro or Sub for inclusion or incorporation by
reference in (i) the Form F-4 will, at the time the Form F-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders and Parent's stockholders or at the time of the
Company's Stockholders' Meeting and the Parent's Stockholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form F-4 will comply as to form in all material respects with
the requirements of the Securities Act and Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or warranty
is made by Parent, Taro or Sub with respect to statements made or incorporated
by reference therein based on information supplied by the Company for inclusion
or incorporation by reference in the Form F-4.
(g) Absence of Certain Changes or Events. Except as
disclosed in the Parent OSC Documents (the "Filed Parent OSC Documents") filed
and publicly available prior to the date of this Agreement, or as set forth
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in Section 3.02(g) of the Parent Disclosure Letter, from September 30, 1996 to
the date of this Agreement, Parent has conducted its business only in the
ordinary course, and during the period from September 30, 1996, to the date of
this Agreement:
(i) there has not been any event, change, effect or
development which, individually or in the aggregate, has had or, so
far as reasonably can be foreseen, is likely to have, a Parent
Material Adverse Effect;
(ii) there has not been any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any shares of Parent Capital Stock;
(iii) there has not been any split, combination or
reclassification of any Parent Capital Stock or any issuance or the
authorization of any issuance of any other securities in exchange or
in substitution for shares of Parent Capital Stock; and
(iv) there has not been any change in accounting methods,
principles or practices by Parent or any Parent Significant Subsidiary
materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in Canadian generally
accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed Parent OSC
Documents or in Section 3.02(h) of the Parent Disclosure Letter, there is no
suit, action or proceeding pending or, to the knowledge of Parent, threatened
against Parent or any Parent Subsidiary (and Parent does not have any
reasonable basis to expect any such suit, action or proceeding to be commenced)
that, individually or in the aggregate, could reasonably be expected to have a
Parent Material Adverse Effect, and there is not any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any Parent Subsidiary having, or which, insofar as reasonably
can be foreseen, in the future would have, any Parent Material Adverse Effect.
As of the date of this Agreement, except as disclosed in the Filed Parent OSC
Documents or in Section 3.02(h) of the Parent Disclosure Letter, there is no
suit, action or
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<PAGE> 43
proceeding pending, or, to the knowledge of Parent, threatened, against Parent
or any Parent Subsidiary (and Parent does not have any reasonable basis to
expect any such suit, action or proceeding to be commenced) that, individually
or in the aggregate, would reasonably be expected to prevent or delay in any
material respect the consummation of the Merger or the transactions
contemplated by this Agreement.
(i) ERISA Compliance. Except as described in the Filed
Parent OSC Documents or as would not have a Parent Material Adverse Effect,
individually or in the aggregate, (i) all employee benefit plans or programs
maintained for the benefit of the current or former employees or directors of
the Parent or any Parent Subsidiary that are sponsored, maintained or
contributed to by Parent or any Parent Subsidiary, or with respect to which
Parent or any Parent Subsidiary has any liability, including any such plan that
is an "employee benefit plan" as defined in Section 3(3) of ERISA, are in
compliance with all applicable requirements of law, including ERISA and the
Code, and (ii) neither Parent nor any Parent Subsidiary has any liabilities or
obligations with respect to any such employee benefit plans or programs,
whether accrued, contingent or otherwise, nor to the knowledge of Parent are
any such liabilities or obligations expected to be incurred. Except as set
forth in Section 3.02(i) of the Parent Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or in combination with another event) constitute an event under
any benefit or compensation plan, policy, arrangement or agreement or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or compensation or obligation to fund benefits or
compensation with respect to any employee.
(j) Voting Requirements. The approval and adoption by
Parent's stockholders of the issuance of shares of Parent Common Stock pursuant
to the Merger ("Parent Stockholder Approval") as required by NYSE Rule
312.03(c) is the only vote of the holders of any class or series of Parent
Capital Stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
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(k) Brokers; Schedule of Fees and Expenses. Merrill Lynch &
Co. ("Merrill Lynch") is the only broker, investment banker, financial advisor
or other person entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
(l) Opinion of Financial Advisor. The Board of Directors of
Parent has received the opinion of Merrill Lynch, dated the date of this
Agreement, to the effect that, as of such date, the Conversion Number is fair
from a financial point of view to Parent, a signed copy of which opinion has
been delivered to the Company.
(m) Taxes. (i) Parent and each Parent Subsidiary have
timely filed (or have had timely filed on their behalf) or will file or cause
to be timely filed, all material Tax Returns required by applicable law to be
filed by any of them prior to or as of the Effective Time of the Merger. All
such material Tax Returns are, or will be at the time of filing, true, complete
and correct in all material respects.
(ii) Parent and each Parent Subsidiary have paid (or have had
paid on their behalf) or, where payment is not yet due, have
established (or have had established on their behalf and for their
sole benefit and recourse) or will establish or cause to be
established on or before the Effective Time of the Merger an adequate
accrual for the payment of all Taxes due with respect to any period
ending prior to or as of the Effective Time of the Merger, except
where the failure to pay or establish adequate reserves has not had
and would not reasonably be expected to have a Parent Material Adverse
Effect.
(iii) Except as set forth in Section 3.02(m) of the Parent
Disclosure Letter, no deficiencies for any material Taxes have been
proposed, asserted or assessed against Parent or any Parent
Subsidiary, and no requests for waivers of the time to assess any such
material Taxes are pending.
(iv) Parent has no reason to believe that any conditions
exist or any conditions or intentions
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will exist that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(n) Compliance with Laws. Except as reflected in the Parent
Disclosure Letter, neither Parent nor any Parent Subsidiary has violated or
failed to comply with any statute, law, ordinance, regulation, rule, judgment,
decree or order of any Governmental Entity applicable to its business or
operations, except for violations and failures to comply that would not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect.
(o) Environmental Matters. (i) Except as disclosed in the
Parent OSC Documents, (A) Parent and the Parent Subsidiaries have conducted
their respective businesses in compliance with all applicable Environmental
Laws and are currently in compliance with all such laws, including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (B) none of the properties currently or formerly owned or operated
by Parent or any Parent Subsidiaries contains any Hazardous Substance in
amounts exceeding the levels permitted by applicable Environmental Laws, (C)
neither Parent nor any Parent Subsidiaries has received any notices, demand
letters or requests for information from any Governmental Entity or third party
indicating that Parent or any Parent Subsidiaries may be in violation of, or
liable under, any Environmental Law in connection with the ownership or
operation of their businesses, including, without limitation, liability
relating to sites not owned or operated by Parent or any Parent Subsidiary, (D)
there are no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings, pending or threatened, against Parent
or any Parent Subsidiaries relating to any violation of or liability under, or
alleged violation of or liability under, any Environmental Law, (E) all reports
that are required to be filed by Parent or any Parent Subsidiaries concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law have been so filed, (F) no Hazardous Substance has been
disposed of, released or transported in violation of or under circumstances
that could create liability under any applicable Environmental Law
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from any properties owned by Parent or any Parent Subsidiaries as a result of
any activity of Parent or any Parent Subsidiaries during the time such
properties were owned, leased or operated by Parent or any Parent Subsidiaries,
(G) neither Parent, any of Parent Subsidiaries nor any of their respective
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative
order, regulatory requirement, judgment or claim asserted or arising under any
Environmental Law; except for violations of the foregoing clauses (A) through
(G) that, singly or in the aggregate, would not reasonably be expected to have
a Parent Material Adverse Effect, and (H) Parent has provided the Company with
each environmental audit, test or analysis performed within the last three
years of any property currently or formerly owned or operated by Parent or any
Parent Subsidiary (x) which involves any condition of environmental impairment
which would give rise to a Parent Material Adverse Effect and (y) of which
Parent has knowledge.
(p) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and has
not engaged in any business activities or conducted any operations other than
in connection with the transactions contemplated by this Agreement.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business
by the Company. Except as otherwise expressly contemplated by this Agreement
or as set forth in Section 4.01(a) of the Company Disclosure Letter, during the
period from the date of this Agreement to the Effective Time of the Merger, the
Company shall, and shall cause the Company Subsidiaries to, unless Parent shall
otherwise agree in writing, carry on their respective businesses in the usual
and ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and, to the extent
consistent therewith, use reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and
39
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employees and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time of the Merger, except as
expressly contemplated by this Agreement or as set forth in Section 4.01(a) of
the Company Disclosure Letter, or otherwise approved in writing by Parent, the
Company shall not, and shall not permit any Company Subsidiary to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock and
dividends and distributions by a direct or indirect wholly owned
Company Subsidiary to its parent, (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any Company Subsidiary or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any
securities convertible into, any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
any phantom stock options, or any restricted stock, performance units,
performance shares, stock appreciation rights ("SARs") or limited
stock appreciation rights ("LSARs") (other than (x) the issuance of
shares of Company Common Stock (and associated Company Rights) upon
the exercise of Company Employee Stock Options outstanding on the date
of this Agreement and in accordance with their present terms, (y) the
issuance of Company Capital Stock pursuant to the Company Rights
Agreement and (z) the issuance of shares of Common Stock upon the
conversion of Convertible Debentures and Convertible Notes) and, in
the case of Company Employee Stock Options, the issuance of Company
Common Stock (and associated Company Rights) upon the exercise
thereof, but only if and to the extent
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that the terms of such Company Employee Stock Options provide that the
consummation by the Company of the transactions contemplated by this
Agreement will not result in the acceleration of vesting or the
exercisability of such Company Employee Stock Options;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association or
other business organization or division thereof or (y) any assets that
are material, individually or in the aggregate, to the Company and the
Company Subsidiaries taken as a whole;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any assets of the Company
or the Company Subsidiaries other than (A) sales and dispositions of
interests or rights with respect to property having an aggregate fair
market value on the date of this Agreement of less than $5,000,000, in
each case only if in the ordinary course of business consistent with
past practice, (B) encumbrances and Liens that are incurred in the
ordinary course of business consistent with past practice and (C)
assets of the Company set forth in Section 4.01(a)(v) to the Company
Disclosure Letter;
(vi) (y) incur any indebtedness for borrowed money, guarantee
any indebtedness for borrowed money of another person, issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any
debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice, or
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(z) make any loans, advances (other than any advances to employees in
the ordinary course of business consistent with prior practice) or
capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned Company
Subsidiary;
(vii) make or agree to make any new capital expenditure or
expenditures that, in the aggregate, are above the aggregate amount
currently budgeted by the Company, as disclosed in Section 4.01(a) of
the Company Disclosure Letter;
(viii) make any material Tax election or settle or compromise
any material Tax liability or refund, except to the extent already
provided for in the Filed Company SEC Documents;
(ix) except pursuant to existing employment agreements or as
required by applicable laws, (A) increase the compensation payable or
to become payable to its executive officers or employees, (B) grant
any severance or termination pay to, or enter into any employment or
severance agreement with, any director, executive officer or employee
of the Company or any Company Subsidiary (other than in accordance
with Company Benefit Plans as in effect on the date of this Agreement)
or (C) establish, adopt, enter into or amend in any material respect
or take any action to accelerate any rights or benefits under any
collective bargaining agreement or Company Benefit Plan; provided,
however, that changes pursuant to clauses (A) and (B) above may only
be made in the ordinary course of business consistent with past
practice; and, provided further, that such changes may not be made
with respect to any executive officer of the Company or any member of
the Company's Management Council;
(x) without limiting the generality of clause (ix) above, make
any amendment to any Company Employee Stock Plan as a result of this
Agreement or in contemplation of the Merger;
(xi) terminate or amend on terms less favorable to the Company
any agreement filed as an exhibit to any Company SEC Document; or
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(xii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Conduct of Business by Parent. Except as expressly
contemplated by this Agreement or as set forth in Section 4.01(b) of the Parent
Disclosure Letter, during the period from the date of this Agreement to the
Effective Time of the Merger, Parent shall, and shall cause the Parent
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time of the
Merger, except as expressly contemplated by this Agreement or as set forth in
Section 4.01(b) of the Parent Disclosure Letter, or otherwise approved by the
Company, Parent shall not, and shall not permit any Parent Subsidiary to:
(i) (x) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its capital
stock and dividends and distributions by a direct or indirect wholly
owned Parent Subsidiary to its parent, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (z) purchase, redeem or otherwise
acquire any shares of Parent Common Stock;
(ii) issue, deliver or sell any shares of its capital
stock or any other voting securities or any securities convertible
into or exchangeable for, any such shares, voting securities or
convertible securities (other than the issuance of shares of Parent
Common Stock or other Parent securities with respect to (A) the
permitted acquisitions set forth in Section 4.01(b) of the Parent
Disclosure Letter, (B) acquisitions otherwise allowed pursuant to
subparagraph (iii) below which utilize shares of
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<PAGE> 51
Parent Common Stock or other Parent securities, (C) upon the exercise
of Parent Stock Options or other options, SARs, LSARs or similar
rights granted or issued pursuant to Parent benefit plans, (D) upon
the lapsing of restricted stock issued pursuant to Parent benefit
plans or (E) the granting of options after the date hereof in the
ordinary course of business under Parent's employee plans as amended
from time to time);
(iii) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association or
other business organization or division thereof or (y) any assets
that, in the case of the foregoing clauses (x) and (y), individually
or in the aggregate, exceed a purchase price of $150,000,000
(including indebtedness assumed or refinanced in connection
therewith), provided, however, that this limitation shall not apply
with respect to the permitted acquisitions set forth in Section
4.01(b) of the Parent Disclosure Letter and capital expenditures
provided for in Parent's 1997 budget;
(iv) incur any indebtedness for borrowed money or
issue or sell any debt securities or warrants or other rights to
acquire debt securities of Parent, except for short term borrowings
incurred in the ordinary course of business consistent with past
practice, borrowings incurred in connection with acquisition
opportunities described in Section 4.01(b) of the Parent Disclosure
Letter and borrowings up to the limits provided for under Parent's
outstanding credit agreements (or any replacement credit agreements
which may be substituted therefor); or
(v) file any registration statement or any Canadian
equivalent thereto contemplating a secondary offering by one or more
of Parent's stockholders, except pursuant to existing contractual
arrangements.
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(c) Other Actions. Except as expressly permitted by this
Agreement, the Company and Parent shall not, and shall not permit any of their
respective subsidiaries to, take any action that would, or that would
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. The Company and Parent shall promptly
advise the other party orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, would have, a Company Material
Adverse Effect or a Parent Material Adverse Effect, as applicable.
SECTION 4.02. No Solicitation by the Company. (a) The
Company shall not, nor shall it permit any Company Subsidiary to, nor shall it
authorize or permit any officer, director or employee of, or any investment
banker, attorney, accountant or other advisor or representative of, the Company
or any Company Subsidiary to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing information
to facilitate inquiries), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any Company Takeover
Proposal (as defined below) or (ii) participate in any discussions or negotia-
tions regarding any Company Takeover Proposal; provided, however, that if, the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the
Company may, in response to a Company Takeover Proposal (as defined below)
which was not solicited by it or which did not otherwise result from a breach
of this Section 4.02(a), and subject to providing prior written notice of its
decision to take such action to Parent (the "Company Notice") and compliance
with Section 4.02(c), so long as the Company's Board of Directors further
determines in good faith, based on the advice of its financial advisor, that
such Company Takeover Proposal has a reasonable likelihood of resulting in a
Company Superior
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Proposal, (x) furnish information with respect to the Company and its
subsidiaries to any person making a Company Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the Company after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such Company Takeover Proposal. For purposes of this
Agreement, "Company Takeover Proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the net revenues, net income or the
assets of the Company and its subsidiaries, taken as a whole, or 15% or more of
any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of the
Company or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement. Except as otherwise permitted in Section 4.01
of the Company Disclosure Letter, the Company shall, and shall cause each
Company Subsidiary to, immediately cease and cause to be terminated any
existing activities, discussions or negotiations by the Company, any Company
Subsidiary or any officer, director or employee of, or investment banker,
attorney, accountant or other advisor or representative of, the Company or any
Company Subsidiary, with any parties conducted heretofore with respect to any
of the foregoing. For purposes of this Agreement, a "Company Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of the Company Common
Stock then outstanding or all or substantially all the assets of the Company
and otherwise on terms which the Board of Directors of the Company determines
in its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required,
is then committed or which, in the good faith judgment of the Board of Direc-
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tors of the Company, is reasonably capable of being obtained by such third
party.
(b) Subject to Section 5.01(d), neither the Board of
Directors of the Company nor any committee thereof shall (i) approve or
recommend, or propose to approve or recommend, any Company Takeover Proposal or
(ii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Company Takeover Proposal.
(c) The Company promptly shall advise Parent orally and in
writing of the receipt of any Company Takeover Proposal and of the receipt of
any inquiry with respect to or which the Company reasonably believes could lead
to any Company Takeover Proposal. The Company promptly shall advise Parent
orally and in writing of the identity of the person making any such Company
Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board or Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its fiduciary duties to the
Company or its stockholders or its obligations under applicable law.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form F-4 and the Proxy
Statement; Company's Stockholders' Meeting and Parent's Stockholders' Meeting.
(a) As soon as practicable following the date of this Agreement, the Company
and Parent shall prepare and file with the SEC the Proxy Statement and Parent
shall prepare and file with the SEC the Form F-4, in which the Proxy Statement
shall be included as part of the prospectus. Each of the Company and Parent
shall use reasonable efforts to have the Form F-4 declared effective under the
Securities Act as
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promptly as practicable after such filing. Each of the Company and Parent
shall use reasonable efforts to cause the Proxy Statement to be mailed to the
Company's stockholders and, if required, Parent's stockholders, respectively,
as promptly as practicable after the Form F-4 is declared effective under the
Securities Act. Parent shall also take any action required to be taken under
any applicable state securities or "blue sky" laws or Canadian securities laws
in connection with the issuance of Parent Common Stock pursuant to the Merger,
and the Company shall furnish all information concerning the Company and the
holders of the Company Common Stock and rights to acquire Company Common Stock
pursuant to the Company Employee Stock Plans as may be reasonably requested in
connection with any such action.
(b) The Company shall, as soon as practicable following the
date of this Agreement, duly call, give notice of, convene and hold a meeting
of its stockholders (the "Company's Stockholders' Meeting") for the purpose of
obtaining the Company Stockholder Approval. The Company shall, through its
Board of Directors, recommend to its stockholders that they give the Company
Stockholder Approval unless otherwise determined by the Board of Directors of
the Company in good faith, after consultation with outside counsel, as
necessary in order to comply with its fiduciary duties to the Company and its
stockholders under applicable law. Parent shall vote or cause to be voted any
shares of Company Capital Stock owned of record by Parent or any Parent
Subsidiary in favor of the Company Stockholder Approval.
(c) Parent shall, as soon as practicable following the date
of this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Parent's Stockholders' Meeting") for the purpose of
obtaining the Parent Stockholder Approval. Parent shall, through its Board of
Directors, recommend to its stockholders that they give the Parent Stockholder
Approval unless otherwise determined by the Board of Directors of Parent in
good faith, after consultation with outside counsel, as necessary in order to
comply with its fiduciary duties to Parent and its stockholders under
applicable law. The Company shall vote or cause to be voted any shares of
Parent Capital Stock owned of record by the Company or any Company Subsidiary
in favor of the Parent Stockholder Approval.
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(d) The Board of Directors of the Company shall be permitted
to (i) withdraw or modify in a manner adverse to Parent its recommendation to
the Company's stockholders that they give the Company Stockholder Approval or
(ii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Company Takeover Proposal, if the Company's Board of Directors determines in
good faith, after consultation with its outside counsel and its financial
advisors, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law.
(e) Notwithstanding any provision in the Agreement to the
contrary, prior to exercising its right to terminate pursuant to Section
7.01(e), the Company shall provide Parent with three days prior written notice
(which notice shall specifically disclose the material terms and conditions
thereof, unless the Company's Board of Directors determines in good faith,
after consultation with its outside counsel and financial advisors, that to
provide such specific notice would breach its fiduciary duties to the Company's
stockholders under applicable law).
SECTION 5.02. Letter of the Company's Accountants. The
Company shall use reasonable efforts to cause to be delivered to the Company
and Parent a letter of Arthur Andersen LLP, the Company's independent public
accountants, dated a date within two business days before the date on which the
Form F-4 shall become effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form F-4.
SECTION 5.03. Letter of Parent's Accountants. Parent shall
use reasonable efforts to cause to be delivered to the Company a letter of
Deloitte & Touche, Parent's independent public accountants, dated a date within
two business days before the date on which the Form F-4 shall become effective
and addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for letters delivered by
independent public accountants in
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connection with registration statements similar to the Form F-4.
SECTION 5.04. Access to Information; Confidentiality. (a)
Each of the Company and Parent shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, directors,
employees, accountants, counsel, financial advisors and other representatives
of such other party, reasonable access during normal business hours during the
period prior to the Effective Time of the Merger to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, each of the Company and Parent shall, and shall cause each of its
respective subsidiaries to, furnish promptly to the other party (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of Canadian or
United States Federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Such information shall be held in confidence to the extent
required by, and in accordance with, the provisions of the letters dated
February 12, 1997, between the Company and Parent (the "Confidentiality
Agreements").
(b) In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly redeliver to the other all
non-public written material provided pursuant to this Section 5.04 and shall
not retain any copies, extracts or other reproductions in whole or in part of
such written material. In such event, all documents, memoranda, notes and
other writings prepared by Parent or the Company based on the information in
such material shall be destroyed (and Parent and the Company shall use their
respective reasonable best efforts to cause their advisors and representatives
to similarly destroy their documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by an
authorized officer supervising such destruction.
SECTION 5.05. Reasonable Efforts; Notification. (a) Upon
the terms and subject to the conditions set forth in this Agreement, each of
the parties shall use reasonable efforts to take, or cause to be taken, all
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actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement;
provided, however, that Parent shall not be obligated to take any action
pursuant to the foregoing if the taking of such action or the obtaining of any
waiver, consent, approval or exemption is reasonably likely to result in the
imposition of a condition or restriction of the type referred to in clause
(ii), (iii) or (iv) of Section 6.02(f). In connection with and without
limiting the foregoing, Parent, the Company and their respective Boards of
Directors shall (i) take all action necessary so that no state takeover statute
or similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any other transaction contemplated by this Agreement and (ii) if
any state takeover statute or similar statute or regulation becomes applicable
to the Merger, this Agreement or any other transaction contemplated by this
Agreement, take all action necessary so that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
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(b) The Company shall give prompt notice to Parent, and
Parent or Sub shall give prompt notice to the Company, of (i) any
representation or warranty made by it or contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
SECTION 5.06. Rights Agreements; Consequences if Rights
Triggered. The Board of Directors of the Company shall take all further action
(in addition to that referred to in Section 3.01(s)) reasonably requested in
writing by Parent in order to render the Company Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement. Except as
provided in Section 3.01(s) or as reasonably requested in writing by Parent,
prior to the Company's Stockholders' Meeting, the Board of Directors of the
Company shall not (i) amend the Company Rights Agreement or (ii) take any
action with respect to, or make any determination under, the Company Rights
Agreement.
SECTION 5.07. Company Employee Stock Options and Restricted
Stock Grants. (a) As soon as practicable following the date of this
Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering the Company Employee Stock Plans) shall adopt such
resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Company Employee
Stock Options granted under the Company Employee Stock Plans and the
terms of the Company Employee Stock Plans, to provide that at the
Effective Time of the Merger, each Company Employee Stock Option
outstanding immediately prior to the Effective Time of the Merger shall
be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Employee Stock Option,
the same number of shares of
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Parent Common Stock as the holder of such Company Employee Stock
Option would have been entitled to receive pursuant to the Merger had
such holder exercised such Company Employee Stock Option in full
immediately prior to the Effective Time of the Merger, at a price per
share equal to (y) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company
Employee Stock option divided by (z) the number of shares of Parent
Common Stock deemed purchasable pursuant to such Company Employee
Stock Option; and
(ii) make such other changes to the Company Employee Stock
Plans as it deems appropriate to give effect to the Merger (subject to
the approval of Parent, which shall not be unreasonably withheld).
(b) As soon as practicable after the Effective Time of the
Merger, Parent shall deliver to the holders of Company Employee Stock Options
and Restricted Shares appropriate notices setting forth such holders' rights
pursuant to the respective Company Employee Stock Plans and the agreements
evidencing the grants of such Company Employee Stock Options and Restricted
Shares shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 5.07 after giving effect to the Merger
and subject to Sections 5.19 and 5.20 hereof). Subject to Sections 5.19 and
5.20 hereof, Parent shall comply with the terms of the Company Employee Stock
Plans and ensure, to the extent required by, and subject to the provisions of,
such Company Employee Stock Plans, that the Company Employee Stock Options
which qualified as qualified stock options prior to the Effective Time of the
Merger continue to qualify as qualified stock options after the Effective Time
of the Merger.
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Company Employee Stock Options assumed in
accordance with this Section 5.07. As soon as reasonably practicable after the
Effective Time of the Merger, Parent shall file a registration statement on
Form S-8 (or any successor or other appropriate form) with respect to the
shares of Parent Common Stock subject to such Company Employee Stock Options
and shall use reasonable
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efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Company Employee Stock
Options remain outstanding.
SECTION 5.08. Indemnification. (a) Parent shall, to the
fullest extent permitted by law, cause the Surviving Corporation to honor, and
will itself honor, all the Company's obligations to indemnify (including any
obligations to advance funds for expenses) each current or former director,
officer, employee or agent of the Company or the Company Subsidiaries (each,
together with such person's heirs, executors or administrators, an "Indemnified
Party" and collectively, the "Indemnified Parties") for acts or omissions by
such Indemnified Parties occurring prior to the Effective Time of the Merger to
the extent that such obligations of the Company exist on the date of this
Agreement, whether pursuant to the Company's Amended and Restated Certificate
of Incorporation, Corrected By-laws, individual indemnity agreements or
otherwise, and such obligations shall survive the Merger and shall continue in
full force and effect in accordance with the terms of such Amended and Restated
Certificate of Incorporation, Corrected By-laws and individual indemnity
agreements from the Effective Time of the Merger until the expiration of the
applicable statute of limitations with respect to any claims against such
Indemnified Parties arising out of such acts or omissions. Any amendment,
repeal or other modification to the Amended and Restated Certificate of
Incorporation or Corrected Bylaws of the Company shall not affect the
obligations of Parent hereunder and shall not adversely affect the rights
thereunder of Indemnified Parties, unless such modification is required by law.
(b) For a period of five years after the Effective Time of
the Merger, Parent shall cause to be maintained in effect the current policies
of directors' and officers' liability insurance maintained by the Company
(provided that Parent may substitute therefor policies with reputable and
financially sound carriers of at least the same coverage and amounts containing
terms and conditions which are no less advantageous) with respect to claims
arising from or related to facts or events which occurred at or before the
Effective Time of the Merger; provided, however, that Parent shall not be
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obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid as of the date hereof by the
Company for such insurance (such 150% amount, the "Maximum Premium"). If such
insurance coverage cannot be obtained at all, or can only be obtained at an
annual premium in excess of the Maximum Premium, Parent shall maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Premium. The Company represents to Parent
that the Maximum Premium is $234,000.
SECTION 5.09. Fees and Expenses. Except as provided in
Section 7.02, all fees and expenses, including any transfer taxes or fees
payable to any broker, investment banker or financial advisor, incurred in
connection with the Merger, this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated, except that expenses incurred in
connection with the filing fees (including SEC filing fees) associated with the
Form F-4 and Proxy Statement and the printing and mailing the Proxy Statement
and the Form S-4 shall be shared equally by Parent and the Company.
SECTION 5.10. Public Announcements. Parent and Sub, on the
one hand, and the Company, on the other hand, shall consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 5.11. Tax Treatment. Each of Parent and the Company
shall use its reasonable best efforts to (i) not take any action and (ii) not
fail to take any action either before or after the Effective Time of the Merger
which action or failure to act would prevent, or would be likely to prevent,
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code, and shall use reasonable efforts to obtain the
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opinions of counsel referred to in Sections 6.02(d) and 6.03(c) of this
Agreement.
SECTION 5.12. Affiliates. (a) Prior to the Closing Date,
the Company shall use its reasonable efforts to deliver to Parent a letter
identifying all persons who are, at the time this Agreement is submitted for
approval to the stockholders of the Company, "affiliates" of the Company
(including all directors of the Company) for purposes of Rule 145 under the
Securities Act. The Company shall use reasonable efforts to cause each such
person to deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form attached hereto as Exhibit A.
(b) Prior to the Closing Date, if pooling of interests is
sought as contemplated by Section 5.18 of this Agreement, Parent shall use its
reasonable efforts to deliver to the Company a letter identifying all persons
who are, at the time of the Parent's Stockholders' Meeting, "affiliates" of
Parent. Parent shall use reasonable efforts to cause each such person to
deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form attached hereto as Exhibit B.
SECTION 5.13. Gain Recognition Agreements. Immediately
prior to the Closing Date, the Company shall deliver to Parent a schedule
identifying all persons who will be, at the Effective Time of the Merger,
"five-percent transferee shareholders" (as defined in Treasury Regulation
Section 1.367(a)-3(c)(5)(ii)). The Company shall use reasonable best efforts
to obtain from each such person a gain recognition agreement pursuant to
Treasury Regulation Section 1.367(a)-3T(g).
SECTION 5.14. Company Shareholder Tax Representation.
Immediately prior to the Closing Date, the Company shall deliver to Parent a
schedule identifying all persons who are five-percent shareholders of the
Company. The Company shall use reasonable best efforts to obtain from such
persons representations which counsel may reasonably require in connection with
their opinions under Sections 6.02(d) and 6.03(c) of this Agreement.
SECTION 5.15. Certificates of Officers. Immediately prior to
the Closing Date, the Company, Sub and
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Parent shall deliver to Parent and the Company, as appropriate, certificates of
officers and directors of Parent, Sub and the Company, as appropriate, which
counsel may reasonably require in connection with their opinions under Sections
6.02(d) and 6.03(c) of this Agreement.
SECTION 5.16. Stock Exchange Listing. Parent shall use its
reasonable efforts to cause the shares of Parent Common Stock to be issued in
the Merger and pursuant to the Company Employee Stock Plans to be approved for
listing on the NYSE, the TSE and the MSE, subject to official notice of
issuance, prior to the Closing Date.
SECTION 5.17. Execution of Supplementary Indenture. Upon the
consummation of the Merger, the Company shall use its reasonable efforts to
enter into a supplementary indenture with the trustee (the "Trustee") for the
holders of the Convertible Debentures in accordance with Section 14.06 of the
Indenture, dated as of June 1, 1989, between the Company and the Texas Commerce
Trust Company of New York, as Trustee.
SECTION 5.18. Pooling Treatment. Although consummation of
the transactions described in this Agreement is not conditioned upon the Merger
qualifying under U.S. generally accepted accounting principles as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board ("APB
16"), each of Parent, Sub and the Company will use reasonable efforts to obtain
pooling treatment for the Merger and to obtain a letter from their respective
independent accounting firms dated as of the Closing Date stating that the
Merger will qualify under U.S. generally accepted accounting principles as a
pooling of interests transaction under APB 16, provided nothing herein shall be
construed as requiring the Company or any of its employees to alter the
treatment being afforded to it or them pursuant to this Agreement.
SECTION 5.19. Restricted Shares and Stock Options.
Immediately prior to the Effective Time of the Merger and subject to the last
sentence of this Section 5.19, all restrictions relating to outstanding shares
of Company Common Stock, including shares which have been granted pursuant to
the Company plans listed in Section 5.19 of the Company Disclosure Letter
(collectively the "Company Restricted Shares"), shall lapse, and all condi-
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tions to the holders' receipt of such shares free of any such restrictions
shall be deemed satisfied. At the Effective Time of the Merger, each of the
outstanding Company Restricted Shares shall be converted into shares of Parent
Common Stock pursuant to Section 2.01(c) hereof. Immediately prior to the
Effective Time of the Merger and subject to the last sentence of this Section
5.19, all outstanding stock options for Company Common Stock which have been
granted pursuant to the Company Employee Stock Plans (the "Company Stock
Options") (including the replacement Options of Parent) will continue to be
governed by their terms and the terms of the relevant Company Employee Stock
Plans, as amended as disclosed in Section 3.01(i) of the Company Disclosure
Letter, to provide certain accelerations upon terminations following the
Effective Time of the Merger. Notwithstanding the foregoing, this Section 5.19
shall not cause any lapsing of restrictions, vesting or accelerated
exercisability with respect to Company Restricted Shares or Company Stock
Options held by the seven individuals listed in Section 5.19 of the Company
Disclosure Letter (for whom other arrangements may be made by individual
agreement).
SECTION 5.20. Executive Severance Agreements. Prior to the
Effective Time, the Company and each individual listed on Section 5.19 of the
Company Disclosure Letter shall execute an Amendment and Restatement of
Executive Severance Agreement substantially in the form attached to the Company
Disclosure Letter and Parent agrees to implement each such Amendment and
Restatement of Executive Severance Agreement in accordance with its terms.
SECTION 5.21. Certain Incentive Arrangements. As of the
Effective Time, Parent agrees to implement those incentive arrangements as set
forth in Section 5.21 of the Company Disclosure Letter.
SECTION 5.22. Allquest Enterprises. Parent intends to
consolidate the Company's PUMC subsidiary and Allquest Enterprises, Inc. under
its Industrial Services Division and, depending upon a number of factors,
including business and market conditions, capital markets considerations, the
judgment of Parent's and the Division senior management and Parent's long term
business and strategic objectives, also intends to consider a public
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offering of at least a portion of the equity of the entity resulting from such
consolidation (assuming such entity is in fact created), it being understood
that no firm plans have been proposed or agreed to and, in any case, Parent
would only take such future actions with respect to such entity as it
determines are in the best interests of Parent and its shareholders. If Parent
were to propose any such public offering, Parent would also expect to adopt
benefit plans or programs which would provide the management of such entity
with the opportunity to share in an ownership interest in such entity.
SECTION 5.23. Employee Benefit Plans. Parent intends that
for a period of not less than one year following the Closing, Parent will
maintain or cause the Surviving Corporation to maintain employee benefit plans
which provide benefits that are comparable in the aggregate to the benefits
(other than the Supplemental Executive Retirement Plan and the Company Employee
Stock Plans) available to employees of the Company immediately prior to
Closing. The Company shall activate a severance plan for employees of the
Surviving Corporation on substantially the terms set forth on Schedule
3.01(j)(3)(ii) attached to the Company Disclosure Letter and subject to
Parent's approval, which shall not be unreasonably withheld.
SECTION 5.24. SERP Termination. The Company agrees that,
prior to the Effective Time of the Merger, the Company will terminate its
Supplemental Executive Retirement Plan (the "SERP") and will obtain any
consents required by the SERP for such termination. Parent agrees that a
retirement benefit comparable to the benefits currently provided for under the
SERP will be provided to Mr. R. L. Nelson, Jr. In addition, Parent agrees to
establish a replacement supplemental executive retirement plan generally in
accordance with the terms set forth in Section 5.24 of the Company Disclosure
Letter.
SECTION 5.25. Parent Options. It is intended that a
transition team which includes executives of Parent and the Company shall be
established to assist with the business integration of the Company with Parent.
Among other responsibilities, it is expected that the transition team shall
review compensation matters relating to the Company and in that connection is
expected to make recommendations to the Board of Directors of Parent
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in respect of options to purchase Parent Common Stock to be granted to
employees of the Company following the Merger.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect
The Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval and Parent Stockholder
Approval. The Company shall have obtained the Company Stockholder Approval and
Parent shall have obtained the Parent Stockholder Approval.
(b) Stock Exchange Listings. The shares of Parent Company
Stock issuable to the Company's stockholders in the Merger and employees
pursuant to this Agreement shall have been approved for listing on the NYSE,
the TSE and the MSE, subject to official notice of issuance.
(c) Antitrust. The waiting periods (and any extensions
thereof) applicable to the transactions contemplated by this Agreement under
the HSR Act shall have been terminated or shall have expired. Any consents,
approvals and filings required under the Competition Act (Canada) shall have
been obtained or made, as applicable.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
subject to the proviso in Section 5.05(a) each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any such injunction or other order that
may be entered.
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(e) Form F-4. The Form F-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order instituted by the SEC or any Canadian or state
regulatory authorities, and Parent shall have received all Canadian, state or
province securities or "blue sky" authorizations necessary to issue the Parent
Common Stock pursuant to this Agreement.
(f) Material Consents and Approvals. The Company, Parent,
each Company Subsidiary and each Parent Subsidiary shall have obtained or made,
as appropriate, such material consents, approvals, orders, authorizations,
registrations, declarations, permits or filings in connection with this
Agreement and the transactions contemplated by this Agreement for the conduct
of their businesses as currently conducted or as expected to be conducted.
SECTION 6.02. Conditions to Obligations of Parent, Taro and
Sub. The obligations of Parent, Taro and Sub to effect the Merger are further
subject to the satisfaction or waiver by Parent on or prior to the Closing Date
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties
of the Company set forth in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except to the extent any such representation or warranty expressly
relates to an earlier date (in which case as of such date), and Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to such
effect.
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(c) Officers' and Directors' Certificates. Parent shall have
received executed copies of the certificates of officers and directors of the
Company, Parent and Sub that may reasonably be required by counsel in
connection with the tax opinions referred to in Section 6.02(d) and 6.03(c) of
this Agreement.
(d) Tax Opinion. Parent shall have received an opinion dated
the Closing Date from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Parent and Sub, in form and substance reasonably satisfactory to Parent,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing on the Closing Date, the Merger will be treated for United
States Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Skadden, Arps, Slate,
Meagher & Flom LLP may require and rely upon (and may incorporate by reference)
representations and covenants, including those contained in certificates of
officers of Parent, the Company, Sub and others.
(e) Absence of Company Material Adverse Effect. There shall
not have occurred since the date of this Agreement any event, change, effect or
development which, individually or in the aggregate, has had or is reasonably
likely to have, a Company Material Adverse Effect.
(f) No Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Entity (i) challenging the acquisition
by Parent, Taro or Sub of any shares of Company Common Stock, seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, Parent or Sub any damages that are material in relation to the Company
and its subsidiaries taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Company, any Company Significant Subsidiary,
Parent or any Parent Significant Subsidiary of any material portion of the
business or assets of the Company, any Company Significant Subsidiary, Parent
or any Parent Significant Subsidiary or to compel the Company, any Company
Significant Subsidiary, Parent or any Parent Significant Subsidiary to dispose
of or hold separate any material portion of
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the business or assets of the Company, any Company Significant Subsidiary,
Parent or any Parent Significant Subsidiary, as a result of the Merger or any
of the other transactions contemplated by this Agreement, (iii) seeking to
impose limitations on the ability of Parent or Sub to acquire or hold, or
exercise full rights of ownership of, any shares of capital stock of the
Surviving Corporation, including the right to vote such capital stock on all
matters properly presented to the stockholders of the Surviving Corporation,
(iv) seeking to prohibit Parent or any Parent Subsidiary from effectively
controlling in any material respect the business or operations of the Company
or the Company Significant Subsidiaries or (v) which otherwise is reasonably
likely to have a Company Material Adverse Effect or a Parent Material Adverse
Effect.
(g) Certain Employee Agreements. The Company and each of the
individuals listed on Section 5.19 of the Company Disclosure Letter shall have
executed the revised agreements contemplated by Section 5.20 hereof.
SECTION 6.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver by the Company on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent, Taro and Sub set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of Parent, Taro and Sub set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except to the extent any such representation or
warranty expressly relates to an earlier date (in which case as of such date),
and the Company shall have received a certificate signed on behalf of Parent by
the Chief Executive Officer and the Chief Financial Officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Sub. Parent,
Taro and Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a
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certificate signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of Parent to such effect.
(c) Tax Opinion. The Company shall have received an opinion
dated the Closing Date from Andrews & Kurth L.L.P., counsel to the Company, in
form and substance reasonably satisfactory to the Company, substantially to the
effect that, on the basis of facts, representations and assumptions set forth
in such opinion which are consistent with the state of facts existing on the
Closing Date, the Merger will be treated for United States Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, Andrews & Kurth L.L.P., may require and rely upon
(and may incorporate by reference) representations and covenants, including
those contained in certificates of officers of Parent, the Company, Sub and
others necessary to give such opinion and to provide assurance to stockholders
of the Company that they will not recognize gain in the Merger, except to the
extent cash is received in exchange for fractional shares.
(d) Absence of Parent Material Adverse Effect. There shall
not have occurred since the date of this Agreement any event, change, effect or
development which, individually or in the aggregate, has had or is reasonably
likely to have, a Parent Material Adverse Effect.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time of the Merger, whether before or after
the Company Stockholder Approval or the Parent Stockholder Approval (if
required):
(a) by mutual written consent of Parent, Taro or Sub and the
Company;
(b) by either Parent or the Company:
(i) if, at a duly held stockholders meeting of the Company or
any adjournment thereof at which the
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Company Stockholder Approval is voted upon, the Company Stockholder
Approval shall not have been obtained;
(ii) if, at a duly held stockholders meeting of Parent or any
adjournment thereof at which the Parent Stockholder Approval is voted
upon, the Parent Stockholder Approval shall not have been obtained;
(iii) if the Merger shall not have been consummated on or before
December 31, 1997 (the "Outside Date"), unless the failure to
consummate the Merger is the result of a wilful, Material Breach (as
defined in Section 7.02(f)) of this Agreement by the party seeking to
terminate this Agreement;
(iv) if any court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have
become final and non-appealable; or
(v) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in
this Agreement which (A) would give rise to the failure of a condition
set forth in Section 6.02(a) or 6.02(b) or Section 6.03(a) or 6.03(b),
as applicable, and (B) has not been cured within 30 days after the
giving of written notice to the breaching party of such breach
(provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement that would give
rise to a failure of a condition as described in clause (A) above);
(c) by either Parent or the Company in the event that any
condition to the obligation of such party to effect the Merger set forth in
Section 6.02 (in the case of Parent) or Section 6.03 (in the case of the
Company) is not capable of being satisfied prior to the Outside Date;
(d) by Parent, if the Company's Board of Directors shall
have (i) failed to recommend to the
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Company's stockholders that they give the Company Stockholder Approval or (ii)
withdrawn or modified in a manner adverse to Parent its recommendation to the
Company's stockholders that they give the Company Stockholder Approval; or
(e) by the Company, if the Board of Directors of the Company
shall have approved, and the Company, concurrently with such termination, shall
enter into, a definitive agreement providing for the implementation of the
transactions contemplated by a Company Superior Proposal; provided, however,
that (i) such Company Superior Proposal was not solicited by the Company and
did not otherwise result from a breach of Section 4.02(a), (ii) the Board of
Directors of the Company shall have complied with Section 5.01(e) in connection
with such Company Superior Proposal and (iii) no termination pursuant to this
Section 7.01(e) shall be effective unless the Company shall simultaneously make
the payment required by Section 7.02(a).
SECTION 7.02. Effect of Termination and Other Events. (a)
In the event that (i) any person shall make a bona fide Company Takeover
Proposal that is a legitimate alternative transaction to the Merger and that
shall not have been withdrawn on the date of the Company's Stockholders'
Meeting, and thereafter this Agreement is terminated pursuant to Section
7.01(b)(i), or (ii) this Agreement is terminated by the Company pursuant to
Section 7.01(e), then the Company shall pay to Parent a fee of $13,000,000,
which amount shall be payable by wire transfer of same day funds, on the date
of termination of this Agreement.
(b) In the event that (i) the Company's Board of Directors
shall have withdrawn or modified in a manner adverse to Parent its
recommendation to the Company's stockholders that they give the Company
Stockholder Approval, (ii) the Company Stockholder Approval shall not have been
obtained at a duly held stockholders meeting and (iii) there shall not have
been pending a bona fide Company Takeover Proposal which is a legitimate
alternative transaction to the Merger at the time of the Company's Stockholders
Meeting, and thereafter this Agreement is terminated pursuant to Section
7.01(b)(i), then the Company shall upon written demand by Parent pay to Parent
a fee of $6,000,000, which amount shall prompt-
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ly be payable by wire transfer of same day funds within three business
days following such demand.
(c) In the event that this Agreement is terminated by Parent
pursuant to Section 7.01(d) prior to the Company's stockholders meeting and
there shall not have then been pending a bona fide Company Takeover Proposal
which is a legitimate alternative transaction to the Merger, then the Company
shall pay to Parent a fee of $6,000,000, which amount shall promptly be payable
by wire transfer of same day funds within three business days.
(d) In the event that this Agreement is terminated pursuant
to Section 7.01(b)(iii) and within 12 months thereafter any person acquires 50%
or more of the combined voting power of the shares of the Company Common Stock
outstanding or all or substantially all of the assets of the Company, then the
Company shall pay to Parent a fee of $13,000,000, which amount shall promptly
be payable by wire transfer of same day funds.
(e) In the event of termination of this Agreement by either
Parent or the Company pursuant to Section 7.01(b)(i), then (unless Sections
7.02(a) through (c) are applicable) the Company shall reimburse Parent for all
its reasonable out-of-pocket expenses (up to $1,000,000) actually incurred in
connection with this Agreement and the transactions contemplated hereby, which
amount shall be payable by wire transfer of same day funds within three
business days of written demand therefor, accompanied by a reasonably detailed
statement of such expenses and appropriate supporting documentation.
(f) In the event of termination of this Agreement by either
the Company or Parent as provided in Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation
on the part of Parent, Taro, Sub or the Company, other than the provisions of
Sections 3.01(l) and 3.02(k), the second sentence of Section 5.04(a), Section
5.09, this Section 7.02 and Article VIII and except to the extent that such
termination results from a wilful, Material Breach by a party of any of its
representations, warranties, covenants or other agreements set forth in this
Agreement which has not been cured prior to the time of such termination. For
purposes of this Agreement, a
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"Material Breach" shall mean a breach that is material by reference to (i) the
breaching party and its subsidiaries, taken as a whole, (ii) the ability of the
parties to consummate the Merger and the other transactions contemplated by
this Agreement in the manner contemplated by this Agreement or (iii) the
benefits expected to be received by the non-breaching party and its
stockholders as a result of the consummation of the Merger and the other
transactions contemplated by this Agreement.
(g) The Company acknowledges that the agreements contained in
this Section 7.02 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the amounts due
pursuant to this 7.02 and, in order to obtain such payment, Parent commences a
lawsuit which results in a judgment against the Company, the Company shall pay
to Parent the amount of such judgment, together with interest at the prime rate
of The Bank of New York then in effect. The party prevailing in any such
lawsuit shall be entitled to reimbursement for its costs and expenses
(including reasonable attorney's fees and expenses) in connection with such
suit.
SECTION 7.03. Amendment. This Agreement may be amended by
the parties at any time before or after the Company Stockholder Approval or the
Parent Stockholder Approval; provided, however, that after the Company
Stockholder Approval or the Parent Stockholder Approval, there shall be made no
amendment that by law requires further approval by such stockholders without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time of the Merger, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.03, waive compliance with any of the
covenants or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument
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in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 7.01, an
amendment of this Agreement pursuant to Section 7.03 or an extension or waiver
pursuant to Section 7.04 shall, in order to be effective, require, in the case
of Parent, Taro, Sub or the Company, action by its Board of Directors or, in
the case of an extension or waiver pursuant to Section 7.04, the duly
authorized designee of its Board of Directors.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time of the Merger. This Section 8.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 8.02. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing
(including by facsimile) and shall be deemed given upon receipt by the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, Taro or Sub, to
Philip Environmental Inc.
100 King Street West
P.O. Box 2440, LCD1
Hamilton, Ontario, Canada L8N 4J6
Phone: (905) 521-1600
Fax: (905) 251-9160
Attention: General Counsel
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with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Phone: (212) 735-3380
Fax: (212) 735-2000
Attention: Jeffrey W. Tindell, Esq.
(b) if to the Company, to
Allwaste, Inc.
5151 San Felipe
Suite 1600
Houston, Texas 77056
Phone: (713) 625-7046
Fax: (713) 625-7059
Attention: General Counsel
with a copy to:
Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Phone: (713) 220-4200
Fax: (713) 220-4285
Attention: Christopher S. Collins, Esq.
SECTION 8.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person.
A "person" means an individual, corporation, partnership,
company, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
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A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person.
SECTION 8.04. Interpretation. When a reference is made in
this Agreement to a Section, Article or Exhibit, such reference shall be to a
Section or Article of, or an Exhibit to, this Agreement unless otherwise
indicated. In this Agreement, unless a contrary intention appears, (i) the
words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section
or other subdivision. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
SECTION 8.05. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any
rule or 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 materially adverse to any party. Upon such
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.
SECTION 8.06. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
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SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents referred to herein) (a) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement and (b) except for the provisions of Article II and Sections 5.07(c)
and 5.08, are not intended to confer upon any person other than the parties any
rights or remedies.
SECTION 8.08. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 8.09. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned Parent Subsidiary, but no such assignment shall relieve Sub of any of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns. Parent shall cause
Sub to perform its obligations hereunder.
SECTION 8.10. Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute
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arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not initiate any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
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IN WITNESS WHEREOF, Parent, Taro, Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
PHILIP ENVIRONMENTAL INC.
by: /s/ Allen Fracassi
---------------------------------
Name: Allen Fracassi
Title: President and Chief
Executive Officer
TARO AGGREGATES LTD.
by: /s/ Allen Fracassi
---------------------------------
Name: Allen Fracassi
Title: President
PHILIP/ATLAS MERGER CORP.
by: /s/ Allen Fracassi
---------------------------------
Name: Allen Fracassi
Title: President
ALLWASTE, INC.
by: /s/ Robert M. Chiste
---------------------------------
Name: Robert M. Chiste
Title: President & CEO
