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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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) April 30, 1999
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Essef Corporation
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(Exact name of registrant as specified in its charter)
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Ohio 0-15902 34-0777631
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
220 Park Drive, Chardon, Ohio 44024
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(Address of principal executive offices) (Zip Code)
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(440) 286-2200
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On April 30, 1999, Essef Corporation ("Essef"), Pentair, Inc.
("Pentair") and Northstar Acquisition Company, a wholly owned subsidiary of
Pentair ("Sub"), entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement") providing, subject to the terms and conditions set forth
therein, for the merger of Sub with and into Essef (the "Merger"). Pursuant to
the terms of the Merger Agreement, shareholders of Essef will receive in the
Merger $19.09 in cash in exchange for each common share of Essef. In addition,
in connection with the Merger, Essef has agreed to distribute to its
shareholders, for each common share of Essef held, 0.25 shares of Anthony &
Sylvan Pools Corporation, a wholly owned subsidiary of Essef ("Anthony &
Sylvan"), thus creating a new stand-alone public company (the "Split-off").
Holders of Essef shares immediately prior to the time of the consummation of the
Merger will receive Anthony & Sylvan shares in connection with the Split-off.
The Merger and the Split-off are expected to close on or about July 31, 1999.
The Merger Agreement is subject to Essef shareholder approval,
regulatory approval, completion of limited due diligence by Pentair, and the
satisfaction or waiver of various other conditions as more fully described in
the Merger Agreement. In addition, the distribution of Anthony & Sylvan shares
is subject to the clearance of a registration statement to be filed with the
Securities and Exchange Commission. The receipt of Anthony & Sylvan shares will
be treated as a taxable distribution to Essef's shareholders.
In connection with the execution of the Merger Agreement, on
April 30, 1999, Pentair, Essef and Anthony & Sylvan entered into a Tax Sharing
Agreement (the "Tax Sharing Agreement"), whereby Essef, Anthony & Sylvan and
Pentair agreed to provide for the allocation of income, franchise and other tax
liabilities of Anthony & Sylvan and of Essef and its other subsidiaries. In
addition, on April 30, 1999, Essef, Anthony & Sylvan and Pentair entered into a
Transition Agreement (the "Transition Agreement") to provide for the Split-off
prior to the Merger.
Copies of the Merger Agreement, the Tax Sharing Agreement, and
the Transition Agreement, and the related press release are attached as exhibits
hereto and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of April 30, 1999, among
Pentair, Inc., Northstar Acquisition Company and Essef Corporation.
2.2 Transition Agreement, dated as of April 30, 1999, among Essef
Corporation, Anthony & Sylvan Pools Corporation and Pentair, Inc.
2.3 Tax Sharing Agreement, dated as of April 30, 1999, between Pentair,
Inc., Essef Corporation, and Anthony & Sylvan Pools Corporation.
99.1 Press release, dated April 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Essef Corporation
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(Registrant)
May 7, 1999 /s/ Mark E. Brody
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(Date) Vice President
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EXHIBIT INDEX
Exhibit
Number Exhibit
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2.1 Agreement and Plan of Merger, dated as of April 30, 1999,
among Pentair, Inc., Northstar Acquisition Company and Essef
Corporation.
2.2 Transition Agreement, dated as of April 30, 1999, among Essef
Corporation, Anthony & Sylvan Pools Corporation and Pentair,
Inc.
2.2 Tax Sharing Agreement, dated as of April 30, 1999, between
Pentair, Inc., Essef Corporation, and Anthony & Sylvan Pools
Corporation.
99.1 Press release, dated April 30, 1999.
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Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
APRIL 30, 1999
AMONG
PENTAIR, INC.,
NORTHSTAR ACQUISITION COMPANY
AND
ESSEF CORPORATION
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TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER
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Section 1.1 The Merger........................................................2
Section 1.2 Effective Time of the Merger......................................2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles..........................................................2
Section 2.2 Regulations.......................................................2
Section 2.3 Board of Directors; Officer.......................................2
Section 2.4 Effects of Merger.................................................2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Shares of Company Common Stock......................3
Section 3.2 Surrender and Payment.............................................3
Section 3.3 Dissenting Shares.................................................5
Section 3.4 Stock Options.....................................................5
Section 3.5 Shareholders' Meetings............................................7
Section 3.6 Assistance in Consummation of the Merger..........................8
Section 3.7 Closing...........................................................8
Section 3.8 Filing of Certificate of Merger...................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.1 Organization and Qualification....................................8
Section 4.2 Authority Relative to this Merger Agreemen........................8
Section 4.3 Consents and Approvals; No Violations.............................9
Section 4.4 Financial Advisor.................................................9
Section 4.5 Financing.........................................................9
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and Qualification...................................10
Section 5.2 Capitalization...................................................10
Section 5.3 Subsidiaries.....................................................10
Section 5.4 Authority Relative to this Merger Agreement......................11
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Section 5.5 Consents and Approvals; No Violations............................11
Section 5.6 Reports and Financial Statements.................................11
Section 5.7 Absence of Certain Changes or Events.............................12
Section 5.8 Litigation.......................................................12
Section 5.9 Information in Disclosure Documents..............................13
Section 5.10 Employee Benefit Plans...........................................13
Section 5.11 ERISA............................................................14
Section 5.12 Company Action...................................................15
Section 5.13 Fairness Opinion.................................................15
Section 5.14 Financial Advisor................................................15
Section 5.15 Compliance with Applicable Laws..................................15
Section 5.16 Liabilities......................................................15
Section 5.17 Taxes............................................................15
Section 5.18 Certain Agreements...............................................17
Section 5.19 Patents, Trademark, Etc..........................................17
Section 5.20 Title to Assets; Liens...........................................17
Section 5.21 Required Vote....................................................17
Section 5.22 Insurance........................................................18
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger............18
Section 6.2 Notice of Breach.................................................20
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information; Environmental and Year 2000 Compliance...20
Section 7.2 Shareholders' Meeting; Filings...................................23
Section 7.3 Employment Arrangements..........................................23
Section 7.4 Employee Benefits................................................23
Section 7.5 Indemnification..................................................24
Section 7.6 Consents.........................................................25
Section 7.7 Antitrust Filings................................................25
Section 7.8 Additional Agreements............................................26
Section 7.9 No Solicitation..................................................26
Section 7.10 Split-Off of A&S.................................................28
Section 7.11 Confidentiality..................................................29
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.......29
Section 8.2 Conditions to Obligation of the Company to Effect the Merger.....29
Section 8.3 Conditions to Obligation of Parent and Sub to Effect the Merger..30
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
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Section 9.1 Termination......................................................30
Section 9.2 Effect of Termination............................................32
Section 9.3 Amendment........................................................32
Section 9.4 Waiver...........................................................32
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements.......32
Section 10.2 Notices..........................................................33
Section 10.3 Fees and Expenses................................................34
Section 10.4 Publicity........................................................35
Section 10.5 Specific Performance.............................................35
Section 10.6 Interpretation...................................................35
Section 10.7 Third Party Beneficiaries........................................36
Section 10.8 Miscellaneous....................................................36
Section 10.9 Cure Period......................................................36
Section 10.10 Validity.........................................................36
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Exhibit A Transition Agreement
Exhibit B Tax Sharing Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"),
dated as of April 30, 1999, by and among PENTAIR, INC., a Minnesota corporation
("Parent"), NORTHSTAR ACQUISITION COMPANY, an Ohio corporation and a wholly
owned subsidiary of Parent ("Sub"), and ESSEF CORPORATION, an Ohio corporation
(the "Company").
RECITALS
WHEREAS, the respective boards of directors of Parent, Sub and
the Company have determined that it is fair to, and in the best interests of
their respective stockholders to consummate the acquisition of the Company
(other than the swimming pool installation business thereof) by Parent upon the
terms and subject to the conditions set forth herein; and
WHEREAS, as part of the Merger (as defined below), Anthony &
Sylvan Pools Corporation, an Ohio corporation and an indirect wholly-owned
subsidiary of the Company (including any successor in interest, "A&S"), will be
split-off from the Company, in a manner (as provided in the Transition
Agreement, dated as of the date hereof, among the Company, A&S and the Parent
attached hereto as Exhibit A (the "Transition Agreement")) whereby the holder
of shares of Company common stock, without par value ("Company Common Stock")
will receive 100% of the shares of common stock, without par value, of A&S (the
"Split-Off") in consideration for the redemption of a portion of their shares
of Company Common Stock; and
WHEREAS, in furtherance of the acquisition, the respective
boards of directors of Parent, Sub and the Company have approved the merger of
Sub with and into the Company (the "Merger") in accordance with the Ohio
General Corporation Law ("OGCL") whereby each issued and outstanding share of
Company Common Stock (other than shares of Company Common Stock held by the
Company as treasury stock or owned by Parent, Sub or any other Subsidiary (as
defined in Section 10.6 below) of Parent immediately prior to the Effective
Time and other than Dissenting Shares (as defined in Section 3.3 hereof)), will
be converted into the right to receive (i) the Cash Consideration (as defined
in Section 3.1(c) hereof) and (ii) the Split-Off Consideration (as defined in
Section 3.1(c) hereof) as set forth below; and
WHEREAS, as set forth in Section 7.10(a) hereof, as a condition
to and in consideration of the transactions contemplated hereby, following the
date hereof the Company, A&S and certain other parties will enter into a Tax
Sharing Agreement substantially in the form attached hereto as Exhibit B with
such changes as shall have been properly approved prior to the consummation of
the Merger (the "Tax Sharing Agreement" and together with the Transition
Agreement, hereafter collectively referred to as the "Ancillary Agreements");
and
WHEREAS, Parent, 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;
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NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the
conditions hereof and in accordance with the OGCL, at the Effective Time (as
defined below in Section 1.2), Sub shall be merged into the Company and the
separate existence of Sub shall thereupon cease, and the name of the Company,
as the surviving corporation in the Merger (the "Surviving Corporation"), shall
by virtue of the Merger be "Essef Corporation."
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall
become effective when a properly executed Certificate of Merger is duly filed
with the Secretary of State of the State of Ohio in accordance with the OGCL,
which filing shall be made as soon as practicable after the closing of the
transactions contemplated by this Merger Agreement in accordance with Section
3.8. When used in this Merger Agreement, the term "Effective Time" shall mean
the date and time at which such filing shall have been made.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 ARTICLES. The Surviving Corporation shall adopt the
Articles of Incorporation of Sub in effect immediately prior to the Merger as
the Articles of Incorporation of the Surviving Corporation until amended in
accordance with its terms and as provided by law and this Merger Agreement.
Section 2.2 REGULATIONS. The Surviving Corporation shall adopt
the Regulations of Sub as in effect at the Effective Time as the Regulations of
the Surviving Corporation.
Section 2.3 BOARD OF DIRECTORS; OFFICERS. The directors of Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each case until their
respective successors are duly elected and qualified in the manner provided in
the Articles of Incorporation and Regulations of the Surviving Corporation.
Section 2.4 EFFECTS OF MERGER. The Merger shall have the
effects set forth in the applicable provisions of the OGCL. Without limiting
the generality of the foregoing, and subject thereto at the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all restrictions, debts, liabilities and duties of
the Sub.
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ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF SHARES OF COMPANY COMMON STOCK. At
the Effective Time:
(a) CANCELLATION OF CERTAIN STOCK. Each share of Company Common
Stock held by the Company as treasury stock or owned by Parent, Sub or any
other Subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired and cease to exist, and no payment shall
be made with respect thereto; provided, that shares of Company Common Stock
held beneficially or of record by any plan, program or arrangement sponsored or
maintained for the benefit of employees of Parent or the Company or any
Subsidiaries thereof shall not be deemed to be held by Parent or the Company
regardless of whether Parent or Company has, directly or indirectly, the power
to vote or control the disposition of such shares of Company Common Stock.
(b) CAPITAL STOCK OF SUB. Each share of common stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and non-assessable share of common
stock, par value $0.01, of the Surviving Corporation and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation.
(c) CONVERSION OF SHARES. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall, except as
otherwise provided in Sections 3.1(a) and 3.3 hereof, be converted into the
right to receive Nineteen Dollars and Nine Cents ($19.09) per share, without
interest (the "Cash Consideration") and 0.25 shares of A&S Common Stock (as
defined in the Transition Agreement) (the "Split-Off Consideration").
Section 3.2 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent and Company shall
jointly appoint a depositary (the "Depositary") for the purpose of exchanging
certificates representing shares of Company Common Stock for the Cash
Consideration and the Split-Off Consideration. The Depositary shall be Bank of
America National Trust and Savings Association. Parent will pay to the
Depositary immediately prior to the Effective Time, the Cash Consideration, and
the Company shall cause A&S to deposit with the Depositary the Split-Off
Consideration (comprised of shares of A&S Common Stock and cash sufficient to
pay any fractional shares), to be paid in respect of the shares of Company
Common Stock. For purposes of determining the Cash Consideration and the
Split-Off Consideration to be so paid, Parent and Company shall assume that no
holder of shares of Company Common Stock will perfect his right to appraisal of
his shares of Company Common Stock. Promptly after the Effective Time, Parent
will send, or will cause the Depositary to send, but in no event later than
three (3) business days after the Effective Time, to each holder of shares of
Company Common Stock at the Effective Time a letter of transmittal for use in
such exchange (which shall specify that the delivery shall be effected, and
risk of loss and title shall pass, only upon proper delivery of the
certificates representing shares of Company Common Stock to the Depositary) and
instructions for use in effecting the surrender of shares of Company Common
Stock in exchange for the Cash
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Consideration and Split-Off Consideration, and no interest shall accrue or be
paid on any Cash Consideration payable upon the surrender of certificates.
(b) Each holder of shares of Company Common Stock that have been
converted into the right to receive the Cash Consideration and Split-Off
Consideration, upon surrender to the Depositary of a certificate or
certificates properly representing such shares of Company Common Stock,
together with a properly completed letter of transmittal covering such shares
of Company Common Stock, will be entitled to receive the Cash Consideration and
Split-Off Consideration payable in respect of such shares of Company Common
Stock less any amounts required to be withheld under applicable federal, state,
local or foreign income tax regulations. Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes, only
the right to receive such Cash Consideration and Split-Off Consideration. No
certificates representing fractional shares of A&S Common Stock shall be issued
upon the surrender for exchange of shares of Company Common Stock, and such
fractional share interests will not entitle the owner thereof to vote or to any
other rights as a shareholder of A&S. Each holder of shares of Company Common
Stock who would otherwise be entitled to receive a fractional share of A&S
Common Stock shall receive from the Depositary an amount in cash (the
"Fractional Share Payment") equal to the product obtained by multiplying (i)
the fractional share interest to which such holder (after taking into account
all shares of Company Common Stock held at the Effective Time by such holder)
would otherwise be entitled by (ii) the mean between the high and low trading
prices of A&S Common Stock on the first full day of trading following the
Closing (as defined in Section 3.7 below) (the "Trading Value").
(c) If any portion of the Cash Consideration and Split-Off
Consideration is to be paid to a Person other than the registered holder of the
shares of Company Common Stock represented by the certificate or certificates
surrendered in exchange therefor, it shall be a condition to such payment that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Depositary any transfer or other taxes required as a
result of such payment to a Person other than the registered holder of such
shares of Company Common Stock or establish to the satisfaction of the
Depositary that such tax has been paid or is not payable. For purposes of this
Merger Agreement, "Person" means an individual, a corporation, limited
liability company, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or any agency
or instrumentality thereof.
(d) After the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration
of transfers of shares of Company Common Stock. If, after the Effective Time,
certificates representing shares of Company Common Stock are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article III. From and after the Effective Time, holders of certificates
theretofore evidencing shares of Company Common Stock shall cease to have any
rights as shareholders of the Company, except as provided herein or by law.
(e) Any portion of the Cash Consideration paid to the Depositary
pursuant to Section 3.2(a) that remains unclaimed by the holders of shares of
Company Common Stock one year
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after the Effective Time shall be returned to the Surviving Corporation,
including any interest thereon, and any portion of the Split-Off Consideration
(including, any interest on the cash deposited for Fractional Share Payments)
paid to the Depositary pursuant to Section 3.2(a) that remains unclaimed by the
holders of shares of Company Common Stock one year after the Effective Time
shall be returned to A&S, upon written demand, and any such holder who has not
exchanged his shares of Company Common Stock for the Cash Consideration and
Split-Off Consideration in accordance with this Section 3.2(a) prior to that
time shall thereafter look only to the Surviving Corporation for payment of the
Cash Consideration and A&S for payment of the Split-Off Consideration in
respect of his shares of Company Common Stock, without any interest thereon.
Notwithstanding the foregoing, Parent, Sub and the Surviving Corporation shall
not be liable to any holder of shares of Company Common Stock for any amount
paid to a public official pursuant to applicable abandoned property laws. Any
Cash Consideration or Split-Off Consideration remaining unclaimed by holders of
shares of Company Common Stock on the day immediately prior to such times as
such amounts would otherwise escheat to or become property of any governmental
entity shall, to the extent permitted by applicable law, in the case of the
Cash Consideration become the property of Parent, and in the case of the
Split-Off Consideration become the property of A&S, free and clear of any
claims or interest of any Person previously entitled thereto.
(f) Any portion of the Cash Consideration and Split-Off
Consideration paid to the Depositary pursuant to Section 3.2(a) hereof to pay
for shares of Company Common Stock for which appraisal rights have been
perfected shall be returned to the Surviving Corporation and A&S, respectively,
upon written demand.
Section 3.3 DISSENTING SHARES . Notwithstanding Section 3.1
hereof, shares of Company Common Stock issued and outstanding immediately prior
to the Effective Time and held by a holder who has properly exercised and
perfected appraisal rights under Section 1701.85 of the OGCL (the "Dissenting
Shares"), shall not be converted into the right to receive the Cash
Consideration and Split-Off Consideration, but the holders of Dissenting Shares
shall be entitled to receive such consideration as shall be determined pursuant
to said Section 1701.85; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose his right to appraisal and payment
under the OGCL, such holder's shares shall thereupon be deemed to have been
converted as of the Effective Time into the right to receive the Cash
Consideration and Split-Off Consideration, without any interest thereon, and
such shares of Company Common Stock shall no longer be Dissenting Shares. The
Company shall give Parent (i) prompt notice of any written demands for payment,
withdrawals of demands for payment and any other instruments served pursuant to
the OGCL received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for payment under the
OGCL. The Company will not voluntarily make any payment with respect to any
demands for payment and will not, except with the prior written consent of
Parent, settle or offer to settle any such demands.
Section 3.4 STOCK OPTIONS.
(a) Except as provided in Section 3.4(c) below, the Company
shall take all actions (including, but not limited to, obtaining any and all
consents from employees to the matters
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contemplated by this Section 3.4) necessary to provide that all outstanding
options and other rights to acquire shares ("Stock Options") granted under any
stock option or deferred compensation plan, program or similar arrangement or
any employment agreement of the Company or any Subsidiaries other than options,
if any, of A&S, each as amended (the "Option Plans"), shall become fully
exercisable and vested on the date (the "Vesting Date") which shall be set by
the Company and which, in any event, shall be not less than thirty (30) days
prior to the Effective Time, whether or not otherwise exercisable and vested.
All Stock Options which are outstanding immediately prior to the Effective Time
shall be cancelled as of the Effective Time and the holders thereof shall be
entitled to receive from the Company, for each share of Company Common Stock
subject to such Stock Option, (i) an amount in cash equal to the difference
between the Cash Consideration and the exercise price per share of such Stock
Option, which amount shall be payable at the Effective Time, plus (ii) 0.25
shares of A&S Common Stock (and in the case of fractional shares, the
Fractional Share Payment), which shall be held by the Depositary pending
delivery after the Effective Time. All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby shall be deducted from the amounts payable under clauses (i) and (ii)
above and all such taxes attributable to the exercise of Stock Options on or
after the Vesting Date shall be withheld from the proceeds received in the
Merger, in respect of the shares of Company Common Stock issuable on such
exercise.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, (i) the Option Plans
shall terminate as of the Effective Time and the provisions in any other plan,
program or arrangement, providing for the issuance or grant by the Company or
any of its Subsidiaries of any interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted as of the Effective Time
and (ii) the Company shall use all reasonable efforts to ensure that following
the Effective Time no holder of Stock Options or any participant in the Option
Plans or any other such plans, programs or arrangements shall have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof.
(c) (i) With respect to the employees identified on Schedule
3.4(c) of the Company Disclosure Schedule who will remain as
employees or directors of A&S (the "Optionees" and individually
an "Optionee"), the Company agrees to take all actions
(including, but not limited to, obtaining any and all consents
from the Optionees to the matters contemplated by this Section
3.4(c) and causing A&S to take such actions as are necessary to
accomplish the matters contemplated by this Section 3.4(c))
necessary to provide that (A) the Stock Options identified on
Schedule 3.4(c) of the Company Disclosure Schedule are amended
in such a fashion that each Optionee has the right under such
options to purchase (subsequent to the Merger) that number of
shares of Company Common Stock that represents the same
proportionate interest in the Company that such Optionee had the
right to purchase prior to the Merger (such option hereafter
referred to as the "Post-Merger Company Option") with
appropriate adjustments (if necessary as specified below) in the
exercise price of such Option and (B) such Optionee is granted a
stock option (with terms equivalent to the terms in the
Optionee's option to purchase Company Common Stock and with an
exercise price as specified in this Section 3.4(c)) to purchase
that number of shares of A&S Common Stock that represents a
proportionate
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interest in A&S equal to the proportionate interest in the
Company that the Optionee's option to purchase Company Common
Stock represented (the "A&S Option").
(ii) (A) The amendment contemplated by Section
3.4(c)(i)(A) shall be accomplished by reducing the option price
of the Post-Merger Company Option to a price equal to the option
price (immediately before the Merger) multiplied by a fraction,
the numerator of which is the aggregate value of Company Common
Stock immediately subsequent to the Merger (utilizing $19.09 as
the per share value of such Common Stock) and the denominator of
which is the sum of such aggregate value of the Company Common
Stock and the aggregate value of A&S Common Stock immediately
subsequent to the Merger (based on the value of A&S Common Stock
as determined pursuant to Section 5 of the Tax Sharing
Agreement) and (B) the A&S Option shall have a per-share
exercise price that bears the same relation to the per-share
value of A&S Common Stock as the per-share exercise price of the
Post-Merger Company Option (adjusted as provided in clause (A))
bears to $19.09.
(iii) Immediately after the amendment contemplated
in Section 3.4(c)(i)(A), all Post-Merger Company Options shall
be cancelled and the holders thereof shall be entitled to
receive from the Company for each share of Company Common Stock
subject to such Post-Merger Company Option an amount in cash
equal to the difference between the Cash Consideration and the
exercise price of such Post-Merger Company Option.
(iv) For all purposes of this Section 3.4(c), the
term "proportionate interest" shall be determined on the basis
of the percentage interest of Company or A&S Common Stock (as
the case may be) that such Optionee would own after the exercise
of all Stock Options (as defined in Section 3.4(a)) in the case
of the Company and all A&S Options in the case of A&S.
Section 3.5 SHAREHOLDERS' MEETINGS. (a) In order to consummate
the Merger, the Company, acting through its board of directors, shall, in
accordance with applicable law, the Company's Third Amended Articles of
Incorporation and its Regulations:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders for the purpose of
considering and taking action upon this Merger Agreement (the
"Shareholders' Meeting");
(ii) subject to its fiduciary duties under
applicable laws as advised by counsel, include in the proxy
statement or information statement prepared by the Company for
distribution to shareholders of the Company in advance of the
Shareholders' Meeting in accordance with Regulation 14A
promulgated under the Exchange Act (the "Company Proxy
Statement") the recommendation of its board of directors; and
(iii) use its best efforts to (A) obtain and
furnish the information required to be included by it in the
Company Proxy Statement, and, after consultation with Parent,
respond promptly to any comments made by the Commission with
respect to the Company Proxy Statement and any preliminary
version thereof and cause the Company
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Proxy Statement to be mailed to its shareholders and (B) obtain
the necessary approvals of this Merger Agreement by its
shareholders.
(b) Parent will provide the Company with information concerning
Parent and Sub required to be included in the Company Proxy Statement and will
vote, or cause to be voted, all shares of Company Common Stock owned by it or
its Subsidiaries in favor of approval and adoption of this Merger Agreement.
Section 3.6 ASSISTANCE IN CONSUMMATION OF THE MERGER. Each of
Parent, Sub and the Company shall provide all reasonable assistance to, and
shall cooperate with, each other to bring about the consummation of the Merger
as soon as possible in accordance with the terms and conditions of this Merger
Agreement. Parent shall cause Sub to perform all of its obligations in
connection with this Merger Agreement.
Section 3.7 CLOSING. The closing (the "Closing") of the
transactions contemplated by this Merger Agreement shall take place (i) at the
offices of Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public Square,
Cleveland, Ohio 44114-1304, at 9:00 A.M. local time on the second business day
after the day on which the last of the conditions set forth in Article VII is
fulfilled or waived, provided, however, that the closing shall take place on or
within 10 days after the last day of a month, or (ii) at such other time and
place as Parent and the Company shall agree in writing (the "Closing Date").
Section 3.8 FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof as soon as practicable following the Closing,
the Company shall execute and file a certificate of merger in the manner
required by the OGCL and the parties hereto shall take all such other and
further actions as may be required by applicable law to make the Merger
effective.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company, except as
set forth in a disclosure schedule delivered by Parent and Sub concurrently
herewith (the "Parent and Sub Disclosure Schedule"), as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and
carry on its business as it is now being conducted or currently proposed to be
conducted.
Section 4.2 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. Each
of Parent and Sub has the corporate power to enter into this Merger Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Merger Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the boards of directors of Parent and Sub. This
Merger Agreement constitutes a valid and binding obligation of each of Parent
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<PAGE> 13
and Sub enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought. No
other corporate proceedings on the part of Parent or Sub are necessary to
authorize the Merger Agreement and the transactions contemplated hereby.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither
Parent nor Sub is subject to or obligated under (i) any charter, by-law,
indenture or other loan document provision or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to either of them or any
of Parent's Subsidiaries or their respective properties or assets, which would
be breached or violated, or under which there would be a default (with or
without notice or lapse of time, or both), or under which there would arise a
right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit, by its executing and carrying out this Merger
Agreement other than, in the case of clause (ii) only, the laws and regulations
referred to in the next sentence. Except as referred to herein or in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934 (the "Exchange Act"), and other governmental approvals required under the
applicable laws of any foreign jurisdiction ("Foreign Laws") and the
environmental, corporation, securities or blue sky laws or regulations of the
various states ("State Laws") (all of which required consents and approvals
under Foreign Laws and State Laws are identified in Schedule 4.3 to the Parent
and Sub Disclosure Schedule), no filing by Parent or Sub or registration by
Parent with any public body or authority is necessary for, nor is any
authorization, consent or approval of any public body or authority required to
be obtained by Parent or Sub for, the consummation of the Merger or the other
transactions contemplated by this Merger Agreement.
Section 4.4 FINANCIAL ADVISOR. Except for Credit Suisse First
Boston Corporation, financial advisor to Parent and Sub ("Credit Suisse First
Boston"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Merger Agreement based upon arrangements made
by or on behalf of Parent and Sub.
Section 4.5 FINANCING. Sub currently has sufficient funds, or
has a firm written commitment from one or more financial institutions and/or
from Parent (copies of all of which have been delivered to the Company), to
enable it to finance the consummation of the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub, except as
set forth in a disclosure schedule delivered by the Company concurrently
herewith (the "Company Disclosure Schedule"), as follows:
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<PAGE> 14
Section 5.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio and has all requisite corporate power and authority
to own, lease and operate its properties and carry on its business as it is now
being conducted or currently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to so qualify would not have a Company Material
Adverse Effect (as defined in Section 10.6). Complete and correct copies as of
the date hereof of the articles of incorporation and regulations of the Company
and each of its Subsidiaries have, to the extent requested, been delivered to
Parent as part of the Company Disclosure Schedule.
Section 5.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 40,000,000 shares of Company Common Stock and 1,000,000
shares of Preferred Stock, without par value ("Company Preferred Stock"). As of
February 28, 1999 and as adjusted to reflect the stock dividend paid by the
Company on March 10, 1999 to the shareholders of record on February 19, 1999
(the "Stock Dividend"), 13,062,741 shares of Company Common Stock were validly
issued and outstanding, fully paid and nonassessable, 618,127 shares of Company
Common Stock were held in treasury, no shares of Preferred Stock had been
issued, and there have been no material changes (other than as a result of the
Stock Dividend) in such numbers of shares through the date hereof. Except for
Stock Option exercises, no shares of Company Common Stock have been issued
since February 28, 1999. Schedule 5.2 of the Company Disclosure Schedule sets
forth as of the date of this Merger Agreement each outstanding Stock Option
issued under the Option Plans, including the holder, date of grant, exercise
price and number of shares of Company Common Stock subject thereto. Except for
such Stock Options, there are no outstanding options, warrants, calls or other
rights, agreements or commitments obligating the Company to issue, deliver or
sell shares of its capital stock or debt securities or obligating the Company
to grant, extend or enter into any such option, warrant, call or other such
right, agreement or commitment.
Section 5.3 SUBSIDIARIES. Schedule 5.3 of the Company
Disclosure Schedule lists each Subsidiary of the Company. Each of such
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power to carry on its business as it is now being conducted or
currently proposed to be conducted. Each of such Subsidiaries is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to so qualify would not have a Company Material Adverse Effect. All
the outstanding shares of capital stock of each of such Subsidiaries are
validly issued, fully paid and nonassessable and those owned by the Company or
by a Subsidiary of the Company are owned free and clear of any liens, claims or
encumbrances. There are no existing options, warrants, calls or other rights,
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any of the Subsidiaries of the Company
other than A&S. Except as set forth in Schedule 5.3 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association or
entity.
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<PAGE> 15
Section 5.4 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. The
Company has the corporate power to enter into this Merger Agreement, subject to
the requisite approval of this Merger Agreement by the holders of Company
Common Stock, and to carry out its obligations hereunder. The execution and
delivery of this Merger Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the board of directors of the
Company and to the extent necessary by the board of directors of A&S. This
Merger Agreement constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought. Except for the
requisite approval of the holders of Company Common Stock, no other corporate
proceedings on the part of the Company are necessary to authorize this Merger
Agreement and the transactions contemplated hereby.
Section 5.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The Company
is not subject to or obligated under (i) any charter, by-law, indenture or
other loan document provision or (ii) any other contract, license, franchise,
permit, order, decree, concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective properties or assets which would be breached
or violated, or under which there would be a default (with or without notice or
lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by its executing and carrying out this Merger Agreement,
other than, in the case of clause (ii) only, the laws and regulations referred
to in the next sentence. Except as referred to herein or, with respect to the
Merger or the transactions contemplated thereby, in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the
Exchange Act, the Foreign Laws and the State Laws (all of which required
consents and approvals under Foreign Laws and State Laws are identified in
Schedule 5.5 to the Company Disclosure Schedule), no filing by the Company or
registration by the Company with any public body or authority is necessary for,
nor is any authorization, consent or approval of any public body or authority
required to be obtained by the Company for, the consummation of the Merger or
the other transactions contemplated hereby.
Section 5.6 REPORTS AND FINANCIAL STATEMENTS. The Company has
previously furnished Parent with true and complete copies of its (i) Annual
Reports on Form 10-K for the three years ended September 30, 1996, 1997, and
1998, as filed with the Commission, (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 30, 1998, June 30, 1998, and December 31, 1998 as filed
with the Commission, (iii) proxy statements related to all meetings of its
shareholders (whether annual or special) since December 31, 1996 and (iv) all
other reports or registration statements filed by the Company with the
Commission since December 31, 1996 which are all the documents (other than
preliminary materials) that the Company was required to file with the
Commission since that date (such documents identified in clauses (i) through
(iv) (except registration statements on Form S-8 relating to employee benefit
plans and the Form S-1 (as defined in the Transition Agreement (or any other
registration statement contemplated to be filed pursuant to the terms of the
Transition Agreement)) being referred to herein collectively as the "Company
SEC Reports")). As of their respective dates, the Company SEC Reports
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<PAGE> 16
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
Commission thereunder applicable to such Company SEC Reports, and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of the Company included in the Company SEC Reports comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto, and the
financial statements included in the Company SEC Reports have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of the Company and its
Subsidiaries as at the dates thereof and the results of their operations and
changes in financial position for the periods then ended subject, in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments and any other adjustments described therein.
Section 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Company SEC Reports, since December 31, 1998, there has not
been (i) any event, condition, transaction, commitment, dispute or other
circumstance (financial or otherwise) of any character (whether or not in the
ordinary course of business) individually or in the aggregate having a Company
Material Adverse Effect; (ii) any damage, destruction or loss, whether or not
covered by insurance, which, insofar as reasonably can be foreseen, in the
future would have a Company Material Adverse Effect; (iii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the capital stock of the Company; or
(iv) any entry into any commitment or transaction material to the Company and
its Subsidiaries taken as a whole (including, without limitation, any borrowing
or sale of assets) except in the ordinary course of business consistent with
past practice.
Section 5.8 LITIGATION.
(a) Except as disclosed in the Company SEC Reports, there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
either alone or in the aggregate, has, or is reasonably likely to have, a
Company Material Adverse Effect or would prevent, delay or otherwise interfere
with any of the transactions contemplated by this Merger Agreement, nor is
there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company or any of its Subsidiaries having, or
reasonably likely to have, either alone or in the aggregate, a Company Material
Adverse Effect or would prevent, delay or otherwise interfere with any of the
transactions contemplated by this Merger Agreement. Schedule 5.8 of the Company
Disclosure Schedule sets forth all claims with respect to the Company or any of
its Subsidiaries, whether or not accrued for or covered by insurance, where the
amount in controversy exceeds $200,000. Schedule 5.8 of the Company Disclosure
Schedule sets forth all claims with respect to Products (as defined in
5.8(b)(i) below) liability that have not been accrued for by the Company in its
consolidated financial statements or are not covered by the Company's insurance
policies. There has not been any adverse change in the number, type or severity
of claims with respect to Products during the last three years. To the
knowledge of the Company, none of the Products is
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<PAGE> 17
the subject of any Recall Campaign (as defined in 5.8(b)(ii) below) and no
facts or conditions exist which could reasonably be expected to result in such
a Recall Campaign, in each case, where the costs of such a Campaign would
exceed $200,000.
(b) For purposes of this Section 5.8, capitalized terms have the
following meanings:
(i) "Products" shall mean any and all products
currently or at any time previously designed, manufactured,
distributed or sold by the Company or its Subsidiaries, or by
any predecessor of the Company or its Subsidiaries.
(ii) "Recall Campaign" shall mean any formal
action by the Company or its Subsidiaries to order the return of
any Product from all known customers for such Product for
repair, substitution or replacement.
Section 5.9 INFORMATION IN DISCLOSURE DOCUMENTS. None of the
information with respect to the Company or its Subsidiaries to be included or
incorporated by reference in the Company Proxy Statement or the Form S-1 (or
any other registration statement contemplated to be filed pursuant to the terms
of the Transition Agreement) will, in the case of the Company Proxy Statement
or any amendments or supplements thereto, and at the time of the Shareholders'
Meeting to be held in connection with the Merger, or in the case of Form S-1
(or any other registration statement contemplated to be filed pursuant to the
terms of the Transition Agreement), at the time it becomes effective and at the
Effective Time 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 Company Proxy Statement and the Form S-1 (or any
other registration statement contemplated to be filed pursuant to the terms of
the Transition Agreement) will comply in all material respects with the
Exchange Act (and the rules and regulations promulgated thereunder) and the
Securities Act (and the rules and regulations promulgated thereunder).
Section 5.10 EMPLOYEE BENEFIT PLANS. Except as disclosed in the
Company SEC Reports or as set forth in Schedule 5.10 of the Company Disclosure
Schedule, there are no employee benefit, compensation or severance plans,
agreements or arrangements, including "employee benefit plans," as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and including, but not limited to, plans, agreements or arrangements
relating to former employees, including, but not limited to, retiree medical
plans or post-employment life insurance plans, maintained by the Company or any
of its Subsidiaries or collective bargaining agreements to which the Company or
any of its Subsidiaries is a party (together, the "Company Benefit Plans"). To
the knowledge of the Company, no default exists with respect to the obligations
of the Company or any of its Subsidiaries under such Company Benefit Plans.
Since December 31, 1998, there have been no disputes or grievances subject to
any grievance procedure, unfair labor practice proceedings, arbitration or
litigation occurring or threatened under such Company Benefit Plans, which have
not been finally resolved, settled or otherwise disposed of, nor is there any
default, or any condition which, with notice or lapse of time or both, would
constitute such a default, under any such Company Benefit Plans, by the Company
or its Subsidiaries or, to the knowledge of the Company and its Subsidiaries,
any other party thereto. Since December 31, 1998, there have been no strikes,
lockouts or work stoppages
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<PAGE> 18
or slowdowns, or to the knowledge of the Company and its Subsidiaries,
jurisdictional disputes or organizing activity occurring or threatened with
respect to the business or operations of the Company or its Subsidiaries.
Except as disclosed in the Company SEC Reports or as set forth in Schedule 5.10
of the Company Disclosure Schedule, neither the execution of the Merger
Agreement nor the consummation of the transactions contemplated hereby will
(either alone or upon the occurrence of additional events or acts) result in,
cause the accelerated vesting or delivery of, or increase the amount or value
of, any payment or benefit to any employee of the Company or any of its
Subsidiaries. Notwithstanding anything stated in this Section 5.10 to the
contrary, with respect to the severance plans or arrangements for the officers
of the Company and its Subsidiaries, Schedule 5.10 of the Disclosure Schedule
sets forth to the knowledge of the Company only such plans or arrangements for
which the costs will exceed $100,000 per individual plan or arrangement or
$500,000 in the aggregate for all such plans or arrangements.
Section 5.11 ERISA. The Company Benefit Plans have been
administered in compliance in all material respects with applicable laws and
regulations such that no condition exists with respect to the Company Benefit
Plans that could have a Company Material Adverse Effect. Each of the Company
Benefit Plans which is intended to meet the requirements of Section 401(a) of
the Code has been determined by the Internal Revenue Service to be "qualified,"
within the meaning of such section of the Code, and the Company knows of no
fact which is likely to have a material adverse effect on the qualified status
of such plans. To the knowledge of the Company, there are not now nor have
there been any non-exempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving the Company Benefit
Plans which could subject the Company, its Subsidiaries or Parent to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. Except as set forth in Schedule 5.11 of the Company Disclosure Schedule,
no Company Benefit Plan which is subject to Title IV of ERISA has been
completely or partially terminated, no proceedings to completely or partially
terminate any Company Benefit Plan have been instituted within the meaning of
Subtitle C of said Title IV of ERISA; and no reportable event, within the
meaning of Section 4043(c) of said Subtitle C for which the 30-day notice
requirement of ERISA has not been waived, has occurred with respect to any
Company Benefit Plan. Neither the Company nor any of its Subsidiaries has made
a complete or partial withdrawal, within the meaning of Section 4201 of ERISA,
from any multiemployer plan which has resulted in, or is reasonably expected to
result in, any withdrawal liability to the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has engaged in any transaction
described in Section 4069 of ERISA within the last five (5) years. To the
knowledge of the Company, there does not now exist, nor do any circumstances
exist that could result in, any material liability of the Company or any of its
Subsidiaries (or any entity, trade or business that is or was at any time
required to be aggregated with the Company or any of its Subsidiaries under
Section 414(b), (c), (m) or (o) of the Code) under Title IV of ERISA, Section
302 of ERISA, Sections 412 and 4971 of the Code, the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and
similar provisions of foreign laws or regulations, other than such liabilities
that arise solely out of, or relate solely to, the Company Benefit Plans, that
would have a Company Material Adverse Effect or a Parent Material Adverse
Effect (as defined in Section 10.6) following the Effective Time.
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Section 5.12 COMPANY ACTION. The board of directors of the
Company (at a meeting duly called and held) has by the requisite vote of
directors (a) determined that the Merger is advisable and fair and in the best
interests of the Company and its shareholders, (b) approved the Merger in
accordance with the provisions of Section 1701.78 of the OGCL, and (c)
recommended the approval of this Merger Agreement and the Merger by the holders
of the Company Common Stock and directed that the Merger be submitted for
consideration by the Company's shareholders entitled to vote thereon at the
Shareholders' Meeting.
Section 5.13 FAIRNESS OPINION. The Company has received the
opinion of Rhone Group LLC, financial advisor to the Company ("Rhone Group"),
dated the date hereof, to the effect that the Cash Consideration and Split-Off
Consideration to be received by the holders of shares of Company Common Stock
pursuant to the terms of this Merger Agreement are fair from a financial point
of view to such holders, a copy of which has been or will be delivered to
Parent.
Section 5.14 FINANCIAL ADVISOR. Except for Rhone Group, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Merger Agreement and the Transition Agreement based upon
arrangements made by or on behalf of the Company. Schedule 5.14 of the Company
Disclosure Schedule contains a true and correct copy of the Company's
engagement letter with Rhone Group.
Section 5.15 COMPLIANCE WITH APPLICABLE LAWS. (i) The Company
and its Subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals (the "Company Permits") of all courts, administrative agencies or
commissions or other governmental authorities or instrumentalities, domestic or
foreign (each, a "Governmental Entity") necessary for the operation of the
businesses of the Company and its Subsidiaries; (ii) to the knowledge of the
Company, the Company and its Subsidiaries are in compliance with the terms of
the Company Permits; (iii) except as disclosed in the Company SEC Reports, the
businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity; and
(iv) no investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending, or threatened, nor has any
Governmental Entity indicated an intention to conduct the same.
Section 5.16 LIABILITIES. As of December 31, 1998, neither the
Company nor any of its Subsidiaries had any liabilities or obligations
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are not disclosed
or provided for in the most recent Company SEC Reports or which could result in
a Company Material Adverse Effect. To the knowledge of the Company, there was
no basis, as of December 31, 1998, for any claim or liability (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which is not reflected in the Company SEC
Reports.
Section 5.17 TAXES. Except as otherwise disclosed in Schedule
5.17 of the Company Disclosure Schedule or as reflected in the Company SEC
Reports and except for those matters
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which, either individually or in the aggregate, would not result in a Company
Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have
had filed on their behalf) or will file or cause to be filed, all Tax Returns
(as defined in Section 5.17(h)(iii) hereof) required by applicable law to be
filed by any of them prior to the Effective Time.
(b) The Company and each of its Subsidiaries have paid (or have
had paid on their behalf) all Taxes (as defined in Section 5.17(h)(ii) hereof)
due with respect to any period ending prior to or as of the Effective Time), or
where payment of Taxes 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 before the consummation of the Merger, an
adequate accrual for the payment of all such Taxes which have accrued prior to
the Effective Time other than Taxes directly attributable to the transactions
contemplated by the Transition Agreement.
(c) No Audit (as defined in Section 5.17(h)(i)) is pending with
respect to any Taxes due from the Company or any Subsidiary. There are no
outstanding waivers extending the statutory period of limitations relating to
the payment of Taxes due from the Company or any Subsidiary for any taxable
period ending prior to the Effective Time which are expected to be outstanding
as of the Effective Time.
(d) Neither the Company nor any Subsidiary is a party to, is
bound by, or has any obligation under, a tax sharing contract or other
agreement or arrangement for the allocation, apportionment, sharing,
indemnification, or payment of Taxes, other than the Tax Sharing Agreement.
(e) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(f) Neither the Company nor any of its Subsidiaries has received
any written notice of deficiency, assessment or adjustment from the Internal
Revenue Service or any other domestic or foreign governmental taxing authority
that has not been fully paid or finally settled, and any such deficiency,
adjustment or assessment shown on such schedule is being contested in good
faith through appropriate proceedings and adequate reserves have been
established on the Company's financial statements therefor. To the knowledge of
the Company, there are no other deficiencies, assessments or adjustments
threatened, pending or assessed with respect to the Company or any of its
Subsidiaries.
(g) Except as contemplated by this Agreement and the Ancillary
Documents or as disclosed in the Company SEC Reports, neither the Company nor
any of its Subsidiaries is a party to any agreement, contract or other
arrangement that would result, separately or in the aggregate, in the
requirement to pay any "excess parachute payments" within the meaning of
Section 280G of the Code or any gross-up in connection with such an agreement,
contract or arrangement. Schedule 5.17 of the Company Disclosure Schedule lists
any agreement, contract or other arrangement in which the Company or any
Retained Subsidiary is a party providing for any such "excess parachute
payments" or gross-ups.
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(h) For purposes of this Section 5.17, capitalized terms have
the following meanings:
(i) "Audit" shall mean any audit, assessment or
other examination of Taxes or Tax Returns by the Internal
Revenue Service or any other domestic or foreign governmental
authority responsible for the administration of any Taxes,
proceedings or appeal of such proceedings relating to Taxes.
(ii) "Taxes" shall mean all federal, state, local
and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise and other
taxes, duties and assessments, charges, or other fees imposed by
a governmental authority, together with any interest, additions
to tax, or penalties imposed with respect thereto.
(iii) "Tax Returns" shall mean all federal, state,
local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any
amended Tax Return relating to Taxes.
Section 5.18 CERTAIN AGREEMENTS. Except as filed as an exhibit
to the Company SEC Reports, neither the Company nor any of its Subsidiaries is
a party to or bound by any contract, agreement, arrangement, commitment or
understanding (whether written or oral) which as of the date hereof, is a
"material contract" (as defined in Item 601(b)(10) of Regulation S-K of the
Commission). Schedule 5.18 to the Company Disclosure Schedule contains true and
correct copies of all indemnification agreements between the Company and
officers, directors and employees of the Company and its Subsidiaries.
Section 5.19 PATENTS, TRADEMARK, ETC. The Company and its
Subsidiaries owns or possesses adequate licenses or other valid rights to use
all patents, trademarks, trade names, service marks, trade secrets, copyrights
and licenses and other proprietary intellectual property rights and licenses
("Intellectual Property Rights") as are necessary in connection with the
conduct of the businesses of the Company and its Subsidiaries. The Company does
not have any knowledge of any infringement by any other person of the Company's
or its Subsidiaries' Intellectual Property Rights and, to the knowledge of the
Company, the Company and its Subsidiaries are not infringing the Intellectual
Property Rights of another person.
Section 5.20 TITLE TO ASSETS; LIENS. The Company has good and
marketable title to all of its inventory, accounts receivable, property,
equipment and other assets, and except as disclosed in the Company's SEC
Reports such assets are free and clear of any mortgages, liens, charges,
encumbrances, or title defects of any nature whatsoever. The Company and its
Subsidiaries have valid and enforceable leases for the premises and the
equipment, furniture and fixtures purported to be leased by them.
Section 5.21 REQUIRED VOTE. The affirmative vote of the holders
of shares of Company Common Stock representing at least two-thirds of the votes
entitled to be cast at the Shareholders' Meeting is required to approve this
Merger Agreement. No other vote of any class or series of stock of the Company
is required by law, the Third Amended Articles of
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Incorporation or Regulations of the Company or otherwise in order for the
Company to consummate the Merger and the transactions contemplated hereby.
Section 5.22 INSURANCE. The Company has previously delivered to
Parent a schedule of all policies of property, casualty, worker's compensation,
product liability, general liability and other insurance as maintained by the
Company and its Subsidiaries. All such policies are valid, outstanding and
enforceable and no notice of cancellation or termination has been received with
respect to any such policy.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. Prior to the Effective Time and except as provided in Section 7.10 or
the Transition Agreement, unless Parent shall otherwise agree in writing after
written notice provided by the Company specifying in reasonable detail the
basis for any action by the Company or its Subsidiaries outside the scope of
agreed upon activities set forth in this Section 6.1 and at Parent's election,
a meeting with officials from the Company or its Subsidiaries, as the case may
be, to discuss the basis for such action:
(i) the Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in the same manner as
heretofore conducted, and shall, and shall cause its
Subsidiaries to, use their diligent efforts to preserve intact
their present business organizations, keep available the
services of their present officers and employees and preserve
their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time.
The Company shall, and shall cause its Subsidiaries to (A)
maintain insurance coverages and its books, accounts and records
in the usual manner consistent with prior practices; (B) comply
in all material respects with all laws, ordinances and
regulations of Governmental Entities applicable to the Company
and its Subsidiaries; (C) maintain and keep its properties and
equipment in good repair, working order and condition, ordinary
wear and tear excepted; and (D) perform in all material respects
its obligations under all contracts and commitments to which it
is a party or by which it is bound, in each case other than
where the failure to so maintain, comply or perform, either
individually or in the aggregate, would not reasonably be
expected to result in a Company Material Adverse Effect;
(ii) the Company shall not and shall not propose to
(A) sell or pledge or agree to sell or pledge any capital stock
owned by it in any of its Subsidiaries, (B) amend its Third
Amended Articles of Incorporation or Regulations, (C) split,
combine or reclassify its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital
stock of the Company, or declare, set aside or pay any dividend
or other distribution payable in cash, stock or property (other
than dividends declared, set aside or paid in a manner
consistent with the Company's past practice), or (D) directly or
indirectly redeem, purchase or
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otherwise acquire or agree to redeem, purchase or otherwise
acquire any shares of Company capital stock;
(iii) the Company shall not, nor shall it permit any
of its Subsidiaries to, (A) issue, deliver or sell or agree to
issue, deliver or sell any additional shares of, or rights of
any kind to acquire any shares of, its capital stock of any
class, or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock other than
issuances of Company Common Stock pursuant to the exercise of
Stock Options, (B) except as provided for in the Company's
capital expenditure budget for the fiscal year ending September
30, 1999 (the "Capital Expenditure Budget"), acquire, lease or
dispose or agree to acquire, lease or dispose of any capital
assets in excess of $1,000,000 or any other assets other than in
the ordinary course of business, (C) incur additional
indebtedness other than in the ordinary course of business for
working capital purposes or as provided for in the Capital
Expenditure Budget or encumber or grant a security interest in
any asset in connection with such indebtedness; or (D) enter
into any binding contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(iv) the Company shall not, nor shall it permit any
of its Subsidiaries to, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity
interest in, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof; provided, however, that if
after notice provided by the Company to Parent, Parent fails to
agree to any such merger, consolidation or acquisition and this
Agreement is later terminated, Parent and its respective
Affiliates shall be precluded from undertaking such merger,
consolidation or acquisition for a period of three (3) years
following the date of such termination;
(v) except as set forth in Schedule 6.1 of the
Company Disclosure Schedule, the Company shall not, nor shall it
permit, any of its Subsidiaries to, except as required to comply
with applicable law and except as provided in Section 7.4
hereof, (A) adopt, enter into, terminate, expand the
applicability of or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other Company
Benefit Plan, agreement, trust, fund or other arrangement for
the benefit or welfare of any director, officer or current or
former employee, (B) increase in any manner the compensation or
fringe benefit of any director, officer or employee (except for
normal increases in the ordinary course of business that are
consistent with past practice and that, in the aggregate, do not
result in a material increase in benefits or compensation
expense to the Company and its Subsidiaries relative to the
level in effect prior to such amendment), (C) pay any benefit
not provided under any existing plan or arrangement, (D) grant
any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Company Benefit Plan
(including, without limitation, the grant of stock options,
stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or
awards made thereunder) except in the ordinary course of
business or in a manner consistent with past practice, (E) take
any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement,
contract or arrangement or Company Benefit Plan other than in
the ordinary course of business consistent with past practice,
or
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(F) adopt, enter into, amend or terminate any binding contract,
agreement, commitment or arrangement to do any of the foregoing;
and
(vi) the Company shall not, nor shall it permit any
of its Subsidiaries to, make any investments in non-investment
grade securities; provided, however, that the Company will be
permitted to create new wholly owned Subsidiaries in the
ordinary course of business.
Section 6.2 NOTICE OF BREACH. Each party shall promptly give
written notice to the other party upon becoming aware of the occurrence or, to
its knowledge, impending or threatened occurrence, of any event which would
cause or constitute a breach of any of its representations, warranties or
covenants contained or referenced in this Merger Agreement and will use its
best efforts to prevent or promptly remedy the same. Any such notification
shall not be deemed an amendment of the Company Disclosure Schedule or the
Parent and Sub Disclosure Schedule.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION; ENVIRONMENTAL AND YEAR 2000
COMPLIANCE.
(a) Upon reasonable notice delivered to and at reasonable times
scheduled as soon as practicable following such notice by the Company's Vice
President-Finance all in a manner that will minimize disruptions of the
business and operations of the Company and its Subsidiaries and that is
sensitive to time and resource demands of the peak business periods of the
Company's pool equipment segment, (i) between the date of this Agreement and
the Cut-Off Date (as defined in Section 7.1(b) below), the Company will give
Parent and its authorized representatives, including Dames & Moore Group or
another mutually agreed upon nationally recognized environmental consultant
("Parent's Environmental Consultant") and Deloitte & Touche LLP or another
mutually agreed upon nationally recognized year 2000 consultant ("Parent's Year
2000 Consultant"), access to all offices and other facilities and to senior
management of it and its Subsidiaries, and will cause its officers and those of
its Subsidiaries to furnish Parent with (A) such financial, environmental and
operating data and other information with respect to the Company and its
Subsidiaries as Parent may from time to time reasonably request, or (B) any
other financial, environmental and operating data which materially impacts the
Company and its Subsidiaries and (ii) between the period beginning on the
Cut-Off Date and continuing through the Effective Time, the Company will give
Parent full and complete access to the Company's continuing businesses,
personnel and records, including, without limitation, a review of business
plans, major customers and suppliers, potential synergies and cost savings,
post-acquisition management and organizational configuration, key employees,
and capital plans. Notwithstanding the foregoing if during the period beginning
on the date of this Agreement and ending on the Cut-Off Date, the parties
reasonably believe that the Established Claims (as determined in Section 7.1(b)
below) will not exceed the Claim Basket (as defined and determined in Section
7.1(b) below), then the Company will accommodate (subject to the notice
requirements and sensitivities described above) increased due diligence as
contemplated in clause (ii) above by the Parent prior to the Cut-Off Date.
Without limiting the foregoing,
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between the date of this Merger Agreement and the Effective Time, the Company
promptly will provide Parent with monthly management reports, including interim
financial statements of the Company, and such other management reports as and
when they are available.
(b) In connection with the performance of its due diligence,
Parent shall have the right at any time prior to the thirtieth day following
the date of this Agreement (the "Cut-Off Date") to deliver to the Company a
written claim (the "Claim Notice") specifying an amount reasonably determined
to be necessary to indemnify Parent for (i) the Company's Environmental
Non-Compliance Costs (as defined in Section 7.1(c)(ii) below), or (ii) the
Company's Year 2000 Non-Compliance Costs (as defined in Section 7.1(c)(iv)
below); provided, however, that if Parent's Environmental Consultant, based on
its initial environmental investigation, reasonably determines that additional
environmental investigation is required to assess the Company's Environmental
Non-Compliance Conditions (as defined in Section 7.1(c)(i) below), then Parent
shall have an additional fifteen (15) day period in which to deliver to the
Company a Claim Notice with respect to the Company's Environmental
Non-Compliance Conditions and the "Cut-Off Date" shall mean the forty-fifth day
following the date of this Agreement. The Claim Notice must set forth in
reasonable detail the nature of the claim and be accompanied by reports of
Parent's Environmental Consultant and Parent's Year 2000 Consultant with
respect to the Company's Environmental Non-Compliance Conditions and Year 2000
Non-Compliance Conditions (as defined in Section 7.1(c)(iii) below) providing
reasonable backup for such claims. If the cost of any claim resulting from the
Environmental Non-Compliance Conditions at a Company property or location is
equal to or exceeds $1,000,000 (an "Extraordinary Claim"), then the Company
shall have five (5) days after the Company's receipt of the Claim Notice to
provide Parent with a written notice disputing such Extraordinary Claims (a
"Counter Notice"). After providing a Counter Notice to Parent, the Company
shall have the right to retain Earth Sciences Consultants, Inc. ("Company's
Environmental Consultant") to consult, for a period of (15) days after the
Company's receipt of the Claim Notice, with Parent's Environmental Consultant
as to the appropriateness of, and the amount of costs of remediation associated
with, such Extraordinary Claims as set forth in Parent's Environmental
Consultant's Report. Within five (5) days after the end of such fifteen (15)
day period, Parent shall provide to the Company a revised Claim Notice (the
"Final Claim Notice") reflecting any modifications Parent's Environmental
Consultant have made, in their sole discretion, to their report after taking
into account such consultation with Company's Environmental Consultant. The
dollar amount of damages with respect to claims for the Company's Environmental
Non-Compliance Conditions and Year 2000 Non-Compliance Conditions (each, an
"Established Claim") shall be (i) the dollar amount of damages claimed by
Parent as set forth in its Claim Notice in the case of claims for the Company's
Year 2000 Non-Compliance Conditions and (ii) the dollar amount of damages
claimed by Parent as set forth in its Claim Notice, or if such Claim Notice is
disputed by the Company, as set forth in the Final Claim Notice, in the case of
claims for the Company's Environmental Non-Compliance Conditions. If, as of ten
(10) days after delivery of the Final Claim Notice to the Company, the sum of
all Established Claims is less than the amount (the "Claim Basket") equal to
(x) $5,000,000 less (y) any Excess Transaction Costs (as determined pursuant to
Section 10.3(c)), then Parent agrees to absorb all such costs without further
remedy. If, on the other hand, as of ten (10) days after delivery of the Final
Claim Notice to the Company, the sum of all Established Claims equals or
exceeds the Claim Basket, then each of the Parent and the Company shall have
the right to terminate this Agreement pursuant to Sections 9.1(d)(ii)
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and 9.1(e)(ii), respectively. Notwithstanding the foregoing, if the dollar
amount of damages with respect to claims relating to the Company's
Environmental Non-Compliance Conditions and Year 2000 Non-Compliance
Conditions, as set forth in either the Claim Notice, or if such Claim Notice is
disputed by the Company the Final Claim Notice, equals or exceeds the Claim
Basket, then the Company shall have the right to terminate this Agreement
pursuant to Section 9.1(d)(ii) immediately upon receipt of such a Claim Notice.
This Section 7.1(b) shall constitute Parent's sole and exclusive remedy with
regard to the Company's Environmental Non-Compliance Conditions and Year 2000
Non-Compliance Conditions and the Company's sole and exclusive remedy with
respect to disputes relating to claims with respect to the Company's
Environmental Non-Compliance Conditions and Year 2000 Non-Compliance
Conditions.
(c) For purposes of this Section 7.1, capitalized terms have the
following meanings:
(i) "Environmental Non-Compliance Condition" shall
mean (A) the presence of a hazardous substance discharge at any
property owned, leased or previously owned or leased by the
Company or its Subsidiaries or their predecessors in interest or
at any location where the Company or its Subsidiaries could be
held responsible for investigation or cleanup activities
resulting from actual or alleged offsite disposal of hazardous
substances or (B) non-compliance with any federal, state, local
or foreign statute, regulation, administrative order, rule, law,
license, permit or ordinance concerning human health or safety
or pollution or protection of the environment, including,
without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing,
emission, reporting, notification, discharge, release,
threatened release, control, or clean-up of any hazardous
materials, substances or wastes, including, for the purposes of
this Section 7.1(c)(i), actual and reasonably anticipated fines,
penalties and forfeitures related to such Environmental
Non-Compliance, as such statutes, regulations and ordinances are
enacted and in effect on or prior to the Cut-Off Date.
(ii) "Environmental Non-Compliance Costs" shall
mean an amount reasonably determined based on good faith
estimates and assumptions by Parent and Parent's Environmental
Consultant to be necessary to indemnify Parent for any known or
reasonably anticipated claims, losses, damages, costs (including
attorneys' and consultants' fees and expenses) associated with
any action that would need to be taken to evaluate, defend a
proceeding, investigate, remediate or otherwise respond to, or
liabilities resulting from, an Environmental Non-Compliance
Condition, that (i) is the subject of an environmental claim by
a third party, (ii) in the opinion of Parent's environmental
counsel, imposes upon the Company or its Subsidiaries a duty to
act, or (iii) in the opinion of Parent's Environmental
Consultant or environmental counsel, is of a nature or severity
that it is proper environmental compliance practice or necessary
to act to avoid the risk of either non-compliance with
environmental law or for the avoidance or mitigation of any
environmental claims.
(iii) "Year 2000 Non-Compliance Condition" shall
mean (A) with respect to Date Data (as defined below), the
failure of such data to be in proper format for all dates in the
twentieth and twenty-first centuries, and (B) with respect to
Date Sensitive Systems (as defined below), the inability of each
such system to accurately process all Date Data,
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including for the twentieth and twenty-first centuries, without
loss of any functionality or performance, including but not
limited to calculating, comparing, sequencing, storing and
displaying such Date Data, when used as a stand-alone system or
in combination with other software or hardware. As used herein,
(x) "Date Data" means any data of the Company of any type that
includes date information or which is otherwise derived from,
dependent on or related to date information, and (y) "Date
Sensitive System" means any software, microcode or hardware
system or component or other personal property or equipment,
including any electric or electronically controlled system or
component, that processes any Date Data and that is installed,
in development or on order by the Company or any Subsidiary of
the Company for their internal use, or which the Company or any
Subsidiary of the Company sells, leases, licenses, assigns or
otherwise provides, or the provision or operation of which the
Company and any Subsidiary of the Company provides the benefit,
to its customers, vendors, suppliers, affiliates or any other
third party.
(iv) "Year 2000 Non-Compliance Cost" shall mean an
amount reasonably determined to be necessary based on good faith
estimates and assumptions by Parent or Parent's Year 2000
Consultant to be necessary to indemnify Parent for any known or
reasonably anticipated claims, losses, damages, costs (including
attorneys' and consultants' fees and expenses) associated with
any actions to avoid disruption of the Company's or its
Subsidiaries' business as a result of, or liabilities resulting
from a Year 2000 Non-Compliance Condition; except as provided
for in, or demonstrated by the Company to be part of, the
Capital Expenditure Budget.
Section 7.2 SHAREHOLDERS' MEETING; FILINGS. (a) In connection
with the Shareholders' Meeting, the Company shall (i) use its reasonable
efforts to obtain the necessary approval by its shareholders of this Merger
Agreement and the transactions contemplated hereby and (ii) otherwise comply in
all material respects with all legal requirements applicable to such meeting.
(b) Parent and the Company shall make all necessary filings with
respect to the Merger, under the Securities Act and the Exchange Act and the
rules and regulations thereunder, under applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto.
Section 7.3 EMPLOYMENT ARRANGEMENTS. After the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, honor in accordance
with their terms, all written or announced employment, severance, consulting
and other compensation contracts between the Company or any of its Subsidiaries
and any current or former director, officer or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under any Company Benefit Plan, each as of the date
hereof except for changes thereto which are (i) not material, (ii) permitted by
this Merger Agreement, or (iii) otherwise agreed to by the parties hereto.
Section 7.4 EMPLOYEE BENEFITS. Until December 31, 2000, Parent
shall provide, or shall cause the Surviving Corporation to provide, generally
to the officers and employees of the Surviving Corporation and its
Subsidiaries, employee benefits, including, without limitation,
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pension benefits, health and welfare benefits, severance arrangements, stock
option plans and other executive compensation arrangements, on terms and
conditions in the aggregate that are at least as favorable to employees as
those provided under the Company Benefit Plans as of the date hereof. To the
extent Parent provides employee benefit plans or arrangements maintained by the
Parent to employees of the Surviving Corporation and its Subsidiaries, Parent
will give full credit for purposes of eligibility and vesting under such
employee benefit plans or arrangements for such employees' service with the
Company or its Subsidiaries.
Section 7.5 INDEMNIFICATION. (a) From and after the Effective
Time, Parent shall indemnify, defend and hold harmless the officers, directors
and employees of the Company and its Subsidiaries (the "Indemnified Parties")
against all losses, expenses, claims, damages or liabilities (i) arising out of
the transactions contemplated by this Merger Agreement or arising as a result
thereof or (ii) otherwise arising prior to the Effective Time to the fullest
extent, in the case of (i) or (ii), permitted or required under (A) applicable
law, (B) any indemnification agreements between the Company and any such person
and (C) the Company's Third Amended Articles of Incorporation and Regulations
as filed in the Company SEC Reports as of the Effective Time. Notwithstanding
the foregoing, Parent shall have no responsibility to indemnify, defend or hold
harmless the Indemnified Parties against any losses, expenses, claims, damages
or liabilities (x) arising out of the transactions contemplated by the
Split-Off and the Transition Agreement (including, without limitation, any
liability with respect to the Form S-1 (or any other registration statement
filed pursuant to the terms of the Transition Agreement) under the Securities
Act) or (y) arising out of the Company Proxy Statement.
(b) From and after the Effective Time, A&S shall indemnify,
defend and hold harmless Parent, the Company and their Subsidiaries, officers,
directors, employees, agents and representatives against all losses, expenses,
claims, damages or liabilities (i) arising out of the Split-Off and the
Transition Agreement (including, without limitation, any liability with respect
to the Form S-1 (or any other registration statement filed pursuant to the
terms of the Transition Agreement) under the Securities Act) or (ii) arising
out of the Company Proxy Statement, except, in each case, for materials
contained in the Form S-1 (or such other registration statement) or the Company
Proxy Statement provided in writing by the Parent to the Company.
Notwithstanding the foregoing, A&S shall have no responsibility to indemnify,
defend, or hold harmless the Company, its Subsidiaries, the Sub, Parent and
each of their respective directors, officers, employees, representatives,
advisors, agents and Affiliates with respect to any claims for Taxes arising
out of the Split-Off and the Transition Agreement, except to the extent
otherwise provided in the Tax Sharing Agreement.
(c) For a period of three (3) years after the Effective Time,
Parent agrees to cause the Surviving Corporation to maintain 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.
(d) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by this
Merger Agreement is commenced, whether before or after
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the Effective Time, the parties hereto agree to cooperate and use their
respective reasonable efforts to vigorously defend against and respond thereto.
(e) The provisions of this Section 7.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
Section 7.6 CONSENTS. Each of the parties shall cooperate and
use its reasonable best efforts to make all filings and obtain as promptly as
practicable all consents of any Governmental Entity or any other person
required in connection with, and waivers of any violations or rights of
termination that may be caused by, the consummation of the transactions
contemplated by this Agreement. Each of the parties hereto will furnish to the
other party such necessary information and reasonable assistance as such other
persons may reasonably request in connection with the foregoing.
Section 7.7 ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent
and Sub contained in Section 7.6 hereof, Parent, Sub and the Company will (i)
take promptly all actions necessary to make the filings required of Parent, Sub
or any of their affiliates under the applicable Antitrust Laws (as defined in
Section 7.7(d) hereof), (ii) comply at the earliest practicable date with any
request for additional information or documentary material received by Parent,
Sub or any of their affiliates from the Federal Trade Commission or the
Antitrust Division of the Department of Justice pursuant to the HSR Act and
from the Commission or any other Governmental Entity pursuant to Antitrust
Laws, and (iii) cooperate with the Company in connection with any filing of the
Company under applicable Antitrust Laws and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Agreement or the Ancillary Agreements commenced by any of the Federal Trade
Commission, the Antitrust Division of the Department of Justice, state
attorneys general, the Commission, or any other Governmental Entity.
(b) In furtherance and not in limitation of the covenants of
Parent and Sub contained in Section 7.6 and Section 7.7(a) hereof, Parent, Sub
and the Company shall each use all reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the Split-Off, the
Merger or any other transactions contemplated by this Agreement or the
Ancillary Agreements under any Antitrust Law. If any administrative, judicial
or legislative action or proceeding is instituted (or threatened to be
instituted) challenging the Split-Off, the Merger or any other transactions
contemplated by this Agreement or the Ancillary Agreements as violative of any
Antitrust Law, Parent, Sub and the Company shall each cooperate to contest and
resist any such action or proceeding.
(c) Each of the Company, Parent and Sub shall promptly inform
the other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the Commission, any state attorney general or any other Governmental Entity
regarding any of the transactions contemplated hereby. Parent and/or Sub will
promptly advise the Company with respect to any understanding, undertaking or
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agreement (whether oral or written) which it proposes to make or enter into
with any of the foregoing parties with regard to any of the transactions
contemplated hereby.
(d) "Antitrust Law" means the Sherman Act, as amended, the
Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state and foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
Section 7.8 ADDITIONAL AGREEMENTS. (a) Subject to the terms and
conditions herein provided (including, without limitation, Section 7.6), each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Merger Agreement,
including, without limitation, (i) cooperating in the preparation and filing of
the Company Proxy Statement and any amendments thereof and (ii) using all
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings (including, but not limited to,
filings with all applicable Governmental Entities) and to lift any injunction
or other legal bar to the Merger (and, in such case, to proceed with the Merger
as expeditiously as possible), and the Split-Off. Notwithstanding the
foregoing, but subject to Section 7.6, there shall be no action required to be
taken and no action will be taken in order to consummate and make effective the
transactions contemplated by this Merger Agreement or the Transition Agreement
if such action, either alone or together with another action, would be
reasonably likely to result in a Company Material Adverse Effect or a Parent
Material Adverse Effect.
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Merger
Agreement, the proper officers and/or directors of Parent, the Company and the
Surviving Corporation shall take all such necessary action.
Section 7.9 NO SOLICITATION. (a) Neither the Company nor any of
its Subsidiaries shall, directly or indirectly, take (nor shall the Company
authorize or permit its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal (as defined below), (ii) enter into any
agreement with respect to any Acquisition Proposal or (iii) participate in any
way in discussions or negotiations with, or furnish any information to, any
person in connection with, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal. The Company will promptly communicate to
Parent that such a solicitation or an inquiry has been received by the Company,
or that any such information has been requested from it or that such
negotiations or discussions have been sought to be initiated with it and will
keep Parent reasonably informed of the status and terms of any Acquisition
Proposal. As used herein, "Acquisition Proposal" shall mean any proposed (A)
merger, consolidation, share exchange or similar transaction involving the
Company or its Subsidiaries, (B) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise of assets of
the Company or its Subsidiaries representing 20% or more of the consolidated
assets of the Company and its Subsidiaries (other than A&S), (C) issue, sale or
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<PAGE> 31
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities (or options, rights or warrants to
purchase, or securities convertible into, such securities) representing 20% or
more of the voting power of the Company, or (D) transaction (including a tender
offer or exchange offer) in which any person would acquire beneficial ownership
(as such term is defined in Rule 13d-3 under the Exchange Act) of, or the right
to acquire beneficial ownership, of (whether itself, as a member of any "group"
(as such term is defined under the Exchange Act) or otherwise) 20% or more of
any class of equity securities of the Company or its Subsidiaries.
(b) Notwithstanding anything in this Merger Agreement to the
contrary (including without limitation clause (a) of this Section 7.9), the
Company's board of directors may engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any Person relating to, or otherwise facilitate any effort or attempt to make
or implement, a written Acquisition Proposal which was not solicited by the
Company or which did not otherwise result in a breach of Section 7.9(a), if and
only to the extent that (i) the Company's board of directors determines in good
faith after consultation with outside counsel that it is necessary to do so to
avoid a breach of its fiduciary duties to the Company or its shareholders under
applicable laws, (ii) the Company's board of directors determines in good
faith, after consultation with its financial advisors and outside counsel, that
such written proposal or indication of interest constitutes a Superior Proposal
(as defined below), (iii) the Shareholders' Meeting shall not have occurred and
(iv) the Company's board of directors provides prior written notice to Parent
of the information referred to in the second sentence of Section 7.9(a). Prior
to furnishing nonpublic information to, or entering into discussions or
negotiations with, any other Persons, the Company shall obtain from such person
or entity an executed confidentiality agreement with terms no less favorable,
taken as a whole, to the Company than those contained in the Confidentiality
Agreement, dated as of October 21, 1998, between Parent and the Company (the
"Confidentiality Agreement"), but which confidentiality agreement shall not
include any provision calling for an exclusive right to negotiate with the
Company, and the Company shall advise Parent of the nature of such nonpublic
information delivered to such person reasonably promptly following its delivery
to the requesting party. Nothing in this Section 7.9 shall (x) permit either
Parent or the Company to terminate this Merger Agreement (except as
specifically provided in Article IX hereof) or (y) affect any other obligation
of Parent or the Company under this Merger Agreement.
(c) A "Superior Proposal" means a bona fide written Acquisition
Proposal which the Company's board of directors concludes in good faith (after
consultation with its financial advisors and outside counsel), taking into
account all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal, (i) would, if consummated, result in a
transaction that is more favorable to the shareholders of the Company than the
transactions contemplated by this Merger Agreement and (ii) is reasonably
capable of being completed (provided that for purposes of this definition, the
term Acquisition Proposal shall have the meaning assigned to such term in
Section 7.9(a) except that the references to "20%" shall be deemed references
to "50%").
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Section 7.10 SPLIT-OFF OF A&S.
(a) Simultaneously with the execution hereof, the Company and
A&S are entering into the Transition Agreement. Immediately prior to the
Closing Date, the Company, A&S and certain other parties will enter into the
Tax Sharing Agreement. From and after the Effective Time, Parent shall cause
the Surviving Corporation to perform any and all obligations and agreements of
the Company set forth herein or in the Ancillary Agreements or in any other
agreements contemplated herein or therein.
(b) The Company, as promptly as practicable, shall use its best
efforts to cause the shares of A&S to be registered pursuant to the Securities
Act and thereafter effect the Split-Off in accordance with the terms of the
Transition Agreement including, without limitation, by preparing and filing a
registration statement on Form S-1 (or any other registration statement
contemplated to be filed pursuant to the terms of the Transition Agreement) and
using its respective best efforts to cause such registration statement to be
declared effective and preparing and making such other filings as may be
required under applicable state securities laws. The Company shall promptly
provide to Parent copies of all filings made with the Commission in connection
with the Split-Off, including, without limitation, the Form S-1 (or any other
registration statement contemplated to be filed pursuant to the terms of the
Transition Agreement) and any amendments thereto, all comments made by the
Commission with respect to such filings and all Company responses to such
Commission comments. Prior to making such filings with the Commission or
entering into any other agreement with A&S other than the Transition Agreement,
the Company shall consult with Parent with respect to such filings and other
agreements and provide Parent with a reasonable opportunity to comment on such
filings and other agreements.
(c) Parent shall, and shall cause the Surviving Corporation to,
treat the Split-Off for purposes of all federal and state taxes as an integral
part of the Merger and thus report the Split-Off as a redemption, for purposes
of Section 302(a) of the Code, of a number of shares of Company Common Stock
equal in value to the value of the A&S Common Stock distributed in the
Split-Off.
(d) The treatment of any decrease in the net tax benefit
expected to be received by Parent in this Merger as a result of the Split-Off
is set forth in Section 4 of the Tax Sharing Agreement and the treatment of any
increase in the net tax benefit expected to be received by Parent in this
Merger as a result of the Split-Off is set forth in Section 4.1 of the
Transition Agreement.
(e) Prior to the Effective Time, the Company and A&S may elect
to form a holding company for the ownership of the A&S Common Stock. In such
event, (i) the Company shall transfer the shares of A&S Common Stock to the
holding company and shares of common stock of the holding company will be
issued in substitution of the shares of A&S Common Stock in the Split-Off and
(ii) the benefits and obligations of A&S from the transactions contemplated by
the Transition Agreement and Tax Sharing Agreement shall inure to and be
binding upon the holding company; provided that A&S shall not be released from
its obligations under such Agreements.
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Section 7.11 CONFIDENTIALITY. Parent, Sub and the Company agree
that the provisions of the Confidentiality Agreement shall remain binding and
in full force and effect (subject, however, to the provisions of Section 7.9(b)
hereof) and that the terms of the Confidentiality Agreement are incorporated
herein by reference.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Merger Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
holders of the Company Common Stock.
(b) No statute, rule, regulation, order or decree shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or materially restricts the consummation of the
Merger.
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any
authorization, consent or approval required under any Antitrust Law shall have
been obtained or any waiting period applicable to the review of the
transactions contemplated hereby shall have expired or been terminated.
(d) The Split-Off Consideration shall have been deposited with
the Depositary.
(e) No preliminary or permanent injunction or other order by any
court or other judicial or administrative body of competent jurisdiction which
prohibits or prevents the consummation of the Merger shall have been issued and
remain in effect (each party, subject to Section 7.6, agreeing to use its best
efforts to have any such injunction lifted).
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the additional
following conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material respects
their agreements contained in this Merger Agreement and the Transition
Agreement required to be performed on or prior to the Effective Time.
(b) The representations and warranties of Parent and Sub
contained in this Merger Agreement shall be true in all material respects
(except that representations and warranties that expressly include a standard
of materiality shall be true in all respects) when made and on and as of the
Effective Time as if made on and as of such date, except for representations
and warranties which are by their express provisions made as of a specific date
or dates, which were or will be
-29-
<PAGE> 34
true in all material respects (except that representations and warranties that
expressly include a standard of materiality were or will be true in all
respects) at such time or times as stated therein.
(c) The Company shall have received a certificate of the
President or Chief Executive Officer or a Vice President of Parent to the
effect that each of the conditions specified above in Sections 8.2(a) and (b)
is satisfied in all respects.
(d) The Cash Consideration shall have been deposited with the
Depositary.
Section 8.3 CONDITIONS TO OBLIGATION OF PARENT AND SUB TO EFFECT
THE MERGER. The obligation of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the additional
following conditions, unless waived by Parent:
(a) The Company and A&S shall have performed in all material
respects their agreements contained in this Merger Agreement and the Transition
Agreement required to be performed on or prior to the Effective Time.
(b) The representations and warranties of the Company contained
in this Merger Agreement shall be true in all material respects (except that
representations and warranties that expressly include a standard of materiality
shall be true in all respects) when made and on and as of the Effective Time as
if made on and as of such date, except for representations and warranties which
are by their express provisions made as of a specific date or dates which were
or will be true in all material respects (except that representations and
warranties that expressly include a standard of materiality were or will be
true in all respects) at such date or dates.
(c) Parent and Sub shall have received a certificate of the
President and Chief Executive Officer or the Chief Financial Officer of the
Company to the effect that each of the conditions specified in Sections 8.3(a)
and (b) is satisfied in all respects.
(d) Parent shall be reasonably satisfied with the final form of
promissory note referred to in Section 4(b)(v) of the Tax Sharing Agreement,
which promissory note shall be prepared by Parent and A&S in a manner
consistent with the terms set forth in Exhibit A to the Tax Sharing Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the shareholders of the Company:
(a) by mutual consent of the board of directors of Parent and
the board of directors of the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated on or before September 30, 1999; provided, that the
terminating party is not otherwise in material breach of its representations,
warranties or obligations under this Merger Agreement;
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<PAGE> 35
(c) by Parent or the Company if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the consummation of the
Split-Off or the Merger and such order, decree, ruling or other action is or
shall have become nonappealable;
(d) by the Company (i) if any of the conditions specified in
Sections 8.1 and 8.2 have not been met or waived by the Company at such time as
such condition is no longer capable of satisfaction or (ii) if the sum of
Established Claims exceeds the Claim Basket, provided, however, that prior to
the exercise of this right of termination by the Company, Parent shall have the
right to waive the Claim Basket and elect to proceed with the transactions
contemplated by this Agreement without any adjustment to the Cash
Consideration; provided, further, that it shall be a condition to termination
by the Company pursuant to this Section 9.1(d)(ii) that the Company shall have
made all payments to Parent required by Section 10.3(b)(iii)(y);
(e) by Parent (i) if any of the conditions specified in Sections
8.1 and 8.3 have not been met or waived by Parent at such time as such
condition is no longer capable of satisfaction or (ii) if the sum of
Established Claims exceeds the Claim Basket, provided, however, that prior to
the exercise of this right of termination by the Parent, the Company shall have
the right to elect to make a financial adjustment to the Cash Consideration in
an amount equal to the difference between the sum of Established Claims and the
Claim Basket;
(f) by Parent if the Company's board of directors shall have
withdrawn, modified in a manner adverse to Parent, or refrained from making its
recommendation concerning the Merger referred to in Section 3.5 hereof, or
shall have disclosed its intention to change such recommendation; provided,
that (i) Parent is not otherwise in material breach of its representations,
warranties or obligations under this Merger Agreement and (ii) Parent has
sufficient funds to enable it to finance the consummation of the Merger;
(g) by Parent, if there has been a Company Material Adverse
Change other than as a result of the Company's Environmental Non-Compliance
Conditions or Year 2000 Non-Compliance Conditions.
(h) by Parent, upon becoming aware that the Company has entered
into a definitive agreement (other than a confidentiality agreement) providing
for, or if the Company's board of directors approves or recommends, a Superior
Proposal pursuant to Section 7.9;
(i) by the Company, at any time prior to the Shareholders'
Meeting, upon three business days' notice to Parent, if the Company's Board of
Directors shall approve a Superior Proposal; provided, however, that (i) the
Company shall have complied with Section 7.9 and (ii) prior to any such
termination, the Company shall, and shall cause its financial and legal
advisors to, negotiate with Parent to make such adjustments in the terms and
conditions of this Merger Agreement as would enable Parent to match or exceed
the consideration offered pursuant to such Superior Proposal, net of amounts
payable by the Company under Section 10.3(b), in order to proceed with the
transactions contemplated hereby; provided, further, that it shall be a
condition to termination by the Company pursuant to this Section 9.1(i) that
the Company shall have made all payments to Parent required by Section 10.3(b);
or
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<PAGE> 36
(j) by either Parent or the Company, if the Shareholders'
Meeting shall have been concluded without having obtained votes of the
Company's shareholders sufficient for the requisite shareholder approval of
this Merger Agreement (provided that the terminating party is not otherwise in
material breach of its obligations under this Merger Agreement).
Section 9.2 EFFECT OF TERMINATION. In the event of termination
of this Merger Agreement by either Parent or the Company, as provided above,
this Merger Agreement shall forthwith become void and (except for the willful
breach of this Merger Agreement by any party hereto) there shall be no
liability on the part of either the Company, Parent or Sub or their respective
officers, directors or shareholders; provided that Sections 6.1(iv), 7.11, 9.2,
10.3, 10.7 and 10.8 shall survive the termination.
Section 9.3 AMENDMENT. This Merger Agreement may be amended by
the parties hereto, by or pursuant to action taken by their respective boards
of directors, at any time before or after approval hereof by the shareholders
of the Company, but, after such approval, no amendment shall be made which (i)
changes the consideration to be received by any class of capital stock of the
Company as provided in Section 3.1(c), (ii) alters or changes any term of the
Articles of Incorporation of the Surviving Corporation (except for such changes
that could otherwise be adopted by the directors of the Surviving Corporation),
or (iii) in any way materially adversely affects the rights of such
shareholders, without the further approval of such shareholders. This Merger
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.4 WAIVER. At any time prior to the Effective Time,
the parties hereto, by or pursuant to action taken by their respective Boards
of Directors, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions contained herein; provided, however, that if such
waiver shall materially adversely affect the rights of the shareholders of the
Company, then no such waiver shall be made without the approval of such
shareholders. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. No representations, warranties or agreements in this Merger
Agreement shall survive the Merger, except for the agreements contained in
Sections 3.3, 3.4, 3.8, 7.3, 7.4, 7.5, 7.6, 7.11, 10.1, 10.3, 10.7 and 10.8.
Section 10.2 NOTICES. All notices or other communications under
this Merger Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, telex, telecopy or other standard form of
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<PAGE> 37
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
(a) If to the Company, to:
Essef Corporation
c/o Anthony & Sylvan Pools Corporation
220 Park Drive
Chardon, Ohio 44024
Facsimile No.: (440) 286-2206
Attention: Mark E. Brody
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 479-8776
Attention: Mary Ann Jorgenson, Esq.
(b) If to Parent or Purchaser, to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Richard J. Cathcart
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<PAGE> 38
with a copy to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Louis L. Ainsworth, Esq.
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Facsimile No.: (414) 297-4900
Attention: Benjamin F. Garmer, III, Esq.
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 10.2.
Section 10.3 FEES AND EXPENSES. (a) Whether or not the Merger
is consummated, all costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated by this Merger Agreement shall be
paid by the party incurring such expenses.
(b) Parent and the Company agree that (i) if the Company shall
terminate this Merger Agreement pursuant to Section 9.1(i); (ii) if (A) Parent
or the Company shall terminate this Agreement pursuant to Section 9.1(b), (B)
at the time of the event giving rise to such termination the Company shall have
received a solicitation or inquiry giving rise to the disclosure obligation set
forth in the second sentence of Section 7.9(a) and (C) within 12 months of the
termination of this Merger Agreement, the Company enters into a definitive
agreement or consummates a merger, consolidation, sale of substantially all of
the assets of the Company or other change in control transaction in connection
with such solicitation or inquiry; (iii) if (A) Parent or the Company shall
terminate this Agreement pursuant to Section 9.1(f) or (h), (B) at the time of
the event giving rise to such termination the Company shall have received an
Acquisition Proposal and (C) within 12 months of the termination of this Merger
Agreement, the Company enters into a definitive agreement with respect to such
Acquisition Proposal or consummates a transaction pursuant to such Acquisition
Proposal; or (iv) if Parent or the Company shall terminate this Merger
Agreement pursuant to Section 9.1(d)(ii) or (e)(ii), as the case may be, then
the Company shall pay to an account designated by Parent in immediately
available funds an amount equal to (x) 3% of the aggregate Cash Consideration
to be paid to holders of Company Common Stock pursuant to Article III in the
case of any termination referred to in clauses (i) or (iii) above; (y) 1 1/2%
of the aggregate Cash Consideration in the case of any termination referred to
in clause (ii) above or (z) an amount equal to the lesser of (1) the actual
out-of-pocket costs and expenses incurred by Parent in connection with this
Merger Agreement and (2) $500,000 in the case of any termination referred to in
clause (iv) above. The Termination Fee shall be paid prior to, and shall be a
condition to the effectiveness of, any termination referred to in clauses (i)
or (iv)
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<PAGE> 39
above. Any payment required to be made pursuant to clauses (ii) and (iii) above
shall be made on the next business day after such a transaction pursuant to an
Acquisition Proposal is consummated.
(c) To the extent that the fees and expenses incurred after
December 31, 1998 by the Company to Rhone Group, Squire, Sanders & Dempsey
L.L.P. and other advisers and service providers of the Company or its
Subsidiaries relating to the Split-Off and the Merger exceed $4,000,000, the
amount of the Claim Basket (as determined pursuant to Section 7.1(b)) shall be
reduced by the amount of the difference between (i) the sum of (x) the fees and
expenses relating to the Split-Off and the Merger actually incurred after
December 31, 1998 and (y) a good faith estimate of the fees and expenses
relating to the Split-Off and the Merger yet to be incurred, and (ii)
$4,000,000 ("Excess Transaction Fees"). Two business days prior to the Cut-Off
Date, the Company shall deliver to Parent a schedule that sets forth the actual
fees and expenses relating to the Split-Off and Merger incurred to date after
December 31, 1998 and an estimate of the additional fees and expenses to
complete the Split-Off and the Merger.
Section 10.4 PUBLICITY. So long as this Merger Agreement is in
effect, Parent, Sub and the Company agree to consult with each other before
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated by this Merger Agreement, and none of them
shall issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange. The commencement
of litigation relating to this Merger Agreement or the transactions
contemplated hereby or any proceedings in connection therewith shall not be
deemed a violation of this Section 10.4.
Section 10.5 SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Merger 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
Merger Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 10.6 INTERPRETATION. (a) When a reference is made in
this Merger Agreement to subsidiaries of Parent or the Company, the word
"Subsidiaries" means corporations more than 50% of whose outstanding voting
securities are directly or indirectly owned by Parent or the Company, as the
case may be; provided, however, that in the case of the Company, A&S shall not
be considered as a Subsidiary. The headings contained in this Merger Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Merger Agreement.
(b) As used in this Merger Agreement, "Parent Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
assets, financial condition, and results of operations of Parent and its
subsidiaries taken as a whole (excluding the effect of a change in general
economic conditions).
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<PAGE> 40
(c) As used in this Merger Agreement, "Company Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
assets, financial condition, and results of operations of the Company and its
Subsidiaries (other than A&S) taken as a whole (excluding the effect of a
change in general economic conditions).
(d) As used in this Merger Agreement, "knowledge" shall mean,
with respect to the matter in question, the actual knowledge of such matter by
an executive officer, with respect to Parent, and by Thomas B. Waldin, Stuart
D. Neidus or Mark E. Brody, with respect to the Company, as applicable.
(e) The inclusion of an item on any schedule to this Merger
Agreement shall not be deemed to be indicative of the materiality of such item.
Section 10.7 THIRD PARTY BENEFICIARIES. Except as specifically
provided in Section 7.5, this Merger Agreement is not intended to confer upon
any other person any rights or remedies hereunder.
Section 10.8 MISCELLANEOUS. This Merger Agreement (including
the documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof; (b) shall not be assigned by operation of law or
otherwise, except that Sub shall have the right to assign to Parent or any
direct wholly owned Subsidiary of Parent any and all rights and obligations of
Sub under this Merger Agreement; and (c) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of Ohio
(without giving effect to the provisions thereof relating to conflicts of law).
This Merger Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
Section 10.9 CURE PERIOD. No party shall have any rights under
this Merger Agreement for any actual or threatened breach of a representation,
warranty, covenant or agreement contained herein, if such breach is capable of
being cured, until (i) the non-breaching party has notified the breaching party
of its determination of the existence (or threatened existence) of a basis for
termination, and (ii) the breaching party shall have had a reasonable time
(considering the nature of the breach and the actions required for cure, but in
no event longer than 15 days) to cure such breach.
Section 10.10 VALIDITY. (a) The invalidity or unenforceability
of any provision of this Merger Agreement shall not affect the validity or
enforceability of the other provisions of this Merger Agreement, which shall
remain in full force and effect.
(b) In the event any court of competent jurisdiction holds any
provision of this Merger Agreement to be null, void or unenforceable, the
parties hereto shall negotiate in good faith the execution and delivery of an
amendment to this Merger Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof.
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<PAGE> 41
(c) Each party agrees that, should any court of competent
jurisdiction hold any provision of this Merger Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith, or not take any action required herein, the other party shall not be
entitled to specific performance of such provision or part hereof or to any
other remedy, including but not limited to money damages, for breach thereof or
of any other provision of this Merger Agreement or part hereof as the result of
such holding or order.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
PENTAIR, INC.
By: /s/ Richard J. Cathcart
-----------------------------
Name: Richard J. Cathcart
-----------------------------
Title: Executive Vice President
-----------------------------
NORTHSTAR ACQUISITION COMPANY
By: /s/ Richard J. Cathcart
-----------------------------
Name: Richard J. Cathcart
-----------------------------
Title: Vice President
-----------------------------
ESSEF CORPORATION
By: /s/ Thomas B. Waldin
-----------------------------
Name: Thomas B. Waldin
-----------------------------
Title: President
-----------------------------
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<PAGE> 43
EXHIBIT A
---------
TRANSITION AGREEMENT
--------------------
[See Exhibit 2.2 filed herewith.]
<PAGE> 44
EXHIBIT B
---------
TAX SHARING AGREEMENT
---------------------
[See Exhibit 2.3 filed herewith.]
<PAGE> 1
Exhibit 2.2
Execution Copy
TRANSITION AGREEMENT
DATED AS OF
APRIL 30, 1999
AMONG
ESSEF CORPORATION,
ANTHONY & SYLVAN POOLS CORPORATION
AND
PENTAIR, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. General.............................................................................................1
Section 1.2. References to Time..................................................................................7
ARTICLE II
THE RELATED TRANSACTIONS
Section 2.1. Transfers of Certain Assets and Liabilities.........................................................8
Section 2.2. Methods of Transfer and Assumption..................................................................8
Section 2.3. Company Approval of Certain A&S Actions.............................................................8
ARTICLE III
THE SPLIT-OFF
Section 3.1. Cooperation and Actions Prior to the Split-Off......................................................8
Section 3.2. Net Asset Adjustment...............................................................................10
Section 3.3. Actions of A&S Prior to the Cut-Off Date...........................................................10
Section 3.4. Post-Cut-Off Date Operations of A&S................................................................11
Section 3.5. The Split-Off......................................................................................11
Section 3.6. Termination of Certain Claims......................................................................11
Section 3.7. Post-Closing Procedures............................................................................11
ARTICLE IV
INTERCOMPANY TRANSACTIONS AND RELATIONSHIPS
Section 4.1. Cash Dividend......................................................................................12
Section 4.2. Intercompany Accounts..............................................................................13
Section 4.3. Transition Services................................................................................13
ARTICLE V
SURVIVAL AND INDEMNIFICATION
Section 5.1. Survival of Agreements.............................................................................14
Section 5.2. Indemnification by A&S.............................................................................14
Section 5.3. Indemnification by the Company.....................................................................15
Section 5.4. Procedure for Indemnification......................................................................16
Section 5.5. Miscellaneous Indemnification Provisions...........................................................18
Section 5.6. Pending Litigation.................................................................................19
Section 5.7. Construction of Agreements.........................................................................20
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
<S> <C> <C>
Section 6.1. Representations or Warranties; Disclaimers.........................................................20
Section 6.2. Further Assurances; Subsequent Transfers...........................................................21
Section 6.3. Use of Names.......................................................................................21
Section 6.4. Litigation Relating to Transaction.................................................................22
Section 6.5. Operation Prior to Split-Off.......................................................................22
Section 6.6. Restrictions on Post-Split-Off Competitive Activities..............................................22
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1. Provision of Corporate Records.....................................................................23
Section 7.2. Access to Information..............................................................................23
Section 7.3. Production of Witnesses............................................................................23
Section 7.4. Retention of Records...............................................................................24
Section 7.5. Confidentiality....................................................................................24
ARTICLE VIII
EMPLOYEE MATTERS
Section 8.1. Employees..........................................................................................25
Section 8.2. Employee Benefits..................................................................................25
Section 8.3. Other Liabilities and Obligations..................................................................26
Section 8.4. Preservation of Rights to Amend or Terminate Plans.................................................26
Section 8.5. Reimbursement; Indemnification.....................................................................26
Section 8.6. Nonsolicitation of Employees.......................................................................27
Section 8.7. Actions By A&S.....................................................................................27
ARTICLE IX
INSURANCE
Section 9.1. General............................................................................................27
Section 9.2. Certain Insured Claims.............................................................................28
ARTICLE X
CONDITIONS; TERMINATION; AMENDMENTS; WAIVERS
Section 10.1. Conditions to Split-Off...........................................................................28
Section 10.2. Termination.......................................................................................29
Section 10.3. Amendments; Waivers...............................................................................29
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE XI
MISCELLANEOUS
<S> <C> <C>
Section 11.1. Survival of Indemnities; Release...............................................................29
Section 11.2. Entire Agreement...............................................................................30
Section 11.3. Fees and Expenses..............................................................................30
Section 11.4. Governing Law..................................................................................30
Section 11.5. Notices........................................................................................30
Section 11.6. Successors and Assigns; No Third Party Beneficiaries...........................................32
Section 11.7. Counterparts...................................................................................32
Section 11.8. Interpretation.................................................................................33
Section 11.9. Schedules......................................................................................33
Section 11.10. Legal Enforceability............................................................................33
Section 11.11. Consent to Jurisdiction.........................................................................33
Section 11.12. Specific Performance............................................................................33
</TABLE>
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<PAGE> 5
TRANSITION AGREEMENT
THIS TRANSITION AGREEMENT (this "Agreement"), dated as of April 30,
1999, by and among ESSEF CORPORATION, an Ohio corporation (the "Company"),
ANTHONY & SYLVAN POOLS CORPORATION, an Ohio corporation and an indirect
wholly-owned subsidiary of the Company ("A&S") and PENTAIR, INC., a Minnesota
corporation ("Parent").
RECITALS
--------
WHEREAS, the Board of Directors of the Company has determined to
implement certain of the transfers and other transactions contemplated in
connection with the Merger (as hereafter defined) and the Split-Off (as
hereafter defined);
WHEREAS, the Board of Directors of the Company has also determined to
cause the Split-Off of shares of A&S Common Stock (as hereafter defined) to the
holders as of the Effective Time (as hereafter defined) of the Company Common
Stock (as hereafter defined) and to the holders of certain Stock Options (as
hereafter defined) all as part of, and in conjunction with, the Merger;
WHEREAS, the Company and A&S have determined that it is desirable to
set forth the principal corporate transactions required to effect such Merger
and Split-Off and to set forth certain other agreements that will govern certain
other matters prior to or following such Split-Off;
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), with Parent and Northstar
Acquisition Company, an Ohio corporation and a wholly-owned subsidiary of Parent
(the "Purchaser"), providing for the Merger (as hereafter defined), as a result
of which the Company, as the corporation surviving the Merger, will become a
wholly-owned subsidiary of Parent; and
WHEREAS, in order to induce the parties to enter into this Agreement
and in consideration of the Company's willingness to enter into the Merger
Agreement, the parties hereto and certain other parties are entering or will
enter into the Tax Sharing Agreement (as hereafter defined) providing for
certain ongoing relationships among the parties;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. GENERAL. For convenience and brevity, certain terms used
in various parts of this Agreement (including the Disclosure Schedule hereto)
are listed in alphabetical order and defined or referred to below (such terms to
be equally applicable to both singular and plural forms of the terms defined or
referred to):
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<PAGE> 6
(a) "Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
(b) "Adjustment Calculation" shall have the meaning set forth in
Section 3.2(a) hereof.
(c) "Affiliate" of any specified person or entity means (x) any
director or officer of, or any person or entity that beneficially owns at least
50% of the capital stock or other equity interests of, such specified person or
entity, or (y) any other person or entity directly or indirectly controlling,
controlled by, or under common control with, such specified person or entity, at
any time during the period for which the determination of affiliation is being
made; provided that the Company and the Retained Subsidiaries, on the one hand,
and A&S, on the other hand, shall not, after giving effect to the Split-Off, be
deemed to be Affiliates of each other for purposes of this Agreement.
(d) "Agreement" means this Transition Agreement, together with all
exhibits and schedules hereto, as the same may be amended from time to time in
accordance with the terms hereof.
(e) "Asserted Liability" shall have the meaning set forth in Section
5.4(a) hereof.
(f) "A&S" shall have the meaning set forth in the preamble to this
Agreement.
(g) "A&S Action" shall have the meaning set forth in Section 5.6
hereof.
(h) "A&S Assets" means (i) the assets of A&S set forth on the A&S
Balance Sheet, as adjusted for transactions occurring in the ordinary course of
business in a manner consistent with past practice between December 31, 1998 and
the Effective Time; (ii) the assets listed on Schedule 2.1(a) of the Disclosure
Schedule; and (iii) all right, title and interest, to the extent held by the
Company and its Subsidiaries immediately prior to the Split-Off, with respect to
each of the following items: (A) the A&S Names and A&S Proprietary Name Rights
(such terms, as defined in Section 6.3 hereof) and (B) any Actions commenced by
A&S the subject matter of which is otherwise an A&S Asset or any Action which
relates primarily to an A&S Asset (to the extent such Actions constitute
assets).
(i) "A&S Balance Sheet" means the unaudited consolidated balance of the
A&S Business as of December 31, 1998 set forth in Schedule 1.1(i) of the
Disclosure Schedule.
(j) "A&S Business" means each business and each former business which
is or was conducted by A&S as of the Effective Time or which is or was included
within the A&S Assets.
(k) "A&S Common Stock" means the common stock, without par value, of
A&S.
(l) "A&S Employees" means (i) those persons who are employed as
officers or employees of A&S or otherwise employed by A&S immediately prior to,
or effective as of, the Effective Time, (ii) any person employed at the
Company's corporate level prior to the Effective Time listed in, or added any
time prior to the Effective Time to, Schedule 1.1(l) of the Disclosure
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<PAGE> 7
Schedule who at the Effective Time is to become an employee of A&S, and (iii)
all former officers and employees of A&S who, immediately prior to the
termination of their employment, were employed by A&S. In the event any person
shall have been employed by A&S, as well as by the Company or any of the
Retained Subsidiaries, such person shall be considered an A&S Employee if at the
Effective Time such person's primary employment shall be with A&S or the A&S
Business.
(m) "A&S 401(k) Plan" shall have the meaning set forth in Section
8.2(a) hereof.
(n) "A&S Indemnified Parties" shall have the meaning set forth in
Section 5.3(a) hereof.
(o) "A&S Liabilities" means (i) all of the Liabilities of A&S to third
parties and all Liabilities relating to or arising out of the A&S Assets or the
conduct of the A&S Business (in all cases, whether arising before or after the
Effective Time); (ii) the liabilities set forth in the A&S Balance Sheet, as
adjusted for transactions occurring in the ordinary course of business in a
manner consistent with past practice between December 31, 1998 and the Effective
Time; (iii) the liabilities listed in Schedule 2.1(b) of the Disclosure
Schedule; (iv) any Actions commenced by A&S the subject matter of which is
otherwise an A&S Asset or any Action which relates primarily to an A&S Asset (to
the extent such Actions constitute Liabilities); (v) except as otherwise
provided in Article VIII hereof, the Liabilities of the Company and its
subsidiaries, including, without limitation, A&S, in respect of A&S Employees
(in all cases, whether arising before or after the Effective Time); and (vi) all
Liabilities relating to or arising out of the A&S Assets or the conduct of the
A&S Business (in all cases, whether arising before or after the Effective Time)
with respect to which the Company or any Retained Subsidiary has agreed, prior
to the Effective Time, to indemnify any third party in any manner with respect
thereto or has agreed to otherwise be, or is otherwise, liable with respect
thereto, except to the extent the Liability relates to or arises out of any
product purchased by A&S from the Company or any Retained Subsidiary or is
otherwise covered under any warranty provided by the Company or any Retained
Subsidiary with respect to such product.
(p) "A&S Names" shall have the meaning set forth in Section 6.3 hereof.
(q) "A&S Net Assets" means the total assets of A&S minus the total
liabilities of A&S as set forth in the Interim Balance Sheet (excluding any
indebtedness of A&S to the Company or any of its Subsidiaries other than any
liabilities to the Company or any of its Subsidiaries incurred in connection
with the purchase by A&S of swimming pool equipment).
(r) "A&S Proprietary Name Rights" shall have the meaning set forth in
Section 6.3 hereof.
(s) "A&S Subsequent Hire" shall have the meaning set forth in Section
8.6(b) hereof.
(t) "A&S Transferee" shall have the meaning set forth in Section 11.6
hereof.
(u) "A&S Welfare Plans" shall have the meaning set forth in Section
8.2(b) hereof.
(v) "Casualty Program" means collectively, the series of programs
pursuant to which various insurance carriers provide insurance coverage to the
Company and its Subsidiaries in
3
<PAGE> 8
respect of claims or occurrences relating to workers' compensation liability,
general liability, products liability, automobile liability and employer's
liability for all periods up to the Effective Time.
(w) "Claim Notice" shall have the meaning set forth in Section 5.4(a)
hereof.
(x) "Closing" shall have the meaning set forth in the Merger Agreement.
(y) "Closing Balance Sheet" shall have the meaning set forth in Section
3.7 hereof.
(z) "Closing Date" shall have the meaning set forth in the Merger
Agreement.
(aa) "Company" shall have the meaning set forth in the preamble to this
Agreement.
(ab) "Company Common Stock" means the common stock of the Company,
without par value.
(ac) "Company Dividend" shall have the meaning set forth in Section 4.1
hereof.
(ad) "Company Names" shall have the meaning set forth in Section 6.3
hereof.
(ae) "Company Proprietary Name Rights" shall have the meaning set forth
in Section 6.3 hereof.
(af) "Company Proxy Statement" means the proxy statement or information
statement prepared by the Company for distribution to the holders of the
Company's Common Stock in connection with the Merger and Split-Off.
(ag) "Company Subsequent Hire" shall have the meaning set forth in
Section 8.6(a) hereof.
(ah) "Company Welfare Plans" shall have the meaning set forth in
Section 8.2(b) hereof.
(ai) "Confidentiality Agreement" means the confidentiality agreement
dated as of October 21, 1998 between Parent and the Company.
(aj) "Confidential Information" shall have the meaning set forth in
Section 7.5 hereof.
(ak) "Conveyance and Assumption Instrument" means, collectively, the
various agreements, instruments and other documents to be entered into to effect
the transfer of assets and the assumption of liabilities set forth in Article II
hereof.
(al) "Court Order" means any judgment, decree, injunction, order or
ruling of any Governmental Entity that is binding on any person or its property
under applicable Law.
(am) "Cut-Off Date" shall have the meaning set forth in Section 3.2(a)
hereof.
4
<PAGE> 9
(an) "Disclosure Schedule" means the disclosure schedule dated as of
the date hereof and attached hereto. References to a particular schedule of the
Disclosure Schedule shall only refer or modify the specific Section of this
Agreement to which such Schedule relates (i.e., Schedule 2.1(b) of the
Disclosure Schedule shall refer to or modify only Section 2.1(b) of this
Agreement), unless otherwise expressly set forth herein.
(ao) "Effective Time" shall have the meaning set forth in the Merger
Agreement.
(ap) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(aq) "Excess Net Tax Benefit" shall have the meaning set forth in
Section 4.1(a) hereof.
(ar) "Form S-1" means the registration statement on Form S-1 to be
filed by A&S with the SEC to effect the registration of the A&S Common Stock
pursuant to the Securities Act.
(as) "Governmental Entity" means any United States or any foreign,
federal, state or local government, court, administrative agency or commission
or other governmental or regulatory body or authority.
(at) "Indemnifiable Losses" means, with respect to any claim by an
Indemnified Party for indemnification pursuant to Articles V, VI or VIII hereof,
any and all damages, losses, deficiencies, Liabilities, obligations, penalties,
judgments, settlements, claims, payments, fines, interest, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and the costs and expenses of attorneys', accountants', consultants' and other
professionals', and fees and expenses incurred in the investigation or defense
thereof or the enforcement of rights hereunder), including direct and
consequential damages, but excluding punitive damages (other than punitive
damages awarded to any third party against an Indemnified Party) suffered by
such Indemnified Party with respect to such claim.
(au) "Indemnified Party" means any party which is seeking
indemnification from an Indemnifying Person pursuant to the provisions of
Articles V, VI or VIII hereof.
(av) "Indemnifying Party" means any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
Articles V, VI or VIII hereof.
(aw) "Information" shall have the meaning set forth in Section 7.2
hereof.
(ax) "Intercompany Agreements" means any contracts or agreements
between A&S on the one hand, and the Company or any Retained Subsidiary on the
other hand.
(ay) "Interim Balance Sheet" shall have the meaning set forth in
Section 3.2(a) hereof.
5
<PAGE> 10
(az) "Law" means any statute, law, rule, regulation, ordinance, order,
decree or judgment of any Governmental Entity, including, without limitation,
those covering environmental, energy, safety, health, transportation,
telecommunications, recordkeeping, zoning, antidiscrimination, antitrust, wage
and hour, and price and wage control matters.
(ba) "Liability" means, with respect to any party, except as otherwise
expressly provided herein, any direct or indirect liability (whether absolute,
accrued, contingent, reflected on a balance sheet (or in the notes thereto) or
otherwise, and whether known or unknown), indebtedness, obligation, expense,
claim, deficiency, guarantee or endorsement of or by any person (including,
without limitation, those arising under any Law or Action or under any award of
any court, tribunal or arbitrator of any kind, and those arising under any
contract, commitment or undertaking).
(bb) "Merger" shall have the meaning set forth in the Merger Agreement.
(bc) "Merger Agreement" shall have the meaning set forth in the
recitals to this Agreement.
(bd) "Net Asset Increase Adjustment" shall have the meaning set forth
in Section 3.2(b) hereof.
(be) "Notice Period" shall have the meaning set forth in Section 5.4(a)
hereof.
(bf) "Parent" shall have the meaning set forth in the preamble to this
Agreement.
(bg) "Parent Employee" shall have the meaning set forth in Section
8.6(a) hereof.
(bh) "Parent Indemnified Parties" shall have the meaning set forth in
Section 5.2(a) hereof.
(bi) "Person" or "person" means and includes any individual,
partnership, joint venture, corporation, association, joint stock company,
trust, unincorporated organization or similar entity and any Governmental
Entity.
(bj) "Plan" shall have the meaning set forth in Section 8.2(c) hereof.
(bk) "Purchaser" shall have the meaning set forth in the recitals to
this Agreement.
(bl) "Retained Action" shall have the meaning set forth in Section 5.6
hereof.
(bm) "Retained Business" means all businesses of the Company and the
Retained Subsidiaries and all business included within the assets, or obligated
by the liabilities, of the Company and the Retained Subsidiaries (each as
described in the Company's Annual Report on Form 10-K for the year ended
September 30, 1998), as conducted by the Company and such Subsidiaries as of the
Effective Time and all former businesses of the Company and the Retained
Subsidiaries; provided that the term "Retained Business" shall not include the
A&S Business, the A&S Assets or the A&S Liabilities.
6
<PAGE> 11
(bn) "Retained Employees" shall mean all current and former officers
and employees of the Company and its Subsidiaries, other than the A&S Employees.
(bo) "Retained Subsidiaries" means all of the Subsidiaries of the
Company, other than A&S.
(bp) "SEC" means the U.S. Securities and Exchange Commission.
(bq) "Securities Act" means the Securities Act of 1933, as amended.
(br) "Split-Off" means the issuance of the shares of A&S Common Stock
to holders of Company Common Stock and to holders of Stock Options in connection
with the Merger pursuant to the provisions of the Merger Agreement.
(bs) "Split-Off Conditions" means each of the conditions set forth in
clauses (i) through (vi) of Section 10.1(a) hereof.
(bt) "Stock Options" shall have the meaning set forth in the Merger
Agreement.
(bu) "Subsidiary" or "subsidiary" of any party means (i) a corporation,
a majority of the voting or capital stock of which is as of the time in question
directly or indirectly owned by such party and (ii) any other partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
similar entity, in which such party, directly or indirectly, owns a majority of
the equity interest thereof or has the power to elect or direct the election of
a majority of the members of the governing body of such entity or otherwise has
control over such entity (e.g., as the managing partner of a partnership).
(bv) "Suit" shall have the meaning set forth in Section 11.11 hereof.
(bw) "Tax Sharing Agreement" means the Tax Sharing Agreement, in the
form of Exhibit B to the Merger Agreement, pursuant to which the Parent, the
Company and A&S have provided for certain tax matters, including, without
limitation, indemnification, allocation of tax benefits and filing of tax
returns.
(bx) "Transition Services" shall have the meaning set forth in Section
4.3 hereof.
(by) "Transition Services Period" shall have the meaning set forth in
Section 4.3 hereof.
(bz) "Transition Services Invoice" shall have the meaning set forth in
Section 4.3 hereof.
(ca) "Transaction Suit" shall have the meaning set forth in Section 6.4
hereof.
Section 1.2. REFERENCES TO TIME. All references in this Agreement to
times of the day shall be to Eastern Standard Time.
7
<PAGE> 12
ARTICLE II
THE RELATED TRANSACTIONS
------------------------
Section 2.1. TRANSFER OF CERTAIN ASSETS AND LIABILITIES. Subject to the
terms and conditions of this Agreement, at the Effective Time,
(a) the Company shall transfer to A&S (and the Company shall cause each
of its subsidiaries to transfer to A&S) all of their right, title and interest
in and to the assets listed in Schedule 2.1(a) of the Disclosure Schedule; and
(b) A&S shall assume and shall in due course pay, perform and discharge
(or shall cause to be assumed and cause in due course to be paid, performed and
discharged), the liabilities listed in Schedule 2.1(b) of the Disclosure
Schedule.
Section 2.2. METHODS OF TRANSFER AND ASSUMPTION. In connection with the
transfers of assets other than capital stock and the assumption of any
liabilities, the Company and A&S shall execute or cause to be executed by the
appropriate entities any necessary Conveyance and Assumption Instruments in such
forms as Parent, the Company and A&S shall reasonably agree.
Section 2.3. COMPANY APPROVAL OF CERTAIN A&S ACTIONS. Unless otherwise
provided in this Agreement, the Company shall cooperate with A&S in effecting,
and if so requested by A&S, the Company shall cause Pac-Fab, Inc., a
wholly-owned subsidiary of the Company and the sole stockholder of A&S, to
ratify any actions that are reasonably necessary or desirable to be taken by A&S
to effectuate the transactions contemplated by this Agreement, in a manner
consistent with the terms of this Agreement, including, without limitation,
adopting, preparing and implementing appropriate plans, agreements and
arrangements for A&S Employees and A&S non-employee directors (including,
without limitation, employee benefit plans, agreements and arrangements (with
such changes thereto as the Board of Directors of the Company may approve in its
reasonable discretion prior to the Effective Time)).
ARTICLE III
THE SPLIT-OFF
-------------
Section 3.1. COOPERATION AND ACTIONS PRIOR TO THE SPLIT-OFF. (a) As
promptly as practicable after the date hereof and prior to the Effective Time:
(i) Subject to the provisions of paragraph (ii) below, the
Company shall prepare the Company Proxy Statement (which shall set
forth appropriate disclosure concerning A&S, the A&S Business, the
Merger, the Split-Off and certain other matters) and A&S shall file
with the SEC the Form S-1 (or such other form of registration statement
determined by the Company to be appropriate to effect the registration
of the A&S Common Stock). The Company and A&S shall use their
respective reasonable efforts to cause the Form S-1 to be declared
effective under the Securities Act, or if the Company shall determine
that the registration of the A&S Shares may not be effected pursuant to
a Form S-1, the Company
8
<PAGE> 13
and A&S shall use best efforts to cause the A&S Common Stock to be
registered pursuant to the registration statement or form determined to
be appropriate to effect such registration. As promptly as practicable
following the effectiveness of the Form S-1 (or other registration
statement, as the case may be), the Company shall mail the Company
Proxy Statement to the holders of the Company Common Stock.
(ii) The Company shall promptly provide to Parent copies of
all filings made with the Commission in connection with the Split-Off,
including, without limitation, the Form S-1 (or any registration
statement referred to in Section 3.1(a) above) and any amendments
thereto, all comments made by the Commission with respect to such
filings and all Company responses to such Commission comments. Prior to
making such filings with the Commission or entering into any other
agreement with A&S other than this Agreement, the Company shall consult
with Parent with respect to such filings and other agreements and
provide Parent with a reasonable opportunity to comment on such filings
and other agreements.
(iii) The Company and A&S shall cooperate in preparing, filing
with the SEC and causing to become effective any registration
statements or amendments thereto which are appropriate to reflect the
establishment of, or amendments to, any employee benefit and other
plans contemplated by this Agreement.
(iv) The Company and A&S shall take all such action as may be
necessary or appropriate under state securities or "Blue Sky" Laws in
connection with the transactions contemplated by this Agreement.
(v) The Company and A&S shall prepare, and A&S shall file and
seek to make effective, an application to permit listing of the A&S
Common Stock either on a national securities exchange or national
market system as may be selected by A&S in its sole discretion (to the
extent permitted pursuant to the listing requirements of such exchange
or national market system).
(vi) In addition to the actions specifically provided for
elsewhere in this Agreement and except as otherwise expressly set forth
in this Agreement, each of the parties hereto shall use its respective
best efforts to take, or cause to be taken, all actions, and, to
execute and deliver, or cause to be executed and delivered, such
additional documents and instruments, and to do, or cause to be done,
all things, reasonably necessary, proper or advisable under applicable
Laws and agreements to consummate and make effective the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing sentence, each of the parties hereto shall use its respective
best efforts to ensure that the conditions set forth in Article X
hereof are satisfied (insofar as such matters are within the control of
such party). Notwithstanding any other provisions set forth in this
Agreement, neither the Company, nor A&S nor any of their respective
Affiliates shall, without first obtaining the prior written consent of
the Parent, take or commit to take any action, in connection with
obtaining any consent, waiver or approval or effecting any of the
transactions contemplated in connection with the Split-Off or
otherwise, (i) except as otherwise expressly provided in this
Agreement, that would result in the payment of any
9
<PAGE> 14
funds (other than normal and usual filing fees) or the incurrence of
any liability by the Company or any Retained Subsidiary, (ii) that
would result in the divestiture or holding separate of any assets,
businesses or operations of the Company or any of the Retained
Subsidiaries, (iii) that might materially limit or impair Parent's or
the Company's or any Retained Subsidiary's freedom of action with
respect to, or its ability to retain or exercise control over, any
assets, businesses or operations of the Company or any Retained
Subsidiaries (other than any limitations or restrictions expressly set
forth in the Merger Agreement, the Tax Sharing Agreement or any other
agreement to be entered into pursuant to this Agreement or the Merger
Agreement), or (iv) that might otherwise adversely affect Parent.
(b) Prior to the Effective Time, the Company and A&S may elect to form
a holding company for the ownership of the A&S Common Stock. In such event, (i)
the Company shall transfer the shares of A&S Common Stock to the holding company
and shares of common stock of the holding company will be issued in substitution
of the A&S Common Shares in the Split-Off and (ii) the benefits and obligations
from the transactions contemplated by this Transition Agreement shall inure to
and be binding upon the holding company; provided that A&S shall not be released
from its obligations hereunder.
Section 3.2. NET ASSET ADJUSTMENT.
(a) A&S, in consultation with Parent and the Company, shall prepare and
deliver to Parent within 15 days prior to the Closing Date and no later than
July 31, 1999, a balance sheet ("Interim Balance Sheet") of A&S as of June 30,
1999 ("Cut-Off Date"), together with a calculation of the amount of any
adjustment determined under Section 3.2(b) (the "Adjustment Calculation"). A&S
shall prepare the Interim Balance Sheet in accordance with generally accepted
accounting principles applied on a consistent basis with the accounting
principles applied by A&S in preparation of its year-end 1998 financial
statements. Representatives of Parent's accountants shall be entitled to review,
following execution of mutually agreed upon confidentiality agreements, the work
papers, schedules, memoranda and other documents used in the preparation by A&S
of the Interim Balance Sheet and the Adjustment Calculation.
(b) If the value of the A&S Net Assets, as determined in the Interim
Balance Sheet, shall be greater than $40,836,000, the Company Dividend (as
defined in Section 4.1 below) shall be increased by an amount equal to the
difference between such amounts ("Net Asset Increase Adjustment"). In addition,
if Parent, based on its representatives' review of the Interim Balance Sheet and
Adjustment Calculation, determines that A&S's payment of accounts payable was
not conducted in compliance with Section 6.5 such that the value of A&S Net
Assets (determined assuming compliance with Section 6.5) differs from the value
of A&S Net Assets as reflected in the Interim Balance Sheet, then the parties
shall mutually agree upon an equitable adjustment to the calculation of the
value of A&S Net Assets for purposes of this Section 3.2(b).
Section 3.3. ACTIONS OF A&S PRIOR TO THE CUT-OFF DATE. By the
Cut-Off Date or as soon as practicable thereafter, A&S shall have obtained
financing upon terms and in such amount reasonably acceptable to A&S to allow
A&S to carryout the transactions contemplated by this Agreement, including the
payment of the Company Dividend prior to the Closing Date (as provided
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in Section 4.1 below), and to conduct its business in the ordinary course after
the Cut-Off Date. In connection with A&S's obligation to obtain the financing
described in the preceding sentence and in particular financing between the
Cut-Off Date and the Closing Date, the Company agrees to take such action,
including issuing an interim guaranty for such financing, as is necessary to
enable A&S to obtain such financing on terms and a rate substantially similar to
financing then available to the Company for the period ending on the Closing
Date, with the understanding that any such interim guaranty would expire at
Closing.
Section 3.4. POST-CUT-OFF DATE OPERATIONS OF A&S. Effective as of the
Cut-Off Date, A&S shall operate its business as a stand alone entity (i)
entitled to all income realized after the Cut-Off Date and (ii) as provided in
the Tax Sharing Agreement, responsible for all taxes on income realized from the
activities or operations of A&S after the Cut-Off Date and entitled to any tax
benefits attributable to any losses or other tax attributes resulting from the
activities or operations of A&S after the Cut-Off Date.
Section 3.5. THE SPLIT-OFF. The Split-Off shall be effected pursuant to
the provisions of Article III of the Merger Agreement; provided, however that
such Split-Off shall be conditioned on the satisfaction (or waiver, to the
extent expressly permitted by the provisions of Section 10.1 hereof) of each of
the Split-Off Conditions. All shares of A&S Common Stock issued in the Split-Off
shall be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights.
Section 3.6. TERMINATION OF CERTAIN CLAIMS. Following the Effective
Time, A&S shall have no claims against the Company, any Retained Subsidiary or
any Affiliate of either based on any breach by the Company, any Retained
Subsidiary or any of their respective Affiliates of any obligations under this
Agreement that occurred on or prior to the Effective Time, all of such claims
being hereby irrevocably waived and terminated as of the Effective Time;
provided that the foregoing shall not limit the Company's liability for any
breach by the Company or any Retained Subsidiary of any of their respective
obligations under this Agreement that occurs following the Effective Time.
Section 3.7. POST-CLOSING PROCEDURES. After the Closing, Parent shall
have the right to cause its independent auditors to conduct, at its sole
expense, a roll-back audit of A&S's year-end audited financial statements to
determine the accuracy of the balance sheet of A&S as of the Closing Date (the
"Closing Balance Sheet"). Such audit will be conducted in accordance with
procedures to be mutually agreed upon by the auditors of A&S and Parent to
verify the appropriateness at, or as of the Cut-Off Date, of (i) the
classification of assets and non-interest bearing liabilities between A&S and
the Company, (ii) the application of funds by A&S prior to the Cut-Off Date, or
(iii) tax allocations and other accruals. In conducting such activities, Parent
shall be given the opportunity to discuss A&S's year-end audit with A&S's
auditors and review work papers prepared by A&S's auditors in connection with
the preparation of A&S's year-end audited financial statements. If Parent's
independent auditors determine that inaccuracies existed in the Closing Balance
Sheet, then adjustments shall be made to the calculations, allocations and
payments made in connection with the transactions contemplated by this
Agreement. If Parent and A&S fail to agree on the resolution of any of the
matters in this Section 3.7, then such matter shall be referred to the
Accountant (as defined in Section 1(b) of the Tax Sharing Agreement) for a
binding determination. Parent and A&S shall deliver to the Accountant copies of
any schedules or
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documentation that may be reasonably required by the Accountant to make its
determination. Parent and A&S shall be entitled to make presentations to the
Accountant in connection therewith. Parent and A&S shall use all reasonable
efforts to cause the Accountant to promptly complete such determination.
ARTICLE IV
INTERCOMPANY TRANSACTIONS AND RELATIONSHIPS
-------------------------------------------
Section 4.1. CASH DIVIDEND.
(a) DECLARATION; AMOUNT. After June 30, 1999 and prior to the Effective
Time, A&S shall declare a cash dividend (the "Company Dividend") payable to the
Company in an amount equal to $17,000,000 plus any Net Asset Increase Adjustment
(as determined pursuant to Section 3.2(b)) and minus the amount by which the Net
Tax Benefit (as defined in Section 4(b) of the Tax Sharing Agreement) exceeds
$4,200,000 (such excess to be referred to herein as the "Excess Net Tax
Benefit").
(b) DISTRIBUTION.
(i) Immediately prior to the Effective Time, A&S shall
distribute the Company Dividend in the following manner: (1) by
distributing an amount (the "Initial Distribution") calculated in
accordance with the formula described in Section 4.1(a), and, for
purposes of that calculation, by computing an estimated Excess Net Tax
Benefit using as the value of the A&S Common Stock the Pre-Closing A&S
Trading Value (as defined in Section 4.1(d)(i) below) two (2) days
prior to the Closing Date; (2) by making the distribution referred in
clause (1) above subject to an obligation by the Company to return to
A&S such part of the Initial Distribution as may exceed an amount equal
to the Company Dividend as computed using the Closing A&S Trading Value
(as defined in Section 4.1(d)(ii) below); and (3) by distributing to
the Company a right to receive an additional distribution from A&S, as
soon as possible after the Closing Date, to the extent that the Company
Dividend computed using the Closing A&S Trading Value, exceeds the
amount of the Initial Distribution.
(ii) Pursuant to the obligation referred to in Section
4.1(b)(i)(2) above or the right referred to in Section 4.1(b)(i)(3)
above, as the case may be, the Company shall return to A&S a portion of
the Initial Distribution, or A&S shall make an additional distribution
to the Company, such that the Initial Distribution as adjusted by this
paragraph equals the amount of the Company Dividend computed using the
Closing A&S Trading Value. Such amount shall be paid under this Section
4.1 as soon as practicable following the Closing Date.
(c) EFFECT. Upon payment of the Initial Distribution, any remaining
intercompany liabilities of A&S other than liabilities incurred in connection
with the purchase of swimming pool equipment from the Company and its
Subsidiaries shall be converted, and classified as a contribution, to the
capital of A&S and thereafter, A&S shall have no further obligation with regard
to such liabilities.
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(d) DEFINITIONS. As used in this Section 4.1, the capitalized terms
used herein and not otherwise defined have the following meanings:
(i) "Pre-Closing A&S Trading Value" shall mean the excess of
the high and low trading prices of Company Common Stock over $19.09.
(ii) "Closing A&S Trading Value" shall mean the value
determined pursuant to the provisions of Section 5 of the Tax Sharing
Agreement.
Section 4.2. INTERCOMPANY ACCOUNTS. Following the date hereof, (i) no
transactions related to intercompany receivables, payables, loans, cash
overdrafts and other accounts in existence as of the date of this Agreement
between A&S, on the one hand, and the Company or any Retained Subsidiary, on the
other hand, shall be entered into except in the ordinary course of business and
in a manner consistent with past practice, and (ii) except with the prior
written consent of the Parent or for Intercompany Agreements which are on their
terms and conditions entered into in the ordinary course of business and in a
manner consistent with past practices, neither the Company, any Retained
Subsidiary or A&S shall enter into any Intercompany Agreement following the date
hereof and prior to the Effective Time.
Section 4.3. TRANSITION SERVICES.
(a) Following the Effective Time and ending on the one (1) year
anniversary of the Effective Time (such period, the "Transition Services
Period"), the Company shall provide, or make available, to A&S, at such times
and in such amounts as may be reasonably requested by A&S, the following
services (the "Transition Services") and A&S will pay for such Transition
Services on a cost basis as agreed to by the parties:
(i) tax preparation and filing services, including the
services of Robert Brunozzi, the Company's current Director of Taxes;
provided such director is employed by the Parent at the time such
services are requested by A&S;
(ii) legal services, to be provided by the Company's general
counsel, Kevan Langner; provided such counsel is employed by the Parent
or the Company at the time such services are requested by A&S;
(iii) information and technology support services of the types
set forth in Schedule 4.3 of the Disclosure Schedule; and
(iv) such other additional services as may be reasonably
requested by A&S; provided that the scope of any services, as well as
the time and the manner in which such services are to be provided,
shall be mutually agreeable between the parties.
Following the end of the calendar month in which any such Transition
Services are performed, the Company shall provide to A&S an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the appropriate cost
thereof. A&S shall pay to the Company in immediately available funds, in a
reasonably prompt manner following the delivery by the Company of a Transition
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Services Invoice, the amounts due with respect to the Transition Services
reflected on such Transition Services Invoice. Notwithstanding anything herein
to the contrary, neither Parent nor the Company shall have any liability
whatsoever to A&S or A&S's Affiliates or any third party for any loss,
liability, damage, cost or deficiency suffered by any such person resulting
from, caused by or arising out of the Company's performance of the Transition
Services.
(b) In addition to the Transition Services to be provided by the
Company, for a period of two (2) months following the Effective Time A&S shall
be entitled to occupy and use without charge such office space at 220 Park
Drive, Chardon, Ohio 44024 reasonably designated by A&S to be necessary to
enable A&S to continue to run its current operations at such location.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 5.1. SURVIVAL OF AGREEMENTS. The obligations under this Article
V of A&S, on the one hand, and the Company and the Retained Subsidiaries, on the
other hand, shall survive the sale or other transfer by it of any assets or
businesses or the assignment by it of any Liabilities. To the extent that A&S
transfers directly or indirectly to any other person all or substantially all of
the A&S Assets or the A&S Business, A&S will cause the transferee of such A&S
Assets or A&S Business to assume specifically its obligations under this
Agreement with respect thereto and will cause such transferee to fulfill its
obligations related to the A&S Liabilities. Such assumption will not relieve A&S
of its obligations in respect thereof. To the extent that the Company or any of
the Retained Subsidiaries transfers directly or indirectly to any other person
all or substantially all of the Retained Business, the Company will cause the
transferee of such Retained Business to assume specifically its obligations
under this Agreement with respect thereto and will cause such transferee to
fulfill its obligations related to the Retained Liabilities. Such assumption
will not relieve the Company of its obligations in respect thereof. A&S, on the
one hand, and the Company, on the other hand, agree that such transferee may
exercise all of A&S's or the Company's rights hereunder, as the case may be,
with respect to such Assets or businesses.
Section 5.2. INDEMNIFICATION BY A&S.
(a) In addition to any indemnification required by Articles VI and VIII
hereof, subject to the terms and conditions set forth in this Agreement, from
and after the Effective Time, A&S shall indemnify, defend and hold harmless the
Company, each Retained Subsidiary, the Purchaser and Parent and each of their
respective directors, officers, employees, representatives, advisors, agents and
Affiliates (collectively, the "Parent Indemnified Parties") from, against and in
respect of any and all Indemnifiable Losses of the Parent Indemnified Parties
arising out of, relating to or resulting from, directly or indirectly, (i) any
misrepresentation or breach of any warranty in this Agreement made by A&S or, on
or prior to the Effective Time, made by the Company, (ii) any breach of any
agreement or covenant under this Agreement by A&S or, on or prior to the
Effective Time, by the Company, (iii) any and all A&S Liabilities, (iv) the
conduct of the A&S Business or any part thereof on or following the Effective
Time, (v) any transfer of A&S Assets to, or assumption of A&S Liabilities by,
A&S in accordance with this Agreement or otherwise in connection with the
Split-Off (other than any costs and expenses which have been expressly assumed
by the Company
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pursuant to the provisions of this Agreement), (vi) any Indemnifiable Loss
resulting from any claims that any statements or omissions relating to or
describing, directly or indirectly, A&S, the A&S Business, any A&S Asset or any
A&S Liability, and which occur on or prior to the Effective Time in the Company
Proxy Statement or the Form S-1 (in each case other than with respect to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors and other than any statements or omissions which
relate solely to the Merger Agreement and this Agreement and the transactions
contemplated thereby and hereby), which are false or misleading with respect to
any 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 were made, not misleading, (vii) any
Indemnifiable Loss arising out of or relating to Transaction Suits resulting
from, directly or indirectly, (a) any statement or omission on the part of A&S
or any of their Affiliates in the documents referred to in Section 5.2(a)(vi)
above, (b) the A&S Business, A&S Assets and A&S Liabilities or (c) any holder of
Company Common Stock exercising appraisal rights under the Ohio General
Corporation Law with respect to the value of the Split-Off Consideration (as
defined in the Merger Agreement) and (viii) any Indemnifiable Loss resulting
from actions the Company or Pac-Fab, Inc. take pursuant to Section 2.3 hereof.
(b) Notwithstanding A&S's obligations to indemnify Parent Indemnified
Parties pursuant to Section 5.2(a) hereof, A&S shall be obligated to indemnify
the Parent Indemnified Parties only for those Indemnifiable Losses under clause
(i) of Section 5.2(a) hereof as to which the Parent Indemnified Parties have
given A&S written notice thereof on or prior to the third anniversary of the
Effective Time and under clause (vi) of Section 5.2(a) hereof as to which the
Parent Indemnified Parties have given A&S written notice thereof on or prior to
the expiration of any applicable statute of limitations period (it being
understood that there shall be no corresponding time limitation with respect to
any Indemnifiable Losses arising under clauses (ii), (iii), (iv), (v), (vii) or
(viii) of Section 5.2(a) hereof). Notwithstanding the foregoing, if on or before
the expiration of such indemnification period any Parent Indemnified Party has
given notice to A&S pursuant to Section 5.4 hereof of any matter which would be
the basis for a claim of indemnification by such Parent Indemnified Party
pursuant to Section 5.2(a), such Parent Indemnified Party shall have the right
after the expiration of such indemnification period to assert or to continue to
assert such claim and to be indemnified with respect thereto.
Section 5.3. INDEMNIFICATION BY THE COMPANY.
(a) In addition to any indemnification required by Articles VI and VIII
hereof, subject to the terms and conditions set forth in this Agreement, from
and after the Effective Time, the Company shall indemnify, defend and hold
harmless A&S and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "A&S
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the A&S Indemnified Parties arising out of, relating to or resulting
from, directly or indirectly, (i) any breach of any agreement or covenant under
this Agreement by Parent or Purchaser or, following the Effective Time, by the
Company, (ii) the conduct of the Retained Business or any part thereof on, prior
to or following the Effective Time, and (iii) any Indemnifiable Loss resulting
from any claims that any statements or omissions relating to or describing,
directly or indirectly, Parent or the Purchaser, and which occur on or prior to
the Effective Time in the Company Proxy Statement or
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the Form S-1 (in each case only to the extent of any statements or omissions
made in reliance upon and in conformity with information furnished in writing by
Parent, the Purchaser or their Affiliates, representatives or advisors), which
are false or misleading with respect to any 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 were made,
not misleading. Notwithstanding the foregoing and anything to the contrary in
this Agreement or any other agreement to be entered into pursuant to this
Agreement, the Company shall not be required to indemnify, defend and hold
harmless any A&S Indemnified Party from and against any Indemnifiable Loss
resulting from any claims that the statements included in the Company Proxy
Statement and the Form S-1 (in each case other than statements or omissions made
in reliance upon and in conformity with information furnished in writing by
Parent, the Purchaser or their Affiliates, representatives or advisors expressly
for use therein) are false or misleading with respect to any 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 were made, not misleading.
(b) Notwithstanding the Company's obligations to indemnify the A&S
Indemnified Parties pursuant to Section 5.3(a) hereof, the Company shall be
obligated to indemnify the A&S Indemnified Parties only for those Indemnifiable
Losses under clause (iii) of Section 5.3(a) hereof as to which the A&S
Indemnified Parties have given the Company written notice thereof on or prior to
the expiration of any applicable statute of limitations period (it being
understood that there shall be no corresponding time limitation with respect to
any Indemnifiable Losses arising under clause (i) or (ii) of Section 5.3(a)
hereof). Notwithstanding the foregoing, if on or before the expiration of such
indemnification period any A&S Indemnified Party has given notice to the Company
pursuant to Section 5.4 hereof of any matter which would be the basis for a
claim of indemnification by such A&S Indemnified Party pursuant to Section
5.3(a), such A&S Indemnified Party shall have the right after the expiration of
such indemnification period to assert or to continue to assert such claim and to
be indemnified with respect thereto.
Section 5.4. PROCEDURE FOR INDEMNIFICATION. All claims for
indemnification under this Article V shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance or
state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder is asserted
against or sought to be collected by a third party (an "Asserted Liability"),
the Indemnified Party shall promptly notify the Indemnifying Party in writing of
such Asserted Liability, specifying the nature of such Asserted Liability and
the amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim or demand)
(the "Claim Notice"); provided that no delay on the part of the Indemnified
Party in giving any such Claim Notice shall relieve the Indemnifying Party of
any indemnification obligation hereunder unless (and then solely to the extent
that) the Indemnifying Party is materially prejudiced by such delay. The
Indemnifying Party shall have twenty (20) days (or less if the nature of the
Asserted Liability requires) from its receipt of the Claim Notice (the "Notice
Period") to notify the Indemnified Party whether or not the Indemnifying Party
desires, at the Indemnifying Party's sole cost and expense and by counsel of its
own choosing, which shall be reasonably satisfactory to the Indemnified Party,
to defend against such Asserted Liability; provided
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that if, under applicable standards of professional conduct a conflict on any
significant issue between the Indemnifying Party and any Indemnified Party
exists in respect of such Asserted Liability, then the Indemnifying Party shall
reimburse the Indemnified Party for the reasonable fees and expenses of one
additional counsel to be retained in order to resolve such conflict, promptly
upon presentation by the Indemnified Party of invoices or other documentation
evidencing such amounts to be reimbursed. If the Indemnifying Party undertakes
to defend against such Asserted Liability, the Indemnifying Party shall control
the investigation, defense and settlement thereof; provided that (i) the
Indemnifying Party shall use its reasonable efforts to defend and protect the
interests of the Indemnified Party with respect to such Asserted Liability, (ii)
the Indemnified Party, prior to or during the period in which the Indemnifying
Party assumes control of such matter, may take such reasonable actions as the
Indemnified Party deems necessary to preserve any and all rights with respect to
such matter, without such actions being construed as a waiver of the Indemnified
Party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, consent to any settlement which (A) imposes any Liabilities
on the Indemnified Party (other than those Liabilities which the Indemnifying
Party agrees to promptly pay or discharge), and (B) with respect to any
non-monetary provision of such settlement, would be likely, in the Indemnified
Party's reasonable judgment, to have an adverse effect on the business
operations, assets, properties or prospects of Parent, the Company or the
Retained Business (in the case of a Parent Indemnified Party), A&S or the A&S
Business (in the case of an A&S Indemnified Party), or such Indemnified Party.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
control, pay or settle any Asserted Liability which the Indemnifying Party shall
have undertaken to defend so long as the Indemnified Party shall also waive any
right to indemnification therefor by the Indemnifying Party. If the Indemnifying
Party undertakes to defend against such Asserted Liability, the Indemnified
Party shall cooperate fully with the Indemnifying Party and its counsel in the
investigation, defense and settlement thereof. If the Indemnified Party desires
to participate in any such defense it may do so at its sole cost and expense. If
the Indemnifying Party does not undertake within the Notice Period to defend
against such Asserted Liability, then the Indemnifying Party shall have the
right to participate in any such defense at its sole cost and expense, but the
Indemnified Party shall control the investigation, defense and settlement
thereof (provided that the Indemnified Party may not settle any such Asserted
Liability without obtaining the prior written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld by the Indemnifying Party;
provided that in the event that the Indemnifying Party is in material breach at
such time of the provisions of this Section 5.4, then the Indemnified Party
shall not be obligated to obtain such prior written consent of the Indemnifying
Party) at the reasonable cost and expense of the Indemnifying Party (which shall
be paid by the Indemnifying Party promptly upon presentation by the Indemnified
Party of invoices or other documentation evidencing the amounts to be
indemnified). The Indemnified Party and the Indemnifying Party agree to make
available to each other, their counsel and other representatives, all
information and documents available to them which relate to such claim or demand
(subject to the confidentiality provisions of Section 7.5 hereof); provided that
no party hereto shall be obligated to disclose any information which would
result in the waiver of any attorney-client, attorney work product or other
similar privileges, if the disclosure of such information would be materially
prejudicial to such disclosing party. The Indemnified Party and the Indemnifying
Party and the Company and its employees also agree to render to each other such
assistance and cooperation as may reasonably be required to ensure the proper
and adequate defense of such claim or demand.
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(b) In the event that an Indemnified Party should have a claim against
the Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. The Indemnifying Party shall have twenty (20) days from the
date such Claim Notice is delivered during which to notify the Indemnified Party
in writing of any good faith objections it has to the Indemnified Party's Claim
Notice or claims for indemnification, setting forth in reasonable detail each of
the Indemnifying Party's objections thereto. If the Indemnifying Party does not
deliver such written notice of objection within such 20-day period, the
Indemnifying Party shall be deemed to have accepted responsibility for the
prompt payment of the Indemnified Party's claims for indemnification, and shall
have no further right to contest the validity of such indemnification claims. If
the Indemnifying Party does deliver such written notice of objection within such
20-day period, the Indemnifying Party and the Indemnified Party shall attempt in
good faith to resolve any such dispute within thirty (30) days of the delivery
by the Indemnifying Party of such written notice of objection. If the
Indemnifying Party and the Indemnified Party are unable to resolve any such
dispute within such 30-day period, then either the Indemnifying Party or the
Indemnified Party shall be free to pursue any remedies which may be available to
such party under applicable Law.
Section 5.5. MISCELLANEOUS INDEMNIFICATION PROVISIONS.
(a) The Indemnifying Party agrees to indemnify any successors of the
Indemnified Party to the same extent and in the same manner and on the same
terms and conditions as the Indemnified Party is indemnified by the Indemnifying
Party under this Article V. In the event that any claim for indemnification
under either Articles V, VI or VIII hereof meets the criteria of more than one
of the types of claims for which indemnification is provided for under such
provisions, the Indemnified Party, in its sole discretion, shall classify such
claim and only be required to include such claim, and the recoveries for
indemnification therefrom, in one of such categories. No investigation made by
any party hereto shall affect any representation or warranty of the other
parties hereto contained in this Agreement, the Disclosure Schedule or any
certificate, document or other instrument delivered in connection herewith. The
consummation by Parent of the Merger pursuant to the terms and conditions of the
Merger Agreement, either with or without knowledge of a breach of warranty or
covenant or misrepresentation by any party hereto, shall not constitute a waiver
of any claim by any Parent Indemnified Party for Indemnifiable Losses with
respect to such breach or misrepresentation. In determining the amount of
Indemnifiable Losses to which a Parent Indemnified Party or A&S Indemnified
Party (as the case may be) is entitled to indemnification hereunder, an
arbitration panel, court or tribunal may take into consideration, where
appropriate and without duplication, any diminution in the aggregate value of
the Retained Business or the A&S Business (as the case may be). Notwithstanding
anything to the contrary contained in this Agreement, the assignment of any
party's rights hereunder to any other person or entity shall not limit, affect
or prejudice the ability of the assigning party to continue to enforce any
rights of indemnification hereunder or other rights hereunder in accordance with
the terms and conditions of this Agreement.
(b) In determining the amount of any indemnity payable under this
Article V, such amount shall be reduced by (x) any related tax benefits if and
when actually realized or received (but only after taking into account any tax
benefits (including, without limitation, any net operating losses or other
deductions) to which the Indemnified Party would be entitled without regard to
such
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item), except to the extent such recovery has already been taken into account in
determining the amount of any indemnity payable under Articles V, VI or VIII
hereof, and (y) any insurance recovery if and when actually realized or
received, in each case in respect of such Asserted Liability. Any such recovery
shall be promptly repaid by the Indemnified Party to the Indemnifying Party
following the time at which such recovery is realized or received pursuant to
the previous sentence, minus all reasonably allocable costs, charges and
expenses incurred by the Indemnified Party in obtaining such recovery.
Notwithstanding the foregoing, if (x) the amount of Indemnifiable Losses for
which the Indemnifying Party is obligated to indemnify the Indemnified Party is
reduced by any tax benefit or insurance recovery in accordance with the
provisions of the previous sentence, and (y) the Indemnified Party subsequently
is required to repay the amount of any such tax benefit or insurance recovery or
such tax benefit or insurance recovery is disallowed, then the obligation of the
Indemnifying Party to indemnify with respect to such amounts shall be reinstated
immediately and such amounts shall be paid promptly to the Indemnified Party in
accordance with the provisions of this Agreement.
(c) In the event that a dispute between any Indemnifying Party and any
Indemnified Party concerning the existence of a right or obligation to indemnity
under this Agreement is determined by any arbitration panel or any court or
tribunal, the reasonable fees and expenses of the attorneys for the party which
is principally prevailing in such action shall be paid by the party which is not
principally prevailing in such action.
(d) All amounts owing under this Article V shall bear interest at a
fluctuating rate of interest equal to the rate of interest from time to time
announced by KeyBank, N.A. in Cleveland, Ohio as its prime lending rate,
computed from the time such damage, cost or expense was incurred or suffered to
the date of payment therefor.
(e) The remedies provided by this Article V shall be the parties' sole
and exclusive remedies for the recovery of any Indemnifiable Losses resulting
from, arising out of or related to misrepresentations, breaches of warranties,
and non-fulfillment of obligations under this Agreement, except those arising
from, arising out of or related to fraud; provided that the provisions of this
Section 5.5(e) shall not limit the ability of any party to seek injunctive or
similar relief pursuant to Section 11.12 hereof.
Section 5.6. PENDING LITIGATION. Following the Effective Time, (a)
A&S shall have exclusive authority and control over the investigation,
prosecution, defense and appeal of all pending Actions relating primarily to the
A&S Business, the A&S Assets or the A&S Liabilities (each, an "A&S Action"), and
may settle or compromise, or consent to the entry of any judgment with respect
to, any such Action without the consent of the Company, and (b) the Company
shall have exclusive authority and control over the investigation, prosecution,
defense and appeal of all pending Actions relating primarily to the Retained
Business (each, a "Retained Action"), and may settle or compromise, or consent
to the entry of any judgment with respect to, any such Action without the
consent of A&S; provided that if both the Company and A&S are named as parties
to any A&S Action or Retained Action, neither the Company nor A&S (nor any of
their respective Subsidiaries) may settle or compromise, or consent to the entry
of any judgment with respect to, any such Action without the prior written
consent of the other party (which consent may not be unreasonably withheld) if
such settlement, compromise or consent to such judgment includes any
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form of injunctive relief binding upon such other party. A&S shall indemnify,
defend and hold harmless each of the Parent Indemnified Parties, and the Company
shall indemnify and hold harmless each of the A&S Indemnified Parties, in the
manner provided in this Article V, from and against all Indemnifiable Losses
arising out of or resulting from each such Action over which such Indemnifying
Party has authority and control pursuant to this Section 5.6.
Section 5.7. CONSTRUCTION OF AGREEMENTS. Notwithstanding any other
provision in this Agreement to the contrary, in the event and to the extent that
there shall be a conflict between the provisions of this Article V and the
provisions of any other part of this Agreement or any exhibit or schedule
hereto, the provisions of this Article V shall control, and in the event and to
the extent that there shall be a conflict between the provisions of this
Agreement (including, without limitation, the provisions of this Article V) and
the provisions of the Tax Sharing Agreement, the provisions of the Tax Sharing
Agreement shall control.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
--------------------------
Section 6.1. REPRESENTATIONS OR WARRANTIES; DISCLAIMERS.
(a) It is the explicit intent of each party hereto that no party to
this Agreement or to the Merger Agreement is making any representation or
warranty whatsoever, express or implied, in this Agreement or in any other
agreement contemplated hereby, except those representations and warranties
expressly set forth in this Agreement. Each of the parties hereto agrees, to the
fullest extent permitted by Law, that none of them nor any of their Affiliates,
agents or representatives shall have any liability or responsibility whatsoever
to any such other party hereto or such other party's Affiliates, agents or
representatives on any basis (including, without limitation, in contract or
tort, under federal or state securities laws or otherwise) based upon any
information provided or made available, or statements made, to any such other
party or such other party's Affiliates, agents or representatives (or any
omissions therefrom), including, without limitation, in respect of the specific
representations and warranties set forth in this Agreement and the Merger
Agreement and the covenants and agreements set forth in the Merger Agreement,
except (i) as and only to the extent expressly set forth in the indemnification
provisions of Article V hereof and as otherwise expressly set forth herein
(subject to the limitations and restrictions contained herein), and (ii) with
respect to breaches of the covenants and agreements set forth in this Agreement.
(b) Without limiting the generality of the foregoing, it is understood
and agreed (a) that neither Parent, the Company nor any of the Retained
Subsidiaries is, in this Agreement or in any other agreement or document
contemplated by this Agreement, representing or warranting in any way as to the
value or freedom from encumbrance of, or any other matter concerning, any A&S
Assets, (b) that the A&S Assets are being transferred "as is, where is" and (c)
that, subject to the obligations of the Company set forth in Section 6.2 hereof,
A&S shall bear the risk that any conveyances of the A&S Assets might be
insufficient. Similarly, it is understood and agreed that neither Parent, the
Company nor any of the Retained Subsidiaries is, in this Agreement or in any
other agreement or document contemplated by this Agreement, representing or
warranting to A&S or any A&S Indemnified Party in any way that the obtaining of
the consents and approvals, the
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execution and delivery of any amendatory agreements and the making of the
filings and applications contemplated by this Agreement shall satisfy the
provisions of any or all applicable agreements or the requirements of all
applicable Laws or judgments.
(c) A&S represents and warrants to the Company that (i) since December
31, 1998, the A&S Business has been conducted in the ordinary course of business
consistent with past practice; (ii) neither the Company nor any of the Retained
Subsidiaries will, after giving effect to the Split-Off, be liable directly or
indirectly, as borrower, surety, guarantor, indemnitor or otherwise, with
respect to any of the A&S Liabilities; (iii) except as set forth in Schedule
6.1(c)(iii) of the Disclosure Schedule, there are no Intercompany Agreements in
effect as of the date hereof; (iv) there are no A&S Assets which have been used
within the Retained Business since December 31, 1998, other than those A&S
Assets which are listed on Schedule 6.1(c)(iv) of the Disclosure Schedule; (v)
except as set forth in Schedule 6.1(c)(v) of the Disclosure Schedule, A&S shall
not immediately after giving effect to the Split-Off, own, hold or lease, in
whole or in part, any of the assets, properties, licenses and rights which are
reasonably necessary to carry on the Retained Business as presently conducted;
and (vi) except as set forth in Schedule 6.1(c)(vi) of the Disclosure Schedule
or as provided in Section 4.2, since December 31, 1998, no other intercompany
transfers, dividends or payments have taken, or will take, place outside the
ordinary course of business between A&S, on the one hand, and the Company or any
Retained Subsidiary, on the other hand.
Section 6.2. FURTHER ASSURANCES; SUBSEQUENT TRANSFERS. Each of the
parties hereto will execute and deliver such further instruments of transfer and
distribution and will take such other actions as any party hereto may reasonably
request in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
Section 6.3. USE OF NAMES. Following the Effective Time, A&S shall have
the sole and exclusive ownership of and right to use, as between the Company and
each of the Retained Subsidiaries, on the one hand, and A&S, on the other hand,
the "Anthony & Sylvan Pools Corporation" name and each of the names used (or
formerly used) in the A&S Business (the "A&S Names"), and each of the trade
marks, trade names, service marks and other proprietary rights exclusively
related to such A&S Names (the "A&S Proprietary Name Rights") and any trade
marks, trade names, service marks or other proprietary rights mutually agreed
among the Parties prior to the Effective Time. Following the Effective Time, the
Company and each of the Retained Subsidiaries shall have the sole and exclusive
ownership of and right to use, as between A&S, on the one hand, and the Company
and each of the Retained Subsidiaries, on the other hand, all names used (or
formerly used) by the Company or any of the Retained Subsidiaries as of such
date other than the A&S Names (the "Company Names"), and all other trade marks,
trade names, service marks and other proprietary rights owned or used by the
Company or any of the Retained Subsidiaries as of such date other than the A&S
Proprietary Name Rights (the "Company Proprietary Name Rights"). Notwithstanding
the foregoing, following the Effective Time, (x) the Company shall, and shall
cause its Subsidiaries and other Affiliates to, take all action reasonably
necessary to cease using, and change as soon as commercially practicable
(including by amending any charter documents), any corporate or other names
which are the same as or confusingly similar to any of the A&S Names or any of
the A&S Proprietary Name Rights, and (y) A&S shall, and shall cause its
Subsidiaries and other Affiliates to, take all action reasonably necessary to
cease using, and change as soon as commercially practicable (including by
amending any charter documents),
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any corporate or other names which are the same as or confusingly similar to any
of the Company Names or any of the Company Proprietary Name Rights.
Section 6.4. LITIGATION RELATING TO TRANSACTION.
(a) Following the date hereof until the Effective Time, in the event
that any Action is commenced against the Company or any of its Subsidiaries
(including A&S) challenging either the Merger Agreement, this Agreement or the
Tax Sharing Agreement or any of the transactions contemplated therein or herein
(any such Action, a "Transaction Suit"), then the Company shall provide promptly
to Parent copies of all material pleadings sent or received after the date
hereof by the Company or its counsel with respect to any such Transaction Suits.
Parent shall be entitled to participate in the defense of each Transaction Suit
and to employ counsel at its own expense to assist in the handling of each such
Transaction Suit. Neither the Company nor any of its Subsidiaries (including
A&S) shall settle or compromise any Transaction Suit or consent to the entry of
any judgment with respect to any such Transaction Suit, without the prior
written consent of Parent (which consent shall not be unreasonably withheld).
(b) Following the Effective Time, the Company shall provide promptly to
A&S copies of all material pleadings sent or received after the Effective Time
by the Company or its counsel with respect to any Transaction Suits to which A&S
or any of its Affiliates is a party. A&S shall be entitled to participate in the
defense of each Transaction Suit to which it or any of its Affiliates is a
party, and to employ counsel at its own expense to assist in the handling of
each such Transaction Suit. Following the Effective Time, neither the Parent nor
the Company nor any of their respective Subsidiaries shall settle or compromise
any Transaction Suit to which A&S or any of its Affiliates is a party or consent
to the entry of any judgment with respect to any such Transaction Suit, without
the prior written consent of A&S (which consent shall not be unreasonably
withheld).
Section 6.5. OPERATION PRIOR TO SPLIT-OFF. Prior to the Effective Time,
A&S and Company agree to operate their respective businesses in the ordinary
course of business and in a manner consistent with past practice. In addition,
during the period prior to the Cut-Off Date, A&S shall (i) continue to sweep
cash from its various accounts to the Company in the ordinary course of its
business in a manner consistent with past practices and (ii) pay its accounts
payable and take payment discounts on such accounts payable in the ordinary
course of its business in a manner consistent with past practices.
Section 6.6. RESTRICTIONS ON POST-SPLIT-OFF COMPETITIVE ACTIVITIES. As
an inducement to the parties hereto to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the A&S Business and the Retained Business, Parent and the
Company, on one hand, and A&S, on the other hand, hereby covenant and agree that
for a period of three (3) years from the Effective Time, they will not, directly
or indirectly: (i) enter, engage in, continue in or carry on (x) in the case of
Parent and the Company, the swimming pool installation business, or (y) in the
case of A&S, the business of manufacturing water pressure vessels or swimming
pool and spa equipment, which as of the date of this Agreement are manufactured
by the Company or any Retained Subsidiary; or (ii) engage in any practice the
purpose of which is to evade the provisions of this covenant not to compete;
provided, however, that the foregoing shall not prohibit the ownership of
securities of corporations engaged in the
22
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prohibited businesses which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which shall not
exceed 5% of the outstanding shares of any such corporation. The parties agree
that the geographic scope of this covenant not to compete shall extend
throughout the world. In the event a court of competent jurisdiction determines
that the provisions of this covenant not to compete are excessively broad as to
duration, geographical scope or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
excessively broad provisions shall be deemed, without further action on the part
of any person, to be modified, amended and/or limited, but only to the extent
necessary to render the same valid and enforceable in such jurisdiction.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
----------------------------------
Section 7.1. PROVISION OF CORPORATE RECORDS. Except as provided in the
following sentence, on or about the Effective Time, the Company shall deliver to
A&S all corporate books and records, in its possession, (including all active
agreements, active litigation files and government filings) which are corporate
records of A&S, including, without limitation, original corporate minute books,
stock ledgers and certificates and corporate seals of A&S. Notwithstanding the
foregoing and subject to the confidentiality provisions of Section 7.5 hereof,
the Company shall have the right to retain copies of any such documents which
also relate to the Retained Business.
Section 7.2. ACCESS TO INFORMATION. Subject to the confidentiality
provisions of Section 7.5 hereof, from and after the Effective Time (i) A&S
shall afford to the Company and its authorized accountants, counsel and other
designated representatives reasonable access (including, without limitation,
using reasonable efforts to give access to persons or firms possessing
Information (as defined below)), subject to any access, disclosure, copying,
time or other limitations imposed by applicable law or A&S, to all records,
books, contracts, instruments, computer data and other data and information
(collectively, "Information") within A&S's possession relating to the A&S
Business, insofar as such access is reasonably required by the Company in
connection with the operation of the Retained Business, and (ii) the Company
shall afford to A&S and its authorized accountants, counsel and other designated
representatives reasonable access (including, without limitation, using
reasonable efforts to give access to persons or firms possessing Information),
subject to any access, disclosure, copying, time or other limitations imposed by
applicable law or the Company, to all Information within the Company's
possession relating to the Retained Business, insofar as such access is
reasonably required by A&S in connection with the operation of the A&S Business.
Information may be requested under this Article VII for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.
Section 7.3. PRODUCTION OF WITNESSES. From and after the Effective
Time, each party shall use reasonable efforts to make available to the other
party, upon written request, its officers, directors, employees and agents as
witnesses to the extent that any such person may reasonably be
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required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
Section 7.4. RETENTION OF RECORDS. Except as otherwise required by Law
or agreed to in writing, A&S and the Company shall each retain, for a period of
at least seven (7) years following the Effective Time, all significant
Information relating to (i) in the case of the Company, the A&S Business and
(ii) in the case of A&S, the Retained Business. Notwithstanding the foregoing,
either A&S or the Company may destroy or otherwise dispose of any of such
Information at any time, provided that, prior to such destruction or disposal,
(a) A&S or the Company, as the case may be, shall provide no less than ninety
(90) or more than one hundred twenty (120) days' prior written notice to the
other party, specifying the Information proposed to be destroyed or disposed of
and (b) if the other party shall request in writing prior to the scheduled date
for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to the other party, A&S or the Company, as
the case may be, shall promptly arrange for the delivery of such of the
Information as was requested, at the expense of the requesting party.
Section 7.5. CONFIDENTIALITY.
(a) Each party shall hold, and shall cause its officers, employees,
agents, consultants and advisors to hold, in strict confidence, unless compelled
to disclose by judicial or administrative process or, in the reasonable opinion
of its counsel, by other requirements of Law, all confidential, proprietary or
other non-public information or trade secrets concerning the other party (or
such other party's business operations or the business operations of such other
party's Affiliates) which is furnished it by such other party or its
representatives (collectively, the "Confidential Information"). None of the
parties hereto nor any of their respective Affiliates shall release or disclose
to any other person or entity, any such Confidential Information (except, to the
extent reasonably required, for disclosure to those of such party's auditors,
attorneys and other representatives who agree to be bound by the provisions of
this Section 7.5). Notwithstanding the foregoing, in the event any party hereto
is requested to disclose any Confidential Information to any third party
pursuant to any judicial or administrative process or, in the reasonable opinion
of its counsel, any other requirements of Law, the party from whom such
disclosure is sought shall (x) notify the other parties hereto as soon as
reasonably practicable of such request for disclosure, (y) disclose only that
portion of the Confidential Information which it reasonably believes, following
the advice of counsel, is necessary in order to comply with such judicial or
administrative process or other requirements of Law, and (z) cooperate with the
other parties hereto in seeking to narrow the scope of any such third party
request for disclosure).
(b) Notwithstanding the foregoing, the term "Confidential Information"
shall not include information (i) which is or becomes generally available to the
public other than as a result of disclosure of such information by the
disclosing party or any of its Affiliates or representatives, (ii) becomes
available to the recipient of such information on a non-confidential basis from
a source which is not, to the recipient's knowledge, bound by a confidentiality
or other similar agreement, or by any other legal, contractual or fiduciary
obligation which prohibits disclosure of such information to the other party
hereto, or (iii) which can be demonstrated to have been developed independently
by the representatives of such recipient which representatives have not had any
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access to any information which would otherwise be deemed to be "Confidential
Information" pursuant to the provisions of this Section 7.5.
ARTICLE VIII
EMPLOYEE MATTERS
----------------
Section 8.1. EMPLOYEES. Effective as of the Effective Time, all A&S
Employees shall remain or become employees of A&S in the same capacities as then
held by such employees (or in such other capacities as A&S shall determine in
its sole discretion), and the employment of any A&S Employee by the Company or
the Retained Subsidiaries shall cease.
Section 8.2. EMPLOYEE BENEFITS.
(a) A&S 401(k) PLAN. A&S maintains a defined contribution plan and
trust intended to qualify under Sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code of 1986, as amended (the "A&S 401(k) Plan"), for the
benefit of A&S Employees. A&S agrees to indemnify and hold harmless the Company,
its officers, directors, employees, agents and affiliates from and against any
and all Indemnifiable Losses arising out of or relating to the A&S 401(k) Plan,
including all benefits accrued by A&S Employees thereunder prior to the
Effective Time.
(b) WELFARE BENEFIT PLANS. As of the Effective Time, A&S Employees
shall cease to participate in the employee welfare benefit plans (as such term
in defined in ERISA) maintained or sponsored by the Company (the "Company
Welfare Plans") and shall commence to participate in welfare benefit plans of
A&S (the "A&S Welfare Plans"). On and after the Effective Time, the Company
shall only be responsible for any claims by A&S Employees for benefits relating
to claims incurred prior to the Effective Time. The Company shall use its best
efforts to ensure that, except as provided otherwise in the Merger Agreement or
this Agreement, the consummation of the transactions contemplated by this
Agreement shall not entitle any employee to severance benefits under any
severance plan or arrangement of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, the Company agrees to permit A&S Employees (and
their beneficiaries and dependents) to continue to participate from the
Effective Time to and including December 31, 1999 in the Company's group medical
plan maintained by the Company in which such persons were participating prior to
the Effective Time. A&S agrees to be responsible for the actual costs incurred
to provide such continuation of participation and coverage and will promptly
reimburse the Company for any costs advanced by it.
(c) DEFERRED COMPENSATION PLANS. A&S agrees to assume the Company's
responsibilities under the Company's Deferred Compensation Plan ("Plan") with
respect to those employees or directors identified on Schedule 8.2(c) of the
Disclosure Schedule and to make all payments required under the terms of such
Plan. In consideration for such assumption, the Company agrees to contribute to
A&S, immediately prior to the Effective Time, an amount of money equal to the
accrued liability of the Company under such Plan as of the Effective Time,
reduced by the tax benefit that the Company would otherwise receive as a result
of deducting such accrued liability. For purposes of this Agreement, such tax
benefit will be deemed to equal 39% of such accrued liability.
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(d) CERTAIN LIABILITIES. The Company hereby agrees to indemnify A&S
against, and agrees to hold it harmless from any and all Indemnifiable Losses
incurred or suffered as a result of any claim by any Retained Employee which
arises under federal, state or local statute (including, without limitation,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1990, the Equal Pay Act, the Americans with
Disabilities Act of 1990, ERISA and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or in
equity (including any claims for wrongful discharge or otherwise), or under any
policy, agreement, understanding or promise, written or oral, formal or
informal, between the Company and the Retained Employee, arising out of actions,
events or omissions that occurred (or, in the case of omissions, failed to
occur) prior to, or after, the Effective Time. A&S hereby agrees to indemnify
the Company against and agrees to hold the Company harmless from any and all
Indemnifiable Losses incurred or suffered as a result of any claim by any A&S
Employee which arises under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Age Discrimination in Employment Act of 1990, the Equal Pay Act, the
Americans with Disabilities Act of 1990, ERISA and all other statutes regulating
the terms and conditions of employment), regulation or ordinance, under the
common law or in equity (including any claims for wrongful discharge or
otherwise), or under any policy, agreement, understanding or promise, written or
oral, formal or informal, between the Company and/or A&S, on the one hand, and
the A&S Employee, on the other hand, arising out of actions, events or omissions
that occurred (or, in the case of omissions, failed to occur) prior to, or
after, the Effective Time. The indemnification provided for in this Section 8.2
shall be subject to the terms and conditions of the indemnification provisions
of Article V hereof.
Section 8.3. OTHER LIABILITIES AND OBLIGATIONS. As of the Effective
Time, with respect to claims relating to any employee liability or obligation
not otherwise provided for in this Agreement or the Merger Agreement, including,
without limitation, accrued holiday, vacation and sick day benefits, (a) the
Company shall assume and be solely responsible for all liabilities and
obligations whatsoever of both the Retained Business and the A&S Business for
all such claims made by Retained Employees and (b) A&S shall assume and be
solely responsible for all liabilities and obligations whatsoever of both the
Retained Business and the A&S Business for all such claims made by all A&S
Employees.
Section 8.4. PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No
provision of this Agreement, shall be construed as a limitation on the right of
the Company or A&S to amend any plan or terminate its participation therein
which the Company or A&S would otherwise have under the terms of such plan or
otherwise, and no provision of this Agreement shall be construed to create a
right in any employee or beneficiary of such employee under a plan that such
employee or beneficiary would not otherwise have under the terms of such plan
itself.
Section 8.5. REIMBURSEMENT; INDEMNIFICATION. A&S and the Company
acknowledge that the Company, on the one hand, and A&S, on the other hand, may
incur costs and expenses (including, without limitation, contributions to plans
and the payment of insurance premiums) pursuant to any of the employee benefit
or compensation plans, programs or arrangements which are, as set forth in this
Agreement, the responsibility of the other party. Accordingly, the Company
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and A&S agree to reimburse each other, as soon as practicable but in any event
within thirty (30) days of receipt from the other party of appropriate
verification, for all such costs and expenses reduced by the amount of any tax
reduction or recovery of tax benefit realized by the Company or A&S, as the case
may be, in respect of the corresponding payment made by it. All liabilities
retained, assumed or indemnified by A&S pursuant to this Article VIII shall in
each case be deemed to be liabilities of A&S, and all liabilities retained,
assumed or indemnified by the Company pursuant to this Article VIII shall in
each case be deemed to be liabilities of the Company, and, in each case, shall
be subject to the indemnification provisions set forth in Article V hereof.
Section 8.6. NONSOLICITATION OF EMPLOYEES. For a period ending two (2)
years after the date of this Agreement,
(a) A&S shall not, directly, or indirectly, (i) solicit or induce, or
attempt to solicit or induce, any Retained Employee (other than a Retained
Employee employed prior to the Effective Time at the Company's corporate level),
any employee of the Company or any Retained Subsidiary hired after the date of
this Agreement ("Company Subsequent Hire") or any employee of the Parent or its
Subsidiaries ("Parent Employee") to leave the employ of the Company, the Parent
or any of their Subsidiaries for any reason whatsoever, or (ii) hire any
Retained Employee, any Company Subsequent Hire or Parent Employee; provided
however, that the prohibition imposed by this subparagraph (ii) shall not apply
to any person whose employment by the Company, Parent or any of their
Subsidiaries is terminated by such entity; and
(b) Neither the Company, Parent nor any of their respective
Subsidiaries shall, directly or indirectly, (i) solicit or induce, or attempt to
solicit or induce, any A&S Employee or any employee of A&S or any subsidiary
thereof hired after the date of this Agreement ("A&S Subsequent Hire") to leave
the employ of A&S or any subsidiary thereof for any reason whatsoever, or (ii)
hire any A&S Employee or any A&S Subsequent Hire; provided however, that the
prohibition imposed by this subparagraph (ii) shall not apply to any person
whose employment by A&S or any subsidiary thereof is terminated by such entity.
Section 8.7. ACTIONS BY A&S. Any action required to be taken under this
Article VIII may be taken by A&S, a Subsidiary of A&S or an entity formed
pursuant to the provisions of Section 3.2(b).
ARTICLE IX
INSURANCE
---------
Section 9.1. GENERAL. Except as otherwise agreed in writing
between the parties, the Company shall maintain until the Effective Time all
policies of liability, fire, extended coverage, fidelity, fiduciary, workers'
compensation and other forms of insurance in effect as of the date hereof
insuring the products, properties, assets and operations of A&S; provided,
however, that coverage of the products, properties, assets and operation of A&S
under such policies shall cease as of the Effective Time.
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Section 9.2. CERTAIN INSURED CLAIMS. The Company shall (a) use
reasonable efforts, upon A&S's written request and at A&S's sole expense, to
continue to maintain and renew for the benefit of A&S the insurance policies
under the Casualty Program with respect to claims having an occurrence date (as
the term "occurrence date" is customarily defined) prior to the Effective Time,
relating to, or arising out of the conduct of, the A&S Business, and (b) use
reasonable efforts and cooperate with A&S, upon A&S's written request and at
A&S's sole expense, to obtain coverage, recoveries and other benefits under such
policies for the benefit of A&S, including, without limitation, by filing and
pursuing claims with respect to obtaining such coverage, recoveries and other
benefits; provided that in no event shall the Company be obligated to litigate
or pursue any other extra-contractual remedies against any insurer; provided
further that all claims pursuant to this Section 9.2 shall be submitted,
investigated, processed and paid in accordance with the claims handling
procedures used by the Company and its Affiliates from time to time with respect
to other like claims. The Company will reimburse A&S for any recovery obtained
by it pursuant to such claims. The Company shall make available to A&S such of
its employees as A&S may reasonably request as witnesses or deponents in
connection with A&S's pursuit of claims.
ARTICLE X
CONDITIONS; TERMINATION;
------------------------
AMENDMENTS; WAIVERS
-------------------
Section 10.1. CONDITIONS TO SPLIT-OFF.
(a) The obligations of each of the Company and A&S to effect the
Split-Off (other than those obligations which are normally expected to precede
the Split-Off) shall be subject to the satisfaction of the following conditions:
(i) the Purchaser shall have notified the Company that it is prepared to
immediately accept for payment shares of Company Common Stock pursuant to the
terms and conditions of the Merger Agreement, (ii) the Form S-1 (or the
registration statement referred to in Section 3.1(a) hereof) shall have been
declared effective by the SEC, (iii) no Court Order or Law shall have been
enacted, promulgated, issued or entered against any of the parties hereto which
(x) prohibits or materially restricts consummation of any of the transactions
contemplated by this Agreement and (y) remains in effect as of the date on which
the satisfaction of this condition is determined, (iv) the Company and the
Retained Subsidiaries (other than A&S) shall have obtained all consents required
to be obtained by the Company as a result of or in connection with the
transactions contemplated by this Agreement in order to avoid a material default
under any material contract or agreement to or by which the Company or any of
their respective Subsidiaries is a party or may be bound, or otherwise necessary
to permit the Company and each of the Retained Subsidiaries to conduct their
business in a manner consistent with its past practices, (v) A&S shall have
declared the Company Dividend and paid the Initial Distribution, and (vi) all
consents and approvals of, and notices to and filings with, any Governmental
Entity or any other person or entity arising out of or relating to the
consummation of the transactions contemplated by this Agreement, shall have been
obtained or made (as the case may be).
(b) The parties hereto acknowledge and agree that (x) Parent may waive,
on behalf of all parties hereto, the conditions set forth in clauses (iii), (iv)
and (vi) of Section 10.1(a) above so long as (1) Parent reasonably believes that
consummation of the Split-Off at such time will have no
28
<PAGE> 33
material adverse effect on A&S or the A&S Business and (2) Parent agrees to
indemnify A&S pursuant to the provisions of Article V hereof with respect to any
Indemnifiable Losses which result from any material adverse effect on A&S or the
A&S Business which results directly from such waiver, and (y) the Company may
not waive any of the conditions set forth in Sections 10.1(a)(i) through
10.1(a)(vi) above without first obtaining the prior written consent of Parent.
The respective obligations of each party hereto to perform those of its
obligations which are to be performed following consummation of the Split-Off,
shall be conditioned on the consummation of the Split-Off in accordance with the
provisions of this Agreement.
Section 10.2. TERMINATION. This Agreement (i) may be terminated and the
Split-Off abandoned at any time prior to the Effective Time by the mutual
written agreement of each of the parties hereto or (ii) shall be terminated
automatically and the Split-Off abandoned upon any termination of the Merger
Agreement in accordance with the terms and conditions thereof. In the event that
this Agreement shall be terminated pursuant to this Section 10.2, all
obligations of the parties hereto under this Agreement shall terminate without
further liability or obligation of any party hereto to the other parties hereto
under this Agreement or otherwise, except (i) for any breach by such party of
the terms and provisions of this Agreement prior to the date of such termination
and (ii) as stated in Section 11.3 hereof.
Section 10.3. AMENDMENTS; WAIVERS. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument executed by such
party. Except as provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, agreements
or conditions contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. SURVIVAL OF INDEMNITIES; RELEASE. The representations
and warranties made in Section 6.1 of this Agreement shall survive for a period
of three years from the Effective Time, but shall not survive any termination of
this Agreement; provided that claims with respect to breaches of covenants and
agreements set forth in this Agreement shall survive for the applicable statute
of limitations period. Except as otherwise expressly provided in this Agreement
(including, without limitation, the indemnification provisions of Article V
hereof), each of the parties (a) agrees that no claims or causes of action may
be brought against the Company, A&S, Parent or the Purchaser or any of their
Affiliates, agents or representatives based upon, directly or indirectly, any of
the representations and warranties contained in this Agreement after three years
following the Effective Time (other than causes of actions commenced after such
three-year period to seek
29
<PAGE> 34
recourse for claims asserted during such three-year period that are not resolved
by the parties), and (b) hereby waives and releases all other claims and causes
of action, that may be asserted or brought against the Company, A&S, Parent or
the Purchaser or any of their Affiliates, agents or representatives directly or
indirectly based upon or arising under this Agreement or the Merger Agreement,
or the transactions contemplated hereby or thereby. Notwithstanding the
foregoing, this Section 11.1 shall not limit any covenant or agreement of the
parties in this Agreement, the Merger Agreement or the Tax Sharing Agreement
which contemplates performance after the Effective Time (including, without
limitation, the covenants and agreements set forth in Sections 2.1(b) and 6.2
hereof), except for the covenants and agreements in the Merger Agreement to the
extent of their performance prior to the Effective Time.
Section 11.2. ENTIRE AGREEMENT. This Agreement (including the schedules
and exhibits and the agreements and other documents referred to herein,
including, without limitation, the Merger Agreement, the Tax Sharing Agreement
and the Confidentiality Agreement) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
negotiations, commitments, agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
Section 11.3. FEES AND EXPENSES. Except as otherwise provided in this
Agreement, the Merger Agreement or the Tax Sharing Agreement and subject to the
proviso below, all costs and expenses incurred by the Company and each of the
Retained Subsidiaries and by A&S in connection with (x) the preparation,
execution and delivery of this Agreement, the Merger Agreement and the Tax
Sharing Agreement and (y) consummating such party's obligations hereunder and
thereunder (including, without limitation, investment banking, legal,
accounting, audit and printing costs and expenses), shall be paid by the
Company, upon the submission to the Company of appropriate documentation
detailing such costs and expenses.
Section 11.4. GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of the State of
Ohio, without giving effect to the choice of law principles thereof.
Section 11.5. NOTICES. All notices and other communications hereunder
shall be (and shall be deemed to have been duly given upon receipt) by delivery
in person, by cable, telegram, telex, telecopy or other standard form of
telecommunication, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
(a) If to the Company, to:
Essef Corporation
c/o Anthony & Sylvan Pools Corporation
220 Park Drive
Chardon, Ohio 44024
Facsimile No.: (440) 286-2206
Attention: Mark E. Brody
30
<PAGE> 35
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 479-8776
Attention: Mary Ann Jorgenson, Esq.
(b) If to A&S, to:
Anthony & Sylvan Pools Corporation
220 Park Drive
Chardon, Ohio 44024
Facsimile No.: (440) 286-2206
Attention: Stuart D. Neidus
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 479-8776
Attention: Mary Ann Jorgenson, Esq.
(c) If to Parent or Purchaser, to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Richard J. Cathcart
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<PAGE> 36
with a copy to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Louis L. Ainsworth, Esq.
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Facsimile No.: (414) 297-4900
Attention: Benjamin F. Garmer, III, Esq.
Section 11.6. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties hereto (which consent may not be unreasonably withheld), except that any
party shall have the right, without the consent of any other party hereto, to
assign all or a portion of its rights, interests and obligations hereunder to
one or more direct or indirect subsidiaries, but no such assignment of
obligation shall relieve the assigning party from its responsibility therefor.
Notwithstanding the foregoing, A&S shall be permitted to assign its rights and
obligations under this Agreement to one of its Affiliates (the "A&S Transferee")
prior to the Effective Time so long as (x) such assignment shall not relieve A&S
from its joint responsibility therefor and (y) such assignment does not
adversely affect any of the rights, benefits or obligations of Parent or any of
the Parent Indemnified Parties under this Agreement or the Merger Agreement;
provided that in the event of any such assignment to the A&S Transferee, all
references to A&S shall be automatically deemed to be references to A&S. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and, except for the provisions of Section 8.1 hereof, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement; provided, however, that the Indemnified Parties are
intended to be third party beneficiaries of the provisions of Article V hereof,
and shall have the right to enforce such provisions as if they were parties
hereto.
Section 11.7. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 37
Section 11.8. INTERPRETATION. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 11.9. SCHEDULES. The Disclosure Schedule shall be construed
with and as an integral part of this Agreement to the same extent as if the same
had been set forth verbatim herein.
Section 11.10. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 11.11. CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably and unconditionally (a) agrees that all suits, actions or other
legal proceedings arising out of this Agreement or any of the transactions
contemplated hereby (a "Suit") shall be brought and adjudicated solely in the
United States District Court for the Northern District of Ohio, or, if such
court will not accept jurisdiction, in any court of competent civil jurisdiction
sitting in Cleveland, Ohio, (b) submits to the non-exclusive jurisdiction of any
such court for the purpose of any such Suit and (c) waives and agrees not to
assert by way of motion, as a defense or otherwise in any such Suit, any claims
that it is not subject to the jurisdiction of the above courts, that such Suit
is brought in an inconvenient forum or that the venue of such Suit is improper.
Each of the parties hereto also irrevocably and unconditionally consents to the
service of any process, summons, pleadings, notices or other papers in a manner
permitted by the notice provisions of Section 11.5 hereof and agrees that any
such form of service shall be effective in connection with any such Suit;
provided that nothing contained in this Section 11.11 shall affect the right of
any party to serve process, pleadings, notices or other papers in any other
manner permitted by applicable Law.
Section 11.12. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(a) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in any court referred to in Section
11.11 hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers, all as of the date first
written above.
ESSEF CORPORATION
By: /s/ Thomas B. Waldin
--------------------------------------
Name: Thomas B. Waldin
--------------------------------------
Title: President
-------------------------------------
ANTHONY & SYLVAN POOLS CORPORATION
By: /s/ Stuart D. Neidus
--------------------------------------
Name: Stuart D. Neidus
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
PENTAIR, INC.
By: /s/ Richard J. Cathcart
--------------------------------------
Name: Richard J. Cathcart
--------------------------------------
Title: Executive Vice President
-------------------------------------
<PAGE> 1
Exhibit 2.3
Execution Copy
TAX SHARING AGREEMENT
---------------------
THIS TAX SHARING AGREEMENT is dated as of the 30th day of April, 1999,
by and between Pentair, Inc., a Minnesota corporation ("Pentair"), Essef
Corporation, an Ohio corporation ("Essef"), and Anthony & Sylvan Pools
Corporation, an Ohio corporation ("A&S").
R E C I T A L S
WHEREAS, Essef currently owns 100 percent of the total voting power and
value of the issued and outstanding stock of A&S and is the common parent of an
"affiliated group," as defined in Section 1504(a) of the Internal Revenue Code
of 1986, as amended ("Code"); and
WHEREAS, Pentair and Essef have executed an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which the shareholders of Essef will
receive both cash and shares of A&S in exchange for all of their shares of Essef
and, at the conclusion of the merger, Pentair will own 100 percent of the
outstanding shares of Essef; and
WHEREAS, A&S has heretofore joined with Essef in filing Consolidated
Tax Returns for a consolidated group that includes Essef, A&S, and certain other
corporations (the "Essef Group") for a taxable year that ends on September 30,
and most recently ended on September 30, 1998, and Essef, A&S, and Pentair
consider it in their mutual best interests to provide herein for the allocation
of the federal income tax, and state, local, and foreign income, franchise, and
other tax liabilities (collectively, "Tax Liabilities") of A&S and the remainder
of the Essef Group for taxable years ended prior to the Closing Date of the
Merger Agreement (the "Closing Date") and for the taxable year that includes the
Closing Date;
NOW, THEREFORE, in consideration of the premises, it is agreed as
follows:
1. DEFINITIONS. For purposes of this Agreement:
a. "Consolidated return," "consolidated group," "taxable year,"
"carryback," and similar terms used herein and bearing on federal
income tax liability shall have the respective meanings ascribed to
them in the Code and the Treasury Regulations thereunder, and, where
applicable, specifically the provisions thereof relating to
consolidated federal income tax returns. For state, local, or foreign
tax purposes, such terms shall be interpreted and applied in a manner
so as to achieve as nearly as possible the intention reflected herein
with respect to the federal income tax.
b. "Accountant" means Ernst & Young LLP, or such other United States of
America accounting firm as A&S and Essef may mutually agree.
c. "Tax" or "Taxes" means any federal, state, local, foreign, or other
tax of any kind whatsoever (together with any interest, penalties, or
additions imposed with respect thereto), including, without limitation,
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, service, premium, windfall profits,
<PAGE> 2
environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, rental, lease,
ad valorem, or other tax.
d. "Tax Affiliate" means, with respect to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under
common control with, such Person; provided, however, that for purposes
of this Agreement, Tax Affiliates of Essef will not include A&S.
e. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, credit,
reduced gain or increased loss from the disposition of an asset, or
otherwise; a person will be deemed to have recognized a Tax Benefit at
the time the amount of Taxes such person otherwise would pay is
reduced;
f. "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to
be filed with respect to any Taxes, including any schedule or
attachment thereto, and including any amendments or supplements
thereof.
g. "Final Determination" means with respect to any Tax for any period
the later of (i) the date on which the statute of limitations for
instituting a claim for refund of such Tax has expired, or if such
claim was filed, the expiration of the time for instituting suit with
respect thereto; and (ii) the date on which all administrative and
judicial proceedings with respect to any such assessments or refunds
have been finally settled through agreement of the parties to the
proceeding or by an administrative or judicial decision from which no
appeal can be taken or the time for taking any such appeal has expired.
h. "Income Taxes" means any Tax based on or measured by or with respect
to gross or net income (including, without limitation, capital gain
taxes, minimum taxes, income taxes collected by withholding and Taxes
on Tax preference items) or receipts (together with any interest,
penalties, and additions to Tax imposed with respect thereto).
i. "Income Tax Return" means any Tax Return with respect to Income
Taxes.
j. "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated association, a limited liability company, a governmental
entity (or any department, agency, or political subdivision thereof),
or any other entity.
k. "Split-Off" shall have the same meaning as in the Merger Agreement.
l. "Transition Agreement" means that certain agreement dated April 30,
1999 among Essef, A&S, and Pentair for the purpose of implementing
certain of the transfers and other transactions contemplated by the
Merger Agreement, and particularly the Split-Off.
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<PAGE> 3
2. TAXES ALLOCATED TO PENTAIR AND ESSEF. Pentair and Essef will be responsible
for, will pay or cause to be paid, and will indemnify and hold A&S harmless from
and against any and all liability for the following Taxes:
a. all Taxes imposed on or asserted against Essef, Pentair, or any of
their Tax Affiliates (including any obligations for Tax Liabilities of
other Persons that have been assumed, by indemnity or otherwise, by
Essef, Pentair, or any of their Tax Affiliates) with respect to any
taxable periods, and, subject to Section 4(a) hereof, all Taxes imposed
on or asserted against A&S (including any obligations for Tax
Liabilities of other Persons that have been assumed, by indemnity or
otherwise, by A&S or any of its Tax Affiliates on or before the Closing
Date) with respect to all taxable periods that end on or prior to the
Closing Date, including any short taxable year of A&S that ends on the
Closing Date either by operation of law or pursuant to an election made
as provided in Section 3(a) hereof;
b. subject to Section 4(a) hereof, all Taxes imposed on or asserted
against A&S arising out of the inclusion of A&S in any consolidated
return filed by Essef, Pentair, or any of their Tax Affiliates,
including, without limitation, any liability asserted under section
1502-6 of the U.S. Treasury regulations and any similar provisions
relating to state, local, or foreign Taxes;
c. subject to the provisions of Section 4(b) hereof, all Taxes imposed
on Essef, A&S, or any of their Tax Affiliates as a result of the
Split-Off pursuant to the Merger Agreement;
d. all Taxes arising as a result of any election filed under section
338 of the Code, or any similar provision of state, local, or foreign
law, as a result of Pentair's acquisition of the shares of Essef
pursuant to the Merger Agreement; and
e. all Taxes allocated to Essef, Pentair, or any of their Tax
Affiliates pursuant to Section 3 hereof.
3. STRADDLE PERIODS.
a. With respect to any taxable period of A&S that would (absent an
election) include, but not end until after, the Closing Date (a
"Straddle Period"), Pentair, Essef (including its Tax Affiliates), and
A&S will, to the extent permitted by applicable law, elect with the
relevant Tax authority to close such Straddle Period as of the close of
the Closing Date.
b. Pentair and Essef will be responsible for, will pay or cause to be
paid, and will indemnify and hold A&S harmless from and against, any
Income Taxes owed by A&S for the portion of any Straddle Period up to
and including June 30, 1999. For purposes of this Section 3(b), Income
Taxes for the portion of a Straddle Period up to and including June 30,
1999, will be determined based upon an interim closing of the books
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<PAGE> 4
of A&S as of June 30, 1999, based upon the accounting practices and
procedures used by A&S in preparing its Tax Returns.
c. As to any Tax other than an Income Tax (a "Non-Income Tax") for any
Straddle Period, Pentair and Essef will be responsible for, will pay or
cause to be paid, and will indemnify and hold A&S harmless from and
against, (i) with respect to any Non-Income Tax that is determined
based upon specific transactions (including, but not limited to, value
added, sales and use Taxes), all Non-Income Taxes applicable to
transactions that have occurred during the period through June 30,
1999, and (ii) with respect to any Non-Income Tax that is not based
upon specific transactions (including, but not limited to, license,
real property, personal property, franchise and doing business Taxes),
a portion of such Non-Income Tax equal to the full amount of such
Non-Income Tax multiplied by a fraction, the numerator of which is the
number of days in the Straddle Period ending on June 30, 1999 and the
denominator of which is the number of days in the entire Straddle
Period; provided that Pentair's and Essef's allocation will be adjusted
appropriately to reflect the actual proportionate period of property
ownership or the activity of A&S during the Straddle Period, as
applicable, for any such Non-Income Taxes imposed with respect to the
ownership of specific items of property held by A&S or the activity of
A&S, as applicable, during the Straddle Period.
d. Pentair and Essef will pay to A&S the amount of any Tax Benefit
recognized by Essef that is attributable to any loss or other Tax
attribute that, if the Split-Off had occurred on June 30, 1999, would
have been reported by A&S on its own Tax Returns, or that otherwise
results from the activities or operations of A&S after June 30, 1999.
4. TAXES ALLOCATED TO A&S.
a. Other than those Taxes for which Pentair or Essef is responsible
pursuant to Sections 2 and 3 hereof, A&S will be responsible for, will
pay or cause to be paid, and will indemnify and hold Pentair and Essef
harmless from and against any and all Taxes imposed on A&S if, in the
case of Income Taxes, the taxable income accrued after June 30, 1999,
or if, in the case of other Taxes, the event giving rise to the Tax
occurred after June 30, 1999.
b. Within 30 calendar days of the Closing Date, A&S will pay to Essef
the amount, if any, computed under this subsection, which will be
determined as prescribed below.
i. First, calculate the Tax that Essef will owe on the gain
recognized as a result of the Split-Off of the A&S stock (the
"A&S Stock Tax") pursuant to the Merger Agreement, using (x)
an assumed effective tax rate of 39 percent, (y) the stock
value determined under Section 5 hereof, and (z) the tax basis
reflected in Essef's books and records at the beginning of the
Closing Date, as adjusted for the net amount of dividend
distributed by A&S pursuant to Section 4.1 of the Transition
Agreement, after any adjustments required by the Code and the
Treasury regulations.
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<PAGE> 5
ii. Second, calculate the Tax Benefit that Essef will
recognize because of payments (whether in cash or otherwise)
made in satisfaction of compensatory stock options (including
options accelerated in connection with the Merger), pursuant
to the Merger Agreement (the "Essef Stock Option Tax
Benefit"), using an assumed effective tax rate of 39 percent.
iii. Third, calculate the nondeductible cash payments that
Essef is obligated to make as a result of the accelerated
vesting of compensatory stock options (the "Parachute Cost").
iv. Fourth, calculate the surplus (the "Surplus") or shortfall
(the "Shortfall") in the proceeds (the "Proceeds") received by
or credited to Essef upon the exercise of the compensatory
stock options referenced in (ii) above. The Surplus shall be
the amount by which the Proceeds exceed $5.8 million and the
Shortfall shall be the amount by which $5.8 million exceeds
the Proceeds. However, there shall be no Shortfall for
purposes hereof unless the Proceeds are less than $5.55
million and there shall be no Surplus for purposes hereof
unless the Proceeds are greater than $6.05 million.
v. To the extent that the excess of (x) the sum of the Essef
Stock Option Tax Benefit plus the Surplus over (y) the sum of
the A&S Stock Tax plus the Parachute Cost plus the Shortfall
(which excess is referred to as the "Net Tax Benefit") is less
than $4.2 million, A&S will pay to Essef the amount by which
$4.2 million exceeds the Net Tax Benefit. At A&S's option, any
amount owing to Essef under this subsection may be satisfied
and discharged by A&S's delivering to Essef a promissory note
consistent with the terms set forth in Exhibit A hereto.
vi. To the extent that the Net Tax Benefit exceeds $4.2
million, the consequences thereof are not the subject of this
Agreement but will be addressed as prescribed in Section 4.1
of the Transition Agreement.
vii. Apart from any amount payable under this Section, A&S
will have no obligation to Essef, Pentair, or any of their Tax
Affiliates on account of the A&S Stock Tax or the Essef Stock
Option Tax Benefit.
viii. The time deadlines prescribed herein will apply
notwithstanding any other timing provisions of this Agreement.
The calculations contemplated by this subsection will be made
initially by A&S within 30 calendar days after the Closing
Date and will then promptly be presented to Essef for its
review and approval. If Essef disagrees with any of the
calculations, it will notify A&S within 30 calendar days of
receiving the calculations from A&S. In the event of such a
disagreement, representatives of the parties will meet to
resolve their differences. If they are unable to resolve all
disagreements within 10 calendar days after Essef has notified
A&S of the disagreement, any remaining disagreements will be
resolved as prescribed in Section 14 hereof. The due date for
any payments required under this subsection will be extended
by the period of
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<PAGE> 6
time required to resolve any disagreements between Essef and
A&S with regard to the calculations.
5. For purposes of computing the capital gain tax referenced in Sections 2(c)
and 4(b) hereof, the parties agree as follows:
a. The A&S stock is expected to be publicly traded, beginning on the
Closing Date, on the NASDAQ market. The parties will value the A&S
stock at the mean between the high and the low trading prices on the
first full day of trading following the Closing, unless, after
reviewing the results of the first five trading days following the
Closing, either Pentair or A&S, each in its sole discretion, determines
that such value does not reflect the value of the A&S shares for tax
purposes on the Closing Date.
b. If either Pentair or A&S makes the determination referenced
immediately above, the parties will commence discussions and attempt to
agree on the value for the A&S stock (the "Value") based upon the
trading pattern of the A&S stock and on other relevant facts and
circumstances, including an appraisal obtained from Rhone Group of the
fair market value of the A&S stock on the Closing Date, which appraisal
will reflect in substantial part the trading prices obtained in the
public securities market for the Essef stock in the last several days
prior to the Closing Date.
c. If after 15 calendar days following the commencement of the
discussions referenced above, Pentair and A&S have not agreed on the
Value, the question will be referred to binding arbitration by an
arbitrator (the "Arbitrator") mutually agreeable to both Pentair and
A&S. The Arbitrator shall be either a tax partner in one of the five
largest public accounting firms doing business in the United States or
a tax partner in a law firm having at least 20 professionals listed
firm-wide in the most recent edition of The Tax Directory published by
Tax Analysts. In either case, the Arbitrator shall be an individual
with expertise in the issues of law and fact that relate to the
valuation of corporate stock distributed in corporate spin-offs or
split-offs. The Arbitrator shall base his decision on the
considerations referenced in Section 5(b).
6. REFUNDS OF INDEMNIFIED TAXES.
a. A&S will promptly remit to Pentair or Essef an amount equal to all
refunds (including interest thereon and any amounts applied against a
Tax Liability for other taxable periods) of any Taxes for which A&S is
indemnified pursuant to this Agreement ("Essef's Refunds").
b. Pentair and Essef will promptly remit (and will cause their Tax
Affiliates to promptly remit) to A&S an amount equal to all refunds
(including interest thereon and any amounts applied against a Tax
Liability for other taxable periods) of any Taxes for which Essef is
indemnified pursuant to this Agreement ("A&S's Refunds").
c. Upon the request of Essef, A&S will file claims for Essef's Refunds
in such form as Essef may reasonably request. Essef will have the sole
right to prosecute any claims
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for Essef's Refunds (by suit or otherwise) at Essef's expense and with
counsel of Essef's choice. A&S will cooperate fully with Essef and its
counsel in connection with any claims for Essef's Refunds.
d. Upon the request of A&S, Essef will file claims for A&S's Refunds in
such form as A&S may reasonably request. A&S will have the sole right
to prosecute any claims for A&S's Refunds (by suit or otherwise) at
A&S's expense and with counsel of A&S's choice. Essef will cooperate
fully with A&S and its counsel in connection with any claims for A&S's
Refunds.
e. Except as otherwise provided in this Agreement, any refunds of Taxes
other than Essef's Refunds or A&S's Refunds will be the property of the
payee of such refunds and no other party to this Agreement or its Tax
Affiliates will have any right to such refunds.
7. TAX CARRYBACKS
a. If A&S incurs any net operating loss, net capital loss, or other
deduction or credit in any taxable period ending after the Closing Date
(a "Post-Closing Carryback") that may be carried back to any taxable
period ending on or before the Closing Date, Essef and Pentair will
cooperate with A&S in filing an appropriate refund claim or amended Tax
Return and will assign and promptly remit to A&S the amount of any
refund of Tax received by, or Tax Benefit recognized by, Pentair or
Essef or any of their Tax Affiliates, as a result of such Post-Closing
Carryback.
b. If Pentair or Essef makes any remittance to A&S under Section 7(a)
hereof and all or part of such Post-Closing Carryback is subsequently
disallowed, then A&S shall promptly pay to Essef or Pentair that
portion of the remittance that relates to the portion of the
Post-Closing Carryback that is disallowed and, in addition thereto, any
other costs or expenses incurred by Pentair or Essef in respect to the
disallowed portion of the Post-Closing Carryback, including any
interest attributable thereto that is assessed by the taxing authority.
8. NO OBLIGATION TO FILE AMENDED TAX RETURNS. Except as otherwise specifically
provided in this Agreement, neither A&S, Pentair, or Essef, nor any of their
respective Tax Affiliates, will be obligated to file any amended Tax Return or
other Tax refund claim.
9. PREPARATION AND FILING OF TAX RETURNS.
a. Pentair or Essef will prepare or cause to be prepared, and file or
cause to be filed (i) all consolidated, combined, or unitary Income Tax
Returns of Essef or any of its Tax Affiliates that include A&S and that
are listed in Schedule 9(a)(i) hereto, and (ii) all Income Tax Returns
required to be filed by or on behalf of A&S for taxable periods ending
on or before the Closing Date (including by reason of any election
under Section 3 hereof) and that are listed in Schedule 9(a)(ii)
hereto, and (iii) all other Tax Returns required to be filed by or on
behalf of A&S on or before the Closing Date. Pentair and Essef covenant
that, except for the returns referenced in Schedule 9(a)(i) hereto,
neither
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they nor any of their Tax Affiliates will file or cause to be filed any
consolidated, combined, or unitary returns that include A&S without
giving A&S at least 30 days notice of their intent to do so and
obtaining the prior written approval of A&S to being so included.
b. A&S will prepare or cause to be prepared, and file or cause to be
filed, all Tax Returns of A&S other than those set forth in Section
9(a) hereof. A&S will prepare all A&S Tax Returns for taxable periods
including, but ending after, the Closing Date ("Straddle Period
Returns") in a manner consistent with A&S's past Tax accounting
practice and, in the absence thereof, reasonable Tax accounting
practices selected by A&S.
c. Neither Pentair, Essef, nor A&S, nor any of their Tax Affiliates,
will exercise any election available under section 1.1502-76(b)(2) of
the U.S. Treasury regulations or any corresponding provisions of other
Tax laws for any Straddle Period.
d. A&S will assist Pentair or Essef in timely obtaining any required
signatures or other filing requirements in respect of Tax Returns
prepared by Pentair or Essef for A&S pursuant to section 9(a).
e. Upon request of either A&S or Essef, the other party shall make
available prior to filing (and after filing) for inspection and copying
all Tax Returns and related workpapers with respect to Taxes to the
extent that (i) such Tax Return relates to Taxes for which the
requesting party may be liable, (ii) such Tax Return relates to Taxes
for which the requesting party may be liable in whole or in part for
any additional Taxes owing as a result of adjustments to the amount of
Taxes reported on such Tax Return, (iii) the requesting party
reasonably determines that it must inspect such Tax Return to confirm
compliance with the terms of this Agreement. A&S and Essef shall
attempt in good faith to resolve any issues arising out of the review
of such Tax Returns.
10. PROCEDURES FOR SETTLEMENT OF TAX ALLOCATIONS.
a. This Section 10(a) will govern the settlement as between A&S, on the
one hand, and Essef and Pentair, on the other hand, of all Straddle
Period Tax allocations for Taxes that are reported on a Straddle Period
Return. With respect to each Straddle Period Return that involves Taxes
subject to allocation pursuant to Section 3(b) hereof, A&S will, at
least sixty (60) days prior to the final due date (including
extensions) of such Straddle Period Return, provide to Essef (i) a copy
of such Straddle Period Return (including supporting schedules and
workpapers) and (ii) a statement (including supporting schedules and
workpapers) certifying the amount of Tax shown on such Straddle Period
Return that is allocable to Essef pursuant to Section 3(b) hereof
reduced by any payments made by A&S prior to the Closing Date, and by
Essef and its Tax Affiliates at any time, in respect of such Taxes
(whether as estimated Taxes or otherwise) (the "Statement"). Essef and
its authorized representatives will have the right to review the
Statement for thirty (30) days following its receipt of the Statement
(the "30-Day Review Period"). If Essef disagrees with the allocation in
the Statement, it will notify
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A&S in writing of such disagreement prior to the close of the 30-Day
Review Period, and Essef and A&S will consult and attempt to resolve in
good faith the disagreement. In the event, Essef and A&S are unable to
resolve the disagreement within fifteen (15) days following the end of
the 30-Day Review Period, Essef and A&S will jointly request that the
disagreement be resolved pursuant to the procedures prescribed in
Section 14 hereof. Not later than five (5) days after the later of (i)
the end of the 30-Day Review Period, or (ii) if there is a
disagreement, the date notice is provided to Essef and A&S regarding
the resolution of the disagreement pursuant to Section 14, Essef or
Pentair shall pay to A&S or A&S will pay to Essef or Pentair, as the
case may be, an amount equal to the difference between the Taxes shown
on the Statement or in such notice (as the case may be) as being
allocable to Essef pursuant to Section 3(b) hereof, and (ii) any
payments made by A&S on or prior to the Closing Date, and by Essef and
its Tax Affiliates at any time, in respect of such Taxes (whether as
Estimated Taxes or otherwise).
b. This Section 10(b) will govern the settlement as between A&S, on the
one hand, and Essef and Pentair, on the other hand, of all Straddle
Period Tax allocations for Taxes that are not required to be reported
on a Straddle Period Return (e.g., Taxes that are assessed without the
filing of a Tax Return). With respect to each such Tax subject to
allocation pursuant to Section 3(b) hereof, A&S will, at least thirty
(30) days prior to the final due date of such Tax, provide to Essef (i)
a copy of the Tax assessment or other supporting schedules and
workpapers and (ii) a statement (including supporting schedules and
workpapers) certifying the amount of Tax that is allocable to Essef
pursuant to Section 3(b) hereof reduced by any payments made by A&S on
or prior to the Closing Date, and by Essef and its Tax Affiliates at
any time, in respect of such Taxes (whether as estimated Taxes or
otherwise) (the "Statement"). Essef and its authorized representatives
will have the right to review the Statement for ten (10) days following
Essef's receipt of the Statement (the "10-Day Review Period"). If Essef
disagrees with the allocation in the Statement, it will notify A&S in
writing of such disagreement prior to close of the 10-Day Review
Period, and Essef and A&S will consult and attempt to resolve in good
faith the disagreement. In the event Essef and A&S are unable to
resolve the disagreement within ten (10) days following the end of the
10-Day Review Period, Essef and A&S will jointly request to resolve the
disagreement pursuant to Section 14. Not later than five (5) days after
the later of (i) the end of the 10-Day Review Period, or (ii) if there
is a disagreement, the date notice is provided to Essef and A&S
regarding the resolution of the disagreement pursuant to Section 14,
Essef or Pentair will pay to A&S or A&S will pay to Essef, as the case
may be, an amount equal to the difference between (i) the Taxes shown
on the Statement or in such notice (as the case may be) as being
allocable to Essef pursuant to Section 3(b) hereof, and (ii) any
payments made by the A&S on or prior to the Closing Date, and by Essef
and its Tax Affiliates at any time, in respect of such Taxes (whether
as estimated Taxes or otherwise).
11. COOPERATION; ACCESS TO INFORMATION; TAX RECORDS.
a. Essef and A&S will cooperate fully with each other with respect to,
and will make available to each other, such Tax data and other
information as may be reasonably required for (i) the preparation of
any Tax Returns required to be prepared by Essef or
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A&S under this Agreement, (ii) determining the liability for and amount
of any Taxes due or the right to and amount of any refund of Taxes,
(iii) examinations of Tax Returns, and (iv) any administrative or
judicial proceeding in respect of Taxes assessed or proposed to be
assessed. Such cooperation shall include making all information and
documents in their possession relating to such Tax Returns, Tax
Liabilities or refunds, examinations, or administrative or judicial
proceedings available to the other party as provided in Section 11(b)
hereof. Essef and A&S shall also make available to the other, as
reasonably requested and available, personnel (including officers,
directors, employees and agents of Essef and A&S and their Tax
Affiliates) responsible for preparing, maintaining and interpreting
information and documents relevant to Taxes, and personnel reasonably
required as witnesses or for purposes of providing information or
documents in connection with any administrative or judicial proceedings
relating to Taxes. Any information or documents provided under this
Section 11, shall be kept confidential by the party receiving the
information or documents, except as may otherwise be necessary in
connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
b. Essef and A&S and their respective Tax Affiliates shall make
available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax records in their
possession to the extent reasonably required by the other party in
connection with the preparation of Tax Returns, audits, litigation, or
the resolution of items under this Agreement. Essef, A&S, and their
respective Tax Affiliates shall preserve and keep such Tax records in
their possession until the expiration of any applicable statutes of
limitation and as otherwise required by law, but in any event for a
period not less than eight (8) years after the Closing Date.
Notwithstanding the foregoing, a party or its Tax Affiliates may
dispose of records sooner upon ninety (90) days prior notice to the
other party. Such notice shall include a list of the records to be
disposed of describing in reasonable detail each file, book or other
record accumulation being disposed. The notified party shall have the
opportunity, at its cost and expense, to copy or remove, within such
ninety (90) day period, all or any part of such Tax records. For
purposes of this Section 11, Tax records include Tax Returns, journal
vouchers, cash vouchers, general ledgers, material contracts, return
workpapers, and any other records pertaining to or used in the
preparation of Tax Returns.
12. AUDITS.
a. A&S or Essef (the "Notifying Party") will promptly notify the other
(the "Notified Party") in writing upon the receipt of notice of any
pending or threatened Tax audits or assessments (i) relating to any
taxable period of A&S ending on, prior to, or including the Closing
Date, or (ii) that may affect the determination of Taxes for which the
Notified Party is or may be obligated to indemnify the Notifying Party
pursuant to this Agreement. The notice required under this Section
12(a) is referred to in this Agreement as the "Audit Notification."
b. Subject to Section 12(c) hereof, the Notified Party will have the
right, at its election, (i) to represent the Notifying Party and to
exclusively control the handling of
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any Tax audit or assessment referred to in Section 12(a) hereof,
including in any administrative or court proceeding relating thereto,
(ii) to employ counsel of its choice at its expense and to control the
conduct of such audit, assessment, or proceeding, including settlement
or other disposition thereof and (iii) to settle the contest of any Tax
or agree to an adjustment to any Tax referred to in Section 12(a) (the
rights under (i), (ii) and (iii) are referred to in this Agreement
collectively as the "Representation Right"); PROVIDED, however, that
the Representation Right will apply only to any issues or items (x)
relating to any taxable period of A&S ending on, prior to, or including
the Closing Date, or (y) that may affect the determination of Taxes for
which the Notified Party is or may be obligated to indemnify the
Notifying Party pursuant to this Agreement. As reasonably necessary,
the Notifying Party will fully cooperate, and will cause its Tax
Affiliates to fully cooperate, at the Notified Party's expense, with
the Notified Party and its counsel in the defense against or compromise
of any claim in any said audit, assessment, or proceeding, such
cooperation to include (but not be limited to) the grant of any
necessary powers of attorney.
c. To exercise the Representation Right, the Notified Party must first,
within a reasonable period following the receipt of the Audit
Notification, (i) notify the Notifying Party in writing that the
Notified Party intends to exercise the Representation Right, and (ii)
deliver to the Notifying Party a written statement acknowledging the
Notified Party's obligation to indemnify the Notifying Party in
accordance with the terms of this Agreement with respect to the Taxes
as to which the Notified Party exercises the Representation Right.
d. The Notifying Party's personnel shall have the right to participate
in any administrative or judicial proceedings for which the Notified
Party exercises its Representation Right (including assisting with
field audits, administrative appeals, and subsequent litigation) in so
far as they relate to the Notifying Party, and such participation shall
be reflected by the grant of appropriate powers of attorney.
e. A&S and Essef shall have exclusive control of all administrative and
judicial proceedings related to their respective Taxes other than those
described in Section 12(a).
f. For so long as the Notified Party is exercising its Representation
Right, it shall not be required to indemnify the Notifying Party
pursuant to Section 13 hereof until there occurs a Final Determination
of the liability of A&S for the Tax.
13. PROCEDURES FOR OBTAINING INDEMNIFICATION.
a. If either Essef or A&S (the "Indemnified Party") determines that it
or any of its Tax Affiliates is or may be entitled to indemnification
by the other party (the "Indemnifying Party") under this Agreement as a
result of the allocations of responsibility for Taxes set forth in
Sections 2 through 4, the Indemnified Party will promptly deliver to
the Indemnifying Party a written notice and demand therefor (the
"Notice") specifying the basis for its claim for indemnification, the
nature of the claim, and, if known, the amount for which the
Indemnified Party reasonably believes it or any
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of its Tax Affiliates is entitled to be indemnified. The Notice must be
received by the Indemnifying Party no later than thirty (30) days
before the expiration of the applicable Tax statute of limitations;
provided, however, that if the Indemnified Party does not receive
notice from the applicable governmental taxing authority ("Government
Notice") that an item exists that could give rise to a claim for
indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the
Notice must be received by the Indemnifying Party immediately after the
Indemnified Party receives the Government Notice. Unless the
Indemnifying Party objects to the claim for indemnification (in the
manner set forth in Section 13(b) hereof), and subject to Section
12(f), the Indemnifying Party will pay the Indemnified Party the amount
set forth in the Notice, in cash or other immediately available funds,
within thirty (30) days after receipt of the Notice; provided, however,
that if the amount for which the Indemnified Party reasonably believes
it is entitled to be indemnified is not known at the time of the
Notice, the Indemnified Party will deliver to the Indemnifying Party a
further notice specifying such amount as soon as reasonably practicable
after such amount is known and payment will then be made as set forth
above.
b. The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the
Indemnified Party, within thirty (30) days following receipt of such
Notice, written notice setting forth the Indemnifying Party's grounds
for so objecting (the "Objection Notice"). If the Indemnifying Party
does not give the Indemnified Party the Objection Notice within such
thirty (30)-day period, the Indemnifying Party may exercise any and all
of its rights under applicable law to collect such amount.
c. If Essef and A&S are unable to settle any dispute regarding a claim
for indemnification within thirty (30) days after receipt of the
Objection Notice, they will, in accordance with Section 14, jointly
request to resolve the dispute as promptly as possible under the
procedures set forth in Section 14.
d. Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 13(a) hereof
will not relieve the Indemnifying Party of any of its obligations under
this Agreement except to the extent the Indemnifying Party is
prejudiced by such failure.
e. The indemnification provisions of this Section 13 shall be the
exclusive remedy following the Closing Date for the allocation of Taxes
pursuant to this Agreement.
14. PROCEDURES FOR RESOLVING DISPUTES. Except as provided in Section 5, if Essef
and A&S fail to mutually agree on the resolution of any of the matters in this
Agreement that require the agreement of the parties, then such matter shall be
referred to the Accountant for a binding determination. Essef and A&S shall
deliver to the Accountant copies of any schedules or documentation that may be
reasonably required by the Accountant to make its determination. Essef and A&S
shall be entitled to make presentations to the Accountant in connection
therewith. Essef and A&S shall use all reasonable efforts to cause the
Accountant to promptly complete such determination. The determination of the
Accountant shall be final and binding on
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all parties. The costs incurred in retaining the Accountant to make a
determination shall be shared equally by Essef and A&S.
15. PAYMENT. If a party (the "Payor") fails to make a payment due and owing
under this Agreement to the other party or any of its Tax Affiliates (the
"Payee") within 10 business days after the parties hereto agree (or there is a
binding determination by the Accountant) that such payment is due and owing, the
Payor will pay to the Payee interest on such payment from and including the date
the parties reach such agreement (or such binding determination is made) to but
excluding the day the Payor makes such payment, at a rate equal to seven percent
(7%) per annum.
16. AMENDMENTS. Any amendment, supplement, variation, alternation, or
modification to this Agreement must be made in writing and duly executed by an
authorized representative or agent of each of the parties hereto.
17. ASSIGNMENT. This Agreement and all the rights and obligations granted hereby
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns, it being expressly agreed that this Agreement shall not
be assigned nor shall any rights or obligations arising hereunder be transferred
by one party without the prior written consent of the other parties. Prior to
the Closing Date, Essef and A&S may elect to form a holding company for the
ownership of the A&S stock. In that event, (i) Essef will transfer the shares of
A&S stock to the holding company and shares of common stock of the holding
company will be issued in substitution of the A&S stock in the Split-Off and
(ii) the benefits and obligations contemplated by this Tax Sharing Agreement
will be binding upon and inure to the holding company, provided that A&S will
not be released from its obligations hereunder.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes any and all prior or contemporaneous understandings,
negotiations, or agreements between the parties relating to the transactions
contemplated hereby or the subject matter of this Agreement, and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives.
19. NO WAIVER. The failure in any one or more instances of a party to insist
upon performance of any of the terms, covenants, or conditions of this
Agreement, to exercise any right or privilege conferred in this Agreement, or to
waive any breach of any of the terms, covenants, or conditions of this
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights, or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
20. NO DOUBLE RECOVERY. No provision of this Agreement shall be construed to
provide an indemnity or other recovery for any Taxes, costs, damages, or other
amounts for which the damaged person has been fully compensated under any other
provision of this Agreement or under any other agreement or action at law or in
equity.
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21. SEVERABILITY. Any provisions of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdictions, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any other jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, each party hereby waives any law that renders any provision
hereof prohibited or unenforceable in any respect.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and all such counterparts shall be deemed to
constitute one and the same instrument.
23. FEES, COSTS AND EXPENSES. Except as otherwise provided herein, each party
shall be responsible for its own fees, costs, and expenses incurred by it in
connection with this Agreement.
24. THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended to create,
nor shall anything in this Agreement be deemed to create or have created, any
third party beneficiary rights.
25. CONSTRUCTION. All references to this Agreement shall include all attachments
hereto, and words importing the singular shall include the plural and vice
versa, and words importing a gender shall include other genders.
26. HEADINGS. The descriptive section headings contained in this Agreement are
for convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement.
27. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, five (5)
business days after mailing when mailed by certified mail, return receipt
requested, or one (1) business day after sending via Federal Express or similar
overnight courier service, or when receipt is confirmed when sent by facsimile.
Such notices or other communications shall be sent to the following addresses,
unless other addresses are subsequently specified in writing:
a. If to the Essef, to:
Essef Corporation
c/o Anthony & Sylvan Pools Corporation
220 Park Drive
Chardon, Ohio 44024
Facsimile No.: (440) 286-2206
Attention: Mark E. Brody
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with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 479-8776
Attention: Mary Ann Jorgenson, Esq.
b. If to A&S, to:
Anthony & Sylvan Pools Corporation
220 Park Drive
Chardon, Ohio 44024
Facsimile No.: (440) 286-2206
Attention: Stuart D. Neidus
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 479-8776
Attention: Mary Ann Jorgenson, Esq.
c. If to Pentair, to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Richard J. Cathcart
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with a copy to:
Pentair, Inc.
Waters Edge Plaza
1500 County Road B2 West
Saint Paul, Minnesota 55113-3105
Facsimile No.: (651) 639-5203
Attention: Louis L. Ainsworth, Esq.
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Facsimile No.: (414) 297-4900
Attention: Benjamin F. Garmer, III, Esq.
28. GOVERNING LAW. This Agreement shall be governed by and controlled as to its
validity, enforcement, interpretation, construction, effect, and in all other
respects by the laws of the State of Ohio (without giving effect to any choice
or conflict of law provision or rule thereof) applicable to contracts made and
to be performed in that State.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their duly authorized representatives as of the day and year first above
written.
ESSEF CORPORATION
By: /s/ Thomas B. Waldin
--------------------------------------
Name: Thomas B. Waldin
--------------------------------------
Its: President
--------------------------------------
ANTHONY & SYLVAN POOLS CORPORATION
By: /s/ Stuart D. Neidus
--------------------------------------
Name: Stuart D. Neidus
--------------------------------------
Its: Chief Executive Officer
--------------------------------------
PENTAIR, INC.
By: /s/ Richard J. Cathcart
--------------------------------------
Name: Richard J. Cathcart
--------------------------------------
Its: Executive Vice President
--------------------------------------
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LIST OF OMITTED SCHEDULES
Exhibit A to Tax Sharing Agreement (Summary Terms of Astro Senior Subordinated
Debt Security).
The registrant agrees to furnish supplementally a copy of the foregoing
Exhibit A to the Tax Sharing Agreement to the Commission upon request.
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<PAGE> 1
Exhibit 99.1
[ESSEF CORPORATION LOGO]
FOR IMMEDIATE RELEASE
Contact: Mark E. Brody
Vice President - Finance
(440) 286-2200
ESSEF CORPORATION ANNOUNCES AGREEMENT TO BE ACQUIRED BY
PENTAIR, INC. AND SPLIT-OFF OF ITS ANTHONY & SYLVAN POOLS
CORPORATION SUBSIDIARY
Chardon, Ohio (April 30, 1999) - Essef Corporation (NASDAQ: ESSF) today
announced that it has entered into a merger agreement with Pentair, Inc. (NYSE:
PNR) whereby each Essef common share would be exchanged for $19.09 cash. In
addition to the $19.09 in cash per share, in connection with the merger, Essef
has agreed to distribute to its shareholders, for each share of Essef common
stock held, 0.25 shares of its Anthony & Sylvan Pools Corporation subsidiary,
thus creating a new stand-alone public company. Holders of Essef shares
immediately prior to the time of the consummation of the acquisition will
receive Anthony & Sylvan shares in connection with the split-off. Based upon
independent valuation analyses, the value of the Anthony & Sylvan stock to be
received by Essef shareholders is expected to be $3.00 - $3.50 for each Essef
share held. The purchase price for the Essef common shares will total
approximately $312 million in cash plus the assumption of debt. These
transactions are expected to close on or about July 31, 1999.
The merger agreement, which was approved by the boards of directors of both
Essef and Pentair, is subject to Essef shareholder approval, regulatory approval
under the Hart-Scott-Rodino Act and completion of limited due diligence by
Pentair. The distribution of Anthony & Sylvan shares is subject to the clearance
of a registration statement to be filed with the Securities and Exchange
Commission. The receipt of Anthony & Sylvan shares will be treated as a taxable
distribution to Essef's shareholders, and will not be preceded by an initial
public offering as earlier announced by Essef in 1998. Anthony & Sylvan, as part
of the transaction with Pentair, will also assume $17 million of Essef debt,
subject to certain adjustments.
"The acquisition of Essef by Pentair will provide expanded growth opportunities
for our Water Treatment and Systems Equipment Segment and Swimming Pool and Spa
Equipment Segment, given Pentair's complementary product lines and greater
financial strength," commented Thomas B. Waldin, Essef's President and Chief
Executive Officer. "In addition, the split-off of Anthony & Sylvan into a
separate public company will provide Essef shareholders a vehicle to participate
in the potential growth of this company as a result of the strategic development
and investments Essef has made in this business since it was acquired in May
1997."
220 Park Drive - Chardon, Ohio 44024 USA - Tel 440-286-2200 - FAX 440-286-2206
<PAGE> 2
"We look forward to being a stand-alone public company which will provide our
investors a more easily understood business strategy as we move to consolidate
the fragmented swimming pool sales and installation industry," commented Stuart
D. Neidus, Anthony & Sylvan's Chairman and Chief Executive Officer.
Commenting on the acquisition of Essef, Winslow H. Buxton, Pentair's Chairman,
President and Chief Executive Officer said, "Combined with our existing water
pump and valve businesses, Essef expands Pentair's already sizeable position in
global water treatment markets, and makes us a leading player in the residential
and industrial water equipment business. The acquisition will drive sales in
Pentair's Water and Fluid Technologies Group to an estimated $1 billion in 2000.
It also offers many synergies with our existing businesses, significantly
expands our presence in international markets, and provides vehicles for growth
through new water filter and control technologies."
Essef Corporation specializes in products that are used to move, store, treat,
and enjoy water. The Company is a leading manufacturer of cost-effective
fiberglass-reinforced pressure vessels and is among the world's largest
suppliers of swimming pool equipment, including filters, pumps, heaters,
controls, valves, and lights. Additionally, the Company is the country's largest
residential in-ground concrete swimming pool installer.
This press release contains statements that are forward-looking, as that term is
defined by the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations, and releases. The
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on current
expectations regarding important risk factors, including but not limited to:
product development activities; dependence on existing management; global
economic, consumer spending and market conditions; the impact of weather on pool
businesses; the unpredictability of the stock markets; events that may impact
the availability of bank financing and year 2000 issues. Accordingly, actual
results may differ from those expressed in the forward-looking statements, and
the making of such statements should not be regarded as a representation by the
Company or any other person that results expressed therein will be achieved.
220 Park Drive - Chardon, Ohio 44024 USA - Tel 440-286-2200 - FAX 440-286-2206
