<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 Check the appropriate box:
Check the appropriate box:
[X]Preliminary Information Statement
[_]Confidential, for Use of the Commission Only (as permitted by rule 14c-
5(d)(2)
[_]Definitive Information Statement
UTILX CORPORATION
-------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required.
[X]Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
<TABLE>
<C> <S>
(1) Title of each class of securities to which transaction applies: Common
Stock
(2) Aggregate number of securities to which transaction applies: 2,463,675
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): $6.125
(4) Proposed maximum aggregate value of transaction: $15,090,010
(5) Total fee paid: $3,018*
[_]Fee paid previously with preliminary materials
[X]Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid: $11,084
(2) Form, Schedule or Registration Statement No.: Schedule TO
(3) Filing Party: InfrastruX Acquisition, Inc., InfrastruX Group, Inc. and
Puget Sound Energy, Inc.
(4) Date Filed: June 30, 2000
</TABLE>
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* This amount is completely offset by the $11,084 fee previously paid in
connection with the filing of the Schedule TO by InfrastruX Acquisition,
Inc., InfrastruX Group, Inc. and Puget Sound Energy, Inc. on June 30, 2000,
in connection with the first step of the transactions of which the merger
that is the subject of this information statement is a part.
<PAGE>
[LOGO OF UTILX CORPORATION]
22820 RUSSELL ROAD
P.O. BOX 97009
KENT, WASHINGTON 98064-9709
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 15, 2000
----------------
August 9, 2000
TO THE STOCKHOLDERS OF UTILX CORPORATION:
We will hold a special meeting of our stockholders on September 15, 2000 at
10 a.m., local time, at the offices of Perkins Coie llp, 1201 Third Avenue,
48th Floor, Seattle, Washington 98101.
As described in the enclosed information statement, at the special meeting,
you will:
1. Consider and vote upon a proposal to approve and adopt a merger
agreement dated as of June 28, 2000, by and among UTILX Corporation
("UTILX"), InfrastruX Group, Inc. ("InfrastruX Group"), and a wholly-owned
subsidiary of InfrastruX Group, providing for, among other things, the
merger of InfrastruX Group's subsidiary with and into UTILX. Following the
merger, UTILX will continue as the surviving corporation and will become a
wholly-owned subsidiary of InfrastruX Group; and
2. Transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
UTILX's board of directors has approved the merger agreement and the merger.
The merger will constitute the second and final step of the acquisition of
UTILX by InfrastruX Group. The first step was a tender offer commenced by
InfrastruX Group through InfrastruX Group's subsidiary on June 30, 2000 for all
of the outstanding shares of common stock of UTILX at a purchase price of
$6.125 per share, net to the seller in cash. The offer expired on July 28,
2000, and InfrastruX Group's subsidiary purchased approximately 6,584,685
shares (representing approximately 88% of the shares outstanding on such date).
Upon the completion of the merger, all shares (other than shares owned by
InfrastruX Group or any of its affiliates, shares held by UTILX as treasury
stock, or shares held by any stockholders of UTILX who have properly exercised
appraisal rights), will be converted into the right to receive $6.125 per share
in cash, without interest thereon. InfrastruX Group currently anticipates that
the merger will be completed in September 2000, or as promptly as practicable
thereafter.
Holders of record of UTILX common stock at the close of business on August
9, 2000 will be entitled to vote at the special meeting or any adjournment or
postponement. As of the record date, InfrastruX Group and its affiliates own an
aggregate of 6,584,685 shares, representing approximately 88% of all shares
outstanding on that date. The approval of the holders of a majority of all
outstanding shares is sufficient to approve and adopt the merger agreement and
the merger. Therefore, InfrastruX Group can cause the merger to occur without
the affirmative vote of any other stockholder. InfrastruX Group is obligated to
vote all shares it owns in favor of approving and adopting the merger
agreement.
<PAGE>
If the merger is completed, holders of shares who do not vote in favor of
approval and adoption of the merger agreement and who otherwise comply with the
requirements of Section 262 of the General Corporation Law of the State of
Delaware (a copy of which can be found in Annex B of the attached information
statement) will be entitled to receive such consideration as may be determined
to be due under such provisions.
Please read the attached information statement carefully. WE ARE NOT ASKING
YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY.
Please do not send in your share certificates at this time. If the merger is
consummated, you will be sent a letter of transmittal for that purpose as soon
as reasonably practicable thereafter.
By Order of UTILX Board
<PAGE>
UTILX CORPORATION
22820 Russell Road
P.O. Box 97009
Kent, Washington 98064-9709
(253) 395-0200
INFORMATION STATEMENT
----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 15, 2000
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
This information statement is being furnished to the holders of common stock
of UTILX Corporation, a Delaware corporation ("UTILX"), in connection with the
special meeting of stockholders of UTILX to be held on September 15, 2000 at 10
a.m., local time, at the offices of Perkins Coie LLP, 1201 Third Avenue,
48th Floor, Seattle, Washington 98101, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the merger
agreement, dated June 28, 20000, among UTILX, InfrastruX Group, Inc.
("InfrastruX Group") and a subsidiary of InfrastruX Group, and the merger,
as described in this information statement; and
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement.
The merger is the second step of InfrastruX Group's two-part acquisition of
UTILX. The first step was a tender offer commenced by a subsidiary of
InfrastruX Group on June 30, 2000 for all of the outstanding shares of UTILX at
a purchase price of $6.125 per share, net to the seller in cash. Pursuant to
the offer, which expired on July 28, 2000, InfrastruX Group's subsidiary
purchased 6,584,685 shares (representing approximately 88% of the shares
outstanding on such date).
Holders of record of UTILX common stock at the close of business on August
9, 2000 will be entitled to vote at the special meeting or any adjournment or
postponement.
InfrastruX Group can cause the merger to occur without the affirmative vote
of any other holder of shares. InfrastruX Group has agreed pursuant to the
merger agreement to vote all shares it beneficially owns in favor of approval
and adoption of the merger agreement.
Please do not send any certificates for your stock at this time. Please read
this information statement carefully.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Information Statement dated August 9, 2000, and first mailed to stockholders
on August , 2000.
<PAGE>
CONTENTS
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<S> <C>
SUMMARY TERM SHEET........................................................ 1
THE SPECIAL MEETING....................................................... 4
Time, Place, Date....................................................... 4
Purpose of the Special Meeting.......................................... 4
Record Date; Quorum; Outstanding Shares Entitled to Vote................ 4
Vote Required........................................................... 4
Surrender of Certificates and Payment Procedures........................ 4
THE MERGER................................................................ 6
Background of the Offer and the Merger.................................. 6
Recommendation and Reasons of UTILX Special Committee................... 7
Opinion of Financial Advisor to the UTILX Special Committee............. 10
Purpose and Structure of the Merger; Reasons of InfrastruX Group for the
Merger................................................................. 14
Plans for UTILX after the Merger........................................ 15
Merger Agreement........................................................ 15
Delisting of UTILX Shares Following the Merger.......................... 21
Regulatory Approvals.................................................... 21
Financing of the Merger................................................. 21
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................ 21
TRANSACTIONS BETWEEN INFRASTRUX GROUP AND UTILX........................... 22
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..................... 23
APPRAISAL RIGHTS.......................................................... 25
CERTAIN INFORMATION CONCERNING UTILX AND THE SHARES GENERALLY............. 27
CERTAIN INFORMATION CONCERNING INFRASTRUX GROUP AND INFRASTRUX GROUP'S
SUBSIDIARY............................................................... 28
OWNERSHIP OF SHARES....................................................... 28
ADDITIONAL AND AVAILABLE INFORMATION...................................... 28
OTHER MATTERS............................................................. 29
ANNEX A--Opinion of Banc of America Securities, LLC dated June 28, 2000... A-1
ANNEX B--Section 262 of the General Corporation Law of the State of
Delaware Relating to Appraisal Rights.................................... B-1
ANNEX C--The Merger Agreement............................................. C-1
</TABLE>
<PAGE>
SUMMARY TERM SHEET
The merger of InfrastruX Acquisition, Inc. ("Purchaser"), a wholly-owned
subsidiary of InfrastruX Group, Inc. ("InfrastruX Group") with and into UTILX
Corporation ("UTILX") will constitute the second and final step of the
acquisition of UTILX by InfrastruX Group. The first step was a tender offer
commenced by InfrastruX Group through its subsidiary on June 30, 2000, for all
of the outstanding shares of UTILX for $6.125 per share, net to the seller in
cash. Pursuant to the offer, which expired on July 28, 2000, InfrastruX Group's
subsidiary purchased 6,584,685 shares representing approximately 88% of the
shares outstanding on the record date. The following are some questions you, as
a stockholder of UTILX, may have and the answers to those questions. We urge
you to carefully read the remainder of this information statement because the
information provided in this summary is not complete and additional important
information is contained in the remainder of this information statement.
Stockholders are urged to read this information statement and the annexes in
their entirety.
When and Where is the Special Meeting?
UTILX will hold a special meeting of stockholders on September 15, 2000, at
10 a.m., local time, at the offices of Perkins Coie LLP, 1201 Third Avenue,
48th Floor, Seattle, Washington 98101. See "The Special Meeting."
Is My Vote Required to Approve the Merger?
No. The affirmative vote of a majority of the votes entitled to be cast by
the holders of all outstanding shares as of the record date will be required to
approve and adopt the merger agreement. InfrastruX Group has agreed to vote all
of the shares it owns in favor of the approval and adoption of the merger
agreement. Because InfrastruX Group and its affiliates own approximately 88% of
the outstanding shares on the record date, APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT IS ASSURED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. YOU ARE NOT
BEING ASKED FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND ONE. If you wish to
vote your shares, you may do so only by attending the special meeting. See "The
Special Meeting."
Who Are the Parties to the Transaction?
InfrastruX Group is a Washington corporation with its principal offices
located at 411--108th Avenue N.E., Bellevue, Washington 98004. InfrastruX Group
is a wholly owned subsidiary of Puget Sound Energy, Inc. ("Puget"). InfrastruX
Group was formed in June, 2000 by Puget to acquire network infrastructure
services companies serving the utility and telecommunications industries.
InfrastruX Group currently has no business or operations. Puget is an investor-
owned public utility incorporated in the State of Washington furnishing
electric and gas service to a territory covering approximately 6,000 square
miles, principally in the Puget Sound region of Washington State.
InfrastruX Group's wholly-owned subsidiary is a Delaware corporation
incorporated in June, 2000. It has not carried on any activities other than
those incident to its formation, the execution and delivery of the merger
agreement and the commencement of, and purchase of shares pursuant to, the
offer. Its principal offices are located at 411--108th Avenue N.E., Bellevue,
Washington 98004.
UTILX is a Delaware corporation with its principal offices located at 22820
Russell Road, P.O. Box 97009, Kent, Washington 98064. UTILX provides specialty
services and products to electric, telecommunications, natural gas, water
sewer, and other utilities in the United States and around the world, and
drilling equipment to contractors and other users outside the United States.
What Will I Receive in Exchange for My Shares of UTILX?
Upon consummation of the merger, all shares (other than shares owned by
InfrastruX Group or any of its affiliates, shares held by UTILX as treasury
stock, or shares held by any stockholders of UTILX who have
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<PAGE>
properly exercised appraisal rights) will be converted into the right to
receive $6.125 per share, net to the seller in cash, without interest thereon.
See "The Merger--Merger Agreement."
Is There an Agreement Governing the Merger?
Yes. InfrastruX Group, its subsidiary and UTILX entered into a merger
agreement dated as of June 28, 2000. The merger agreement provides, among other
things, for the terms and conditions of the offer and the merger of InfrastruX
Group's subsidiary into UTILX following the offer. See "The Merger--Purpose and
Structure of the Merger; Reasons of InfrastruX Group for the Merger".
What Does UTILX Board of Directors Think of the Merger?
UTILX board, acting through a special committee consisting solely of
disinterested directors, recommends that its stockholders approve and adopt the
merger agreement and the merger. See "The Merger--Recommendation and Reasons of
UTILX Special Committee."
In reaching its decision to approve and adopt the merger agreement and to
recommend that UTILX stockholders approve and adopt the merger agreement, UTILX
Special Committee considered a number of factors. See "The Merger--
Recommendation and Reasons of UTILX Special Committee."
Did UTILX Receive an Opinion from its Financial Advisor?
Yes. Banc of America Securities, LLC ("BAS"), UTILX's financial advisor,
delivered to UTILX's board its written opinion dated as of June 28, 2000, that,
as of the date of such opinion, the cash consideration to be received by the
holders of UTILX shares in the offer and the merger is fair from a financial
point of view to UTILX stockholders (other than InfrastruX Group and its
affiliates). A copy of the full text of the written opinion of BAS, which sets
forth, among other things, the opinion expressed, assumptions made, procedures
followed, matters considered, and limitations of review undertaken in
connection with the opinion, is attached to this information statement as Annex
A and should be read in its entirety. See "The Merger--Opinion of Financial
Advisor to UTILX Special Committee" and Annex A.
When Do the Companies Expect to Complete the Merger?
InfrastruX Group expects to complete the merger in September 2000, or as
promptly as practicable thereafter. The merger will become effective at such
time as the merger is approved by the stockholders of UTILX as of the record
date and the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware. See "The Merger."
Can the Merger Agreement Be Terminated?
The merger agreement may be terminated by either InfrastruX Group or UTILX
under certain circumstances. See "The Merger--Merger Agreement."
Is Infrastrux Group's Financial Condition Relevant?
We do not believe InfrastruX Group's financial condition is relevant because
the form of payment consists solely of cash and InfrastruX Group has advised us
that funding will be readily obtainable.
What Will Happen to UTILX After the Merger Is Consummated?
After consummation of the merger, UTILX will become a wholly-owned
subsidiary of InfrastruX Group and the former holders of UTILX shares will no
longer possess any interest in UTILX. Promptly upon consummation of the merger,
UTILX will terminate the registration of the shares under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition,
upon termination of the
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registration of the shares under the Exchange Act, the shares will no longer be
eligible for inclusion in the Nasdaq National Market System. See "The Merger--
Delisting of UTILX Shares Following the Merger."
Do Any Existing or Former Members of UTILX's Management or Board of Directors
Have Interests in the Merger Other than as Stockholders of UTILX?
Yes. Certain existing and former members of UTILX's management and board (as
well as employees of UTILX) have interests in the merger other than as
stockholders relating to, among other things, (i) the exchange of outstanding
options for a cash payment and (ii) the terms of employment agreements between
UTILX and William Weisfield, the President and Chief Executive Officer of
UTILX, providing for cash payments and other benefits upon termination of
employment. See "Interests of Certain Persons in the Merger."
Should I Send in My Stock Certificates Now?
No. A letter of transmittal for use in surrendering share certificates and
obtaining payment for surrendered UTILX shares will be mailed to stockholders
promptly following the effective time of the merger. See "The Merger."
CERTIFICATES REPRESENTING UTILX SHARES SHOULD NOT BE SENT IN UNTIL YOU RECEIVE
THE LETTER OF TRANSMITTAL AND ACCOMPANYING INSTRUCTIONS, AND THEN SHOULD BE
SURRENDERED ONLY IN ACCORDANCE WITH SUCH INSTRUCTIONS.
Will I Have to Pay Taxes on the Consideration I Receive for My Shares in the
Merger?
The receipt of cash by a UTILX stockholder pursuant to the merger will be a
taxable transaction for United States federal income tax purposes and may also
be taxable under applicable state, local and foreign tax laws. See "Certain
United States Federal Income Tax Consequences." ALL STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS.
Are Any Regulatory Approvals Required?
InfrastruX Group filed the required Premerger Notification and Report Forms
with respect to the offer and the merger with the Antitrust Division of the
Department of Justice and the Federal Trade Commission on April 27, 2000. The
applicable waiting period expired on July 15, 2000. See "The Merger--Regulatory
Approvals."
UTILX and InfrastruX Group believe that there are no other material
regulatory or governmental approvals required in order for the merger to be
consummated.
Can I Exercise Appraisal Rights?
Stockholders of UTILX are entitled to appraisal rights under Section 262 of
the General Corporation Law of the State of Delaware as to shares owned by
them. A summary description of Section 262 is set forth in "Appraisal Rights"
and Section 262 is reprinted in its entirety as Annex B to this information
statement. All references in "Appraisal Rights" and Section 262 to a
"stockholder" are to the record holder of the shares as to which appraisal
rights are asserted. A person having a beneficial interest in shares that are
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the steps set forth in
Section 262 properly and in a timely manner to perfect whatever appraisal
rights the beneficial owner may have.
For more information regarding appraisal rights, see Annex B. Annex B should
be reviewed carefully by any stockholder who wishes to exercise statutory
appraisal rights or who wishes to preserve the right to do so because failure
to comply strictly with the procedures set forth in Annex B may result in the
loss of appraisal rights.
3
<PAGE>
THE SPECIAL MEETING
Time, Place, Date
This information statement is being furnished to the holders of outstanding
shares of UTILX in connection with the special meeting to be held on September
15, 2000, at 10 a.m., local time, at the offices of Perkins Coie LLP, 1201
Third Avenue, 48th Floor, Seattle, Washington 98101, including any adjournments
or postponements thereof.
Purpose of the Special Meeting
At the special meeting, stockholders of UTILX will consider and vote upon a
proposal to approve and adopt the merger agreement, dated as of June 28, 2000,
among UTILX, InfrastruX Group and InfrastruX Acquisition, Inc., a wholly-owned
subsidiary of InfrastruX Group, pursuant to which InfrastruX Group's subsidiary
will be merged with and into UTILX with UTILX as the surviving corporation at
and after the effective time of the merger. The merger agreement is attached as
Annex C to this information statement. Stockholders will also consider such
other business as may properly come before the meeting.
Record Date; Quorum; Outstanding Shares Entitled to Vote
The record date for the special meeting has been fixed as the close of
business on August 9, 2000. Only holders of record of shares on the record date
are entitled to vote at the special meeting. Holders of shares on the record
date are entitled to one vote on matters properly presented at the special
meeting for each share held.
On the record date, there were 7,475,944 shares outstanding. The outstanding
shares were held of record by approximately 342 registered holders. The
presence in person of holders of a majority of the shares entitled to vote will
constitute a quorum for the transaction of business at the special meeting.
Because the shares owned by InfrastruX Group and its affiliates will be
represented at the special meeting, a quorum will be present, even if no other
stockholders are present.
Vote Required
Pursuant to the Certificate of Incorporation of UTILX, the merger agreement
must be approved and adopted by the affirmative vote of the holders of two-
thirds of the total number of outstanding shares. Abstentions of shares that
are present at the special meeting and broker non-votes will each have the same
effect as a vote against approval and adoption of the merger agreement.
Pursuant to the merger agreement, InfrastruX Group and its affiliates are
required to vote their shares for approval and adoption of the merger
agreement. As of the record date, InfrastruX Group and its affiliates
beneficially own 6,584,685 shares (approximately 88% of all outstanding
shares). Because the approval of the holders of a majority of all outstanding
shares is sufficient to approve and adopt the merger agreement, InfrastruX
Group can cause the merger to occur without the affirmative vote of any other
stockholder. You are not being asked for a proxy and you are requested not to
send one. If you wish to vote your shares, you may do so only by attending the
special meeting in person.
A stockholder who wishes to exercise appraisal rights under Delaware law
must not vote his or her shares in favor of the approval and adoption of the
merger agreement. An abstention or broker non-vote will not constitute a waiver
of a stockholder's appraisal rights or the written notice of intent to exercise
appraisal rights required under Section 262 of Delaware law. See "Appraisal
Rights" and Annex B.
Surrender of Certificates and Payment Procedures
As soon as practicable after the effective time, ChaseMellon Shareholder
Services, LLC, the paying agent, will mail to each record holder of a
certificate representing an outstanding share a letter of transmittal and
instructions for effecting the surrender of such certificate. Upon surrender to
the paying agent of a certificate
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representing a share, together with a duly executed letter of transmittal and
such other documents as may reasonably be required by the paying agent, the
holder of such certificate shall be entitled to receive $6.125 per share in
cash, without interest thereon. Until surrendered in accordance with the
foregoing instructions, each certificate representing a share will represent
for all purposes only the right to receive $6.125 per share in cash, without
interest thereon.
You should not send your share certificates to the paying agent now. Share
certificates should be sent to the paying agent only pursuant to instructions
set forth in the letter of transmittal, which will be mailed to you as soon as
practicable after the effective time. In all cases, the merger consideration
will be provided only in accordance with the procedures set forth in this
information statement, the merger agreement and the letter of transmittal.
Any merger consideration made available to the paying agent that remains
unclaimed by stockholders for six months after the effective time will be
delivered to UTILX and any stockholders who have not surrendered their
certificates prior to that time must look to UTILX for payment of their claim
for merger consideration.
Any questions concerning payment procedures and requests for letters of
transmittal may be addressed to the paying agent at 1-800-777-3674 (toll free).
5
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THE MERGER
Background of the Offer and the Merger
Certain contacts and negotiations between InfrastruX Group and UTILX
relating to the offer and merger.
On May 21, 2000, John Durbin, a director of Puget and Chief Executive
Officer of InfrastruX Group, met informally with William Weisfield, Chairman
and Chief Executive Officer of UTILX, to discuss a potential business
combination between UTILX and InfrastruX Group, a newly formed subsidiary of
Puget. Mr. Durbin knew of UTILX and Mr. Weisfield through his membership on
the board of directors of UTILX.
On May 24, 2000, Mr. Durbin, Mr. Weisfield and Michael Lennon, a Managing
Director at Emerge Corporation, financial advisor to InfrastruX Group,
discussed UTILX's business at the offices of UTILX and engaged in preliminary
discussions about a possible fit between UTILX and InfrastruX Group.
On May 24, 2000, InfrastruX Group entered into the Confidentiality
Agreement with UTILX.
On May 26, 2000, Mr. Durbin, Mr. Lennon and Mr. Weisfield met at the
offices of Emerge Corporation. At the meeting, InfrastruX Group presented
UTILX with a proposal to purchase all of the outstanding stock of UTILX in a
cash tender offer. InfrastruX Group also described its preliminary valuation
of UTILX.
On May 27, 2000, Mr. Weisfield and Darla Norris, UTILX's Senior Vice
President and Chief Financial Officer, met with UTILX's counsel to discuss and
review the terms of the proposal.
On May 31, 2000, UTILX's board of directors met to discuss the proposal of
InfrastruX Group. Due to potential conflicts of interest (as described in Item
3), Messrs. Durbin and Ellis were absent, having recused themselves. Mr.
Weisfield reviewed with the Board his meetings and discussions with
representatives of InfrastruX Group. Management also discussed its initial
contact with potential financial advisers. Following extensive discussion, the
Board formed the Special Committee of disinterested non-employee directors
(the "Special Committee") to consider the sale of UTILX, including the
proposal of InfrastruX Group. The Board also discussed the receipt of an
unsolicited inquiry from a third party and a planned meeting with such third
party. Mr. Weisfield and Ms. Norris reported on their identification of and
contact with three potential investment bankers.
On June 6, 2000, Mr. Durbin, Mr. Lennon, Mr. Weisfield and Ms. Norris met
at the offices of Emerge Corporation to discuss InfrastruX Group's operating
plan and strategy, change of control provisions in UTILX's contracts, and the
structure of the tender offer and valuation.
On June 7, 2000, the Special Committee met to discuss the status of the
proposal from InfrastruX Group. UTILX's management reported on its meetings
with potential financial advisors and provided its recommendations to the
Special Committee. Based on such recommendations, the Special Committee
approved the engagement of BAS.
On June 7, 2000, Mr. Durbin, Mr. Lennon, and representatives of Perkins
Coie LLP, counsel to InfrastruX Group, met with Mr. Weisfield and Ms. Norris
and representatives of Graham & Dunn PC, counsel to UTILX, at the offices of
Graham & Dunn to discuss issues relating to timing and expenses, a non-
solicitation agreement presented by InfrastruX Group, and the duties of
UTILX's board of directors.
On June 9, 2000, the Special Committee met to further consider the proposal
of InfrastruX Group. Mr. Weisfield reported on his meeting with InfrastruX
Group and its counsel and reviewed the status of the proposal. With input from
management and representatives of BAS, the Special Committee discussed the
factors that would be considered in analyzing UTILX's value, reviewed stock
trading history, certain Company financial information and UTILX's strategic
plan. Following such discussions, the Special Committee authorized Mr.
Weisfield and Darla Norris, to pursue negotiations with InfrastruX Group of a
definitive
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agreement to acquire UTILX, subject to the Special Committee's further review
and approval and the condition that such negotiations preserve the ability of
UTILX to consider and pursue any potentially superior offer and to obtain
reimbursement of expenses.
On June 12, 2000, the Special Committee met to further discuss the proposal
of InfrastruX Group, including a proposed non-solicitation agreement, and the
engagement of BAS. The Special Committee received information from management
and its corporate and securities counsel regarding the proposed transaction,
including a review of filings necessary under applicable antitrust laws and
securities matters related to the proposed transaction.
On June 14, 2000, UTILX and InfrastruX Group entered into a non-solicitation
agreement.
On June 14, 2000, UTILX engaged BAS as its financial advisor.
On June 20, 2000, members of UTILX's management, Mr. Durbin, Mr. Weisfield,
and representatives of BAS, Graham & Dunn PC, Emerge Corporation and
PricewaterhouseCoopers, InfrastruX Group's accountants, held meetings at the
offices of Graham & Dunn PC to discuss due diligence matters.
On June 20, 2000, Mr. Weisfield met with Mr. Durbin and Mr. Lennon to
discuss due diligence matters and the status of the proposed transaction.
On June 22, 2000, Mr. Weisfield, representatives of Graham & Dunn PC, Mr.
Durbin, representatives of Emerge Corporation and representatives of Perkins
Coie LLP met to negotiate the terms of the merger agreement.
From June 22 through June 28, 2000, UTILX, InfrastruX Group and their
respective counsel continued to negotiate the merger agreement and began
preparation of the offering materials and exhibits.
On June 26, 2000, the Special Committee met with management, representatives
of BAS and Graham & Dunn PC for an update of the status of the proposal and to
conduct a preliminary review of the terms of the proposed merger agreement.
On June 28, 2000, the Special Committee reviewed the proposed transactions
with management and representatives of Graham & Dunn PC and BAS, and approved
the merger agreement and transactions contemplated thereby.
On June 28, 2000, the parties concluded negotiations and executed the merger
agreement.
InfrastruX Group's subsidiary commenced the offer on June 30, 2000. Pursuant
to the offer, which expired on July 28, 2000, InfrastruX Group's subsidiary
purchased 6,584,685 shares (representing approximately 88% of the shares
outstanding on such date).
Recommendation and Reasons of UTILX Special Committee
Recommendation of UTILX Special Committee
UTILX's board, acting through its Special Committee, has (i) unanimously
determined that each of the merger agreement, the offer and the merger is fair
to, and in the best interests of, the stockholders of UTILX, (ii) duly approved
the merger agreement and the transactions contemplated thereby, including the
offer and the merger, and (iii) subject to the terms and conditions of the
merger agreement, resolved to recommend that the stockholders of UTILX accept
the offer and tender their shares pursuant to the offer, and approve and adopt
the merger agreement and the merger.
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Reasons for the Recommendation of UTILX Special Committee
In approving the merger, the tender offer and the merger agreement, and
recommending that all shareholders tender their shares, the Special Committee
considered a number of factors, including:
1. The Special Committee considered the current and historical financial
condition and results of operation of UTILX, as well as the prospects and
strategic objectives of UTILX, including the risks involved in achieving
those prospects and objectives, and the current and expected conditions in
the industries in which UTILX operates its business. The Special Committee
discussed its belief that UTILX's common stock has historically been
undervalued and the challenges of a relatively small market capitalization
in the marketplace.
2. The Special Committee considered the relationship of the offer price
and the merger consideration to the historical market price of the common
stock. The $6.125 offer price and the merger consideration exceed the
average closing price of the common stock during the one month and one year
periods preceding the announcement of the offer ($4.125 and $4.445,
respectively) and represent a 40% premium over the $4.375 Nasdaq National
Market closing price of the shares on June 28, 2000 (the last trading day
prior to the announcement of the offer). The Special Committee also
considered the form of consideration to be paid to holders of shares of the
common stock in the offer and the merger, and the certainty of cash
consideration as opposed to stock consideration. The Special Committee was
aware that the consideration to be received by holders of the shares in the
offer and the merger would be taxable to holders for federal income tax
purposes.
3. The Special Committee participated in presentations from BAS and
reviewed the opinion of BAS, dated June 28, 2000, that, based upon and
subject to certain considerations and assumptions, the consideration to be
received by UTILX's stockholders in the offer and the merger is fair, from
a financial point of view, to UTILX's stockholders. A copy of the opinion
delivered by BAS to the Special Committee, setting forth the procedures
followed, the matters considered and the assumptions made by BAS in
arriving at its opinion, is attached hereto as Annex A and incorporated
herein by reference. Stockholders are urged to read this opinion in its
entirety.
4. The Special Committee recognized that the obligation of InfrastruX
Group to consummate the offer and the merger is subject to a relatively
limited number of conditions, and is not subject to any financing
conditions on the part of InfrastruX Group. The Special Committee also
considered the likelihood of obtaining required regulatory approvals, and
the terms of the merger agreement regarding the obligation of both
companies to pursue such regulatory approvals.
5. The Special Committee considered that under the terms of the non-
solicitation agreement (discussed in the Section entitled "Transactions
between InfrastruX Group and UTILX"), while UTILX was prohibited from
soliciting acquisition proposals from third parties, UTILX was permitted to
respond to, and under certain circumstances engage in discussions with,
another party who made an unsolicited inquiry or acquisition proposal. The
provisions of the merger agreement that supercede the non-solicitation
agreement provide that UTILX may respond to, and engage in discussions with
and furnish information to, third parties having made an unsolicited, bona
fide acquisition proposal that the Special Committee in good faith
determines, upon advice of its independent financial advisors, would result
in a transaction more favorable, from a financial point of view, than the
transactions contemplated by the merger agreement and for which there would
not be a financing condition; if the Special Committee determines to accept
and recommend such acquisition proposal, the merger agreement will be
terminated and UTILX will be obligated to pay InfrastruX Group $2,000,000
as liquidated damages. The Special Committee has considered the possible
effect of these provisions on third parties who might be interested in
exploring a business combination with UTILX. In this regard, the Special
Committee recognized that the provisions of the non-solicitation agreement
and the superceding provisions of the merger agreement were insisted upon
by InfrastruX Group as a condition to entering into the merger agreement
and would be a factor in negotiating the offer price and the merger
consideration.
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<PAGE>
6. The Special Committee considered the fact that pursuant to the non-
solicitation agreement, InfrastruX Group advanced $50,000, and upon the
execution of the merger agreement advanced an additional $225,000, to
defray expenses to be incurred in connection with the offer and the merger.
Pursuant to the merger agreement, such advances are required to be repaid
to InfrastruX Group only if the merger agreement is terminated due to the
fact that UTILX is in material breach of any of its covenants or
obligations under the merger agreement, or if there is any material
inaccuracy in the representations and warranties of UTILX contained in the
merger agreement.
7. The Special Committee considered the complementary nature of
InfrastruX Group's business and UTILX's business, and InfrastruX Group's
intent to maintain UTILX's business strategy and employees.
In view of the many factors considered, the Special Committee did not find
it practical to, and did not, quantify or otherwise assign relative weights to
the specific factors considered. After weighing all of these considerations,
the Special Committee determined that the merger, and the transactions
contemplated by the merger, represented the best available transactions to
UTILX and unanimously approved the merger agreement and resolved to recommend
that holders of shares of common stock tender their shares in the offer.
Provisions for Unaffiliated Security Holders
Neither UTILX nor InfrastruX Group has made any provisions in connection
with the Offer or the Merger to grant unaffiliated shareholders of UTILX access
to UTILX's corporate records, or to obtain counsel or appraisal services at the
expense of either UTILX or InfrastruX Group.
Certain Projections for UTILX
In connection with InfrastruX Group's review of UTILX and in the course of
the negotiations between UTILX and InfrastruX Group, UTILX provided InfrastruX
Group with certain business and financial information about UTILX which
InfrastruX Group and Purchaser believe is not publicly available. This
information included forecasts of potential financial performance of UTILX
(without regard to the impact on UTILX of a transaction with InfrastruX Group)
which had previously been provided to UTILX's board of directors by UTILX
management on April 28, 2000. These forecasts included two alternative
scenarios: "Scenario A," representing, for information relating to the fiscal
year ending March 31, 2001, UTILX management's business plan, and, for all
other years, financial projections in which management assumes that ongoing
research and development efforts will not result in significant additional
profits and revenues, and "Scenario B" representing a "best case" scenario
under which increased revenue and profits could potentially be achieved in the
case that new products were developed and commercialized as a result of UTILX's
ongoing research and development efforts. Such future financial forecasts and
new product developments are, according to UTILX management, highly speculative
and should in no way be regarded as a likely outcome.
The forecasts provided by UTILX to InfrastruX Group were as follows:
(i) UTILX's estimated annual revenues and net income for the year ended
March 31, 2001 under Scenario A could be approximately $108,000,000
and $3,250,000, respectively; (and, under Scenario B, $108,000,000
and $3,250,000, respectively);
(ii) UTILX's estimated annual revenues and net income for the year ended
March 31, 2002 under Scenario A could be approximately $126,000,000
and $5,000,000, respectively; (and, under Scenario B, $132,000,000
and $7,600,000, respectively);
(iii) UTILX's estimated annual revenues and net income for the year ended
March 31, 2003 under Scenario A could be approximately $142,000,000
and $7,500,000, respectively; (and, under Scenario B, $155,000,000
and $13,000,000, respectively);
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<PAGE>
(iv) UTILX's estimated annual revenues and net income for the year ended
March 31, 2004 under Scenario A could be approximately $148,000,000
and $8,100,000, respectively; (and, under Scenario B, $171,000,000
and $17,700,000, respectively);
(v) UTILX's estimated annual revenues and net income for the year ended
March 31, 2005 under Scenario A could be approximately $158,000,000
and $9,700,000, respectively; (and, under Scenario B, $200,000,000
and $27,600,000, respectively);
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY
OF WHICH ARE BEYOND UTILX'S CONTROL. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT
BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN ADDITION, THESE
PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE
WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED
BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS
AND FORECASTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH
INFORMATION WAS MADE AVAILABLE TO THE PURCHASER AND INFRASTRUX GROUP BY UTILX.
NONE OF INFRASTRUX GROUP, PURCHASER, UTILX, ANY OF THEIR RESPECTIVE AFFILIATES
OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF
THE FOREGOING PROJECTIONS.
Opinion of Financial Advisor to the UTILX Special Committee
On June 14, 2000, UTILX board retained Banc of America Securities, LLC
("BAS") to act as its financial advisor in connection with the possible sale of
UTILX and, if requested, to render an opinion to UTILX's board as to the
fairness, from a financial point of view, of the merger consideration.
On June 28, 2000, at a meeting of the Special Committee of the UTILX board
held to evaluate the proposed merger, representatives from BAS rendered to
UTILX board an oral opinion, subsequently confirmed by delivery of a written
opinion dated June 28, 2000, to the effect that, as of such date and based on
and subject to the assumptions made, matters considered and limitations set
forth in such opinion and summarized below, the merger consideration was fair,
from a financial point of view, to the stockholders of UTILX (other than
InfrastruX Group and its affiliates).
THE FULL TEXT OF BAS'S WRITTEN OPINION DATED JUNE 28, 2000, WHICH SETS
FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY BAS IN CONNECTION WITH THE OPINION, IS
ATTACHED AS ANNEX A TO THIS INFORMATION STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. BAS'S OPINION IS DIRECTED ONLY TO UTILX CORPORATION BOARD, ADDRESSES
ONLY THE FAIRNESS OF THE MERGER CONSIDERATION, FROM A FINANCIAL POINT OF VIEW,
TO THE STOCKHOLDERS OF UTILX CORPORATION (OTHER THAN INFRASTRUX GROUP AND ITS
AFFILIATES), AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER TO
APPROVE THE MERGER. STOCKHOLDERS OF UTILX CORPORATION ARE URGED TO READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF BAS IN
THIS INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
In connection with BAS's role as financial advisor to UTILX, and in arriving
at its opinion, BAS:
. reviewed certain publicly available financial information and other
information concerning UTILX and InfrastruX Group and certain internal
analyses and other information furnished to it by UTILX;
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<PAGE>
. held discussions with members of the senior management of UTILX
regarding the business and prospects of UTILX;
. reviewed the reported prices and trading activity for UTILX common
stock;
. compared certain financial and stock market information for UTILX with
similar information for certain other companies whose securities are
publicly traded;
. reviewed the financial terms of certain recent business combinations
which it deemed comparable in whole or in part;
. reviewed the terms of the merger agreement and certain related
documents; and
. performed such other studies and analyses and considered such other
factors as it deemed appropriate.
In preparing its opinion, BAS did not assume responsibility for independent
verification of, and did not independently verify, any information, whether
publicly available or furnished to it, concerning UTILX or InfrastruX Group,
including, without limitation, any financial information considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, BAS assumed and relied on the accuracy and completeness of all such
information and did not conduct a physical inspection of any of the properties
or assets of UTILX or InfrastruX Group, and did not prepare or obtain any
independent evaluation or appraisal of any of the assets or liabilities of
UTILX or InfrastruX Group.
With respect to the financial forecasts and projections made available to
BAS by UTILX management and used in its analyses, BAS assumed that such
financial forecasts and projections have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of UTILX, as to the matters covered thereby. In rendering this
opinion, BAS expressed no view as to the reasonableness of such current fiscal
year forecasts and projections or the assumptions on which they are based.
BAS's opinion was necessarily based on economic, market and other conditions
as in effect on, and the information made available to it as of, the date of
the opinion. Although subsequent developments may affect its opinion, BAS has
assumed no obligation to update, revise or reaffirm its opinion.
For purposes of rendering its opinion and based on the consent of UTILX's
board of directors, BAS assumed that, in all respects material to its analysis:
. the representations and warranties of UTILX, InfrastruX Group and
InfrastruX Group's subsidiary contained in the merger agreement were
true and correct;
. UTILX, InfrastruX Group and InfrastruX Group's subsidiary would each
perform all of the covenants and agreements to be performed by it under
the merger agreement and all conditions to the obligations of each of
UTILX, InfrastruX Group and InfrastruX Group's subsidiary to consummate
the offer and merger would be satisfied without any waiver thereof; and
. all material governmental, regulatory or other approvals and consents
required in connection with the consummation of the merger would be
obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any
amendments, modifications or waivers to any agreements, instruments or
orders to which InfrastruX Group was a party or was subject or by which
it was bound, no limitations, restrictions or conditions would be
imposed or amendments, modifications or waivers made that would have a
material adverse effect on InfrastruX Group or would materially reduce
the contemplated benefits of the merger to UTILX.
SET FORTH BELOW IS A BRIEF SUMMARY OF THE MATERIAL FACTORS CONSIDERED, AND
FINANCIAL ANALYSES PERFORMED, BY BAS IN CONNECTION WITH ITS OPINION, WHICH WAS
RENDERED ORALLY TO UTILX CORPORATION BOARD AT ITS MEETING ON JUNE 28, 2000:
Discounted Cash Flow Analysis. BAS used financial cash flow forecasts for
UTILX for March 31 years 2001 through 2005, as estimated by the management of
UTILX, to perform discounted cash flow analysis. In
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<PAGE>
conducting this analysis, BAS first calculated the present values of the
forecasted cash flows. Second, BAS estimated the terminal value of UTILX at the
end of 2005 by applying multiples to UTILX's estimated 2005 EBITDA (earnings
before interest, taxes, depreciation and amortization) which multiples ranged
from 6x to 8x. BAS then discounted the cash flows and terminal values to
present values using discount rates ranging from 15% to 17%. BAS selected the
range of discount rates to reflect the estimated weighted average cost of
capital for UTILX. The weighted average cost of capital weights the cost of
debt and equity by the proportion of each type of capital employed by the
company. BAS used the June 26, 2000 10-year treasury note for a risk free rate,
Ibboson Associates equity risk premium, the average of the comparable companies
predicted betas derived from Barra's equity model and the Company's target
capital structure to calculate the Company's cost of capital.
This analysis indicated a range of aggregate value for UTILX, expressed as
multiples of fiscal year 2000 EBITDA, as follows:
Multiple of Aggregate Value to EBITDA
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount Terminal Multiple of 6x Terminal Multiple of 7x Terminal Multiple of 8x
Rate Fiscal Year 2000 EBITDA Fiscal Year 2000 EBITDA Fiscal Year 2000 EBITDA
-------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
15% 7.5x 8.4x 9.4x
16% 7.2x 8.1x 9.0x
17% 6.9x 7.8x 8.6x
</TABLE>
BAS noted that the aggregate value of the consideration to be received by
the stockholders of UTILX in connection with the implied multiples of (a) .5x
latest twelve months revenues, (b) 21.5 latest twelve months EBIT and (c) 8.2x
latest twelve months EBITDA for UTILX.
Analysis of Certain Publicly Traded Companies. Based on public and other
available information, BAS calculated the multiples of aggregate value to each
of (a) revenues, (b) earnings before interest and taxes ("EBIT") and (c)
earnings before interest, taxes, depreciation and amortization ("EBITDA"), each
for the latest twelve months, for four companies in the network infrastructure
services industry that BAS deemed to be comparable to UTILX.
BAS defined aggregate value to mean:
. equity value, defined as the product of the number of option adjusted
shares of common stock outstanding for a company multiplied by its stock
price; plus
. outstanding funded debt; less
. cash and cash equivalents.
The following table sets forth multiples indicated by this analysis for
these four companies:
<TABLE>
<CAPTION>
Range of
Aggregate Value to: Multiples Median Mean
---------------------------- -------------- ------ -----
<S> <C> <C> <C>
Latest twelve months revenue 1.1x to 1.5x 1.3x 1.3x
Latest twelve months EBIT 11.2x to 12.2x 12.3x 11.7x
Latest twelve months EBITDA 7.3x to 8.3x 8.4x 7.8x
</TABLE>
The comparable company analysis compared UTILX to the four companies in the
network infrastructure services industry on the basis that the companies
selected were the most relevant. Consequently, BAS did not include every
company that could be deemed to be a participant in the same industry.
BAS noted that the aggregate value of the consideration to be received by
the stockholders of UTILX in connection with the implied multiples of (a) .5x
latest twelve months revenues, (b) 21.5 latest twelve months EBIT and (c) 8.2x
latest twelve months EBITDA for UTILX.
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Analysis of Selected Precedent Transactions. Based on public and other
available information, BAS calculated the multiples of (a) aggregate value to
each of latest twelve months revenues, EBIT and net income for the acquired
company implied in eight acquisitions of network infrastructure services
companies that have been announced since 1997.
The following table sets forth the multiples indicated by this analysis for
these eight acquisitions:
<TABLE>
<CAPTION>
Aggregate Value to: Range of Multiples Median Mean
---------------------------- ------------------ ------ ----
<S> <C> <C> <C>
Latest twelve months revenue .3x to 1.3x .7x .8x
Latest twelve months EBIT 8.5x to 9.5x 6.4x 9.0x
Latest twelve months EBITDA 5.6x to 6.6x 4.8x 6.1x
</TABLE>
The comparable transactions analysis compared the merger to the eight
acquisitions of network infrastructure services companies on the basis that the
transactions selected were the most relevant given the factors considered
above. Consequently, BAS did not include every transaction that could be deemed
to have occurred in the relevant industries.
BAS noted that the aggregate value of the consideration to be received by
the stockholders of UTILX in connection with the implied multiples of (a) .5x
latest twelve months revenues, (b) 21.5 latest twelve months EBIT and (c) 8.2x
latest twelve months EBITDA for UTILX.
No company or transaction used in the comparable company or comparable
transactions analyses is identical to UTILX or the merger. Accordingly, an
analysis of the foregoing results is not mathematical. Rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value of the companies to which UTILX and the merger are
being compared.
Premiums Paid Analysis. BAS reviewed the consideration paid or offered in 30
merger and acquisition transactions announced in 1999 and 2000 involving U.S.
industrial or industrial services companies with pre-offer market
capitalizations of between $25 and $100 million. BAS calculated the premiums
paid or offered relative to the stock prices of the acquired companies one day
and four weeks before the announcement of the acquisition offer.
This analysis indicated the following median and mean premiums:
<TABLE>
<CAPTION>
Premium One Day Premium Four Weeks
Before Announcement Before Announcement
------------------- -------------------
<S> <C> <C>
Median............................. 18.6% 37.2%
Mean............................... 27.4% 43.6%
</TABLE>
BAS noted that the per share value of the cash consideration to be received
by UTILX stockholders in connection with the merger implied a premium of 32.3 %
over UTILX's closing stock price on June 23, 2000. The premium implied by the
merger over UTILX's closing stock price four weeks before that date was 53.8%.
The summary set forth above does not purport to be a complete description of
the opinion of BAS to UTILX board or the financial analyses performed and
factors considered by BAS in connection with its opinion. The preparation of a
fairness opinion is a complex analytic process involving the application of
subjective business judgment in various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. BAS believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or
selecting portions of the above summary, without considering all factors and
analyses, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In arriving at its fairness
determination, BAS did not assign specific weights to any particular analyses.
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<PAGE>
In performing its analyses and arriving at its opinion, BAS utilized a
variety of generally accepted valuation methods. The analyses were prepared
solely for the purpose of enabling BAS to provide its opinion to UTILX board as
to the fairness, from a financial point of view, of the merger consideration to
the stockholders of UTILX and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold,
which are inherently subject to uncertainty. In connection with its analyses,
BAS made, and was provided by UTILX with, numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of UTILX.
The assumptions and estimates contained in such analyses, and the ranges of
valuations resulting from any particular analysis, are not necessarily
indicative of actual historical values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of UTILX, neither UTILX nor BAS
nor any other person assumes responsibility if future results or actual values
are materially different from these forecasts or assumptions.
The type and amount of consideration payable in the offer and merger were
determined through negotiations between UTILX and InfrastruX Group and were
approved by UTILX board, acting through its Special Committee. The decision to
enter into the merger agreement was solely that of UTILX board, acting through
its Special Committee. BAS's opinion and financial analyses were only one of a
number of factors taken into consideration by UTILX board in its evaluation of
the proposed offer and merger and should not be viewed as determinative of the
views of UTILX board with respect to the merger consideration or the merger.
Pursuant to the terms of BAS's engagement, UTILX has paid $200,000 to BAS
for rendering its opinion and BAS will receive an additional $550,000 upon
consummation of the transaction. In addition, UTILX has agreed to reimburse BAS
for its reasonable travel and other out-of-pocket expenses, including
reasonable fees and disbursements of counsel, and to indemnify BAS and certain
related parties against certain liabilities, including certain liabilities
under the federal securities laws, relating to, or arising out of, its
engagement.
UTILX selected BAS as its financial advisor in connection with the offer and
merger based on BAS's reputation, expertise and familiarity with UTILX and its
business. BAS is an internationally recognized investment banking firm and, as
a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and valuations for
estate, corporate and other purposes.
Purpose and Structure of the Merger; Reasons of InfrastruX Group for the Merger
The purpose of the merger is for InfrastruX Group to increase InfrastruX
Group's ownership of UTILX from approximately 88% to 100%. Upon consummation of
the merger, UTILX will become a wholly-owned subsidiary of InfrastruX Group.
The acquisition of the shares was structured as a cash tender offer followed by
a cash merger so as to effect a prompt and orderly transfer of ownership of
UTILX from UTILX's public stockholders to InfrastruX Group and InfrastruX
Group's subsidiary, and so as to provide such stockholders with cash for all of
their shares.
Under the Certificate of Incorporation of UTILX, the approval of UTILX's
board and the affirmative vote of a majority of the votes entitled to be cast
by the holders of all the outstanding shares as of the record date are required
to approve and adopt the merger agreement. UTILX's board has approved and
adopted the merger agreement and the transactions contemplated thereby, and the
only remaining required corporate action of UTILX is the approval and adoption
of the merger agreement by a majority vote of UTILX stockholders. InfrastruX
Group has agreed to vote all shares it beneficially owns in favor of the
approval and adoption of the merger agreement. Because InfrastruX Group and its
affiliates own approximately 88% of the outstanding shares as of the record
date, the approval and adoption of the merger agreement is assured without the
vote of any other stockholder.
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Plans for UTILX after the Merger
Except as set forth in this information statement, it is expected that
initially following the merger, the business and operations of UTILX will
continue substantially as they are currently being conducted.
InfrastruX Group intends to conduct a detailed review of UTILX and its
assets, corporate structure, dividend policy, capitalization, operations,
properties, policies, management and personnel and to consider, subject to the
terms of the merger agreement, what, if any, changes would be desirable in
light of the circumstances then existing, and reserves the right to take such
actions or effect such changes as it deems desirable. Such changes could
include changes in UTILX's business, corporate structure, capitalization,
management or dividend policy.
Except as described above and for the transactions contemplated by the
Merger Agreement, InfrastruX Group has no current plans or proposals which
relate to or would result in: (a) an extraordinary corporate transaction, such
as a merger, reorganization or liquidation involving UTILX; (b) a sale or
transfer of a material amount of assets of UTILX or any of it subsidiaries; (c)
any change in the board or management of UTILX; (d) any material change in
UTILX's capitalization prior to the consummation of the merger; or (e) any
other material change in UTILX's corporate structure or business.
Merger Agreement
The following is a summary of the material provisions of the merger
agreement which relate to the merger. This summary does not purport to be
complete and is qualified in its entirety by reference to the merger agreement,
which is attached hereto as Annex C and is incorporated herein by reference.
Stockholders are urged to read the merger agreement in its entirety and to
consider it carefully.
Recommendation. UTILX's board, acting through a special committee of
disinterested directors, has (i) unanimously determined that each of the merger
agreement, the offer and the merger is fair to, and in the best interests of,
the stockholders of UTILX, (ii) duly approved the merger agreement and the
transactions contemplated thereby, including the offer and the merger and (iii)
subject to the terms and conditions of the merger agreement, resolved to
recommend that the stockholders of UTILX accept the offer and tender their
shares thereunder to InfrastruX Group's subsidiary and approve and adopt the
merger agreement and the merger.
Appointment of UTILX Directors by InfrastruX Group. The merger agreement
provides that, promptly upon the purchase by InfrastruX Acquisition, Inc. of
shares tendered in the offer, InfrastruX Group shall be entitled to designate a
majority of the members of UTILX's board of directors, subject to compliance
with Section 14(f) of the Exchange Act. UTILX has agreed to cause InfrastruX
Group's designees to be elected as directors of UTILX, including increasing the
size of the board of directors to the extent permitted by its Restated
Certificate of Incorporation and/or secure the resignations of such number of
directors as is necessary to cause InfrastruX Group's designees to be elected
as directors of UTILX.
The merger agreement provides that following the election or appointment of
Purchaser's designees in accordance with the immediately preceding paragraph,
any amendment or termination of the merger agreement by UTILX or any extension
by UTILX of the time for the performance of any of the obligations or other
acts of InfrastruX Group or Purchaser or waiver of any of UTILX's rights
thereunder, will require the concurrence of a majority of those directors of
UTILX then in office who were not designated by InfrastruX Group.
The Merger. The merger agreement provides that as promptly as practicable
after all conditions to the merger set forth therein have been satisfied or, to
the extent permitted thereunder, waived, InfrastruX Group's subsidiary will be
merged with and into UTILX in accordance with Delaware law. As a result of the
merger, the separate existence of InfrastruX Group's subsidiary will cease and
UTILX will continue as the surviving corporation.
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Effective Time. The merger shall become effective at such time as the merger
agreement is approved by UTILX stockholders and the Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware.
Merger Consideration. At the effective time, each outstanding share of stock
of UTILX (other than shares held in the treasury of UTILX, shares owned by
InfrastruX Group and its affiliates or shares as to which appraisal rights have
been properly exercised) will be converted, by virtue of the merger and without
any action on the part of UTILX stockholders, into the right to receive $6.125
per share in cash, without interest thereon.
Each holder of outstanding options under any employee stock option or
compensation plan or arrangement and each holder of outstanding warrants to
purchase shares of common stock will receive, for each share subject to such
option or warrant an amount (net of applicable withholding tax) in cash equal
to the difference between $6.125 and the per share exercise price of such
option or warrant, to the extent $6.125 is greater than the per share exercise
price of such option or warrant.
Surrender of Certificates and Payment Procedures. As soon as practicable
after the effective time, the paying agent will mail to each record holder of
an outstanding certificate representing a share immediately prior to the
effective time, a letter of transmittal and instructions for use in effecting
the surrender of such certificate in exchange for $6.125 in cash per share.
Upon surrender to the paying agent of a certificate representing a share,
together with the letter of transmittal, duly executed, and such other
documents as may reasonably be required by the paying agent, the holder of such
certificate shall be entitled to receive the merger consideration. Until
surrendered in accordance with the foregoing instructions, each certificate
representing a share will represent for all purposes only the right to receive
$6.125 in cash per share. Any merger consideration made available to the paying
agent that remains unclaimed by stockholders for six months after the effective
time will be delivered to UTILX and any UTILX stockholders who have not
theretofore made an exchange must thereafter look to UTILX for payment of their
claim for merger consideration.
Transfer of Shares. No transfer of shares will be made on the share transfer
books of UTILX after the effective time. If, at or after the effective time,
certificates of shares are presented, they will be canceled and exchanged for
the right to receive $6.125 in cash per share as provided in "-- Surrender of
Certificates and Payment Procedures."
Covenants. The merger agreement contains various customary covenants of the
parties thereto. A description of certain of these covenants follows:
Pursuant to the merger agreement, UTILX has covenanted and agreed, between
the date of the merger agreement and continuing until the earlier of the
termination of the merger agreement pursuant to its terms and the effective
time, unless InfrastruX Group shall otherwise consent in writing, to carry on
the businesses of UTILX and its subsidiaries diligently and in accordance with
good commercial practice and in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance with
all applicable laws and regulations, to pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, to pay or perform
other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
business dealings. In addition, UTILX will promptly notify InfrastruX Group of
any material event involving its business or operations. The merger agreement
provides that, except as permitted by the terms of the merger agreement,
neither UTILX nor any Subsidiary will do any of the following, without the
prior written consent of InfrastruX Group: (i) waive any stock repurchase
rights, accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant or
director stock plans or authorize cash payments in exchange for any options
granted under any of such plans; (ii) grant any severance or termination pay to
any officer or employee except payments in amounts consistent with policies and
past practices or pursuant to written agreements outstanding, or policies
existing, on the date of the merger agreement and as previously
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disclosed in writing to the other, or adopt any new severance plan; (iii)
subject to certain exceptions, transfer or license to any person or entity or
otherwise extend, amend or modify in any material respect any rights to UTILX's
intellectual property or other proprietary rights, or enter into grants to
future patent rights, other than in the ordinary course of business, consistent
with past practice; (iv) buy any Intellectual Property of a third party or
enter into any license agreement with respect to the Intellectual Property of
any third party for an acquisition or license, the price for which exceeds
$50,000 individually (or in the aggregate for a single third party) other than
"shrink wrap," "click wrap" and similar widely available commercial end-user
licenses; (v) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock; (vi) repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date of the merger agreement (which repurchase rights UTILX shall be obligated
to exercise if the repurchase price is less than the merger consideration);
(vii) issue, deliver, sell, authorize or propose the issuance, delivery or sale
of, any shares of capital stock or any securities convertible into shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
the issuance of shares, pursuant to the exercise of stock options therefor
outstanding as of the date of the merger agreement, and shares issuable
pursuant to the option plans; (viii) cause, permit or propose any amendments to
any charter document or Bylaw (or similar governing instruments of any
subsidiaries); (ix) acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of UTILX, or enter into any
joint ventures, strategic partnerships or alliances; (x) sell, lease, license,
encumber or otherwise dispose of any properties or assets which are material,
individually or in the aggregate, to the business of UTILX, except in the
ordinary course of business consistent with past practice; (xi) incur any
indebtedness for borrowed money (other than ordinary course trade payables or
pursuant to existing credit facilities in the ordinary course of business) or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire debt securities, or guarantee any debt securities
of others; (xii) adopt or amend any employee benefit or employee stock purchase
or employee option plan (other than is necessary to comply with law), or enter
into any employment contract, pay any special bonus or special remuneration to
any director or employee, or increase the salaries or wage rates of its
officers or employees other than in the ordinary course of business, consistent
with past practice, or change in any material respect any management policies
or procedures; (xiii) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business; (xiv) make any grant of exclusive rights to any third
party; (xv) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement involving payments of $50,000 or
more to which UTILX or any subsidiary thereof is a party or waive, release or
assign any material rights or claims thereunder; (xvi) materially revalue any
of its assets or, except as required by generally accepted accounting
principals, make any change in accounting methods, principles or practices;
(xvii) make or change any material election in respect of taxes, adopt or
change any accounting method in respect of taxes, enter into any closing
agreement, settle any claim or assessment in respect of taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of taxes in an amount in excess of $50,000 in the
aggregate; (xviii) commence any litigation or settle any litigation for an
amount in excess of the greater of $100,000 in the aggregate or the amount
reserved in respect thereof in the balance sheet of UTILX dated March 31, 2000;
or (xix) agree in writing or otherwise to take any of the actions described in
(i) through (xviii) above.
Confidentiality. The merger agreement provides that subject to and in
accordance with the terms and conditions of that certain letter dated May 24,
2000 between InfrastruX Group and UTILX (the "Confidentiality Agreement"), from
the date of the merger agreement to the effective time, UTILX shall, and
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shall cause its subsidiaries, officers, directors, employees and agents to,
afford the officers, employees and agents of InfrastruX Group, Purchaser and
their affiliates and the attorneys, accountants, banks, other financial
institutions and investment banks working with InfrastruX Group or Purchaser,
and their respective officers, employees and agents, reasonable access at all
reasonable times to its officers, employees, agents, properties, books, records
and contracts, and shall furnish InfrastruX Group, Purchaser and their
affiliates and the attorneys, banks, other financial institutions and
investment banks working with InfrastruX Group or Purchaser, all financial,
operating and other data and information as they reasonably request. Subject to
the requirements of law, InfrastruX Group and Purchaser shall, and shall use
their reasonable efforts to cause their officers, employees and agents, and the
attorneys, banks, other financial institutions and investment banks who obtain
such information to, hold all information obtained pursuant to the merger
agreement or the Confidentiality Agreement in accordance with the terms and
conditions of the Confidentiality Agreement.
The No Shop Provision. The merger agreement provides that until the earlier
of effective time or termination of the merger agreement, UTILX and its
subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of, any proposals
or offers by any person, entity or group (other than InfrastruX Group and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any non-public information concerning UTILX
or any of its subsidiaries to, or afford any access to the properties, books or
records of UTILX or any of its subsidiaries to, or otherwise assist or
facilitate, or enter into any agreement or understanding with, any person,
entity or group (other than InfrastruX Group and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
UTILX. Under the merger agreement, an "Acquisition Proposal" with respect to an
entity means any proposal or offer relating to (i) any merger, consolidation,
sale of substantial assets, reorganization, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transactions
involving the entity or any subsidiaries of the entity (other than sales of
assets or inventory in the ordinary course of business or as permitted under
the terms of the merger agreement), (ii) sale of outstanding shares of capital
stock of the entity (including without limitation by way of a tender offer or
an exchange offer), (iii) the Acquisition by any person of beneficial ownership
or a right to acquire beneficial ownership of, or the formation of any "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) which beneficially owns, or has the right to acquire
beneficial ownership of, 10% or more of the then outstanding shares of capital
stock of the entity (except for acquisitions for passive investment purposes
only in circumstances where the person or group qualifies for and files a
Schedule 13G with respect thereto); or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. UTILX will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Pursuant to the merger
agreement, UTILX will (i) notify InfrastruX Group as promptly as practicable if
any inquiry or proposal is made or any information or access is requested in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) as promptly as practicable notify InfrastruX Group of the terms and
conditions of any such Acquisition Proposal. In addition, subject to other
provisions of this paragraph, from and after the date of the merger agreement
until the earlier of the effective time and termination of the merger agreement
pursuant to its terms, UTILX and its subsidiaries will not, and will instruct
their respective directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, make or
authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than
InfrastruX Group).
Public Announcements. Pursuant to the merger agreement, InfrastruX Group and
Purchaser on the one hand and UTILX on the other hand will consult with each
other before issuing any press release or otherwise making any public
statements with respect to the merger agreement or the merger or the other
transactions contemplated thereby, and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law.
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Actions by UTILX. Pursuant to the merger agreement, subject to the terms and
conditions therein, UTILX shall, and shall cause its Subsidiaries to, cooperate
with InfrastruX Group and Purchaser and take all such actions as may be
reasonably requested by InfrastruX Group and Purchaser to accomplish the
merger.
Options; Employee Benefit Plans. The merger agreement provides that, as soon
as reasonably practicable, UTILX shall adopt resolutions or take such other
actions as may be required to effect the following: (i) adjust the terms of all
outstanding options to purchase shares, whether vested or unvested, as
necessary to provide that each option outstanding immediately prior to the
acceptance for payment of the shares pursuant to the tender offer, including
all vested and unvested Company Stock Options, shall be canceled effective
immediately prior to the acceptance for payment of the shares pursuant to the
tender offer, with the holder thereof becoming entitled to receive an amount in
cash equal to (A) the excess, if any, of (1) $6.125 over (2) the exercise price
per share of the Common Stock subject to such Company Option, multiplied by
(B) the number of shares of the Common Stock for which such option shall not
theretofore have been exercised.
The merger agreement provides that UTILX adopt resolutions that terminate or
amend 401(k) plans or other employee benefit plans in accordance with any
directions given by InfrastruX Group prior to the effective time.
Indemnification; Litigation. Pursuant to the merger agreement, from and
after the effective time, InfrastruX Group will cause the surviving corporation
to fulfill and honor in all respects the obligations of UTILX pursuant to any
indemnification agreements between UTILX and its directors and officers as of
the effective time (the "Indemnified Parties"). The Restated Certificate of
Incorporation and Bylaws of the surviving corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
to the Indemnified Parties as those contained in the Restated Articles of
Incorporation and Bylaws of UTILX as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a period of
six years from the effective time in any manner that would adversely affect the
rights thereunder of individuals who, immediately prior to the effective time,
were directors, officers, employees or agents of UTILX, unless such
modification is required by law. For a period of six years after the effective
time, InfrastruX Group will cause the surviving corporation to use its
commercially reasonable efforts to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by UTILX's directors' and officers' liability insurance policy on terms
comparable to those applicable to the current directors and officers of UTILX;
provided, however, that in no event will InfrastruX Group or the surviving
corporation be required to expend in excess of 150% of the annual premium
currently paid by UTILX for such coverage (or such coverage as is available for
such 150% of such annual premium).
The merger agreement provides that UTILX shall give InfrastruX Group the
opportunity to participate in the defense or settlement of any stockholder
litigation against UTILX and its directors relating to any of the transactions
contemplated by the merger agreement until the purchase of the shares pursuant
to the tender offer, and thereafter, shall give InfrastruX Group the
opportunity to direct the defense of such litigation and, if InfrastruX Group
so chooses to direct such litigation, InfrastruX Group shall give UTILX and its
directors an opportunity to participate in such litigation; provided, however,
that no settlement of such litigation shall be agreed to without InfrastruX
Group's consent; and provided further that no settlement requiring a payment by
a director shall be agreed to without such director's consent.
Additional Agreements. The merger agreement provides that, subject to its
terms and conditions, each of the parties thereto 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 to consummate and make
effective as promptly as practicable the transactions contemplated by the
merger agreement (including consummation of the tender offer and merger) and to
cooperate with each other in connection with the foregoing. In addition the
merger agreement provides that, subject to its terms and conditions, each of
the parties to the merger agreement agrees to use (i) all reasonable efforts to
obtain all necessary waivers, consents and approvals from other parties to loan
agreements, leases, licenses and other contracts, and (ii) all reasonable
efforts to obtain all necessary
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consents, approvals and authorizations as required to be obtained under any
federal, state or foreign law or regulations, including, but not limited to,
those required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), to defend all lawsuits or other legal proceedings
challenging the merger agreement or the consummation of the transactions
contemplated thereby, to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated thereby, to effect all necessary registrations and
filings, including, but not limited to, filings under the HSR Act and
submissions of information requested by Governmental Entities, and to fulfill
all conditions to the merger agreement.
Anti-Takeover Provisions. Pursuant to the merger agreement, if any "fair
price," "moratorium," "control share acquisition," "stockholder protection" or
other form of anti-takeover statute, regulation or charter provision or
contract is or shall become applicable to the tender offer or the transactions
contemplated by the merger agreement, UTILX and the board of directors of UTILX
shall grant such approvals and take such actions as are necessary under such
laws and provisions so that the transactions contemplated by the merger
agreement may be consummated as promptly as practicable on the terms
contemplated thereby and otherwise act to eliminate or minimize the effects of
such statute, regulation, provision or contract on the transactions
contemplated thereby.
Representations and Warranties. The merger agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations by UTILX and each of its Subsidiaries as to the
absence of certain changes or events concerning UTILX's business since March
31, 2000, compliance with law, litigation, employee benefit plans, real
property and leases, trademarks, intellectual property, environmental matters,
and material agreements, contracts and commitments.
Termination; Fees and Expenses. The merger agreement provides that it may be
terminated and the transactions contemplated thereby may be abandoned at any
time prior to the effective time, whether before or after approval by the
stockholders of UTILX:
(i) by mutual written agreement of the Boards of Directors of InfrastruX
Group and UTILX;
(ii) by ether InfrastruX Group or UTILX if any court of competent
jurisdiction in the United States or any United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the tender
offer and such order, decree, ruling or other action shall have
become final and nonappealable;
The merger agreement provides that, upon signing of merger agreement,
InfrastruX Group shall advance to UTILX $225,000 to fund expenses to be
incurred by UTILX in connection with the transactions contemplated by the
merger agreement. UTILX shall repay to InfrastruX Group these advances plus the
$50,000 advanced to UTILX by InfrastruX Group under the non-solicitation
agreement, in the event InfrastruX Group or Purchaser terminates the merger
agreement as a result of UTILX being in material breach of any of its covenants
or obligations under the merger agreement or if there shall have been any
material inaccuracy in the representations and warranties of UTILX contained in
the merger agreement.
The merger agreement provides that UTILX shall pay to InfrastruX Group, in
same day funds, upon demand, a fee of U.S. $2 million (the "Break-up Fee") in
the event that any of the following shall occur: (i) the board of directors of
UTILX or any committee thereof shall have approved, or recommended that
stockholders of UTILX accept or approve, a merger Proposal by a third party, or
shall have resolved to do any of the foregoing; (ii) the board of directors of
UTILX or any committee thereof shall have withdrawn or modified its approval
of, or recommendation that the stockholders of UTILX accept or approve (as the
case may be), the tender offer or shall have resolved to do any of the
foregoing; or (iii) UTILX shall have failed to include in Schedule 14D-9 the
recommendation of the board of directors of UTILX that the stockholders of
UTILX accept the tender offer.
Pursuant to the merger agreement the Break-up Fee shall be deemed to be
liquidated damages.
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Delisting of UTILX Shares Following the Merger
Following the merger, the holders of shares (other than InfrastruX Group and
its affiliates) will cease to participate in future earnings or growth, if any,
of UTILX or benefit from any increases, if any, in the value of UTILX, and they
no longer will bear the risk of any decreases in the value of UTILX. Because
the shares will be canceled as a result of the merger, the shares will be
delisted from the Nasdaq National Market System.
The shares are currently registered under the Exchange Act. Registration of
the shares under the Exchange Act will be terminated and UTILX will be relieved
of the obligation to comply with the public reporting requirements of the
Exchange Act, including the obligation to comply with the proxy rules of
Regulation 14A and 14C under the Exchange Act.
Regulatory Approvals
InfrastruX Group filed the required Premerger Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
with respect to the offer and the merger with the Antitrust Division of the
Department of Justice and the Federal Trade Commission on June 30, 2000. The
applicable waiting period expired on July 15, 2000.
We believe that there are no other material regulatory or governmental
approvals required in order for the merger to be consummated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as InfrastruX Group's acquisition of
UTILX. At any time before or after the merger, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the merger or seeking the divestiture of shares purchased by
InfrastruX Group's subsidiary or the divestiture of substantial assets of
InfrastruX Group, UTILX or their respective subsidiaries. Private parties and
state attorneys general may also bring legal action under federal or state
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
Financing of the Merger
The total amount of funds required by InfrastruX Group and InfrastruX
Group's subsidiary to consummate the merger and to pay related fees and
expenses is estimated to be approximately $5 million. The merger is not
conditioned on InfrastruX Group obtaining financing. InfrastruX Group expects
to fund the merger and to pay related fees and expenses from internally
generated funds. No alternate financing plan currently exists.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of UTILX's management and UTILX's board (as well as other
employees of UTILX) have certain interests in the merger that are described
below that are in addition to their interests as stockholders generally. UTILX
board took these interests into account in approving and adopting the merger
agreement and the transactions contemplated thereby.
Pursuant to the terms of the Merger Agreement, immediately prior to the
effective date of the merger, each option to purchase shares outstanding under
any stock option or compensation plan or arrangement of UTILX shall be
cancelled and that UTILX shall pay to the holder of each such option an amount
in cash determined by multiplying (i) the excess, if any, of the amount of the
merger consideration over the applicable per share exercise price of such
option or warrant by (ii) the number of shares to which such option or warrant
related.
Pursuant to the merger agreement, UTILX and InfrastruX Group have entered
into an employment agreement with William Weisfield, President and Chief
Executive Officer of UTILX, which will be effective on
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the closing of the merger. Mr. Weisfield will serve as the President of UTILX
following the merger. The agreement may be terminated by either Mr. Weisfield
or UTILX at any time, with or without reason. The agreement provides for an
annual base salary of $325,000, subject to increase in future years in the
discretion of UTILX's Board. Mr. Weisfield will also be granted stock options,
following InfrastruX Group's adoption of a stock option plan, to purchase a
number of shares of InfrastruX Group common stock equal to 1% of InfrastruX
Group's outstanding stock, subject to standard vesting provisions and at an
exercise price equal to the fair market value of the InfrastruX Group common
stock on the date of grant. If Mr. Weisfield's employment is terminated without
cause (as defined in the employment agreement) or Mr. Weisfield terminates his
employment for good reason (as defined in the employment agreement), he will be
entitled to receive termination payments equal to eight months salary.
Indemnification of UTILX directors and officers InfrastruX Group, InfrastruX
Group's subsidiary and UTILX have each agreed that for six years after the
effective time, InfrastruX Group will cause UTILX to indemnify and hold
harmless the present and former officers and directors of UTILX in respect of
acts or omissions occurring at or prior to the effective time to the fullest
extent provided by Delaware law or any other applicable laws or as provided
under UTILX's certificate of incorporation and bylaws in effect on the date of
the merger agreement, subject to any limitation imposed from time to time under
applicable law.
For a period of six years after the effective time, InfrastruX Group will
cause the surviving corporation to use its commercially reasonable efforts to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who are currently covered by UTILX's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the current directors and officers of UTILX; provided, however, that in no
event will InfrastruX Group or the surviving corporation be required to expend
in excess of 150% of the annual premium currently paid by UTILX for such
coverage (or such coverage as is available for such 150% of such annual
premium).
TRANSACTIONS BETWEEN INFRASTRUX GROUP AND UTILX
John D. Durbin, a director of UTILX, is also President and Chief Executive
Officer of InfrastruX Group and a director of Puget John W. Ellis, a director
of UTILX, is also a director of Puget As of June 2, 2000 Mr. Durbin
beneficially owned 36,000 Shares (including shares subject to options
exercisable within 60 days of June 2, 2000) and Mr. Ellis beneficially owned
60,000 Shares (including shares subject to options exercisable within 60 days
of June 2, 2000). In connection with their services as directors, in UTILX's
fiscal year ended March 31, 2000, Mr. Ellis received compensation of
approximately $12,950 and options to purchase 5,000 Shares, and Mr. Durbin
received compensation of approximately $12,250 and options to purchase
5,000 Shares. Mr. Durbin and Mr. Ellis are members of UTILX's compensation
committee, and Mr. Durbin is also a member of UTILX's audit committee.
UTILX provides services to Puget in the ordinary course of business. In the
past fiscal year ended March 31, 2000, Puget made payments to UTILX in exchange
for such services totaling approximately $480,000.
Effective as of May 24, 2000, UTILX and InfrastruX Group entered into the
Confidentiality Agreement pursuant to which the parties agreed to provide,
among other things, for the confidential treatment of their discussions
regarding the tender offer and the merger and the exchange of confidential
information.
The Confidentiality Agreement also provides that for a period of two years
from the date of such agreement, each party agrees that unless specifically
invited in writing by the other party, neither party nor any affiliate will
directly or indirectly effect or seek, offer or propose to effect, or assist
any other person to effect or seek, offer or propose, any (i) acquisition of
the securities or assets of the other party; (ii) tender or exchange offer,
merger or other business combination involving the other party; (iii) any
recapitalization, restructuring,
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liquidation, dissolution or other extraordinary transaction with respect to the
other party; or (iv) any solicitation of proxies or consents to vote any voting
securities of the other party, or otherwise act, alone or in concert with
others, to seek to control or influence the other party.
Effective as of June 14, 2000, UTILX and InfrastruX Group entered into a
non-solicitation and expense reimbursement agreement. The provisions of the
non-solicitation agreement have subsequently been superceded by provisions of
the merger agreement. The non-solicitation agreement provided that until the
earlier of June 30, 2000 or the signing of a definitive merger agreement, UTILX
would cease all discussions with any parties other than InfrastruX Group with
respect to any proposed merger, acquisition or similar transaction, and would
not initiate, solicit or encourage inquiries, negotiations or proposals with
respect to any such transactions. UTILX was not prevented, however, from
responding to, or engaging in discussions with another party who made an
unsolicited inquiry or proposal to merge with or acquire UTILX. UTILX was
required to immediately notify InfrastruX Group of any unsolicited inquiries or
proposals, and if an unsolicited proposal was received by UTILX, InfrastruX
Group was relieved of its "standstill" obligations, as described above, under
the Confidentiality Agreement.
The non-solicitation agreement also provided that, in order to facilitate
negotiations, InfrastruX Group would reimburse UTILX for its actual reasonable
expenses incurred with respect to professional fees in connection with the
tender offer and the merger, up to a maximum amount of $150,000, and in
accordance with such agreement on June 14, 2000 InfrastruX Group advanced to
UTILX $50,000.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
U.S. Shareholders. The receipt of cash for shares by a U.S. shareholder in
the merger (including by reason of exercise of appraisal rights) will be a
taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a U.S. shareholder will recognize gain or loss for U.S. federal income
tax purposes equal to the difference between the amount received in exchange
for the shares sold and such stockholder's adjusted tax basis in such shares.
Assuming the shares constitute capital assets in the hands of the stockholder,
such gain or loss will be capital gain or loss. If, at the time of the merger,
the shares then exchanged have been held for more than one year by such
stockholder, such gain or loss will be long-term capital gain or loss (other
than, with respect to the exercise of appraisal rights, amounts, if any, which
are or are deemed to be interest for federal income tax purposes, which amounts
will be taxed as ordinary income). Under current law, long-term capital gains
of individuals are generally taxed at lower rates than items of ordinary income
and short-term capital gains. Capital losses are only deductible to the extent
of capital gains plus, in the case of taxpayers other than corporations, $3,000
of ordinary income. Capital losses that are not currently deductible may be
carried forward to other years, subject to certain limitations.
Non-U.S. Shareholders. Non-U.S. shareholders generally will not be subject
to U.S. federal income tax on the receipt of cash for shares pursuant to the
Offer or in the merger, unless such Non-U.S. shareholder's gain is effectively
connected with a U.S. trade or business; or, in the case of gain recognized by
an individual Non-U.S. shareholder, such individual is present in the U.S. for
183 days or more during the taxable year and certain other conditions are
satisfied.
Backup Withholding. Stockholders may be subject to "backup withholding" at a
rate of 31% under United States tax law when they receive payments of cash
pursuant to the merger. Backup withholding is not an additional tax but merely
an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
his own tax advisor as to his qualification for exemption from withholding and
the procedure for obtaining such exemption. To
23
<PAGE>
avoid the imposition of backup withholding, U.S. Shareholders and Non-U.S.
Shareholders should follow the instructions set forth below.
U.S. Shareholders. In order to avoid "backup withholding" on payments of
cash pursuant to the merger (including any cash paid pursuant to the exercise
of appraisal rights), a U.S. shareholder surrendering shares in the merger
must, unless an exemption applies, provide the paying agent with such
stockholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such TIN is correct and
that such stockholder is not subject to backup withholding. If a U.S.
shareholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service may impose a
penalty on such stockholder and payment of cash to such stockholder pursuant to
the merger may be subject to backup withholding of 31%. All U.S. Shareholders
surrendering shares pursuant to the merger should complete and sign the
Substitute Form W-9 included as part of the letter of transmittal which will be
sent by the paying agent following the effective date of the merger to provide
the information and certification necessary to avoid backup withholding.
Non-U.S. Shareholders. In order to avoid 31% backup withholding, Non-U.S.
shareholders other than corporations should properly complete and provide to
the paying agent the Substitute Form W-8 included as part of the letter of
transmittal which will be sent by the paying agent after the effective date of
the merger. Foreign corporations should follow the instructions above with
respect to the completion of Substitute Form W-9.
For purposes of this information statement, "U.S. shareholder" and "Non-U.S.
shareholder" have the following meanings:
"U.S. shareholder" means one of (1) a citizen or resident of the United
States, including an alien individual (such as a citizen of another country)
who is a lawful permanent resident of the United States or meets the
"substantial presence test" under Section 7701(b) of the Code (for example,
because the alien individual is present in the United States for 183 days or
more in the current calendar year), (2) a corporation or partnership created or
organized in the United States or under the laws of the United States or any
political subdivision, or (3) an estate or trust which is not a foreign estate
or trust under Section 7701(a)(31) of the Code.
"Non-U.S. shareholder" means any stockholder that is not a U.S. Shareholder,
except for Non-U.S. shareholders, if any, who are subject to United States
federal income tax on payments received pursuant to the merger because such
payments are effectively connected with their conduct of a U.S. trade or
business. Any such stockholder receiving payments that are effectively
connected with the conduct of a U.S. trade or business should contact an
independent tax advisor with respect to the backup withholding and other U.S.
tax consequences of receiving payments pursuant to the merger.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN SHAREHOLDERS,
DEPENDING ON THEIR CIRCUMSTANCES, INCLUDING SHAREHOLDERS WHO ACQUIRED SHARES
PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION. SHAREHOLDERS WHO ARE IN SPECIAL TAX SITUATIONS (SUCH AS FINANCIAL
INSTITUTIONS, INSURANCE COMPANIES, OR TAX-EXEMPT ORGANIZATIONS), OR TO PERSONS
HOLDING SHARES AS PART OF A "STRADDLE," "HEDGE" OR "CONVERSION TRANSACTION."
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
24
<PAGE>
APPRAISAL RIGHTS
Stockholders of UTILX are entitled to appraisal rights under Section 262 of
the General Corporation Law of the State of Delaware as to shares owned by
them. Set forth below is a summary description of Section 262. Section 262 is
reprinted in its entirety as Annex B to this information statement. All
references in Section 262 and in this summary to a "stockholder" are to the
record holder of the shares as to which appraisal rights are asserted. A person
having a beneficial interest in shares that are held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever appraisal rights the beneficial owner may have.
FOR MORE DETAIL REGARDING APPRAISAL RIGHTS, SEE ANNEX B. THIS SUMMARY AND
ANNEX B SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE
STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO BECAUSE
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN
WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
In accordance with Section 262, any stockholder may, before the vote at the
special meeting upon the proposal to approve and adopt the merger agreement,
demand in writing from UTILX the appraisal of the fair value of such
stockholder's shares. Such demand must be made within 20 days after the day of
mailing of this information statement and which demand must reasonably inform
UTILX of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholder's shares. In order to be
entitled to appraisal rights with respect to any shares, a stockholder must be
the record holder of such shares on the date of such demand, must continuously
hold such shares through the effective time, must properly demand an appraisal
as described in this paragraph and the following paragraphs, and must not vote
in favor of the proposal to approve and adopt the merger agreement. Any
stockholder (other than a record owner who is acting as a nominee holder for
different beneficial owners) seeking to exercise appraisal rights for a
portion, but not all, of such stockholder's shares should consult with legal
counsel before taking any such action. UTILX believes that Delaware law has not
clearly addressed the ability of such a stockholder to exercise appraisal
rights with respect to a portion, but not all, of such stockholder's shares.
Should a stockholder (other than a record owner who is acting as a nominee
holder for different beneficial owners) seek to exercise appraisal rights with
respect to a portion, but not all, of such stockholder's shares, UTILX
presently intends to assert that by doing so such stockholder has waived such
stockholder's appraisal rights. Stockholders should be aware that a Delaware
court may find that such stockholder has so waived such stockholder's appraisal
rights. A stockholder who elects to exercise appraisal rights must mail or
deliver such stockholder's written demand to the president of UTILX at 22820
Russell Road, P.O. Box 97009, Kent, Washington 98064-9709. A vote against the
merger or a failure to vote for the merger would not by itself constitute
sufficient notice of a stockholder's election to exercise appraisal rights.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the certificate or
certificates representing such stockholder's shares. If the shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian, or custodian,
such demand must be executed by the fiduciary. If the shares are owned of
record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner.
A record owner, such as a broker, who holds shares as a nominee for others,
may exercise appraisal rights with respect to the shares held for all or less
than all beneficial owners of shares as to which such person is the record
owner. In such case, the written demand must set forth the number of shares
covered by such demand. Where the number of shares is not expressly stated, the
demand will be presumed to cover all shares outstanding in the name of such
record owner. Beneficial owners who are not record owners and who intend to
25
<PAGE>
exercise appraisal rights should instruct the record owner to comply strictly
with the statutory requirements with respect to the exercise of appraisal
rights.
Within 120 days after the effective time, either the surviving corporation
or any stockholder who has complied with the required conditions of Section 262
may file a petition in the Delaware Court of Chancery demanding a determination
of the fair value of the shares of the dissenting stockholders. UTILX is under
no obligation to and has no present intention to file such a petition.
Accordingly it is the obligation of the former stockholders to initiate all
necessary action to perfect their appraisal rights in respect of such shares
within the time prescribed in Section 262.
Within 120 days after the Effective Time, any former holder of Common Stock
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from UTILX a statement setting forth
the aggregate number of shares not voted in favor of the adoption of the Merger
Agreement and with respect to which demands for appraisal have been received
and the aggregate number of former holders of such shares. Such statement must
be mailed within ten days after the expiration of the period for delivery of
demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the shares formerly owned by
such stockholders, determining the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value, the Delaware
Chancery Court is to take into account all relevant factors. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares have been appraised.
Stockholders considering seeking appraisal should note that the "fair value"
of their shares determined under Section 262 could be more than, the same as or
less than $6.125 per share, and that opinions of investment banking firms as to
fairness, from a financial point of view, are not opinions as to fair value
under Section 262. The cost of the appraisal proceeding may be determined by
the Delaware Chancery Court and taxed against the parties as the Delaware
Chancery Court deems equitable in the circumstances. Upon application of a
dissenting stockholder, the Delaware Chancery Court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal.
From and after the effective time, no stockholder who has duly demanded
appraisal in compliance with Section 262 will be entitled to vote for any
purpose the shares subject to such demand or to receive payment of dividends or
other distributions on such shares, except for dividends or distributions
payable to stockholders of record at a date prior to the effective time.
At any time within 60 days after the effective time, any stockholder shall
have the right to withdraw such stockholder's demand for appraisal and to
accept the terms offered in the merger agreement; after this period, a
stockholder may withdraw such stockholder's demand for appraisal only with the
consent of the surviving corporation. If no petition for appraisal is filed
with the Delaware Chancery Court within 120 days after the effective time,
stockholders' rights to appraisal shall cease, and all stockholders who had
previously demanded appraisal shall thereafter be entitled to receive $6.125
per share, in cash, without interest thereon, upon valid surrender of the
certificates that formerly represented their shares. Inasmuch as UTILX has no
obligation to file such a petition, and has no present intention to do so, any
stockholder who desires such a petition to be filed is advised to file it on a
timely basis. However, no petition timely filed in the Delaware Chancery Court
26
<PAGE>
demanding appraisal shall be dismissed as to any stockholder without the
approval of the Delaware Chancery Court, and such approval may be conditioned
upon such terms as the Delaware Chancery Court deems just.
CERTAIN INFORMATION CONCERNING UTILX AND THE SHARES GENERALLY
UTILX is a Delaware corporation with its principal executive offices located
at 22820 Russell Road, P.O. Box 97009, Kent, Washington 98064. UTILX provides
specialty services and products to electric, telecommunications, natural gas,
water, sewer, and other utilities in the United States and around the world,
and drilling equipment to contractors and other users outside the United
States.
Price Range of Shares; Dividends
The shares are authorized for quotation on the Nasdaq National Market under
the symbol "UTLX."
<TABLE>
<CAPTION>
High Low Volume(1)
------ ------- ---------
<S> <C> <C> <C>
Fiscal Year Ending March 31, 1998:
First Quarter..................................... 4 7/8 3 13/16 738,617
Second Quarter.................................... 5 3/8 4 837,668
Third Quarter..................................... 6 7/8 4 3/8 1,240,320
Fourth Quarter.................................... 7 7/8 4 7/8 1,488,111
Fiscal Year Ending March 31, 1999:
First Quarter..................................... 5 3/4 4 1/8 1,025,477
Second Quarter.................................... 5 3 1/4 630,553
Third Quarter..................................... 3 7/16 1 7/16 2,521,877
Fourth Quarter.................................... 3 1/2 1 1/2 1,305,170
Fiscal Year Ending March 31, 2000:
First Quarter..................................... 3 1/2 1 1/2 3,342,936
Second Quarter.................................... 4 3/4 2 7/16 1,956,995
Third Quarter..................................... 4 3/4 2 9/16 1,430,574
Fourth Quarter.................................... 8 7/16 3 8,977,565
Fiscal Year Ending March 31, 2001:
First Quarter..................................... 6 1/4 3 3/4 4,253,384
Second Quarter (through August 4, 2000)........... 6 1/8 5 7/8 2,726,915
</TABLE>
--------
(1) Aggregate trading volume per period.
UTILX historically has not declared dividends.
On June 28, 2000, the last full trading day prior to the announcement of the
execution of the merger agreement and of InfrastruX Group's intention to
commence the Offer, the closing price per share as reported on the Nasdaq was
$4.375. On August 4, 2000, the closing price per share as reported on the
Nasdaq was $5.969.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
27
<PAGE>
CERTAIN INFORMATION CONCERNING INFRASTRUX GROUP
AND INFRASTRUX GROUP'S SUBSIDIARY
Purchaser is a newly formed Delaware corporation organized in connection
with the tender offer and the merger and has not carried on any activities
other than in connection with the tender offer and the merger. The principal
offices of Purchaser are located at 411- 108th Avenue N.E., Bellevue,
Washington 98004 and its business telephone number is (425) 462-3162. Purchaser
is a wholly owned subsidiary of InfrastruX Group.
InfrastruX Group is a Washington corporation and a wholly owned subsidiary
of Puget InfrastruX Group was formed in June, 2000 by Puget to acquire network
infrastructure services companies serving the utility and telecommunication
industries. The principal offices of InfrastruX Group are located at 411--108th
Avenue N.E., Bellevue, Washington 98004 and its business telephone number is
(425) 462-3162. InfrastruX Group currently has no business or operations.
Puget is an investor-owned public utility incorporated in the State of
Washington furnishing electric and gas service to a territory covering
approximately 6,000 square miles, principally in the Puget Sound region of
Washington State. Puget is subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the commission related to
its business, financial condition and other matters.
OWNERSHIP OF SHARES
As of August 4, 2000, there were 7,475,944 shares outstanding. The following
table sets forth the beneficial ownership of shares as of August 4, 2000 by
each person known by UTILX to own more than 5% of the outstanding shares. None
of the directors and executive officers of UTILX as at such date own any
shares. Each of the stockholders named below has sole voting and investment
power with respect to the shares beneficially owned:
<TABLE>
<CAPTION>
Number of Shares of Percent of UTILX Common
Name and Address of UTILX Common Stock Stock Beneficially
Beneficial Owner Beneficially Owned Owned
---------------------------- ------------------- -----------------------
<S> <C> <C>
InfrastruX Acquisition, Inc. 6,584,685 88%
411--108th Avenue N.E.
Bellevue, Washington 98004
</TABLE>
--------
(1) Applicable percentage ownership for the stockholder is based on 7,475,944
shares outstanding as of August 4, 2000.
ADDITIONAL AND AVAILABLE INFORMATION
All documents filed by UTILX pursuant to Sections 13(a), 14 or 15(d) of the
Exchange Act after the date of this information statement and prior to the date
of the special meeting shall be deemed to be incorporated by reference into
this information statement and to be a part hereof from the dates of filing
such documents or reports. Any statement contained herein or in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this information statement to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated herein modifies or supercedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this information
statement.
Puget and UTILX are each subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, are each required to file
periodic reports, proxy statements and other information with the SEC relating
to their respective business, financial condition and other matters. Such
reports, proxy statements
28
<PAGE>
and other information can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information
regarding the public reference facilities may be obtained from the SEC by
telephoning 1-800-SEC-0330. InfrastruX Group's and UTILX's filings are also
available to the public on the SEC's internet site (http://www.sec.gov). Copies
of such materials may also be obtained by mail from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Certain reports and other information concerning Puget Sound
Energy, Inc. may also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF UTILX, INFRASTRUX GROUP OR INFRASTRUX GROUP'S
SUBSIDIARY NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED.
OTHER MATTERS
We do not intend to hold a 2001 annual meeting prior to the scheduled
consummation of the merger. If the merger is not consummated and we do hold a
2001 annual meeting, we will notify you of such meeting, including the date by
which stockholder proposals must be received at UTILX's executive offices in
order to be considered for inclusion in the proxy materials relating to such
meeting.
We do not intend to bring any other matters before the special meeting, and
are not aware of any other matters that are expected to be brought properly
before the special meeting.
29
<PAGE>
ANNEX A
[LETTERHEAD OF BANK OF AMERICA]
June 28, 2000
Special Committee of the
Board of Directors
UTILX Corporation
22820 Russell Road
P.O. Box 97009
Kent, Washington 98064
Members of the Special Committee of the Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of UTILX Corporation (the "Company") of the
consideration proposed to be received by such stockholders in the proposed
tender offer (the "Offer") by InfrastruX Acquisition, Inc. (the "Purchaser"),
a wholly owned subsidiary of InfrastruX Group, Inc. (the "Parent"), a wholly
owned subsidiary of Puget Sound Energy, Inc. for all of the outstanding shares
of Common Stock, no par value, of the Company (the "Company Common Stock") and
the proposed subsequent merger (the "Merger" and together with the Offer, the
"Transactions") of the Purchaser with and into the Company. Pursuant to the
terms of the Agreement and Plan of Merger, to be dated as of June 28, 2000
(the "Agreement"), among the Company, the Parent and the Purchaser, the
Purchaser will commence the Offer at an offer price of $6.125 per share in
cash, and subsequently engage in the Merger pursuant to which the Company will
become a wholly owned subsidiary of the Parent and stockholders of the Company
will receive for each share of Company Common Stock held by them, other than
shares held in treasury or held by the Purchaser or any affiliate of the
Purchaser or as to which dissenters' or appraisal rights have been perfected,
consideration equal to $6.125 per share. The terms and conditions of the
Transactions are more fully set out in the Agreement.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company;
(iii) analyzed certain financial forecasts prepared by the management of
the Company;
(iv) discussed the past and current operations, financial condition and
prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Company
Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Company Common Stock with that of certain
other publicly traded companies we deemed relevant;
(vii) compared certain financial terms of the Transactions to financial
terms, to the extent publicly available, of certain other business
combination transactions we deemed relevant;
(viii) reviewed the June 27, 2000 draft of the Agreement and certain
related documents;
(ix) performed such other analyses and considered such other factors as
we have deemed appropriate.
A-1
<PAGE>
Special Committee of the
Board of Directors
UTILX Corporation
June 28, 2000
Page 2
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information reviewed by us
for the purposes of this opinion. With respect to the financial forecasts, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of the future
financial performance of the Company. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals.
We were requested not to and did not contact any other parties with respect
to the sale of all or any part of the Company or any other alternative
transaction other than those parties that could be contacted under the
Company's Non-Solicitation and Expense Reimbursement Agreement dated June 14,
2000. We were not requested to and did not directly participate in negotiations
with respect to the terms of the Transactions. Consequently, we have assumed
that such terms are the most beneficial terms from the Company's perspective
that could under the circumstances be negotiated among the parties to the
Transactions, and no opinion is expressed as to whether any alternative
transaction might produce consideration for the Company's stockholders in an
amount in excess of that contemplated in the Transactions.
We have acted as sole financial advisor to the Special Committee of the
Board of Directors of the Company in connection with the Transactions and will
receive a fee for our services, including a fee, which is contingent upon the
consummation of the Merger. In the past, Banc of America Securities LLC or its
affiliates have provided financial advisory and financing services for the
Company and have received fees for the rendering of these services. In the
ordinary course of our businesses, we and our affiliates may actively trade the
debt and equity securities of the Company and Puget Sound Energy, Inc. for our
own account or for the accounts of customers and, accordingly, we or our
affiliates may at any time hold long or short positions in such securities.
It is understood that this letter is for the benefit and use of the Special
Committee of the Board of Directors of the Company in connection with and for
purposes of its evaluation of the Merger. This opinion may not be disclosed,
referred to, or communicated (in whole or in part) to any third party for any
purpose whatsoever except with our prior written consent in each instance.
However, this opinion may be included in its entirety in any filing made by the
Company in respect of the Transactions with the Securities and Exchange
Commission, so long as this opinion is reproduced in such filing in full and
any description of or reference to us or summary of this opinion and the
related analysis in such filing is in a form acceptable to us and our counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
we do not have any obligation to update, revise, or reaffirm this opinion. In
addition, BAS expresses no opinion or recommendation as to how the stockholders
of the Company should vote at the stockholders' meeting held in connection with
the Merger or whether stockholders of the Company should or should not tender
their shares of Company Common Stock to the Purchaser pursuant to the Offer.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, we are of the opinion on the date hereof that
the consideration to be received by the Company's stockholders in the proposed
Transactions is fair from a financial point of view to the Company's
stockholders.
Very truly yours,
[LOGO OF BANC OF AMERICA SECURITIES
LLC]
A-2
<PAGE>
ANNEX B
(S)262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms
of an agreement of merger or consolidation pursuant to (S)(S)251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof), or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under (S)253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
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of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do so
by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or (S)253
of this title, each constituent corporation, either before the effective date
of the merger or consolidation or within ten days thereafter, shall notify each
of the holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares of
such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such
notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
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(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of
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<PAGE>
uncertificated stock forthwith, and the case of holders of shares represented
by certificates upon the surrender to the corporation of the certificates
representing such stock. The Court's decree may be enforced as other decrees in
the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 339, L.
'98, eff. 7-1-98.)
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<PAGE>
ANNEXC
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--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
By and Among
INFRASTRUX GROUP, INC.
INFRASTRUX ACQUISITION, INC.
and
UTILX CORPORATION
Dated as of June 28, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
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<C> <C> <S> <C>
ARTICLE I THE TENDER OFFER................................................ C-1
1.1 The Offer......................................................... C-1
1.2 Company Action.................................................... C-2
1.3 Directors......................................................... C-3
ARTICLE II THE MERGER..................................................... C-4
2.1 The Merger........................................................ C-4
2.2 Effective Time.................................................... C-4
2.3 Effects of the Merger............................................. C-4
2.4 Restated Certificate of Incorporation............................. C-4
2.5 Bylaws............................................................ C-4
2.6 Directors......................................................... C-4
2.7 Officers.......................................................... C-4
2.8 Conversion of Shares.............................................. C-5
2.9 Payment for Shares................................................ C-5
2.10 No Further Rights or Transfers.................................... C-6
2.11 Supplementary Action.............................................. C-6
2.12 Closing........................................................... C-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. C-7
3.1 Organization of the Company....................................... C-7
3.2 Company Capital Structure......................................... C-7
3.3 Obligations With Respect to Capital Stock......................... C-8
3.4 Authority......................................................... C-8
3.5 SEC Filings; the Company Financial Statements..................... C-9
3.6 Absence of Certain Changes or Events.............................. C-10
3.7 Taxes............................................................. C-10
3.8 Title to Properties; Absence of Liens and Encumbrances............ C-12
3.9 Intellectual Property............................................. C-12
3.9.1 General.................................................... C-12
3.9.2 Company Technology......................................... C-12
3.9.3 Third Party Technology..................................... C-12
3.9.4 Trademarks................................................. C-13
3.9.5 Intellectual Property Rights............................... C-13
3.9.6 Maintenance of Rights...................................... C-13
3.9.7 Third Party Claims......................................... C-14
3.9.8 Infringement by the Company................................ C-14
3.9.9 Restrictions on Intellectual Property...................... C-14
3.10 Compliance; Permits; Restrictions................................. C-14
</TABLE>
C-i
<PAGE>
<TABLE>
<CAPTION>
Page
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<C> <C> <S> <C>
3.11 Litigation....................................................... C-15
3.12 Brokers' and Finders' Fees....................................... C-15
3.13 Employee Benefit Plans........................................... C-15
3.13.1 Employee Benefit Plan Listing........................... C-15
3.13.2 Documents Provided...................................... C-15
3.13.3 Compliance.............................................. C-16
3.13.4 Qualification........................................... C-16
3.13.5 Contributions and Premium Payments...................... C-16
3.13.6 Multiemployer, Defined Benefit and Money Purchase
Pension Plans and Multiple Employer Welfare
Arrangements............................................ C-17
3.13.7 Post-Termination Benefits............................... C-17
3.13.8 Suits, Claims and Investigations........................ C-17
3.13.9 Payments Resulting From Transactions.................... C-17
3.13.10 Insured Benefits........................................ C-17
3.13.11 Definitions............................................. C-18
3.14 Employees; Labor Matters......................................... C-18
3.15 Environmental Matters............................................ C-18
3.16 Agreements, Contracts and Commitments............................ C-19
3.17 Change of Control Payments....................................... C-20
3.18 Board Approval................................................... C-20
3.19 Fairness Opinion................................................. C-20
3.20 State Anti-Takeover Statutes Not Applicable; Company Rights
Plan............................................................. C-20
3.21 Offer Documents; Proxy Statement................................. C-21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........ C-21
4.1 Organization and Qualification................................... C-21
4.2 Corporate Power, Authorization and Enforceability................ C-21
4.3 No Conflict; Required Filings and Consents....................... C-22
4.4 Schedule TO...................................................... C-22
4.5 Available Funds.................................................. C-22
ARTICLE V COVENANTS...................................................... C-23
5.1 Conduct of Business by the Company............................... C-23
5.2 Access to Information; Confidentiality........................... C-24
5.3 Proxy Material; Stockholders' Meeting............................ C-25
5.4 No Solicitation; Break-up Fee.................................... C-26
5.5 Public Announcements............................................. C-27
5.6 Notification of Certain Matters.................................. C-27
5.7 Actions by Company............................................... C-27
5.8 Officers' and Directors' Indemnification......................... C-27
</TABLE>
C-ii
<PAGE>
<TABLE>
<CAPTION>
Page
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<C> <C> <S> <C>
5.9 Employment Agreements........................................ C-28
5.10 Additional Agreements........................................ C-28
5.11 Other Actions by the Company................................. C-28
5.12 Company Options.............................................. C-28
5.13 Stock Option Plans........................................... C-29
5.14 Employee Benefit Plans....................................... C-29
5.15 Stockholder Litigation....................................... C-29
ARTICLE VI CONDITIONS OF MERGER....................................... C-29
6.1 Conditions to the Obligations of Each Party to Effect
the Merger.................................................... C-29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................... C-30
7.1 Termination................................................... C-30
7.2 Procedure and Effect of Termination........................... C-31
7.3 Fees and Expenses............................................. C-31
7.4 Amendment..................................................... C-32
7.5 Waiver........................................................ C-32
ARTICLE VIII MISCELLANEOUS............................................ C-32
8.1 Severability.................................................. C-32
8.2 Notices....................................................... C-32
8.3 Entire Agreement; No Third Party Beneficiaries;
No Assignment................................................. C-33
8.4 Interpretation; Knowledge..................................... C-33
8.5 Counterparts.................................................. C-34
8.6 Other Remedies; Specific Performance.......................... C-34
8.7 Governing Law................................................. C-34
8.8 Rules of Construction......................................... C-34
8.9 Waiver of Jury Trial.......................................... C-34
EXHIBIT A Employment Agreements
EXHIBIT B Required Third Party Consents
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 28, 2000, by and among InfrastruX Group, Inc., a Washington
corporation ("Parent"), InfrastruX Acquisition, Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("Purchaser"), and UTILX Corporation, a
Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of Parent and Purchaser and the Board of
Directors of the Company, through its special committee of disinterested
directors (referred to herein as the "Board of Directors of the Company") have
each unanimously approved the terms and conditions of a merger of Purchaser
with and into the Company (the "Merger") upon the terms and subject to
conditions set forth herein, the Board of Directors of the Company having
determined that the Merger represents the best available transaction for the
Company.
B. Pursuant to the Merger, Purchaser will acquire each issued and
outstanding share of Common Stock of the Company at a price of $6.125 net per
Share to the seller in cash and without interest thereon (the "Offer Price").
In order to accomplish the Merger, Purchaser shall first commence a tender
offer (the "Offer") by Purchaser under Section 14(d)(1) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), to purchase all
outstanding shares of the Common Stock, no par value, of the Company (shares of
the Common Stock of the Company are referred to herein as the "Shares").
C. The Board of Directors of the Company has unanimously resolved to
recommend, subject to applicable law and the provisions of this Agreement, the
acceptance of the Offer and approval of the Merger to the holders of Shares and
determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares and that the Offer and the
Merger are in the best interests of the holders of such Shares.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer
(a) Provided that this Agreement shall not have been terminated pursuant to
Section 7.1 and none of the events set forth in clause (iii) of Annex I shall
have occurred or be existing, Purchaser shall, and Parent shall cause Purchaser
to, promptly (but no later than five (5) business days) following the public
announcement of the execution of this Agreement commence (within the meaning of
Rule 14d-2 under the Exchange Act) the Offer at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and to accept for
payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on Annex I, including that a minimum of sixty-seven
percent (67%) of the Shares outstanding on a fully diluted basis (including for
purposes of such calculation all Shares issuable upon the cash exercise of all
vested and unvested stock options, warrants and conversion of convertible
securities or other rights to purchase or acquire Shares) being validly
tendered and not withdrawn prior to the expiration of the Offer (the "Minimum
Condition"). The per Share amount shall be net to the seller in cash, upon the
terms and subject to the conditions of the Offer and subject to reduction for
any applicable federal back-up or other applicable withholding or stock
transfer taxes. The Offer shall
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remain open until 12:00 Midnight, New York City time, on the date that is
twenty (20) business days following the commencement of the Offer; which shall
be the "Expiration Date," unless Purchaser extends the Offer as permitted by
this Agreement, in which case the "Expiration Date" means the latest time and
date to which the Offer is extended.
(c) Purchaser expressly reserves the right in its sole discretion to waive
any conditions to the Offer (other than the condition set forth in clause (i)
unless agreed to by the Company or (iii)(E) of Annex I), to increase the price
per Share payable in the Offer, to extend the duration of the Offer, or to make
any other changes in the terms and conditions of the Offer, provided, however,
that no such change may be made which decreases the price per Share payable in
the Offer, reduces the maximum number of Shares to be purchased in the Offer,
imposes conditions to the Offer in addition to those set forth in Annex I or
amends any other material terms of the Offer in a manner materially adverse to
the Company's shareholders, and provided, further, that the Offer may not,
without the Company's prior written consent, be extended beyond the Expiration
Date. Notwithstanding the foregoing, Purchaser may, without the consent of the
Company but upon notification of the Company, (i) extend the offer for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof applicable
to the Offer and (ii) make available a subsequent offering period (within the
meaning of Rule 14d-11 under the Exchange Act) which shall not exceed ten (10)
business days.
(d) The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement and the conditions
set forth in Annex I. Concurrently with the commencement of the Offer, Parent
and Purchaser shall file with the SEC a tender offer statement on Schedule TO
reflecting the Offer (together with all exhibits, amendments and supplements
thereto, the "Schedule TO"). Upon the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will purchase by
accepting for payment and will pay for Shares validly tendered and not properly
withdrawn, as promptly as practicable after the Expiration Date. The Schedule
TO will contain or will incorporate by reference the Offer to Purchase (or
portions thereof) and forms of the related letter of transmittal and summary
advertisements (which Schedule TO, Offer to Purchase and other documents,
together with any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). Parent, Purchaser and the Company agree
promptly to correct any information provided by any of them for use in the
Offer Documents that shall have become false or misleading, and Parent and
Purchaser further agree to take all steps necessary to cause the Schedule TO as
so corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to the holders of Shares, in each case as and to
the extent required by applicable federal securities laws. The Offer Documents
will, on the date filed, comply in all material respects with all provisions of
applicable federal securities laws.
1.2 Company Action
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that (i) its Board of Directors has unanimously (A) determined
that this Agreement and the transactions contemplated hereby, including each of
the Offer and the Merger, are fair to and in the best interests of the holders
of the Shares, (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) resolved to recommend, subject to applicable law
and the provisions of this Agreement, that the shareholders of the Company
accept the Offer and approve and adopt this Agreement and the transactions
contemplated hereby and thereby (provided, however, that subject to the
provisions of Section 5.4 such recommendation may be withdrawn, modified or
amended in connection with a Superior Proposal (as defined in Section 5.4)) and
(ii) Banc of America Securities LLC ("Banker") has rendered to the Board of
Directors of the Company its written opinion (which opinion is permitted to be
included in writing in the Schedule 14D-9 (as defined in Section 1.2(b)), to
the effect that the consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Company's Board of Directors
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<PAGE>
described in the first sentence of this Section 1.2(a), and has obtained the
consent of Banker to the inclusion in the Schedule 14D-9 of a copy of the
written opinion referred to in clause (ii) above.
(b) The Company shall file with the SEC, concurrently with the filing by
Parent and Purchaser of the Schedule TO, a Solicitation/Recommendation
Statement on Schedule 14D-9 under the Exchange Act relating to the Offer
(together with all exhibits, amendments and supplements thereto as well as the
Information Statement required pursuant to Section 14(f) under the Exchange
Act, collectively the "Schedule 14D-9"), which shall contain the recommendation
of the Company's Board of Directors described in Section 1.2(a), and shall
disseminate the Schedule 14D-9 as required by Rule 14D-9 promulgated under the
Exchange Act. The Schedule 14D-9, and each amendment thereto, will, on the date
filed, comply in all material respects with the provisions of applicable
federal securities laws. The Company, Parent and Purchaser agree promptly to
correct any information provided by any of them for use in the Schedule 14D-9
that shall have become false or misleading, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and the Schedule 14D-9 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given the opportunity
to review and shall be reasonably satisfied with the Schedule 14D-9 in the form
in which such document is originally filed with the SEC, and all amendments and
supplements thereto, prior to the time at which such documents and all
documents related thereto are filed with the SEC. The Company shall provide
Purchaser and its counsel with any comments the Company or its counsel may
receive from the SEC with respect to the Schedule 14D-9 promptly after receipt
of such comments.
(c) The Company has been advised by each of the members of the Special
Committee and by its Chief Executive Officer and Chief Financial Officer, as of
the date of this Agreement, that such person intends to tender all outstanding
Shares beneficially owned and not disclaimed by such person to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each of a recent date,
and shall promptly furnish Purchaser with such additional information,
including updated lists of shareholders, mailing labels and security position
listings, and such other assistance as Parent, Purchaser or their agents may
reasonably request in connection with communicating the Offer and any
amendments or supplements thereto to the Company's shareholders. Subject to the
requirements of applicable laws and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Purchaser shall hold in confidence the information
contained in any of such labels and lists.
1.3 Directors
Promptly upon the acquisition by Purchaser pursuant to the Offer of such
number of Shares which satisfies the Minimum Condition and from time to time
thereafter, Parent shall be entitled to designate a majority of the members of
the Company's Board of Directors, subject to compliance with Section 14(f) of
the Exchange Act. The Company shall, upon request by Parent, promptly increase
the size of the Board of Directors to the extent permitted by its Restated
Certificate of Incorporation and/or secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors and shall cause Parent's designees to be so elected. The
Company shall take, at its expense, all action necessary to effect any such
election, including mailing to its shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in form
and substance reasonably satisfactory to Parent and its counsel. Following the
election or appointment of Parent's designees pursuant to this Section 1.3 and
prior to the Effective Time (as defined in Section 2.2), any amendment or
termination of this Agreement, extension for the performance or waiver of the
obligations or other acts of Parent or Purchaser or waiver of the Company's
rights hereunder, shall require the concurrence of a majority of the Company's
directors (or the concurrence of the director, if there is only one remaining)
then in office who are directors on the date hereof, or are directors
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(other than directors designated by Parent in accordance with this Section 1.3)
designated by such persons to fill any vacancy (the "Continuing Directors").
ARTICLE II
THE MERGER
2.1 The Merger
Upon the terms and subject to the conditions hereof and in accordance with
the Delaware General Corporation Law (the "DGCL"), Purchaser shall be merged
with and into the Company as soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article VI of this
Agreement. Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of Purchaser shall cease. At the election of Parent or Purchaser, any direct or
indirect wholly owned subsidiary of Parent incorporated under the laws of
Delaware may be substituted for Purchaser as a constituent corporation in the
Merger. As used herein, the term "Purchaser" shall, upon such substitution
refer to any such substituted corporation.
2.2 Effective Time
The Merger shall be consummated by and shall be effective at the time there
has been filed as provided by Section 2.12 with the Secretary of State of the
State of Delaware the articles of merger in such form as is required by, and
executed in accordance with, the relevant provisions of the DGCL, and such
other documents as may be required by the provisions of the DGCL. The time of
such filing is referred to as the "Effective Time."
2.3 Effects of the Merger
The Merger shall have the effects set forth in applicable sections of the
DGCL. As of the Effective Time, the Company shall be a wholly owned subsidiary
of Parent.
2.4 Restated Certificate of Incorporation
The Restated Certificate of Incorporation of the Surviving Corporation shall
be amended to contain the substantive provisions of the Certificate of
Incorporation of the Purchaser as in effect at the Effective Time, except that
Article I thereof shall read as follows: "The name of this corporation is UTILX
Corporation."
2.5 Bylaws
The Bylaws of Purchaser, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation, until thereafter duly
amended in accordance with applicable law.
2.6 Directors
The directors of Purchaser immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, as such instruments may
be amended from time to time, or as otherwise provided by law.
2.7 Officers
The officers of the Purchaser immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation. Such officers of the
Surviving Corporation will hold office from the Effective Time
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until their respective successors are duly elected or appointed and qualified
in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, as such instruments may be amended from time to time, or
as otherwise provided by law.
2.8 Conversion of Shares
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Parent, Purchaser, the Company or the holders of the Shares:
(i) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held, directly or indirectly, by Parent, Purchaser,
the Company or any of their majority-owned subsidiaries and any Dissenting
Shares (as defined below)) shall automatically be canceled and extinguished
and be converted into the right to receive $6.125, or such higher amount
per Share as is paid pursuant to the Offer (the "Merger Consideration"), in
cash, without interest thereon.
(ii) Each Share issued and outstanding immediately prior to the
Effective Time which is owned or held, directly or indirectly, by Parent,
Purchaser, the Company or any of their majority-owned subsidiaries shall be
canceled and extinguished and cease to exist, without any conversion
thereof, and no payment shall be made with respect thereto.
(iii) Each holder (other than holders referred to in Section 2.8(a)(ii))
of a certificate representing any Shares shall after the Effective Time
cease to have any rights with respect to such Shares, except either to
receive the Merger Consideration upon surrender of such certificate, or to
exercise such holder's appraisal rights as provided in Section 2.9 and the
DGCL.
(iv) Each share of Common Stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
thereafter represent one validly issued, fully paid and nonassessable share
of Common Stock of the Surviving Corporation.
(v) Each Company Option (as defined in Section 3.2) shall be treated in
accordance with Section 5.12.
(b) Notwithstanding anything in this Agreement to the contrary, Shares which
are outstanding immediately prior to the Effective Time and which are held by a
holder who dissents from the Merger in the manner provided under the DGCL and
becomes entitled to obtain payment for the fair value of such Shares pursuant
to the applicable provisions of the DGCL ("Dissenting Shares") shall not be
converted into a right to receive the Merger Consideration pursuant to this
Section 2.8, but the holders of Dissenting Shares shall instead be entitled to
receive such consideration as shall be determined pursuant to the DGCL;
provided, however, that this Section 2.8 shall apply to Shares held by a
dissenting shareholder who subsequently withdraws his or her demand for payment
in the manner provided under the DGCL, fails to comply fully with the
requirements of applicable provisions of the DGCL, or otherwise fails to
establish the fair value of such holder's Shares under the DGCL, in which event
such Shares shall be deemed to be converted into the right to receive the
Merger Consideration pursuant to Section 2.8. The Company shall give Parent and
Purchaser prompt notice of any written objection to the Merger and demand for
payment of the fair value of Shares. Prior to the Effective Time, the Company
shall not, except with the prior written consent of Purchaser, make any payment
with respect to, or settle or offer to settle, any such demand for payment of
the fair value of Shares. Each holder of Dissenting Shares shall have only such
rights and remedies as are granted to such holder under the DGCL.
2.9 Payment for Shares
(a) Prior to the Effective Time, Purchaser shall select and appoint a bank
to act as agent for the holders of Shares (the "Paying Agent") to receive and
disburse the Merger Consideration to which holders of Shares shall become
entitled pursuant to Section 2.8. At the Effective Time, Purchaser or Parent
shall provide the
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Paying Agent with sufficient cash to allow the Merger Consideration to be paid
by the Paying Agent for each Share then entitled to receive the Merger
Consideration.
(b) As soon as practicable after the Effective Time, Purchaser or Parent
shall cause the Paying Agent to mail to each record holder a certificate or
certificates representing Shares which as of the Effective Time represents the
right to receive the Merger Consideration (the "Certificates"), a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be requested, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration and such Certificate shall forthwith be canceled. No interest
shall be paid or accrued on the Merger Consideration upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section, each Certificate shall be deemed for all purposes to evidence only the
right to receive the Merger Consideration (without interest thereon), and shall
have no other right.
(c) If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the Certificates surrendered in
exchange thereof are registered, it shall be a condition to the payment that
the Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such payment or
delivery shall pay any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Paying Agent nor any party hereto shall be liable to a holder of
Shares for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
(d) Promptly following the date that is six months after the Effective Date,
the Paying Agent shall return to the Surviving Corporation all Merger
Consideration and other cash, property and instruments in its possession
relating to the transactions described in this Agreement, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a Certificate
formerly representing a Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration (without interest
thereon). Notwithstanding the foregoing, the Surviving Corporation shall be
entitled to receive from time to time all interest or other amounts earned with
respect to any cash deposited with the Paying Agent as such amounts accrue or
become available.
2.10 No Further Rights or Transfers
At and after the Effective Time the holders of Certificates to be exchanged
for the Merger Consideration pursuant to this Agreement shall cease to have any
rights as to shareholders of the Company except for the right to surrender such
holder's Certificates in exchange for payment of the Merger Consideration, and
after the Effective Time there shall be no transfers on the stock transfer
books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. Any Certificates formerly representing
Shares presented to the Surviving Corporation or Paying Agent shall be canceled
and exchanged for the Merger Consideration, as provided in this Article II,
subject to applicable law in the case of Dissenting Shares.
2.11 Supplementary Action
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either the Company or Purchaser, or otherwise to carry
out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered, in the name of and
on behalf of the Company and Purchaser, to execute and deliver any and all
things necessary or proper to vest or to perfect or confirm title to such
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes and provisions of this Agreement.
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2.12 Closing
Upon the terms and subject to the conditions of this Agreement, as soon as
practicable after all the conditions to the obligations of the parties hereto
to effect the Merger under Article VI of this Agreement shall have been
satisfied or waived, the Company and Purchaser shall (i) file with the Delaware
Secretary of State a certificate or agreement of merger or a certificate of
ownership and merger in such form as may be required by, and executed in
accordance with, the relevant provisions of the DGCL and (ii) take all such
other and further actions as may be required by law to make the Merger
effective. Contemporaneous with the filing referred to in this Section, a
closing (the "Closing") will be held at the offices of Perkins Coie LLP, 1201
Third Avenue, Suite 4800, Seattle, Washington or at such other location as the
parties may establish for the purpose of confirming all the foregoing. The date
and the time of such Closing are referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which for purposes of this Article III shall include the
Company and each of its subsidiaries unless the context otherwise requires)
represents and warrants to Parent and Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent and Purchaser dated as of the date hereof and certified by a
duly authorized officer of the Company (the "Company Schedules"), as follows:
3.1 Organization of the Company
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to
own, lease and operate its assets and property and to carry on its business as
now being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined below).
(b) The Company has delivered to Parent a true and complete list of all of
the Company's subsidiaries, indicating the jurisdiction of incorporation or
formation of each subsidiary, the jurisdictions in which such subsidiary is
qualified or licensed to do business, and the Company's and any other person's
equity interest therein. Except for qualifying directors' shares, no person
other than the Company owns any equity interest in any such subsidiary.
(c) The Company has delivered or made available to Parent a true and correct
copy of the Restated Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the Company
nor, to the knowledge of the Company, any of its subsidiaries is in violation
of any of the provisions of its Restated Certificate of Incorporation or Bylaws
or equivalent governing instruments.
(d) When used in connection with the Company, the term "Material Adverse
Effect" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Company and its subsidiaries
taken as a whole.
3.2 Company Capital Structure
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, no par value, of which 7,475,944 shares were issued and
outstanding as of June 2, 2000, and 2,000,000 shares of
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Preferred Stock, no par value, of which no shares are issued or outstanding. No
shares of capital stock have been issued since June 2, 2000 except pursuant to
option exercises. All outstanding shares of the Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Restated Certificate of Incorporation
or Bylaws of the Company or any agreement or document to which the Company is a
party or by which it is bound. As of the date of this Agreement, the Company
had reserved an aggregate of 1,600,000 shares of the Company Common Stock, net
of exercises, for issuance to employees, consultants and non-employee directors
pursuant to the 1984 Restated Nonqualified Stock Option Plan, 1984 Restated
Stock Option Plan, 1987 Restated Stock Option Plan for Non-Employee Directors
and the 1994 Option and Restricted Stock Plan for Employees (the "Option
Plans"). (Stock options granted by the Company pursuant to the Option Plans or
otherwise are referred to in this Agreement as "Company Options.") As of June
2, 2000, there were Company Options outstanding to purchase an aggregate of
1,572,416 shares of Common Stock, issued to employees, consultants and
non-employee directors pursuant to the Option Plans. Except for 10,000 shares
subject to options granted to Bob Gannon upon his election as a new director on
June 9, 2000, no Company Options have been granted since June 2, 2000 and,
except pursuant to the exercise of Company Options, no shares of capital stock
of the Company have been issued by the Company since June 2, 2000. All shares
of the Company Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, would be duly authorized, validly issued, fully paid and
nonassessable. The Company has provided the Purchaser a complete and accurate
list as of June 26, 2000 of each person who held restricted stock or options,
the name of the holder of such shares or option, the exercise price of such
option, and the term of such shares or option.
3.3 Obligations With Respect to Capital Stock
Except as set forth in Section 3.2, there are no equity securities,
partnership interests or similar ownership interests of any class of the
Company, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities the Company
owns, directly or indirectly through one or more subsidiaries, there are no
equity securities, partnership interests or similar ownership interests of any
class of any subsidiary of the Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company or any of its subsidiaries is
a party or by which it is bound obligating the Company or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock, partnership
interests or similar ownership interests of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no
registration rights and, to the knowledge of the Company, as of the date of
this Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of the Company
or with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
3.4 Authority
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
shareholders and the filing and recordation of the Restated Articles of Merger
pursuant to the DGCL. A vote of the holders of two-thirds of the outstanding
Shares is required for the Company's shareholders to approve and adopt this
Agreement and approve the Merger. This Agreement has
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been duly executed and delivered by the Company and constitutes valid and
binding obligations of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws
and general principles of equity. The execution and delivery of this Agreement
by the Company do not, and the performance of this Agreement by the Company
will not, (i) conflict with or violate the Restated Certificate of
Incorporation or Bylaws of the Company or the equivalent organizational
documents of any of its subsidiaries, (ii) subject to obtaining the approval
and adoption of this Agreement and the approval of the Merger by the Company's
shareholders, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected and which
will have a Material Adverse Effect, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected. The Company Schedules list
all consents, waivers and approvals under any of the Company's or any of its
subsidiaries' material agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Delaware Secretary of State, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
securities or antitrust laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect or have a material
adverse effect on the ability of the parties to consummate the Offer or the
Merger.
3.5 SEC Filings; the Company Financial Statements
(a) The Company has filed in a timely manner all forms, reports and
documents required to be filed with the SEC since it became subject to the
reporting requirements of the Exchange Act, and has made available to Parent
all such forms, reports and documents. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the "Company SEC Reports." As of their
respective dates, the Company SEC Reports and all currently effective
registration statements of the Company filed with the SEC (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such the Company SEC Reports,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports (the "Company
Financials") including any of the Company SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved
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(except as may be indicated in the notes thereto or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on Form 10-Q, 8-K
or any successor form under the Exchange Act) and (z) fairly presented the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated. The balance sheet of the
Company contained in the Company SEC Reports as of March 31, 2000 is
hereinafter referred to as the "Company Balance Sheet." Except as disclosed in
the Company Financials or the Company Schedules, since the date of the Company
Balance Sheet neither the Company nor any of its subsidiaries has any
liabilities (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, individually
or in the aggregate, material to the business, results of operations or
financial condition of the Company and its subsidiaries taken as a whole,
except liabilities (i) provided for in the Company Balance Sheet, or (ii)
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practices and immaterial in the aggregate and
liabilities incurred in connection with this Agreement.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events
Since the date of the Company Balance Sheet there has not been: (i) any
Material Adverse Effect, (ii) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any material revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the
ordinary course of business.
3.7 Taxes
(a) To the Company's knowledge, (i) All Tax Returns (as defined below)
required to be filed by or on behalf of the Company and each of its
subsidiaries have been filed on a timely basis with the appropriate
governmental authority in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns are true, correct and complete
in all material respects; (ii) all Taxes (as defined below) of the Company and
each of its subsidiaries (whether or not reflected on any Tax Return) have been
fully and timely paid, withheld and remitted to the applicable Taxing
authority; (iii) no waivers of statutes of limitation have been given or
requested with respect to the Company or any of its subsidiaries in connection
with any Tax Returns covering the Company or any of its subsidiaries with
respect to any Taxes payable thereby; (iv) no taxing authority in a
jurisdiction where none of the Company or any of its subsidiaries files Tax
Returns has made a claim, assertion or threat to the Company or any of its
subsidiaries that the Company or any of its subsidiaries is or may be subject
to taxation by such jurisdiction; (v) there are no liens with respect to Taxes
on any of the Company's or any of its subsidiaries' property or assets other
than liens for current Taxes not yet payable; (vii) there are no audits or
other administrative proceedings presently in progress, pending or threatened
with respect to Taxes or any Tax Return of the Company or any of its
subsidiaries; and (viii) no Tax deficiencies or assessments have been proposed,
asserted or threatened against the Company or any of its subsidiaries.
(b) Neither the Company nor, to the Company's knowledge, any of its
subsidiaries nor any other Person on behalf thereof (i) has executed or entered
into a closing agreement pursuant to Section 7121 of the Internal Revenue Code
of 1986, as amended (the "Code") or any predecessor provision thereof or any
similar provision of state, local or foreign law; or (ii) has agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or has notice that a governmental
authority has proposed any such adjustment or change in accounting method.
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(c) To the knowledge of the Company, there is no dispute or claim concerning
any Tax liability of the Company or any of its subsidiaries either (i) claimed
or raised by any authority in writing or (ii) as to which any of the directors
and officers (and employees responsible for Tax matters) of the Company or its
subsidiaries have knowledge based on contact or correspondence with any agent
of such authority. Schedule 3.7 (c) to the Company Schedules lists all U.S.
federal Tax Returns filed with respect to the Company and its subsidiaries for
taxable periods ended on or after March 31, 1995 that have been audited. The
Company has made available to Parent through the Company's accountants correct
and complete copies of all income, excise and franchise Tax Returns,
examination reports and statements of deficiencies assessed against or agreed
to by the Company related thereto for all taxable periods ended on or after
March 31, 1995.
(d) Neither the Company, nor any of its subsidiaries, nor any ERISA
Affiliate (as defined in Section 3.13.11) has made any payments, is obligated
to make any payments or is a party to (or a participating employer in) any
agreement or Employee Benefit Plan (as defined in Section 3.13.11) that could
obligate it to make any payments that would constitute "excess parachute
payments" within the meaning of Section 280G of the Code (or any similar
provision of state, local or foreign law) or that would otherwise not be
deductible under Section 162(a)(1), 162(m) or 404 of the Code.
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) Neither the Company nor any of its subsidiaries is a party to any Tax
allocation, sharing, indemnity or similar agreement. Neither the Company nor
any of its subsidiaries (i) has been a member of a Tax Group (as defined below)
filing a consolidated income Tax Return under Section 1501 of the Code (or any
similar provision of state, local or foreign law) (other than the Tax Group,
the common parent of which is the Company) and (ii) does not have any liability
for Taxes of any Person (other than the Company and any of its subsidiaries)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor by contract or otherwise.
(g) The unpaid Taxes of the Company and its subsidiaries (i) did not, as of
March 31, 2000, exceed the reserve for Tax liability set forth on the face
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) of the Company Balance Sheet and (ii)
do not exceed that reserve as adjusted for the passage of time and operations
in the ordinary course of business through the Closing Date.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means (A) all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties and other assessments, including, but
not limited to, any income, alternative minimum or add-on, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax, (B) any
liability for payment of amounts described in clause (A) whether as a result of
transferee liability, or being a member of a Tax Group for any period, or
otherwise through operation of law, and (C) any liability for the payment of
amounts described in clauses (A) or (B) as a result of any tax sharing, tax
indemnity or tax allocation agreement or any other express or implied agreement
to indemnify any other person; and "Tax" means any of the foregoing Taxes.
"Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is
now or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
information return, statement or other similar document, including any schedule
or attachment thereto, and including any amendment thereof required to be filed
with respect to Taxes.
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3.8 Title to Properties; Absence of Liens and Encumbrances
(a) The Company Schedules list all jurisdictions in which real property is
owned or leased by the Company. The Company Schedules list all real property
leases to which the Company is a party and each amendment thereto with lease
payments of more than an aggregate of $100,000 per year. All such current
leases are in full force and effect, are valid and effective in accordance with
the respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim in an amount
greater than $100,000.
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
the Company Financials or in the Company Schedules and except for liens for
taxes not yet due and payable and such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present
use, of the property subject thereto or affected thereby.
3.9 Intellectual Property
3.9.1 General
The Company owns, co-owns or is licensed and has all rights in and to all
intellectual property and other proprietary rights required to conduct its
business as now conducted and as proposed to be conducted, including, without
limitation, all trade names, trademarks, service marks, logos, brand names and
other identifiers, trade secrets, maskworks, copyrights and domestic and
foreign letters patent, and the registrations, applications, renewals,
extensions, reissues, reexaminations, divisionals and continuations (in whole
or in part) thereof, all goodwill associated therewith and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith.
3.9.2 Company Technology
(a) Schedule 3.9.2 to the Company Schedules sets forth a list of all
products and tools developed, produced, used, marketed or sold by the Company
during the two years prior to the date of this Agreement and that are
essential, proprietary, and required to conduct its business as now conducted
and as proposed to be conducted , together with all prior versions,
predecessors or precursors to such products or tools (collectively, the
"Products"). Except for the Third Party Technologies (as defined in Section
3.9.3), the Company owns all right, title and interest in and to the following
(collectively, the "Technology"), free and clear of all Liens: all inventions,
discoveries, processes, designs, works of authorship, data compilations
(whether in electronic form or not) trade secrets, know-how and other
confidential or proprietary information related to the Products. The
Technology, excluding the Third Party Technologies (as defined below), is
sometimes referred to herein as the "Company Technology."
(b) The Company owns certain proprietary Company Technology relating to the
CableCure treatment process and injection technology, separate and apart from
its rights under the CableCure license agreement with Dow Corning Corporation,
which would provide the Company with a significant competitive advantage, both
in terms of cost and product/service effectiveness, relative to any other third
parties in the event that the exclusivity provisions of the CableCure license
agreement with Dow Corning Corporation were terminated in connection with the
Dow Corning Corporation bankruptcy proceedings.
3.9.3 Third Party Technology
Schedule 3.9.3 to the Company Schedules sets forth a list of all Technology
used in the Company's business for which the Company does not own all right,
title and interest (collectively, the "Third Party Technologies"), and all
material license agreements or other contracts pursuant to which the Company
has the
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right to use (in the manner used by the Company, or intended or necessary for
use with the Company Technology) the Third Party Technologies (the "Third Party
Licenses"), indicating, with respect to each of the Third Party Technologies
listed therein, the owner thereof and the Third Party License applicable
thereto. The Company has the lawful right to use (free of any material
restriction not expressly set forth in the Third Party Licenses) (a) all Third
Party Technology that is incorporated in or used in the development or
production of the Company Technology and (b) all other Third Party Technology
material to and necessary for the conduct of the Company's business as now
conducted and as proposed to be conducted. All Third Party Licenses are valid,
binding and in full force and effect, the Company and, to the Company's
knowledge, each other party thereto have performed in all material respects
their obligations thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in default thereunder, nor to the
Company's knowledge has there occurred any event or circumstance that with
notice or lapse of time or both would constitute a default or event of default
on the part of the Company or, to the Company's knowledge, any other party
thereto or give to any other party thereto the right to terminate or modify any
Third Party License. The Company has not received notice that any party to any
Third Party License intends to cancel, terminate or refuse to renew (if
renewable) such Third Party License or to exercise or decline to exercise any
option or right thereunder. To the knowledge of the Company, no action has been
taken to reject the CableCure License in connection with the Dow Corning
bankruptcy proceedings.
3.9.4 Trademarks
Schedule 3.9.4 to the Company Schedules sets forth a list of all trademarks,
trade names, brand names, service marks, logos or other identifiers for the
Products or otherwise used by the Company in its business (the "Marks"). The
Company has full legal and beneficial ownership, free and clear of any Liens,
of all rights conferred by use of the Marks in connection with the Products or
otherwise in the Company's business and, as to those Marks that have been
registered in the United States Patent and Trademark Office, by federal
registration of the Marks.
3.9.5 Intellectual Property Rights
Schedules 3.9.4 and 3.9.5 to the Company Schedules sets forth all patents,
patent applications, copyright registrations (and applications therefor),
maskwork registrations (and applications therefor) and trademark registrations
(and applications therefor) (collectively, the "IP Registrations") associated
with the Company Technology and the Marks. Except as set forth in Schedule
3.9.3 and 3.9.5 to the Company Schedules, the Company owns all right, title and
interest, free and clear of any Liens, in and to the IP Registrations, together
with any other rights in or to any copyrights (registered or unregistered),
rights in the Marks (registered or unregistered), trade secret rights and other
intellectual property rights (including, without limitation, rights of
enforcement) contained or embodied in the Company Technology and the Marks
(collectively, the "IP Rights").
3.9.6 Maintenance of Rights
The Company has not conducted its business, and has not used or enforced
(or, to its knowledge, failed to use or enforce) the IP Rights, in a manner
that would result in the abandonment, cancellation, lapse or unenforceability
of any item of the IP Rights or the IP Registrations or any inventions, and the
Company has not taken (or, to its knowledge, failed to take) any action that
would result in the forfeiture or relinquishment of any IP Rights, IP
Registrations or inventions, in each case where such abandonment, cancellation,
unenforceability, forfeiture or relinquishment would have a Material Adverse
Effect. Except as set forth in Schedules 3.9.6 to the Company Schedules, the
Company has not granted to any third party any rights or permissions to use any
of the Technology or the IP Rights, except for any such grant that would not be
reasonably expected (as far as can be foreseen at the time) to have a Material
Adverse Effect. To the best of the Company's knowledge, except pursuant to
reasonably prudent safeguards, (a) no third party has received any confidential
information relating to the Technology or the IP Rights and the Company has at
all times
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maintained and diligently enforced commercially reasonable procedures to
protect all confidential information relating to the Technology, and (b) the
Company is not under any contractual or other obligation to disclose to any
third party any Company Technology.
3.9.7 Third Party Claims
Except as disclosed in Schedules 3.9.7(a), (b) and (c) to the Company
Schedules, (a) the Company has not received any notice or claim (whether
written, oral or otherwise) challenging the Company's ownership of or rights in
the Company Technology or the IP Rights or claiming that any other person or
entity has any legal or beneficial ownership with respect thereto; (b) all the
IP Rights are legally valid and enforceable without any material qualification,
limitation or restriction on their use, and the Company has not received any
notice or claim (whether written, oral or otherwise) challenging the validity
or enforceability of any of the IP Rights; and (c) to the Company's knowledge,
no other person or entity is infringing or misappropriating any part of the IP
Rights or otherwise making any unauthorized use of the Company Technology.
3.9.8 Infringement by the Company
Except as disclosed in Schedule 3.9.8 to the Company Schedules, (a) the
manufacture, use, sale, disclosure, execution, reproduction, modification,
adaptation, distribution, performance or display of any of the Technology or
any modifications or enhancements thereof, in the Company's business does not
and will not infringe, violate or interfere with or constitute an appropriation
of any right, title or interest (including, without limitation, any patent,
maskwork, copyright or trade secret right) held by any other person or entity,
and there have been no claims made with respect thereto; (b) the use of any of
the Marks and other IP Rights in the Company's business will not infringe,
violate or interfere with or constitute an appropriation of any right, title or
interest (including, without limitation, any patent, copyright, trademark or
trade secret right) held by any other person or entity, and there have been no
claims made with respect thereto; and (c) the Company has not received any
notice or claim (whether written, oral or otherwise) regarding any
infringement, misappropriation, misuse, abuse or other interference with any
third party intellectual property or proprietary rights (including, without
limitation, infringement of any patent, copyright, trademark or trade secret
right of any third party) by the Company, the Technology or the Marks or other
IP Rights, or claiming that any other entity has any claim of infringement with
respect thereto.
3.9.9 Restrictions on Intellectual Property
To the knowledge of the Company, none of the Company's officers, employees,
consultants, distributors, agents, representatives or advisors has entered into
any agreement relating to the Company's business regarding know-how, trade
secrets, assignment of rights in inventions, or prohibition or restriction of
competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than the
Company.
3.10 Compliance; Permits; Restrictions
(a) Neither the Company nor any of its subsidiaries is, in conflict with, or
in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which the
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (ii) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other material
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected and, in either case, which default
or violation would have a Material Adverse Effect. To the knowledge of the
Company, no investigation or review by any Governmental Entity is pending or
threatened against the Company or any of its subsidiaries, nor has any
Governmental Entity indicated an intention to conduct the same. There is no
agreement, judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries which
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has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are
material to the operation of the business of the Company (collectively, the
"Company Permits"). The Company and its subsidiaries are in compliance in with
the terms of the Company Permits, except where the failure to do so would not
have a Material Adverse Effect.
3.11 Litigation
There is no action, suit, proceeding, claim, arbitration or investigation
pending, or as to which the Company or any of its subsidiaries has received any
notice of assertion nor, to the knowledge of the Company, is there a threatened
action, suit, proceeding, claim, arbitration or investigation against the
Company or any of its subsidiaries which would be required to be disclosed
pursuant to Item 103 of Regulation S-K under the Exchange Act which has not
been disclosed in the Company's Exchange Act filings. To the knowledge of the
Company, no Governmental Entity has at any time challenged or questioned in
writing the legal right of the Company to manufacture, offer or sell any of its
products in the present manner or style thereof.
3.12 Brokers' and Finders' Fees
Except for fees payable to Banker pursuant to an engagement letter dated
June 14, 2000, as amended, a copy of which has been provided to Parent, the
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.13 Employee Benefit Plans
3.13.1 Employee Benefit Plan Listing
Schedule 3.13.1 to the Company Schedules contains a complete and accurate
list of all material Employee Benefit Plans other than the Option Plans.
Neither the Company nor any ERISA Affiliate has any agreement, arrangement,
commitment or obligation, whether formal or informal, whether written or
unwritten and whether legally binding or not, to create, enter into or
contribute to any additional material Employee Benefit Plan, or to modify or
amend any existing material Employee Benefit Plan. There has been no amendment,
interpretation or other announcement (written or oral) by the Company, any
ERISA Affiliate or any other person relating to any material Employee Benefit
Plan that, either alone or together with other such items or events, could
materially increase the expense of maintaining the Employee Benefit Plans above
the level of expense incurred with respect thereto for the most recent fiscal
year included in the Financial Statements. Except as disclosed in the Company
Schedules, the terms of each material Employee Benefit Plan permit the Company
or its ERISA Affiliates to amend or terminate such Employee Benefit Plan at any
time and for any reason without material penalty or material liability. Except
as disclosed in the Company Schedules, none of the rights of the Company or any
ERISA Affiliate under any material Employee Benefit Plan will be impaired in
any way by this Agreement or the consummation of the transactions contemplated
in (or by) this Agreement.
3.13.2 Documents Provided
The Company has delivered or will deliver to Parent within ten (10) business
days after the execution of this Agreement true, correct and complete copies
(or, in the case of unwritten Employee Benefit Plans, descriptions) of all
Employee Benefit Plans (and all amendments thereto), along with, to the extent
applicable to the particular Employee Benefit Plan, copies of the following:
(a) the last three annual reports (Form 5500 series) filed with respect to such
Employee Benefit Plan; (b) all summary plan descriptions, summaries of material
modifications and all employee manuals or communications filed or distributed
with respect to such
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Employee Benefit Plan during the last three years; (c) all contracts and
agreements (and any amendments thereto) relating to such Employee Benefit Plan,
including, without limitation, trust agreements, investment management
agreements, annuity contracts, insurance contracts, bonds, indemnification
agreements and service provider agreements; (d) the most recent determination
letter issued by the IRS with respect to such Employee Benefit Plan; (e) all
written communications relating to the amendment, creation or termination of
such Employee Benefit Plan, or an increase or decrease in benefits,
acceleration of payments or vesting or other events that could result in
liability to the Company since the date of the most recently completed and
filed annual report; (f) all correspondence to or from any Governmental Entity
relating to such Employee Benefit Plan; (g) samples of all administrative forms
currently in use, including, without limitation, all COBRA and HIPAA forms and
notices; (h) all coverage, nondiscrimination, top heavy and Code Section 415
tests performed with respect to such Employee Benefit Plan for the last three
years; and (i) the most recent registration statement, annual report (Form 11-
K) and prospectus prepared in connection with such Employee Benefit Plan.
3.13.3 Compliance
With respect to each material Employee Benefit Plan: (a) such Employee
Benefit Plan is, and at all times since inception has been, maintained,
administered, operated and funded in all respects in accordance with its terms
and in material compliance with all applicable requirements of all applicable
laws, statutes, orders, rules and regulations, including, without limitation,
ERISA, COBRA, HIPAA and the Code; (b) the Company, each ERISA Affiliate, each
fiduciary of such Employee Benefit Plan and all other persons have, at all
times, properly performed all material obligations, whether arising by
operation of law or by contract, required to be performed by any of them in
connection with such Employee Benefit Plan; (c) none of the Company, any ERISA
Affiliate or any other fiduciary of such Employee Benefit Plan has engaged in
any transaction or acted or failed to act in a manner that violates the
fiduciary requirements of ERISA or any other applicable law in any material
respect; (d) no transaction or event has occurred or is threatened or about to
occur (including any of the transactions contemplated in or by this Agreement)
that constitutes or could constitute a prohibited transaction under Section 406
or 407 of ERISA or under Section 4975 of the Code for which an exemption is not
available; and (e) neither the Company nor any ERISA Affiliate has incurred,
and there exists no condition or set of circumstances in connection with which
the Company, any ERISA Affiliate, Parent, Purchaser or the Surviving
Corporation could incur, directly or indirectly, any material liability or
expense (except for routine contributions and benefit payments) under ERISA,
the Code or any other applicable law, statute, order, rule or regulation or
pursuant to any indemnification or similar agreement with respect to such
Employee Benefit Plan.
3.13.4 Qualification
Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code is, and at all times since inception has been, so qualified
and its related trust is, and at all times since inception has been, exempt
from taxation under Section 501(a) of the Code. Each such Employee Benefit Plan
either is the subject of an unrevoked favorable determination, opinion,
notification or advisory letter from the IRS with respect to such Employee
Benefit Plan's qualified status under the Code, as amended by the Tax Reform
Act of 1986 and all subsequent legislation, or has remaining a period of time
under the Code or applicable Treasury regulations or IRS pronouncements in
which to apply to the IRS for such a letter and to make any amendments
necessary to obtain such a letter from the IRS. No fact exists or is reasonably
expected by the Company or any ERISA Affiliate to arise, that could adversely
affect the qualification or exemption of any such Employee Benefit Plan or its
related trust. No such Employee Benefit Plan is a "top-heavy plan," as defined
in Section 416 of the Code.
3.13.5 Contributions and Premium Payments
All contributions, premiums and other payments (including, without
limitation, administrative costs, such as trustee and service provider fees)
due or required to be paid to (or with respect to) each material Employee
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Benefit Plan have been timely paid, or, if not yet due, have been accrued as a
liability on the Company Balance Sheet.
3.13.6 Multiemployer, Defined Benefit and Money Purchase Pension Plans and
Multiple Employer Welfare Arrangements.
Neither the Company nor any ERISA Affiliate maintains or contributes to, or
has ever maintained or contributed to (or been obligated to contribute to), any
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA
or 414(f) of the Code, any multiple employer plan within the meaning of
Section 4063 or 4064 of ERISA or Section 413(c) of the Code, any employee
benefit plan, fund, program, contract or arrangement that is subject to Section
412 of the Code, Section 302 of ERISA or Title IV of ERISA or any multiple
employer welfare arrangement as defined in Section 3(40) of ERISA.
3.13.7 Post-Termination Benefits
Except as disclosed in the Company Schedules, none of the Company, any ERISA
Affiliate or any material Employee Benefit Plan provides or has any obligation
to provide (or contribute toward the cost of) post-employment or post-
termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company or any ERISA
Affiliate, other than (a) continuation coverage mandated by Sections 601
through 608 of ERISA and Section 4980B(f) of the Code, (b) retirement benefits
under any Employee Benefit Plan that is qualified under Section 401(a) of the
Code, and (c) deferred compensation that is accrued as a current liability on
the Company Balance Sheet.
3.13.8 Suits, Claims and Investigations
Except as disclosed in the Company Schedules, there are no actions, suits or
claims (other than routine claims for benefits) pending or, to the knowledge of
the Company and each ERISA Affiliate, threatened with respect to (or against
the assets of) any Employee Benefit Plan, nor, to the knowledge of the Company
and each ERISA Affiliate, is there a basis for any such action, suit or claim.
No Employee Benefit Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS, the DOL or any other Governmental Entity,
and, to the knowledge of the Company or any ERISA Affiliate, no such action is
contemplated or under consideration by the IRS, the DOL or any other
Governmental Entity.
3.13.9 Payments Resulting From Transactions
Except as disclosed in the Company Schedules, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated in (or by) this Agreement, will (a) entitle any individual to
severance pay, unemployment compensation or any other payment from the Company,
any ERISA Affiliate, Parent, Purchaser, the Surviving Corporation or any
Employee Benefit Plan, (b) otherwise increase the amount of compensation due to
any individual, (c) result in any benefit or right becoming established or
increased, or accelerate the time of payment or vesting of any benefit, under
any Employee Benefit Plan, or (d) require the Company, any ERISA Affiliate,
Parent, Purchaser or the Surviving Corporation to transfer or set aside any
assets to fund or otherwise provide for any benefits for any individual.
3.13.10 Insured Benefits
With respect to any Employee Benefit Plan that is funded wholly or partially
through a third party insurance policy, there will be no liability, as of the
Effective Time, under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Effective Time.
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3.13.11 Definitions
As used in this Agreement, the following terms shall have the following
meanings:
(a) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (as set forth in Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code).
(b) "DOL" means the United States Department of Labor.
(c) "Employee Benefit Plan" means any retirement, pension, profit
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance,
accidental death and dismemberment, medical expense reimbursement,
dependent care assistance, tuition reimbursement, disability, sick pay,
holiday, vacation, severance, change of control, stock purchase, stock
option, restricted stock, phantom stock, stock appreciation rights, fringe
benefit (within the meaning of Section 132 of the Code) or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll
practice (including any "employee benefit plan," as defined in Section 3(3)
of ERISA) or any employment, consulting or personal services contract,
whether written or oral, qualified or nonqualified, funded or unfunded, or
domestic or foreign, (i) sponsored, maintained or contributed to by the
Company or any ERISA Affiliate or to which the Company or any ERISA
Affiliate is a party, (ii) covering or benefiting any current or former
officer, employee, agent, director or independent contractor of the Company
or any ERISA Affiliate (or any dependent or beneficiary of any such
individual), or (iii) with respect to which the Company or any ERISA
Affiliate has (or could have) any obligation or liability.
(d) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(e) "ERISA Affiliate" means any corporation, partnership, limited
liability company, sole proprietorship, trade, business or other
organization, entity or person that, together with the Company, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code.
(f) "HIPAA" means the Health Insurance Portability and Accountability
Act of 1997, as amended.
(g) "IRS" means the United States Internal Revenue Service.
3.14 Employees; Labor Matters
To the Company's knowledge, no employee of the Company (a) is in violation
of any term of any employment contract, patent disclosure agreement, non-
competition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use of trade secrets or proprietary
information of others and (b) has given notice to the Company, nor is the
Company otherwise aware, that any employee intends to terminate his or her
employment with the Company except for terminations of a nature and number
that are consistent with the Company's prior experience. Company Schedule 3.14
lists all collective bargaining agreements that are binding on the Company. To
the Company's knowledge, there are no activities or proceedings of any labor
union to organize any employees of the Company or any of its subsidiaries and
there are no strikes, or material slowdowns, work stoppages or lockouts, or
threats thereof by or with respect to any employees of the Company or any of
its subsidiaries. To the Company's knowledge, the Company and its subsidiaries
are and have been in compliance in all material respects with all applicable
laws regarding employment practices, terms and conditions of employment, and
wages and hours (including, without limitation, OSHA, ERISA, WARN or any
similar state or local law).
3.15 Environmental Matters
(a) Hazardous Material. To the Company's knowledge, no underground storage
tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances
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pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws (a "Hazardous Material"),
but excluding office and janitorial supplies, are present in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company or any of its subsidiaries has at any time
owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither the Company nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has the Company or any of its
subsidiaries disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity, except where such
violation would not have a Material Adverse Effect.
(c) Permits. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"Company Environmental Permits") material and necessary for the conduct of the
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of the Company and its subsidiaries as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or the
Company's knowledge, threatened concerning any Company Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company or any of
its subsidiaries. The Company is not aware of any fact or circumstance which
could involve the Company or any of its subsidiaries in any material
environmental litigation or impose upon the Company any material environmental
liability.
The Cablecure(R) and CableBlock(R) services provided to customers have been
conducted in compliance with all applicable environmental and safety laws, and
have not resulted in any soil contamination or given rise to any claims of
which the Company has notice, nor to the Company's knowledge, is there any
basis for any such claims.
3.16 Agreements, Contracts and Commitments
Except as set forth in the Company Schedules, neither the Company nor any of
its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with any
officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company or any of its
subsidiaries on no more than thirty days notice without liability or financial
obligation, except to the extent general principles of wrongful termination law
may limit the Company's or any of its subsidiaries' ability to terminate
employees at will;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan, stock purchase plan or restricted stock
purchase agreement, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Company or any of its subsidiaries and any of its officers or directors;
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(d) any agreement, contract or commitment currently in force containing any
covenant limiting the freedom of the Company or any of its subsidiaries to
engage in any line of business or compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise; or
(f) any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any
agreement, contract or commitment to which the Company or any of its
subsidiaries is a party of the type described above or any other material
agreement, contract or commitment (any such agreement, contract or commitment,
as well as any agreement, contract or commitment that is an exhibit to any
Company SEC Report, a "Company Contract") in such a manner as would permit any
other party to cancel or terminate any such Company Contract, or would permit
any other party to seek damages, which would be reasonably likely to be
material to the Company.
3.17 Change of Control Payments
The Company Schedules set forth each plan or agreement pursuant to which any
amounts may become payable (whether currently or in the future) to current or
former officers and directors of the Company as a result of or in connection
with the Offer and/or the Merger.
3.18 Board Approval
The Board of Directors of the Company has, as of the date of this Agreement
(a) determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (b) approved and adopted this Agreement
and the transactions contemplated hereby and (c) resolved to recommend that the
shareholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby and thereby.
3.19 Fairness Opinion
The Company's Board of Directors has received a written opinion from Banker
to the effect that the consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view, and the Company has delivered to Parent a copy
of such opinion.
3.20 State Anti-Takeover Statutes Not Applicable; Company Rights Plan
The Board of Directors of the Company has taken all actions so that (a) the
restrictions contained in Chapter 23B.19 of the Washington Business Corporation
Act and Section 203 of the DGCL will not apply to the execution, delivery or
performance of this Agreement or to the consummation of the Merger or the other
transactions contemplated by this Agreement, (b) approval of shareholders
holding sixty-seven percent (67%) of the outstanding shares will be sufficient
under the DGCL to approve the Merger, and (c) the execution, delivery and
performance of this Agreement and the consummation of the Merger will not cause
any change, effect or result under the Rights Agreement, dated as of November
6, 1998, between the Company and American Stock Transfer and Trust Company (the
"Company Rights Plan") which is adverse to the interests of Purchaser or
Parent. Without limiting the generality of the foregoing, if necessary to
accomplish the foregoing, the Company Rights Plan has been (or will be within
five business days of the date hereof) amended to (i) render the Company Rights
Plan inapplicable to the Merger and the other transactions contemplated by this
Agreement, (ii) ensure that (x) neither Parent nor Purchaser is an Acquiring
Person (as defined in the
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Company Rights Plan) pursuant to the Company Rights Plan by virtue of the Offer
or the Consummation of the Merger or the other transactions contemplated hereby
and thereby and (y) a Distribution Date or Shares Acquisition Date (as such
terms are defined in the Company Rights Plan) does not occur by reasons of the
execution of this Agreement, the consummation of the Merger, or the
consummation of the transactions contemplated hereby or thereby, and such
amendment may not be further amended by Company without the prior consent of
Parent in its sole discretion.
3.21 Offer Documents; Proxy Statement
Neither the Schedule 14D-9, nor any of the information supplied by the
Company for inclusion in the Offer Documents, shall, at the respective times
that the Schedule 14D-9, the Offer Documents or any amendments or supplements
thereto are filed with the SEC or are first published, sent or given to
shareholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the proxy
statement to be sent to the shareholders of the Company in connection with the
meeting of the Company's stockholders to consider the Merger (the "Company
Stockholders' Meeting") or the information statement to be sent to such
shareholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, is referred to as the "Proxy Statement"), shall, at
the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to shareholders, at the time of the Company Stockholders'
Meeting 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 made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become false or
misleading. The Schedule 14D-9 and the Proxy Statement will comply in all
material respects as to form and substance with the requirements of the
Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied to the Company by Parent or Purchaser which is contained
in the foregoing document.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company that:
4.1 Organization and Qualification
Each of Parent and Purchaser is a corporation duly organized validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now
being conducted.
4.2 Corporate Power, Authorization and Enforceability
Each of Parent and Purchaser has full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to consummate
all the transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Purchaser, the performances by each of Parent and
Purchaser of their respective obligations hereunder and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of each Parent and Purchaser and
no other corporate action on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of appropriate merger documents as
required by the DGCL). This Agreement has been duly executed and delivered by
each of Parent and Purchaser and is a legal, valid and binding obligation of
each of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms.
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4.3 No Conflict; Required Filings and Consents
(a) Assuming satisfaction of all applicable requirements referred to in
Section 4.3(b) below, the execution and delivery of this Agreement by Parent
and Purchaser, the compliance by Parent and Purchaser with the provisions
hereof and the consummation by Parent and Purchaser of the transactions
contemplated hereby will not conflict with or violate (i) any statute, law,
ordinance, rule, regulation, order, writ, judgment, award, injunction, decree
or ruling applicable to Parent and Purchaser or any of their properties, other
than such conflicts or violations which individually or in the aggregate do not
and will not have a material adverse effect on the business, properties,
assets, results of operations or financial condition of Parent and Purchaser,
taken as a whole, or (ii) conflict with or violate the Articles of
Incorporation or Bylaws of Parent and the Certificate of Incorporation or
Bylaws of Purchaser.
(b) Other than in connection with or in compliance with the provisions of
the DGCL, the Exchange Act, the "takeover" or "blue sky" laws of various states
and the HSR Act, (i) neither Parent nor Purchaser is required to submit any
notice, report, registration, declaration or other filing with any Governmental
Entity in connection, with the execution or delivery of this Agreement by
Parent and Purchaser or the performance by Parent and Purchaser of their
obligations hereunder or the consummation by Parent and Purchaser of the
transactions contemplated by this Agreement and (ii) no waiver, consent,
approval, order or authorization of any Governmental Entity is required to be
obtained by Parent and Purchaser in connection with the execution or delivery
of this Agreement by Parent and Purchaser or the performance by Parent and
Purchaser of their obligations hereunder or the consummation by Parent and
Purchaser of the transactions contemplated by this Agreement. None of the
information supplied by Parent and Purchaser for inclusion in the Proxy
Statement shall, at the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
required to be stated therein or necessary in order to make the statements made
therein in light of the circumstances under which they were made, not
misleading.
4.4 Schedule TO
Neither the Schedule TO nor the Offer Documents, nor any of the information
supplied by Parent and Purchaser for inclusion in the Schedule 14D-9, shall at
the respective times the Schedule TO or the Offer Documents or any amendments
or supplements thereto are filed with the SEC or are first published, sent or
given to shareholders or upon the expiration of the Offer, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading (except for information supplied by the Company for inclusion in the
Schedule TO and the Offer Documents, as to which Parent and Purchaser make no
representation).
4.5 Available Funds
Parent has or has available to it, and will make available to Purchaser, all
funds necessary to satisfy all of Parent's and Purchaser's obligations under
this Agreement and in connection with the transaction contemplated hereby,
including, without limitation, the obligation to purchase all outstanding
Shares pursuant to the Offer and the Merger and to pay all related fees and
expenses in connection with the Offer and the Merger.
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ARTICLE V
COVENANTS
5.1 Conduct of Business by the Company
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms and the
Effective Time, the Company (which for the purposes of this Article V shall
include the Company and each of its subsidiaries) agrees, except to the extent
that Parent shall otherwise consent in writing, to carry on its business
diligently and in accordance with good commercial practice and to carry on its
business in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when
due, and use its commercially reasonable efforts consistent with past practices
and policies to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationship with customers, suppliers, distributors, licensors, licensees, and
others with which it has business dealings. In addition, the Company will
promptly notify Parent of any material event involving its business or
operations.
In addition, except as permitted by the terms of this Agreement, without the
prior written consent of Parent, the Company shall not do any of the following,
and shall not permit any of its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee except
payments in amounts consistent with policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the other, or adopt any new severance plan;
(c) Other than with respect to the proposed licensing and joint venture
arrangement with Mr. T. Chen and affiliates (the "Chen Transaction"), transfer
or license to any person or entity or otherwise extend, amend or modify in any
material respect any rights to the Company's intellectual property or other
proprietary rights, or enter into grants to future patent rights, other than in
the ordinary course of business, consistent with past practice;
(d) Buy any intellectual property of a third party or enter into any license
agreement with respect to the intellectual property of any third party for an
acquisition or license, the price for which exceeds $50,000 individually (or in
the aggregate for a single third party), other than "shrink wrap," "click
wrap," and similar widely available commercial end-user licenses;
(e) Declare or pay any dividends on or make any other distributions (whether
in cash, stock or property) in respect of any capital stock of the Company or
split, combine or reclassify any capital stock of the Company or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock of the Company;
(f) Repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock of the Company except pursuant to rights of repurchase of any
such shares under any employee, consultant or director stock plan existing on
the date hereof (which repurchase rights the Company shall be obligated to
exercise if the repurchase price is less than the Merger Consideration);
(g) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock of the Company or any securities
convertible into shares of capital stock of the Company, or subscriptions,
rights, warrants or options to acquire any shares of capital stock of the
Company or any securities convertible into shares of capital stock of the
Company, or enter into other agreements or commitments of any character
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obligating it to issue any such shares or convertible securities, other than
the issuance of Shares pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement;
(h) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries);
(i) Other than with respect to the Chen Transaction, acquire or agree to
acquire by merging or consolidating with, or by purchasing any equity interest
in or a material portion of the assets of, or by any other manner, any
business or any corporation, partnership interest, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the business of the Company, or enter into any joint ventures, strategic
partnerships or alliances;
(j) Other than with respect to the Chen Transaction, sell, lease, license,
encumber or otherwise dispose of any properties or assets which are material,
individually or in the aggregate, to the business of the Company, except in
the ordinary course of business consistent with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire debt securities, or guarantee
any debt securities of others;
(l) Adopt or amend any employee benefit or employee stock purchase or
employee option plan (other than is necessary to comply with law), or enter
into any employment contract, pay any special bonus or special remuneration to
any director or employee, or increase the salaries or wage rates of its
officers or employees other than in the ordinary course of business,
consistent with past practice, or change in any material respect any
management policies or procedures;
(m) Pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business;
(n) Other than with respect to the Chen Transaction, make any grant of
exclusive rights to any third party;
(o) Except in the ordinary course of business, modify, amend or terminate
any material contract or agreement involving payments of $50,000 or more to
which the Company or any subsidiary thereof is a party or waive, release or
assign any material rights or claims thereunder;
(p) Materially revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
(q) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes in an amount in excess of $50,000 in the
aggregate;
(r) Commence any litigation or settle any litigation for an amount in
excess of the greater of $100,000 in the aggregate or the amount reserved in
respect thereof in the Company Balance Sheet, as set forth in Section 5.1 of
the Company Schedules; or
(s) Agree in writing or otherwise to take any of the actions described in
(a) through (r) above.
With respect to the actions described in (a), (b) and (l) above, the
Company further represents and warrants that it has not taken any such actions
since March 31, 2000, other than the authorization of the annual bonuses in
April 2000 and their payment in May 2000.
5.2 Access to Information; Confidentiality
(a) Subject to and in accordance with the terms and conditions of that
certain letter dated May 24, 2000 between Parent and the Company (the
"Confidentiality Agreement"), from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its subsidiaries, officers,
directors, employees and agents to,
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afford the officers, employees and agents of Parent, Purchaser and their
affiliates and the attorneys, accountants, banks, other financial institutions
and investment banks working with Parent or Purchaser, and their respective
officers, employees and agents, reasonable access at all reasonable times to
its officers, employees, agents, properties, books, records and contracts, and
shall furnish Parent, Purchaser and their affiliates and the attorneys, banks,
other financial institutions and investment banks working with Parent or
Purchaser, all financial, operating and other data and information as they
reasonably request.
(b) Subject to the requirements of law, Parent and Purchaser shall, and
shall use their reasonable efforts to cause their officers, employees and
agents, and the attorneys, banks, other financial institutions and investment
banks who obtain such information to, hold all information obtained pursuant to
this Agreement or the Confidentiality Agreement in accordance with the terms
and conditions of the Confidentiality Agreement.
(c) No investigation pursuant to this Section 5.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
5.3 Proxy Material; Stockholders' Meeting
(a) The Company and each of Parent and Purchaser shall prepare and file, or
shall cause to be prepared and filed, with the SEC those documents, schedules
and amendments and supplements thereto required to be filed with respect to the
transactions contemplated by this Agreement. The Company, acting through its
Board of Directors, shall, if necessary, cause the Company Stockholders'
Meeting to be duly called (including establishing the record date, if
requested, to be a date immediately after the date the Purchaser first
purchases any Shares pursuant to the Offer) and shall give notice of, convene
and hold the Company Stockholders' Meeting as soon as practicable, and at such
time and place designated by Parent or Purchaser, for the purpose of approving
the Merger, this Agreement and any other actions contemplated hereby which
require the approval of the Company's stockholders. The Company shall recommend
to its stockholders approval of the Merger and take all reasonable actions
necessary to solicit such approval. The Company shall use its best efforts to
obtain and furnish the information required to be included by it in the Proxy
Statement and, after consultation with Parent and Purchaser, shall respond
promptly to any comments of the SEC relating to any preliminary proxy statement
regarding the Merger and the other transactions contemplated by this Agreement
and to cause the Proxy Statement to be mailed to its stockholders, all at the
earliest practicable time. Whenever any event occurs which should be set forth
in an amendment or supplement to the Proxy Statement or any other filing
required to be made with the SEC with respect to the Proxy Statement or the
Company Stockholders' Meeting, each party shall promptly inform the other of
such occurrence and cooperate in filing with the SEC and/or mailing to the
Company's stockholders such amendment or supplement. The Proxy Statement and
all amendments and supplements thereto shall comply with applicable law and be
in form and substance satisfactory to each of Parent and Purchaser and the
Company. The Company, acting through its Board of Directors, shall include in
the Proxy Statement the recommendation of its Board of Directors that
stockholders of the Company vote, to the extent possible, for the approval and
adoption of this Agreement and the Merger and shall disclose, to the extent
possible, that each of the Company's directors and executive officers intend to
tender all outstanding shares beneficially owned by such persons to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act. The Company shall solicit from
stockholders of the Company proxies in respect of such approval and adoption
and shall, subject to applicable law, take all other actions necessary or, in
the reasonable judgment of Parent and Purchaser, advisable to secure the vote
or consent of the Company's stockholders required by the DGCL to effect the
Merger.
(b) Notwithstanding the foregoing, in the event that Purchaser shall acquire
at least ninety percent (90%) of the outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VI, to take all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting and
without a vote of the Company's stockholders, in accordance with the DGCL.
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5.4 No Solicitation; Break-up Fee
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or encourage submission
of, any proposals or offers by any person, entity or group (other than Parent
and its affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. For the purposes of this Agreement, an "Acquisition Proposal"
with respect to an entity means any proposal or offer relating to (i) any
merger, consolidation, sale of substantial assets or similar transactions
involving the entity or any subsidiaries of the entity (other than sales of
assets or inventory in the ordinary course of business or as permitted under
the terms of this Agreement), (ii) sale of outstanding shares of capital stock
of the entity (including without limitation by way of a tender offer or an
exchange offer), (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, 10% or more of the then outstanding
shares of capital stock of the entity (except for acquisitions for passive
investment purposes only in circumstances where the person or group qualifies
for and files a Schedule 13G with respect thereto); or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing. The Company will immediately cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company will (i)
notify Parent as promptly as practicable if any inquiry or proposal is made or
any information or access is requested in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) as promptly as practicable
notify Parent of the terms and conditions of any such Acquisition Proposal. In
addition, subject to the other provisions of this Section 5.4, from and after
the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, the Company and its
subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, make or authorize any public statement, recommendation
or solicitation in support of any Acquisition Proposal made by any person,
entity or group (other than Parent).
(b) Notwithstanding the provisions of paragraph (a) above, prior to
consummation of the Offer, the Company may participate in discussions or
negotiations with, and, subject to the requirements of paragraph (c), below,
furnish information to any person, entity or group after such person, entity or
group has delivered to the Company in writing, an unsolicited bona fide
Acquisition Proposal which the Board of Directors of the Company in its good
faith reasonable judgment determines, upon advice of its independent financial
advisors, would result in a transaction more favorable than the Offer and the
Merger to the shareholders of the Company from a financial point of view and
for which there would not be a financing condition or contingency, (a "Superior
Proposal"). In the event the Company receives a Superior Proposal, nothing
contained in this Agreement (but subject to the terms hereof) will prevent the
Board of Directors of the Company from recommending such Superior Proposal to
the Company's stockholders, provided that (i) the Board determines in good
faith that such action is required by its fiduciary duties under applicable
law; (ii) the Company shall not recommend to its stockholders a Superior
Proposal until at least two (2) business days after Parent's receipt of a copy
of such Superior Proposal (or a description of its terms and conditions, if not
in writing); and (iii) the Company shall not recommend to its stockholders a
Superior Proposal unless the Company shall have terminated this Agreement and
paid the Break-up Fee pursuant to Section 7.3(c).
(c) Notwithstanding anything to the contrary herein, the Company will not
provide any non-public information to a third party unless: (x) the Company
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y) such non-
public information has been previously delivered to Parent.
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(d) Nothing contained in this Section 5.4 shall prohibit the Company from at
any time taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) or (b) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company Board, upon the advice of outside counsel, failure so to disclose would
constitute a breach of its fiduciary duties to the Company's shareholders under
applicable law; provided, however, that neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
5.4(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to the Merger or this Agreement or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal. The taking of a position by the
Company pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of
an Acquisition Proposal shall not be deemed a withdrawal, a modification or a
proposal to withdraw or modify its position with respect to the Acquisition for
purposes hereof.
5.5 Public Announcements
Parent and Purchaser on the one hand and the Company on the other hand will
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the Merger or the other
transactions contemplated hereby, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law. This Section 5.5 shall supersede any conflicting provisions in
the Confidentiality Agreement.
5.6 Notification of Certain Matters
(a) The Company shall give prompt notice (which notice shall state that it
is delivered pursuant to Section 5.6(a) of this Agreement) in writing to
Parent, and Parent and Purchaser shall give prompt notice in writing to the
Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement through the Effective Time and (ii)
any failure of the Company, Parent or Purchaser, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy in all
material respects any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, no such notification
shall affect the representations or warranties of the parties or the conditions
to the obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which notice shall
state that it is delivered pursuant to Section 5.6(b) of this Agreement) to
Parent of (i) any act, omission to act, event or occurrence which, with the
passage of time or otherwise, would likely have a Material Adverse Effect on
the Company and (ii) any material contingent liability of the Company or any of
its subsidiaries for which such party reasonably believes it will, with the
passage of time or otherwise, become liable; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
5.7 Actions by Company
Subject to the terms and conditions hereof, the Company shall, and shall
cause its subsidiaries to, cooperate with Parent and Purchaser and take all
such actions as may be reasonably requested by Parent and Purchaser to
accomplish the Merger.
5.8 Officers' and Directors' Indemnification
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its
directors and officers as of the Effective Time (the "Indemnified Parties").
The Restated Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Restated
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Certificate of Incorporation and Bylaws of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the
Company, unless such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors'
and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of the Company; provided,
however, that in no event will Parent or the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage (or such coverage as is available for such 150% of such
annual premium).
5.9 Employment Agreements
Prior to commencement of the Offer, the Company shall offer to enter into
employment agreement (the "Employment Agreement") with William Weisfield, which
Employment Agreement shall be substantially in the form of Exhibit A hereto or
such other terms as may be accepted in writing by Parent.
5.10 Additional Agreements
(a) Subject to the terms and conditions hereof, each of the parties to this
Agreement 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 to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement (including consummation of the
Offer and the Merger) and to cooperate with each other in connection with the
foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to this
Agreement agrees to use (i) all reasonable efforts to obtain all necessary
waivers, consents and approvals from other parties to loan agreements, leases,
licenses and other contracts, and (ii) all reasonable efforts to obtain all
necessary consents, approvals and authorizations as required to be obtained
under any federal, state or foreign law or regulations, including, but not
limited to, those required under the HSR Act, to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, to effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by Governmental Entities, and to
fulfill all conditions to this Agreement.
5.11 Other Actions by the Company
If any "fair price," "moratorium," "control share acquisition," "shareholder
protection" or other form of anti-takeover statute, regulation or charter
provision or contract is or shall become applicable to the Offer or the Merger
or the transactions contemplated hereby, the Company and the Board of Directors
of the Company shall grant such approvals and take such actions as are
necessary under such laws and provisions so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute,
regulation, provision or contract on the transactions contemplated hereby.
5.12 Company Options
As soon as reasonably practicable following the date of this Agreement, the
board of directors of the Company (or, if appropriate, any committee
administering the Option Plans) shall adopt resolutions or take
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such other actions as may be reasonably requested by Purchaser (which
resolutions or other actions may be contingent on the Purchaser acquiring
pursuant to the Offer such number of Shares which satisfies the Minimum
Condition) as may be required to effect the following: (i) adjust the terms of
all outstanding Company Options, whether vested or unvested, as necessary to
provide that each Company Option outstanding, including all vested and unvested
Company Stock Options, shall be canceled effective immediately prior to the
Effective Time, with the holder thereof becoming entitled to receive an amount
in cash equal to (A) the excess, if any, of (1) $6.125 over (2) the exercise
price per share of the Common Stock subject to such Company Option, multiplied
by (B) the number of shares of the Common Stock for which such Company Option
shall not theretofore have been exercised; provided, however, that all amounts
payable pursuant to this Section 5.12 shall be subject to any required
withholding of Taxes or proof of eligibility of exemption therefrom and to
receipt of the written consent of the holder thereof and shall be paid at or as
soon as practicable following the Effective Time, without interest; and (ii)
make such other changes to the Company Plans as the Company and Parent may
agree are appropriate to give effect to the Merger.
5.13 Stock Option Plans
The Company agrees to take all necessary actions to ensure that all offering
periods outstanding under the Company's Stock Option Plans terminate
immediately prior to the Effective Time, and to ensure that the Stock Option
Plans terminate immediately prior to the Effective Time.
5.14 Employee Benefit Plans
The Company and its ERISA Affiliates each agree to adopt resolutions that
terminate or amend their respective 401(k) plans or other Employee Benefit
Plans in accordance with any directions given by Parent prior to the Effective
Time (the form and substance of which resolutions shall be subject to review
and approval by Parent), such terminations or amendments to be effective prior
to the Effective Time (but which may be contingent on the Purchaser acquiring
pursuant to the Offer such number of Shares which satisfies the Minimum
Condition).
5.15 Stockholder Litigation
The Company shall give Parent the opportunity to participate in the defense
or settlement of any stockholder litigation against the Company and its
directors relating to any of the transactions contemplated by this Agreement
until the purchase of Company Common Stock pursuant to the Offer, and
thereafter, shall give Parent the opportunity to direct the defense of such
litigation and, if Parent so chooses to direct such litigation, Parent shall
give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no settlement of such litigation shall be
agreed to without Parent's consent; and provided further that no settlement
requiring a payment by a director shall be agreed to without such director's
consent.
ARTICLE VI
CONDITIONS OF MERGER
6.1 Conditions to the Obligations of Each Party 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 each of the
following conditions:
(a) If required by the DGCL, this Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company.
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
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(c) Shares shall have been purchased pursuant to the Offer.
(d) No temporary restraining order, preliminary or permanent injunction,
judgment or other order, decree or ruling nor any statute, rule, regulation or
order shall be in effect which would (i) make the acquisition or holding by
Parent or its affiliates of Shares or shares of Common Stock of the Surviving
Corporation illegal or otherwise prevent the consummation of the Merger, (ii)
prohibit Parent's or Purchaser's ownership or operation of, or compel Parent or
Purchaser to dispose of or hold separate, all or a material portion of the
business or assets of Purchaser, the Company or any Significant Subsidiary
thereof, (iii) compel Parent, Purchaser or the Company to dispose of or hold
separate all or a material portion of the business or assets of Parent or any
of its Subsidiaries or the Company or any of its Significant Subsidiaries, (iv)
impose material limitations on the ability of Parent or Purchaser or their
affiliates effectively to exercise full ownership and financial benefits of the
Surviving Corporation, or (v) impose any material condition to the Offer, this
Agreement or the Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination
This Agreement may be terminated, at any time prior to the Effective Time,
whether before or after approval by the shareholders of the Company:
(a) by mutual written agreement of the Boards of Directors of Parent and the
Company;
(b) by either Parent or the Company;
(i) if the Offer shall be terminated or expire without any Shares having
been purchased pursuant to the Offer; provided, however, that a party shall
not be entitled to terminate this Agreement pursuant to this Section
7.1(b)(i) if it is in material breach of its representations and
warranties, covenants or other obligations under this Agreement; or
(ii) if any court of competent jurisdiction in the United States or
other United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable;
(c) by Parent or Purchaser:
(i) if the Board of Directors of the Company or any committee thereof
shall have approved, or recommended that shareholders of the Company accept
or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its approval of, or recommendation that
the shareholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of
the foregoing;
(iii) if the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Board of Directors of the Company that the
shareholders of the Company accept the Offer;
(iv) prior to the purchase of Shares pursuant to the Offer, in the event
that the conditions to the Offer set forth in clause (i) or (ii) of Annex I
shall not be satisfied or if any of the events set forth in clause
(iii) thereof shall have occurred; or
(v) if the Company is in material breach of any of its covenants or
obligations under this Agreement, or if there shall have been or be any
material inaccuracy in the representations and warranties of the Company
contained in this Agreement, either as of the date of this Agreement or
subsequently;
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(d) by the Company:
(i) if the Offer shall not have been commenced in accordance with
Section 1.1, or Parent or Purchaser shall have failed to purchase validly
tendered Shares in violation of the terms of the Offer within ten business
days after the expiration of the Offer; provided, however, that the Company
shall not be entitled to terminate this Agreement pursuant to this Section
7.1(d)(i) if it is in material breach of its representations and
warranties, covenants or other obligations under this Agreement;
(ii) if the Board of Directors of the Company has resolved to, and in
fact does, recommend to the Company's Shareholders that they accept a
Superior Proposal, provided that all the provisions of Section 5.4 have
been fully complied with, and provided further that the Company shall have
paid to Parent the entire Break-up Fee as provided in Section 7.3(b);
(iii) prior to the purchase of Shares pursuant to the Offer, if Parent
or Purchaser is in material breach of any of its covenants or obligations
under this Agreement, or any representation or warranty of Parent or
Purchaser contained in this Agreement shall have been incorrect, in any
material respect, when made or shall have since ceased to be true and
correct in any material respect; or
(iv) prior to the purchase of Shares pursuant to the Offer, in the event
that the conditions to the Offer set forth in clause (i) of Annex I shall
not be satisfied or if any of the events set forth in clause (iii)(A)(1)
thereof shall have occurred.
7.2 Procedure and Effect of Termination
In the event of the termination of this Agreement by the Company or Parent
or both of them pursuant to Section 7.1, the terminating party shall provide
written notice of such termination to the other party and this Agreement shall
forthwith become void and there shall be no liability on the part of Parent,
Purchaser or the Company, except as set forth in Sections 5.4(b) and 7.3.
Sections 5.4(b), 7.2, 7.3 and Article VIII shall survive the termination of
this Agreement.
7.3 Fees and Expenses
(a) Except as otherwise provided in this Agreement and whether or not the
transactions contemplated by the Offer and this Agreement are consummated, all
costs and expenses incurred in connection with the transactions contemplated by
the Offer and this Agreement shall be paid by the party incurring such
expenses.
(b) Parent has advanced the Company $50,000 pursuant to a Non-Solicitation
and Expense Reimbursement Agreement dated June 14, 2000 between Parent and
Company (the "Non-Solicitation and Expense Reimbursement Agreement") and shall,
upon signing of this Agreement, advance to the Company $225,000 to fund
additional expenses to be incurred by the Company in connection with the
transactions contemplated by this Agreement. The Company shall repay to Parent
these advances in the event Parent or the Purchaser terminates this Agreement
pursuant to Section 7.1(c)(v). The parties acknowledge that the
Non-Solicitation and Expense Reimbursement Agreement is terminated as of the
date hereof.
(c) The Company shall pay to Parent, in same day funds, upon demand, (i) a
fee of U.S. $2 million (the "Break-up Fee"), if any of the following shall
occur:
(i) if the Board of Directors of the Company or any committee thereof
shall have approved, or recommended that shareholders of the Company accept
or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of
the foregoing; or
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(iii) if the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Board of Directors of the Company that the
stockholders of the Company accept the Offer.
(d) Parent, Purchaser and the Company agree that the agreement contained in
paragraph (c) above is an integral part of the transactions contemplated by
this Agreement, and that without such agreement, Parent and Purchaser would not
have entered into this Agreement. The parties acknowledge that the damages to
Parent and Purchaser in the event this Agreement is breached by the Company
would be extremely costly and impractical to calculated and that such amount
constitutes reasonable liquidated damages and reasonable compensation to Parent
and Purchaser for the loss likely to be sustained thereby and is not a penalty.
(e) Parent shall pay for filing fees related to compliance with requirements
of the HSR Act.
7.4 Amendment
This Agreement may be amended by each of the parties by action taken by or
on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that (i) such amendment shall be in writing
signed by all of the parties, (ii) any such waiver, amendment or supplement by
the Company shall be effective as against the Company only if approved by a
majority of the Continuing Directors and (iii) after adoption of this Agreement
and the Merger by the shareholders of the Company, no amendment may be made
without the further approval of the shareholders of the Company which reduces
the Merger Consideration or changes the form thereof or changes any other terms
and conditions of this Agreement if the changes, alone or in the aggregate,
would materially adversely affect the shareholders of the Company.
7.5 Waiver
At any time prior to the Effective Time, whether before or after the
Company's Shareholders Meeting, any party hereto, by action taken by its Board
of Directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
provisions of Section 7.4, waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party by a duly
authorized officer of such party. Notwithstanding the above, any waiver given
shall not apply to any subsequent failure of compliance with agreements of the
other party or conditions to its own obligations.
ARTICLE VIII
MISCELLANEOUS
8.1 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
8.2 Notices
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given, or made as of the date
delivered if sent via telecopier or delivered personally (including, without
limitation, delivery by commercial carrier next-day delivery) to the parties at
the following
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addresses (or at such other address for a party as shall be specified by
similar notice, except that notices of changes of address shall be effective
upon receipt):
(a) If to Parent or Purchaser:
InfrastruX Group, Inc.
411-108th Avenue NE
Bellevue, Washington 98004
Attention: John Durbin
Telecopier No.: (425) 462-3300
With copies to:
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, WA 98101-3099
Attention: Andrew Bor
Telecopier No.: (206) 583-8500
(b) If to the Company:
UTILX Corporation
22820 Russell Road
P.O. Box 97009
Kent, Washington 98064-9709
Attention: William Weisfield
Telecopier No.: (253) 395-4636
With copies to:
Graham & Dunn PC
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101
Attention: Carmen L. Smith
Telecopier No.: (206) 340-9599
8.3 Entire Agreement; No Third Party Beneficiaries; No Assignment
This Agreement, Annex I, the documents delivered pursuant hereto or in
connection herewith, and the Confidentiality Agreement (i) constitute the
entire agreement and supersede all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof (including the Non-Solicitation and Expense Reimbursement
Agreement), (ii) are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder, and (iii) may not be assigned,
except that Parent or Purchaser may assign their rights hereunder in whole or
in part to one or more direct or indirect subsidiaries or affiliates of Parent
which, in written instruments reasonably satisfactory to the Company, shall
agree to make all representations and warranties of Purchaser set forth herein
and shall agree to assume all of such party's obligations hereunder and be
bound by all of the terms and conditions of this Agreement; provided, however,
that no such assignment shall relieve the assignor of its obligations
hereunder.
8.4 Interpretation; Knowledge
(i) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the
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meaning or interpretation of this Agreement. When reference is made herein to
"the business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "knowledge" means, with
respect to any matter in question, that any of the directors, Chief Executive
Officer or Chief Financial Officer) of the parties, as the case may be, have
knowledge of such matter and knowledge that could have been obtained by such
persons with respect to those matters that would cause a reasonable person, in
a similar position, to investigate the matter further and that could have been
obtained from such investigation without undue effort.
8.5 Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign the same
counterpart.
8.6 Other Remedies; Specific Performance
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions 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.
8.7 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof; provided that
issues involving the corporate governance of any of the parties hereto shall be
governed by their respective jurisdictions of incorporation. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction of any state
or federal court within King County, Washington, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
other than issues involving the corporate governance of any of the parties
hereto, agrees that process may be served upon them in any manner authorized by
the laws of the State of Washington for such persons and waives and covenants
not to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
8.8 Rules of Construction
The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the party drafting such agreement or document.
8.9 WAIVER OF JURY TRIAL
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INFRASTRUX GROUP, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
INFRASTRUX ACQUISITION, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
UTILX CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
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ANNEX I
CONDITIONS OF THE OFFER
The term "Agreement" as used in this Annex I shall mean the Agreement and
Plan of Merger to which this Annex I is attached, and all capitalized terms
used in this Annex I and not defined in this Annex I shall have the respective
meanings set forth in the Agreement.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of,
and payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any Shares tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated prior to the Expiration Date;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Agreement, any of the
following events shall be determined by Parent or Purchaser to have occurred:
(A) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the Offer or the Merger by any Governmental Entity or
arbitration panel that could reasonably be expected to, directly or
indirectly, (1) make the acceptance for payment or the payment for, or the
purchase of some or all of the Shares pursuant to the Offer illegal or
otherwise delay, restrict or prohibit consummation of the Offer or the
Merger or the consummation of any transaction contemplated by the Merger
Agreement, (2) result in a delay in or restrict the ability of Purchaser,
or render Purchaser unable, to accept for payment, pay for or purchase some
or all of the Shares, (3) require the divestiture by Parent, Purchaser, the
Company or any of their respective Subsidiaries or affiliates of all or any
portion of the business, assets or property of any of them or any Shares or
impose any material limitation on the ability of any of them to conduct
their business and own such assets, property or Shares, (4) impose any
material limitation on the ability of Parent, Purchaser or their affiliates
to acquire or hold or to exercise effectively all rights of ownership of
the Shares, including the right to vote any Shares purchased by any of them
on all matters properly presented to the shareholders of the Company,
including, without limitation, the adoption and approval of the Agreement
and the Merger, (5) result in a material diminution in the benefits
expected to be derived by Parent or Purchaser as a result of the
transactions contemplated by the Offer or the Agreement (other than
legislation or rule-making affecting the industry as a whole), or (6)
impose any material condition to the Offer, the Agreement or the Merger
unacceptable to Parent or Purchaser; or
(B) the Company shall have failed to obtain all of the consents of third
parties set forth in Exhibit B by the Expiration Date; or
(C) the Company shall have breached, or failed to comply with, in any
material respect, any of its covenants or obligations under the Agreement
or there shall have been or be any material inaccuracy in the
representations and warranties of the Company contained in the Agreement,
either as of the date of this Agreement or subsequently; or
(D) the Board of Directors of the Company or any committee thereof shall
have (1) withdrawn or modified (including without limitation, by amendment
of the Company's Schedule 14D-9) in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger or the Agreement,
(2) approved or recommended any Acquisition Proposal by a third party other
than the Offer and the
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Merger, (3) publicly resolved to do any of the foregoing, or (4) upon a
request to reaffirm the Company's approval or recommendation of the Offer,
the Agreement or the Merger, the Board of Directors of the Company shall
fail to do so within two business days after such request is made; or
(E) the Agreement shall have been terminated in accordance with its
terms; or
(F) there shall have occurred any Material Adverse Effect on the
Company, or any event, fact or change which could reasonably be expected to
result in a Material Adverse Effect on the Company.
The foregoing conditions are for the sole benefit of Parent, Purchaser and
their affiliates and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to such condition. All the foregoing conditions may
be waived by Parent or Purchaser in whole or in part at any time and from time
to time in the sole discretion of Parent or Purchaser. The failure by Parent or
Purchaser at any time to exercise its rights with respect to the foregoing
conditions shall not be deemed a waiver of any such condition, and each
condition shall be deemed an ongoing condition with respect to which Parent or
Purchaser may assert its rights at any time and from time to time.
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