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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
MARCH 5, 1997
SERV-TECH, INC.
(Exact name of registrant as
specified in its charter)
TEXAS 0-1788 74-1398757
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
5200 CEDAR CREST BOULEVARD
HOUSTON, TEXAS 77087
(Address of principal executive offices and zip code)
(713) 644-9974
(Registrant's telephone number,
including area code)
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ITEM 5. OTHER EVENTS
On March 5, 1997, the Registrant entered into an Agreement and Plan of
Merger dated March 5, 1997, by and among Philip Environmental Inc., an Ontario,
Canada corporation ("Philip"), Taro Aggregates Ltd., an Ontario, Canada
corporation and wholly-owned subsidiary of Philip ("Taro"), ST Acquisition
Corporation, a newly-formed Texas corporation and wholly-owned subsidiary of
Taro (the "Subsidiary"), and the Registrant (the "Merger Agreement"), which
Merger Agreement provides for the merger of the Subsidiary with and into the
Registrant. Pursuant to the Merger Agreement, the shareholders of the
Registrant will receive 0.403 share of Philip common stock for each share of
outstanding Registrant common stock. The attached press release and Agreement
and Plan of Merger are filed as exhibits and are incorporated herein by
reference.
ITEM 7. EXHIBITS
Exhibit 20 Press Release dated March 6, 1997.
Exhibit 99 Agreement and Plan of Merger dated March 5, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SERV-TECH, INC.
Dated: March 6, 1997 By: /s/ David P. Tusa
David P. Tusa,
Senior Vice President,
Finance &
Administration
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INDEX TO EXHIBITS
Exhibit 20 Press Release dated March 6, 1997.
Exhibit 99 Agreement and Plan of Merger dated March 5, 1997.
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NEWS RELEASE
PHILIP ENVIRONMENTAL CONTACT: SERV-TECH CONTACTS:
ALLEN FRACASSI DAVID P. TUSA
President and Chief Executive Officer Senior Vice President,
(905) 540-6620 (March 6, 1997 Only) Finance & Administration
(905) 521-1600 (After March 6, 1997) (713) 641-8673
PAT SOLIS
Treasurer and Director,
Investor Relations
(713) 641-8656
PHILIP EXPANDS INDUSTRIAL SERVICES BY MERGING WITH SERV-TECH
HOUSTON, TEXAS (6 March 1996) - Serv-Tech, Inc. (NASDAQ:STEC) and
Philip Environmental Inc. (NYSE: PEV) announced today that they have signed a
definitive merger agreement. In 1996, Serv-Tech generated revenue in excess of
US $140 million and provided industrial and environmental services from twenty
operations, primarily situated in the Gulf and West Coast regions of the United
States.
Under the terms of the agreement, each share of Serv-Tech stock will
be exchanged for 0.403 share of Philip Environmental stock. Based on the
closing price of Philip Environmental stock on Wednesday, March 5, 1997 each
Serv-Tech share is valued at US $6.60. In aggregate, the transaction is valued
at approximately US $72 million, including the assumption of approximately US
$21 million of indebtedness. The transaction is expected to be accretive to
Philip's earnings. Closing of the transaction is subject to regulatory and
shareholder approvals and is expected on or before June 30, 1997.
Serve-Tech provides innovative specialty industrial and environmental
services and products to
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the hydrocarbon processing, oil production, food, power, and pulp and paper
industries, primarily concentrated in the Gulf and West Coast regions of the
United States. Serv-Tech is comprised of three operating units: (i) Speciality
Services, which provides total turnaround project management services, including
heat exchanger extraction and cleaning, repair, specialty welding, refractory
and other specialized maintenance services, through the use of proprietary
technology; (ii) SECO Industries, which provides electrical and instrumentation
services to oil and gas production platforms, process and power plants, and the
hydrocarbon processing industry; and (iii) Environmental and Performance
Chemicals ("EC"), which provides specialty chemical, tank cleaning and
decontamination services.
In 1996, Specialty Services comprised 52% of Serv-Tech's total revenue,
SECO 36% and EC 12%. The market for industrial services within the U.S.
hydrocarbon processing industry is estimated at approximately US$8 billion.
"The merger with Serv-Tech significantly strengthens our presence in
the heavily industrialized Gulf Coast region and our services to the
hydrocarbon processing industry, a significant market for our integrated
services," said Allen Fracassi, president and chief executive officer of Philip
Environmental. "It also reflects our objective to establish a balance between
our metals and industrial services businesses. We intend to utilize the
strength of our combined management and employee base to integrate Serv-Tech's
business and client base with those of Philip in order to facilitate
cross-selling of our services into new markets."
Robert J. Cresci, chairman and chief executive officer of Serv-Tech,
stated, "The merger with Philip provides Serv-Tech's shareholders with the
opportunity to participate in the growth of the industrial services market as
part of a larger company with a
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proven track record of success. The merger will also facilitate Serv-Tech's
expansion into new market sectors served by Philip, while providing our
customers with a broader range of services."
Philip is a fully integrated resource recovery and industrial services
company providing metals processing and mill services, solid and liquid
by-products recovery and industrial and remediation services to all major
industry sectors. Philip trades on the New York Stock Exchange
under the symbol "PEV" and on the Toronto and Montreal Stock Exchanges under
the symbol "PEN."
Serv-Tech provides innovative specialty maintenance, electrical and
instrumentation, and environmental services and products to the hyrdrocarbon
processing, oil production, food, power, and pulp and paper industries
worldwide.
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of the 5th day of March,
1997 (this "Agreement"), is entered into by and among Philip Environmental
Inc., an Ontario, Canada corporation ("Parent"), Taro Aggregates Ltd., an
Ontario, Canada corporation and a wholly-owned subsidiary of Parent ("Taro"),
ST Acquisition Corporation, a Texas corporation and a wholly-owned subsidiary
of Taro ("Sub"), and Serv-Tech, Inc., a Texas corporation ("Target").
WHEREAS, subject to and in accordance with the terms and conditions of
this Agreement, the respective Boards of Directors of Parent, Sub and Target,
and Taro as sole shareholder of Sub, have approved the merger of Sub with and
into Target (the "Merger"), whereby each issued and outstanding share of common
stock, par value $.50 per share, of Target ("Target Common Stock") not owned
directly or indirectly by Target will be converted into the right to receive
common stock, no par value, of Parent ("Parent Common Stock"), as provided
herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Texas Business
Corporation Act (the "TBCA"), at the Effective Time (as defined in Section 1.3)
Sub shall be merged with and into Target. As a result of the Merger, the
separate corporate existence of Sub shall cease and Target shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") and shall succeed to and assume all of the rights and obligations
of Sub in accordance with the TBCA. At the election of Parent, any direct or
indirect wholly-owned subsidiary of Parent may be substituted for Sub as a
constituent corporation in the Merger; provided, however, that such
substitution has no impact on the satisfaction of the conditions set forth in
Sections 5.2(d) and 5.3(b). In such
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event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect such substitution.
1.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Liddell,
Sapp, Zivley, Hill & LaBoon, L.L.P., 600 Travis, Texas Commerce Tower, Houston,
Texas 77002, or at such other place as Parent and Target shall agree, as soon
as practicable, but in any event not later than five business days, after the
satisfaction or waiver of the conditions set forth in Article V. The date on
which the Closing occurs is herein referred to as the "Closing Date".
1.3 Consummation of the Merger. As soon as practicable on the
Closing Date, the parties hereto will cause the Merger to be consummated by
filing with the Secretary of State of Texas articles of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
TBCA. The "Effective Time" of the Merger as that term is used in this
Agreement shall mean the effective time set forth in the certified copy of the
certificate of merger issued by the Secretary of State of Texas with respect to
the Merger.
1.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the TBCA.
1.5 Articles of Incorporation; Bylaws. The articles of
incorporation and bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation and bylaws of the
Surviving Corporation and thereafter shall continue to be its articles of
incorporation and bylaws until amended as provided therein and under the TBCA.
1.6 Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and bylaws of the Surviving Corporation, and the officers of
Target immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified. The names of such officers and
directors are set forth on Exhibit 1.6.
1.7 Conversion of Securities; Exchange; Fractional Shares.
Subject to the terms and conditions of this Agreement, at the Effective Time,
by virtue of the Merger and without any action on the part of Target, Sub or
their shareholders:
(a) Exchange Ratio. Each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time (the "Shares"), other than
any Shares to be canceled pursuant to Section 1.7(b) and any Dissenting Shares
(as defined and to the extent provided in Section 1.8), shall be converted,
subject to the provisions of this Section 1.7, into the right to receive .403
shares of Parent Common Stock; provided, however, that no fractional shares of
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Parent Common Stock shall be issued, and, in lieu thereof, a cash payment shall
be made pursuant to Section 1.7(g) hereof.
(b) Conversion of Shares. Each share of Target Common Stock held
in the treasury of Target and each Share owned by Sub, Parent or any direct or
indirect wholly-owned subsidiary of Parent or of Target immediately prior to
the Effective Time shall be canceled and extinguished at the Effective Time and
each holder of a certificate representing any such shares of Target Common
Stock shall cease to have any rights with respect thereto, except the right to
receive upon the surrender of such certificates, certificates representing the
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or other distributions to the extent provided in
Section 1.7(e) to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with this Section 1.7, without interest.
(c) Exchange Agent. Immediately following the Effective Time of
the Merger, Parent shall deposit with The Bank of New York or such other bank
or trust company as may be designated by Parent and Target (the "Exchange
Agent"), for the benefit of the holders of shares of Target Common Stock, for
exchange in accordance with this Article I, through the Exchange Agent,
certificates representing the shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time of the Merger, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
1.7(a) in exchange for outstanding shares of Target Common Stock. The Exchange
Agent shall, pursuant to mutually agreed instructions, deliver the Parent
Common Stock contemplated to be issued pursuant to Section 1.7(a).
(d) Exchange Procedures. As soon as reasonably practicable (and
in any event within five business days) after the Effective Time of the Merger,
Parent shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time of the Merger represented outstanding shares of Target Common
Stock, other than shares to be cancelled or retired in accordance with Section
1.7(b), (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in customary
form and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock and cash in lieu of fractional shares. Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article I, cash in lieu of fractional shares of Parent
Common Stock, and any dividends or other distributions to which such holder is
entitled pursuant to Section 1.7(g) and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Target
Common Stock which is not registered in the transfer records of Target, a
certificate representing the proper number of shares of Parent Common Stock and
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cash in lieu of fractional shares of Parent Common Stock, and any dividends or
other distributions to which such holder is entitled pursuant to Section 1.7(g)
may be issued to a person other than the person in whose name the Certificate
is registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the issuance of shares of
Parent Common Stock to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
1.7, each Certificate shall be deemed at any time after the Effective Time of
the Merger to represent only the right to receive upon such surrender the
certificate representing the appropriate number of whole shares of Parent
Common Stock, cash in lieu of any fractional shares of Parent Common Stock and
any dividends or other distributions to the extent provided in Section 1.7(e)
as contemplated by this Section 1.7. No interest will be paid or will accrue
on any cash payable in lieu of any fractional shares of Parent Common Stock.
(e) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time of the Merger shall be paid to the holder
of any unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 1.7(g) until the surrender
of such Certificate in accordance with this Article I. Subject to the effect
of applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 1.7(g)
and the amount of dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such whole shares
of Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time of
the Merger but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(f) No Further Ownership Rights in Target Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article I (including any cash
paid pursuant to Section 1.7(e) or 1.7(g)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Target Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time of the
Merger which may have been declared or made by the Target on such shares of
Target Common Stock in accordance with the terms of this Agreement or prior to
the date of this Agreement and which remain unpaid at the Effective Time of the
Merger, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Target Common
Stock which were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger,
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Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be cancelled and exchanged as provided in this
Article I, except as otherwise provided by law.
(g) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder
of Parent.
(ii) As promptly as practicable following the Effective Time of the
Merger, the Exchange Agent shall determine the excess of (x) the
number of shares of Parent Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 1.7(c) over (y) the aggregate
number of whole shares of Parent Common Stock to be distributed to
holders of the Certificates pursuant to Section 1.7(d) (such excess
being herein called the "Excess Shares"). As soon as practicable
after the Effective Time of the Merger, the Exchange Agent, as agent
for the holders of the Certificates, shall sell the Excess Shares at
then prevailing prices on the New York Stock Exchange, Inc. (the
"NYSE"), all in the manner provided in Paragraph (iii) of this Section
1.7(g).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The
proceeds from such sale or sales available for distribution to the
holders of certificates shall be reduced by the compensation payable
to the Exchange Agent and the expenses incurred by the Exchange Agent,
in each case, in connection with such sale or sales of the Excess
Shares, including all related commissions, transfer taxes and other
out-of- pocket transaction costs. Until the net proceeds of such sale
or sales have been distributed to the holders of the Certificates, the
Exchange Agent shall hold such proceeds in trust for the holders of
the Certificates (the "Common Shares Trust"). The Exchange Agent
shall determine the portion of the Common Shares Trust to which each
holder of a Certificate shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares
Trust by a fraction, the numerator of which is the aggregate amount of
fractional share interests to which such holder of a Certificate is
entitled and the denominator of which is the aggregate amount of
fractional share interests to which all holders of the Certificates
are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates in lieu of any
fractional share interests, the Exchange Agent shall make available
such amounts, without interest, to such holders of Certificates who
have surrendered their Certificates in accordance with this Article I.
(h) Termination of Exchange Fund and Common Shares Trust. Any
portion of the Exchange Fund and Common Shares Trust which remains
undistributed to the holders of
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Certificates for six months after the Effective Time of the Merger shall be
delivered to Parent, upon demand, and any holders of Certificates who have not
theretofore complied with this Article I shall thereafter look only to Parent
for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock.
(i) No Liability. None of Parent, Sub, the Target, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Parent Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund or the Common Shares Trust delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to
seven years after the Effective Time of the Merger (or immediately prior to
such earlier date on which any shares of Parent Common Stock, any cash in lieu
of fractional shares of Parent Common Stock or any dividends or distributions
with respect to Parent Common Stock in respect of such Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.01 (d)), any such shares, cash, dividends or distributions
in respect of such Certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund and Common Shares Trust. The
Exchange Agent shall invest any cash included in the Exchange Fund and Common
Shares Trust, as directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent.
1.8 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares that are held by shareholders who shall not have voted
such Shares in favor of adoption and approval of the Merger and this Agreement
and who, prior to the taking of a vote of the shareholders on the adoption and
approval of the Merger and this Agreement, shall have delivered to Target a
written objection to the Merger in the manner provided in Article 5.12 of the
TBCA and who shall have delivered to the Surviving Corporation a written demand
for payment of the fair value of such Shares in the manner provided in Article
5.12 ("Dissenting Shares") shall not be converted into the right to receive
Parent Common Stock, but the holders thereof shall be entitled to payment of
the fair value of such Shares in accordance with the provisions of Article
5.12; provided, however, that (i) if any holder of Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for payment of the fair
value of such Dissenting Shares (with the written consent of the Surviving
Corporation, if such consent is required by the TBCA), or (ii) if any holder
fails to establish his entitlement to appraisal rights as provided in Article
5.12 and Article 5.13, or fails strictly to comply with any other applicable
provision of the TBCA, or (iii) if neither any holder of Dissenting Shares nor
the Surviving Corporation has filed a petition asking for a finding and
determination of the fair value of all Dissenting Shares within the time
provided in Article 5.12, such holder or holders (as the case may be) shall
forfeit the right to appraisal of such Dissenting Shares and such Dissenting
Shares shall thereupon be deemed to have
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been converted into the right to receive Parent Common Stock as provided in
Section 1.7 hereof and shall have only such rights as provided under the TBCA.
1.9 Taking of Necessary Action; Further Action. The parties
hereto shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Target or Sub, such corporations
shall direct their respective officers and directors to take all such lawful
and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Parent, Taro and Sub.
Parent, Taro and Sub hereby represent and warrant to Target that:
(a) Organization and Compliance with Law. Parent and
each of its subsidiaries (the "Parent Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized and has all requisite
corporate power and authority and all necessary governmental authorizations to
own, lease and operate all of its properties and assets and to carry on its
business as now being conducted, except where the failure to have such
governmental authority would not have a material adverse effect on the
financial condition, results of operations or business of Parent and the Parent
Subsidiaries, taken as a whole, or on the ability of Parent or Sub to
consummate the transactions contemplated hereby (a "Parent Material Adverse
Effect"). Parent and each of the Parent Subsidiaries is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except in such jurisdictions where the failure to be duly qualified does not
and would not, in the aggregate, result in a Parent Material Adverse Effect.
Parent and each of the Parent Subsidiaries is in compliance with all applicable
laws, judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not result in a Parent Material
Adverse Effect. Parent has heretofore delivered to Target true and complete
copies of Parent's articles of incorporation and bylaws as in existence on the
date hereof. A disclosure letter delivered by Parent to Target on the date
hereof (the "Parent Disclosure Letter") sets forth each of the Parent
Subsidiaries and the respective jurisdiction of its incorporation. All the
outstanding shares of capital stock of each Parent Subsidiary have been validly
issued and are fully paid and non- assessable and, except as set forth in the
Parent Disclosure Letter, are owned by Parent, by another Parent Subsidiary or
by Parent and another Parent Subsidiary, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens") which are material to Parent and
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the Parent Subsidiaries, taken as a whole. Except for the capital stock of
Parent Subsidiaries and except for the ownership interests set forth in the
Parent Disclosure Letter, Parent does not own, directly or indirectly, any
capital stock or other ownership interest, with a fair market value as of the
date of this Agreement greater than $1,000,000, in any corporation,
partnership, company, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
(b) Capitalization. The authorized capital stock of
Parent consists of an unlimited number of shares of Parent Common Stock. As of
January 31, 1997, there were issued and outstanding 70,089,685 shares of Parent
Common Stock. As of January 31, 1997, no shares of Parent Common Stock were
held as treasury shares. As of January 31, 1997, there were reserved for
issuance a total of 4,257,149 shares of Parent Common Stock pursuant to the
stock option plans described in this Section 2.1(b). All issued shares of
Parent Common Stock are validly issued, fully paid and nonassessable and no
holder thereof is entitled to preemptive rights. All shares of Parent Common
Stock to be issued pursuant to the Merger, when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable and will not
violate the preemptive rights of any person. As of January 31, 1997, there
were outstanding options (the "Parent Options") to purchase an aggregate of
3,844,261 shares of Parent Common Stock. As of the date hereof, the authorized
capital stock of Sub consists of 1,000 shares of common stock, par value $1.00
per share, all of which are validly issued, fully paid and nonassessable and
are owned by Parent.
(c) Authorization and Validity of Agreement. Parent,
Taro and Sub have all requisite corporate power and authority to enter into
this agreement and to perform their obligations hereunder. The execution and
delivery by Parent, Taro and Sub of this Agreement and the consummation by each
of them of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent, Taro or Sub. This
Agreement has been duly executed and delivered by Parent, Taro and Sub and is
the valid and binding obligation of Parent and Sub, enforceable against Parent,
Taro and Sub in accordance with its terms.
(d) No Approvals or Notices Required; No Conflict with
Instruments to which Parent or any of the Parent Subsidiaries is a Party.
Neither the execution and delivery of this Agreement nor the performance by
Parent, Taro or Sub of its obligations hereunder, nor the consummation of the
transactions contemplated hereby by Parent, Taro and Sub, will (i) conflict
with the articles of incorporation or bylaws of Parent or the charter or bylaws
of any of the Parent Subsidiaries; (ii) assuming satisfaction of the
requirements set forth in clause (iii) below, violate any provision of law
applicable to Parent or any of the Parent Subsidiaries; (iii) except for (A)
requirements of Federal and state securities law, (B) requirements arising out
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
(C) requirements of notice filings in such foreign jurisdictions as may be
applicable, and (D) the filing of articles of merger in accordance with the
TBCA, require any consent or approval of, or filing with or notice to, any
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public body or authority, domestic or foreign, under any provision of law
applicable to Parent or any of the Parent Subsidiaries; or (iv) except as set
forth in the Parent Disclosure Letter, require any consent, approval or notice
under, or violate, breach, be in conflict with or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under, or permit the termination of any provision of, or result in the creation
or imposition of any lien upon any properties, assets or business of Parent or
any of the Parent Subsidiaries under, any note, bond, indenture, mortgage, deed
of trust, lease, franchise, permit, authorization, license, contract,
instrument or other agreement or commitment or any order, judgment or decree to
which Parent or any of the Parent Subsidiaries is a party or by which Parent or
any of the Parent Subsidiaries or any of its or their assets or properties is
bound or encumbered, except those that have already been given, obtained or
filed, and except in any of the cases enumerated in clauses (ii) through (iv)
those that, in the aggregate, would not result in a Parent Material Adverse
Effect. Except as set forth in the Parent Disclosure Letter, Parent and the
Parent Subsidiaries possess all certificates, franchises, licenses, permits,
authorizations and approvals granted by governmental entities (collectively,
"Permits") necessary to conduct their business as such business is currently
conducted, except for such Permits, the lack of possession of which has not,
and is not reasonably expected to have, a Parent Material Adverse Effect.
(e) OSC Filings; Financial Statements. Since January 1,
1995, Parent has filed all reports, forms and other filings, together with any
amendments required to be made with respect thereto, that it has been required
to file with the Ontario Securities Commission (the "OSC") under the
Securities Act (Ontario). All reports, forms and other filings filed by
Parent with the OSC since January 1, 1995 through the date of this Agreement,
together with any amendments thereto, are listed in the Parent Disclosure
Letter and are sometimes collectively referred to as the "Parent OSC Filings."
Parent has heretofore made available to Target copies of the Parent OSC
Filings. As of the respective dates of their filing with the OSC, the Parent
OSC Filings complied with the Securities Act (Ontario) and the regulations and
policy statements of the OSC promulgated thereunder applicable to such
documents, and the Registration Statement (as defined in Section 4.1) (except
with respect to information concerning Target and the Target Subsidiaries (as
defined in Section 2.2(a)) furnished by or on behalf of Target to Parent
specifically for use therein) will comply, in all material respects with the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission"),
promulgated thereunder, and did not or will not, as the case may be, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Each of the consolidated financial statements (including any related
notes or schedules) included in the Parent OSC Filings was, and each of the
consolidated financial statements to be included in the Registration Statement
and Proxy Statement (except for those financial statements of Target and the
Target Subsidiaries furnished by or on behalf of Target to Parent specifically
for use therein) will be, prepared in accordance with the accounting principles
generally accepted in
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Canada applied on a consistent basis ("Canadian Accounting Principles") (except
as may be noted therein or in the notes or schedules thereto), and fairly
present or will fairly present, as the case may be, in all material respects
the consolidated financial position of Parent and the Parent Subsidiaries as of
the dates thereof and the results of operations, cash flows and changes in
shareholders' equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments on
a basis comparable with past periods). Except as set forth in the Parent OSC
Filings or in the Parent Disclosure Letter, neither the Parent nor any Parent
Subsidiary has any liabilities or obligations of any nature whether accrued,
absolute, contingent or otherwise) required by Canadian Accounting Principles
to be set forth on a consolidated balance sheet of the Parent and Parent
Subsidiaries or in the notes thereto and which, individually or in the
aggregate, is reasonably likely to have a Parent Material Adverse Effect. None
of the Parent Subsidiaries is subject to the information reporting requirements
of Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(f) Conduct of Business in the Ordinary Course; Absence
of Certain Changes and Events. Since September 30, 1996, except as
contemplated by this Agreement, disclosed in the Parent OSC Filings filed with
the OSC since that date or set forth in the Parent Disclosure Letter, Parent
and the Parent Subsidiaries have conducted their business only in the ordinary
and usual course, and there has not been (i) any Parent Material Adverse
Effect, or any condition, event or development that reasonably may be expected
to result in a Parent Material Adverse Effect, other than those associated with
or arising out of the effects of the seasonality and volatility of Parent's and
Parent's Subsidiaries' businesses consistent with the historic seasonality and
volatility of such businesses; (ii) any material change by Parent in its
accounting methods, principles or practices; (iii) any material revaluation by
Parent or any of the Parent Subsidiaries of any of its or their material assets
other than in the ordinary course of business; (iv) any entry by Parent or any
of the Parent Subsidiaries into any commitment or transaction (or any agreement
regarding any such commitment or transaction) material to Parent and the Parent
Subsidiaries, taken as a whole; (v) any declaration, setting aside or payment
of any dividends or distributions in respect of the Parent Common Stock or any
redemption, purchase or other acquisition of any of its securities or any
securities of any of the Parent Subsidiaries; (vi) any damage, destruction or
loss (whether or not covered by insurance) materially adversely affecting the
properties or business of Parent and the Parent Subsidiaries, taken as a whole;
(vii) any increase in indebtedness for borrowed money other than under working
capital revolving lines of credit; (viii) any granting of a security interest
or lien on any material property or assets of Parent and the Parent
Subsidiaries, taken as a whole, other than (A) liens for taxes not due and
payable or which are being contested in good faith; (B) mechanics',
warehousemen's and other statutory liens incurred in the ordinary course of
business; and (C) defects and irregularities in title and encumbrances which
are not substantial in character or amount and do not materially impair the use
of the property or asset in question (collectively, "Permitted Liens"); or (ix)
any split, combination or reclassification of any Parent capital stock or any
issuance or the authorization of any issuance of any other securities in
exchange or in substitution for shares of Parent capital stock.
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(g) Certain Fees. Except as set forth in the Parent
Disclosure Letter, neither Parent nor any of its officers, directors or
employees, on behalf of Parent or any of the Parent Subsidiaries or its or
their respective Boards of Directors (or any committee thereof), has employed
any financial advisor, broker or finder or incurred any liability for any
financial advisory, brokerage or finders' fees or commissions in connection
with the transactions contemplated hereby.
(h) Litigation. Except as disclosed in the Parent
Commission Filings or set forth in the Parent Disclosure Letter, there are no
claims, actions, suits, investigations or proceedings pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of the
Parent Subsidiaries or any of their respective properties at law or in equity,
or any of their respective employee benefit plans or fiduciaries of such plans,
or before or by any federal, state, municipal or other governmental agency or
authority, or before any arbitration board or panel, wherever located, that are
reasonably likely to result in a Parent Material Adverse Effect, or that
involve a substantial risk of criminal liability (and Parent does not have any
reasonable basis to expect any such claim, action, suit, investigation or
proceeding to be commenced), and there is not any judgment, decree, injunction,
rule or order of any governmental entity or arbitrator outstanding against
Parent or any Parent Subsidiary having, or which, insofar as reasonably can be
foreseen, in the future would have, a Parent Material Adverse Effect. As of
the date of this Agreement, except as disclosed in the Parent Commission
Filings or in the Parent Disclosure Letter, there is no suit, action or
proceeding pending, or, to the knowledge of Parent, threatened, against Parent
or any Parent Subsidiary (and Parent does not have any reasonable basis to
expect any such suit, action or proceeding to be commenced) that, individually
or in the aggregate, could reasonably be expected to prevent or delay in any
material respect the consummation of the Merger or the transactions
contemplated by this Agreement.
(i) Employee Benefit Plans. There are no "employee
pension benefit plans," as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by
Parent or the Parent Subsidiaries for the benefit of their employees except for
those (each a "Parent Pension Plan") disclosed in the Parent Disclosure Letter.
Each "employee benefit plan," as such term is defined in Section 3(3) of ERISA,
maintained, sponsored or contributed to by Parent or a Parent Subsidiary or
with respect to which the Parent or any Parent Subsidiary has any liability
(each a "Parent Benefit Plan") complies in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws. To
Parent's knowledge, neither Parent nor any Parent Subsidiary, nor any of their
respective directors, officers or employees, has, with respect to any Parent
Benefit Plan, engaged in any conduct that would result in any taxes or
penalties on prohibited transactions under Section 4975 of the Code or under
Section 502(i) of ERISA or in any breach of fiduciary duty liability under
Section 409 of ERISA which in the aggregate is reasonably likely to result in a
Parent Material Adverse Effect.
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Except as set forth in the Parent Disclosure Letter, neither Parent
nor any Parent Subsidiary maintains any Parent Pension Plan that is subject to
Title IV of ERISA. Neither Parent nor any Parent Subsidiary has, or within the
preceding six years has had, any obligation to contribute to any "multiemployer
plan," as defined in Section 3(37) of ERISA.
Except as set forth in the Parent Disclosure Letter, each Parent
Pension Plan which is intended to be qualified under Section 401(a) of the Code
has received a letter from the Internal Revenue Service (the "IRS") determining
that such plan is exempt from United States federal income tax under Sections
401(a) and 501(a) of the Code and approving the form of such plan as amended to
comply with the requirements of the Tax Reform Act of 1986 and all subsequent
required amendments have been timely made, and there has been no occurrence
since the date of any such determination letter (to the extent such letter has
been received) which has adversely affected such qualification.
Except as set forth in the Parent Disclosure Letter, neither Parent
nor any Parent Subsidiary has any obligation to provide welfare benefits to any
of its former employees, except to the extent required by Section 4980B of the
Code and Section 601-608 of ERISA (collectively, "COBRA").
(j) Taxes. Except as set forth in the Parent Disclosure
Letter or in the Parent Commission Filings, all returns and reports, including,
without limitation, information and withholding returns and reports ("Tax
Returns"), of or relating to any foreign, federal, state or local tax,
assessment or other governmental charge ("Taxes" or a "Tax") that are required
to be filed on or before the Closing Date by or with respect to Parent or any
of the Parent Subsidiaries, have been or will be duly and timely filed, such
Tax Returns are true, complete and correct in all material respects, and all
Taxes, including interest and penalties, due and payable pursuant to such Tax
Returns have been paid or, except as set forth in the Parent Disclosure Letter,
adequately provided for in reserves established by Parent, except where the
failure to file, pay or provide for would not result in a Parent Material
Adverse Effect. There is no material claim against Parent or any of the Parent
Subsidiaries with respect to any Taxes, and no material assessment, deficiency
or adjustment has been asserted or proposed with respect to any Tax Return of
or with respect to Parent or any of the Parent Subsidiaries that has not been
adequately provided for in reserves established by Parent and no requests for
waivers of the time to assess any such Taxes are pending.
(k) Environmental. Except as set forth in the Parent
Disclosure Letter or in the Parent Commission Filings, Parent and the Parent
Subsidiaries are in substantial compliance with all applicable Environmental
Laws (as defined below). For purposes of this Section 2.1(k), "substantial
compliance" shall mean compliance, except to the extent that failure to comply
would not reasonably be expected to result in a Parent Material Adverse Effect.
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Except as set forth in the Parent Disclosure Letter, (i) none
of the properties currently owned or operated by Parent or any Parent
Subsidiary contains any Hazardous Substance in amounts exceeding the levels
permitted by applicable Environmental Laws, (ii) neither Parent nor any Parent
Subsidiary has received any notices, demand letters or requests for information
from any Federal, state, local or foreign governmental entity or third party
indicating that Parent or any Parent Subsidiary may be in violation, or is
liable under, any applicable Environmental Law in connection with the ownership
or operation of its business including, without limitation, liability relating
to assets not owned or operated by Parent or any Parent Subsidiary, (iii) there
are no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings, pending or threatened, against Parent
or any Parent Subsidiary relating to any violation of or liability under, or
alleged violation of or liability under, any applicable Environmental Law, (iv)
no reports have been filed, or are required to be filed, by Parent or any
Parent Subsidiary concerning the threatened or actual violation of any
applicable Environmental Law, (v) no Hazardous Substance has been disposed of,
released or transported in violation of or under circumstances that could
create liability under any applicable Environmental Law from any properties
owned by Parent or any Parent Subsidiary as a result of any activity of Parent
or any Parent Subsidiary during the time such properties were owned, leased or
operated by Parent or any Parent Subsidiary, and (vi) neither Parent, any of
the Parent Subsidiaries nor any of their respective properties are subject to
any material liabilities or expenditure (fixed or contingent) relating to any
settlement, court order, administrative order, judgment or claim asserted or
arising under any applicable Environmental Law, except for violations of or
matters described by the foregoing clauses (i) through (vi) not set forth in
the Parent Disclosure Letter that, individually or in the aggregate, would not
reasonably be expected to have a Parent Material Adverse Effect.
"Environmental Law" means any Federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction, requirement or
agreement with any governmental entity relating to (x) the protection,
preservation or restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource) or
to human health or safety or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. in each case
as amended and as in effect on the Closing Date. The term "Environmental Law"
includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Occupational Safety and Health Act of 1970, each as amended and
as in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for
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<PAGE> 14
injuries or damages due to, or threatened as a result of, the presence of or
effects of exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as a "Hazardous Substance" under any Environmental
Law, or oil or any fraction thereof.
Except as set forth in the Parent Disclosure Letter or in the Parent
Commission Filings, neither Parent nor the Parent Subsidiaries are subject to
any order or decree of or have received, within the past five years, any
written notice from any governmental agency with respect to any alleged
violation by Parent or any of the Parent Subsidiaries of, or the incurrence of
any remedial obligation by Parent or the Parent Subsidiaries under, any
applicable federal, state or local environmental or health and safety statutes
and regulations which has had or would have a Parent Material Adverse Effect
and no requests for waivers of the fine to assess any such Taxes are pending.
(l) Title to Property. Except as set forth in the Parent
Disclosure Letter or in the Parent Commission Filings, Parent and each of the
Parent Subsidiaries have good and indefeasible title to all of their real
properties purported to be owned in fee and good title to all their other
material assets, free and clear of all Liens, other than Permitted Liens or
Liens that are not material to the business of Parent and the Parent
Subsidiaries, taken as a whole.
(m) Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
2.2 Representations and Warranties of Target. Target hereby
represents and warrants to Parent that:
(a) Organization and Compliance with Law. Target and
each of its subsidiaries (the "Target Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized and has all requisite
corporate power and authority and all necessary governmental authorizations to
own, lease and operate all of its properties and assets and to carry on its
business as now being conducted, except where the failure to have such
governmental authority would not have a material adverse effect on the
financial condition, results of operations or business of Target and the Target
Subsidiaries, taken as a whole, or on the ability of Target to consummate the
transactions contemplated hereby ("Target Material Adverse Effect"). Target
and each of the Target Subsidiaries is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified does not and would not, in
the aggregate, result in a Target Material Adverse Effect. Target and each of
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<PAGE> 15
the Target Subsidiaries is in compliance with all applicable laws, judgments,
orders, rules and regulations, domestic and foreign, except where failure to be
in such compliance would not result in a Target Material Adverse Effect.
Target has heretofore delivered to Parent true and complete copies of Target's
articles of incorporation and bylaws as in existence on the date hereof. A
disclosure letter delivered by Target to Parent on the date hereof (the "Target
Disclosure Letter") sets forth each of the Target Subsidiaries and the
respective jurisdiction of its incorporation. All the outstanding shares of
capital stock of each Target Subsidiary have been validly issued and are fully
paid and non-assessable and, except as set forth in the Target Disclosure
Letter, are owned by Target, by another Target Subsidiary or by Target and
another Target Subsidiary, free and clear of all Liens which are material to
Target and the Target Subsidiaries, taken as a whole. Except for the capital
stock of Target Subsidiaries and except for the ownership interests set forth
in the Target Disclosure Letter, Target does not own, directly or indirectly,
any capital stock or other ownership interest, with a fair market value as of
the date of this Agreement greater than $1,000,000, in any corporation,
partnership, company, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
(b) Capitalization. The authorized capital stock of
Target consists of 20,000,000 shares of Target Common Stock and 2,000,000
shares of preferred stock, par value $1.00 per share ("Target Preferred
Stock"). As of February 28, 1997, there were issued and outstanding 6,861,999
shares of Target Common Stock, and no shares of Target Preferred Stock were
issued and outstanding. As of February 28, 1997, no shares of Target Preferred
Stock and 7,710 shares of Target Common Stock were held as treasury shares.
All issued shares of Target Common Stock are validly issued, fully paid and
nonassessable and no holder thereof is entitled to preemptive rights. As of
the date hereof, there are outstanding options (the "Target Options") to
purchase an aggregate of 1,285,400 shares of Target Common Stock, and shares of
Target Common Stock have been reserved for issuance pursuant to all such stock
options. Other than as set forth in this Section 2.2(b) or pursuant to rights
("Target Rights") issued pursuant to the Rights Agreement by and between Target
and American Stock Transfer & Trust Company, as Rights Agent (as amended, the
"Target Rights Agreement"), there are not now, and at the Effective Time there
will not be, any (A) shares of capital stock or other equity securities of
Target outstanding (other than Target Common Stock issued pursuant to the
exercise of Target Options as described herein) or (B) outstanding options,
warrants, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of Target, or contracts,
understandings or arrangements to which Target is a party, or by which it is or
may be bound, to issue additional shares of its capital stock or options,
warrants, scrip or rights to subscribe for, or securities or rights convertible
into or exchangeable for, any additional shares of its capital stock.
(c) Authorization and Validity of Agreement. Target has
all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery by Target of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of Target,
subject
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only, with respect to the Merger, to adoption and approval of the Merger and
this Agreement by its shareholders as provided for in Section 4.3(a). On or
prior to the date hereof the Board of Directors of Target has determined to
recommend approval of the Merger to the shareholders of Target, and such
determination is in effect as of the date hereof. This Agreement has been duly
executed and delivered by Target and is the valid and binding obligation of
Target, enforceable against Target in accordance with its terms.
(d) No Approvals or Notices Required; No Conflict with
Instruments to which Target or any of the Target Subsidiaries is a Party.
Neither the execution and delivery of this Agreement nor the performance by
Target of its obligations hereunder, nor the consummation of the transactions
contemplated hereby by Target, will (i) conflict with the articles of
incorporation or bylaws of Target or the charter or bylaws of any of the Target
Subsidiaries; (ii) assuming satisfaction of the requirements set forth in
clause (iii) below, violate any provision of law applicable to Target or any of
the Target Subsidiaries; (iii) except for (A) requirements of Federal and state
securities law, (B) requirements arising out of the HSR Act, (C) requirements
of notice filings in such foreign jurisdictions as may be applicable, and (D)
the filing of articles of merger in accordance with the TBCA, require any
consent or approval of, or filing with or notice to, any public body or
authority, domestic or foreign, under any provision of law applicable to Target
or any of the Target Subsidiaries; or (iv) except as set forth in the Target
Disclosure Letter, require any consent, approval or notice under, or violate,
breach, be in conflict with or constitute a default (or an event that, with
notice or lapse of time or both, would constitute a default) under, or permit
the termination of any provision of, or result in the creation or imposition of
any lien upon any properties, assets or business of Target or any of the Target
Subsidiaries under, any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which Target or any
of the Target Subsidiaries is a party or by which Target or any of the Target
Subsidiaries or any of its or their assets or properties is bound or
encumbered, except those that have already been given, obtained or filed, and
except in any of the cases enumerated in clauses (i) through (iv) those that,
in the aggregate, would not result in a Target Material Adverse Effect. Except
as set forth in the Target Disclosure Letter, Target and the Target
Subsidiaries possess all Permits necessary to conduct their business as such
business is currently conducted, except for such Permits, the lack of
possession of which has not, and is not reasonably expected to have, a Target
Material Adverse Effect.
(e) Commission Filings; Financial Statements. Since
January 1, 1995, Target has filed all reports, registration statements and
other filings, together with any amendments required to be made with respect
thereto, that it has been required to file with the Commission under the
Securities Act and the Exchange Act. All reports, registration statements and
other filings filed by Target with the Commission since January 1, 1995 through
the date of this Agreement, together with any amendments thereto, are listed in
the Target Disclosure Letter and are sometimes collectively referred to as the
"Target Commission Filings". Target has heretofore delivered to Parent copies
of the Target Commission Filings. As of the respective dates of their
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<PAGE> 17
filing with the Commission, the Target Commission Filings complied, and the
Proxy Statement (except with respect to information concerning Parent and the
Parent Subsidiaries furnished by or on behalf of Parent to Target specifically
for use therein) will comply, in all material respects with the Securities Act,
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and did not or will not, as the case may be, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
All material contracts of Target and the Target Subsidiaries have been
included in the Target Commission Filings, except for those contracts not
required to be filed pursuant to the rules and regulations of the Commission
and those contracts entered into in connection with the transactions
contemplated hereby.
Each of the consolidated financial statements (including any related
notes or schedules) included in the Target Commission Filings was, and each of
the consolidated financial statements to be included in the Proxy Statement
(except for those financial statements of Parent and the Parent Subsidiaries
furnished by or on behalf of Parent to Target specifically for use therein)
will be, prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be noted therein or in the notes
or schedules thereto), and fairly presents or will fairly present, as the case
may be, in all material respects the consolidated financial position of Target
and the Target Subsidiaries as of the dates thereof and the results of
operations, cash flows and changes in shareholders' equity for the periods then
ended (subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments on a basis comparable with past periods).
Except as set forth in the Target Commission Filings or in the Target
Disclosure Letter, neither the Target nor any Target Subsidiary has any
liabilities or obligations of any nature whether accrued, absolute, contingent
or otherwise) required by generally accepted accounting principles to be set
forth on a consolidated balance sheet of the Target and Target Subsidiaries or
in the notes thereto and which, individually or in the aggregate, is reasonably
likely to have a Target Material Adverse Effect. None of the Target
Subsidiaries is subject to the information reporting requirements of Section 13
of the Exchange Act.
(f) Conduct of Business in the Ordinary Course; Absence
of Certain Changes and Events. Since September 30, 1996, except as
contemplated by this Agreement, disclosed in the Target Commission Filings
filed with the Commission since that date or set forth in the Target Disclosure
Letter, Target and the Target Subsidiaries have conducted their business only
in the ordinary and usual course, and there has not been (i) any Target
Material Adverse Effect, or any condition, event or development that reasonably
may be expected to result in any such Target Material Adverse Effect other than
those associated with or arising out of the effects of the seasonality and
volatility of Target's and Target's Subsidiaries' businesses consistent with
the historic seasonality and volatility of such businesses; (ii) any material
change by Target in its accounting methods, principles or practices; (iii) any
material revaluation by Target or any of the Target Subsidiaries of any of its
or their material assets other than in the ordinary course of business; (iv)
any entry by Target or any of the
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<PAGE> 18
Target Subsidiaries into any commitment or transaction (or any agreement
regarding any such commitment or transaction) material to Target and the Target
Subsidiaries, taken as a whole; (v) any declaration, setting aside or payment
of any dividends or distributions in respect of the Target Common Stock or any
redemption, purchase or other acquisition of any of its securities or any
securities of any of the Target Subsidiaries; (vi) any damage, destruction or
loss (whether or not covered by insurance) materially adversely affecting the
properties or business of Target and the Target Subsidiaries, taken as a whole;
(vii) any increase in indebtedness for borrowed money other than under working
capital revolving lines of credit; (viii) any granting of a security interest
or lien on any material property or assets of Target and the Target
Subsidiaries, taken as a whole, other than Permitted Liens; (ix) any split,
combination or reclassification of any Target capital stock or any issuance or
the authorization of any issuance of any other securities in exchange or in
substitution for shares of Target capital stock; or (x) (A) any granting by
Target or any Target Subsidiary to any executive officer of Target or any
Target Subsidiary of any increase in compensation, except in the ordinary
course of business consistent with prior practice or as required under any
employment agreement in effect as of September 30, 1996, (B) any granting by
Target or any Target Subsidiary to any such executive officer of any increase
in severance or termination pay, except as required under any employment,
severance or termination agreement in effect as of September 30, 1996, or (C)
any entry by Target or any Target Subsidiary into any employment, severance or
termination agreement with any such executive officer.
(g) Certain Fees. Except as set forth in the Target
Disclosure Letter, neither Target nor any of its officers, directors or
employees, on behalf of Target or any of the Target Subsidiaries or its or
their respective Boards of Directors (or any committee thereof), has employed
any financial advisor, broker or finder or incurred any liability for any
financial advisory, brokerage or finders' fees or commissions in connection
with the transactions contemplated hereby.
(h) Litigation. Except as disclosed in the Target
Commission Filings or set forth in the Target Disclosure Letter, there are no
claims, actions, suits, investigations or proceedings pending or, to the
knowledge of Target, threatened against or affecting Target or any of the
Target Subsidiaries or any of their respective properties at law or in equity,
or any of their respective employee benefit plans or fiduciaries of such plans,
or before or by any federal, state, municipal or other governmental agency or
authority, or before any arbitration board or panel, wherever located, that are
reasonably likely to result in a Target Material Adverse Effect, or that
involve a substantial risk of criminal liability (and Target does not have any
reasonable basis to expect any such claim, action, suit, investigation or
proceeding to be commenced), and there is not any judgment, decree, injunction,
rule or order of any governmental entity or arbitrator outstanding against
Target or any Target Subsidiary having, or which, insofar as reasonably can be
foreseen, in the future would have, a Target Material Adverse Effect. As of
the date of this Agreement, except as disclosed in the Target Commission
Filings or in the Target Disclosure
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Letter, there is no suit, action or proceeding pending, or, to the knowledge of
Target, threatened, against Target or any Target Subsidiary (and Target does
not have any reasonable basis to expect any such suit, action or proceeding to
be commenced) that, individually or in the aggregate, could reasonably be
expected to prevent or delay in any material respect the consummation of the
Merger or the transactions contemplated by this Agreement.
(i) Employee Benefit Plans. There are no "employee
pension benefit plans," as such term is defined in Section 3(2) of ERISA,
maintained by Target or the Target Subsidiaries for the benefit of their
employees, except for those (each a "Target Pension Plan") disclosed in the
Target Disclosure Letter. Each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, maintained, sponsored, or contributed to by
Target or a Target Subsidiary or with respect to which Target or any Target
Subsidiary has any liability (each a "Target Benefit Plan") complies in all
material respects with all applicable requirements of ERISA, the Code and other
applicable laws. To Target's knowledge, neither Target nor any Target
Subsidiary, nor any of their respective directors, officers or employees has,
with respect to any Target Benefit Plan, engaged in any conduct that would
result in any taxes or penalties on prohibited transactions under Section 4975
of the Code or under Section 502(i) of ERISA or in breach of fiduciary duty
liability under Section 409 of ERISA which in the aggregate is reasonably
likely to result in a Target Material Adverse Effect. Except as set forth in
the Target Disclosure Letter or as otherwise provided in this Agreement, the
execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or in combination with another event)
constitute an event under any benefit or compensation plan, policy, arrangement
or agreement or any trust or loan that will or may result in any material
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or compensation or
obligation to fund benefits or compensation with respect to any employee. The
only severance or termination agreements or severance or termination plans,
policies or arrangements applicable to Target or the Target Subsidiaries are
those specifically set forth in the Target Disclosure Letter.
Except as set forth in the Target Disclosure Letter, neither Target
nor any Target Subsidiary maintains any Target Pension Plan that is subject to
Title IV of ERISA. Except as set forth in the Target Disclosure Letter,
neither Target nor any Target Subsidiary has, or within the preceding six years
has had, any obligation to contribute to any "multiemployer plan," as defined
in Section 3(37) of ERISA.
Except as disclosed in the Target Disclosure Letter, each Target
Pension Plan which is intended to be qualified under Section 401(a) of the Code
has received a letter from the IRS determining that such plan is exempt from
United States federal income tax under Sections 401(a) and 501(a) of the Code
and approving the form of such plan as amended to comply with the requirements
of the Tax Reform Act of 1986 and all subsequent required amendments have been
made, and there has been no occurrence since the date of any such determination
letter (to the extent such letter has been received) which has adversely
affected such qualification.
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Except as set forth in the Target Disclosure Letter, neither Target
nor any Target Subsidiary has any obligation to provide welfare benefits to any
of its former employees except to the extent required by COBRA.
(j) Taxes. Except as set forth in the Target Disclosure
Letter or in the Target Commission Filings:
(i) all Tax Returns of or relating to any Tax that are required to
be filed on or before the Closing Date by or with respect to Target or any of
the Target Subsidiaries, or any other corporation that is or was a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) of
corporations of which Target was a member for any period ending on or prior to
the Closing Date, have been or will be duly and timely filed, such Tax Returns
are true, complete and correct in all material respects, and all Taxes,
including interest and penalties, due and payable pursuant to such Tax Returns
have been paid or adequately provided for in reserves established by Target,
except where the failure to file, pay or provide for would not result in a
Target Material Adverse Effect. There is no material claim against Target or
any of the Target Subsidiaries with respect to any Taxes, and no material
assessment, deficiency or adjustment has been asserted or proposed with respect
to any Tax Return of or with respect to Target, or any of the Target
Subsidiaries that has not been adequately provided for in reserves established
by Target and no requests for waivers of the time to assess any such Taxes are
pending. All Tax Returns of and with respect to Target or any of the Target
Subsidiaries have been either examined by and settled with the United States
Internal Revenue Service or closed without examination for all years through
1992.
(ii) Where payment is not yet due, Target has established (or have
had established on its behalf and for its sole benefit and recourse) or will
establish or cause to be established on or before the Closing Date an adequate
accrual for the payment of all Taxes due with respect to any period ending
prior to or as of the Closing Date of the Merger, except where the failure to
pay or establish adequate reserves has not had and would not reasonably be
expected to have a Target Material Adverse Effect.
(iii) There are no Liens for Taxes upon the assets of Target except
Liens for Taxes not yet due.
(iv) There are no material federal, state, local or foreign audits
or other administrative proceedings or court proceedings presently pending with
regard to any Taxes or Tax Returns of Target.
(v) Target is not a party to any agreement or arrangement (written
or oral) providing for the allocation or sharing of Taxes.
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(vi) Target has not filed a consent pursuant to Section 341(f)(2)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term as defined in Section
341(f)(4) of the Code) owned by Target.
(vii) Target is not and has not been a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
five year period ending on the Closing Date.
(k) Environmental. Except as set forth in the Target
Disclosure Letter, Target and the Target Subsidiaries are in substantial
compliance with all applicable Environmental Laws. For purposes of this Section
2.2(k), "substantial compliance" shall mean compliance, except to the extent
that failure to comply would not reasonably be expected to result in a Target
Material Adverse Effect.
Except as set forth in the Target Disclosure Letter, (i) none of the
properties currently owned or operated by Target or any Target Subsidiary
contains any Hazardous Substance in amounts exceeding the levels permitted by
applicable Environmental Laws, (ii) neither Target nor any Target Subsidiary
has received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Target or any Target Subsidiary may be in violation, or is liable under,
any applicable Environmental Law in connection with the ownership or operation
of its business including, without limitation, liability relating to assets not
owned or operated by Target or any Target Subsidiary, (iii) there are no civil,
criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings, pending or threatened, against Target or any
Target Subsidiary relating to any violation of or liability under, or alleged
violation of or liability under, any applicable Environmental Law, (iv) no
reports have been filed, or are required to be filed, by Target or any Target
Subsidiary concerning the threatened or actual violation of any applicable
Environmental Law, (v) no Hazardous Substance has been disposed of, released or
transported in violation of or under circumstances that could create liability
under any applicable Environmental Law from any properties owned by Target or
any Target Subsidiary as a result of any activity of Target or any Target
Subsidiary during the time such properties were owned, leased or operated by
Target or any Target Subsidiary, and (vi) neither Target, any of the Target
Subsidiaries nor any of their respective properties are subject to any material
liabilities or expenditure (fixed or contingent) relating to any settlement,
court order, administrative order, judgment or claim asserted or arising under
any applicable Environmental Law, except for violations of or matters described
by the foregoing clauses (i) through (vi) not set forth in the Target
Disclosure Letter that, individually or in the aggregate, would not reasonably
be expected to have a Target Material Adverse Effect.
Except as set forth in the Target Disclosure Letter, neither Target
nor the Target Subsidiaries are subject to any order or decree of or have
received, within the past five years, any written notice from any governmental
agency with respect to any alleged violation by Target or any of the Target
Subsidiaries of, or the incurrence of any remedial obligation by Target or any
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of the Target Subsidiaries under, any applicable federal, state or local
environmental or health and safety statutes and regulations which has had or
would have a Target Material Adverse Effect.
(l) Title to Property. Except as set forth in the Target
Disclosure Letter or in the Target Commission Filings, Target and each of the
Target Subsidiaries have good and indefeasible title to all of their real
properties purported to be owned in fee and good title to all their other
material assets, free and clear of all Liens, other than Permitted Liens or
Liens that are not material to the business of Target and the Target
Subsidiaries, taken as a whole.
(m) Voting Requirements. The affirmative vote of the
holders of two-thirds of the outstanding shares of Target Common Stock in favor
of the adoption and approval of the Merger and this Agreement is the only vote
of the holders of any class or series of the capital stock of Target necessary
to approve this Agreement and the Merger.
(n) Severance Payments. The Target Disclosure Letter
lists all obligations of Target and the Target Subsidiaries for the payment of
severance or similar obligations to any of their respective employees, officers
or directors as a result of the cessation of their employment in connection
with or after the Merger or the transactions contemplated by this Agreement.
Target or the Target Subsidiaries will pay to certain employees the transaction
bonuses listed in the Target Disclosure Letter upon consummation of the Merger,
and such listed bonuses represent all such bonuses payable by Target or the
Target Subsidiaries to any employee, officer or director of Target or a Target
Subsidiary in connection with the Merger or the transactions contemplated by
this Agreement.
(o) Intentionally Left Blank.
(p) Dissenting Shareholders. Target has no knowledge of
any plan or intention on the part of any Target shareholders to make written
demand for payment of the fair value of their Shares in the manner provided in
Article 5.12 of the TBCA.
(q) Opinion of Financial Advisor. Target has received
the oral opinion of Simmons and Company International, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be
received in the Merger by Target's shareholders is fair to Target's
shareholders from a financial point of view, and a copy of the written opinion
will be delivered to Parent promptly after its receipt by Target, but in any
event not later than three business days after the date of this Agreement.
(r) Compliance with Laws. Neither Target nor any Target
Subsidiary has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any governmental entity
applicable to its business or operations, except for violations and failures to
comply that could not, individually or in the aggregate, reasonably be expected
to result in a Target Material Adverse Effect.
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(s) State Takeover Statutes. The Board of Directors of
Target has approved the Merger and this Agreement, and such approval is
sufficient to render inapplicable to the Merger, this Agreement, and the
transactions contemplated by this Agreement, the provisions of any applicable
state takeover statute or similar statute or regulation.
(t) Rights Agreement. Target has taken all necessary
action to (i) render Target Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement and (ii) ensure that (x) neither
Parent nor any of its Affiliates (as defined in the Target Rights Agreement) is
an Acquiring Person (as defined in the Target Rights Agreement), and (y) no
Distribution Date, Section 11(a)(ii) Event, Section 13 Event, Stock Acquisition
Date or Triggering Event (each as defined in the Target's Rights Agreement)
shall occur by reason of the approval, execution or delivery of this Agreement,
the announcement or consummation of the Merger or the consummation of any of
the other transactions contemplated by this Agreement.
(u) No Excess Parachute Payments. Other than payments
that may be made to the persons listed in the Target Disclosure Letter, any
amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
(whether alone or in combination with a qualifying termination of employment)
by any employee, officer or director of the Target or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Target Benefit Plan currently in
effect would not be characterized as an "excess parachute payment" (as such
term is defined in Section 280G(b)(1) of the Code).
ARTICLE III
COVENANTS OF TARGET PRIOR TO THE EFFECTIVE TIME
3.1 Conduct of Business by Target Pending the Merger. Target
covenants and agrees that, from the date of this Agreement until the Effective
Time, unless Parent shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement or set forth in the Target Disclosure Letter:
(a) The business of Target and the Target Subsidiaries
shall be conducted only in, and Target and the Target Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice and in compliance in all material respects with all applicable laws
and regulations;
(b) Target shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber, or permit any
Target Subsidiary to issue, sell, pledge, dispose of or encumber, (A) any
capital stock of Target or any Target Subsidiary except upon the exercise of
Target Options outstanding as of the date of this Agreement or pursuant to the
Target Rights
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Agreement (as amended in contemplation of the Merger) or (B) other than in the
ordinary course of business and consistent with past practice and not relating
to the borrowing of money, any assets of Target or any Target Subsidiary; (ii)
amend or propose to amend the respective charters or bylaws of Target or any
Target Subsidiary, (iii) split, combine or reclassify any outstanding capital
stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to its capital stock whether now or
hereafter outstanding; (iv) redeem, purchase or acquire or offer to acquire, or
permit any of the Target Subsidiaries to redeem, purchase or acquire or offer
to acquire, any of its or their capital stock; or (v) except in the ordinary
course of business and consistent with past practice, enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 3.1(b);
(c) Target shall use all reasonable efforts (i) to
preserve intact the business organization of Target and each of the Target
Subsidiaries, (ii) to maintain in effect any franchises, authorizations or
similar rights of Target and each of the Target Subsidiaries, (iii) to keep
available the services of its and their current officers and key employees,
(iv) to preserve the goodwill of those having business relationships with it
and the Target Subsidiaries, (v) to maintain and keep its properties and the
properties of the Target Subsidiaries in as good a repair and condition as
presently exists, except for deterioration due to ordinary wear and tear and
damage due to casualty; and (vi) to maintain in full force and effect insurance
comparable in amount and scope of coverage to that currently maintained by it
and the Target Subsidiaries;
(d) Target shall not make or agree to make, or permit any
of the Target Subsidiaries to make or agree to make, any new capital
expenditure other than those made in the ordinary course of business and
consistent with past practice, which shall not exceed an aggregate of
$1,500,000 during the term of this Agreement;
(e) Target shall, and shall cause the Target Subsidiaries
to, perform their respective obligations under any contracts and agreements to
which any of them is a party or to which any of their assets is subject, except
to the extent such failure to perform would not result in a Target Material
Adverse Effect, and except for such obligations as Target or the Target
Subsidiaries in good faith may dispute;
(f) Target shall not, or permit any of the Target
Subsidiaries to, amend its articles of incorporation, bylaws or other
comparable charter or organizational documents;
(g) Target shall not, or permit any of the Target
Subsidiaries to, acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets or, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or division
thereof or (y) any assets that are material, individually or in the aggregate,
to Target and the Target Subsidiaries taken as a whole;
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(h) Target shall not, or permit any of the Target
Subsidiaries to, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any Target Property other than (A)
sales and dispositions of interests or rights with respect to real or personal
property having an aggregate fair market value on the date of this Agreement of
less than $2,000,000, in each case only if in the ordinary course of business
consistent with past practice, and (B) Liens that are incurred in the ordinary
course of business consistent with past practice. Notwithstanding the
foregoing provisions of this Section 3.1(h), Parent acknowledges and agrees
that, subject to Parent's consent which shall not be unreasonably withheld,
Target shall be permitted to sell all of its interest in Chemisolv Holdings,
Inc. ("Chemisolv") by merger, sale of substantially all the assets of Chemisolv
or its subsidiaries, sale of any equity interest in Chemisolv or its
subsidiaries, or any other business combination; provided, however, that in any
case (i) Parent is satisfied through its independent review of the transaction
of the commercial reasonableness of proceeding therewith; and (ii) any proceeds
from such merger, sale or other business combination are used to pay down the
long-term debt of Target.
(i) Target shall not, or permit any of the Target
Subsidiaries to, incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Target or any Target
Subsidiary, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term or working capital borrowings incurred
in the ordinary course of business consistent with past practice, or make any
loans, advances (other than any advances to employees in the ordinary course of
business consistent with prior practice) or capital contributions to, or
investments in, any other person, other than to Target or any Target
Subsidiary;
(j) Target shall not, or permit any of the Target
Subsidiaries to, except pursuant to existing employment agreements or as
required by applicable laws (A) increase the compensation payable or to become
payable to its executive officers, (B) grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
executive officer or employee of Target or any Target Subsidiary (other than in
accordance with Target Benefit Plans in effect on the date of this Agreement)
or (C) establish, adopt, enter into or amend in any material respect or take
any action to accelerate any rights or benefits under any collective bargaining
agreement or Target Benefit Plan;
(k) except as contemplated by this Agreement, Target
shall not, or permit any of the Target Subsidiaries to, amend any Target
Options as a result of this Agreement or in contemplation of the Merger;
(l) Target shall not make, or permit any of the Target
Subsidiaries to make, any material Tax election or settle or compromise any
material Tax liability or refund, except to the extent already provided for in
the Target Commission Filings; and
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(m) Target shall not, or permit any of the Target
Subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions.
3.2 No Shopping. Target and the Target Subsidiaries shall not,
directly or indirectly, through any officer, director, employee, representative
or otherwise, solicit, initiate or encourage submission of proposals or offers
from any person or entity (other than Parent) relating to any merger,
acquisition or purchase of all or (other than in the ordinary course of
business) a portion of the assets of, or any equity interest in, Target or any
of the Target Subsidiaries or any business combination with Target or any of
the Target Subsidiaries (collectively, a "Target Acquisition Proposal") or
participate in any negotiations regarding, or furnish to any other person any
information with respect to Target for the purposes of, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to seek or effect a Target Acquisition
Transaction; provided, however, that (i) Target may furnish or cause to be
furnished information concerning its businesses, properties or assets to a
third party, subject to an appropriate confidentiality agreement having been
entered into by such third party; (ii) Target may engage in discussions or
negotiations with a third party; (iii) following the receipt of a proposal for
a Target Acquisition Transaction, the Board of Directors of Target may
withdraw, modify or amend its recommendation to the shareholders of Target
regarding approval of the Merger and this Agreement and discontinue the
solicitation of proxies in favor of such adoption and approval; and (iv)
following receipt of a proposal for a Target Acquisition Transaction, Target
may take and disclose to its shareholders a position contemplated by Rule 14e-2
under the Exchange Act or otherwise make appropriate disclosures to Target's
shareholders, but in each case referred to in the foregoing clauses (i) through
(iv), only to the extent that the Board of Directors of Target concludes in
good faith on the basis of the written opinion of its outside counsel that
failure to take such action would constitute a breach by the Board of Directors
of Target of its fiduciary duty under applicable law. If any Target
Acquisition Proposal, or any inquiry or contact with any person with respect
thereto is made, Target shall promptly notify Parent and shall identify the
party making the Target Acquisition Proposal and the material terms of the
Target Acquisition Proposal and shall provide the Parent with a reasonable
opportunity to respond to Target regarding any such Target Acquisition
Proposal.
3.3 Dissenters' Rights. Target shall not settle or compromise any
claim for dissenters' rights in respect of the Merger prior to the Effective
Time without the prior written consent of Parent.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Proxy Statement/Prospectus; Registration Statement.
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(a) As promptly as practicable after the execution of
this Agreement, but in any event not later than April 22, 1997, Parent and
Target shall prepare and file with the Commission preliminary proxy materials
which shall constitute the proxy statement (the "Proxy Statement") of Target
and the registration statement with respect to the Parent Common Stock to be
issued in connection with the Merger (the "Registration Statement"). As
promptly as practicable after comments are received from the Commission on the
preliminary proxy materials and after the furnishing by Target and Parent of
all information required to be contained therein, Target and Parent shall file
with the Commission a combined proxy and registration statement on Form F-4 (or
on such other form as shall be appropriate) relating to the approval and
adoption of the Merger and this Agreement by the shareholders of Target and the
issuance by Parent of Parent Common Stock in connection with the Merger and
shall use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable. The Proxy Statement shall contain
the recommendation of the Board of Directors of Target that the shareholders of
Target vote to approve and adopt the Merger and this Agreement, unless the
Board of Directors of Target concludes in good faith on the basis of the
written opinion of its outside counsel that such recommendation would
constitute a breach by the Board of Directors of Target of its fiduciary duty
under applicable law.
(b) Target shall use reasonable efforts to cause to be
delivered to Parent a letter of Target's independent public accountants, dated
a date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
letters delivered by independent public accounts in connection with
registration statements similar to the Registration Statement.
(c) Parent shall use reasonable efforts to cause to be
delivered to Target a letter of its independent public accounts, dated a date
within two business days before the date on which the Registration Statement
shall become effective and addressed to Target, in form and substance
reasonably satisfactory to Target and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
4.2 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, Target
shall, and shall cause the Target Subsidiaries and its and their officers,
directors, employees and representatives to, afford the representatives of
Parent reasonable access during normal business hours to its officers,
employees, representatives, books and records, and shall furnish Parent all
financial, operating and other data and information as Parent, through its
representatives, reasonably may request. Parent agrees to hold in confidence
all, and not to disclose to others for any reason whatsoever, any non-public
information received by it, any Parent Subsidiary or its or their
representatives in connection with the transactions contemplated hereby except
(i) as required by law, provided that
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before any disclosure by Parent of any information relating to Target pursuant
to this Section 4.2(a)(i), Parent shall notify Target as soon as practicable
after learning that such a disclosure is required so as to afford Target an
opportunity to obtain a protective order or otherwise to contest such
disclosure; (ii) for disclosure to officers, directors, employees and
representatives of Parent and the Parent Subsidiaries as necessary in
connection with the transactions and filings contemplated hereby or as
necessary to the operation of Parent's business; and (iii) for information
which becomes publicly available other than through Target. In the event the
Merger is not consummated, Parent shall return to Target all non-public
documents and other material obtained from Target, the Target Subsidiaries or
their representatives in connection with the transactions contemplated hereby,
or shall certify to Target that such information has been destroyed.
(b) From the date hereof to the Effective Time, Parent
shall, and shall cause the Parent Subsidiaries and its and their officers,
directors, employees and representatives to, afford the representatives of
Target reasonable access during normal business hours to its officers,
employees, representatives, books and records, and shall furnish Target all
financial, operating and other data and information as Target, through its
representatives, reasonably may request. Target agrees to hold in confidence
all, and not to disclose to others for any reason whatsoever, any non-public
information received by it, any Target Subsidiary or its or their
representatives in connection with the transactions contemplated hereby except
(i) as required by law, provided that before any disclosure by Target of any
information relating to Parent pursuant to this Section 4.2(b)(i), Target shall
notify Parent as soon as practicable after learning that such a disclosure is
required so as to afford Parent an opportunity to obtain a protective order or
otherwise to contest such disclosure; (ii) for disclosure to officers,
directors, employees and representatives of Target and the Target Subsidiaries
as necessary in connection with the transactions and filings contemplated
hereby or as necessary to the operation of Target's business; and (iii) for
information which becomes publicly available other than through Parent. In the
event the Merger is not consummated, Target shall return to Parent all
non-public documents and other material obtained from Parent, the Parent
Subsidiaries or their representatives in connection with the transactions
contemplated hereby, or shall certify to Parent that such information has been
destroyed.
4.3 Meeting of Shareholders. Target shall promptly take all
action reasonably necessary in accordance with the TBCA and its articles of
incorporation and bylaws to convene a meeting of its shareholders to consider
and vote upon the adoption and approval of the Merger and this Agreement. The
Board of Directors of Target (i) shall recommend at such meeting that the
shareholders of Target vote to adopt and approve the Merger and this Agreement;
(ii) shall use all reasonable efforts to solicit from shareholders of Target
proxies in favor of such adoption and approval; and (iii) shall take all other
action necessary to secure a vote of its shareholders in favor of the adoption
and approval of the Merger and this Agreement and shall not, upon any notice
having been issued to so convene, take any steps to cancel or postpone such
meeting, except to the extent required by applicable law; provided, however,
that the Board of Directors of Target shall not be required to take any of the
foregoing actions to the extent that the Board of Directors of Target concludes
in good faith on the basis of the written opinion of its outside counsel that
taking
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any such action would constitute a breach by the Board of Directors of Target
of its fiduciary duty under applicable law.
4.4 Filings; Consents; Reasonable Efforts. Subject to the terms
and conditions of this Agreement, Target and Parent shall (i) make all
necessary filings with respect to the Merger and this Agreement under the HSR
Act, the Securities Act, the Exchange Act and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto; (ii) obtain all consents,
waivers, approvals, authorizations and orders required in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger; and (iii) take, or cause to be taken, all appropriate action, and
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 defending any lawsuits or other legal
proceedings challenging this Agreement or the transactions contemplated by this
Agreement and taking any action that may be necessary so that no state takeover
statute or similar statute or regulation is or becomes applicable to the
Merger, this Agreement or the transactions contemplated by this Agreement.
Target shall not, and shall not permit any of the Target Subsidiaries to, take
any action that would, or that reasonably could be expected to, result in any
of the representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Merger set forth in Article V not being
satisfied. Parent shall not, and shall not permit any of the Parent
Subsidiaries to, take any action that would, or that reasonably could be
expected to, result in any of the representations and warranties set forth in
this Agreement becoming untrue or any of the conditions to the Merger set forth
in Article V not being satisfied.
4.5 Notification of Certain Matters. Target shall give prompt
notice to Parent, and Parent shall give prompt notice to Target, 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 at any time from the date hereof to the Effective
Time, (ii) any material failure of Target or Parent, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and (iii) any fact or event that would make it necessary to amend
the Registration Statement or the Proxy Statement in order to render the
statements therein not misleading or to comply with applicable law. Target
promptly shall advise Parent of any Target Material Adverse Effect, other than
those changes or events associated with or arising out of the effects of the
seasonality and volatility of Target's and Target's Subsidiaries' businesses
consistent with the historic seasonality and volatility of such businesses.
Parent promptly shall advise Target of any Parent Material Adverse Effect,
other than those changes or events associated with or arising out of the
effects of seasonality and volatility of Parent's and Parent's Subsidiaries'
businesses consistent with the historic seasonality and volatility of such
businesses.
4.6 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding
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is commenced that questions the validity or legality of the transactions
contemplated hereby or seeks damages in connection therewith, whether before or
after the Effective Time, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
4.7 Expenses; Termination Fee. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses. Notwithstanding the provisions of
the immediately preceding sentence, if this Agreement is terminated in
accordance with Section 6.1, Target shall promptly, but in no event later than
three business days after written request by Parent, pay to Parent an amount
equal to $2,000,000 in immediately available funds, if, and only if, a
Triggering Event (as defined below) shall have occurred prior to termination of
this Agreement in accordance with Section 6.1. As used herein, "Triggering
Event" shall mean the occurrence of any of the following events: (i) the
Target (or its Board of Directors) shall have recommended or resolved to
recommend any Target Acquisition Proposal or shall have entered into an
agreement with respect to, authorized, proposed or publicly announced its
intention to enter into any Target Acquisition Proposal; (ii) the Target Board
of Director shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Merger in a manner adverse to Parent or
Sub, or shall have resolved to do the same; or (iii) a Target Acquisition
Proposal shall have been made or proposed to be made by any person (other than
Parent and its subsidiaries), or been publicly disclosed.
4.8 Intentionally Left Blank.
4.9 Reservation of Parent Common Stock; Stock Exchange Listing.
Parent shall reserve for issuance, out of its authorized but unissued capital
stock, such number of shares of Parent Common Stock as may be issuable upon
consummation of the Merger. Parent shall use all reasonable efforts to cause
the shares of Parent Common Stock to be issued upon consummation of the Merger
to be approved for listing on the New York Stock Exchange, subject to official
notice of issuance, prior to the Closing Date.
4.10 Indemnification.
(a) Target shall, and solely from and after the Effective
Time, Parent and the Surviving Corporation shall defend, indemnify and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of Target or any of the Target Subsidiaries (each, an "Indemnified
Party" and, collectively, the "Indemnified Parties") against (i) all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, based in whole or in part on, or arising in
whole or in part out of, the fact that such person is or was an officer,
director or employee, whether pertaining to any matter existing or occurring at
or prior to the Effective Time and whether asserted or claimed prior to, or at
or after, the Effective Time (collectively, the "Indemnified Liabilities"),
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and (ii) all Indemnified Liabilities based in whole or in part on, or arising
in whole or in part out of, or pertaining to, this Agreement, the Merger or the
transactions contemplated hereby, to the same extent as Target is now obligated
to defend, indemnify and hold harmless such Indemnified Parties in accordance
with its Articles of Incorporation, Bylaws, applicable law and existing
indemnification agreements (copies of which have been made available to
Parent). Target (or after the Effective Time, Parent and the Surviving
Corporation) shall be entitled to participate in and, to the extent that it may
wish, to assume the defense of any action, with counsel reasonably satisfactory
to the Indemnified Party but, if any Indemnified Party believes that by reason
of an actual or potential conflict of interest it is advisable for such
Indemnified Party to be represented by separate counsel, or if Target (or after
the Effective Time, Parent and the Surviving Corporation) shall fail to assume
responsibility for such defense, such Indemnified Party may retain counsel
reasonably satisfactory to Target (or after the Effective Time, Parent and the
Surviving Corporation) who will represent such Indemnified Party and Target (or
after the Effective Time, Parent and the Surviving Corporation) shall pay all
reasonable fees and disbursements of such counsel promptly as statements
therefor are received to the full extent permitted by applicable law upon
receipt of any undertaking contemplated by Article 2.02-1K of the TBCA. The
Indemnified Party and Target (or after the Effective Time, Parent and the
Surviving Corporation) will cooperate with each other and use all reasonable
efforts to assist each other in the vigorous defense of any such matter;
provided, however, that neither Target, Parent nor the Surviving Corporation
shall be liable for any settlement of any claim effected without its written
consent. Any Indemnified Party wishing to claim indemnification under this
Section 4.10, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Target, Parent or the Surviving
Corporation, as applicable (but the failure to be so notified by an Indemnified
Party shall not relieve it from any liability which it may have under this
Section 4.10 except to the extent such failure prejudices such party). The
indemnifying parties shall be required to pay for only one law firm, in
addition to local counsel, in each applicable jurisdiction selected by the
Indemnified Parties as a group in accordance with the foregoing provisions with
respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict in any significant issue between the positions
of any two or more Indemnified Parties.
(b) For a period of three years after the Effective Time,
Parent and the Surviving Corporation shall cause to be maintained in effect
policies of directors' and officers' liability insurance providing all
Indemnified Parties with the same coverage as Target's current policies with
respect to claims arising from facts or events which occurred before the
Effective Time (the "Replacement Policies"); provided, however, that the annual
premiums for the Replacement Polices shall not exceed 125% of the current
annual premiums for Target's policies, and to the extent that the annual
premiums for the Replacement Policies exceed 125% of the current annual
premiums of Target's insurance policies, Parent shall obtain the maximum
coverage obtainable by payment of annual premiums of 125% of the current annual
premiums of Target's insurance policies for the period specified herein.
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(c) In the event Parent, the Surviving Corporation or any
of their successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the successors and
assigns of Parent and the Surviving Corporation assume the obligations set
forth in this section.
(d) The provisions of this Section 4.10 (i) are intended
to be for the benefit of, and shall be enforceable by, each Indemnified Party,
his heirs and his representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
4.11 Target Stock Options. (a) With respect to Target's Amended
and Restated 1989 Incentive Stock Option Plan (the "1989 Plan"), all Target
Options granted to persons presently employed by Target or any Target
Subsidiary pursuant to the 1989 Plan shall not be terminated as provided in
Section 8(c)(i) of the 1989 Plan, but shall remain in effect and shall be
exercisable in accordance with and subject to the written terms of the 1989
Plan and applicable Target Option agreements, including, without limitation,
the optionees' three year vesting schedule and other conditions set forth in
the 1989 Plan and Target Option agreements. With respect to the Target Options
granted under the 1989 Plan to persons not presently employed by Target or a
Target Subsidiary (the "Non-Employee Optionees"), the Committee (as defined in
Section 3 of the 1989 Plan) has directed the officers of Target to notify each
such Non-Employee Optionee in the manner contemplated by Section 8(b) of the
1989 Plan.
(b) Parent agrees to take such action immediately after
the Effective Time as is necessary to assume each Target Option which remains
as of the Effective Date unexercised in whole or in part and to substitute
shares of Parent Common Stock as purchasable under such assumed option
("Assumed Option"), with such assumption and substitution to be effected as
follows:
(i) The number of shares of Parent Common Stock
purchasable under the Assumed Option (the "Parent Stock Option
Shares") shall be equal to the number of shares of Parent
Common Stock that the holder of the Target Option being
assumed would have received upon consummation of the Merger
had such Target Option been exercised immediately prior to the
Merger;
(ii) The per share option price of the Assumed
Option shall be equal to the product of (a) the exercise price
per share of the Target Option multiplied by (b) the number of
shares of the Target Common Stock purchasable under the Target
Option, divided by (c) the Parent Stock Option Shares; and
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(iii) The Assumed Options shall provide the
optionee with substantially the same benefit rights which he
had under the Target Option before such assumption.
(c) Parent shall provide to holders of Assumed Options,
promptly after the Effective Time, documentation reflecting the Target Options
assumed.
(d) Not later than five business days after the Effective
Time, Parent shall register on Form S-8 the sales by the holders of Target
Options of Parent Common Stock that may be acquired by holders of Target
Options.
(e) The parties to this Agreement agree that the
transactions contemplated by this Agreement shall constitute a
"Reorganization", "Change in Control" or other term with similar meaning under
any employment agreement, severance agreement, or plan or agreement pursuant to
which Target Options or stock awards of Target ("Target Awards") have been
granted.
4.12 Employee Benefits.
(a) For a period of one year after the Effective Time of
the Merger, Parent shall either (A) maintain or cause the Surviving Corporation
(or in the case of a transfer of all or substantially all the assets and
business of the Surviving Corporation, its successors and assigns) to maintain
the Target Benefit Plans (other than plans providing for the issuance of Target
Common Stock or based on the value of Target Common Stock) at the benefit
levels in effect on the date of this Agreement or (B) provide or cause the
Surviving Corporation (or in the case of a transfer of all or substantially all
the assets and business of the Surviving Corporation, its successors and
assigns) to provide employee benefits to employees of Target and the Target
Subsidiaries that, taken as a whole, are not materially less favorable in the
aggregate to such employees than those benefits provided to similarly situated
employees of the Parent; provided, however, that any preexisting condition
exclusion applicable under plans and programs pursuant to which such employee
benefits are provided to employees of Target and the Target Subsidiaries shall
be waived; and provided, further, that Parent agrees to credit each employee of
Target and the Target Subsidiaries with any deductibles already incurred during
the year such coverage begins.
(b) With respect to any "employee benefit plan" as
defined in Section 3(3) of ERISA maintained by Parent or any Parent Subsidiary
(including any severance plan), for all purposes, including, but not limited
to, determining eligibility to participate, level of benefits and vesting,
service with Target or any Target Subsidiary shall be treated as service with
Parent or the Parent Subsidiaries; provided, however, that such service need
not be recognized to the extent that such recognition would result in any
duplication of benefits.
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(c) On or before, but effective as of the Effective Time,
Target and the Target Subsidiaries shall take such actions as may be necessary
to cause each individual employed by Target and any Target Subsidiaries
immediately prior to the Effective Time to have a fully vested and
nonforfeitable interest in such employee's account balance under the 401(k)
plan sponsored by Target and the Target Subsidiaries as of the Effective Time.
4.13 Post-Closing Tax Reporting. From and after the Effective
Time, the Surviving Corporation shall satisfy, and Parent shall assist and
insure that the Surviving Corporation does so satisfy, the reporting and filing
requirements of Target pursuant to Treasury Regulation Section
1.367(a)-3T(c)(4) as a result of the characterization of the Merger as an
out-bound transfer under Section 367(a)(1) of the Code, both in the U.S. income
tax return for the taxable year in which the Merger occurs and in any required
amendment thereto in a subsequent period.
4.14 HSR Filing. As soon as is reasonably practicable, but in any
event not later than ten business days after the execution of this Agreement,
Parent and Target shall prepare and submit for filing at the Federal Trade
Commission and the Department of Justice the Notification Form required to be
filed under the HSR Act.
4.15 Tax and Accounting Treatment. Each of Parent and the Target
shall not take any action and shall not fail to take any action which action or
failure to act would prevent, or would be likely to prevent, the Merger from
qualifying as a reorganization within the meaning of Section 368(a)(1)(B) of
the Code and shall use reasonable efforts to obtain the opinions of counsel
referred to in Sections 5.2(d) and 5.3(b).
4.16 Affiliates. Prior to Closing Date, the Target shall deliver
to Parent a letter identifying all persons who are, at the time this Agreement
is submitted for approval to the stockholders of the Target, "affiliates" of
the Target (including all directors of the Target) for purposes of Rule 145
under the Securities Act. The Target shall use reasonable efforts to cause
each person to deliver to Parent on or prior to the Closing Date a written
agreement pursuant to which such persons acknowledge and agree that they are
subject to Rule 145.
4.17. Gain Recognition Agreements. Immediately prior to the Closing
Date, Target shall deliver to Parent a schedule identifying all persons who, to
the knowledge of Target, will be at the Effective Time of the Merger, "five-
percent transferee shareholders" (as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(ii)). Target and Parent shall use reasonable efforts to
obtain from each such person a gain recognition agreement pursuant to Treasury
Regulation Section 1.367(a)-3T(g).
4.18. Target Shareholder Tax Representation. Immediately prior to
the Closing Date, Target shall deliver to Parent a schedule identifying all
persons who are five-percent shareholders of Target. Target and Parent shall
use reasonable efforts to obtain from such persons representations which
counsel may reasonably require in connection with their opinions under Sections
5.2(d) and 5.3(b) of this Agreement.
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4.19. Certificates of Officers. Immediately prior to the Closing
Date, Target, Sub and Parent shall deliver to Parent and Target certificates of
officers and directors of Parent, Sub and Target which counsel may reasonably
require in connection with their opinions under Sections 5.2(d) and 5.3(b) of
this Agreement.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of Target as
required by the TBCA and the NASDAQ National Market System, and by any
applicable provisions of Target's articles of incorporation or bylaws;
(b) The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
(c) No order shall have been entered and remain in effect
in any action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal the
consummation of the Merger;
(d) The Registration Statement shall be effective on the
Closing Date, and all post-effective amendments filed shall have been declared
effective or shall have been withdrawn; and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the parties,
threatened by the Commission;
(e) There shall have been obtained any and all material
permits, approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other governmental body or agency, that is reasonably
necessary so that the consummation of the Merger and the transactions
contemplated thereby will be in compliance with applicable laws, the failure to
comply with which would have a Parent Material Adverse Effect or a Target
Material Adverse Effect; and
(f) The shares of Parent Common Stock issuable upon
consummation of the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
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5.2 Additional Condition to Obligation of Parent. The obligation
of Parent to effect the Merger is, at the option of Parent, also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) That the representations and warranties of Target
contained in Section 2.2 that are qualified as to materiality or material
adverse effect shall be true and correct and the representations and warranties
of Target that are not so qualified shall be true and correct in all material
respects as of the date hereof (subject to Target's right to cure any breach of
any representation or warranty as set forth herein) and the Closing Date as
though such representations and warranties had been made at and as of that
time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by Target on or before the Closing Date shall have
been duly complied with and performed in all material respects; the holders of
not more than ten percent (10%) of the outstanding shares of Target Common
Stock shall have given notice of their intent to exercise dissenters' rights
under the TBCA; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Target shall have been
delivered to Parent;
(b) All approvals of private persons or corporations
including noteholders, banks and letter of credit issuers, (i) the granting of
which is necessary for the consummation of the Merger or the transactions
contemplated in connection therewith and (ii) the non-receipt of which would
have a material adverse effect on the business, financial condition or results
of operations of Parent, the Surviving Corporation and their subsidiaries,
taken as a whole after the consummation of the Merger, shall have been
obtained;
(c) There shall not be pending any suit, action or
proceeding by any governmental entity (i) challenging the acquisition by Parent
or Sub of any shares of Target Common Stock, seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement or seeking to obtain from the Target, Parent or Sub any damages
that are material in relation to the Target and the Target Subsidiaries taken
as a whole, (ii) seeking to prohibit or limit the ownership or operation of the
Target, any Target Subsidiary, Parent or any Parent Subsidiary or any material
portion of the business or assets of the Target, any Target Subsidiary, Parent
or any Parent Subsidiary or to compel the Target, any Target Subsidiary, Parent
or any Parent Subsidiary to dispose of or hold separate any material portion of
the business or assets of the Target, any Target Subsidiary, Parent or any
Parent Subsidiary, as a result of the Merger or any of the transactions
contemplated by this Agreement, (iii) seeking to impose limitations on the
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of capital stock of the Surviving Corporation,
including the right to vote such capital stock on all matters properly
presented to the stockholders of the surviving Corporation, (iv) seeking to
prohibit Parent or any Parent Subsidiary from effectively controlling in any
material respect the business or operations of the Target or the Target
Subsidiaries or (v) which otherwise is reasonably likely to have a material
adverse effect on either the Target or Parent; and
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(d) Parent shall have received an opinion dated the
Closing Date from Skadden, Arps, Slate, Meagher & Flom, L.L.P., counsel to
Parent and Sub, in form and substance reasonably satisfactory to Parent,
substantially to the effect that on the basis of facts. representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing on the Closing Date, the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a)(1)(B) of the Code. In rendering such opinion, Skadden, Arps, Slate,
Meagher & Flom, L.L.P., may require and rely upon (and may incorporate by
reference) representations and covenants, including those contained in
certificates of officers of Parent, the Target, Sub and others. Parent shall
have received executed copies of the certificates of officers and directors of
Target, Parent and Sub that may reasonably be required by counsel in connection
with the tax opinions referred to in Sections 5.2(d) and 5.3(b) of this
Agreement.
5.3 Additional Conditions to Obligation of Target. The
obligation of Target to effect the Merger is, at the option of Target, also
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) That the representations and warranties of Parent and
Sub contained in Section 2.1 that are qualified as to materiality or material
adverse effect shall be true and correct and the representations and warranties
of Target that are not so qualified shall be true and correct in all material
respects as of the date hereof (subject to Parent's and Sub's right to cure any
breach of any representation or warranty as set forth herein) and as of the
Closing Date as though such representations and warranties had been made at and
as of that time; all the terms, covenants and conditions of this Agreement to
be complied with and performed by Parent on or before the Closing Date shall
have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Closing Date and signed by the
chief executive officer of Parent shall have been delivered to Target; and
(b) Target shall have received an opinion dated the
Closing Date from Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to
Target, in form and substance reasonably satisfactory to Target, substantially
to the effect that on the basis of facts. representations and assumptions set
forth in such opinion which are consistent with the state of facts existing on
the Closing Date, the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a)(1)(B) of the Code. In
rendering such opinion, Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., may
require and rely upon (and may incorporate by reference) representations and
covenants, including those contained in certificates of officers of Parent, the
Target, Sub and others. Target shall have received executed copies of the
certificates of officers and directors of Target, Parent and Sub that may
reasonably be required by counsel in connection with the tax opinions referred
to in Sections 5.2(d) and 5.3(b) of this Agreement.
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ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated herein may be abandoned at any time
prior to the Effective Time, whether prior to or after approval by the
shareholders of Parent or Target:
(a) by mutual consent of Parent and Target;
(b) by either Parent or Target if the Merger has not been
effected on or before December 31, 1997; provided, however, that neither Parent
nor Target shall be entitled to terminate this Agreement pursuant to this
Section 6.1(b), if the Merger has not been effected solely as a result of such
party's material breach of any covenant, representation or warranty set forth
in this Agreement;
(c) by Parent if a Target Acquisition Proposal has been
proposed and (i) the recommendation of the Board of Directors of Target in
favor of the adoption and approval of the Merger and this Agreement is
withdrawn or modified in any manner adverse to Parent; or (ii) regardless of
whether such recommendation remains in effect, the Merger and this Agreement
are not approved by the requisite vote of the shareholders of Target;
(d) Intentionally Left Blank.
(e) by either Parent or Target if a final, unappealable
order to restrain, enjoin or otherwise prevent, or awarding substantial damages
in connection with, a consummation of this Agreement or the transactions
contemplated in connection herewith shall have been entered;
(f) by Parent if the required approval of the
shareholders of Target for the adoption and approval of the Merger and this
Agreement is not received at a duly convened shareholders' meeting or any
adjournment thereof at which such matter is voted upon (for reasons other than
as set forth in paragraph (c) and (d) above);
(g) by Parent if there has been a material breach of any
covenant, representation or warranty set forth in this Agreement by Target
which breach has not been cured within thirty days following receipt by Target
of notice of such breach, provided that Parent shall not be permitted to
terminate this Agreement if there is a material breach of any covenant,
representation or warranty set forth in this Agreement by Parent that has not
been cured; or
(h) by Target if there has been a material breach of any
covenant, representation or warranty set forth in this Agreement by Parent
which breach has not been cured
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within thirty days following receipt by Parent of notice of such breach,
provided that Target shall not be permitted to terminate this Agreement if
there is a material breach of any covenant, representation or warranty set
forth in this Agreement by Target that has not been cured.
6.2 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 6.1, Target and Parent shall have no
obligation or liability to each other except that (i) the provisions of
Sections 4.2 (to the extent regarding confidentiality), 4.7, 6.8 and 6.12 shall
survive any such termination, and (ii) nothing herein and no termination
pursuant hereto will relieve any party from liability for any breach of this
Agreement.
6.3 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose shareholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto,
provided that after this Agreement has been approved and adopted by the
shareholders of Parent and Target, this Agreement may be amended only as may be
permitted by applicable provisions of the TBCA. The waiver by any party hereto
of any condition or of a breach of another provision of this Agreement shall
not operate or be construed as a waiver of any other condition or subsequent
breach. The waiver by any party hereto of any of the conditions precedent to
its obligations under this Agreement shall not preclude it from seeking redress
for breach of this Agreement other than with respect to the condition so
waived.
6.4 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
6.5 Public Statements. Target and Parent shall agree with respect
to the content and timing of any press release or other public statement with
respect to the transactions contemplated hereby; provided, however, that either
party, after exercising reasonable efforts to consult with the other party, may
issue a press release or make a public statement with respect to the
transactions contemplated hereby, or any other matter, to the extent that such
party reasonably determines that such press release or public statement is
required by law or applicable stock exchange policy.
6.6 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. Except as set forth in this
Agreement, this Agreement shall not be assignable by the parties hereto.
6.7 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
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if to Parent: Philip Environmental Inc.
100 King Street West
P.O. Box 2440, LCD #1
Hamilton, Ontario Canada LBN 4J6
Telecopy No.: (905) 521-9160
Attention: Colin Soule, General Counsel
if to Target: Serv-Tech, Inc.
5200 Cedar Crest Blvd.
Houston, Texas 77087
Telecopy No.: (713) 644-2455
Attention: Frank Perrone, General Counsel
with a copy to: Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3300 Texas Commerce Tower
600 Travis
Telecopy No.: (713) 223-3717
Houston, Texas 77002
Attention: Gene G. Lewis
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 6.7. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor.
6.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of Texas without
giving effect to the principles of conflicts of law thereof.
6.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated.
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6.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
6.11 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
6.12 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. In addition, each of the parties
hereto hereby waives its right to a trial by jury in respect of any action
relating to this Agreement or any of the transactions contemplated by this
Agreement.
6.13 Entire Agreement; Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both oral and written, among the parties or any of them, with
respect to the subject matter hereof and neither this nor any document
delivered in connection with this Agreement confers upon any person not a party
hereto any rights or remedies hereunder except as provided in Sections 4.10,
4.11, and 4.12.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
PHILIP ENVIRONMENTAL INC.
By: /s/ COLIN SOULE
--------------------------------------
Its: Senior Vice President
-------------------------------------
TARO AGGREGATES, LTD.
By: /s/ COLIN SOULE
--------------------------------------
Its: Secretary
------------------------------------
ST ACQUISITION CORPORATION
By: /s/ COLIN SOULE
--------------------------------------
Its: Secretary
------------------------------------
SERV-TECH, INC.
By: /s/ DAVID TUSA
--------------------------------------
Its: Senior Vice President, Finance &
Administration
--------------------------------------
42
