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): August 18, 1998
Alamo Group Inc.
--------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-21220 74-1621248
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1502 E. Walnut, Seguin, Texas 78155
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (830) 379-1480
--------------
- --------------------------------------------------------------------------------
(Former address, if changed since last report.)
Item 5. Other Events
- ----------------------
On August 18,1998, Alamo Group Inc. (the "Company"), WEC Company
("WEC") and AGI Acquisition Corp. entered into an agreement and plan of merger
(the "Merger Agreement") whereby the Company will be acquired by WEC in a cash
merger, pursuant to which the Company's stockholders will receive $18.50 for
each Company share outstanding, for a total equity consideration of
approximately $180 million. The transaction has been approved by the Board of
Directors of the Company. The two largest Company stockholders, owning in the
aggregate over 40% of the Company's outstanding common stock, have each
granted WEC an option to acquire their shares at $18.50 per share and have
agreed to vote their shares in support of the transaction.
WEC is owned primarily by Madison Dearborn Capital Partners II, LP,
a private equity investment partnership based in Chicago, IL. Madison Dearborn
Partners has committed additional equity capital of $58.5 million to WEC and
has arranged for debt financing commitments to fund the acquisition.
The closing of the merger is subject to customary conditions,
including the receipt of certain governmental approvals and the approval of
the Company's stockholders. The Company will file with the Securities and
Exchange Commission a proxy statement that will be mailed to stockholders in
connection with a special stockholders meeting to be called to consider the
merger.
Attached and incorporated herein by reference in their entirety as
Exhibits 2.1, 10.1, 10.2 and 99.1, respectively, are copies of (1) the Merger
Agreement, (2) the Option Agreement, dated as of August 18, 1998, by and among
WEC, AGI Acquisition Corp. and Donald J. Douglass, (3) the Option Agreement,
dated as of August 18, 1998, by and among WEC, AGI Acquisition Corp. and
Capital Southwest Venture Corporation and (4) the joint press release of
August 18, 1998 issued by the Company and Woods Equipment Company in
connection with the transactions contemplated by the Merger Agreement.
Item 7(c) Exhibits
------------------
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated as of August
18, 1998, by and among Alamo Group Inc., WEC
Company and AGI Acquisition Corp.
10.1 Option Agreement, dated as of August 18, 1998,
by and among WEC Company, AGI Acquisition Corp.
and Donald J. Douglass.
10.2 Option Agreement, dated as of August 18, 1998,
by and among WEC Company, AGI Acquisition Corp.
and Capital Southwest Venture Corporation.
99.1 Joint press release dated August 18, 1998 issued
by Alamo Group Inc. and Woods Equipment Company.
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, thereto duly authorized.
ALAMO GROUP INC.
(Registrant)
By: /s/ Jim A. Smith
-------------------------------------
Name: Jim A. Smith
Title: Executive Vice President
and Chief Financial Officer
Dated: August 20, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ALAMO GROUP INC.
EXHIBITS
TO CURRENT REPORT ON
FORM 8-K DATED August 18, 1998
Commission File Number 0-21220
Exhibit Index
-------------
Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Merger, dated as of August 18, 1998,
by and among Alamo Group Inc., WEC Company and AGI
Acquisition Corp.
10.1 Option Agreement, dated as of August 18, 1998, by and
among WEC Company, AGI Acquisition Corp. and Donald J.
Douglass.
10.2 Option Agreement, dated as of August 18, 1998, by and
among WEC Company, AGI Acquisition Corp. and Capital
Southwest Venture Corporation.
99.1 Joint press release dated August 18, 1998 issued by Alamo
Group Inc. and Woods Equipment Company.
Exhibit 2.1
-----------
AGREEMENT AND PLAN OF MERGER
by and among
ALAMO GROUP INC.,
WEC COMPANY
and
AGI ACQUISITION CORP.
---------------------
Dated as of August 18, 1998
---------------------
TABLE OF CONTENTS
PAGE
ARTICLE I.
Merger.
Section 1 (a) The Merger............................................1
(b) Effective Time........................................1
(c) Effects of the Merger.................................2
(d) Certificate of Incorporation and By-Laws..............2
(e) Directors and Officers................................2
(f) Conversion of Shares..................................2
(g) Adjustments...........................................2
(h) Conversion of Acquisition Common Stock................2
(i) Employee Stock Options................................2
(j) Dissenting Shares.....................................3
(k) Payment for Shares....................................3
(l) Stock Transfer Books..................................4
(m) Closing...............................................4
ARTICLE II.
Representations and Warranties of the Company.
Section 2 (a) Authority.............................................4
(b) No Conflicts; Consents................................5
(c) Organization and Standing.............................5
(d) Capital Stock of the Company..........................6
(e) SEC Reports and Financial Statements..................6
(f) Absence of Certain Changes or Events..................7
(g) Litigation............................................8
(h) Taxes.................................................8
(i) Benefit Plans........................................10
(j) Employee Relations...................................11
(k) Certain Contracts and Arrangements...................11
(l) Environmental Matters................................11
(m) Compliance with Laws.................................13
(n) Takeover Statutes....................................13
(o) Vote Required........................................13
(p) Opinion of Financial Advisors........................13
(q) Brokers, Finders, etc................................13
(r) Tangible Property....................................13
(s) Product Warranty.....................................14
(t) Insurance............................................14
(u) Suppliers and Dealers................................14
(v) Real Property........................................14
(w) Intellectual Property................................15
(x) Affiliated Transactions..............................16
(y) Contributions........................................16
(z) No Other Representations or Warranties...............16
ARTICLE III.
Representations and Warranties of the Buyer and
Acquisition.
Section 3 (a) Organization and Standing........................17
(b) Authority........................................17
(c) No Conflicts; Consents...........................17
(d) Information Supplied.............................18
(e) Financial Ability to Perform.....................18
(f) Surviving Corporation after the Merger...........18
(g) Brokers, Finders, etc............................18
(h) Acquisition's Operations.........................18
(i) No Shares Owned..................................18
(j) No Other Representations or Warranties...........18
ARTICLE IV.
Covenants of the Company.
Section 4 (a) Access...........................................19
(b) Ordinary Conduct.................................19
(c) Other Transactions...............................20
(d) Company Special Meeting; Preparation of the
Proxy Statement................................21
(e) Interim Operating Reporting......................22
(f) Notice of Breach.................................22
ARTICLE V.
Covenants of the Buyer and Acquisition.
Section 5 (a) Confidentiality..................................22
(b) Employees and Employee Benefit Plans.............23
(c) WARN Act.........................................23
(d) Indemnification..................................23
(e) Certain Understandings...........................25
ARTICLE VI.
Mutual Covenants.
Section 6 (a) Consummation of the Transactions.................25
(b) Publicity........................................26
(c) Antitrust Notification...........................26
(d) Further Assurances...............................26
ARTICLE VII.
Conditions to Closing.
Section 7 (a) Each Party's Obligations.........................27
(b) The Company's Obligations........................27
(c) The Buyer's and Acquisition's Obligations........28
(d) Frustration of Closing Conditions................28
ARTICLE VIII.
Termination.
Section 8 (a) Termination Events...............................28
(b) Termination Notice...............................29
(c) Termination Fees.................................29
(d) Effects of Termination...........................30
ARTICLE IX.
Nonsurvival of Representations, Warranties and Agreements.
ARTICLE X.
Expenses.
ARTICLE XI.
Miscellaneous.
Section 11 (a) No Third-Party Beneficiaries.....................30
(b) Amendment or Waiver..............................30
(c) Headings ........................................30
(d) Counterparts.....................................30
(e) Interpretation...................................30
(f) Assignment.......................................31
(g) Notices .........................................31
(h) Entire Agreement.................................32
(i) Severability.....................................32
(j) Schedules........................................32
(k) Governing Law....................................32
DISCLOSURE SCHEDULES ...............................................S-1
SCHEDULE 2(b) No Conflicts; Consents (Company's)............S-2
SCHEDULE 2(c) Subsidiaries..................................S-3
SCHEDULE 2(d) Capital Stock of the Company..................S-5
SCHEDULE 2(e) SEC Reports and Financial Statements..........S-6
SCHEDULE 2(f) Absence of Certain Changes or Events..........S-7
SCHEDULE 2(g) Litigation....................................S-8
SCHEDULE 2(h) Taxes........................................S-11
SCHEDULE 2(i) Benefit Plans................................S-12
SCHEDULE 2(j) Employee Relations...........................S-16
SCHEDULE 2(k) Certain Contracts and Arrangements...........S-17
SCHEDULE 2(l)(ii)(A) Environmental Laws...........................S-18
SCHEDULE 2(l)(ii)(B) Environmental Claims.........................S-19
SCHEDULE 2(l)(ii)(C) Potential Environmental Claims...............S-20
SCHEDULE 2(m) Compliance with Laws.........................S-21
SCHEDULE 2(s) Product Warranty.............................S-22
SCHEDULE 2(t) Insurance....................................S-23
SCHEDULE 2(u)(i) Suppliers....................................S-24
SCHEDULE 2(u)(ii) Dealers......................................S-25
SCHEDULE 2(v)(i) Owned Real Property..........................S-26
SCHEDULE 2(v)(ii) Leased Real Property.........................S-27
SCHEDULE 2(w) Intellectual Property........................S-28
SCHEDULE 2(x) Affiliated Transactions......................S-29
SCHEDULE 3(c) No Conflicts; Consents (Buyer's and
Acquisition's).............................S-30
SCHEDULE 4(b) Ordinary Conduct.............................S-31
Table of Definitions
--------------------
Acquisition...........................................................preamble
Acquisition Common Stock..................................................1(h)
Acquisition Proposal......................................................4(c)
Agreement.............................................................preamble
Affected Persons..........................................................2(i)
Affiliated Group..........................................................2(h)
Audit.....................................................................2(h)
Benefit Plans.............................................................2(i)
Board.....................................................................2(a)
Break-Up Fee..............................................................8(c)
Buyer.................................................................preamble
Buyer's and Acquisition's Representatives.................................4(a)
Certificates..............................................................1(k)
Cleanup...................................................................2(l)
Closing...................................................................1(m)
Closing Date..............................................................1(m)
Code......................................................................2(h)
Company...............................................................preamble
Company Balance Sheet.....................................................2(r)
Company Common Stock..................................................preamble
Company Preferred Stock...................................................2(d)
Company SEC Reports.......................................................2(e)
Company's Intellectual Property Rights....................................2(w)
Company Special Meeting...................................................4(d)
Costs.....................................................................5(d)
Delaware Law..........................................................preamble
Dissenting Shares.........................................................1(j)
DOJ.......................................................................6(c)
Effective Time............................................................1(b)
Environmental Claim.......................................................2(l)
Environmental Laws........................................................2(l)
ERISA.....................................................................2(i)
Exchange Act..............................................................2(e)
FTC.......................................................................6(c)
GAAP......................................................................2(e)
Governmental Entity.......................................................2(b)
Hazardous Materials.......................................................2(l)
HSR Act...................................................................2(b)
Indemnifiable Claim.......................................................5(d)
Indemnitees...............................................................5(d)
Intellectual Property Rights..............................................2(w)
IRS.......................................................................2(h)
Leased Real Property......................................................2(v)
Leases....................................................................2(v)
Material Adverse Effect...................................................2(b)
Material Contracts........................................................2(k)
Maximum Amount............................................................5(d)
Merger................................................................preamble
Merger Consideration......................................................1(f)
Merrill Lynch.............................................................2(p)
Option....................................................................1(i)
Option Agreement......................................................preamble
Option Settlement Amount..................................................1(i)
Paying Agent .............................................................1(k)
Payment Fund .............................................................1(k)
Permitted Encumbrances ...................................................2(v)
Pre-Closing Tax Period....................................................2(h)
Real Property.............................................................2(v)
Release...................................................................2(l)
Schedule 14D-9............................................................3(d)
SEC.......................................................................2(b)
Securities Act............................................................2(e)
Shares....................................................................1(f)
Subsidiary................................................................2(c)
Surviving Corporation.....................................................1(a)
Tax or Taxes..............................................................2(h)
Tax Return................................................................2(h)
Treasury Regulations......................................................2(h)
WARN Act..................................................................5(c)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (including the exhibits and schedules
attached hereto, the "Agreement"), dated as of August 18, 1998, by and among
Alamo Group Inc., a Delaware corporation (the "Company"), WEC Company, a
Delaware corporation ("Buyer"), and AGI Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Buyer ("Acquisition").
W I T N E S S E T H:
-------------------
WHEREAS, the respective Boards of Directors of Buyer, Acquisition
and the Company have each approved the acquisition of the Company by Buyer,
through the merger of Acquisition with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement, and
in accordance with the General Corporation Law of the State of Delaware (the
"Delaware Law"), whereby each issued and outstanding share of common stock,
par value $0.10 per share, of the Company (the "Company Common Stock") (other
than shares owned directly or indirectly by Buyer, any wholly-owned subsidiary
of Buyer, Acquisition, the Company or any wholly owned Subsidiary (as defined
in Section 2(c) hereof) immediately prior to the Effective Time (as defined in
Section 1(b) hereof) and other than Dissenting Shares (as defined in Section
1(i) hereof)) will be converted into the right to receive the Merger
Consideration (as defined in Section 1(f)(i) hereof) in accordance with the
provisions of Article I of this Agreement;
WHEREAS, Buyer, Acquisition and certain stockholders have entered
into an option agreement, dated as of the date hereof (each, an "Option
Agreement"), providing Buyer with an option to purchase certain shares of
Company Common Stock and, under certain circumstances, obligating each of the
stockholders that are parties thereto to vote for approval of the Merger and
this Agreement at the Company Special Meeting (as hereinafter defined);
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions hereafter set forth, and intending to be
legally bound hereby, Buyer, Acquisition and the Company hereby agree as
follows:
ARTICLE I Merger.
------
Section 1 (a) The Merger. Upon the terms and subject to the
-----------
conditions hereof and in accordance with the relevant provisions of the
Delaware Law, at the Effective Time (as defined hereafter) Acquisition and the
Company will consummate the Merger, pursuant to which: (i) Acquisition shall
be merged with and into the Company; (ii) the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware; and (iii) the
separate corporate existence of Acquisition shall cease.
(b) Effective Time. The Merger shall be consummated by filing with
---------------
the Secretary of State of the State of Delaware a certificate of merger or
such other document or documents as may be permitted or required pursuant to
the relevant provisions of the Delaware Law (the time of such filing being the
"Effective Time").
(c) Effects of the Merger. The Merger shall have the effects set
----------------------
forth in Section 259 of the Delaware Law.
(d) Certificate of Incorporation and By-Laws. The Certificate of
------------------------------------------
Incorporation of the Company at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and the By-Laws of Acquisition at
the Effective Time shall be the By-Laws of the Surviving Corporation, in each
case until modified in accordance with applicable law.
(e) Directors and Officers. The directors of Acquisition at the
----------------------
Effective Time shall be the directors of the Surviving Corporation until their
successors are duly elected and qualified and the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation until
replaced in accordance with the By-Laws of the Surviving Corporation.
(f) Conversion of Shares.
--------------------
(i) At the Effective Time, each Share of Company Common Stock
then issued and outstanding (the "Shares") (other than Shares owned
by the Company, any wholly-owned Subsidiary, Buyer, Acquisition or
any wholly owned subsidiary of Buyer and Dissenting Shares as
defined in Section 1(j) below) shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted
into the right to receive $18.50 net in cash (the "Merger
Consideration"), payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such share
as provided in Section 1(k) hereof.
(ii) At the Effective Time, each Share owned by the Company,
any wholly-owned Subsidiary, Buyer, Acquisition or any wholly owned
subsidiary of Buyer shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired
and shall cease to exist without any payment therefor.
(g) Conversion of Acquisition Common Stock. At the Effective Time, by
---------------------------------------
virtue of the Merger and without any action on the part of the holder thereof,
each share of common stock, par value $0.01 per share, of Acquisition
("Acquisition Common Stock") issued and outstanding shall be converted into and
exchanged for one share of common stock of the Surviving Corporation.
(h) Warrants and Employee Stock Options. At the Effective Time, each
-----------------------------------
then outstanding warrant (a "Warrant") to purchase shares of Company Common
Stock and each then outstanding option (an "Option") to purchase shares of
Company Common Stock heretofore granted under any employee stock option or
compensation plan or other arrangement with the Company shall be cancelled and
in exchange therefore, the holder thereof shall receive a cash payment from
the Company in an amount equal to the amount, if any, by which the Merger
Consideration exceeds the per share exercise price of such Warrant or Option,
multiplied by the number of shares of Company Common Stock then subject to
such Warrant or Option, as the case may be (the "Warrant Settlement Amount" or
the "Option Settlement Amount", as the case may be), but subject to all
required tax withholdings by the Company. The obligation of the Surviving
Corporation to pay the Warrant Settlement Amount or the Option Settlement
Amount shall be subject to each holder of an Option or Warrant, as the case
may be, executing an agreement acknowledging cancellation of such holder's
Option or Warrant and all rights thereunder in exchange for the appropriate
Option Settlement Amount or Warrant Settlement Amount.
(i) Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by a stockholder who has not voted such
Shares in favor of the Merger and who is entitled by the Delaware Law to
appraisal rights, and who shall have properly demanded in writing appraisal
for such Shares in accordance with Section 262 of the Delaware Law
(collectively, the "Dissenting Shares"), shall not be converted into the right
to receive the Merger Consideration unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost his rights to
appraisal and payment under the Delaware Law. Stockholders who have perfected
their rights under Section 262 of the Delaware Law shall be entitled to
receive payment of the appraised value of such Shares in accordance with
Section 262 of the Delaware Law, except that if any such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's Shares shall thereupon be deemed to have been converted into the
right to receive, as of the Effective Time, the Merger Consideration without
any interest thereon. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Buyer, make any payment with respect
to, or settle or offer to settle, any such demands.
(j) Payment for Shares.
------------------
(i) Paying Agent. Immediately prior to the Effective Time,
-------------
Buyer shall, pursuant to an agreement with a paying agent (the
"Paying Agent"), deposit, or cause to be deposited, with or for the
account of the Paying Agent in trust for the benefit of the holders
of Shares (other than Shares to be cancelled pursuant to Section
1(f)(ii) and any Dissenting Shares) for exchange through the Paying
Agent in accordance with this Section 1, cash in the aggregate
amount required to be exchanged for Shares pursuant to Section 1(f)
(the "Payment Fund"). The Paying Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration out of
the Payment Fund to holders of Shares in accordance with Section
1(j)(ii) below. The Payment Fund shall not be used for any other
purposes. The Paying Agent shall invest funds in the Payment Fund
only in short-term securities issued or guaranteed by the United
States government or certificates of deposit of commercial banks
that have consolidated total assets of not less than $5,000,000,000
and are "well capitalized" within the meaning of the applicable
federal bank regulations. Any interest or other income earned on the
investment of funds in the Payment Fund shall be for the account of
and payable to Buyer.
(ii) Payment Procedure. Promptly after the Effective Time,
------------------
Buyer will cause the Paying Agent to mail to each holder of record
of a certificate or certificates that immediately prior to the
Effective Time evidenced outstanding Shares (other than Shares to be
cancelled pursuant to Section 1(f)(ii) and any Dissenting Shares)
("Certificates"), (A) a notice of the effectiveness of the Merger,
(B) 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 Paying Agent and
shall be in such customary form and have such other provisions as
Buyer may specify in accordance with the terms of this Agreement)
and (C) instructions to effect the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent together with such
letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration for each Share formerly
represented by such Certificate, less any required tax withholdings,
and the Certificate so surrendered shall forthwith be cancelled.
Until surrendered as contemplated by this Section 1(k), from and
after the Effective Time each Certificate shall be deemed to
evidence only the right to receive, upon surrender thereof, the
Merger Consideration. In no event will interest be paid or accrued
on the Merger Consideration payable upon the surrender of
Certificates.
(iii) Termination of Payment Fund. Any portion of the Payment
----------------------------
Fund that remains undistributed to the holders of Shares for six
months after the Effective Time shall be delivered to the Surviving
Corporation upon demand, and any holders of Certificates who have
not theretofore complied with this Section 1 shall thereafter look,
subject to Section 1(j)(iv), only to the Surviving Corporation for
the Merger Consideration to which they are entitled pursuant to this
Section 1.
(iv) Abandoned Property Laws. Neither the Surviving Corporation
-----------------------
nor the Paying Agent shall be liable to any holder of a Certificate
for any cash from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law. If any Certificate shall not have been surrendered prior to two
years after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration payable to the holder of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 2(b)) any such Merger
Consideration 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.
(k) Stock Transfer Books. At the Effective Time, the stock transfer
---------------------
books of the Company shall be closed, and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
After the Effective Time, any Certificates presented to the Paying Agent, or
the Surviving Corporation for any reason, shall be cancelled and exchanged for
the Merger Consideration as provided hereby.
(l) Closing. Upon the terms and subject to the conditions hereof,
-------
the closing of the Merger (the "Closing") shall take place at (i) the offices
of Brown & Wood LLP, One World Trade Center, New York, New York 10048 at 10:00
a.m., local time, on November 16, 1998, or (ii) such other place and/or time
and/or on such other date as the Company and the Buyer may agree or as may be
necessary to permit the fulfillment or waiver of the conditions herein (in
case of either clause (i) or (ii), the "Closing Date").
ARTICLE II. Representations and Warranties of the Company. The Company
------------------------------------------------
hereby represents and warrants to Buyer and Acquisition as follows:
Section 2 (a) Authority. The Company has the corporate power and
---------
authority to execute this Agreement and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
performance by the Company of its obligations hereunder, have been duly
authorized by the Board of Directors of the Company (the "Board") and, except
for adoption of this Agreement by the stockholders of the Company as provided
in Section 4(d) hereof, no further corporate action is necessary on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and, assuming the due execution and delivery by the other parties
hereto, constitutes a valid and binding obligation of the Company, enforceable
against it in accordance with its terms.
(b) No Conflicts; Consents. Except as set forth on Schedule 2(b),
-----------------------
neither the execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated hereby will conflict with, or
result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under any
provision of (i) the respective certificates of incorporation or by-laws of
the Company or any of its Subsidiaries (as such term is defined in Section
2(c) below), (ii) any note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment, agreement or arrangement to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound or (iii) any judgment, order or
decree, or statute, law, ordinance, rule or regulation, applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, in each case except for any such conflict, violation, default or right
which would not reasonably be expected to have a material adverse effect on
the business, assets, financial condition, value, prospects or results of
operations of the Company and its Subsidiaries taken as a whole (a "Material
Adverse Effect"). No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other regulatory or self-regulatory
body or association (a "Governmental Entity") is required to be obtained or
made by the Company or any of its Subsidiaries in connection with the
consummation of the transactions contemplated hereby other than (U) the filing
of a certificate of merger pursuant to the relevant provisions of Delaware
Law, (V) filings with the Securities and Exchange Commission (the "SEC") and
the state securities or "blue sky" commission or similar body in each state
where such filing may be necessary, (W) compliance with and filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or other applicable antitrust or competition laws, (X) as set forth on
Schedule 2(b), (Y) as become applicable solely as a result of the specific
regulatory status of Buyer or Acquisition and their affiliates and (Z) those
the failure of which to make or obtain would not reasonably be expected to
have a Material Adverse Effect.
(c) Organization and Standing. Each of the Company and its
---------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Company and its Subsidiaries has all requisite corporate power and authority
to carry on its respective businesses as presently conducted and to own, lease
and operate its respective properties and assets as currently owned, leased
and operated, and each is duly qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or
operated by it, or where the nature of the business conducted by it, make such
qualification necessary, except where the failure to so qualify or be in good
standing would not reasonably be expected to have a Material Adverse Effect.
Each of the Company and its Subsidiaries is in possession of all licenses,
permits and authorizations legally necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted, except for those which the failure to
possess would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect on the Company. The term "Subsidiary" means
each corporation or entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by the Company. As of the date hereof, the only direct or indirect
subsidiaries of the Company are those set forth on Schedule 2(c) hereto.
Except as set forth on Schedule 2(c), neither the Company nor any Subsidiary,
directly or indirectly, beneficially owns any equity interest in any Person
which is not a Subsidiary of the Company. Schedule 2(c) sets forth a complete
and accurate list of all of the issued and outstanding shares of capital stock
of each Subsidiary, and except as set forth on Schedule 2(c), all such shares
are owned by the Company or another Subsidiary free and clear of all liens,
claims, security interests or other encumbrances, and all such shares have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 2(c), there are no (i) outstanding warrants,
options, rights, agreements, covertible or exchangeable securities or other
commitments (A) pursuant to which any Subsidiary is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of any Subsidiary or the Company or (B) that give any person the
right to receive any benefits or rights similar to any rights enjoyed by or
accruing to the holders of shares of any Subsidiary or (ii) voting trusts,
voting agreements, stockholders agreements or similar arrangements of which
any Subsidiary has knowledge.
(d) Capital Stock of the Company. The authorized capital stock of
----------------------------
the Company consists of 20,000,000 shares of Company Common Stock, [9,735,759
shares] of Company Common Stock, constituting the Shares, are duly authorized
and validly issued and outstanding, fully paid and nonassessable. Except for
the Shares, there are no other shares of capital stock of the Company
outstanding. None of the Shares have been issued in violation of, or are
subject to, any purchase option, call, right of first refusal or preemptive,
subscription or similar right under any provision of applicable law, the
Certificate of Incorporation or By-laws of the Company or any agreement,
contract or instrument to which the Company is a party or by which any of it
or any of its properties or assets is bound. Except as set forth on Schedule
2(d), there are (i) no outstanding warrants, options, rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) (A) pursuant to which the Company is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of the Company or any of its Subsidiaries or (B) that give any
person the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the holders of Shares of the Company or (ii) voting
trusts, voting agreements, stockholders agreements or similar arrangements of
which the Company has knowledge.
(e) SEC Reports and Financial Statements. Except as set forth on
---------------------------------------
Schedule 2(e), each form, report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since December
31, 1996, which include all the documents (other than preliminary material)
that the Company was required to file with the SEC since such date (the
"Company SEC Reports"), as of their respective dates, complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports. None of the Company SEC
Reports contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed
by the Company with the SEC since December 31, 1994 comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles as in
effect from time to time in the United States ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form 10-Q
under the Securities Act) and fairly present, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended, subject in the case of interim financial
statements to normal year-end adjustments and except that the interim
financial statements do not contain all of the footnote disclosures required
by GAAP. Except as set forth on Schedule 2(e), neither the Company nor any of
its Subsidiaries has any liabilities or obligations, whether absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due including, without limitation, any earn-out, installment
or contingent payment obligation arising out of any acquisition by the Company
or any Subsidiary of any interest in any business (or any portion thereof),
except (i) as disclosed in the Company SEC Reports filed after December 31,
1997 and prior to the date hereof, (ii) as incurred in connection with the
transactions contemplated or as provided by this Agreement, (iii) as incurred
after December 31, 1997 in the ordinary course of business and consistent with
past practices in manner and amount, or (iv) except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has delivered to Buyer true and complete copies of all agreements
and instruments that evidence or otherwise govern the Company's indebtedness
set forth on Schedule 2(e) or reflected in the most recent balance sheet
included in financial statements contained in the Company SEC Reports.
(f) Absence of Certain Changes or Events. Since December 31, 1997,
-------------------------------------
except as contemplated hereby and except as disclosed in the Company SEC
Reports filed since December 31, 1997 and prior to the date hereof, the
Company and its Subsidiaries have conducted their respective businesses only
in the ordinary course, consistent with past practice, and there has not
occurred or arisen any event or events which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect or
which would reasonably be expected to prevent or delay in any material respect
the consummation of any of the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, except as set forth on
Schedule 2(f) hereto or in the Company SEC Reports through the date hereof,
since December 31, 1997, neither the Company nor any Subsidiary has: (i)
issued any notes, bonds or other debt securities or any capital stock or other
equity securities or any securities convertible, exchangeable or exercisable
into any capital stock or other equity securities; (ii) borrowed any amount or
incurred or become subject to any material liabilities, except liabilities
incurred in the ordinary course of business; (iii) paid any material
obligation or liability, other than liabilities paid in the ordinary course of
business; (iv) other than the quarterly dividend declared on July 2, 1998 and
paid on August 4, 1998 for the second quarter of the Company's 1998 fiscal
year, declared or made any payment or distribution of cash or other property
to its stockholders with respect to its capital stock or other equity
securities or purchased or redeemed any shares of its capital stock or other
equity securities (including, without limitation, any warrants, options or
other rights to acquire its capital stock or other equity securities); (v)
sold, assigned or transferred any of its material tangible assets, except in
the ordinary course of business, (vi) sold, assigned or transferred any
patents or patent applications, trademarks, service marks, trade names,
corporate names, copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any proprietary confidential information to
any Person (other than in circumstances in which the Company has imposed
confidentiality restrictions); (vii) waived any rights entitling the Company
to receive consideration in excess of $50,000, whether or not in the ordinary
course of business or suffered any loss in excess of $100,000 that would
constitute an extraordinary loss under GAAP; (viii) made any commitments for
capital expenditures in excess of $400,000 in the aggregate; (ix) made any
loans or advances to, guarantees for the benefit of, or any Investments in,
any Persons (other than its Subsidiaries) in excess of $200,000 in the
aggregate; or (x) entered into any written agreement to do any of the
foregoing.
(g) Litigation. Except as disclosed on Schedule 2(g), there is no
----------
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to (i) have a
Material Adverse Effect or (ii) prevent, delay or burden in any material
respect the Company's performance of its obligations under, or consummation of
the transactions contemplated by, this Agreement. There is not any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries which has had or
would reasonably be expected to have a Material Adverse Effect.
(h) Taxes.
-----
(i) For purposes of this Agreement, (A) "Tax" or "Taxes" shall
mean all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, occupation, use,
service, license, payroll, franchise, transfer and recording taxes,
fees and charges, including estimated taxes, imposed by the United
States or any other taxing authority (domestic or foreign), whether
computed on a separate, consolidated, unitary, combined or any other
basis and such term shall include any interest, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect
to any such taxes, charges, fees, levies or other assessments; (B)
"Tax Return" shall mean any return, report or other document or
information required to be supplied to a taxing authority in
connection with Taxes, including any schedule or attachment thereto;
(C) "IRS" shall mean the United States Internal Revenue Service; (D)
"Treasury Regulations" shall mean the Treasury Regulations
promulgated under the Code; (E) "Pre-Closing Tax Period" shall mean
all taxable periods ending on or before the Closing Date and the
portion ending on the Closing Date of any taxable period that
includes (but does not end on) such day; (F) "Audit" shall mean any
audit, assessment of Taxes, reassessment of Taxes, or other
examination by any taxing authority or any judicial or
administrative proceedings or appeal of such proceedings; (G) "Code"
shall mean the Internal Revenue Code of 1986, as amended; and (H)
"Affiliated Group" shall mean any affiliated group within the
meaning of Section 1504 of the Code or any similar group defined
under a similar or corresponding provision of state, local or
foreign Tax law.
(ii) The Company and its Subsidiaries are each "C" corporations
as defined in the Code.
(iii) In the last five years, the only jurisdictions where the
Company and its Subsidiaries have filed any income Tax Returns are
with the Federal government of the United States and with the States
of California, [Georgia], Illinois, Iowa, Kansas, Oklahoma,
Pennsylvania and Tennessee and in the following foreign
jurisdictions: the United Kingdom, France and the Netherlands.
(iv) Except as set forth on Schedule 2(h), (A) the Company and
each of its Subsidiaries have duly filed (taking into account any
allowable extensions) with the appropriate Governmental Entities all
Tax Returns required to be filed on or prior to the date hereof, and
such Tax Returns are true, correct and complete in all material
respects, (B) the Company and each of its Subsidiaries have duly
paid all Taxes due and owing and the unpaid Taxes of the Company and
each of its Subsidiaries have been properly accrued in accordance
with GAAP and do not exceed the reserve for Tax liability (excluding
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth or included in
the most recent balance sheet of the Company and each of its
Subsidiaries, respectively, (C) there are no liens for Taxes upon
the Shares or the assets of the Company or any of its Subsidiaries,
except for statutory liens for current Taxes not yet due, (D) the
Company and each of its Subsidiaries have complied with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes; and have, within the time and the manner
prescribed by law, withheld from and paid over to the proper
Governmental Entities all amounts required to be so withheld and
paid over under applicable laws, (E) no Audits or other
administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company or
any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries have received notice of any pending Audits or
proceedings, (F) there are no outstanding written requests,
agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes or
deficiencies against the Company or any of its Subsidiaries, (G)
neither the Company nor any of its Subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes, and (H)
no power of attorney has been executed by the Company or any of its
Subsidiaries with respect to any matter relating to Taxes which is
currently in force, (I) neither the Company nor any of its
Subsidiaries has been a member of an Affiliated Group (other than
one of which the Company was the common parent) or filed or been
included in a combined, consolidated or unitary Tax Return, other
than one filed by the Company, (J) neither the Company nor any of
its Subsidiaries is liable for any unpaid Taxes of an Affiliated
Group of which it was a member prior to the Closing Date, (K)
neither the Company nor any of its Subsidiaries has made any
payments, and is not and will not become obligated to make any
payments, that will be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign Tax law),
(L) neither Company nor any of its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of (1) any change in
method of accounting for a taxable period ending on or prior to the
Closing Date, (2) any closing agreement described in Section 7121 of
the Code (or any corresponding provision of state, local or foreign
income Tax law), (3) any deferred intercompany gain or any excess
loss account described in Treasury Regulations under Section 1502 of
the Code (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign Tax law)
arising prior to the Closing Date, or (4) any installment sale made
prior to the Closing Date, and (M) no claim has ever been made by a
taxing authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or any of
its Subsidiaries, as the case may be, is or may be subject to Taxes
assessed by such jurisdiction
(i) Benefit Plans. Set forth on Schedule 2(i) is a list of each
--------------
bonus, deferred compensation, pension, profit-sharing, retirement, stock
purchase or stock option, hospitalization or other medical, life or other
insurance plan relating to the Company's and its Subsidiaries' businesses,
including any policy, plan, program or agreement that provides for the payment
of severance benefits, salary continuation, salary in lieu of notice or
similar benefits (collectively, the "Benefit Plans"), maintained, sponsored or
obligated to be contributed to by the Company or its Subsidiaries or under
which the Company or its Subsidiaries has any present or future material
obligations or material liability on behalf of the Company's or its
Subsidiaries' employees or former employees or their dependents or
beneficiaries (collectively, the "Affected Persons"). To the knowledge of the
Company, the Benefit Plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Company are in compliance
with the presently applicable provisions of ERISA and the Code and any other
applicable law, in all material respects. For purposes of this paragraph 2(i),
Subsidiaries shall include any entity that together with the Company is
treated as a single employer for purposes of Section 414 of the Code.
All contributions made or required to be made under any Benefit Plan
meet the requirements for deductibility under the Code, and all contributions
that are required but have not been made as of the date hereof and as of the
Closing Date have been properly recorded on the books of the Company or its
Subsidiaries, as the case may be, to the extent required under GAAP.
No Benefit Plan is a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA, and no Benefit Plan is an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) subject to Title IV of ERISA. No event
has occurred with respect to the Company or any of its Subsidiaries in
connection with which the Company or any of its Subsidiaries could be subject
to any material liability or lien with respect to any Benefit Plan under
ERISA, the Code or any other applicable law.
Except as described in Schedule 2(i), neither the Company nor any of
its Subsidiaries is or will be obligated under any circumstance to pay any
separation, severance, termination or similar benefit as a result of any
transaction contemplated by this Agreement, solely as a result of a change in
control or ownership within the meaning of Section 280G of the Code, or for
any other reason.
Except as described in Schedule 2(i), neither the Company nor any
Subsidiary has any obligation or otherwise to provide health or life insurance
benefits to former employees of the Company or Subsidiary or any other person,
except as specifically required by Part 6 of Subtitle B of Title I or ERISA.
With respect to each Benefit Plan, the Company has provided the
Buyer with true, complete and correct copies of (to the extent applicable) (i)
all documents pursuant to which the most recent annual report (Form 5500
series) filed with the IRS (with applicable attachments), (ii) the most recent
financial statement, (iii) the most recent summary plan description provided
to participants, and (iv) the most recent determination letter received from
the IRS. There are no pending or threatened actions, suits, investigations or
claims with respect to any Benefit Plan (other than routine claims for
benefits).
(j) Employee Relations. Except as set forth on Schedule 2(j), (i) no
------------------
employee related complaint, inquiry or investigation against the Company or
any Subsidiary is pending before the National Labor Relations Board; (ii)
there is no labor strike, dispute, slowdown or stoppage pending or, to the
best of the Company's knowledge, threatened against or involving the Company
or any Subsidiary of the Company; (iii) no employee grievance which would
reasonably be expected to have a Material Adverse Effect is pending and no
claim therefor has been asserted; (iv) no collective bargaining agreement is
currently being negotiated by the Company or any Subsidiary of the Company and
no union organizing or decertification efforts are underway or threatened; and
(v) neither the Company nor any Subsidiary of the Company has experienced any
material labor dispute during the last three years. Any notice required under
any law or collective bargaining agreement has been given, and all bargaining
obligations with any employee representative have been satisfied. Neither the
Company nor any of its Subsidiaries has implemented any plant closing or mass
layoff of employees as those terms are defined in the Worker Adjustment
Retraining and Notification Act of 1988 ("Warn Act"), 29 U.S.C. Section 2101
et seq. as amended, or any similar state or local law or regulation, and no
- ------ layoffs that could implicate such laws or regulations will be
implemented before Closing without advance notification to Buyer.
(k) Certain Contracts and Arrangements. Schedule 2(k) lists each
-------------------------------------
contract which is required by its terms to result in the payment or receipt by
the Company or any of its Subsidiaries of more than $100,000 per year or
$250,000 in the aggregate over the term of the contract (collectively,
"Material Contracts"), to which the Company or any of its Subsidiaries is a
party, except for contracts which have been filed and are publicly available
prior to the date of this Agreement as exhibits to any Company SEC Report.
Except as set forth in Schedule 2(k), each Material Contract by which the
Company or any of its Subsidiaries is bound is in full force and effect and is
a legal, valid and binding obligation of the Company or Subsidiary which is
party thereto, enforceable against such party, subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
(whether general or specific) and similar law as relating to creditors' rights
generally, and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law), as of the date
hereof, and neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company, any other party thereto, is in breach of, or default
under, any such Material Contract or agreement, and no event has occurred that
with notice or passage of time or both would constitute such a breach or
default thereunder by the Company or any of its Subsidiaries, or, to the
knowledge of the Company, any other party thereto, except for such failures to
be in full force and effect and such breaches and defaults which, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(l) Environmental Matters.
---------------------
(i) (A) "Cleanup" means all actions required to: (1) cleanup,
remove, treat or remediate Hazardous Materials (as defined
hereafter) in the indoor or outdoor environment; (2) prevent the
Release (as defined hereafter) of Hazardous Materials so that they
do not migrate, endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; (3) perform
preremedial studies and investigations and postremedial monitoring
and care; or (4) respond to any governmental requests for
information or documents in any way relating to cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Materials in the indoor or outdoor
environment.
(B) "Environmental Claim" means any claim, action, cause of
action, investigation or written notice by any Person alleging
potential liability (including, without limitation, potential
liability for investigatory costs, Cleanup costs, governmental
response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or
resulting from (1) the presence or Release of any Hazardous
Materials at any location, whether or not owned or operated by the
Company or any of its Subsidiaries or (2) circumstances forming the
basis of any violation of any Environmental Law (as defined
hereafter).
(C) "Environmental Laws" means all federal, state, local and
foreign laws and regulations, including principles of common law
nuisance, relating to worker health and safety, pollution or
protection of the environment, including, without limitation, laws
relating to Releases or threatened Releases of Hazardous Materials
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, transport or handling of Hazardous
Materials.
(D) "Hazardous Materials" means all materials, substances or
wastes with respect to which liabilities or standards of conduct are
imposed, or which are regulated under, any Environmental Law.
(E) "Release" means any release, spill or emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching
or migration into the environment (including, without limitation,
ambient air, surface water, groundwater and surface or subsurface
strata) or into or out of any property, including the movement of
Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
(ii) (A) Except as set forth in Schedule 2(l)(ii)(A), the
Company and its Subsidiaries have complied in all material respects
and are in compliance in all material respects with all applicable
Environmental Laws (which compliance includes, but is not limited
to, the possession by the Company and its Subsidiaries of all
permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof). Except as set forth in Schedule 2(l)(ii)(A),
since January 1, 1996 and prior to the date of this Agreement,
neither the Company nor any of its Subsidiaries has received any
communication (written or oral), whether from a Governmental Entity,
citizens, group, employee or otherwise, alleging that the Company or
any of its Subsidiaries is not in such compliance.
(B) Except as set forth in Schedule 2(l)(ii)(B), there is no
Environmental Claim pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or, to the
knowledge of the Company, against any Person whose material
liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
(C) Except as set forth in Schedule 2(l)(ii)(C), with respect
to each parcel of Owned Real Property there are no present or, for
the period prior to the date hereof during which the Company or any
Subsidiary was the owner of such parcel of Owned Real Property, past
actions, activities, circumstances, conditions, events or incidents
or, to the knowledge of the Company, at any time prior to the
Company's or a Subsidiary's ownership of such parcel of Owned Real
Property, past actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the Release or
presence of any Hazardous Material, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries
or, to the knowledge of the Company, against any person whose
material liability for any Environmental Claim the Company or any of
its Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
(D) The Company agrees to cooperate with Buyer to effect the
transfers of or otherwise obtain any permits or other governmental
authorizations under Environmental Laws that will be required to
permit Buyer to conduct the business as conducted by the Company and
its Subsidiaries immediately prior to the Closing Date.
(m) Compliance with Laws. Except as set forth on Schedule 2(m), the
--------------------
Company and its Subsidiaries have complied with and are currently in
compliance with all statutes, laws, regulations and ordinances applicable to
the conduct of their businesses, except where the failure to so comply would
not reasonably be expected to have a Material Adverse Effect and no suit,
action, investigation, proceeding, claim or notice has been filed or commenced
(or to the knowledge of the Company is threatened) alleging any failure to so
comply; it being understood that nothing in this representation addresses any
compliance issue that is related to any Environmental Law.
(n) Takeover Statutes. No "fair price," "moratorium," "control share
-----------------
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States applicable to the Company is
applicable to the Merger (including, without limitation, Section 203 of the
Delaware Law).
(o) Vote Required. The affirmative vote of a majority of the
--------------
outstanding Shares is the only vote of holders of capital stock of the Company
required to adopt this Agreement.
(p) Opinion of Financial Advisors. The Company has received the
-------------------------------
opinion or advice of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") on August 18, 1998 to the effect that, as of such date, the
consideration to be received by holders of shares of Company Common Stock
(other than Buyer or any affiliate thereof) pursuant to the Merger is fair
from a financial point of view to such holders.
(q) Brokers, Finders, etc. Except as set forth in the Merrill Lynch
----------------------
Engagement Letter dated February 23, 1998, a true and correct copy of which
was provided to Buyer prior to the date hereof, the Company is not subject to
any valid claim of any broker, investment banker, finder or other intermediary
in connection with the transactions contemplated by this Agreement.
(r) Tangible Property. The Company and its Subsidiaries have good
------------------
title to, or a valid leasehold interest in, the tangible personal properties
and assets used by them or shown on the most recent balance sheet of the
Company included in the Company SEC Reports (the "Company Balance Sheet") or
acquired after the date thereof (except those sold or otherwise disposed of
for fair value since March 30, 1998 in the ordinary course of business), which
are free and clear of any mortgage, pledge, lien, encumbrance, charge, or
other security interest, other than (i) mechanic's, materialmen's and similar
liens arising or incurred in the ordinary course of business, (ii) purchase
money liens and encumbrances identified and reflected on the Company Balance
Sheet, and (iii) mortgages, pledges, liens, encumbrances, charges or other
security interests that do not, individually or in the aggregate, materially
adversely affect the current use of such property or asset.
(s) Product Warranty. Except as set forth in Schedule 2(s), all
-----------------
products manufactured, distributed or sold by the Company and its Subsidiaries
prior to the Closing Date with respect to which any contractual warranty
period has not expired have been manufactured, distributed or sold, as
applicable, in conformity in all material respects with all applicable
contractual commitments and all express or implied warranties.
(t) Insurance. Schedule 2(t) sets forth an accurate and complete
---------
list of each insurance policy to which the Company or any of its Subsidiaries
is a party, a named insured or otherwise the beneficiary of coverage. All of
such insurance policies are legal, valid, binding and enforceable and in full
force and effect and the Company and its Subsidiaries are not in breach or
default with respect to their obligations under such insurance policies.
(u) Suppliers and Dealers. Schedule 2(u)(i) lists the Company's and
---------------------
its Subsidiaries' 25 largest vendors by the Company's consolidated purchase
volume for the fiscal year ended December 31, 1997 and the six-months ended
June 30, 1998. Neither the Company nor any Subsidiary has received any notice
that any such vendor intends to terminate or materially reduce its business
with the Company and its Subsidiaries and except as set forth on Schedule
2(u)(i), no such vendor has terminated or materially reduced its business with
the Company and its Subsidiaries since January 1, 1997. Schedule 2(u)(ii)
lists the Company's and its Subsidiaries' 25 largest dealers by the Company's
consolidated sales volume for the fiscal year ended December 31, 1997 and the
six-months ended June 30, 1998. Neither the Company nor any Subsidiary has
received any notice that any such dealer intends to terminate or materially
reduce its business with the Company and its Subsidiaries since January 1,
1997. Schedule 2(u)(ii) contains correct and complete current forms of
standard dealer agreements for the Company and each of its Subsidiaries.
(v) Real Property.
-------------
(i) Owned Real Property. Schedule 2(v)(i) sets forth a true and
-------------------
complete list of each Owned Real Property. The Company has delivered
to Buyer a true and complete copy of all existing title insurance
policies and surveys for each Owned Real Property. Except as set
forth in Schedule 2(v)(i), with respect to each parcel of Owned Real
Property: (A) the Company or a Subsidiary (as the case may be) has
good and marketable fee simple title to such parcel, which shall be
free and clear of all liens and encumbrances as of the Closing Date,
except for Permitted Encumbrances; (B) there are no leases,
subleases, licenses, concessions or other agreements granting to any
person the right to use or occupy such parcel or any portion
thereof; (C) other than the right of Buyer pursuant to this
Agreement, there are no outstanding options, rights of first offer
or rights of first refusal to purchase such parcel or any portion
thereof or interest therein; and (D) neither the Company nor any
Subsidiary is a party to purchase any additional real property. The
term "Owned Real Property" means all land and other buildings,
fixtures and other improvements located thereon, and all easements
and other rights with respect thereto, owned by the Company or any
Subsidiary.
The term "Permitted Encumbrances" means with respect to each
parcel of Real Property: (a) liens for current taxes or other governmental
assessments, fees or other charges not yet due and payable, or the amount or
validity of which is being contested by Seller in good faith by appropriate
proceedings; (b) mechanics and similar liens arising or incurred in the ordinary
course of business and which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect; (c) zoning, building and
other land use and similar laws or regulations imposed by any governmental
authority having jurisdiction over such parcel which are not violated by the
current use of such parcel in the operation of the Company's business; (d)
easements, covenants, conditions, restrictions and other similar title matters
affecting title to such parcel which would not materially impair the use of such
parcel in the operation of the Company's business; and (e) survey defects to the
extent that such defects would not materially impair the use of such parcel in
the operation of the Company's business.
(ii) Leased Real Property. Schedule 2(v)(ii) sets forth a true
--------------------
and complete list of all leases and sub-leases of the Company (the
"Leases") for each Leased Real Property. The Company has delivered
to Buyer a true and complete copy of each written lease (including
all amendments, extensions, renewals, guarantees and other documents
with respect thereto). Except as set forth in Schedule 2(v)(ii),
with respect to each of the Leases: (A) the Lease is in full force
and effect and is the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms
(subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium (whether general
or specific) and similar laws relating to creditors' rights
generally, and general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law));
(B) the Merger will not result in a breach of or default under the
Lease, (C) the Company or Subsidiary (as the case may be) is not in
breach or default under the Lease, and no event has occurred or
circumstance exists which, with the delivery of notice, passage of
time or both, would constitute such a breach or default under the
Lease, other than any such breaches or defaults which would not,
individually or in the aggregate, reasonably be expected to have
Material Adverse Effect; and (D) the Company or any Subsidiary (as
the case may be) has not assigned, subleased, mortgaged, deeded in
trust or otherwise transferred or encumbered the Lease or any
interest therein. The term "Leased Real Property" means all land,
buildings, and other real property which the Company or any
Subsidiary has the right to use or occupy pursuant to any leasehold,
subleasehold, license, concession or other similar real property
interest held by the Company or such Subsidiary.
(iii) Real Property Used in The Business. The Owned Real
-------------------------------------
Property, Leased Real Property and Leasehold Improvements
(collectively, the "Real Property") include all of the real property
used by the Company in the operation of the Business.
(iv) Condemnation. There are no condemnation, expropriation or
------------
other eminent domain proceedings, pending or, to the knowledge of
the Company, threatened, affecting any Real Property or any portion
thereof.
(w) Intellectual Property. The term "Intellectual Property Rights"
----------------------
shall mean all of the following: (i) patents, patent applications, patent
disclosures and inventions; (ii) trademarks, service marks, trade dress, trade
names and corporate names and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; (v) trade secrets, confidential information and know-how; and
(vi) computer software.
Schedule 2(w) sets forth a complete and correct list of all of the
following that are owned or used by the Company or any of its Subsidiaries:
(X) patented or registered Intellectual Property Rights and pending patent
applications or other applications for registrations of Intellectual Property
Rights; (Y) computer software (other than commercially available software
purchased or licensed by the Company or any Subsidiary for a cost less than
$10,000); and (Z) all other material Intellectual Property Rights (including
but not limited to unregistered trademarks, but excluding copyrights).
Schedule 2(w) also sets forth a complete and correct list of all licenses or
similar agreements covering Intellectual Property Rights to which the Company
or any of its Subsidiaries are a party and the Company has provided to Buyer a
complete and correct copy of each such license or similar agreements.
Except as set forth on Schedule 2(w): (u) the Company and its
Subsidiaries own and possess all right, title and interest in and to, or have
a valid and enforceable right to use, free and clear of all liens, licenses,
security interests, encumbrances or any other restrictions (including but not
limited to any injunction, judgment, order, decree or ruling issued by a
Governmental Entity), all of the Intellectual Property Rights set forth on
Schedule 2(w) (collectively, the "Company's Intellectual Property Rights");
(v) no claim by any third party contesting the validity, enforceability, use
or ownership of any of the Company's Intellectual Property Rights has been
made, is currently outstanding or, to the knowledge of the Company, is
threatened other than such claims that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company; (w) no loss or expiration of any of the Company's Intellectual
Property Rights is pending or, to the knowledge of the Company, threatened or
reasonably foreseeable, except for patents expiring at the end of their
statutory terms (and not as a result of any act or omission by the Company or
any of its Subsidiaries); (x) to the knowledge of the Company, no third party
has infringed or misappropriated any of the Company's Intellectual Property
Rights; (y) neither the Company nor any of its subsidiaries (i) to the
knowledge of the Company, has infringed, misappropriated or otherwise
conflicted with, and the operation of their respective businesses does not
infringe, misappropriate or otherwise conflict with, any Intellectual Property
Rights of any third party, (ii) has received any notices regarding any of the
foregoing (including but not limited to any demand to license any Intellectual
Property Rights) (z) neither the Company nor any of its Subsidiaries has
agreed to indemnify any third party for or against any interference,
infringement, misappropriation or other conflict with respect to any
Intellectual Property Rights; and (aa) the Closing of the Merger will not
adversely affect the Company's ability to use the Company's Intellectual
Property Rights on substantially the same basis as the Company and its
Subsidiaries owned or used the Company's Intellectual Property Rights
immediately prior to the Closing.
(x) Affiliated Transactions. Set forth in Schedule 2(x) is a list of
-----------------------
all arrangements, agreements and contracts entered into by the Company or any
of its Subsidiaries with any Person who is an officer, director or affiliate
(as defined in Section 11(e) hereof) of the Company or any of its
Subsidiaries, any relative of any of the foregoing or any entity of which any
of the foregoing is an affiliate. Correct and complete copies of such
documents have previously been made available to Buyer.
(y) Contributions. Neither the Company, nor any director or officer
-------------
of the Company, has, in the course of his actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity or made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds. Neither the Company, nor any
director or officer of the Company, has, in the course of his actions for, or
on behalf of, the Company violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, or
unlawful rebate, payoff, influence payment, kickback or other unlawful
payment.
(z) Proxy Statement. The information (other than any and all
----------------
information supplied or to be supplied by Buyer or its affiliates for
inclusion or incorporation by reference in the proxy statement referred to
hereinafter) set forth in the proxy statement to be distributed in connection
with the Company Special Meeting (as hereinafter defined) to vote upon this
Agreement (together with all amendments and supplements thereto, the "Proxy
Statement") will not at the date mailed to stockholders contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(aa) No Other Representations or Warranties. Except for the
------------------------------------------
representations and warranties contained in this Section 2, neither the
Company nor any other person makes any other express or implied representation
or warranty on behalf of the Company.
ARTICLE III. Representations and Warranties of the Buyer and
-----------------------------------------------------
Acquisition. The Buyer and Acquisition hereby, jointly and severally,
- -----------
represent and warrant to the Company as follows:
Section 3 (a) Organization and Standing. The Buyer and Acquisition
--------------------------
are corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware.
(b) Authority. The Buyer and Acquisition have all requisite
---------
corporate power and authority to execute this Agreement and consummate the
transactions contemplated hereby. The execution and delivery of the Agreement
and the performance by the Buyer and Acquisition of their respective
obligations hereunder have been duly authorized by all necessary action on the
part of each of Buyer and Acquisition. This Agreement has been duly executed
and delivered by each of the Buyer and Acquisition and, assuming the due
execution and delivery hereof by the other parties hereto, constitutes a valid
and binding obligation of each of the Buyer and Acquisition, enforceable
against each of the Buyer and Acquisition in accordance with its terms
(subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium (whether general or specific) and
similar laws relating to creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law)).
(c) No Conflicts; Consents. Except as set forth on Schedule 3(c),
-----------------------
neither the execution and delivery of this Agreement by Buyer and Acquisition,
nor the consummation of the transactions contemplated hereby will conflict
with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under any provision of (i) the respective certificate of incorporation
or by-laws of the Buyer or Acquisition, (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Buyer or Acquisition is a party or by which any of
them or any of their respective properties or assets is bound or (iii) any
material judgment, order or decree, or statute, law, ordinance, rule or
regulation, applicable to the Buyer or Acquisition or any of their respective
properties or assets, in each case except for any such conflict, violation,
default or right which would not reasonably be expected to have a material
adverse effect on the business, assets, financial condition, or results of
operations of the Buyer and its subsidiaries (including Acquisition) taken as
a whole. No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
to be obtained or made by the Buyer or Acquisition or in connection with the
consummation of the transactions contemplated hereby other than (U) Uniform
Commercial Code filings, recordations and other filings required in connection
with the granting of security interests, (V) the filing of a certificate of
merger or such other document or documents as permitted pursuant to the
relevant provisions of Delaware Law, (W) filings with the SEC and the state
securities or "blue sky" commission or similar body in each state where such
filing may be necessary, (X) compliance with and filings under the HSR Act and
other applicable antitrust and competition laws, (Y) as set forth on Schedule
3(c) and (Z) for those the failure of which to make or obtain would effect the
ability of the Buyer or Acquisition to consummate the transactions
contemplated hereby.
(d) Information Supplied. The information supplied or to be supplied
--------------------
by Buyer or its affiliates for inclusion or incorporation by reference in the
Proxy Statement distributed in connection with the Company Special Meeting to
vote upon this Agreement, will not at the date mailed to stockholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(e) Financial Ability to Perform. Buyer and Acquisition have
-------------------------------
delivered to the Company a true and complete copy of the letters obtained by
Buyer and Acquisition from Credit Suisse First Boston to provide debt
financing for the transactions contemplated hereby. Madison Dearborn Capital
Partners II, L.P. has agreed with Buyer to provide $58,500,000 of equity
financing for the transactions contemplated hereby.
(f) Surviving Corporation after the Merger. At and immediately after
--------------------------------------
the Effective Time, (after giving effect to the Merger and any changes in the
Surviving Corporation's assets and liabilities as a result thereof), the
Surviving Corporation will have adequate working capital and will not (i) be
insolvent (either because its financial condition is such that the sum of its
debts is greater than the fair value of its assets or because the present fair
saleable value of its assets will be less than the amount required to pay its
probable liabilities on its debts as they mature), (ii) have unreasonably
small capital with which to engage in its business or (iii) have incurred or
plan to incur debts beyond its ability to pay as they mature.
(g) Brokers, Finders, etc. Except for Credit Suisse First Boston and
---------------------
Madison Dearborn Partners, Inc., the Buyer is not subject to any valid claim
of any broker, investment banker, finder or other intermediary in connection
with the transactions contemplated by this Agreement.
(h) Acquisition's Operations. Acquisition was formed solely for the
------------------------
purpose of engaging in the transactions contemplated by this Agreement and has
not engaged in any business activities other than in connection with the
transactions contemplated hereby.
(i) No Shares Owned. As of the date hereof, neither Buyer,
-----------------
Acquisition or any of their affiliates owns any Shares.
(j) No Other Representations or Warranties. Except for the
-------------------------------------------
representations and warranties contained in this Section 3, neither Buyer,
Acquisition nor any other person makes any other express or implied
representation or warranty on behalf of Buyer or Acquisition.
ARTICLE IV. Covenants of the Company. The Company covenants and agrees
------------------------
with the Buyer and Acquisition as follows:
Section 4 (a) Access. Upon reasonable advance notice, between the
------
date hereof and the Effective Time, the Company shall (i) give Buyer and
Acquisition and their counsel, financial advisors, financing sources and their
respective counsel, auditors and other authorized representatives
(collectively, "Buyer's and Acquisition's Representatives") reasonable access
(as defined hereafter) during normal business hours to the offices,
properties, books and records of the Company and its Subsidiaries, (ii)
furnish to Buyer's and Acquisition's Representatives such financial, legal,
technical, personnel and operating data and other information as such Persons
may reasonably request and (iii) instruct the Company's employees, counsel,
auditors and financial advisors to cooperate with Buyer and Acquisition in
their preparation of any rating agency presentation materials, private
placement prospectus or offering memorandum, syndication book or similar
marketing materials ("Financing Materials") in connection with a high yield
capital markets transaction to sell securities of Buyer (or its subsidiaries)
or obtain a leveraged bank credit facility to finance the Merger Consideration
and in their investigation of the business of the Company and its
Subsidiaries, including by furnishing copies of data or information pertaining
to the business of the Company and its Subsidiaries for purposes of due
diligence or for inclusion in any Financing Materials in connection with a
high yield capital markets transaction to sell securities of Buyer (or its
subsidiaries) or obtain a leveraged bank credit facility to finance the Merger
Consideration; provided that all requests for information, to visit plants or
-------- ----
facilities or to interview the Company's employees or agents should be
directed to and coordinated with the chief financial officer of the Company or
such person or persons as he shall designate; and provided further that any
-------- -------
information and documents received by Buyer, Acquisition or Buyer's and
Acquisition's Representatives (whether furnished before or after the date of
this Agreement) shall be held in strict confidence in accordance with Section
5(a) hereof, it being understood that the Company shall not unreasonably
withhold its consent for Buyer or Acquisition to use in presentations or
include in its Financing Materials information that is customarily used or
disclosed in Financing Materials used in the placement of high yield capital
markets offerings and the syndication of leveraged bank credit facilities.
Notwithstanding anything to the contrary in this Agreement, neither the
Company nor any of its Subsidiaries shall be required to disclose any
information to Buyer, Acquisition or Buyer's and Acquisition's Representatives
if doing so would violate any agreement, law, rule or regulation to which the
Company or any of its Subsidiaries is a party or to which the Company or any
of its Subsidiaries is subject (it being understood that the Company shall
notify the Buyer of any such restriction). The Company shall, at the expense
of Buyer, obtain such comfort letters, surveys and title policies as Buyer may
request in connection with its efforts to sell securities of Buyer or obtain a
credit facility to finance the Merger Consideration.
(b) Ordinary Conduct. Except as otherwise permitted by the terms of
----------------
this Agreement, from the date hereof to the Closing, the Company and its
Subsidiaries shall conduct their respective businesses in the ordinary course
in substantially the same manner as presently conducted and shall make all
reasonable best efforts consistent with past practices to preserve its
relationships with customers, suppliers and others with whom such entity
deals, perform and enforce their respective agreements and obligations,
maintain all of their respective physical properties in good repair and
operating condition, subject only to ordinary wear and tear, in each case in
accordance with past practices, and continue capital expenditure programs as
heretofore disclosed to Buyer in all material respects. Except as set forth on
Schedule 4(b) or otherwise permitted by the terms of this Agreement, from the
date hereof until the Closing, neither the Company nor any of its Subsidiaries
shall do any of the following without the written consent of the Buyer (which
consent will not be unreasonably withheld):
(i) amend their certificate of incorporation or by-laws or
similar documents;
(ii) declare or pay any dividend or make any other distribution
to their stockholders whether or not upon or in respect of any
shares of their capital stock other than regular quarterly dividends
not to exceed $0.11 per share of Common Stock for any quarter;
(iii) redeem or otherwise acquire any shares of their capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable
for any shares of capital stock;
(iv) acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any
assets that are material, individually or in the aggregate, to the
Company and its Subsidiaries taken as a whole;
(v) sell, lease, mortgage, pledge or create or permit to be
created any security interest or other encumbrance on, or otherwise
dispose of, any of its material assets, other than in the ordinary
course of business or as contemplated by the capital expenditure
programs referred to herein;
(vi) enter into, or amend, modify or supplement in a manner
materially adverse to the Company, any agreement, contract or other
arrangement (or series of related agreements, contracts or other
arrangements) to which the Company or its Subsidiaries is a party or
by which they or any of their properties or assets are bound which
has an aggregate future liability or receivable to or from any
person in excess of $300,000 or is not terminable by the Company or
one of its Subsidiaries, as the case may be, by notice of not more
than 60 days for an aggregate cost of less than $100,000; or
(vii) incur any obligation to make any payments that become due
as a result of a change in control of the Company or, other than in
the ordinary course of business, incur any indebtedness or other
obligations or liabilities;
(viii) enter into any employment agreements in the United
States, enter into new severance agreements, retention, bonus or
similar agreements or amend any plans or increase the rates of
compensation payable or to become payable to any officer, employee,
agent or consultant of the Company or any of its Subsidiaries,
except as required by law or except in accordance with existing
compensation policies or the existing terms of contracts entered
into prior to the date of this Agreement, which policies and
contracts are set forth on Schedule 4(b)(viii);
(ix) change any accounting or Tax principle or practice of the
Company, including but not limited to any change in the nature or
method of calculation of any reserve of any kind, except as may be
required by GAAP or by law;
(x) accelerate the collection of accounts receivables or delay
the payment of payables or other liabilities as compared to past
practice or fail to maintain inventory in the ordinary course of
business consistent with past practice;
(xi) enter into any amendments, extensions or other
modifications with respect to any of the Leases that would result in
the assumption of any material additional liability by, or that
would be reasonably expected to have a Material Adverse Effect on
the operation of, the Company or its Subsidiaries; provided, that,
in the case of any extension, the Company shall consult with Buyer
in advance of such extension (it being understood that Buyer's
consent is not required in connection with any such extension);
(xii) effect any reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares or any
stock dividend on the Company Common Stock;
(xiii) make any loans to employees in excess of $1,000
individually and $50,000 in the aggregate; or
(xiv) agree, whether in writing or otherwise, to do any
of the foregoing.
(c) Other Transactions. (i) Prior to the Effective Time, neither the
------------------
Company nor any Subsidiary (whether directly or indirectly through its
officers, directors, employees, investment bankers, attorneys, accountants,
advisors, agents or other intermediaries) may: (A) solicit, initiate or
encourage, directly or indirectly, any inquiries with respect to, or the
making or implementation of any Acquisition Proposal (as hereafter defined) or
(B) engage in discussions or negotiations (other than to disclose the terms of
this Section 4(c) of this Agreement) with, or disclose any nonpublic
information relating to the Company or its Subsidiaries or afford access to
employees, auditors, agents, properties, books or records of the Company or
its Subsidiaries to, any Person that has made, or has indicated its interest
in making, an Acquisition Proposal or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; provided, however, that,
subject to compliance with Section 8(c)(ii), the Board shall be entitled,
notwithstanding anything to the contrary in this Agreement, to furnish
information to or enter into discussions or negotiations with any person or
entity that makes an unsolicited Acquisition Proposal, commencing three
business days after delivery of a written notice to Buyer that it intends to
furnish such information or enter into such discussions or negotiations (a
"Determination Notice") if the Board has determined in good faith (the
"Determination") by the date on which the Determination Notice is given (A)
after consultation with and based upon the advice of a nationally recognized
investment banking firm, that the Acquisition Proposal represents a
financially superior transaction for the stockholders of the Company when
compared to the Merger, (B) that such Acquisition Proposal is reasonably
capable of being consummated in a timely manner and for which financing is
reasonably likely to be available, (C) that the approval and adoption of this
Agreement by holders of Common Stock is not likely to be obtained due to such
pending Acquisition Proposal, and (D) after consultation with outside legal
counsel, that failure to provide such information or enter into such
discussions or negotiations would present a reasonably substantial risk of a
breach of the fiduciary duties of the Board under applicable law; and provided
--------
further that, subject to Section 4(c)(ii) and upon the payment to Buyer of the
- -------
amount required by Section 8(c)(i) and termination of this Agreement pursuant
to Section 8(a)(iv), the Board shall be entitled to cause the Company to enter
into any agreements regarding such Acquisition Proposal (a "Company
Acquisition Agreement"). The Company shall promptly notify Buyer and
Acquisition if any information is requested from it or any negotiations or
discussions are sought to be initiated with the Company and shall promptly
communicate to Buyer and Acquisition the terms of any Acquisition Proposal or
related inquiry and the identity of the party making such Acquisition Proposal
or related inquiry which it may receive in respect of any such transaction,
including, in the case of written proposals or inquiries, furnishing Buyer and
Acquisition with a copy of such written proposal or inquiry. For purposes of
this Agreement, "Acquisition Proposal" means any offer or proposal for a
merger, consolidation, recapitalization, liquidation or other business
combination involving the Company or any of its Subsidiaries or the
acquisition or purchase of 50% or more of any class of equity securities of
the Company or any of its Subsidiaries, or any tender offer (including self
tenders) or exchange offer that if consummated would result in any person or
entity (other than an affiliate of Buyer) beneficially owning 50% or more of
any class of equity securities of the Company or any of its Subsidiaries, or a
substantial portion of the assets of, the Company or any of its Subsidiaries,
other than the Merger. However, nothing contained in this Section 4(c) shall
prohibit the Company or the Board from taking and publicly disclosing to the
Company's stockholders a position with respect to a tender or exchange offer
by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or other applicable law or from making any public disclosure
required under its fiduciary duties.
(ii) Prior to recommending an Acquisition Proposal or entering
into a Company Acquisition Agreement or withdrawing, amending or
modifying its recommendation of this Agreement and the Merger (it
being understood that the Company taking no position or remaining
neutral with respect to a tender or exchange offer from a third
party (a "Neutral Statement"), or making a recommendation in favor
of such a tender or exchange offer, in a filing made pursuant to
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act shall
constitute an adverse modification of its approval or recommendation
of the Merger, unless, in the case of a Neutral Statement only,
contemporaneously with the filing of such Neutral Statement the
Company publicly confirms that it continues to recommend approval of
the Merger and continues to actively support the Merger thereafter),
the Company shall (A) notify Buyer in writing that it intends to
approve, recommend or accept such an Acquisition Agreement or
withdraw, amend or modify its recommendation of the Merger, and (B)
attach the most current version of any such Acquisition Proposal or
Company Acquisition Agreement to such notice. Buyer shall have the
opportunity, within three business days after receipt of the
Company's written notification of its intention to accept such
Acquisition Proposal or to enter into such Company Acquisition
Agreement or to withdraw, amend or modify its recommendation of the
Merger, to make an offer relating to the acquisition of the Company
(a "Counter Offer"). Unless the Board of Directors of the Company
determines, in good faith after consultation with its outside legal
counsel and financial advisors, that such Counter Offer is not at
least as favorable to the shareholders of the Company, taking into
account such factors (including, without limitation, the
consideration (both as to amount and form) offered in, and the other
terms and conditions of, the Counter Offer and such other
Acquisition Proposal or Company Acquisition Agreement) as and to the
extent it deems relevant, the Company shall not accept such other
Acquisition Proposal or Company Acquisition Agreement, but shall
accept the Counter Offer. The Company agrees that it will not enter
into a Company Acquisition Agreement referred to in clause (A) above
until at least the fourth business day after it has provided the
notice to Buyer required hereby and shall have terminated this
Agreement pursuant to Section 8(a)(iv).
(d) Company Special Meeting; Preparation of the Proxy Statement.
-----------------------------------------------------------
(i) The Company shall, in accordance with applicable law and
the Certificate of Incorporation and the Company Bylaws, duly call,
give notice of, convene and hold a special meeting of its
stockholders (the "Company Special Meeting") as promptly as
practicable after the date hereof and submit this Agreement to the
stockholders of the Company for approval and such other matters as
may in the reasonable judgment of the Company be appropriate in
order to consummate the transactions contemplated by this Agreement
for consideration at the Company Special Meeting. In the event the
Stock Option (as defined in the Option Agreement) under either of
the Option Agreements becomes exercisable in accordance with the
terms of such agreements, the Company may, and at the request of
Buyer shall, adjourn the Company Special Meeting for a period not to
exceed sixty (60) days from the date such Stock Options first become
exercisable. The Board shall recommend approval and adoption of this
Agreement and the Merger by the Company's stockholders; provided
--------
that the Board may withdraw, modify or change such recommendation,
----
subject to compliance with clauses (A) through (C) inclusive of
Section 4(c)(i) in the event such withdrawal, modification or change
results from a pending Acquisition Proposal, if it has determined in
good faith, after consultation with outside legal counsel, that the
failure to withdraw, modify or change such recommendation would
present a reasonably substantial risk of a breach of the fiduciary
duties of the Board under applicable law.
(ii) As soon as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Proxy
Statement. Buyer shall cooperate with the Company in connection with
the preparation of the Proxy Statement, including furnishing to the
Company all information regarding the Buyer and its affiliates as
may be required to be disclosed therein. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to
the Company's stockholders as promptly as practicable after the date
hereof. No filing of, or amendment or supplement to, the Proxy
Statement will be made by the Company without providing Buyer the
opportunity to review and comment thereon and to approve the same,
provided that such approvals shall not be unreasonably withheld. The
Company will advise Buyer, promptly after it receives notice
thereof, of any request by the SEC for amendment of the Proxy
Statement or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the
Effective Time any information relating to the Company or Buyer, or
any of their respective affiliates, officers or directors, should be
discovered by the Company or Buyer which should be set forth in an
amendment or supplement to the Proxy Statement, so that the Proxy
Statement would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company.
(e) Interim Operating Reporting. During the period from the date of
---------------------------
this Agreement to the Closing, the Company shall cause its officers to confer
on a regular basis with one or more representatives of Buyer to report
material operational matters and to report the general status of on-going
operations. The Company shall notify Buyer of any material adverse change in
the financial position, earnings or business of the Company or any of its
Subsidiaries after the date hereof and prior to the Closing, and any
unexpected emergency or other unanticipated change in the business of the
Company or any of its Subsidiaries and of any governmental complaints,
investigations or hearings or adjudicatory proceedings (or communications
indicating that the same are contemplated) and shall keep Buyer fully informed
of such events and, to the extent legally permitted, permit its
representatives to participate in all discussion relating thereto.
ARTICLE V. Covenants of the Buyer and Acquisition. The Buyer and
-------------------------------------------
Acquisition covenant and agree, jointly and severally, with the Company as
follows:
Section 5(a) Confidentiality. Except to the extent that any of the
---------------
provisions of the Confidentiality Agreement are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and
supersede such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive
any termination of this Agreement.
(b) Employees and Employee Benefit Plans.
------------------------------------
(i) Immediately after the Closing, the Buyer shall cause the
Company and its Subsidiaries to continue the employment, on
substantially the same terms and conditions, and with benefits that
in the aggregate are at least as valuable, as in effect immediately
prior to the Closing, of all employees of the Company and its
Subsidiaries employed at the Closing Date. Notwithstanding anything
to the contrary, the preceding sentence shall not impose a
continuing obligation after the Closing and no contracts of
employment shall be deemed to have been created pursuant to this
Section 5(b)(i).
(ii) Service by Affected Persons with the Company or its
Subsidiaries shall be recognized by the Buyer under each benefit
plan or arrangement established, maintained or contributed to by the
Buyer, the Company or its Subsidiaries after the Closing for the
benefit of any Affected Persons.
(c) WARN Act. The Buyer acknowledges and agrees that any employment
--------
loss within the meaning of the WARN Act, suffered by any employee of the
Company or its Subsidiaries immediately upon or within 90 days following the
Closing Date, shall have been caused by the Buyer's decision not to continue
the employment of such employee, and not by the sale of the Company and its
Subsidiaries. The Buyer further acknowledges and agrees that it shall be
responsible for giving any notices required by the WARN Act, that it is liable
to any employee who does not receive notice under, and who suffers an
employment loss (as defined in the WARN Act) because of a "plant closing" or
"mass layoff," as defined therein, occurring on or after the Closing Date. For
purposes of this Agreement, the Closing Date is and shall be the same as the
"effective date" of the sale within the meaning of the WARN Act.
(d) Indemnification.
---------------
(i) Buyer and the Company agree that all rights to
indemnification and all limitations on liability existing in favor
of any Indemnitee (as defined hereafter) as provided in the
Company's Certificate of Incorporation, Company's Bylaws or an
agreement between an Indemnitee and the Company or a Subsidiary of
the Company as in effect as of the date hereof shall survive the
Merger and continue in full force and effect in respect of acts or
omissions occurring on or prior to the Effective Time (including in
respect of acts or omissions in connection with this Agreement or
the Merger).
(ii) In addition to the other rights provided for in this
Section 5(d) and not in limitation thereof, for six years after the
Effective Time the Surviving Corporation shall, to the fullest
extent permitted by law, (A) indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers or
directors of the Company and any of its Subsidiaries (the
"Indemnitees") against all losses, expenses (including, without
limitation, attorneys' fees and the cost of any investigation or
preparation incurred in connection thereof), claims, damages,
liabilities, judgments or amounts paid in settlement (collectively,
"Costs") in respect to any threatened, pending or contemplated
claim, action, suit or proceeding, whether criminal, civil,
administrative or investigative, arising out of acts or omissions
occurring on or prior to the Effective Time relating to their acts
or omissions as a director or officer of the Company or any
Subsidiary (including, without limitation, in respect of acts or
omissions in connection with this Agreement and the Merger) (an
"Indemnifiable Claim") and (B) advance to such Indemnitees all
expenses incurred in connection with any Indemnifiable Claim. In the
event any Indemnifiable Claim is asserted or made within such six
year period, all rights to indemnification and advancement of
expenses in respect of any such Indemnifiable Claim shall continue
until such Indemnifiable Claim is disposed of or all judgments,
orders, decrees or other rulings in connection with such
Indemnifiable Claim are fully satisfied. To the extent required by
law, such advancement of expenses shall be subject to delivery of an
undertaking to reimburse the Surviving Corporation if it is
ultimately determined that an Indemnitee is not entitled to
indemnification.
(iii) For six years after the Effective Time, the Surviving
Corporation shall provide officers and directors liability insurance
in respect of acts or omissions occurring prior to the Effective
Time covering each such person currently covered by the Company's
officers' and directors' liability insurance policy on terms with
respect to coverage and amount no less favorable than those of the
policy in effect on the date hereof; provided, however, that in no
-------- -------
event shall Surviving Corporation be required to expend more than an
amount per year equal to 200% of current annual premiums paid by the
Company for such insurance (the "Maximum Amount") to maintain or
procure insurance coverage pursuant hereto; provided, further, that
-------- -------
if the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, the
Surviving Corporation shall maintain or procure, for such six year
period, the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum
Amount.
(iv) Notwithstanding any other provisions hereof, the
obligations of the Surviving Corporation contained in this Section
5(d) shall be binding upon the successors and assigns of the
Surviving Corporation. In the event the Surviving Corporation or any
of its successors or assigns (A) consolidates with or merges into
any other person or entity or (B) transfers all or substantially all
of its properties or assets to any person or entity, then, and in
each case, proper provision shall be made so that successors and
assigns of the Surviving Corporation, as the case may be, honor the
indemnification obligations set forth in this Section 5(d).
(v) The obligations of the Surviving Corporation under this
Section 5(d) shall not be terminated or modified in such a manner as
to adversely affect any Indemnitee to whom this Section 5(d) applies
without the consent of such affected Indemnitee (it being expressly
agreed that the Indemnitees to whom this Section 5(d) applies shall
be third party beneficiaries of this Section 5(d)).
(e) Indemnification Costs. The Surviving Corporation shall advance
----------------------
all Costs to any Indemnitee incurred by enforcing the indemnity or other
obligations provided for in this Section 5(d).
ARTICLE VI. Mutual Covenants.
----------------
Section 6(a) Consummation of the Transactions. Subject to the terms
--------------------------------
and conditions of this Agreement, each party hereto shall use its reasonable
best efforts consistent with applicable legal requirements and the terms of
this Agreement to take or cause to be taken all actions and to do or cause to
be done all things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby and to cause the Closing to
occur as soon as practicable, including obtaining all permits, approvals,
authorizations and consents of all third parties necessary or desirable for
the purpose of enabling such party to consummate the transactions contemplated
by this Agreement. The Company and its Subsidiaries and each of their
respective directors, officers and representatives shall cooperate (and shall
cause their respective Agents to cooperate) with the Buyer, and the Buyer
shall cooperate (and shall cause its Agents to cooperate) with the Company and
its Subsidiaries in filing any necessary applications, reports or other
documents, including the proxy materials, with, giving any notices to, and
seeking any consents from, all Governmental Entities and all third parties as
such party may be required to deliver in connection with the consummation of
the transactions contemplated by this Agreement and the performance by the
Surviving Corporation and its Subsidiaries of their businesses after such
consummation, and in seeking necessary consultation with and prompt favorable
action by any such Governmental Entity or third party.
(b) Publicity. The first press release made upon execution and
---------
delivery of this Agreement shall be a joint press release agreed upon by Buyer
and Company. The parties hereto agree that, from the date of the execution and
delivery of this Agreement through the Closing, no public release or
announcement concerning the transactions contemplated hereby after the initial
joint press release shall be issued by any party hereto without the prior
consent of (i) the Buyer in the case of a release or an announcement by the
Company or any of its Subsidiaries or (ii) the Company in the case of a
release or an announcement by the Buyer or Acquisition (in each case which
consent shall not be unreasonably withheld), except as such release or
announcement may be required by law or the rules or regulations of any United
States or foreign securities exchange, in which case the party required to
make the release or announcement shall allow the other party reasonable time
to comment on such release or announcement in advance of such issuance. After
the date hereof, the parties hereto shall not make any comments or statements
with respect to the transactions contemplated hereby to any third party
(including, without limitation, members of the news media, securities analysts
and employees of the Company, any of its Subsidiaries, or the Buyer or any of
its subsidiaries) without the prior consent of the Buyer, on the one hand, or
the Company, on the other hand, as the case may be, provided, however, that
-------- -------
nothing in this Section 6(b) shall limit Buyer's ability to distribute private
placement offering memoranda in connection with a transaction to sell
securities of the Buyer to finance the Merger Consideration and engage in
standard marketing activities and to participate in investor presentations
with respect to such transactions.
(c) Antitrust Notification. The Company shall, and the Buyer shall,
----------------------
as promptly as practicable, file with the United States Federal Trade
Commission (the "FTC") and the United States Department of Justice (the "DOJ")
and other Government Entities the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act or other
applicable antitrust or competition laws. Any such notification and report
form and supplemental information shall be in substantial compliance with the
requirements of the HSR Act. The Company shall furnish to the Buyer, and the
Buyer shall furnish to the Company, such necessary information and reasonable
assistance as may be requested in connection with the preparation of any
filing or submission which is necessary under the HSR Act. The Company shall
keep the Buyer reasonably informed, and the Buyer shall keep the Company
reasonably informed, of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request.
(d) Further Assurances. From time to time, as and when reasonably
-------------------
requested by another party hereto, a party hereto shall execute and deliver,
or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further acts or other actions as
such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof.
(e) Notice of Breach. The Company shall promptly give written notice
----------------
to Buyer, and the Buyer shall promptly give written notice to the Company upon
becoming aware of any event which would cause or constitute a material breach
of any of the representations, warranties or covenants of such party contained
or referred to in this Agreement or that would cause any of the conditions to
such party's own obligations to Close to become incapable of being performed.
ARTICLE VII. Conditions to Closing.
---------------------
Section 7(a) Each Party's Obligations. The respective obligations of
------------------------
each party hereto to effect the Merger is subject to the satisfaction or
waiver as of the Closing of the following conditions:
(i) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or
other order shall have been enacted, entered, promulgated, enforced
or issued by any Governmental Entity preventing the Merger or any of
the other transactions contemplated by this Agreement;
(ii) The waiting or notice period under the HSR Act or other
applicable antitrust or competition laws, if applicable to the
Merger, shall have expired or been terminated; and (iii) This
Agreement and the Merger shall have been approved and adopted by the
stockholders of the Company as required by the Delaware Law and the
Company's Certificate of Incorporation and By-Laws.
(b) The Company's Obligations. The obligations of the Company to
--------------------------
effect the transactions contemplated hereby are subject to the satisfaction
(or waiver by the Company) as of the Closing of the following additional
conditions:
(i) Accuracy of Representations and Warranties, Compliance with
-----------------------------------------------------------
Covenants. The representations and warranties of the Buyer and
---------
Acquisition made in this Agreement qualified as to materiality shall
be true and correct, and those not so qualified shall be true and
correct in all material respects, as of the date hereof and as of
the time of the Closing as though made as of such time, except to
the extent such representations and warranties expressly relate to
an earlier date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on
and as of such earlier date). The Buyer and Acquisition each shall
have duly performed, complied with and satisfied in all material
respects all covenants, agreements and conditions required by this
Agreement to be performed, complied with or satisfied by them by the
time of the Closing.
(ii) Injunction. There shall not be pending, threatened or in
----------
effect any injunction, writ, preliminary restraining order or any
order of any nature issued by a court or governmental agency of
competent jurisdiction directing that the transactions contemplated
hereby not be consummated as so provided or any statute, rule or
regulation enacted or promulgated that makes consummation of the
transactions contemplated hereby illegal.
(iii) Solvency Opinion. The Company shall have received an
-----------------
opinion from Houlihan Lokey, Howard & Zukin or such other firm
acceptable to the Company to the effect that, at and immediately
after the Effective Time, and after giving effect to the Merger (and
any changes in the Surviving Corporation's assets and liabilities as
a result thereof), (A) on a pro forma basis, the sum of the
Company's debts is less than the fair value of its assets or the
present fair saleable value of its assets will be greater than the
amount required to pay its probable liabilities on its debts as they
mature, (B) the capital remaining in the Company after the
transaction would not be unreasonably small for the business in
which the Company is engaged and (C) the Company would be able to
pay its debts as they mature.
(iv) Consents, Approvals. All consents, authorizations, orders
-------------------
and approvals of (or filings or registrations with) any Governmental
Entity or third parties required in connection with the execution,
delivery and performance of this Agreement by Buyer or Acquisition
shall have been obtained or made, except for filings to effectuate
the Merger and any documents required to be filed after the
Effective Time, and except for such consents, authorizations, orders
and approvals that if not obtained or made would not materially and
adversely effect the ability of Buyer or Acquisition to consummate
the transactions contemplated hereby.
(v) Officer's Certificate. The Buyer shall have delivered to
----------------------
the Company a certificate dated the Closing Date and signed by an
officer of the Buyer and an officer of Acquisition confirming the
satisfaction of the conditions set forth in clauses (i) and (iv)
above.
(c) The Buyer's and Acquisition's Obligations. The obligations of
-------------------------------------------
the Buyer and Acquisition to effect the transactions contemplated hereby are
subject to the satisfaction (or waiver by the Buyer and Acquisition) as of the
Closing of the following additional conditions:
(i) Accuracy of Representations and Warranties, Compliance with
-----------------------------------------------------------
Covenants. The representations and warranties of the Company made in
---------
this Agreement qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all
material respects, as of the date hereof and as of the time of the
Closing as though made as of such time, except to the extent such
representations and warranties expressly relate to an earlier date
(in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified
shall be true and correct in all material respects, on and as of
such earlier date). The Company shall have duly performed, complied
with and satisfied in all material respects all covenants,
agreements and conditions required by this Agreement to be
performed, complied with or satisfied by the Company by the time of
the Closing.
(ii) Injunctions. There shall not be pending, threatened or in
-----------
effect any injunction, writ, preliminary restraining order or any
order of any nature issued by a court or governmental agency of
competent jurisdiction directing that the transactions contemplated
hereby not be consummated as so provided or any statute, rule or
regulation enacted or promulgated that makes consummation of the
transactions contemplated hereby illegal.
(iii) No Litigation. There shall be no action, suit or
--------------
proceeding pending or, to the knowledge of the Company, threatened
against the Company that would reasonably be expected to have a
Material Adverse Effect.
(iv) Dissenting Shares. No more than four percent (4.0%) of the
-----------------
shares of Common Stock outstanding immediately prior to the
Effective Time shall be Dissenting Shares.
(v) Consents, Approvals. All consents, authorizations, orders
-------------------
and approvals of (or filings or registrations with) any Governmental
Entity or third parties required in connection with the execution,
delivery and performance of this Agreement by the Company shall have
been obtained or made, except for filings to effectuate the Merger
and any other documents required to be filed after the Effective
Time, and except for such consents, authorizations, orders and
approvals that, if not obtained or made, would not in the aggregate
have a Material Adverse Effect.
(vi) Market Condition. There exists and is continuing (A) any
general suspension of trading, or limitation on prices for,
securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market, (B) the declaration of a
banking moratorium or any suspension of payments in respect of the
banks in the United States, (C) the commencement of a war, armed
hostilities or other international or national calamity or emergency
or a material escalation or worsening thereof directly involving the
United States, or (D) any condition or material adverse change in
the financial or capital markets generally that, based on the
written advice of Credit Suisse First Boston addressed to Buyer (a
copy of which Buyer shall promptly provide to the Company), would
reasonably be expected to materially adversely affect the
syndication of leveraged bank credit facilities or the consummation
of high yield offerings, as the case may be.
(vii) Opinion. The Company shall have received the opinion of
-------
Brown & Wood LLP, counsel to the Company, to the effect that the
Company has the corporate power and authority to execute and deliver
this Agreement and to consummate the Merger, all requisite approvals
of this Agreement by the Company's stockholders have been obtained
and, assuming due authorization and approval of the Agreement by
Buyer and Acquisition, that upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware, the
Merger will be effective.
(viii) Officer's Certificate. The Company shall have delivered
---------------------
to the Buyer a certificate dated the Closing Date and signed by an
officer of the Company confirming the satisfaction of the conditions
set forth in clauses (i), (iii), (iv) and (v) above.
(d) Frustration of Closing Conditions. No party to this Agreement
----------------------------------
may rely on the failure of any condition set forth in Article 7 if such
failure was caused by such party's failure to act in good faith or to use its
reasonable best efforts to cause the Closing to occur.
ARTICLE VIII. Termination.
-----------
Section 8(a) Termination Events. Anything contained herein to the
-------------------
contrary notwithstanding, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing
Date:
(i) by mutual written consent of the parties hereto;
(ii) by Buyer or the Company, if the Closing does not occur on
or prior to March 31, 1999 (the "Outside Termination Date");
provided, however, that in the event all conditions to closing have
-------- -------
been satisfied or waived other than Section 7(c) (vi), the Outside
Termination Date shall be deemed to be the later of (A) January 31,
1999 or (B) 60 days after the first day on which all of the
conditions other than Section 7(c)(vi) shall have been satisfied or
waived, but in no event later than March 31, 1999, provided,
--------
further, that the right to terminate this Agreement pursuant to this
-------
Section 8(a)(ii) shall not be available to any party hereto, if the
failure of such party to perform any of its covenants, agreements or
obligations under this Agreement resulted in the Closing to not have
occurred on or prior to such date;
(iii) by Buyer or the Company, if any Governmental Entity shall
have issued a judgment, order or decree or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
Merger or any of the other transactions contemplated by this
Agreement, and such judgment, order or decree or other action shall
have become final and nonappealable;
(iv) by the Company, if the Board of Directors of the Company
determines to accept an Acquisition Proposal in accordance with
Section 4(c); (v) by Buyer, if (A) any other entity, person or group
consummates a tender offer pursuant to which such person, entity or
group becomes the beneficial owner of 50% or more of the then
outstanding shares of Company Common Stock, (B) the Company Special
Meeting has not been convened prior to the day before the Outside
Termination Date and the failure to convene the Company Special
Meeting was not (x) the fault of Buyer or (y) as a result of any
statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other
order enacted, entered, promulgated, enforced or issued by any
Governmental Entity that has the effect of preventing the Company
from calling, convening or holding the Company Special Meeting or
(C) prior to the vote of the Company's stockholders, the Board of
Directors of the Company shall have withdrawn or modified or amended
in any respect adverse to Buyer its approval or recommendation of
the Merger (it being understood that the Company making a Neutral
Statement with respect to, or making a recommendation in favor of a
tender or exchange offer from a third party, in a filing made
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act shall constitute an adverse modification of its approval or
recommendation of the Merger, unless, in the case of a Neutral
Statement only, contemporaneously with the filing of such Neutral
Statement the Company publicly confirms that it continues to
recommend approval of the Merger and continues to actively support
the Merger thereafter);
(vi) by Buyer or the Company, if the stockholders of the
Company fail to approve this Agreement at the Company Special
Meeting; or
(vii) by Buyer, at any time during the three business days
immediately following receipt of an Determination Notice, provided
that Buyer has cured by the time of such termination any material
breach of its representations, warranties, covenants or agreements
with respect to which the Company has given written notice to the
Buyer at least five business days prior to the first date on which a
proposal or inquiry is first submitted to the Company, any of its
Subsidiaries or any of their respective directors, officers or
employees with respect to a potential Acquisition Proposal.
(b) Termination Notice. In the event of any termination pursuant to
------------------
this Article 8, written notice thereof setting forth the reasons therefore
shall forthwith be given to the other parties and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party (other than the payments contemplated by Section 8(c)). If the
transactions contemplated by this Agreement are terminated as provided herein:
(i) the Buyer shall return all documents and other materials received from the
Company and its Subsidiaries relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the Company; and
(ii) all confidential information received by the Buyer with respect to the
business of the Company and its Subsidiaries shall be treated in accordance
with Section 5(a) hereof, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) Termination Fees. (i) If this Agreement shall have been
-----------------
terminated pursuant to Section 8(a)(iv), 8(a)(v) or 8(a)(vi) (provided, that
in the case of termination pursuant to Section 8(a)(vi), at the time of the
Company Special Meeting an Acquisition Proposal shall have been publicly
announced and not withdrawn, terminated or lapsed), then the Company shall
promptly, but in no event later than two business days after the termination
of this Agreement (or, in the event of a termination pursuant to Section
8a(iv), on the date of termination), pay Buyer an amount equal to the
Applicable Break-Up Fee (as hereafter defined). The Applicable Break-Up Fee
shall be $10,000,000 in the case of termination pursuant to Section 8(a)(iv)
or 8(a)(v) and $5,000,000 in the case of Section 8(a)(vi), plus in each case
the documented out-of-pocket expenses incurred by Buyer pursuant to the last
sentence of Section 4(a). Payment of the Applicable Break-Up Fee shall be made
under this clause (i), as directed by Buyer, by wire transfer in immediately
available funds promptly, but in no event later than two (2) business days
following such termination (provided, that in the case of termination pursuant
to Section 8(a)(iv), such payment shall be made on the same day as
termination).
(ii) If the Agreement is terminated pursuant to Section 8(a)(vii),
the Company shall pay Buyer $3,000,000, plus the documented out-of-pocket
expenses incurred by Buyer pursuant to the last sentence of Section 4(a) no
later than two (2) business days following such termination and if within
twelve (12) months thereafter the Company enters into any written Company
Acquisition Agreement (whether or not such Company Acquisition Agreement is
related to the Acquisition Proposal which had been received at the time of the
termination of this Agreement) or any third party (other than an affiliate of
Buyer) acquires 50% or more of the then outstanding shares of Common Stock,
then the Company shall immediately prior to entering into such Company
Acquisition Agreement pay Buyer $7,000,000 (which, together with the prior
$3,000,000, shall constitute an "Applicable Break-Up Fee"). Only one fee in an
amount not to exceed the amount of the Applicable Break-Up Fee shall be
payable pursuant to this Section 8(c). The payment of the Applicable Break-Up
Fee shall be compensation and liquidated damages for the loss suffered by
Buyer as the result of the failure of the Merger to be consummated and to
avoid difficulty of determining damages under the circumstances.
(d) Effects of Termination. If this Agreement is terminated and the
----------------------
transactions contemplated hereby are abandoned as described in this Article 8,
this Agreement shall become void and of no further force or effect, except for
the provisions of (i) 5(a) relating to the obligation of the Buyer to keep
confidential certain information and data obtained by them, (ii) Section 6(b)
relating to publicity, (iii) this Article 8, (iv) Article 10 relating to
certain expenses and (v) Article 11. Nothing in this Section 8 shall be deemed
to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement (with respect to which a claim shall
survive) or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement. Buyer agrees that
neither the Company nor its directors, officers, employees, representatives or
agents, nor any person or entity who shall make an Acquisition Proposal shall
be deemed, by reason of the making of such proposal or any actions taken in
connection with it (provided that such person or entity making such
Acquisition Proposal does not take any action that results in a violation of
this Agreement, including, without limitation, Section 4(c)) to have
tortiously or otherwise wrongfully interfered with or caused a breach of this
Agreement, or other agreements, instruments and documents executed in
connection herewith, or the rights of Buyer or any of its affiliates
hereunder.
ARTICLE IX. Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
All representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall not survive beyond the Effective
Time. Notwithstanding the foregoing, this Article 9 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time.
ARTICLE X. Expenses. Whether or not the transactions contemplated hereby
--------
are consummated, and except as otherwise specifically provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
ARTICLE XI. Miscellaneous.
-------------
Section 11(a) No Third-Party Beneficiaries. Except as otherwise
------------------------------
provided in Section 5(d) which are for the benefit of, and enforceable by, the
persons referred to therein, this Agreement is for the sole benefit of the
parties hereto and their permitted assigns, and nothing herein expressed or
implied shall give or be construed to give to any person, other than the
parties hereto and such assigns, any legal or equitable rights hereunder.
(b) Amendment or Waiver. No amendment, modification or waiver in
-------------------
respect of this Agreement shall be effective unless it shall be in writing and
signed by the parties hereto.
(c) Headings. The headings contained in this Agreement, or in any
--------
exhibit or schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
(e) Interpretation. References in this Agreement to "reasonable best
--------------
efforts" shall not require a Person obligated to use its reasonable best
efforts to incur out-of-pocket expenses or indebtedness or, except as
expressly provided herein, to institute litigation. References herein to the
"knowledge of the Company" shall mean the actual knowledge of the officers (as
such term is defined in Rule 3b-2 promulgated under the Exchange Act) of the
Company. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." The phrase "made available" when used in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. As used in this
Agreement, the terms "affiliate(s)" and "associates" shall have the meaning
set forth in Rule 12b-2 promulgated under the Exchange Act.
(f) Assignment. This Agreement and the rights and obligations
----------
hereunder shall not be assignable or transferable by any party hereto
(including by operation of law in connection with a merger, or sale of
substantially all the assets, or any dissolution, of any party hereto) without
the prior written consent of the other parties hereto; provided, however, that
-------- -------
the Buyer may assign its or Acquisition's rights hereunder to an affiliate of
the Buyer without the prior written consent of any party hereto; provided
--------
further, however, that no assignment shall limit or affect the assignor's
- -------
obligations hereunder. Any attempted assignment in violation of this Section
11(e) shall be void.
(g) Notices. All notices or other communications required or
-------
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by telecopy or sent, postage prepaid, by registered, certified or
express mail or overnight courier service and shall be deemed given when so
delivered by hand, or telecopied, or if mailed, three days after mailing (one
business day in the case of express mail or overnight courier service), as
follows:
if to the Company,
Alamo Group Inc.
750 East Mulberry Street
Suite 401
San Antonio, Texas 78212
Telecopy No: (210) 738-3185
Attention: Chief Executive Officer
with a copy to:
Brown & Wood LLP
One World Trade Center
58th Floor
New York, New York 10048
Telecopy No.: (212) 839-5599
Attention: Joseph W. Armbrust, Esq.
if to the Buyer,
WEC Company
c/o Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Telecopy No: (312) 895-1156
Attention: Thomas R. Reusche or Paul R. Wood
with copies to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Telecopy No: (312) 861-2200
Attention: Michael H. Kerr, P.C.
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
(h) Entire Agreement. This Agreement, including the Schedules
-----------------
hereto, and the Confidentiality Agreement contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. The parties hereto shall not be liable or bound to any other
party in any manner by any representations, warranties or covenants relating
to such subject matter except as specifically set forth herein or in the
Confidentiality Agreement.
(i) Severability. If any provision of this Agreement (or any portion
------------
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances
shall not be affected by such invalidity or unenforceability.
(j) Schedules. The inclusion of any matter in any schedule to this
---------
Agreement shall be deemed to be an inclusion for all purposes of this
Agreement, to the extent such disclosure is sufficient to identify the section
to which such disclosure is responsive, but inclusion therein shall expressly
not be deemed to constitute an admission by the Sellers, or otherwise imply,
that any such matter is material or creates a measure for materiality for the
purposes of this Agreement.
(k) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
ALAMO GROUP INC.,
A Delaware Corporation
By: /s/ Donald J. Douglass
-------------------------
Name: Donald J. Douglass
Title: Chairman and Chief Executive Officer
AGI ACQUISITION CORP., WEC COMPANY,
a Delaware corporation a Delaware corporation
By: /s/ Thomas J. Laird By: /s/ Thomas J. Laird
---------------------- ----------------------
Name: Thomas J. Laird Name: Thomas J. Laird
Title: President Title: President
Exhibit 10.1
------------
PRIVILEGED AND CONFIDENTIAL
OPTION AGREEMENT
OPTION AGREEMENT, dated as of August 18, 1998 (the "Agreement"), by
and among, WEC Company a Delaware corporation ("Buyer"), AGI Acquisition Corp.
a Delaware corporation and a wholly-owned subsidiary of Buyer ("Acquisition"),
and Donald J. Douglass (the "Stockholder").
WITNESSETH:
----------
WHEREAS, the Stockholder is the owner of 1,034,975 shares (the
"Shares") of Common Stock, par value $0.10 per share (the "Common Stock"), of
Alamo Group Inc. (the "Company");
WHEREAS, the Buyer, Acquisition and the Company have entered into an
Agreement and Plan of Merger, dated as of the date hereof (as amended from
time to time, the "Merger Agreement"), which provides, among other things,
that, upon the terms and subject to the conditions therein, Acquisition shall
be merged with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Buyer and Acquisition
to enter into the Merger Agreement, Buyer has requested that the Stockholder
agree, and in order to induce Buyer and Acquisition to enter into the Merger
Agreement, the Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and subject to the terms and conditions set forth
herein, the parties hereto hereby agree as follows:
Section 1. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to the Buyer as follows:
(a) The Stockholder is the sole record and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), of the Shares and there exist no liens, claims,
security interests, options, proxies, voting agreements, charges, obligations,
understandings, arrangements or other encumbrances of any nature whatsoever,
except for restrictions applicable thereto under federal and state securities
laws ("Liens") (except for such Liens as will no longer exist at the earlier
of the Effective Time and the Closing), affecting the Shares.
(b) Other than a number of the Shares not to exceed 500,000 which the
Stockholder intends to transfer to The Douglass Charitable Remainder Unitrust
during the term of this Agreement, the Shares and the certificates
representing the Shares are now and at all times during the term hereof will
be held by the Stockholder, or by a nominee or custodian for the benefit of
the Stockholder free and clear of all Liens, except for the Liens described in
(a) above and Liens arising hereunder. Upon transfer to Buyer by the
Stockholder of the Shares hereunder, Buyer will have good and marketable title
to the Shares, free and clear of all Liens.
(c) This Agreement has been duly and validly executed and delivered
by the Stockholder and, assuming due authorization, execution and delivery by
Buyer and Acquisition, constitutes a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy or other laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(d) The execution and delivery of this Agreement by the Stockholder
does not, and the performance by the Stockholder of his obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, or result in the creation of any Lien on any Shares under, (i) any
contract, commitment, agreement, partnership agreement, understanding,
arrangement or restriction of any kind to which the Stockholder is a party or
by which the Stockholder is bound, (ii) any judgment, writ, decree, order or
ruling applicable to the Stockholder or (iii) any law applicable to the
Stockholder.
(e) To the Stockholder's knowledge, neither the execution and
delivery of this Agreement nor the performance by the Stockholder of its
obligations hereunder will require any consent, authorization or approval of,
filing with or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
state antitrust laws or the federal securities laws.
Section 2. Representations and Warranties of Buyer and Acquisition.
--------------------------------------------------------
Buyer and Acquisition jointly and severally represent and warrant to the
Stockholder as follows:
(a) Each of Buyer and Acquisition is duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. This Agreement has been duly and
validly executed and delivered by each of Buyer and Acquisition and
constitutes the legal, valid and binding obligation of each of Buyer and
Acquisition, enforceable against each of Buyer and Acquisition in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by each of Buyer and
Acquisition does not, and the performance by each of Buyer and Acquisition of
its obligations hereunder will not, constitute a violation of, conflict with,
or result in a default (or an event which, with notice or lapse of time or
both, would result in a default) under, its charter or bylaws or any contract,
commitment, agreement, understanding, arrangement or restriction of any kind
to which Buyer or Acquisition is a party or by which Buyer or Acquisition is
bound or any judgment, writ, decree, order or ruling applicable to Buyer or
Acquisition.
(c) Neither the execution and delivery of this Agreement nor the
performance by each of Buyer and Acquisition of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to Buyer or Acquisition or require any consent,
authorization or approval of, filing with, or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act, state antitrust laws or
the federal securities laws.
Section 3. Option to Purchase.
------------------
(a) The Stockholder hereby grants to Buyer, subject to the terms and
conditions hereof, an irrevocable option (the "Stock Option") to purchase the
Shares at a purchase price per share of $18.50 per Share (the "Exercise
Price") in cash, in the manner set forth in this Section 3. At any time prior
to the termination of the Stock Option hereunder, Buyer (or a wholly owned
subsidiary of Buyer) may exercise the Stock Option, in whole only, if on or
after the date hereof:
(i) The Company (or the Board or any committee thereof)
shall have recommended, approved, authorized, proposed or filed a
Schedule 14D-9 not opposing (it being understood that the Company
taking no position or remaining neutral with respect to a tender or
exchange offer from a third party (a "Neutral Statement"), or making
a recommendation in favor of such a tender or exchange offer in a
filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act, shall constitute an adverse modification of its
approval or recommendation of the Merger unless, in the case of a
Neutral Statement only, contemporaneously with the filing of a
Neutral Statement the Company publicly confirms that it continues to
recommend approval of the Merger and continues to actively support
the Merger), or publicly announces its intention to enter into, any
Acquisition Transaction (other than with Buyer, Acquisition or any of
their affiliates), or shall have resolved to do any of the foregoing.
For purposes of this Agreement "Acquisition Transaction" shall mean
any tender offer or exchange offer, any merger, consolidation,
liquidation, dissolution, recapitalization, reorganization or other
business combination, any acquisition, sale or other disposition of a
material amount of assets or securities or any other similar
transaction involving the Company, its securities or any of its
material Subsidiaries or divisions;
(ii) the Board or any committee thereof shall have withdrawn
or modified or amended in any manner adverse to Buyer or Acquisition
its authorization, approval or recommendation to the stockholders of
the Company with respect to the Merger or the Merger Agreement (it
being understood that the Company making a Neutral Statement, or
making a recommendation in favor of such a tender or exchange offer
in a filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act, shall constitute an adverse modification of
its approval or recommendation of the Merger unless, in the case of a
Neutral Statement only, contemporaneously with the filing of a
Neutral Statement the Company publicly confirms that it continues to
recommend approval of the Merger and continues to actively support
the Merger), or shall have resolved to do any of the foregoing;
(iii) any person, entity or "group" (as that term is used in
Section 13(d) of the Exchange Act) (other than the Stockholder and
its affiliates and other than Buyer, Acquisition or any of their
affiliates and other than persons, entities or groups that are
permitted to report their ownership of Shares with the SEC on
Schedule 13G) shall have become the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the
then outstanding Common Stock;
(iv) any person, other than Buyer, Acquisition or any of its
affiliates, shall have commenced or announced an intention to
commence a bona fide tender offer or exchange offer for any shares of
Common Stock, the consummation of which would result in "beneficial
ownership" (as defined in the Exchange Act) by such third party
(together with all such third party's affiliates and "associates" (as
defined in the Exchange Act)) of 15% or more of the then outstanding
voting equity of the Company (either on a primary or a fully diluted
basis); or
(v) the Merger Agreement shall have been terminated in
accordance with Section 8(a)(iv) of the Merger Agreement.
In the event that Buyer wishes to exercise the Stock Option, Buyer
shall give written notice (the "Option Notice", with the date of the Option
Notice being hereinafter called the "Notice Date") to the Stockholder
specifying the place and date (not earlier than three nor later than ten
Business Days from the Notice Date) for closing such purchase (a "Closing").
Buyer's obligation to purchase the Shares upon any exercise of the Stock
Option and the Stockholder's obligation to sell the Shares upon any exercise
of the Stock Option are subject (at the election of Buyer and the Stockholder,
respectively) to the conditions that (X) no preliminary or permanent
injunction or other order prohibiting the purchase, issuance or delivery of
the Shares issued by any Governmental Authority will be in effect and (Y) any
applicable waiting period required for the purchase of Shares under the HSR
Act will have expired or been terminated or clearance from the appropriate
agencies shares have been obtained, provided that if such injunction or other
order has become final and nonappealable, the Stock Option shall terminate;
and provided further, that if the Stock Option is not exercisable because
either of the circumstances described in the immediately foregoing clause (X)
or (Y) exist, then the Stock Option shall be exercisable for the ten business
day period commencing on the date that the circumstances set forth in clause
(X) or (Y), as applicable, cease to exist, but in no event shall the Stock
Option be exercisable after the date set forth in Section 8(c). The
Stockholder's obligation to sell the Shares upon exercise of the Stock Option
and the Stockholder's obligations under Section 6 are subject (at the
Stockholder's election) to the further conditions that there will have been no
material breach of the representations, warranties, covenants or agreements of
Buyer or Acquisition contained in this Agreement or contained in the Merger
Agreement, which breach has not been cured within ten business days of the
receipt of written notice thereof from the Stockholder.
(b) At the Closing, (i) the Stockholder shall deliver to Buyer the
certificate or certificates representing the Shares in proper form for
transfer upon exercise of the Stock Option in the denominations designated by
Buyer in the Option Notice and (ii) Buyer shall pay the aggregate purchase
price for the Shares by wire transfer of immediately available funds to an
account designated by the Stockholder in writing to Buyer in the amount equal
to the product of the Exercise Price and the number of the Shares.
(c) In the event that Buyer or Acquisition exercise the Stock Option
and on or prior to the first anniversary of such exercise either (i) Buyer or
Acquisition purchases Common Stock from any other party (other than from the
Company) for per share consideration in excess of the Exercise Price
(excluding any consideration paid for Dissenters' Shares) (a "Higher Price"),
or (ii) Buyer or Acquisition exercises the Stock Option and Buyer or
Acquisition subsequently disposes, transfers or otherwise sells the Shares for
consideration in excess of the Exercise Price (the "Excess Consideration")
then, in the case of (i) above, Buyer or Acquisition shall pay to the
Stockholder in cash, within two days after Buyer or Acquisition pays the
Higher Price to holders of Common Stock, an amount equal to (a) the number of
Shares multiplied by the difference between the Higher Price and the Exercise
Price less (b) interest on the aggregate purchase price paid by Buyer to
acquire the Shares from the date of Closing through the date of such purchase
calculated using the prime rate announced by Citibank N.A. as of the Closing
plus (c) the amount of all dividends paid or payable with respect to the
Shares to Buyer, and in the case of (ii) above, Buyer or Acquisition shall pay
to the Stockholder in cash, within five days after Buyer or Acquisition
receives the Excess Consideration to holders of Common Stock, an amount equal
to (d) the number of Shares multiplied by the difference between the Excess
Consideration and the Exercise Price less (e) interest on the aggregate
purchase price paid by Buyer to acquire the Shares from the date of Closing
through the date of such sale calculated using the prime rate announced by
Citibank, N.A. as of the Closing plus (iii) the amount of all dividends paid
or payable with respect to the Shares to Buyer.
Section 4. Transfer of the Shares. During the term of this Agreement,
----------------------
and except for a transfer of a number of the Shares not to exceed 500,000 to
The Douglass Charitable Remainder Unitrust the Stockholder will not (a) offer
to sell, sell, pledge or otherwise dispose of or transfer any interest in or
encumber with any Lien any of the Shares; (b) enter into any contract, option
or other agreement or understanding with respect to any transfer of any or all
of the Shares or any interest therein; (c) grant any proxy, power-of-attorney
or other authorization or consent in or with respect to the Shares (it being
understood that, upon termination of the Merger Agreement, the Stockholder may
grant a proxy with respect to the Shares if such proxy is, by its terms,
immediately revocable upon the Closing); (d) deposit the Shares into a voting
trust or enter into a voting agreement or arrangement with respect to the
Shares; or (e) take any other action with respect to the Shares that would in
any way restrict, limit or interfere with the performance of its obligations
hereunder.
Section 5. No Solicitation. Stockholder hereby agrees, in its
----------------
capacity as a stockholder of the Company, that neither Stockholder nor any
affiliates, representatives or agents shall directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than Buyer, Acquisition or any of their respective
affiliates or representatives) concerning any proposal relating to an
Acquisition Transaction. Stockholder will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any proposal relating to an Acquisition Transaction.
Stockholder will promptly communicate to Buyer, to the same extent as is
required by the Company pursuant to Section 4(c) of the Merger Agreement, the
terms, and other information concerning, any proposal, discussion, negotiation
or inquiry and the identity of the party making such proposal or inquiry which
Stockholder may receive in respect of any such Acquisition Transaction.
Section 6. Voting of Shares; Grant of Irrevocable Proxy; Appointment
----------------------------------------------------------
of Proxy.
- --------
(a) The Stockholder hereby agrees that, during the term of this
Agreement, at any meeting (whether annual or special and whether or not an
adjourned or postponed meeting) of the holders of Common Stock, however
called, or in connection with any written consent of the holders of Common
Stock, the Stockholder will appear at the meeting or otherwise cause the
Shares to be counted as present thereat for purposes of establishing a quorum
and vote or consent (or cause to be voted or consented) the Shares (i) in
favor of the Merger and (ii) against any proposal or agreement that would
impede, interfere with or prevent the Merger, including any other
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal of a
third party to acquire the Company and (iii) if requested by Buyer, in favor
of a resolution the purpose of which is to cause the Merger to be consummated
and which does not relate to the election of directors.
(b) The Stockholder hereby irrevocably grants to, and appoints, Buyer
and any nominee thereof, its proxy and attorney-in-fact (with full power of
substitution) during the term of this Agreement, for and in the name, place
and stead of the Stockholder, to vote the Shares, or grant a consent or
approval in respect of the Shares, in connection with any meeting of the
Stockholders of the Company (i) in favor of the Merger and (ii) against any
proposal or agreement that would impede, interfere with or prevent the Merger,
including any other extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company and a third party or any
other proposal of a third party to acquire the Company.
(c) The Stockholder represents that all proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and hereby revokes all
such proxies given with respect to the Shares.
(d) The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 6 is given in connection with the execution of the
Merger Agreement and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy set forth in
this Section 6 is coupled with an interest and is intended to be irrevocable
in accordance with the provisions of Section 212 of the Delaware Law.
Section 7. Adjustments. The number and types of securities subject to
-----------
this Agreement will be appropriately adjusted in the event of any stock
dividends, stock splits, recapitalization, combinations, exchanges of shares
or the like or any other action that would have the effect of changing the
Stockholder's ownership of the Company's capital stock.
Section 8. Termination. Except as otherwise specifically provided
-----------
herein, all obligations under this Agreement will terminate on the earliest of
(a) the date the Merger Agreement is terminated in accordance with its terms;
provided, however, that the provisions of Section 3(a) and 4(c) shall not
terminate until sixty (60) days thereafter if the Merger is terminable
pursuant to Section 8(a)(iv), 8(a)(v), or 8(a)(vi) (but, in the case of
termination pursuant to Section 8(a)(vi), only in the event that at the time
of the Company Special Meeting an Acquisition Proposal (as defined in the
Merger Agreement) shall have been publicly announced and not withdrawn,
terminated or lapsed), (b) the purchase of all the Shares pursuant to the
Stock Option, (c) the first anniversary of the date hereof or (d) the
Effective Time. The provisions of Section 14 shall survive any termination of
this Agreement.
Section 9. Effectiveness. This Agreement shall not be effective
-------------
unless and until the Merger Agreement shall have been executed and delivered
by the Company.
Section 10. Brokerage. Buyer, Acquisition and the Stockholder each
---------
represent and warrant to the other parties hereto that the negotiations
relevant to this Agreement have been carried on by Buyer and Acquisition, on
the one hand, and the Stockholder, on the other hand, directly with the other,
and that there are no claims for finder's fees or brokerage commissions or
other like payments in connection with this Agreement or the transactions
contemplated hereby. Buyer and Acquisition, on the one hand, and Stockholder,
on the other hand, will indemnify and hold harmless the other from and against
any and all claims or liabilities for finder's fees or brokerage commissions
or other like payments incurred by reason of action taken by him, it or any of
them, as the case may be.
Section 11. No Limitation. Nothing in this Agreement shall be
--------------
construed to prohibit Stockholder, or any officer or affiliate of Stockholder
who is or has designated a member of the Board of Directors of the Company,
from taking any action solely in his or her capacity as a member of the Board
of Directors of the Company or from exercising his or her fiduciary duties as
a member of such Board of Directors and no such action shall be deemed to
violate this Agreement.
Section 12. Indemnification. For a period of six years from and after
---------------
the Effective Time, Acquisition shall indemnify Stockholder and hold
Stockholder harmless against any loss, cost or expense (including without
limitation reasonable attorneys' fees) in the event of any claim against
Stockholder relating to the actions of Stockholder, as stockholder, in
connection with the Merger Agreement, this Agreement and any of the
transactions contemplated thereby; provided that Stockholder shall have first
sought indemnification from Acquisition pursuant to insurance, Acquisition's
charter or by-laws and any indemnification agreement or other arrangement
between Acquisition and Stockholder; provided further, however, that the
obligations of Acquisition hereunder shall be limited to the excess, if any,
of Stockholder's loss, cost or expense over the amounts actually recovered
from the Company in accordance with the preceding proviso. In the event of any
claim for which indemnification is provided herein, Stockholder shall promptly
notify Acquisition; provided that the failure to give such notice shall not
relieve Acquisition from its obligations hereunder except if, and to the
extent that, it suffers actual prejudice thereby. Acquisition shall have the
right to undertake, with counsel of its choice (subject to the reasonable
approval of Stockholder), the defense of such claim. Stockholder shall have
the right to employ its own counsel to participate (but not to control the
defense) in any such action, but the fees and expenses of such counsel shall
be at the sole expense of Stockholder unless (a) Buyer or the Company shall
have failed to employ counsel reasonably satisfactory to Stockholder to assume
the defense of such claim within a reasonable time after receiving notice
thereof, or (b) a conflict of interest shall prevent the same counsel from
representing Buyer or the Company and the Stockholder. Buyer shall not be
liable hereunder for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld).
Section 13. Miscellaneous.
-------------
(a) Except for the representations and warranties set forth in
Section 1(a) and 1(b), all representations and warranties contained herein
will terminate upon the termination of this Agreement.
(b) [Intentionally Omitted]
(c) Any provisions of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in writing and is signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any breach of any other provision of this Agreement.
(d) This Agreement contains the entire agreement among the parties in
respect to the subject matter hereof, and supersedes all prior agreements
among the parties with respect to such matters. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified, except upon the
delivery of a written agreement executed by the parties hereto.
(e) This Agreement will be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and
performed in that state. Each of the parties hereto acknowledges and agrees
that in the event of any breach of this Agreement, each non-breaching party
would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (i) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (ii) will be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in any state or federal court
sitting in Wilmington, Delaware. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Merger Agreement.
(f) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(g) All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:
If to Stockholder to:
Donald J. Douglass
330 Argyle Avenue
San Antonio, TX 78209
Facsimile: (203) 966-6193
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, NY 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
Attention: Joseph W. Armbrust Jr.
If to Buyer or Acquisition to:
c/o Madison Dearborn Partners
Three First National Plaza
Suite 3800
Chicago, IL 60602
Facsimile: (312) 895-1156
Attention: Thomas R. Reusche
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Facsimile: (312) 861-2200
Attention: Michael H. Kerr, P.C.
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
(h) This Agreement may be executed in any number of counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one agreement.
(i) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties hereto
without the prior written consent of the other parties other than the
assignment to the Surviving Corporation of obligations of Acquisition under
Section 12 by operation of law.
(j) If any term or other provision of this Agreement is determined to
be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect as long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party hereto. Upon any such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
Section 14. Expenses. Except as provided in Section 3 hereof, all
--------
fees and expenses incurred by any one party hereto shall be borne by the party
incurring such fees and expenses.
Section 15. Further Assurances; Stockholder Capacity. The Stockholder
----------------------------------------
shall, upon request of Buyer or Acquisition, execute and deliver any
additional documents and take such further actions as may reasonably be deemed
by Buyer or Acquisition to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote the Shares as contemplated by
Section 6 hereof in Buyer.
IN WITNESS WHEREOF, the Buyer, Acquisition and the Stockholder have
caused this Agreement to be signed by their respective officers or
representatives thereunto duly authorized, all as of the date first written
above.
WEC COMPANY
a Delaware Corporation
By: /s/ Thomas J. Laird
-----------------------
Name: Thomas J. Laird
Title: President
AGI ACQUISITION CORP.
a Delaware Corporation
By: /s/ Thomas J. Laird
-----------------------
Name: Thomas J. Laird
Title: President
/s/ Donald J. Douglass
----------------------
Donald J. Douglass
Exhibit 10.2
------------
PRIVILEGED AND CONFIDENTIAL
OPTION AGREEMENT
OPTION AGREEMENT, dated as of August 18, 1998 (the "Agreement"), by
and among, WEC Company a Delaware corporation ("Buyer"), AGI Acquisition Corp.
a Delaware corporation and a wholly-owned subsidiary of Buyer ("Acquisition"),
and Capital Southwest Venture Corporation (the "Stockholder").
WITNESSETH:
----------
WHEREAS, the Stockholder is the owner of 2,660,000 shares (the
"Shares") of Common Stock, par value $0.10 per share (the "Common Stock"), of
Alamo Group Inc. (the "Company");
WHEREAS, the Buyer, Acquisition and the Company have entered into an
Agreement and Plan of Merger, dated as of the date hereof (as amended from
time to time, the "Merger Agreement"), which provides, among other things,
that, upon the terms and subject to the conditions therein, Acquisition shall
be merged with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Buyer and Acquisition
to enter into the Merger Agreement, Buyer has requested that the Stockholder
agree, and in order to induce Buyer and Acquisition to enter into the Merger
Agreement, the Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and subject to the terms and conditions set forth
herein, the parties hereto hereby agree as follows:
Section 1. Representations and Warranties of the Stockholder. The
--------------------------------------------------
Stockholder represents and warrants to the Buyer as follows:
(a) The Stockholder is the sole record and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), of the Shares and there exist no liens, claims,
security interests, options, proxies, voting agreements, charges, obligations,
understandings, arrangements or other encumbrances of any nature whatsoever,
except for restrictions applicable thereto under federal and state securities
laws ("Liens") (except for such Liens as will no longer exist at the earlier
of the Effective Time and the Closing), affecting the Shares.
(b) The Shares and the certificates representing the Shares are now
and at all times during the term hereof will be held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder free and clear of
all Liens, except for the Liens described in (a) above and Liens arising
hereunder. Upon transfer to Buyer by the Stockholder of the Shares hereunder,
Buyer will have good and marketable title to the Shares, free and clear of all
Liens.
(c) This Agreement has been duly and validly executed and delivered
by the Stockholder and, assuming due authorization, execution and delivery by
Buyer and Acquisition, constitutes a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy or other laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(d) The execution and delivery of this Agreement by the Stockholder
does not, and the performance by the Stockholder of its obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, or result in the creation of any Lien on any Shares under (i) its
charter or bylaws, (ii) any contract, commitment, agreement, partnership
agreement, understanding, arrangement or restriction of any kind to which the
Stockholder is a party or by which the Stockholder is bound, (iii) any
judgment, writ, decree, order or ruling applicable to the Stockholder or (iv)
any law applicable to the Stockholder.
(e) To the Stockholder's knowledge, neither the execution and
delivery of this Agreement nor the performance by the Stockholder of its
obligations hereunder will require any consent, authorization or approval of,
filing with or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
state antitrust laws or the federal securities laws.
Section 2. Representations and Warranties of Buyer and Acquisition.
--------------------------------------------------------
Buyer and Acquisition jointly and severally represent and warrant to the
Stockholder as follows:
(a) Each of Buyer and Acquisition is duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. This Agreement has been duly and
validly executed and delivered by each of Buyer and Acquisition and
constitutes the legal, valid and binding obligation of each of Buyer and
Acquisition, enforceable against each of Buyer and Acquisition in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by each of Buyer and
Acquisition does not, and the performance by each of Buyer and Acquisition of
its obligations hereunder will not, constitute a violation of, conflict with,
or result in a default (or an event which, with notice or lapse of time or
both, would result in a default) under, its charter or bylaws or any contract,
commitment, agreement, understanding, arrangement or restriction of any kind
to which Buyer or Acquisition is a party or by which Buyer or Acquisition is
bound or any judgment, writ, decree, order or ruling applicable to Buyer or
Acquisition.
(c) Neither the execution and delivery of this Agreement nor the
performance by each of Buyer and Acquisition of its obligations hereunder will
violate any order, writ, injunction, judgment, law, decree, statute, rule or
regulation applicable to Buyer or Acquisition or require any consent,
authorization or approval of, filing with, or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act, state antitrust laws or
the federal securities laws.
Section 3. Option to Purchase.
------------------
(a) The Stockholder hereby grants to Buyer, subject to the terms and
conditions hereof, an irrevocable option (the "Stock Option") to purchase the
Shares at a purchase price per share of $18.50 per Share (the "Exercise
Price") in cash, in the manner set forth in this Section 3. At any time prior
to the termination of the Stock Option hereunder, Buyer (or a wholly owned
subsidiary of Buyer) may exercise the Stock Option, in whole only, if on or
after the date hereof:
(i) The Company (or the Board or any committee thereof)
shall have recommended, approved, authorized, proposed or filed a
Schedule 14D-9 not opposing (it being understood that the Company
taking no position or remaining neutral with respect to a tender or
exchange offer from a third party (a "Neutral Statement"), or making
a recommendation in favor of such a tender or exchange offer in a
filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act, shall constitute an adverse modification of its
approval or recommendation of the Merger unless, in the case of a
Neutral Statement only, contemporaneously with the filing of a
Neutral Statement the Company publicly confirms that it continues to
recommend approval of the Merger and continues to actively support
the Merger), or publicly announces its intention to enter into, any
Acquisition Transaction (other than with Buyer, Acquisition or any of
their affiliates), or shall have resolved to do any of the foregoing.
For purposes of this Agreement "Acquisition Transaction" shall mean
any tender offer or exchange offer, any merger, consolidation,
liquidation, dissolution, recapitalization, reorganization or other
business combination, any acquisition, sale or other disposition of a
material amount of assets or securities or any other similar
transaction involving the Company, its securities or any of its
material Subsidiaries or divisions;
(ii) the Board or any committee thereof shall have withdrawn
or modified or amended in any manner adverse to Buyer or Acquisition
its authorization, approval or recommendation to the stockholders of
the Company with respect to the Merger or the Merger Agreement (it
being understood that the Company making a Neutral Statement, or
making a recommendation in favor of such a tender or exchange offer
in a filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act, shall constitute an adverse modification of
its approval or recommendation of the Merger unless, in the case of a
Neutral Statement only, contemporaneously with the filing of a
Neutral Statement the Company publicly confirms that it continues to
recommend approval of the Merger and continues to actively support
the Merger), or shall have resolved to do any of the foregoing;
(iii) any person, entity or "group" (as that term is used in
Section 13(d) of the Exchange Act) (other than the Stockholder and
its affiliates and other than Buyer, Acquisition or any of their
affiliates and other than persons, entities or groups that are
permitted to report their ownership of Shares with the SEC on
Schedule 13G) shall have become the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of 15% or more of the
then outstanding Common Stock;
(iv) any person, other than Buyer, Acquisition or any of its
affiliates, shall have commenced or announced an intention to
commence a bona fide tender offer or exchange offer for any shares of
Common Stock, the consummation of which would result in "beneficial
ownership" (as defined in the Exchange Act) by such third party
(together with all such third party's affiliates and "associates" (as
defined in the Exchange Act)) of 15% or more of the then outstanding
voting equity of the Company (either on a primary or a fully diluted
basis); or
(v) the Merger Agreement shall have been terminated in
accordance with Section 8(a)(iv) of the Merger Agreement.
In the event that Buyer wishes to exercise the Stock Option, Buyer
shall give written notice (the "Option Notice", with the date of the Option
Notice being hereinafter called the "Notice Date") to the Stockholder
specifying the place and date (not earlier than three nor later than ten
Business Days from the Notice Date) for closing such purchase (a "Closing").
Buyer's obligation to purchase the Shares upon any exercise of the Stock
Option and the Stockholder's obligation to sell the Shares upon any exercise
of the Stock Option are subject (at the election of Buyer and the Stockholder,
respectively) to the conditions that (X) no preliminary or permanent
injunction or other order prohibiting the purchase, issuance or delivery of
the Shares issued by any Governmental Authority will be in effect and (Y) any
applicable waiting period required for the purchase of Shares under the HSR
Act will have expired or been terminated or clearance from the appropriate
agencies shares have been obtained, provided that if such injunction or other
order has become final and nonappealable, the Stock Option shall terminate;
and provided further, that if the Stock Option is not exercisable because
either of the circumstances described in the immediately foregoing clause (X)
or (Y) exist, then the Stock Option shall be exercisable for the ten business
day period commencing on the date that the circumstances set forth in clause
(X) or (Y), as applicable, cease to exist, but in no event shall the Stock
Option be exercisable after the date set forth in Section 8(c). The
Stockholder's obligation to sell the Shares upon exercise of the Stock Option
and the Stockholder's obligations under Section 6 are subject (at the
Stockholder's election) to the further conditions that there will have been no
material breach of the representations, warranties, covenants or agreements of
Buyer or Acquisition contained in this Agreement or contained in the Merger
Agreement, which breach has not been cured within ten business days of the
receipt of written notice thereof from the Stockholder.
(b) At the Closing, (i) the Stockholder shall deliver to Buyer the
certificate or certificates representing the Shares in proper form for
transfer upon exercise of the Stock Option in the denominations designated by
Buyer in the Option Notice and (ii) Buyer shall pay the aggregate purchase
price for the Shares by wire transfer of immediately available funds to an
account designated by the Stockholder in writing to Buyer in the amount equal
to the product of the Exercise Price and the number of the Shares.
(c) In the event that Buyer or Acquisition exercise the Stock Option
and on or prior to the first anniversary of such exercise either (i) Buyer or
Acquisition purchases Common Stock from any other party (other than from the
Company) for per share consideration in excess of the Exercise Price
(excluding any consideration paid for Dissenters' Shares) (a "Higher Price"),
or (ii) Buyer or Acquisition exercises the Stock Option and Buyer or
Acquisition subsequently disposes, transfers or otherwise sells the Shares for
consideration in excess of the Exercise Price (the "Excess Consideration")
then, in the case of (i) above, Buyer or Acquisition shall pay to the
Stockholder in cash, within two days after Buyer or Acquisition pays the
Higher Price to holders of Common Stock, an amount equal to (a) the number of
Shares multiplied by the difference between the Higher Price and the Exercise
Price less (b) interest on the aggregate purchase price paid by Buyer to
acquire the Shares from the date of Closing through the date of such purchase
calculated using the prime rate announced by Citibank N.A. as of the Closing
plus (c) the amount of all dividends paid or payable with respect to the
Shares to Buyer, and in the case of (ii) above, Buyer or Acquisition shall pay
to the Stockholder in cash, within five days after Buyer or Acquisition
receives the Excess Consideration to holders of Common Stock, an amount equal
to (d) the number of Shares multiplied by the difference between the Excess
Consideration and the Exercise Price less (e) interest on the aggregate
purchase price paid by Buyer to acquire the Shares from the date of Closing
through the date of such sale calculated using the prime rate announced by
Citibank, N.A. as of the Closing plus (iii) the amount of all dividends paid
or payable with respect to the Shares to Buyer.
Section 4. Transfer of the Shares. During the term of this Agreement,
----------------------
the Stockholder will not (a) offer to sell, sell, pledge or otherwise dispose
of or transfer any interest in or encumber with any Lien any of the Shares;
(b) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of the Shares or any interest therein;
(c) grant any proxy, power-of-attorney or other authorization or consent in or
with respect to the Shares (it being understood that, upon termination of the
Merger Agreement, the Stockholder may grant a proxy with respect to the Shares
if such proxy is, by its terms, immediately revocable upon the Closing); (d)
deposit the Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Shares; or (e) take any other action with
respect to the Shares that would in any way restrict, limit or interfere with
the performance of its obligations hereunder.
Section 5. No Solicitation. Stockholder hereby agrees, in its
----------------
capacity as a stockholder of the Company, that neither Stockholder nor any
affiliates, representatives or agents shall (and, if Stockholder is a
corporation, partnership, trust or other entity, Stockholder shall cause its
officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Buyer,
Acquisition or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. Stockholder
will immediately cease any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any proposal relating to
an Acquisition Transaction. Stockholder will promptly communicate to Buyer, to
the same extent as is required by the Company pursuant to Section 4(c) of the
Merger Agreement, the terms, and other information concerning, any proposal,
discussion, negotiation or inquiry and the identity of the party making such
proposal or inquiry which Stockholder may receive in respect of any such
Acquisition Transaction.
Section 6. Voting of Shares; Grant of Irrevocable Proxy; Appointment
----------------------------------------------------------
of Proxy.
- --------
(a) The Stockholder hereby agrees that, during the term of this
Agreement, at any meeting (whether annual or special and whether or not an
adjourned or postponed meeting) of the holders of Common Stock, however
called, or in connection with any written consent of the holders of Common
Stock, the Stockholder will appear at the meeting or otherwise cause the
Shares to be counted as present thereat for purposes of establishing a quorum
and vote or consent (or cause to be voted or consented) the Shares (i) in
favor of the Merger and (ii) against any proposal or agreement that would
impede, interfere with or prevent the Merger, including any other
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal of a
third party to acquire the Company and (iii) if requested by Buyer, in favor
of a resolution the purpose of which is to cause the Merger to be consummated
and which does not relate to the election of directors.
(b) The Stockholder hereby irrevocably grants to, and appoints, Buyer
and any nominee thereof, its proxy and attorney-in-fact (with full power of
substitution) during the term of this Agreement, for and in the name, place
and stead of the Stockholder, to vote the Shares, or grant a consent or
approval in respect of the Shares, in connection with any meeting of the
Stockholders of the Company (i) in favor of the Merger and (ii) against any
proposal or agreement that would impede, interfere with or prevent the Merger,
including any other extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company and a third party or any
other proposal of a third party to acquire the Company.
(c) The Stockholder represents that all proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and hereby revokes all
such proxies given with respect to the Shares.
(d) The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 6 is given in connection with the execution of the
Merger Agreement and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy set forth in
this Section 6 is coupled with an interest and is intended to be irrevocable
in accordance with the provisions of Section 212 of the Delaware Law.
Section 7. Adjustments. The number and types of securities subject to
-----------
this Agreement will be appropriately adjusted in the event of any stock
dividends, stock splits, recapitalization, combinations, exchanges of shares
or the like or any other action that would have the effect of changing the
Stockholder's ownership of the Company's capital stock.
Section 8. Termination. Except as otherwise specifically provided
-----------
herein, all obligations under this Agreement will terminate on the earliest of
(a) the date the Merger Agreement is terminated in accordance with its terms;
provided, however, that the provisions of Section 3(a) and 4(c) shall not
terminate until sixty (60) days thereafter if the Merger is terminable
pursuant to Section 8(a)(iv), 8(a)(v), or 8(a)(vi) (but, in the case of
termination pursuant to Section 8(a)(vi), only in the event that at the time
of the Company Special Meeting an Acquisition Proposal (as defined in the
Merger Agreement) shall have been publicly announced and not withdrawn,
terminated or lapsed), (b) the purchase of all the Shares pursuant to the
Stock Option, (c) the first anniversary of the date hereof or (d) the
Effective Time. The provisions of Section 14 shall survive any termination of
this Agreement.
Section 9. Effectiveness. This Agreement shall not be effective
-------------
unless and until the Merger Agreement shall have been executed and delivered
by the Company.
Section 10. Brokerage. Buyer, Acquisition and the Stockholder each
---------
represent and warrant to the other parties hereto that the negotiations
relevant to this Agreement have been carried on by Buyer and Acquisition, on
the one hand, and the Stockholder, on the other hand, directly with the other,
and that there are no claims for finder's fees or brokerage commissions or
other like payments in connection with this Agreement or the transactions
contemplated hereby. Buyer and Acquisition, on the one hand, and Stockholder,
on the other hand, will indemnify and hold harmless the other from and against
any and all claims or liabilities for finder's fees or brokerage commissions
or other like payments incurred by reason of action taken by him, it or any of
them, as the case may be.
Section 11. No Limitation. Nothing in this Agreement shall be
--------------
construed to prohibit Stockholder, or any officer or affiliate of Stockholder
who is or has designated a member of the Board of Directors of the Company,
from taking any action solely in his or her capacity as a member of the Board
of Directors of the Company or from exercising his or her fiduciary duties as
a member of such Board of Directors and no such action shall be deemed to
violate this Agreement.
Section 12. Indemnification. For a period of six years from and after
---------------
the Effective Time, Acquisition shall indemnify Stockholder and hold
Stockholder harmless against any loss, cost or expense (including without
limitation reasonable attorneys' fees) in the event of any claim against
Stockholder relating to the actions of Stockholder, as stockholder, in
connection with the Merger Agreement, this Agreement and any of the
transactions contemplated thereby; provided that Stockholder shall have first
sought indemnification from Acquisition pursuant to insurance, Acquisition's
charter or by-laws and any indemnification agreement or other arrangement
between Acquisition and Stockholder; provided further, however, that the
obligations of Acquisition hereunder shall be limited to the excess, if any,
of Stockholder's loss, cost or expense over the amounts actually recovered
from the Company in accordance with the preceding proviso. In the event of any
claim for which indemnification is provided herein, Stockholder shall promptly
notify Acquisition; provided that the failure to give such notice shall not
relieve Acquisition from its obligations hereunder except if, and to the
extent that, it suffers actual prejudice thereby. Acquisition shall have the
right to undertake, with counsel of its choice (subject to the reasonable
approval of Stockholder), the defense of such claim. Stockholder shall have
the right to employ its own counsel to participate (but not to control the
defense) in any such action, but the fees and expenses of such counsel shall
be at the sole expense of Stockholder unless (a) Buyer or the Company shall
have failed to employ counsel reasonably satisfactory to Stockholder to assume
the defense of such claim within a reasonable time after receiving notice
thereof, or (b) a conflict of interest shall prevent the same counsel from
representing Buyer or the Company and the Stockholder. Buyer shall not be
liable hereunder for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld).
Section 13. Miscellaneous. (a) Except for the representations and
-------------
warranties set forth in Section 1(a) and 1(b), all representations and
warranties contained herein will terminate upon the termination of this
Agreement.
(b) [Intentionally Omitted]
(c) Any provisions of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in writing and is signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any breach of any other provision of this Agreement.
(d) This Agreement contains the entire agreement among the parties in
respect to the subject matter hereof, and supersedes all prior agreements
among the parties with respect to such matters. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified, except upon the
delivery of a written agreement executed by the parties hereto.
(e) This Agreement will be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and
performed in that state. Each of the parties hereto acknowledges and agrees
that in the event of any breach of this Agreement, each non-breaching party
would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (i) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (ii) will be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in any state or federal court
sitting in Wilmington, Delaware. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Merger Agreement.
(f) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(g) All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:
If to Stockholder to:
c/o Capital Southwest Corporation
12900 Preston Road at LBJ
Suite 700
Dallas, TX 75230
Facsimile: (972) 233-7362
Attention: William R. Thomas
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, NY 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
Attention: Joseph W. Armbrust Jr.
If to Buyer or Acquisition to:
c/o Madison Dearborn Partners
Three First National Plaza
Suite 3800
Chicago, IL 60602
Facsimile: (312) 895-1156
Attention: Thomas R. Reusche
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Facsimile: (312) 861-2200
Attention: Michael H. Kerr, P.C.
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
(h) This Agreement may be executed in any number of counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one agreement.
(i) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties hereto
without the prior written consent of the other parties other than the
assignment to the Surviving Corporation of obligations of Acquisition under
Section 12 by operation of law.
(j) If any term or other provision of this Agreement is determined to
be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect as long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party hereto. Upon any such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
Section 14. Expenses. Except as provided in Section 3 hereof, all
--------
fees and expenses incurred by any one party hereto shall be borne by the party
incurring such fees and expenses.
Section 15. Further Assurances; Stockholder Capacity. The Stockholder
----------------------------------------
shall, upon request of Buyer or Acquisition, execute and deliver any
additional documents and take such further actions as may reasonably be deemed
by Buyer or Acquisition to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote the Shares as contemplated by
Section 6 hereof in Buyer.
************************
IN WITNESS WHEREOF, the Buyer, Acquisition and the Stockholder have
caused this Agreement to be signed by their respective officers or
representatives thereunto duly authorized, all as of the date first written
above.
WEC COMPANY
a Delaware Corporation
By: /s/ Thomas J. Laird
-----------------------
Name: Thomas J. Laird
Title: President
AGI ACQUISITION CORP.
a Delaware Corporation
By: /s/ Thomas J. Laird
-----------------------
Name: Thomas J. Laird
Title: President
CAPITAL SOUTHWEST
VENTURE CORPORATION
By: /s/ William R. Thomas
------------------------------
Name: William R. Thomas
Title: President and Chairman
Exhibit 99.1
------------
SEGUIN, Texas and OREGON, ILL.--(BUSINESS WIRE)--Aug. 18, 1998--Alamo
Group Inc. (NYSE:ALG) and Woods Equipment Company jointly announced today that
they have entered into a definitive agreement whereby Alamo will be acquired
by Woods in a cash merger, pursuant to which Alamo stockholders will receive
$18.50 for each Alamo share outstanding, for a total equity consideration of
approximately $180 million. The transaction has been approved by the Board of
Directors of Alamo Group. The two largest Alamo shareholders, owning over 40%
of the outstanding stock, have each granted Woods an option to acquire their
shares at $18.50 per share and have agreed to vote their shares in support of
the transaction.
Woods Equipment Company is owned primarily by Madison Dearborn
Capital Partners II, LP, a private equity investment partnership based in
Chicago, IL. Madison Dearborn Partners has committed additional equity capital
of $58.5 million to Woods and has arranged for debt financing commitments to
fund the acquisition.
The closing of the merger is subject to customary conditions,
including the receipt of certain governmental approvals and the approval of
Alamo stockholders. Alamo will shortly file with the Securities and Exchange
Commission a proxy statement that will be mailed to stockholders in connection
with a special stockholder meeting to be called to consider the merger.
Alamo, with 1997 sales of $203.1 million, is a leading worldwide
manufacturer and supplier of heavy duty, tractor-mounted mowing and vegetation
maintenance equipment for roadside, industrial and governmental applications,
and for agricultural applications in ranch pasture maintenance and farm crop
shedding. Alamo maintains production facilities in the United States, England
and France and sells its products through an extensive network of dealers
worldwide.
Woods Equipment Company, with 1997 sales of $150 million, is a
leading manufacturer and supplier of attachment systems serving the turf and
grounds maintenance, construction equipment and agricultural equipment
markets. Its products are distributed through a network of agricultural,
construction and power equipment dealers throughout the United States. Woods
sells its products under the Woods, DuAl, Alloway, Gill, Gannon and Wain Roy
brand names.
Don Douglass, founder, Chairman and CEO of Alamo, commented, "We
believe that this merger is in the best interests of Alamo's shareholders.
Since founding Alamo 29 years ago, the company has experienced growth and
development largely through the contribution of its people and its dealers and
their customers. This merger should provide a sound basis for continued
growth."
Oran Logan, President of Alamo, added, "We believe that the
combination of Alamo and Woods makes very good sense. Our businesses are
highly complementary and the combined companies will benefit significantly
from the strengths of each of our dealer networks."
The combined Alamo and Woods businesses will employ over 2,500 people
with total sales exceeding $350 million. The executive management team will be
headed by Thomas J. Laird, current CEO of Woods.
Laird commented, "We are extremely excited about the combination of
Woods and Alamo. Both companies have developed strong product offerings and
have supported these offerings with parts and service. The result has been the
creation of well recognized industry brand names. This acquisition will be a
joining of these brands to provide the dealer network with the industry's most
complete product and service offering."
This release contains forward looking statements that are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward looking statements involve known and unknown risks
and uncertainties which may cause the Company's actual results in future
periods to differ materially from forecasted results. Among those factors
which could cause actual results to differ materially are the following:
market demand, market softness, competition, weather, seasonality,
currency-related issues, and other risk factors listed from time to time in
the Company's SEC reports. The Company does not undertake any obligation to
update the information contained herein, which speaks only as of this date.
