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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 9, 1999
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ASAHI/AMERICA, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
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(State or Other Jurisdiction of Incorporation)
04-2621836
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(Commission File Number) (IRS Employer Identification No.)
35 Green Street, Malden, Massachusetts 02148-0005
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(Address of Principal Executive Offices) (Zip Code)
781-321-5409
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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TABLE OF CONTENTS
FORM 8-K
AUGUST 9, 1999
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Item Page
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Item 2. Acquisition or Disposition of Assets. 1
Item 7. Financial Statements and Exhibits. 1
Signature 2
Exhibits E-1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 9, 1999, Asahi/America, Inc. (the "Company") entered into
a Merger Agreement (the "Merger Agreement") with Midnight Acquisition
Holdings, Inc. ("Holdings"), a wholly-owned subsidiary of Asahi Organic
Chemicals Industry Co., Ltd. ("AOC"), the Company's principal supplier of
valves. The merger consideration to be paid for all of the outstanding shares
of the Company's common stock is $8.25 per share plus an estimated $1.20 to
$1.30 per share representing the per share proceeds of the disposition of
Quail Piping Products, Inc. ("Quail"), a wholly-owned subsidiary of the
Company, net of taxes and certain expenses. Leslie B. Lewis will remain with
the Company as President and Chief Executive Officer.
The merger is conditioned upon Company stockholder approval and the
disposition of Quail. The Merger Agreement also requires that (i) the Company
have no debt at the time of the closing, with certain exceptions, (ii) all
Quail-related obligations of the Company be terminated pursuant to an
agreement in the form attached to the Merger Agreement and (iii) all shares
held directly and indirectly by Nichimen Corporation have been purchased by
AOC or its subsidiaries. The Company has also executed a Stock Purchase
Agreement for the disposition of Quail with Quail Acquisition Corporation,
which is majority owned by a management buyout group. The Stock Purchase
Agreement is contingent upon the receipt of financing and Quail Acquisition
Corporation is in discussions with potential sources for financing. There can
be no assurances that financing for the disposition will be obtained or that
the disposition and merger will be consummated.
As an inducement to Holdings to enter into the Merger Agreement,
Leslie B. Lewis, who beneficially owns 27.2% of the shares of the Company,
entered into a Stockholder Agreement, dated as of August 9, 1999 (the
"Stockholder Agreement"), pursuant to which Mr. Lewis has granted a proxy to
vote such shares in favor of the merger. The Stockholder Agreement terminates
upon the earlier to occur of (i) the closing date of the merger,
(ii) March 31, 2000 or (iii) the date the Merger Agreement is terminated if
it is terminated by mutual consent of the parties or resulting from a
governmental or court order or decree.
The foregoing descriptions of the Merger Agreement, the Stock
Purchase Agreement and the Stockholder Agreement contained herein are
qualified in their entirety by reference to (a) the Merger Agreement attached
hereto as Exhibit 2, including Exhibit C - Stockholder Agreement thereto, and
incorporated herein by reference, (b) the Stock Purchase Agreement attached
hereto as Exhibit 10.1 and incorporated herein by reference, and (c) the
Employment Agreement for Leslie B. Lewis attached hereto as Exhibit 10.2 and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
B. PRO FORMA FINANCIAL INFORMATION.
Not applicable.
C. EXHIBITS.
The following exhibits are filed with this report:
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Exhibit No. Title
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2 Agreement and Plan of Merger among Midnight Acquisition
Holdings, Inc., Midnight Acquisition Corp. and
Asahi/America, Inc. dated August 9,
1999, including Exhibit C - Stockholder
Agreement
10.1 Stock Purchase Agreement between Quail Acquisition
Corporation and Asahi/America, Inc. dated August 9, 1999
10.2 Employment Agreement of Leslie B. Lewis
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Asahi/America, Inc.
Date: August 9, 1999 By: /s/ Kozo Terada
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Kozo Terada
Vice President, Treasurer and
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Title
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2 Agreement and Plan of Merger among Midnight Acquisition
Holdings, Inc., Midnight Acquisition Corp. and
Asahi/America, Inc. including Exhibit C - Stockholder
Agreement
10.1 Stock Purchase Agreement between Quail Acquisition
Corporation and Asahi/America, Inc. dated August 9, 1999
10.2 Employment Agreement of Leslie B. Lewis
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Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
MIDNIGHT ACQUISITION HOLDINGS, INC.,
MIDNIGHT ACQUISITION CORP.
AND
ASAHI/AMERICA, INC.
DATED AS OF AUGUST 9, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I The Merger ...........................................................................2
SECTION 1.01. The Merger ....................................................................2
SECTION 1.02. Closing .......................................................................2
SECTION 1.03. Effective Time.................................................................2
SECTION 1.04. Effects of the Merger..........................................................3
SECTION 1.05. Articles of Organization and By-laws...........................................3
SECTION 1.06. Directors .....................................................................3
SECTION 1.07. Officers ......................................................................3
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates....................................3
SECTION 2.01. Effect on Capital Stock........................................................3
SECTION 2.02. Payment for Shares.............................................................5
SECTION 2.03. Options. ......................................................................6
ARTICLE III Representations and Warranties of the Company.......................................8
SECTION 3.01. Organization...................................................................8
SECTION 3.02. Subsidiaries...................................................................8
SECTION 3.03. Capitalization.................................................................9
SECTION 3.04. Authority ....................................................................10
SECTION 3.05. Consents and Approvals; No Violations.........................................10
SECTION 3.06. SEC Reports and Financial Statements..........................................11
SECTION 3.07. Absence of Certain Changes or Events..........................................12
SECTION 3.08. No Undisclosed Liabilities....................................................13
SECTION 3.09. Information Supplied..........................................................13
SECTION 3.10. Benefit Plans.................................................................13
SECTION 3.11. Other Compensation Arrangements...............................................15
SECTION 3.12. Litigation ...................................................................16
SECTION 3.13. Compliance with Applicable Law................................................16
SECTION 3.14. Tax Matters...................................................................17
SECTION 3.15. State Takeover Statutes.......................................................18
SECTION 3.16. Brokers; Fees and Expenses....................................................19
SECTION 3.17. Opinion of Financial Advisor..................................................19
SECTION 3.18. Intellectual Property.........................................................19
SECTION 3.19. Labor Relations and Employment................................................20
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SECTION 3.20. Change of Control; Effect of the Disposition..................................21
SECTION 3.21. Environmental Matters.........................................................22
SECTION 3.22. Material Contracts............................................................24
SECTION 3.23. Property. ....................................................................27
SECTION 3.24. Insurance. ...................................................................27
ARTICLE IV Representations and Warranties of Parent and Sub....................................28
SECTION 4.01. Organization..................................................................28
SECTION 4.02. Authority ....................................................................28
SECTION 4.03. Consents and Approvals; No Violations.........................................29
SECTION 4.04. Information Supplied..........................................................29
SECTION 4.05. Interim Operations of Sub.....................................................29
ARTICLE V Covenants ...........................................................................29
SECTION 5.01. Conduct of Business of the Company............................................29
SECTION 5.02. No Solicitation...............................................................33
SECTION 5.03. Other Actions.................................................................35
SECTION 5.04. Notice of Certain Events......................................................35
ARTICLE VI Additional Agreements...............................................................36
SECTION 6.01. Stockholder Approval; Preparation of Proxy Statement..........................36
SECTION 6.02. Access to Information.........................................................37
SECTION 6.03. Reasonable Efforts............................................................37
SECTION 6.04. Fees and Expenses.............................................................38
SECTION 6.05. Indemnification; Insurance....................................................39
SECTION 6.06. Certain Litigation............................................................39
ARTICLE VII Conditions ........................................................................40
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger....................40
SECTION 7.02. Conditions to Obligations of Parent and Sub...................................41
SECTION 7.03. Conditions to Obligations of the Company......................................42
ARTICLE VIII Termination, Amendment and Waiver.................................................43
SECTION 8.01. Termination...................................................................43
SECTION 8.02. Effect of Termination.........................................................44
SECTION 8.03. Amendment ....................................................................45
SECTION 8.04. Extension; Waiver.............................................................45
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ARTICLE IX Miscellaneous ......................................................................45
SECTION 9.01. Nonsurvival of Representations and Warranties.................................45
SECTION 9.02. Notices ......................................................................45
SECTION 9.03. Interpretation................................................................46
SECTION 9.04. Counterparts..................................................................47
SECTION 9.05. Entire Agreement; Third Party Beneficiaries...................................47
SECTION 9.06. Governing Law.................................................................47
SECTION 9.07. Publicity ....................................................................47
SECTION 9.08. Assignment ...................................................................47
SECTION 9.09. Enforcement...................................................................48
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Annexes
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Annex I - Definitions
Exhibits
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Exhibit A - Employment Agreement
Exhibit B - Disposition Agreement
Exhibit C - Stockholder Agreement
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of August 9, 1999, is among MIDNIGHT Acquisition Holdings, Inc., a Delaware
Corporation ("Parent"), MIDNIGHT ACQUISITION CORP., a Massachusetts corporation
and a subsidiary of Parent ("Sub"), and ASAHI/AMERICA, INC., a Massachusetts
corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have each determined that it is advisable and in the best interests
of their respective stockholders for Sub to merge with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, pursuant to the Merger, each outstanding share of
common stock, no par value, of the Company (the "Company Common Stock," all the
outstanding shares of the Company Common Stock being hereinafter collectively
referred to as the "Shares") shall be converted into the right to receive the
Merger Consideration (as defined below), upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Sub and the Company are hereby adopting a
plan of merger, providing for the merger of Sub with and into the Company, with
the Company being the surviving corporation. The Merger will be consummated in
accordance with this Agreement upon the filing by the Company and Sub of
articles of merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts, such Merger to be consummated as of the Effective
Time (as defined below) of the Merger;
WHEREAS, upon consummation of the Merger, the separate
corporate existence of Sub shall cease and the Company, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the Business Corporation Law of the Commonwealth of
Massachusetts (the "MBCL") as provided in this Agreement;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, Parent and Sub have required, as a condition to their
willingness to enter into this Agreement, that Leslie B. Lewis (the "Executive")
contemporaneously enter into the Employment Agreement (as defined herein)
concurrently with the execution and delivery of this Agreement; and
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WHEREAS, the Board of Directors of the Company (the "Board")
has directed that this Agreement be submitted to a vote of the holders of the
Shares in accordance with the MBCL, and Parent, as sole shareholder of Sub, has
duly approved this Agreement in accordance with the MBCL.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements herein contained,
and intending to be legally bound hereby, Parent, Sub and the Company hereby
agree as follows:
AGREEMENT
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the MBCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 1.03), whereupon the separate corporate existence of Sub shall cease and
the Company shall continue as the Surviving Corporation and shall continue its
corporate existence as a subsidiary of Parent and shall continue to be governed
by the laws of the Commonwealth of Massachusetts. At the election of Parent, any
direct or indirect wholly owned subsidiary (as defined in Section 9.03) of
Parent may be substituted for Sub as a constituent corporation in the Merger. In
such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
SECTION 1.02. CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. (New York City time) on a date to be
specified by Parent or Sub, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VII (the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file with the Secretary of State of the Commonwealth of Massachusetts (i)
the Articles of Merger executed in accordance with the relevant provisions of
the MBCL, and (ii) all other filings or recordings required under the MBCL and
the Massachusetts General Laws. The Merger shall become effective at such time
as Articles of Merger are duly filed with the Secretary of State of the
Commonwealth of Massachusetts, or at such other time not more than thirty days
after such filing as Sub and the Company shall agree should be
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specified in the Articles of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 80 of the MBCL. From and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and Sub, all as provided under Massachusetts law.
SECTION 1.05. ARTICLES OF ORGANIZATION AND BY-LAWS.
(a) The Articles of Organization of Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The By-Laws of Sub as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving
Corporation, until thereafter changed or amended as provided therein or
by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and the Company
shall procure, prior to and as a condition to the Closing, the resignation of
each of its directors effective as of the Closing.
SECTION 1.07. OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Shares or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding
share of capital stock of Sub shall be converted into and become 1
fully paid and
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nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND GRANDPARENT
AND PARENT OWNED STOCK. Each share of Company Common Stock that is
owned by the Company or by any subsidiary of the Company and each Share
that is owned by Asahi Organic Chemicals Industry Co., Ltd.
("Grandparent"), Parent, Sub or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to
Section 2.01(d), each Share issued and outstanding (other than Shares
to be canceled in accordance with Section 2.01(b)) shall be converted
into the right to receive from the Surviving Corporation in cash,
without interest, $8.25, plus an amount equal to the Net Quail Proceeds
divided by (i) the number of Shares issued and outstanding (other than
Shares to be canceled in accordance with Section 2.01(b)) plus (ii) all
Shares into which Options (as defined in Section 2.03(a)) are
exercisable at the Effective Time (the "Merger Consideration"). As of
the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such Shares shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration, without interest. For the purposes
hereof, "Net Quail Proceeds" shall mean the aggregate amount of
consideration received by the Company in the Disposition (as defined in
Section 3.02), net of taxes paid or payable by the Company in respect
of the Disposition, after taking into account any tax deductions
received or receivable by the Company, and net of all expenses paid or
payable by the Company or by Quail Piping Products, Inc. ("Quail") on
account of any other party in connection with the Disposition or
pursuant to Section 8 of the agreement in the form attached hereto as
Exhibit B (the "Disposition Agreement").
(d) SHARES OF DISSENTING STOCKHOLDERS.
Notwithstanding anything in this Agreement to the contrary, any issued
and outstanding Shares held by a person (a "Dissenting Stockholder")
who complies with Sections 86 through 98, inclusive, of the MBCL
concerning the right of holders of Company Common Stock to dissent from
the Merger and require appraisal of their Shares ("Dissenting Shares")
shall not be converted as described in Section 2.01(c) but shall become
the right to receive such consideration as may be determined to be due
to such Dissenting Stockholder pursuant to the MBCL. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the MBCL, his Shares shall be deemed
to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i)
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prompt notice of any demands for appraisal of Shares received by the
Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, make
any payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
(e) WITHHOLDING TAX. Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of shares of Common Stock outstanding
immediately prior to the Effective Time such amounts as may be required
to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), or
any provision of state, local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the
shares of Common Stock outstanding immediately prior to the Effective
Time in respect of which such deduction and withholding was made.
SECTION 2.02. PAYMENT FOR SHARES.
(a) PAYING AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company located in the United States to
act as paying agent in the Merger (the "Paying Agent"), and, at the
Effective Time, Parent shall make available to the Paying Agent funds
in amounts necessary for the payment of the Merger Consideration,
excluding the Net Quail Proceeds, which shall be made available to the
Paying Agent by the Surviving Corporation in amounts and at the times
necessary, upon surrender of certificates representing Shares as part
of the Merger pursuant to Section 2.01 and upon cancellation of any
Option as part of the Merger pursuant to Section 2.03 (it being
understood that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned over to
Parent).
(b) EXCHANGE PROCEDURE. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail to
each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented Shares (the
"Certificates"), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent,
the holder of such Certificate
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shall be entitled to receive in exchange therefor the amount of cash
into which the Shares theretofore represented by such Certificate shall
have been converted pursuant to Section 2.01, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of
the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person
other than the registered holder of such Certificate or establish to
the satisfaction of the Surviving Corporation that such tax has been
paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 2.01. No interest will be paid or will accrue on
the cash payable upon the surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON
STOCK. All cash paid upon the surrender of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in
full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates
are presented to the Surviving Corporation or the Paying Agent for any
reason, they shall be canceled and exchanged as provided in this
Article II.
(d) TERMINATION OF FUND; NO LIABILITY. At any time
following six months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to
it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a Certificate for
Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.03. OPTIONS.
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(a) OPTION PLANS. Prior to the Effective Time, the Company
shall take all actions necessary, including without limitation, obtaining any
required consent of each holder of the following options, awards or other rights
(each an "Option" and collectively, the "Options"): (i) the Stock Option
Agreement dated March 4, 1998 issued to Thomas J. Hammer (the "TJH Option"),
(ii) all options, awards or rights under the Midnight Independent Directors'
Stock Option Plan (the "Directors Plan"), (iii) all options, awards or rights
under the Midnight Employee Stock Purchase Plan (the "Stock Purchase Plan") and
(iv) all options, awards or rights under the Midnight 1996 Equity Incentive Plan
(the "Equity Plan," and together with the Directors Plan and the Stock Purchase
Plan, the "Option Plans," and each an "Option Plan") to terminate each Option
Plan without liability to the Company and to cancel each Option as provided in
Section 2.03(b) below.
(b) CANCELLATION OF OPTIONS. The Company shall cause:
(i) all Options outstanding immediately prior to the
Effective Time under the Stock Purchase Plan, whether or not then
exercisable, to be canceled at the Effective Time and all payroll
deductions (the "Payroll Amount") plus accrued interest to be refunded
to each such Option holder after such cancellation, plus payment of an
amount in cash equal to that amount which is equal to the excess, if
any, of the Merger Consideration over the purchase price of the Company
Common Stock at the Effective Time (the "Option Price"), multiplied by
the amount obtained by dividing the aggregate Payroll Amount of such
Option holder at the Effective Time by the Option Price; and
(ii) the TJH Option and all Options outstanding
immediately prior to the Effective Time under the Equity Plan and
the Directors Plan, whether or not then exercisable, to immediately
vest and be canceled at the Effective Time, and each holder of an
Option under such plan or agreement will be entitled to receive,
after the Effective Time from the Surviving Corporation, for each
share of Common Stock subject to any such Option, an amount in cash
equal to the excess, if any, of the Merger Consideration over the
per share exercise price of such Option, without interest (the
"Delta Payment"); PROVIDED, that any Options held by Leslie B. Lewis
will be canceled but no Delta Payment will be paid on such Options.
Parent shall cause the Paying Agent to mail to each holder of an
Option under such plan or agreement appropriate instructions and
documents to effect the cancellation of such Options and the cash
payment thereof. All amounts payable pursuant to this Section
2.03(b)(ii) shall be subject to all applicable withholding taxes and
shall be paid as soon as practicable following the Effective Time.
(iii) If and to the extent that the TJH Option has
not been exercised prior to its cancellation in connection with the
Merger, the Company will pay to Thomas J. Hammer the Delta Payment
plus the sum of $145,000, prorated to the extent of any prior
exercise, and any amount the Company has drawn under any letter of
credit described in the Amendment to Agreement between the Company
and Mr. Hammer dated March 4, 1998, prorated to the extent of any
prior exercise, so as to avoid any duplicate payments to Mr. Hammer.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule attached to this Agreement
setting forth exceptions to the Company's representations and warranties set
forth herein (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as set forth below. The Company Disclosure Schedule
will be arranged in sections corresponding to sections of this Agreement to be
modified by such disclosure schedule.
SECTION 3.01. ORGANIZATION. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a material adverse
effect (as defined in Section 9.03) on the Company. The Company and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Merger. The Company has made available to Parent complete and correct copies of
its Articles of Organization and By-laws and the certificates of incorporation
and by-laws (or similar organizational documents) of its subsidiaries.
SECTION 3.02. SUBSIDIARIES. Section 3.02 of the Company
Disclosure Schedule sets forth for each subsidiary of the Company: (i) its name
and jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; (iii) the number of issued and outstanding shares of
capital stock or share capital; and (iv) the holder or holders of such shares.
All the outstanding shares of capital stock of each such subsidiary, other than
director qualifying shares of foreign subsidiaries, are owned by the Company, by
another wholly owned subsidiary of the Company or by the Company and another
wholly owned subsidiary of the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"), except for immaterial Liens on outstanding
shares of capital stock of foreign subsidiaries of the Company, and are duly
authorized, validly issued, fully paid and nonassessable. Except for the capital
stock of its subsidiaries, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture, business, trust or other entity. Notwithstanding the foregoing, prior
to or concurrently with the Closing, the Disposition shall have occurred. The
Disposition has been authorized by all necessary corporate action on the
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part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize or consummate the Disposition.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of
the Company consists of 10,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $10.00 per share ("Company Preferred
Shares"). At the close of business on July 26, 1999, (i) 3,427,217 shares of
Company Common Stock were issued and outstanding, (ii) no shares of Company
Common Stock were held by the Company in its treasury and (iii) 401,961 shares
of Company Common Stock were reserved for issuance upon exercise of outstanding
Options. There are no shares of Company Preferred Shares issued and outstanding.
Except as set forth above and except for Shares issued upon the exercise of
Options, as of the date of this Agreement, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above, and except for obligations to issue shares subject to
options outstanding on the date hereof, subject to the approval of the Board of
Directors of the Company, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking, including any securities pursuant to
which rights to acquire capital stock became exercisable only after a change of
control of the Company or any of its subsidiaries or upon the acquisition of a
specified amount of the Common Stock or voting powers of the Company or any of
its subsidiaries. There are no outstanding contractual obligations (i) of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or (ii) of the Company to vote or to
dispose of any shares of the capital stock of any of its subsidiaries other than
as contemplated by this Agreement. Since July 26, 1999, no shares of the capital
stock of the Company or any of its subsidiaries have been issued other than
pursuant to the exercise of Company stock options and warrants already in
existence and outstanding on such date, and neither the Company nor any of its
subsidiaries has granted any stock options, warrants or other rights to acquire
any capital stock of the Company or any of its subsidiaries. There are no
securities issued by the Company or agreements, arrangements or other
understandings to which the Company is a party giving any person any right to
acquire equity securities of the Surviving Corporation at or following the
Effective Time and all securities, agreements,
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arrangements and understandings relating to the right to acquire equity
securities of the Company (whether pursuant to the exercise of options, warrants
or otherwise) provide that, at and following the Effective Time, such right
shall entitle the holder thereof to receive the consideration he would have
received in the Merger had he exercised his right immediately before the
Effective Time.
SECTION 3.04. AUTHORITY. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of the terms of this Agreement by the holders
of a majority of the Shares (the "Company Stockholder Approval")). The only
votes of the holders of any class or series of Company capital stock necessary
to approve the Merger are the affirmative votes of the holders of a majority of
the outstanding shares of Common Stock. The execution, delivery and performance
of this Agreement and the consummation by the Company of the Merger and of the
other transactions contemplated hereby, including but not limited to the
delivery and performance of the Disposition Agreement and the Employment
Agreement and the acknowledgment and acceptance of the Executive's execution and
performance of the Stockholder Agreement, have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated (in each case, other than,
with respect to the Merger, the Company Stockholder Approval). This Agreement
has been duly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
SECTION 3.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including the filing with the SEC of a
proxy statement relating to any required approval by the Company's stockholders
of this Agreement (the "Proxy Statement")), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Chapters 110C, 110D, 110E,
and 110F of the Massachusetts General Laws and the laws of other states in which
the Company is qualified to do or is doing business, the MBCL (including the
filing of the Articles of Merger), state takeover laws and foreign laws, neither
the execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the Articles of
Organization or By-laws of the Company or of the similar organizational
documents of
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any of its subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any Federal, state or local government or any court,
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity") (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on the Company or prevent or materially delay the
consummation of the Merger), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound; PROVIDED, HOWEVER, that
certain contracts and agreements set forth in Section 3.05 of the Company
Disclosure Schedule, (A) provide for their termination upon a change of control
of the Company or (B) contain provisions restricting their assignment pursuant
to a merger, or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its subsidiaries or any of their
properties or assets, except in the case of clauses (iii) or (iv) for
violations, breaches or defaults that would not have a material adverse effect
on the Company or prevent or materially delay the consummation of the Merger.
SECTION 3.06. SEC REPORTS AND FINANCIAL STATEMENTS. The
Company has filed with the SEC, and has heretofore made available to Parent true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since May 16, 1996, under the Exchange Act
or the Securities Act of 1933, as amended (the "Securities Act") (such forms,
reports, schedules, statements and other documents, including any financial
statements or schedules included therein, are referred to as the "Company SEC
Documents"). The Company SEC Documents, at the time filed, (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Except to the extent
revised or superseded by a subsequently filed Company SEC Document (a copy of
which has been made available to Parent on or prior to the date hereof), the
Company SEC Documents, considered as a whole as of their date, do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that the foregoing does not cover future
events resulting from public announcement of the Merger). The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the
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SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles 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 Forms 10-Q and 8-K of the SEC) and fairly
present (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Other than
in respect of the Disposition, since December 31, 1998, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been any material adverse change (as defined in
Section 9.03) with respect to the Company or its subsidiaries. Since December
31, 1998, there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or any
redemption, purchase or other acquisition of any of its capital stock, (ii) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, (iii) (v) any
granting by the Company or any of its subsidiaries to any officer or director of
the Company or any of its subsidiaries of any increase in compensation, (w) any
granting by the Company or any of its subsidiaries to any such officer or
director of any increase in severance or termination pay, (x) any granting by
the Company or any of its subsidiaries to any such officer, director or other
key employees of any loans or any increases to outstanding loans, (y) except
employment arrangements in the ordinary course of business consistent with past
practice with employees other than any executive officer of the Company, and
except for the Employment Agreement in the form attached hereto as Exhibit A
(the "Employment Agreement") any entry by the Company or any of its subsidiaries
into any employment, severance or termination agreement with any such employee
or executive officer or director or (z) any increase in or establishment of any
bonus, insurance, deferred compensation, pension, retirement, profit-sharing,
stock option (including the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards or the amendment of any
existing stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan or
agreement or arrangement, (iv) any damage, destruction or loss, whether or not
covered by insurance, that has or reasonably could be expected to have a
material adverse effect on the Company, (v) any material payment to an affiliate
of the Company or any of its subsidiaries other than in the ordinary course of
business consistent with past practice, (vi) any revaluation by the Company of
any of its material assets, (vii) any mortgage, lien, pledge, encumbrance,
charge, agreement, claim or restriction placed upon any of the material
properties or assets of the Company or any of its subsidiaries, (viii) any
material change in accounting methods, principles or practices by the Company,
(ix) (A) any licensing or other agreement with regard to the acquisition or
disposition of any material Intellectual Property Right (as defined in Section
3.18) or rights thereto other than
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licenses or other agreements in the ordinary course of business consistent with
past practice or (B) any amendment or consent with respect to any licensing
agreement filed, or required to be filed, by the Company with the SEC or (x) any
capital contributions, loans or other payments to, or on account of, Quail.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the 1998 financial statements of the Company, as of December
31, 1998 (the "1998 Financial Statements") as disclosed in Company SEC
Documents, neither the Company nor any of its subsidiaries had any Liabilities
(as defined below), that would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of the Company and
its subsidiaries (including the notes thereto). Since December 31, 1998, except
as and to the extent set forth in the Company SEC Documents, neither the Company
nor any of its subsidiaries has incurred any liabilities of any nature, whether
or not accrued, contingent or otherwise, that would have a material adverse
effect on the Company. For purposes of this Agreement, "Liabilities" shall mean
debts, liabilities, obligations and commitments, whether known or unknown,
asserted or unasserted, fixed, absolute or contingent, matured or unmatured,
accrued or unaccrued, liquidated or unliquidated, due or to become due, whenever
or however arising (including, without limitation, whether arising out of any
contract, agreement or understanding, whether written or oral, or tort based on
negligence, strict liability or otherwise) and whether or not the same would be
required by generally accepted accounting principles to be reflected as a
liability in financial statements or disclosed in the notes thereto.
SECTION 3.09. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in the Proxy Statement, or related filings, will, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting (as defined in Section 6.01), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement, and related filings, will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
SECTION 3.10. BENEFIT PLANS.
(a) Each "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (a "Welfare Plan") and each
other pension,
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profit-sharing, savings, cash incentive, equity incentive
(including, but not limited, to stock options, stock purchases,
employee stock ownership, stock awards, restricted stock, phantom
stock and stock appreciation rights), severance, fringe benefits,
payroll practices and other current and deferred compensation and
employee benefit plans, arrangement and practices (whether written
or oral, direct or contingent), in each case maintained or
contributed to, or required to be maintained or contributed to, by
the Company or its subsidiaries for the benefit of any present or
former employee, consultant, officer or director (each of the
foregoing, including Pension Plans and Welfare Plans, a "Benefit
Plan") has been administered in all material respects in accordance
with its terms. The Company and its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable
provisions of ERISA, the Code and all other applicable laws.
(b) Section 3.10 to the Company Disclosure Schedule
attached hereto sets forth a complete list of each Benefit Plan as well
as each employment, consulting, termination, indemnity and severance
agreement and any and all other contracts, binding arrangements and
understandings (whether written or oral) with employees, consultants,
officers and directors of the Company and its subsidiaries.
(c) None of the Pension Plans is subject to Title IV
of ERISA or Section 412 of the Code and the Company nor any other
person or entity that, together with the Company, is treated as a
single employer under Section 414 (b), (c), (m) or (o) of the Code
(each, including the Company, a "Commonly Controlled Entity"): (i)
currently has an obligation to contribute to, or during any time during
the last six years had an obligation to contribute to, a Pension Plan
subject to Title IV of ERISA or Section 412 of the Code, or (ii) has
incurred any liability to the Pension Benefit Guaranty Corporation,
which liability has not been fully paid. All contributions and other
payments required to be made by the Company to any Pension Plan with
respect to any period ending before the Closing Date have been timely
made and reserves adequate for such contributions or other payments
that have accrued for the period before the Closing Date but which are
not required to be made before the Closing Date have been or will be
set aside therefor and have been or will be reflected in financial
statements.
(d) Neither the Company nor any Commonly Controlled
Entity is or has ever been required to contribute to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from
any multiemployer plan where such withdrawal has resulted or would
result in any "withdrawal liability" (within the meaning of Section
4201 of ERISA) or "mass withdrawal liability" within the meaning of
PBGC Regulation Section 4219.2 that has not been fully paid.
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(e) Each Pension Plan (and its related trust) that is
intended to be qualified under Sections 401 and 501(a) of the Code has
been determined by the IRS to qualify under such sections and nothing
has occurred to cause the loss of such qualified status.
(f) Each Benefit Plan that is a Welfare Plan may be
amended or terminated, upon thirty (30) days notice, at any time after
the Effective Time without liability to the Company or its
subsidiaries.
(g) Except as required by law or under Section 4980B
of the Code, the Company does not have any obligation to provide
post-retirement health benefits.
(h) The Company has heretofore delivered to Parent
correct and complete copies of each of the following:
(1) all written, and descriptions of all oral,
employment, consulting, termination and severance agreements,
contracts, arrangements and understandings listed in Section
3.10 of the Company Disclosure Schedule (other than the
Employment Agreement);
(2) each Benefit Plan and all amendments thereto; the
trust instrument and/or insurance contracts, if any, forming a
part of such Benefit Plan and all amendments thereto;
(3) the three most recent IRS Form 5500 and all
schedules and attachments thereto for each Benefit Plan, if
required;
(4) the most recent determination letter issued by
the IRS regarding the qualified status for each Pension Plan;
(5) the most recent accountant's report for each
Pension Plan, if required; and
(6) the most recent summary plan description for each
Benefit Plan, if required.
SECTION 3.11. OTHER COMPENSATION ARRANGEMENTS. Except (i) as
disclosed in the Company SEC Documents, (ii) for the Employment Agreement and
(iii) with respect to Quail (not involving any officer or employee of the
Company or any other of its subsidiaries), as of the date of this Agreement,
neither the Company nor any of its subsidiaries is a party to any oral or
written (a) consulting agreement terminable on more than 60 calendar days notice
(except for third party agreements for the development of, and assignment to,
the Company of Intellectual Property in the ordinary course of
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business) and involving the payment of more than $100,000 per annum, (b)
agreement with any executive officer or other key employee of the Company or any
of its subsidiaries (1) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement or (2) providing any term
of employment or compensation guarantee extending for a period longer than two
years or the payment of more than $100,000 per annum or (c) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 3.12. LITIGATION. There is no suit, claim, action,
proceeding or investigation pending before any Governmental Entity or, to the
best knowledge of the Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to have a material adverse effect
on the Company. Neither the Company nor any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree that could reasonably be
expected to have a material adverse effect on the Company.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAW. The Company and
its subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals that would not
have a material adverse effect on the Company. The Company and its subsidiaries
are in compliance with the terms of the Company Permits, except where the
failure so to comply would not have a material adverse effect on the Company.
Except as disclosed in the Company SEC Documents, to the best knowledge of the
Company, the businesses of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations that would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Merger. As of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct any such investigation or
review, other than, in each case, those the outcome of which would not be
reasonably expected to have a material adverse effect on the Company or prevent
or materially delay the consummation of the Merger.
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SECTION 3.14. TAX MATTERS.
(a) The Company and each of its subsidiaries (and any
affiliated group of which the Company or any of its subsidiaries is now
or has ever been a member) has timely filed all Federal income tax
returns and all other material tax returns and reports required to be
filed by it. All such returns are complete and correct in all material
respects. Each of the Company and its subsidiaries (i) has paid (or the
Company has paid on its subsidiaries' behalf) to the appropriate
authorities all taxes required to be paid by it (without regard to
whether a tax return is required), except taxes for which an adequate
reserve has been established on the financial statements contained in
the Company SEC Documents or the 1998 Financial Statements, and (ii)
has withheld and paid to the appropriate authorities all material
withholding taxes required to be withheld by it. The most recent
financial statements contained in the Company SEC Documents reflect an
adequate reserve for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through the
date of such financial statements.
(b) Except as disclosed in the Company SEC Documents,
no Federal income tax return or other material tax return of the
Company or any of its subsidiaries is under audit or examination by any
taxing authority, and no written or unwritten notice of such an audit
or examination has been received by the Company or any of its
subsidiaries. Each material deficiency resulting from any audit or
examination relating to taxes by any taxing authority has been paid,
except for deficiencies being contested in good faith. No material
issues relating to taxes were raised in writing by the relevant taxing
authority in any completed audit or examination that can reasonably be
expected to recur in a later taxable period. The Federal income tax
returns of the Company and each of its subsidiaries do not contain any
positions that could give rise to a material substantial understatement
penalty within the meaning of Section 6662 of the Code.
(c) There is no agreement or other document
extending, or having the effect of extending, the period of assessment
or collection of any taxes and no power of attorney with respect to any
taxes has been executed or filed with any taxing authority.
(d) No material liens for taxes exist with respect to
any assets or properties of the Company or any of its subsidiaries,
except for liens for taxes not yet due.
(e) None of the Company or any of its subsidiaries is
a party to or is bound by any tax sharing agreement, tax indemnity
obligation or similar
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agreement, arrangement or practice with respect to taxes (including
any advance pricing agreement, closing agreement or other agreement
relating to taxes with any taxing authority).
(f) None of the Company or any of its subsidiaries
shall be required to include in a taxable period ending after the
Effective Time taxable income attributable to income that accrued in a
prior taxable period but was not recognized in any prior taxable period
as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) Neither the Company nor any of its subsidiaries
(i) is a party to a safe harbor lease within the meaning of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect prior to amendment by the Tax Equity and Fiscal Responsibility
Act of 1982, (ii) is a "consenting corporation" under Section 341(f) of
the Code, (iii) has agreed or is obligated to make any payments for
services which would not be deductible pursuant to Sections 162(a)(1),
162(m) or 280G of the Code, (iv) has participated in an international
boycott as defined in Section 999 of the Code, (v) is required to make
any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise, (vi) owns any assets which directly
or indirectly secure any debt the interest on which is tax-exempt under
Section 103(a) of the Code, or (vii) owns any asset which is tax-exempt
use property within the meaning of Section 168(h) of the Code.
(h) None of the Company or any of its subsidiaries is
a party to any joint venture, partnership or other arrangement or
contract which is treated as a partnership for tax purposes, or has
elected to be treated as a branch or a partnership pursuant to Treasury
Regulation Section 301.7701-3.
(i) Each of the Company and its subsidiaries is a
United States person within the meaning of Section 7701(a)(30) of the
Code.
(j) As used in this Agreement, "Taxes" shall include
all Federal, state, local and foreign income, property, sales, excise,
withholding and other taxes, tariffs or governmental charges of any
nature whatsoever.
SECTION 3.15. STATE TAKEOVER STATUTES. The Board of Directors
of the Company has approved the Merger and this Agreement and such approval is
sufficient to render inapplicable to the Merger, this Agreement, the Stockholder
Agreement and the transactions contemplated by this Agreement and the
Stockholder Agreement, the provisions of Chapters 110C, 110D, 110E and 110F of
the Massachusetts General Laws.
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To the actual knowledge of the Company without investigation, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger, this Agreement, or any of the transactions contemplated by this
Agreement.
SECTION 3.16. BROKERS; FEES AND EXPENSES. No broker,
investment banker, financial advisor, consultant or other person, other than ING
Barings LLC (the "Financial Adviser") and Jeffrey Bloomberg, the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The estimated fees and expenses incurred
and to be incurred by the Company in connection with this Agreement and the
transactions contemplated by this Agreement (including the fees of the Company's
legal counsel, legal counsel for the special committee and the legal counsel for
its financial advisor) are set forth in a letter dated July 26, 1999 from the
Company to Parent, all of which will have been paid in full immediately prior to
the Effective Time.
SECTION 3.17. OPINION OF FINANCIAL ADVISOR. The Special
Committee has received the opinion of the Financial Adviser, dated August 9,
1999, to the effect that, as of that date, (a) the consideration to be
received by the Company pursuant to the Disposition is fair to the Company
from a financial point of view and (b) the Merger Consideration to be
received by the holders of Shares pursuant to the Merger is fair to such
holders from a financial point of view (the "Fairness Opinion"), and a
complete and correct signed copy of such opinion will be included in the
Proxy Statement, and related filings.
SECTION 3.18. INTELLECTUAL PROPERTY. The Company and its
subsidiaries have, and after the Disposition, will have, rights to use, whether
through ownership, licensing or otherwise, all patents, trademarks, service
marks, trade names, copyrights, trade secrets, know-how, invention and other
proprietary rights and processes of which the Company is aware that are material
to its business as now conducted (collectively the "Company Intellectual
Property Rights"). Except for such matters as would not, individually or in the
aggregate, have a material adverse effect on the Company, (a) the Company and
its subsidiaries have not assigned, hypothecated or otherwise encumbered any of
the Company Intellectual Property Rights and (b) none of the licenses included
in the Company Intellectual Property Rights purports to grant sole or exclusive
licenses to another person, including, without limitation, sole or exclusive
licenses limited to specific fields of use. To the best of the Company's
knowledge, the patents owned by the Company and its subsidiaries are valid and
enforceable and any patent issuing from patent applications of the Company and
its subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, have a material
adverse effect on the Company. The Company has no knowledge of any infringement
by any other person of any of the Company Intellectual Property Rights, and the
Company and its subsidiaries have not, to the Company's knowledge, entered into
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any agreement to indemnify any other party against any charge of infringement of
any of the Company Intellectual Property Rights, except for such matters as
would not, individually or in the aggregate, have a material adverse effect on
the Company. To the best of the Company's knowledge, the Company and its
subsidiaries have not and do not violate or infringe any intellectual property
right of any other person, and neither the Company nor any of its subsidiaries
have received any communication alleging that it violates or infringes the
intellectual property right of any other person, except for such matters as
would not, individually or in the aggregate, have a material adverse effect on
the Company. Except for such matters as would not, individually or in the
aggregate, have a material effect on the Company, the Company and its
subsidiaries have not been sued for infringing any intellectual property right
of another person. None of the Company Intellectual Property Rights or other
know-how relating to the business of the Company and its subsidiaries, the value
of which to Parent is contingent upon maintenance of the confidentiality
thereof, has been disclosed by the Company or any affiliate thereof to any
person other than those persons who are bound to hold such information in
confidence pursuant to confidentiality agreements or by operation of law.
SECTION 3.19. LABOR RELATIONS AND EMPLOYMENT.
(a) There is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, and
during the past three years there has not been any such action; (ii) no
union claims to represent the employees of the Company or any of its
subsidiaries; (iii) neither the Company nor any of its subsidiaries is
a party to or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees
of the Company or any of its subsidiaries; (iv) none of the employees
of the Company or any of its subsidiaries is represented by any labor
organization and the Company does not have any knowledge of any current
union organizing activities among the employees of the Company or any
of its subsidiaries, nor are there representation or certification
proceedings or petitions seeking a representation proceeding presently
pending or threatened to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal; (v) the Company
and its subsidiaries are, and have at all times been, in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vi) there is no unfair labor
practice charge or complaint against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, threatened
before the National Labor Relations Board or any similar state or
foreign agency; (vii) there is no grievance with respect to or relating
to the Company or any of its
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subsidiaries arising out of any collective bargaining agreement or
other grievance procedure; (viii) no charges with respect to or
relating to the Company or any of its subsidiaries are pending before
the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices; (ix)
neither the Company nor any of its subsidiaries has received notice of
the intent of any federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
subsidiaries and no such investigation is in progress; and (x) there
are no complaints, lawsuits or other proceedings pending or to the
knowledge of the Company threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries
alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship.
(b) To the knowledge of the Company, since the
enactment of the Worker Adjustment and Retraining Notification ("WARN")
Act, there has not been (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the
Company or any of its subsidiaries; or (ii) a "mass layoff" (as defined
in the WARN Act) affecting any site of employment or facility of the
Company or any of its subsidiaries; nor has the Company or any of its
subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of
any similar state or local law. To the knowledge of the Company, none
of the employees of the Company or any of its subsidiaries has suffered
an "employment loss" (as defined in the WARN Act) since three months
prior to the date of this Agreement.
SECTION 3.20. CHANGE OF CONTROL; EFFECT OF THE DISPOSITION.
The transactions contemplated by this Agreement, including, without limitation,
the Disposition, will not constitute a "change of control" under, require the
consent from or the giving of notice to a third party pursuant to, permit a
third party to terminate or accelerate vesting, repayment or repurchase rights,
or create any other detriment under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound.
The Disposition will not result in the creation of any Liabilities of the
Company or any of its subsidiaries and will result in the release of all
outstanding Liabilities of the Company in relation to Quail.
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SECTION 3.21. ENVIRONMENTAL MATTERS.
(a) To the best knowledge of the Company, after due
inquiry, the Company and its subsidiaries have been and are in
compliance with all applicable Environmental Laws (as this term and the
other terms in this section are defined below), except for such
violations and defaults as would not, individually or in the aggregate,
have a material adverse effect on the Company.
(b) To the best knowledge of the Company, after due
inquiry, the Company and its subsidiaries possess all required
Environmental Permits; all such Environmental Permits are in full force
and effect; there are no pending or threatened proceedings to revoke
such Environmental Permits and the Company and its subsidiaries are in
compliance with all terms and conditions thereof, except for such
failures to possess or comply with Environmental Permits as would not,
individually or in the aggregate, have a material adverse effect on the
Company.
(c) Except for matters which would not, individually
or in the aggregate, have a material adverse effect on the Company,
neither the Company nor any of its subsidiaries has received any
notification that the Company or any subsidiary as a result of any of
the current or past operations of the Business, or any property
currently or formerly owned or leased or used in connection with the
Business, is or may be adversely affected by any proceeding,
investigation, claim, lawsuit or order by any Governmental Entity or
other person relating to whether (i) any Remedial Action is or may be
needed to respond to a Release or threat of Release into the
environment of Hazardous Substances arising out of or caused by any
current or past operations of the Company or any of its subsidiaries,
(ii) any Environmental Liabilities and Costs imposed by, under or
pursuant to Environmental Laws as in effect on or prior to the date
hereof shall be sought, or proceeding commenced, arising from the
current or past operations of the Business or (iii) the Company or any
subsidiary is or may be a "potentially responsible party" for a
Remedial Action, pursuant to any Environmental Law for the costs of
investigating or remediating Releases or threatened Releases into the
environment of Hazardous Substances, whether or not such Release or
threatened Release has occurred or is occurring at properties currently
or formerly owned or operated by the Company and its subsidiaries;
(d) Except for Environmental Permits, none of the
Company or its subsidiaries has entered into any written agreement with
any entity or persons including any Governmental Entity by which the
Company or any of its subsidiaries has assumed the responsibility,
either directly or by acting as a guarantor or surety, to pay for the
remediation of any condition arising from or relating to a Release of
Hazardous Substances as defined under Environmental
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Laws as in effect on or prior to the date hereof into the environment
in connection with the Business, including for cost recovery by third
parties with respect to such Releases or threatened Releases;
(e) Except for matters which would not, individually
or in the aggregate, have a material adverse effect on the Company, to
the best knowledge of the Company, after due inquiry, there has been no
Release of Hazardous Substances for which the Company is or may be
liable under any Environmental Laws on, under or from any real property
currently or previously owned or operated by the Company or in
connection with the Company's Business except for authorized discharges
complying with applicable Environmental Laws.
(f) For purposes hereof:
(i) "Business" means the current and former
businesses of the Company and its subsidiaries including, but
not limited to, businesses or subsidiaries that have been
previously sold by the Company, its subsidiaries or any
predecessors thereto.
(ii) "Environmental Laws" means all Laws
relating to the protection of human health or the environment,
or to any emission, discharge, generation, processing,
storage, holding, abatement, existence, Release, threatened
Release or transportation of any chemical or Hazardous
Substances, including, but not limited to, (i) CERCLA, the
Resource Conservation and Recovery Act, the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, property
transfer statutes or requirements and (ii) all other
requirements pertaining to reporting, licensing, permitting,
investigation or remediation of Hazardous Substances in the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, sale, treatment,
receipt, storage, disposal, transport or handling of Hazardous
Substances or relating to human health or safety from exposure
to Hazardous Substances.
(iii) "Environmental Liabilities and Costs"
means all damages, natural resource damages, claims, losses,
expenses, costs, obligations, and liabilities (collectively,
"Losses"), whether direct or indirect, known or unknown,
current or potential, past, present or future, imposed by,
under or pursuant to Environmental Laws, including, but not
limited to, all Losses related to Remedial Actions, and all
fees, capital costs, disbursements, penalties, fines and
expenses of counsel, experts, contractors, personnel and
consultants and the value of any services that might be
provided by the Company or any of its subsidiaries in lieu
thereof and expenditures necessary to cause any such property
or the
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Company or any subsidiary to be in compliance with
requirements of Environmental Laws.
(iv) "Environmental Permits" means any
federal, state, provincial or local permit, license,
registration, consent, order, administrative consent order,
certificate, approval or other authorization necessary for the
conduct of the Business as currently conducted, and wherever
it is currently conducted, under any applicable Environmental
Law.
(v) "Governmental Entity" means any
government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or
regulatory authority, agency, commission, tribunal or body,
domestic, foreign or supranational.
(vi) "Hazardous Substances" means any
substance that (a) is defined, listed or identified or
otherwise regulated under any Environmental Law (including,
without limitation, radioactive substances,
polycholorinated-biphenyls, petroleum and petroleum
derivatives and products) or (b) requires investigation,
removal or remediation under applicable Environmental Law.
(vii) "Laws" means all (A) constitutions,
treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances or codes of any
Governmental Entity, (B) Environmental Permits, and (C)
orders, decisions, injunctions, judgments, awards and decrees
of any Governmental Entity.
(viii) "Release" shall be as defined in
CERCLA.
(ix) "Remedial Action" means all actions
required by any Governmental Entity pursuant to Environmental
Law or otherwise taken as necessary to comply with
Environmental Law to (i) clean up, remove, treat or in any
other way remediate any Hazardous Substances; (ii) prevent the
release of Hazardous Substances so that they do not migrate or
endanger or threaten to endanger public health or welfare or
the environment; or (iii) perform studies, investigations or
monitoring in respect of any such matter.
SECTION 3.22. MATERIAL CONTRACTS. Neither the Company nor
any of its subsidiaries is a party to or bound by any:
(a) employment or consulting agreement or
contract that has an aggregate future liability in excess of
$100,000 annually and is
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not terminable by the Company or a subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
(b) employee collective bargaining agreement
or other contract with any labor union;
(c) covenant of the Company or a subsidiary
not to compete;
(d) agreement, contract or other arrangement
with any current or former officer, director, or any relative
thereof, of the Company or any subsidiary (other than
employment agreements covered by clause (i) above);
(e) lease, sublease or similar agreement
involving annual payments in excess of $100,000 with any
person (other than the Company or a subsidiary) under which
the Company or a subsidiary is a lessor or sublessor of, or
makes available for use to any person (other than the Company
or a subsidiary), (A) any Company Property (as hereinafter
defined) or (B) any portion of any premises otherwise occupied
by the Company or a subsidiary;
(f) lease or similar agreement with any
person (other than the Company or a subsidiary) under which
(A) the Company or a subsidiary is lessee of, or holds or
uses, any machinery, equipment, vehicle or other tangible
personal property owned by any person or (B) the Company or a
subsidiary is a lessor or sublessor of, or makes available for
use any person, any tangible personal property owned or leased
by the Company or a subsidiary, in any such case which has an
aggregate annual future liability or receivable, as the case
may be, in excess of $100,000 and is not terminable by the
Company or a subsidiary by notice of not more than 60 days for
a cost of less than $100,000;
(g) (A) continuing contract for the future
purchase of materials, supplies or equipment (other than
purchase contracts and orders for inventory in the ordinary
course of business consistent with past practice) in excess of
$100,000 annually, (B) management, service, consulting or
other similar type of contract or (C) advertising agreement or
arrangement, in any such case which has an aggregate future
liability to any person (other than the Company or a
subsidiary) in excess of $100,000 and is not terminable by the
Company or a subsidiary by notice of not more than 60 days for
a cost of less than $100,000;
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(h) material license, option or other
agreement relating in whole or in part to intellectual
property (including any license or other agreement under which
the Company or a subsidiary is licensee or licensor of any
such intellectual property);
(i) agreement, contract or other instrument
under which the Company or a subsidiary has borrowed any money
from, or issued any note, bond, debenture or other evidence of
indebtedness to, any person (other than the Company or a
subsidiary) or any other note, bond, debenture or other
evidence of indebtedness issued to any person (other than the
Company or a subsidiary);
(j) agreement, contract or other instrument
(including so-called take-or-pay or keepwell agreements) under
which (A) any person (including the Company or a subsidiary)
has directly or indirectly guaranteed Liabilities of the
Company or a subsidiary or (B) the Company or a subsidiary has
directly or indirectly guaranteed Liabilities of any person
(in each case other than endorsements for the purpose of
collection in the ordinary course of business);
(k) agreement, contract or other instrument
under which the Company or a subsidiary has, directly or
indirectly, made any advance, loan, extension or credit or
capital contribution in excess of $50,000 to, or other
investment in any person;
(l) mortgage, pledge, security agreement,
deed of trust or other instrument granting a lien or other
encumbrance upon any Company Property;
(m) agreement or instrument providing for
indemnification of any person with respect to Liabilities
relating to any current or former business of the Company, a
subsidiary or any predecessor person exclusive of
indemnifications included in other documents listed in the
Company Disclosure Schedule or granted to sellers of real
property owned or leased by the Company or its affiliates; or
(n) any other material agreement, contract,
management contract, lease, license, commitment or instrument
to which the Company or any subsidiary is a party or by or to
which it or any of its assets or business is bound or subject,
not covered by any of the categories specified in clauses (i)
through (xiii) above.
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All agreements, contracts, leases, licenses,
commitments or instruments of the Company or any subsidiary listed in
the Company Disclosure Schedule (collectively, the "Contracts") are
valid, binding and in full force and effect and are enforceable by the
Company or the relevant subsidiary in accordance with its terms. The
Company and the subsidiaries have performed all material obligations
required to be performed by them to date under the Contracts and they
are not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder and, to
the knowledge of the Company and its subsidiaries, no other party to
any of the Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder.
SECTION 3.23. PROPERTY. Section 3.23 of the Company Disclosure
Schedule accurately identifies all real property, leases and other rights in
real property, structures and other buildings of the Company and, with the
exception of Quail, its subsidiaries (collectively, the "Company Properties").
All properties and assets of the Company and its subsidiaries, real and
personal, material to the conduct of their respective businesses are, except for
changes in the ordinary course of business since December 31, 1998, reflected in
the balance sheet of the Company dated December 31, 1998 (the "1998 Balance
Sheet"), the Company and its subsidiaries (other than Quail) have good and
marketable title to their respective real and personal property reflected on the
1998 Balance Sheet or acquired by them since the date of such balance sheet,
free and clear of all mortgages, liens, pledges, encumbrances, charges,
agreements, claims, restrictions and defects of title (collectively, "Title
Liens"), other than Permitted Title Liens (as defined below). All real property,
structures and other buildings and material equipment of each of the Company and
its subsidiaries (other than Quail) are currently used in the operation of the
business, are adequately maintained and are in satisfactory operating condition
and repair for the requirements of the business as presently conducted.
"Permitted Title Liens" means Title Liens for (i) taxes or other charges or
levies of a Governmental Entity which are not due and payable or which are being
contested in good faith by appropriate proceedings as described in Section 3.14
of the Company Disclosure Schedule and as to which adequate financial reserves
have been established and described in Section 3.14 of the Company Disclosure
Schedule; (ii) workmen's, repairmen's or other similar Title Liens (inchoate or
otherwise) arising or incurred in the ordinary course of business in respect of
obligations which are not overdue; (iii) minor title defects, easements or Title
Liens affecting real property, which defects, easements or Liens do not,
individually or in the aggregate, materially impair the continued use,
occupancy, value or marketability of title of the real property to which they
relate, assuming that the property is used on substantially the same basis as
such property is currently being used by the Company.
SECTION 3.24. INSURANCE. Section 3.24 of the Company
Disclosure Schedule accurately identifies each material insurance policy
(including policies
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providing property, casualty, environmental liability, liability, malpractice
and workers compensation insurance) and all other material types of insurance
maintained by the Company and its subsidiaries, together with carriers and
liability limits for each such policy, other than those insurance policies that
are maintained separately by and/or for Quail. Each such policy is duly in force
and no notice has been received by the Company or any of its subsidiaries from
any insurance carrier purporting to cancel or reduce coverage under any such
policy. The Company and its subsidiaries (other than Quail) are current in all
premiums or other payments due thereunder and no notice has been received by the
Company or any of its subsidiaries (other than Quail) from any insurance carrier
purporting to increase any such premiums in any material respect. All insurance
coverage held for the benefit of the Company or its subsidiaries (other than
Quail) is adequate to cover risks customarily insured against by similar
companies in their industry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
SECTION 4.01. ORGANIZATION. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not be reasonably expected to prevent or materially delay
the consummation of the Merger.
SECTION 4.02. AUTHORITY. Parent and Sub have requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub and no other corporate proceedings on the part of
Parent and Sub are necessary to authorize this Agreement or to consummate such
transactions. No vote of Parent shareholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Sub, as the case may be, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, constitutes
a valid and binding obligation of each of Parent and Sub enforceable against
them in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
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SECTION 4.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Proxy Statement), the HSR Act, the MBCL, the
Massachusetts General Laws, the laws of other states in which Parent is
qualified to do or is doing business, state takeover laws and foreign laws,
neither the execution, delivery or performance of this Agreement by Parent and
Sub nor the consummation by Parent and Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation, articles of organization or By-Laws of
Parent and Sub, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
be reasonably expected to prevent or materially delay the consummation of the
Merger), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Merger.
SECTION 4.04. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement and related filings, will, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
SECTION 4.05. INTERIM OPERATIONS OF SUB. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE V
COVENANTS
SECTION 5.01. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement, as expressly agreed to in writing by Parent or
in
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connection with the Disposition, or as described in Section 5.01 of the
Company Disclosure Schedule, during the period from the date of this Agreement
until the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations according to its ordinary and usual
course of business and consistent with past practice and use its and their
respective commercially reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them and to preserve goodwill. Without limiting the generality of
the foregoing, and except as (x) otherwise expressly provided in this Agreement,
(y) required by law, or (z) set forth in Section 5.01 of the Company Disclosure
Schedule, the Company will not, and will cause its subsidiaries not, without the
consent of Parent, to:
(a) (i) declare, set aside or pay any dividends on,
or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to
its stockholders in their capacity as such, other than dividends
declared prior to the date of this Agreement, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than
in connection with the exercise of options outstanding prior to the
date hereof in accordance with their current terms);
(c) amend its Articles of Organization or By-Laws;
(d) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets
that in the aggregate have a value in excess of 1% of the Company's
assets;
(e) except for the Disposition and in the ordinary
course of business, sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets that in the
aggregate have an excess of 1% of the Company's assets;
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(f) amend or otherwise modify, or terminate, any
material Contract, or enter into any joint venture, lease or management
agreement or other material agreement of the Company or any of its
subsidiaries (other than the Employment Agreement);
(g) except in the ordinary course of business under
the Company's existing line of credit (including letters of credit),
incur any additional indebtedness (including for this purpose any
indebtedness evidenced by notes, debentures, bonds, leases or other
similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of 1% of the Company's assets, or
make any loans, advances or capital contributions to, or investments
in, any other person;
(h) alter through merger, liquidation,
reorganization, restructuring or in any other fashion its corporate
structure or ownership;
(i) except as may be required as a result of a change
in law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it;
(j) revalue any of its assets, including, without
limitation, writing down the value of its inventory or writing off
notes or accounts receivable other than in the ordinary course of
business;
(k) make any tax election, change any annual tax
accounting period, amend any tax return, settle or compromise any
income tax liability, enter into any closing agreement, settle any tax
claim or assessment, surrender any right to claim a tax refund or fail
to make the payments or consent to any extension or waiver of the
limitations period applicable to any tax claim or assessment;
(l) except in the ordinary course of business, settle
or compromise any pending or threatened suit, action or claim with a
cost of $100,000 or more;
(m) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the
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financial statements (or the notes thereto) of the Company or incurred
in the ordinary course of business consistent with past practice;
(n) increase in any manner the compensation or fringe
benefits of any of its directors or officers or pay any pension or
retirement allowance not required by any existing plan or agreement to
any such employees, or become a party to, amend or commit itself to any
pension, retirement, profit-sharing savings, severance, incentive or
other or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee, other than increases in the
compensation of employees who are not officers or directors of the
Company or any of its subsidiaries made in the ordinary course of
business consistent with past practice, or, except to the extent
required by law, voluntarily accelerate the vesting of any compensation
or benefit, or grant any loans or increases to any outstanding loans to
any of the Company's or its subsidiaries, directors or officers;
(o) waive, amend or allow to lapse any term or
condition of any confidentiality, "standstill," consulting, advisory or
employment agreement to which the Company is a party;
(p) approve any annual operating budgets for the
Company and its subsidiaries;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the
business currently engaged in by the Company;
(t) pursuant to or within the meaning of any
bankruptcy law, (i) commence a voluntary case, (ii) consent to the
entry of an order for relief against it in an involuntary case, (iii)
consent to the appointment of a custodian of it or for all or
substantially all of its property or (iv) make a general assignment for
the benefit of its creditors;
(u) purchase or lease or enter into a binding
agreement to purchase or lease any real property;
(v) enter into or amend, modify or terminate any
employment, consulting or independent contractor agreement, arrangement
or understanding with any officer, director, or any relative thereof,
or employee;
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(w) enter into any development agreement, option
relating to new development or any other obligation relating to new
development which in the aggregate would have a cost to the Company in
excess of 1% of the Company's assets;
(x) make any capital contributions, loans or
other payments to, or on account of Quail; or
(y) take, or agree in writing or otherwise to take,
any of the foregoing actions.
During the period from the date of this Agreement through the
Effective Time, (i) as reasonably requested by Parent so as not to interfere
with ongoing operations of the Company, the Company shall confer on a regular
basis with one or more representatives of Parent with respect to material
operational matters; (ii) the Company shall, within 30 days following each
fiscal month, deliver to Parent management prepared unaudited financial
statements as to the Company, including an income statement and balance sheet
for such month; and (iii) upon obtaining knowledge of any material adverse
change to the Company, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach in any material respect of any
representation or warranty contained herein, the Company shall promptly notify
Parent thereof.
The Company shall have the right to update the Company
Disclosure Schedule between the date hereof and the Effective Time to reflect
actions taken by the Company and its subsidiaries which are permitted to be
taken pursuant to this Section 5.01.
SECTION 5.02. NO SOLICITATION.
(a) The Company and its officers, directors,
employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition or exchange of all
or any material portion of the assets of, or any equity interest in,
the Company or any of its subsidiaries or any business combination with
the Company or any of its subsidiaries (except as contemplated by this
Agreement or in connection with the Disposition). The Company agrees
that, prior to the Effective Time, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information
in furtherance of, any inquiries or the making of any proposal with
respect to any Acquisition Proposal (as defined below), or negotiate,
explore or otherwise engage in discussions with
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any person (other than Parent, its affiliates or their respective
directors, officers, employees, agents and representatives) with
respect to any Acquisition Proposal or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail
to consummate the Merger or any other transactions contemplated by this
Agreement; PROVIDED; HOWEVER, that the Company may furnish information,
pursuant to a customary confidentiality agreement with terms not more
favorable to such third party than the Confidentiality Agreement (as
defined in Section 6.02), to, and negotiate or otherwise engage in
discussions with, any party who delivers a bona fide written proposal
for an Acquisition Proposal for which all necessary financing is then
in the judgment of the Company's Independent Committee of the Board of
Directors reasonably obtainable, if the Company's Independent Committee
of the Board of Directors determines in good faith by a vote of a
majority of the members of the Independent Committee of the Board of
Directors that failing to take such action would create a reasonable
possibility of a breach of the fiduciary duties of the Company's Board
of Directors (after consultation with its outside legal counsel) and
such a proposal is, in the written opinion of the Company's financial
advisor, more favorable to the Company's stockholders from a financial
point of view than the transactions contemplated by this Agreement as
the same has been proposed to be amended by Parent pursuant to Section
5.02(b); PROVIDED, FURTHER, that nothing contained in this Section 5.02
shall prohibit the Company or its Board of Directors from making such
disclosure to the Company's stockholders which, in the judgment of the
Board of Directors of the Company (after consultation with its outside
legal counsel), may be required under applicable law.
(b) From and after the execution of this Agreement,
the Company shall promptly advise Parent in writing of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations or
proposals relating to an Acquisition Proposal, identify the offeror and
furnish to the Parent a copy of any such proposal or inquiry, if it is
in writing, relating to an Acquisition Proposal. The Company shall
promptly advise Parent of any material development relating to such
proposal, including the results of any discussions or negotiations with
respect thereto. Notwithstanding anything in this Agreement to the
contrary, prior to the approval of an Acquisition Proposal by the
Company's Board of Directors Board in accordance with Section 8.01(d),
Company shall give Parent sufficient notice of the material terms and
conditions of any such Acquisition Proposal and negotiate in good faith
with Parent for a period of not less than five business days after
receipt of a written proposal or a written summary of any oral proposal
to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions
contemplated herein.
(c) For purposes hereof: "Acquisition Proposal" means
any inquiry, proposal or offer from any person relating to any direct
or indirect
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acquisition or purchase of 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any tender offer
or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of
the Company or any of its subsidiaries, any merger, consolidation,
business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement and the Disposition, or any
other transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially delay the
Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby.
SECTION 5.03. OTHER ACTIONS. The Company shall not, and shall not
permit any of its subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as
to materiality becoming untrue or (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material respect
(subject to the Company's right to take actions specifically permitted by
Section 5.02).
SECTION 5.04. NOTICE OF CERTAIN EVENTS. The Company and Parent
shall promptly notify each other of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Government
Entity in connection with the transactions contemplated by this Agreement;
(c) any action, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party or any of its subsidiaries;
(d) an administrative or other order or notification relating
to any material violation or claimed violation of law;
(e) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Closing Date; and
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(f) any material failure of any party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 5.04
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDER APPROVAL; PREPARATION OF PROXY
STATEMENT.
(a) The Company shall call, give notice of, convene
and hold a meeting of its stockholders (the "Stockholders Meeting") for
the purpose of obtaining the Company Stockholder Approval as soon as
practicable following the execution of this Agreement. The Company
will, through its Board of Directors, recommend to its stockholders
that the Company Stockholder Approval be given. Without limiting the
generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 6.01(a) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of this Agreement or the Merger, except
upon a termination of this Agreement pursuant to Section 8.01(d).
(b) The Company shall as soon as practicable
following the execution of this Agreement, prepare and file a
preliminary Proxy Statement with the SEC and will use its best efforts
to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after responding to all such comments to the
satisfaction of the staff and will make any additional filings as may
be required by law. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy
Statement, or any additional filings, or for additional information,
and will supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the Proxy Statement and
any additional filings, or the Merger. If at any time prior to the
Stockholders Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company
will promptly prepare and mail to its stockholders such an amendment or
supplement. The
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Company will not mail or file any Proxy Statement, or make any
additional filings, or any amendment or supplement thereto, to which
Parent reasonably objects unless, upon consultation with counsel, the
Company determines such document is required as a matter of law.
(c) Grandparent and Parent agree to cause all Shares
owned by Grandparent, Parent or any subsidiary of Grandparent or Parent
to be voted in favor of the Company Stockholder Approval.
SECTION 6.02. ACCESS TO INFORMATION. From the date hereof
until the Effective Time, the Company shall give Parent and Sub, their counsel,
financial advisors, auditors and other authorized representatives full access to
the offices, properties, books and record of the Company and its subsidiaries
during normal business hours, will furnish to Parent and Sub, their counsel,
financial advisors, financial institutions auditors and other authorized
representatives such financial and operating data and other information as such
may be reasonably requested and will instruct the employees of the Company and
its subsidiaries, their counsel and financial advisors to cooperate with Parent
and Sub in their investigation of the Business; PROVIDED, that no investigation
pursuant to this Section 6.02 shall affect any representation or warranty given
by the Company to Parent and Sub hereunder; and PROVIDED, FURTHER, that any
information provided to Parent and/or Sub pursuant to this Section 6.02 shall be
subject to the confidentiality agreement, dated as of May 19, 1999 (the
"Confidentiality Agreement"), the terms of which shall continue to apply, except
as otherwise agreed by the Company, unless and until the Effective Time and
notwithstanding termination of this Agreement and provided further that any
requests shall not interfere with ongoing operations of the Company and its
subsidiaries.
SECTION 6.03. REASONABLE EFFORTS. Each of the Company, Parent
and Sub agree to use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on itself with respect to the Merger (which actions shall include
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their subsidiaries in connection
with the Merger. Each of the Company, Parent and Sub will, and will cause its
subsidiaries to, use its reasonable efforts to take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, Sub, the Company or any of their subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement, except that no party need waive any substantial rights or
agree to any substantial limitation on its operations or to dispose of any
assets.
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SECTION 6.04. FEES AND EXPENSES.
(a) In addition to any other amounts which may be
payable or become payable pursuant to any other paragraph of this
Section 6.04, in the event that this Agreement is terminated (i) by
Parent (A) if there occurs a material breach by the Company of any
term, covenant, representation or warranty contained in this Agreement,
(B) pursuant to Section 8.01(e) or (C) pursuant to Section 8.01(g) or
(ii) by the Company pursuant to Section 8.01(d) of this Agreement, the
Company shall promptly reimburse the Parent or Sub, as the case may be,
for all out-of-pocket expenses and fees (including, without limitation,
fees and expenses payable to all Governmental Entities, banks,
investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents,
experts and consultants to Parent and its affiliates), actually
incurred, whether incurred prior to, on or after the date hereof, in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement (the "Fees") up to a maximum amount of
$300,000. Except as otherwise specifically provided for herein, whether
or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
(b) If this Agreement is terminated by the Company if
there occurs a material breach by Grandparent, Parent or Sub of any
term, condition, covenant, representation or warranty contained in this
Agreement, Parent shall promptly reimburse the Company for all Fees, up
to a maximum amount of $300,000.
(c) In the event that this Agreement is terminated
pursuant to Section 8.01(d) or (e), then, in addition to the amounts
paid pursuant to Section 6.04(b), the Company shall promptly pay Parent
a termination fee of $600,000 (the "Termination Fee").
(d) The prevailing party in any legal action
undertaken to enforce this Agreement or any provision hereof shall be
entitled to recover from the other party the costs and expenses
(including attorneys' and expert witness fees and expenses) incurred in
connection with such action.
(e) Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, stamp, recording,
documentary or other taxes and any other fees and similar taxes which
become payable in connection with the Merger
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(collectively, "TRANSFER TAXES"). The Company will pay all of the
Transfer Taxes, except that Parent will pay all fees related to the HSR
Act.
SECTION 6.05. INDEMNIFICATION; INSURANCE.
(a) Parent and Sub agree that all rights to
indemnification for acts or omissions occurring prior to and
concurrently with the Effective Time now existing in favor of the
current or former directors or officers (the "Indemnified Parties") of
the Company and its subsidiaries as provided in their respective
articles of organization or by-laws (or similar organizational
documents) or existing indemnification contracts (all of which have
been disclosed in Section 3.10 of the Company Disclosure Schedule)
shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and the Surviving Corporation's Articles
of Organization and By-laws shall reflect such protections.
(b) For six years from the Effective Time, Parent
shall cause the Surviving Corporation to maintain in effect the
Company's current directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been
heretofore delivered to Parent); PROVIDED, HOWEVER, that in no event
shall Parent be required to expend in any one year an amount in excess
of 150% of the annual premiums currently paid by the Company for such
insurance (which the Company represents is currently not more than
$50,000); and, PROVIDED, FURTHER, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated only
to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) This Section 6.05 shall survive the consummation
of the Merger at the Effective Time, is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties, and
shall be binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 6.06. CERTAIN LITIGATION. The Company agrees that it
will not settle any litigation commenced after the date hereof against the
Company or any of its officers or directors by any stockholder of the Company
relating to the Merger or this Agreement, without the prior written consent of
Parent. In addition, the Company will not voluntarily cooperate with any third
party which may hereafter seek to restrain or prohibit or otherwise oppose the
Merger and will cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Merger, unless the Board of
Directors of the Company determines in good faith, after consultation with and
receipt of a written opinion to such effect from its outside counsel, that
failing so to cooperate with
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such third party or cooperating with Parent or Sub, as the case may be, would
constitute a breach of the director's fiduciary duties under applicable law.
ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) COMPANY STOCKHOLDER APPROVAL. The Company
Stockholder Approval shall have been obtained.
(b) HSR ACT. Any waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or early termination thereof shall have been
granted, without limitation, restriction or condition of any kind.
(c) NO INJUNCTIONS OR RESTRAINTS. No statute, rule,
regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger
shall be in effect; PROVIDED, HOWEVER, that each of the parties shall
have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(d) DISPOSITION OF QUAIL. The Disposition of Quail
shall have occurred pursuant to the terms of an agreement in the form
attached hereto as Exhibit B hereto, with no waivers, amendments or
modifications of the terms thereof other than as consented to in
writing by Parent. All items stated therein to be to the agreement,
approval or satisfaction of the Company shall also be to the prior
written agreement, approval or satisfaction of Parent. The Company
shall have obtained a fairness opinion with respect to the
consideration being paid for the sale of Quail. Following the
Disposition, the Company shall have no Liabilities, other than as
specified in the Disposition Agreement, related to Quail or its
Disposition other than the payment of Taxes in connection with the
receipt of the purchase price therefor.
(e) REQUIRED CONSENTS. (i) All consents and approvals
required as set forth in Section 3.05 of the Company Disclosure
Schedule shall have been
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made or obtained, without limitation, restriction or condition and (ii)
all other consents and approvals shall have been made or obtained,
without limitation, restriction or condition that has or would have a
material adverse effect on the Company (or any effect on Parent and
Sub), except for such authorizations the failure of which does not and
would not, individually or in the aggregate, have a material adverse
effect on the Company (or any material adverse effect on Parent and
Sub).
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
respective obligations of Parent and Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent to the extent permitted by
applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this
Agreement, to the extent qualified by materiality or material adverse
effect, shall have been true and, to the extent not qualified by
materiality or material adverse effect, shall have been true in all
material respects, in each case when made and on and as of the
Effective Time as though made on and as of the Effective Time (except
for representations and warranties made as of a specified date, which
need be true, or true in all material respects, as the case may be,
only as of the specified date) and Parent and Sub shall have received a
certificate of the Company to that effect signed by a duly authorized
officer thereof.
(b) PERFORMANCE. The Company shall have performed or
complied with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the Effective
Time.
(c) OTHER AUTHORIZATIONS. All authorizations (other
than those specified in Section 7.01(b) and 7.01(e) hereof) required in
connection with the execution and delivery of this Agreement and the
performance of the obligations hereunder shall have been made or
obtained, without any limitation, restriction or condition that has or
would have a material adverse effect on the Company (or any effect on
Parent and Sub), except for such authorizations the failure of which to
have been made or obtained does not and would not, individually or in
the aggregate, have a material adverse effect on the Company (or any
material adverse effect on Parent and Sub).
(d) INTERCOMPANY ACCOUNTS. All intercompany accounts
between the Company and Quail shall have been settled as nearly as
possible as can be determined at the Closing Date on an accrual basis
in accordance with generally accepted accounting principles (except
that adjustments for the month in
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which the Closing Date occurs shall be made on a cash basis) and an
accounting satisfactory to Parent, shall have been made thereof except
that $1 million worth in loans outstanding from the Company to Quail at
the Effective Time shall be converted into a loan with the following
terms, subject to documentation reasonably satisfactory to Parent (the
"Quail Loan"): (i) the repayment of the Quail Loan shall be guaranteed
by Executive and secured, with recourse solely to, the $1 million
payment to the Executive under Section 3 of the Employment Agreement,
(ii) the Quail Loan will be payable in 36 equal monthly installments of
principal, with simple annual interest thereon at the "prime rate," as
announced from time to time by Citibank, N.A., with the first such
installment of principal and interest payable on the last business day
of the first full month following the Effective Time and thereafter on
the last business day of each of the next 35 months following such
date, and (iii) the Quail Loan shall be subordinated to payment
obligations of Quail to its senior lenders providing financing for the
Disposition in form and substance satisfactory to Parent. Quail
shall have paid the Company as part of the above intercompany account
settlement $145,000 on account of the Thomas J. Hammer Option
payment referred to in Section 2.03(b)(iii).
(e) COMPANY DEBT. As at the Effective Time, the
Company and its subsidiaries (other than Quail) will have no
"indebtedness" other than (i) the loans outstanding under the financing
provided by the Massachusetts Industrial Finance Authority, (ii) trade
debt incurred and outstanding in the ordinary course of business, (iii)
any indebtedness to Citizens Bank for borrowing incurred to pay trade
debts in the ordinary course of business or expenses in connection with
the transactions contemplated herein, (iv) the Quail Loan and (v) any
capital leases existing as of the date hereof. For the purposes of this
paragraph "indebtedness" shall mean and include (1) all obligations of
such entity for borrowed money, (2) all obligations of such entity
evidenced by bonds, debentures, notes or other similar instruments, (3)
all obligations of such entity to pay the deferred purchase price of
property, except accounts payable arising in the ordinary course of
business, (4) all obligations of such entity as lessee under capital
leases, (5) all indebtedness of others secured by a lien on any asset
of such entity, whether or not such indebtedness is assumed by such
entity, and (6) all indebtedness of others guaranteed by such entity.
(f) EMPLOYMENT AGREEMENT. The Employment Agreement
entered into by the Company and Executive, as provided in Section 3.07,
shall not have been modified or amended in any manner since its
execution and shall be in full force and effect as of the Effective
Time.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the
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following conditions, any or all of which may be waived in whole or
in part by the Company to the extent permitted by applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Parent and Merger Sub contained in
this Agreement, to the extent qualified by materiality shall be true
and, to the extent not qualified by materiality shall be true in all
material respects, in each case when made and on and as of the
Effective Time as though made on and as of the Effective Time (except
for representations and warranties made as of a specified date, which
need be true, or true in all material respects, as the case may be,
only as of the specified date) and the Company shall have received a
certificate of Parent and Sub to that effect signed by a duly
authorized officer thereof.
(b) PERFORMANCE. Parent and Sub shall have performed
or complied with all agreements and conditions contained herein
required to be performed or complied with by them prior to or at the
Effective Time.
(c) PURCHASE OF NICHIMEN SHARES. Parent shall have
purchased, and Nichimen Corporation ("NMC") and Nichimen America Inc.
("NAI") shall have sold to Parent, all Shares held by NMC, NAI or any
of their subsidiaries, and the Company shall have received a
certificate of Parent to that effect signed by a duly authorized
officer thereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of the
terms of this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the
Company, by action of their respective Boards of Directors;
(b) by Parent or the Company if the Merger shall not
have been consummated on or before December 31, 1999; PROVIDED,
HOWEVER, that neither Parent nor the Company may terminate this
Agreement pursuant to this Section 8.01(b) if such party shall have
materially breached this Agreement;
(c) by Parent or the Company if any court of
competent jurisdiction or other Governmental Entity has issued an
order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
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nonappealable; PROVIDED, HOWEVER, that the party seeking to terminate
this Agreement shall have used its reasonable best efforts to remove or
lift such order, decree, ruling or other action;
(d) by the Company if, following compliance with the
Company of its obligations under Section 5.02, (i) the Company's Board
of Directors approves an Acquisition Proposal, for which all necessary
financing is then in the judgment of the Company Board reasonably
obtainable, on terms which a majority of the members of the Company's
Independent Committee of the Board of Directors has determined in good
faith after consultation with its outside legal counsel to the effect
that failing to take such action would create a reasonable possibility
of a breach of the fiduciary duties of the Company's Board of
Directors, and (ii) such Acquisition Proposal is, in the written
opinion of the Company's financial advisor, more favorable from a
financial point of view to the Company's stockholders than the
transactions contemplated by this Agreement (as the same may have been
proposed to be amended by Parent as provided in Section 5.02(b));
PROVIDED; HOWEVER; that the termination described in this Section
8.01(d) shall not be effective unless and until the Company shall have
paid to Parent all of the fees and expenses described in Section
6.04(b) including, without limitation, the Termination Fee;
(e) by Parent, if the Company Board shall have (i)
failed to recommend to the stockholders of the Company that they
approve and adopt this Agreement (the "Stockholder Acceptance"), (ii)
withdrawn or modified its approval or recommendation of this Agreement
or the Merger, (iii) approved or recommended an Acquisition Proposal or
(iv) resolved to effect any of the foregoing;
(f) by either Parent or the Company, if the Company
Stockholder Approval shall not have been obtained at a Stockholders
Meeting including any adjournments thereof; or
(g) by Parent if the Stockholder Agreement (the
"Stockholder Agreement") in the form attached hereto as Exhibit C,
shall not have been executed and delivered by Leslie B. Lewis,
individually and as trustee of a certain voting trust described
therein, to Parent on August 9, 1999.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent, Sub or the Company or their respective officers or directors, except
with respect to the Confidentiality Agreement,
44
<PAGE>
Section 6.04, this Section 8.02 and Article IX; PROVIDED, HOWEVER, that nothing
herein shall relieve any party for liability for any breach hereof.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after obtaining the Company Stockholder
Approval, but, after any such approval, no amendment shall be made which by law
requires further approval by such shareholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the terms of this Agreement or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party hereto to assert any of
its rights hereunder or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall terminate at the Effective Time.
SECTION 9.02. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
45
<PAGE>
(a) if to Grandparent, Parent or Sub:
c/o Asahi Organic Chemicals Industry Co., Ltd.
15-9 Uchikanda 2-chome,
Chiyoda-ku, Tokyo 101-0047, Japan
Attention: Ichiro Murao
Telecopy No.:03-3254-3473
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: David M. Wilf, Esq.
Telecopy No.: (212) 541-5369
and
(b) if to the Company:
Asahi/America, Inc.
19 Green Street,
Malden, MA 02148
Attention: President
Telecopy No.: (781) 321-8467
with a copy to:
Gadsby & Hannah LLP
225 Franklin Street
Boston, MA 02110-2811
Attention: Burton Winnick, Esq.
Telecopy No.: (617) 345-7050
SECTION 9.03. INTERPRETATION. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" 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 term "subsidiary" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
46
<PAGE>
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person. As used in this Agreement,
"material adverse change" or "material adverse effect" means, when used in
connection with the Company, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, financial condition, prospects
or results of operations of the Company and its subsidiaries taken as a whole.
Notwithstanding the foregoing, a material adverse change or material adverse
effect shall not include any material adverse change or material adverse effect
caused by any change resulting from the announcement of the Merger.
SECTION 9.04. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 9.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.05, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 9.06. GOVERNING LAW. This Agreement shall be
governed and construed in accordance with the laws of the Commonwealth of
Massachusetts without regard to any applicable conflicts of law.
SECTION 9.07. PUBLICITY. Except as otherwise required by law
or the rules of the Nasdaq National Market, for so long as this Agreement is in
effect, neither the Company nor Parent shall, or shall permit any of its
subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
47
<PAGE>
SECTION 9.09. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the Commonwealth of Massachusetts or in a Massachusetts
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit to the personal jurisdiction of any Federal court located in
the Commonwealth of Massachusetts or any Massachusetts state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal court sitting in the Commonwealth of Massachusetts or a Massachusetts
state court and (iv) waives any right to trial by jury with respect to any claim
or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
[Text continued on next page]
48
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
MIDNIGHT ACQUISITION HOLDINGS,
INC.
By: /s/ Ichiro Murao
--------------------------
Name: Ichiro Murao
Title: President
MIDNIGHT ACQUISITION CORP.
By: /s/ Ichiro Murao
--------------------------
Name: Ichiro Murao
Title: President
ASAHI/AMERICA, INC.
By: /s/ Leslie B. Lewis
--------------------------
Name: Leslie B. Lewis
Title: President
The undersigned hereby consents to the provisions of Section
2.01(b) of the Agreement and agrees to the obligations of the undersigned stated
in Section 6.01 of the Agreement. The undersigned irrevocably, unconditionally
and absolutely guarantees to the Company primarily and not merely as a surety
that Parent and Sub will duly and punctually pay or perform, all of their
obligations and liabilities arising pursuant to the terms of this Agreement and
such other agreements as may be entered into by Parent or Sub in connection with
this Agreement. The undersigned hereby waives to the fullest extent permitted by
law all defenses based on the granting of any time or other indulgence, or the
variation, renewal or release of or neglect to enforce any right or remedy
against or with respect to Parent and Sub. The undersigned further agrees to be
bound by the terms of Sections 9.06, 9.08 and 9.09 of this Agreement in the same
manner as the parties to this Agreement.
ASAHI ORGANIC CHEMICALS
INDUSTRY CO., LTD.
By: /s/ Haruro Tabata
--------------------------
Name: Haruro Tabata
Title: Chairman & CEO
49
<PAGE>
ANNEX I
DEFINITIONS
<TABLE>
<S> <C>
"1998 Balance Sheet", 27 "Environmental Liabilities and
"1998 Financial Statements", 13 Costs", 23
"Acquisition Proposal", 34 "Environmental Permits", 24
"Agreement", 1 "Equity Plan", 7
"Articles of Merger", 1 "ERISA", 14
"Benefit Plan", 14 "Exchange Act", 10
"Board", 1 "Executive", 1
"Business", 23 "Fairness Opinion", 19
"Certificates", 5 "Fees", 38
"Closing Date", 2 "Financial Adviser", 19
"Closing", 2 "Governmental Entity", 11, 24
"Code", 5 "Grandparent", 4
"Commonly Controlled Entity", "Hazardous Substances", 24
14 "HSR Act", 10
"Company Common Stock", 1 "Indemnified Parties", 39
"Company Disclosure Schedule", "Laws", 24
8 "Liabilities", 13
"Company Intellectual Property "Liens", 8
Rights", 19 "Losses", 23
"Company Permits", 16 "MBCL", 1
"Company Preferred Shares", 9 "Merger Consideration", 4
"Company Properties", 27 "Merger", 1
"Company SEC Documents", 11 "NAI", 43
"Company Stockholder "Net Quail Proceeds", 4
Approval", 10 "NMC", 43
"Company", 1 "Option Plan", 7
"Confidentiality Agreement", 37 "Option Plans", 7
"Contracts", 26 "Option", 7
"Directors Plan", 7 "Options", 7
"Disposition Agreement", 4 "Parent", 1
"Dissenting Shares", 4 "Paying Agent", 5
"Dissenting Stockholder", 4 "Pension Plan", 14
"Effective Time", 2 "Permitted Title Liens", 27
"Employment Agreement", 12 "Proxy Statement", 10
"Environmental Laws", 23 "Quail Loan", 42
</TABLE>
<PAGE>
"Quail", 4
"Release", 24
"Remedial Action",24
"Securities Act", 11
"Shares", 1
"Stock Purchase Plan", 7
"Stockholder Acceptance", 44
"Stockholder Agreement", 44
"Stockholders Meeting", 36
"Sub", 1
"Surviving Corporation", 1
"Taxes", 18
"Termination Fee", 38
"Title Liens", 27
"Transfer Taxes", 39
"WARN", 21
"Welfare Plan", 14
ii
<PAGE>
Exhibit C to Merger Agreement
THIS STOCKHOLDER AGREEMENT (this "Agreement"), dated as of
August 9, 1999, is among Midnight Acquisition Holdings, Inc., a Delaware
corporation ("Parent"), and Leslie B. Lewis, as trustee (the "Trustee") of the
voting trust (the "Voting Trust") created under that certain Voting Trust
Agreement dated as of January 11, 1993 (the "Voting Trust Agreement") and
individually (the "Stockholder").
RECITALS
WHEREAS, Parent, through a subsidiary ("Sub"), intends to
enter into a business combination (the "Merger") with Asahi/America, Inc. (the
"Company") pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated as of August 9, 1999; and
WHEREAS, the Stockholder and the Trustee have agreed to vote
all shares of Common Stock of the Company beneficially owned by them in favor of
the Merger and Parent, the Trustee and the Stockholder desire to memorialize
certain other agreements, all as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENT
1. CERTAIN DEFINITIONS. For purposes of this Agreement:
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of the Company or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any merger, consolidation,
business combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries, other than the transactions contemplated by the Merger
Agreement, or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to dilute materially the benefits to Parent
of the transactions contemplated hereby.
"Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to
<PAGE>
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same securities
by the same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d) of the Exchange Act.
"Closing Date" shall mean the date set forth in the Merger
Agreement as the closing date for the Merger.
"Common Stock" shall mean at any time the Common Stock, no par
value, of the Company.
"Existing Shares" shall mean the shares of Common Stock
Beneficially Owned by the Stockholder or the Trustee on the date hereof.
"Permitted Transfer" means a sale, transfer, assignment or
other disposition to a Permitted Transferee.
"Permitted Transferee" means any person who is (A) the spouse
or former spouse of, or any lineal descendent of, or any spouse of such lineal
descendant of, or the grandparent, parent, brother or sister of, or spouse of
such brother or sister of, either of the Stockholder or of a Permitted
Transferee; (B) upon the death of the Stockholder or any Permitted Transferee of
the Stockholder, the executors of the estate of the Stockholder or such
Permitted Transferee, and any of the Stockholder's or such Permitted
Transferee's heirs, testamentary trustees, devisees, or legatees; (C) any trust
for the benefit of the Stockholder or one or more Permitted Transferees; (D)
upon the disability of either of the Stockholder or any Permitted Transferee,
any guardian or conservator of the Stockholder or such Permitted Transferee;
PROVIDED, HOWEVER, that in each case such transferee assumes and agrees to
perform and becomes a party to this Agreement, agrees not to make an Acquisition
Proposal, and agrees not to dissent in the Merger, all on terms reasonably
acceptable to Parent. For purposes of this Agreement, when a Permitted
Transferee has acquired Shares in accordance herewith, such person shall be
deemed a "Stockholder" hereunder.
"Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
"Shares" shall mean the Existing Shares and any right to
acquire shares of Common Stock owned on the date hereof and any shares of Common
Stock or rights to acquire shares of Common Stock acquired by the Stockholder or
the Trustee in any capacity after the date hereof and prior to the termination
of this Agreement. "Shares" shall include (i) shares of Common Stock acquired
upon the exercise of options, warrants or other rights to acquire shares; (ii)
shares of Common Stock acquired upon the conversion or exchange of
4
<PAGE>
convertible or exchangeable securities; (iii) shares of Common Stock acquired by
means of purchase, dividend, distribution, gift, bequest, inheritance or as a
successor in interest in any capacity or otherwise; and (iv) rights to acquire
shares of Common Stock, vested or not, presently exercisable or not, including,
but not limited to, options and warrants. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, reclassification, combination, exchange of shares or
the like, the term "Shares" shall be deemed to refer to and include the Shares
as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed, reclassified or exchanged
and appropriate adjustments shall be made to the terms and provisions of this
Agreement. "Shares" shall also include voting trust certificates issued in
respect of any Shares.
2. VOTING AGREEMENT.
(a) The Stockholder and the Trustee, subject to the
terms of this Agreement, hereby irrevocably grant to, and appoint,
Parent and any other Person designated by Parent from time to time, the
Stockholder's and the Trustee's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of the
Stockholder, to vote the Stockholder's and the Trustee's Shares, or
grant a consent or approval in respect of such Shares, at any meeting
of stockholders of the Company or at any adjournment thereof or in any
other circumstances upon which their vote, consent or other approval is
sought, (i) in favor of (A) the Merger, (B) the Merger Agreement and
(C) the transactions contemplated by the Merger Agreement, including,
but not limited to, the sale of any subsidiary of the Company in
accordance therewith and the amendments to the Articles of Organization
of the Company contemplated thereby and (ii) against (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its
subsidiaries (except as contemplated by the Merger Agreement); (B) any
sale, lease or transfer by the Company of a material amount of assets
(including stock) of the Company or any of its subsidiaries, or a
reorganization, restructuring, recapitalization, special dividend,
dissolution or liquidation of the Company or any of its subsidiaries
(except as contemplated by the Merger Agreement); and (C)(1) any change
in a majority of the persons who constitute the board of directors of
the Company or any of its subsidiaries; (2) any change in the present
capitalization of the Company or any of its subsidiaries including any
proposal to issue an equity interest (or rights thereto) in the Company
or any of its subsidiaries (except as contemplated by the Merger
Agreement); (3) any amendment of the Company or any of its
subsidiaries' charters or by-laws; (4) any other change in the Company
or any of its subsidiaries' corporate structure or business (except as
contemplated in the Merger Agreement); and (5) any other action which,
in the case of each of the matters referred to in clauses (C)(1), (2),
(3) or (4), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or adversely affect the
5
<PAGE>
Merger and the transactions contemplated by this Agreement and the
Merger Agreement.
(b) The Stockholder and the Trustee represent that
any proxies previously given in respect of the Stockholder's or the
Trustee's Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Stockholder and the Trustee hereby affirm
that the irrevocable proxy set forth in this Section 2 is given to
secure the performance of the duties of the Stockholder and the Trustee
under this Agreement. The Stockholder and the Trustee hereby further
affirm that such irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, except in connection with the
termination of this Agreement pursuant to Section 7 hereof. The
Stockholder and the Trustee hereby ratify and confirm all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 41 of Chapter 156B of the
Massachusetts General Laws.
(d) The Stockholder and the Trustee agree that
neither of them shall enter into any agreement or understanding with
any Person the effect of which would be inconsistent with or violative
of the provisions and agreements contained herein, including in this
Section 2. Further, the Stockholder and the Trustee agree that they
will, if the Board of Directors of the Company fails or refuses to
submit the Merger to the Company stockholders or if the Board of
Directors withdraws its approval of the Merger, vote all Shares held of
record or Beneficially Owned by them to (i) call or cause to be called
a special meeting of stockholders of the Company (or effect a written
consent) to remove the directors of the Company who have so failed or
refused or voted in favor of such withdrawal, or to increase the size
of the Board of Directors and elect a majority of new directors who
will submit the Merger to the stockholders of the Company for a vote or
reinstate such approval, and (ii) use their reasonable efforts to vote
such Shares to effect such removal and replacement, or increase and
election, and the submission of the Merger to the stockholders of the
Company; and (iii), at any time if so requested by Parent, vote such
Shares to approve all or any actions incident to the Merger or the
other matters referred to in this Section 2 by stockholder written
consent.
3. OTHER COVENANTS OF THE STOCKHOLDER AND THE TRUSTEE.
(a) RESTRICTION ON TRANSFER; PROXIES AND
NON-INTERFERENCE. From the date hereof through the Closing Date or the
earlier termination of this Agreement in accordance with its terms, and
except for (i) Permitted Transfers as expressly permitted herein and
(ii) enforcement of the pledge pursuant to the Consumer Pledge and
Security Agreement dated April 16, 1998, as amended to date, in favor
of
6
<PAGE>
Boston Private Bank & Trust Company, the Stockholder and the Trustee
agree that they shall not directly or indirectly:
(i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or
understanding with respect to, or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment
or other disposition of (collectively, "transfer"), and shall,
to the extent permitted by law, take all steps necessary to
prevent the transfer of, any or all of the Shares or any
interest therein except in connection with the transactions
contemplated by the Merger Agreement except for the transfer
of certain voting trust certificates held by persons other
than the Stockholder and his immediate family;
(ii) grant any proxies or powers of attorney
with respect to the Shares, deposit the Shares into a voting
trust or enter into a voting agreement, arrangement or
understanding with respect to the Shares (except pursuant to
the Voting Trust Agreement); or
(iii) take any action (A) that would make
any representation or warranty of the Stockholder or the
Trustee contained herein untrue or incorrect or would result
in a breach by the Stockholder or the Trustee of their
obligations under this Agreement or (B) to terminate the
Voting Trust.
(b) NO SOLICITATION. Subject to Section 3(f), from
the date hereof until the Closing Date, or the earlier termination of
this Agreement in accordance with Section 7 hereof, the Stockholder and
the Trustee agree that they shall not, and shall not permit any of
their respective representatives, agents or affiliates (including,
without limitation, any investment banker, attorney or accountant
retained by the Stockholder or the Trustee), directly or indirectly, to
enter into, solicit, initiate or continue any discussions or
negotiations with, or provide any information to, or otherwise
cooperate in any other way with, any Person or group, other than Parent
and its affiliates, concerning any offer or proposal which constitutes
or is reasonably likely to lead to an Acquisition Proposal. The
Stockholder and the Trustee agree that they will immediately notify
Parent orally and in writing if any discussions or negotiations are
sought to be initiated, any inquiry or proposal is made, or any
information is requested with respect to any Acquisition Proposal or
which could lead to an Acquisition Proposal, and immediately notify
Parent of all material terms of any proposal which they may receive in
respect of any such Acquisition Proposal, including the identity of the
prospective purchaser or soliciting party if known, and thereafter
shall inform Parent on a timely, ongoing basis of the status and
content of any
7
<PAGE>
discussions or negotiations with such a third party, including
immediately reporting any material changes to the terms and conditions
thereof.
(c) RELIANCE. The Stockholder and the Trustee
understand and acknowledge that Parent entered into the Merger
Agreement in reliance upon their execution and delivery of this
Agreement.
(d) FURTHER ASSURANCES. From time to time, at
Parent's request and without further consideration, the Stockholder and
the Trustee agree that they shall execute and deliver such additional
documents and take all such further reasonable and lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the purposes of this Agreement.
(e) STOCKHOLDER TERMINATION FEE. In the event that
any Acquisition Proposal is consummated, then Stockholder shall pay to
Parent as soon as practicable, but in no event later than two business
days after receipt of the consideration paid to the Stockholder in
connection with such Acquisition Proposal an amount (the "Stockholder
Termination Fee") equal to the product of (x) the number of Shares
Beneficially Owned by the Stockholder (for himself or for the benefit
of another Person), multiplied by (y) the excess of the per share value
of consideration paid or payable in consequence of consummation of the
Acquisition Proposal (with the value of any non-cash consideration
being determined by agreement of Parent and the Stockholder or, failing
such agreement within 10 business days of consummation of such
Acquisition Proposal, as provided below) over the Merger Consideration
(as defined in the Merger Agreement). In the case of options on Shares,
to the extent the same are canceled for a payment in cash (the "Option
Payment"), the amount due hereunder shall be the amount by which the
Option Payment exceeds the product of (a) the number of Shares
underlying such options and (b) the Merger Consideration (as defined in
the Merger Agreement). In the event that the consideration paid or
payable in consequence of consummation of the Acquisition Proposal: (i)
consists solely of cash, then the Stockholder Termination Fee shall be
payable solely in cash, or (ii) consists of cash and other non-cash
property, or solely non-cash property, then the Stockholder Termination
Fee shall be payable in cash and such non-cash property in the same
proportion as the cash bears to the value of the non-cash property
issued or issuable in consequence of consummation of the Acquisition
Proposal (as such value is determined herein).
If Parent and the Stockholder, as the case may be,
fail to agree promptly on the value of such non-cash consideration,
then the parties shall appoint an independent investment banking firm
reasonably acceptable to Parent and the Stockholder to act as
arbitrator (the "Arbitrator"). Upon the selection of the Arbitrator,
Parent on the one hand and the Stockholder, on the other hand, shall
8
<PAGE>
deliver to the Arbitrator and to each other their last and final offer
concurrently in writing (the "Certified Offers"). The Certified Offers
shall list one amount which the submitting party asserts is the
appropriate valuation of such non-cash consideration as of the date of
submittal. The Arbitrator's sole role shall be to select which one of
the two Certified Offers most closely approximates the valuation the
Arbitrator would have determined for such non-cash consideration,
taking into account current market valuations of any publicly traded
securities which constitute such non-cash consideration. The Arbitrator
shall notify the parties of such determination. The determination of
the Arbitrator shall be binding on the parties. All costs and expenses
of the Arbitrator shall be borne by the parties whose Certified Offer
is not selected.
The Stockholder acknowledges that the agreements
contained in this Section 3(e) are an integral part of the transactions
contemplated by this Agreement and the Merger. Accordingly, if the
Stockholder shall fail to pay when due any amounts which shall become
due under Section 3(e) hereof, the Stockholder shall in addition hereto
pay to Parent all costs and expenses (including fees and disbursements
of counsel) incurred in collecting such overdue amounts, together with
interest on such overdue amounts from the date such payment was
required to be made until the date such payment is received at a rate
per annum equal to the Prime Rate as announced from time to time by
Citibank, N.A. as its "prime rate," "reference rate," "base rate" or
other similar rate. Any payment required to be made pursuant to this
Section 3(e) shall be made when due by wire transfer of immediately
available funds to an account designated by Parent.
The parties agree and acknowledge that in the event
that any Acquisition Proposal is consummated, it would be impracticable
and extremely difficult to ascertain with certainty the amount of
damages to Parent. Therefore, the parties agree that payment of the
Stockholder Termination Fee pursuant to this Section 3(e) shall
represent full liquidated damages hereunder in the event that any
Acquisition Proposal is consummated. The parties agree that no party
shall be liable for special, indirect, incidental or consequential
damages of any nature arising from this Agreement.
(f) FIDUCIARY DUTY OF DIRECTORS. Parent agrees and
acknowledges that the Stockholder is a director of the Company, and, in
such capacity, has fiduciary duties to the stockholders of Company.
Nothing in this Agreement (including, without limitation, Section 3(b))
shall be deemed to limit or affect the obligation of the Stockholder,
as a director of the Company, to take any and all action as may be
necessary in the exercise of his fiduciary duty to the stockholders of
the Company.
9
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND
THE TRUSTEE. The Stockholder and the Trustee, jointly and severally, hereby
represent and warrant to Parent as follows:
(a) OWNERSHIP OF SHARES. The Stockholder and the
Trustee are the record and/or Beneficial Owner of the Existing Shares
set forth besides their names on Exhibit A hereto. On the date hereof,
the Existing Shares as set forth on Exhibit A constitute all of the
Shares owned of record or Beneficially Owned by the Stockholder and the
Trustee, respectively. With respect to the number of shares set forth
opposite the Stockholder's and the Trustee's name on Exhibit A hereto,
and with the exceptions noted thereon, if any, the Stockholder or the
Trustee has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2 and 3 hereof and sole
power to agree to all of the matters set forth in this Agreement, in
each case with respect to all of the Existing Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement, and in the
case of the Stockholder, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights with respect to all
of the Existing Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement. The Initial Beneficiary (as defined in the
Voting Trust Agreement) no longer has the power to direct voting of
Shares or to terminate the Voting Trust.
(b) DUE AUTHORIZATION. The Stockholder and the
Trustee have all requisite capacity, power and authority to execute and
deliver this Agreement and perform their respective obligations
hereunder. This Agreement has been duly and validly executed and
delivered by the Stockholder and the Trustee and constitutes a valid
and binding agreement enforceable against the Stockholder and the
Trustee in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(c) NO CONFLICTS. Except for filings, authorizations,
consents and approvals contemplated by the Merger Agreement and
necessary for the consummation of the transactions contemplated hereby
and thereby, (i) no filing with, and no permit, authorization, consent
or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by the Stockholder or the
Trustee and the consummation by the Stockholder and the Trustee of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by the Stockholder or the Trustee, the
consummation by the Stockholder or the Trustee of the transactions
contemplated hereby or compliance by the Stockholder or the Trustee
with any of the provisions hereof shall
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(A) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder or the Trustee is a
party or by which the Stockholder, the Trustee or any of their
respective properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder, the Trustee or any of their respective
properties or assets.
(d) NO ENCUMBRANCES. Except as set forth on Exhibit A
or as otherwise permitted herein, the Shares and the certificates
representing such Shares are now, and at all times during the term
hereof, will be, held by the Stockholder or the Trustee, or by a
nominee, custodian or trust for the benefit of the Stockholder or the
Trustee, as the case may be, free and clear of all liens, claims,
security interests, proxies, voting trusts (except for the Voting Trust
Agreement) or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such arising hereunder.
(e) FINDER'S FEES. No broker, investment banker,
financial advisor or other Person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder or the Trustee.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent
represents and warrants to the Stockholder and the Trustee as follows:
(a) ORGANIZATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power or other
power and authority to execute and deliver this Agreement and perform
its obligations hereunder. The execution and delivery by Parent of this
Agreement and the performance by Parent of its obligations hereunder
have been duly and validly authorized by its Board of Directors and,
except as contemplated in the Merger Agreement, no other corporate
proceedings on the part of Parent are necessary to authorize the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) AGREEMENT. This Agreement has been duly and
validly executed and delivered by Parent and constitutes a valid and
binding agreement of Parent enforceable against Parent in accordance
with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii)
the
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<PAGE>
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be
brought.
(c) NO CONFLICTS. Except for filings, authorizations,
consents, and approvals contemplated by the Merger Agreement and
necessary for the consummation of the transactions contemplated hereby
and thereby, (i) no filing with, and no permit, authorization, consent
or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby, and
(ii) none of the execution and delivery of this Agreement by Parent,
the consummation by Parent of the transaction contemplated hereby or
compliance by Parent with any of the provisions hereof shall (A)
conflict with or result in any breach of the charter or bylaws of
Parent, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third-party right of termination, cancellation, material modifications
or acceleration) under any of the terms, conditions or provisions of
any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Parent is a party or by which Parent
of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or its respective properties or assets.
6. LEGEND.
(a) The Stockholder and the Trustee agree with, and
covenant to, Parent that the Stockholder and the Trustee shall not
request that the Company register the transfer (by book-entry or
otherwise) of any certificate or uncertificated interest representing
any of the Shares, unless such transfer is in compliance with this
Agreement.
(b) The Stockholder and the Trustee agree that they
shall promptly after the date hereof surrender to Parent all
certificates representing the Shares held by the Stockholder or the
Trustee, and Parent shall place the following legend on such
certificates, which legend, except as otherwise expressly provided in
this Agreement, shall remain on such certificates until the termination
of this Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT, DATED AS OF AUGUST 9, 1999 AMONG CERTAIN STOCKHOLDERS AND
MIDNIGHT ACQUISITION HOLDINGS, INC. THE SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFER OR ENCUMBRANCE AND
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VOTING. A COPY OF THE AGREEMENT IS AVAILABLE AT THE PRINCIPAL OFFICE OF
THE COMPANY."
7. TERMINATION. This Agreement shall terminate upon the
earlier to occur of (i) the Closing Date, (ii) March 31, 2000 or (iii) the date
the Merger Agreement is terminated if the Merger Agreement is terminated
pursuant to Section 8.01(a) or (c) of the Merger Agreement; PROVIDED, HOWEVER,
that if the Merger Agreement is terminated pursuant to Section 8.01(c) of the
Merger Agreement, such order, decree, ruling or other action shall not have
resulted from any action taken by the Stockholder. The parties hereto agree that
the provisions of Section 3(e) (but only to the extent an Acquisition Proposal
is made, proposed, communicated, disclosed or consummated prior to termination
hereunder) and Section 8 shall survive any termination of this Agreement, and no
such termination shall relieve any party of liability for a breach hereof prior
to termination.
8. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. The parties
recognize that successful consummation of the transactions contemplated by this
Agreement may be dependent upon confidentiality with respect to the matters
referred to herein. In this connection, pending public disclosure thereof, each
of the parties hereto severally and not jointly agrees not to disclose or
discuss such matters with anyone not a party to this Agreement (other than its
counsel, advisors, corporate parents and affiliates) without the prior written
consent of the other parties hereto, except for filings required pursuant to the
Exchange Act and the rules and regulations thereunder or disclosures its counsel
advises are necessary in order to fulfill its obligations imposed by law or the
requirements of any securities exchange. At all times during the term of this
Agreement, the parties hereto will consult with each other before issuing or
making any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of public reports, statements or releases.
9. GENERAL PROVISIONS.
(a) EXPENSES. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, except as otherwise
specifically noted herein or in the Merger Agreement.
(b) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by
telecopy, electronic or digital transmission method; the day after it
is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
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<PAGE>
(i) if to Parent, to:
Midnight Acquisition Holdings, Inc.
c/o Asahi Organic Chemicals Industry Co., Ltd
15-9 Uchikanda 2-chome
Chiyoda-ku, Tokyo 101-0047
Japan
Telephone: 03-3256-2451
Telecopy: 03-3254-3473
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: David M. Wilf, Esq.
Telephone: (212) 408-5100
Telecopy: (212) 541-5369
(ii) if to the Stockholder or the
Trustee, to the respective addresses set forth on Exhibit A.
(c) INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the word
"include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". This
Agreement shall not be construed for or against either party by reason
of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in
this Agreement in the singular shall have comparable meanings when used
in the plural, and vice versa, unless otherwise specified.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and is not intended
to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
(e) ASSIGNMENT. Except in connection with Permitted
Transfers, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned (whether by operation of law or
otherwise) by the Stockholder or the Trustee without the consent of
Parent. Subject to the preceding
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<PAGE>
sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and
assigns.
(f) GOVERNING LAW. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with
the laws of the Commonwealth of Massachusetts (without reference to the
choice of law provisions), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives
its powers shall govern.
(g) SEVERABILITY. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement
or part hereof to be null, void or unenforceable, or order any party to
take any action inconsistent herewith or not to take an action
consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or
set forth herein shall not in any way be affected or impaired thereby.
Upon any such holding that any provision of this Agreement is null,
void or unenforceable, the parties 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. Except as otherwise contemplated by this Agreement, to
the extent that a party hereto took an action inconsistent herewith or
failed to take action consistent herewith or required hereby pursuant
to an order or judgment of a court or other competent authority, such
party shall incur no liability or obligation unless such party did not
in good faith seek to resist or object to the imposition or entering of
such order or judgment.
(h) INJUNCTIVE RELIEF. Subject to the last paragraph
of Section 3(e), the parties acknowledge that it will be impossible to
measure in money the damages that would be suffered if the parties fail
to comply with any of the obligations herein imposed on them and that
in the event of any such failure, an aggrieved Person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any
such Person or entity shall, therefore, be entitled to injunctive
relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties shall raise the
defense that there is an adequate remedy at law.
(i) ATTORNEYS' FEES. If any party to this Agreement
brings an action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and expenses,
including without limitation reasonable
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<PAGE>
attorneys' fees, incurred in connection with such action, including any
appeal of such action.
(j) CUMULATIVE REMEDIES. All rights and remedies of
either party hereto are cumulative of each other and of every other
right or remedy such party may otherwise have at law or in equity, and
the exercise of one or more rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of other rights or
remedies.
(k) COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same instrument and shall become effective when executed and delivered
by each of the parties.
(l) AMENDMENTS, WAIVERS, ETC. This Agreement may not
be amended, changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written
agreement executed by the parties hereto.
(m) BINDING AGREEMENT. The Stockholder and the
Trustee agree that this Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any Person or entity to
which legal or Beneficial Ownership of such shares shall pass, whether
by operation of law or otherwise, including, without limitation, the
Stockholder's heirs, distributees, guardians, administrators,
executors, legal representatives, or successors or other transferees
(for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Shares the transferor shall remain
liable for the performance of all obligations under this Agreement of
the transferor.
(n) CAPACITY. For purposes of this Agreement and the
representations, covenants and promises contained herein, the
Stockholder is acting solely in his capacity as stockholder (of record
or beneficial) of, and not as a director, officer, employee,
representative or agent of, the Company and as trustee under the Voting
Trust Agreement.
(o) CONSENT AND JURISDICTION. Each party irrevocably
and unconditionally agrees and consents that any suit, action or other
legal proceeding arising out of or related to this Agreement shall be
brought and heard in the Commonwealth of Massachusetts and each party
irrevocably consents to personal jurisdiction in any and all tribunals
in said State.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Midnight Acquisition Holdings, Inc.
By: /s/ Ichiro Murao
------------------------------------
Name: Ichiro Murao
Title: President
/s/ Leslie B. Lewis
---------------------------------------
Leslie B. Lewis, individually
/s/ Leslie B. Lewis
---------------------------------------
Leslie B. Lewis, Trustee
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EXHIBIT 10.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
between
QUAIL ACQUISITION CORPORATION
and
ASAHI/AMERICA, INC.
August 9, 1999
- --------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 9th day
of August, 1999, by and between Quail Acquisition Corporation, a Massachusetts
corporation ("Buyer"), and Asahi/America, Inc., a Massachusetts corporation
("Asahi"). The definitions set forth in Schedule I hereto are incorporated
herein by reference for all purposes of the Agreement.
WHEREAS, Asahi owns one hundred (100) shares of common stock, at no par
value per share (the "Shares"), of Quail Piping Products, Inc. a Massachusetts
corporation ("Quail"), being all of the issued and outstanding shares of capital
stock of Quail; and
WHEREAS, Asahi desires to sell, and Buyer desires to purchase, all of
the Shares.
NOW, THEREFORE, in consideration of these premises, the agreements,
representations, warranties and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. PURCHASE AND SALE OF SHARES.
1.1 SALE OF SHARES. Asahi agrees to sell and deliver to Buyer, and
Buyer agrees to purchase and accept from Asahi, free and clear of all liens,
options and other encumbrances, on the terms and subject to the conditions set
forth in this Agreement, and for the Purchase Price described in Section 1.2
hereof, the Shares.
1.2 PURCHASE PRICE. There shall be paid to Asahi on the Closing Date,
the purchase price of Four Million Five Hundred Thousand ($4,500,000.00) (the
"Purchase Price") by wire transfer, certified or bank cashier's check or other
immediately available funds.
1.3 DELIVERY OF SHARES. Against payment of the Purchase Price, Asahi
shall deliver to Buyer the certificates representing the Shares duly endorsed
for transfer to Buyer or accompanied by an instrument to effect such transfer
duly executed by Asahi.
Section 2. CLOSING.
Consummation of the transactions contemplated hereby ("Closing") shall
occur at the offices of Chadbourne & Parke, LLP, commencing at 10:00 a.m. local
time on the Merger Closing Date upon satisfaction or waiver of all conditions to
the obligations of the parties hereto to consummate the transactions
contemplated hereby (the "Closing Date").
<PAGE>
Section 3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES CONCERNING QUAIL AND ASAHI. Asahi
represents and warrants, upon which representations and warranties Buyer is
relying, as follows:
(a) EXISTENCE AND GOOD STANDING. Asahi and Quail are corporations
duly organized, validly existing and in good standing under the laws of
Massachusetts. Quail has the power to own or hold under lease the rights,
properties and assets it purports to own or hold under lease and to carry on its
business as now being conducted except where the failure to do so would not
result in a Material Adverse Effect.
(b) CAPITAL STOCK. The authorized capital stock of Quail consists
solely of 200,000 shares of Common Stock, no par value, of which one hundred
(100) shares are issued and outstanding. Asahi owns one hundred percent (100%)
of the issued and outstanding capital stock of Quail. There are no existing
options, warrants, rights, calls or commitments of any character relating to the
capital stock of Quail, and there are no outstanding securities or other
instruments convertible into or exchangeable for shares of capital stock of
Quail and no commitments to issue such securities or instruments. All
outstanding Shares were issued in compliance with all applicable federal and
state securities laws and all such Shares are duly authorized, validly issued,
fully paid and non-assessable and, at the Closing, will be free and clear of all
liens, encumbrances, security interests, equities, options, claims, charges and
restrictions and have not been sold, assigned, transferred, pledged,
hypothecated, optioned or otherwise encumbered.
(c) OWNERSHIP OF SHARES AND DELIVERY OF VALID TITLE. Asahi owns of
record and beneficially the Shares, and Asahi has, and at the Closing will have,
and upon delivery will pass to Buyer, good and marketable title to the Shares,
free and clear of all liens, options and other encumbrances.
(d) AUTHORIZATION. All consents, authorizations, orders and
approvals necessary for the sale and delivery of the Shares to be sold by Asahi
hereunder, have been obtained, and Asahi has, and as of the Closing will have,
full right, power, authority and capacity to sell, assign, transfer and deliver
the Shares pursuant to this Agreement.
(e) EXECUTION AND DELIVERY. Except as set forth on Schedule 3.1(e),
all consents, approvals, authorizations and orders necessary for the execution
and delivery by Asahi of this Agreement have been obtained, and Asahi has full
right, power, authority and capacity to enter into and perform fully under this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate actions on the part of Asahi, this Agreement has been duly executed
and delivered by Asahi and constitutes a legal, valid and binding obligation of
Asahi enforceable against it in accordance with its terms, except as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, and by general
equitable principles.
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<PAGE>
(f) NO CONFLICTS. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement will not:
(i) result in any breach of, or constitute a default under,
the Corporate Documents of Asahi;
(ii) upon fulfillment of conditions set forth in Section 5.3
result in a breach of or constitute a default under any instrument,
agreement or obligation to which Asahi is a party or by which Asahi or
any of its properties is bound;
(iii) require the consent, approval, order or authorization
of, or registration, declaration or filing with any governmental or
quasi-governmental authority or board, or any other Person in
connection with the execution and delivery of this Agreement by Asahi
or the consummation of the transactions contemplated hereunder; or
(iv) violate any existing statute, arbitration award, order,
writ, judgment, injunction or decree of any court, administrative
agency or governmental or quasi-governmental body having jurisdiction
over Asahi or any of its properties.
(g) BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of Quail or Asahi is, or will be, entitled to any commission or
broker's or finder's fees from Buyer in connection with any of the transactions
contemplated herein.
3.2 DISCLAIMER OF ASAHI WARRANTIES.
(a) Except as expressly set forth in Section 3.1, Asahi makes no
representation or warranty whatsoever, express or implied, relating to the
assets or business of Quail, including without limitation, any representation or
warranty as to the future sales or profitability of the business of Quail.
(b) Under no circumstances shall Asahi be liable for any breach of a
representation or warranty or for any indemnity hereunder if such breach or
indemnification obligation is based on items, facts, circumstances, actions,
inactions or matters known by Leslie B. Lewis, T.J. Hammer or John E. Lawrence,
it being agreed that (i) such individuals are collectively responsible for and
have operated or supervised the operation of the business of Asahi and/or Quail;
(ii) such individuals have in-depth knowledge of the business of Quail and its
assets and liabilities; (iii) such individuals have ownership interests in the
Buyer; (iv) the Buyer has had access to the knowledge of such individuals; and
(v) Asahi's knowledge of the business of Quail is dependent upon the knowledge
of such individuals. For purposes hereof, "known" shall include actual knowledge
and items which should have been known.
3.3 REPRESENTATIONS AND WARRANTIES CONCERNING BUYER. Buyer
represents and warrants, upon which representations and warranties Asahi is
relying, as follows:
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<PAGE>
(a) EXISTENCE AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts. Buyer has the power to own or hold under lease
the rights, properties and assets it purports to own or hold under lease and to
carry on its business as now being conducted.
(b) DUE AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on the part of Buyer; and this
Agreement has been duly executed and delivered by Buyer, constitutes the valid,
legally binding obligation of Buyer and is enforceable in accordance with its
terms, except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
(c) FINANCING AND NET WORTH. Buyer has obtained in good faith: (a) a
bona fide commitment letter from Management Shareholders, and (b) a letter of
interest from Gemini Investors, LLC providing for debt and equity financing
sufficient to pay the Purchase Price. Such letters are attached hereto as
EXHIBIT A. To the best of Buyer's knowledge, no facts or circumstances exist as
of the date of this Agreement that would be reasonably likely to result in the
failure to complete such financing upon the terms set forth in such letters.
After giving effect to the transactions contemplated by this Agreement, Quail
will have assets in excess of its liabilities of not less than $4,000,000.
(d) NO CONFLICTS. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement will not:
(i) result in any breach of, or constitute a default under,
the Corporate Documents of Buyer;
(ii) result in a breach of or constitute a default under any
instrument, agreement or obligation as to which Buyer is a party or by
which Buyer or any of its properties is bound;
(iii) require the consent, approval, order or authorization
of, or registration, declaration or filing with any governmental or
quasi-governmental authority or board, or any other Person in
connection with the execution and delivery of this Agreement by Buyer
or the consummation of the transactions contemplated hereunder; or
(iv) violate any existing statute, arbitration award, order,
writ, judgment, injunction or decree of any court, administrative
agency or governmental or quasi-governmental body having jurisdiction
over Buyer or any of its properties.
(e) BROKER'S AND FINDER'S FEES. No agent, broker, person or firm
acting on behalf of Buyer is, or will be, entitled to any commission or broker's
or finder's fees from Asahi in connection with any of the transactions
contemplated herein.
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<PAGE>
Section 4. CONDITIONS TO BUYER'S OBLIGATIONS TO CLOSE.
The obligations of Buyer hereunder shall be subject to the fulfillment
on or prior to the Closing of the following conditions:
4.1 CLERK'S CERTIFICATE. There shall have been delivered to Buyer a
certificate of the corporate Clerk of Asahi dated the Closing Date certifying as
to true copies of all corporate action taken by the stockholders and directors
of Asahi relative to this Agreement, the Articles of Organization (certified by
the Secretary of State as of a recent date), and the Bylaws of Asahi as amended
to date, and the names, true signatures and incumbency of the officers of Asahi
authorized to execute this Agreement and the other documents executed or to be
executed in connection herewith.
4.2 MERGER. The Merger shall concurrently have become effective.
4.3 NO LEGAL ACTION. No injunction or other restraining order
issued by a court of competent jurisdiction that in Buyer's judgment prohibits
the consummation of any of the transactions contemplated hereby shall be in
effect (each party agreeing to use its best efforts in good faith to have any
such injunction or other order lifted), and no governmental action or proceeding
shall have been commenced or threatened in writing seeking any injunction or
other restraining order that seeks to prohibit, restrain, invalidate or set
aside consummation of any of the transactions contemplated hereby.
4.4 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Asahi contained in this Agreement shall be true and correct in
all material respects at and as of the Closing.
4.5 FINANCING. Buyer shall have received the cash proceeds of the
financing described in the letters attached hereto as EXHIBIT A and additional
equity financing in an aggregate amount of up to $940,000.
4.6 PERFORMANCE OF COVENANTS. Asahi shall have performed in all
material respects all of its covenants set forth herein that are required to be
performed at or prior to the Closing Date.
4.7 NO MATERIAL ADVERSE CHANGE. Since the date hereof, there shall
not have been any material adverse change in the financial condition, business,
operations, prospects or properties of Quail.
4.8 RESIGNATION OF OFFICERS AND DIRECTORS. Buyer shall have
received the written resignations of each Officer and Director of Quail.
4.9 RELEASE OF GUARANTEES. All guarantees, negative pledges,
severance agreements, reimbursement agreements and all other obligations and
liabilities, of Asahi with respect to Quail obligations ("Asahi Guarantees"),
shall have been terminated or
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released to the satisfaction of Asahi in its sole discretion including without
limitation, those referred to on Schedule 3.05 of the Merger Agreement. Quail
shall have been removed from the Citizens Loan Agreement. The foregoing
notwithstanding, subject to Section 3.2(b), Asahi shall remain liable for all
tax obligations of Quail relative to the fiscal year of Quail in which the
transaction closes, up to and including the Closing Date. All intercompany
accounts by and between Quail and Asahi shall have been settled.
4.10 QUAIL LOAN. All intercompany accounts between Asahi and Quail
shall have been settled except that $1,000,000 in loans outstanding from Asahi
to Quail shall be converted into a loan payable, guaranteed, secured and
subordinated as provided in Section 7.02(d) of the Merger Agreement.
4.11 GENERAL. All instruments, filings and legal and other
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Buyer and its counsel, and it
shall have received copies of all documents, including records of corporate
proceedings, and certificates which it may have requested in connection
therewith, such documents where appropriate to be certified by proper corporate
or governmental authorities.
Section 5. CONDITIONS TO ASAHI'S OBLIGATIONS TO CLOSE.
The obligations of Asahi hereunder shall be subject to the fulfillment
on or prior to the Closing of the following conditions:
5.1 SECRETARY'S CERTIFICATES. Buyer shall have delivered to Asahi a
certificate of its Secretary dated the Closing Date certifying as to true copies
of all corporate action taken by it relative to this Agreement, charter
documents (certified by the Secretary as of a recent date), the Bylaws of Buyer
and the names, true signatures and incumbency of the officers of Buyer
authorized to execute this Agreement and the other documents executed or to be
executed in connection herewith.
5.2 MERGER. The Merger shall concurrently have become effective.
5.3 RELEASE OF GUARANTEES. All guarantees, negative pledges,
severance agreements, reimbursement agreements and all other obligations and
liabilities, of Asahi with respect to Quail obligations ("Asahi Guarantees"),
shall have been terminated or released to the satisfaction of Asahi in its sole
discretion including without limitation, those referred to on Schedule 3.05 of
the Merger Agreement. Quail shall have been removed from the Citizens Loan
Agreement. The foregoing notwithstanding, Asahi shall remain liable for all tax
obligations of Quail relative to the fiscal year of Quail in which the
transaction closes, up to and including the Closing Date. All intercompany
accounts by and between Quail and Asahi shall have been settled.
5.4 QUAIL LOAN. All intercompany accounts between Asahi and Quail
shall have been settled except that an intercompany loan in the aggregate amount
of $1,000,000
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outstanding from Asahi to Quail shall be converted into a loan payable of Quail,
guaranteed, secured and subordinated as provided in Section 7.02(d) of the
Merger Agreement.
5.5 NO LEGAL ACTION. No injunction or other restraining order
issued by a court of competent jurisdiction that in Asahi's judgment prohibits
the consummation of any of the transactions contemplated hereby shall be in
effect (each party agreeing to use its best efforts in good faith to have any
such injunction or other order lifted), and no governmental action or proceeding
shall have been commenced or threatened in writing seeking any injunction or
other restraining order that seeks to prohibit, restrain, invalidate or set
aside consummation of any of the transactions contemplated hereby.
5.6 PERFORMANCE OF COVENANTS. Buyer shall have performed in all
material respects all of its covenants set forth herein that are required to be
performed at or prior to the Closing Date.
5.7 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, except as contemplated or
permitted by this Agreement.
5.8 NO MATERIAL ADVERSE CHANGE. Since the date hereof, there shall
not have been any material adverse change in the financial condition, business,
operations, prospects or properties of Quail.
5.9 GENERAL. All instruments, filings and legal and other
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Asahi, and Asahi shall have
received copies of all documents, including records of corporate proceedings,
and certificates which it may have requested in connection therewith, such
documents where appropriate to be certified by proper corporate or governmental
authorities.
Section 6. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS; POST CLOSING
OBLIGATIONS.
6.1 INDEMNITY OF BUYER.
(a) Asahi shall indemnify, defend and hold harmless Buyer against
and in respect of any and all losses, costs, liabilities, actual damages,
claims, causes of action, litigation, judgments, suits, proceedings, costs,
disbursements, expenses, including but not limited to interest, penalties and
reasonable attorneys' fees, but excluding consequential damages (collectively,
"Losses"), incurred or suffered by Buyer which arise from, are based upon or
relate to, (i) any breach by Asahi of any representation or warranty contained
in the Agreement, or (ii) the failure by Asahi to perform any covenant or
agreement required by this Agreement or any schedule, certificate, exhibit or
other instrument furnished or to be furnished by it pursuant to this Agreement.
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(b) The preceding paragraph notwithstanding, there shall be no
entitlement to indemnification under Section 6.1(a)(i) unless the amount of
indemnification to which Buyer would be entitled in respect of a Loss or the
aggregate amount of all Losses described in Section 6.1(a)(i) shall exceed
$30,000. If the aggregate amount of all Losses shall exceed $30,000, Buyer shall
be entitled to indemnification for the entire amount thereof, not just for the
portion in excess of $30,000; provided, however, that Buyer shall not be
entitled to any amounts in excess of the Purchase Price.
6.2 INDEMNITY OF ASAHI.
(a) Buyer shall indemnify, defend and hold harmless Asahi against
and in respect of any and all Losses incurred or suffered by Asahi which arise
from, are based upon or relate to, (i) any breach by Buyer of any representation
or warranty contained in the Agreement (ii) the failure by Buyer to perform any
covenants or agreement required by this Agreement or any schedule, certificate,
exhibit or other instrument furnished or to be furnished by them pursuant to
this Agreement or (iii) any obligation or liability of or relating to Quail, its
officers, directors or employees other than as specified herein to be undertaken
by Asahi, provided, however, that any liability of any officer or director of
Quail prior to the Closing which is covered under any Directors and Officers
insurance policy of Asahi shall be, to the extent of such policy limit
thereunder, covered under such policy.
(b) The preceding paragraph notwithstanding, there shall be no
entitlement to indemnification unless the amount of indemnification under
Section 6.2(a)(i) to which Asahi would be entitled in respect of a Loss or the
aggregate amount of all Losses described in Section 6.2(a)(i) shall exceed
$30,000. If the aggregate amount of all Losses shall exceed $30,000, Asahi shall
be entitled to indemnification for the entire amount thereof, not just for the
portion in excess of $30,000; provided, however, that Asahi shall not be
entitled to any amounts in excess of the Purchase Price.
6.3 PROCEDURE IN RESPECT OF THIRD PARTY CLAIMS. In the event any
third party claim is asserted against any party with a right to be indemnified
hereunder ("Indemnified Party") that may give rise to a claim against Asahi or
Buyer ("Indemnifying Party") for indemnification under this Section 6, the
Indemnified Party shall, promptly after notice of such claim, advise the
Indemnifying Party in writing that such claim is an Indemnity Claim. The failure
to give prompt notice shall not affect the rights of the Indemnified Party to
indemnity hereunder except to the extent that such failure either shall have
materially prejudiced the Indemnifying Party in the defense of such claim or
shall have increased the amount of the obligation of the Indemnifying Party, and
then only to such extent. The Indemnifying Party receiving such notice shall,
within thirty (30) days of receipt of such notice, (a) deny in writing the
claim, (b) pay the amount of the claim if a monetary amount is involved, or (c)
if a claim of a third party is involved, have the right to assume the defense of
such claim. The Indemnifying Party shall have the exclusive right to conduct and
control, through counsel of its own choosing, the defense of any such claim or
any action arising therefrom, PROVIDED, that in conducting the defense of any
such claim or action, the Indemnifying Party shall, and shall cause its counsel
to, consult with the Indemnified Party and counsel, if any, selected by it, and
shall keep such counsel, if any, and the Indemnified
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Party fully advised of the progress thereof. If the Indemnifying Party fails or
refuses to assume the conduct and control of the defense of any such claim or
action, then the Indemnified Party shall conduct and control such defense;
PROVIDED, HOWEVER, that in so conducting the defense of any such claim or
action, the Indemnified Party shall, and shall cause its counsel to, consult
with the Indemnifying Party and counsel, if any, selected by it, and shall keep
such counsel, if any, and the Indemnifying Party fully advised of the progress
thereof. No settlement of any claim for which indemnification is sought
hereunder shall be made without either (x) the prior written consent of both the
Indemnifying Party and the Indemnified Party, which consent shall not be
unreasonably withheld or delayed, or (y) the release of the Indemnified Party
from all liability relating to such claim, in form and substance reasonable
satisfactory to the Indemnified Party and its counsel.
6.4 RECOURSE FOR INDEMNITY CLAIMS. If either party is entitled to
indemnification for any Indemnity Claims, such party shall be entitled to
immediate payment from the other party.
6.5 INTEREST AND COSTS OF COLLECTION. If any amount shall be owing
to Buyer or Asahi pursuant to this Section 6 and if any such amount or any
portion thereof is not paid when duly claimed by the party entitled thereto,
then upon a final determination that such amount or any portion thereof is in
fact owing, the party owing such amount or any portion thereof agrees (x) to pay
interest thereon at a rate equal to the prime lending rate quoted by The Wall
Street Journal as the "Prime Rate" from the date claimed to the date paid and
(y) to pay the costs and expenses of collection, including reasonable counsel's
fees.
6.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants and agreements of Asahi and Buyer made in
this Agreement or in any exhibit, statement, schedule, certificate, instrument
or any document delivered pursuant hereto, shall survive the Closing for a
period of one (1) year from the Closing Date. Notwithstanding anything to the
contrary contained in the first sentence of this Section 6.6, the
representations and warranties contained in Sections 3.1(a), 3.1(b), 3.1(c),
3.1(d) and 3.2(a) shall survive the Closing for a period of three (3) years.
6.7 POST-CLOSING OBLIGATIONS. After the Closing Date, where there
is a legitimate purpose in connection with defending a claim for which Asahi is
or may be required to indemnify Buyer, Buyer shall provide Asahi with copies of
information or documentation, upon prior reasonable written request specifying
the need therefor; PROVIDED, HOWEVER, that the foregoing right shall not be
exercisable in such a manner as to interfere unreasonably with the normal
operations and business of Buyer.
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6.8 POST CLOSING ACCOUNTING AND ADJUSTMENTS. Within thirty (30)
days following the Closing Date, Quail and Asahi shall share all pertinent
information and agree upon the intercompany account between them as of the
Closing Date determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied and Quail or Asahi, as the
case may be, shall remit to the other such amount as is necessary to bring such
account to zero (exclusive of the Quail Loan). In the event that the parties
cannot agree upon the settlement of the account within such thirty (30) day
period, the dispute shall be fully and finally settled by an independent
accounting firm mutually acceptable to the parties.
Section 7. TAX MATTERS
7.1 PREPARATION AND FILING OF TAX RETURNS. Asahi will prepare and
timely file or will cause to be prepared and timely filed all appropriate
Federal, state, local and foreign tax returns in respect of Quail and its assets
or activities that (a) are required to be filed on or before the Closing Date or
(b) are required to be filed after the Closing Date and (i) include Quail, on
the one hand, and Asahi or any of its affiliates (other than Quail), on the
other hand or (ii) are with respect to Income Taxes or other taxes and are
required to be filed on a separate tax return basis for any tax period ending on
or before the Closing Date. Buyer will prepare or cause to be prepared and will
timely file or cause to be timely filed all other tax returns required of Buyer
and its affiliates (including Quail), or in respect of their assets or
activities. Any such tax returns that include periods ending on or before the
Closing Date or that include the activities of Quail prior to the Closing Date
will, insofar as they relate to Quail, be on a basis consistent with the last
previous such tax returns filed in respect of Quail, unless Asahi or Buyer, as
the case may be, concludes that there is no reasonable basis for such position,
and no position shall be taken on any such tax return that would have a material
adverse effect on Quail for taxable periods ending after the Closing Date.
Neither Buyer nor Quail will file any amended tax returns for any periods for or
in respect of Quail with respect to which Buyer is not obligated to prepare or
cause to be prepared the original such tax returns pursuant to this Section 7.1
without the prior written consent of Asahi which shall not be unreasonably
withheld and which will be granted if the amended tax return position is
reasonable.
7.2 PAYMENT OF TAXES. From and after the Closing Date Asahi will
pay or cause to be paid all Taxes shown as due with respect to tax returns which
Asahi is obligated to prepare and file or cause to be prepared and filed
pursuant to Section 7.1 and Buyer will pay or cause to be paid all Taxes shown
as due with respect to tax returns which Buyer is obligated to prepare and file
or cause to be prepared and filed pursuant to Section 7.1.
7.3 TAX SHARING AGREEMENTS. On the Closing Date, all Tax sharing
agreements and arrangements between (a) Quail, on the one side and (b) Asahi or
any of its affiliates (other than Quail), on the other side, will be terminated
and have no further effect for any taxable year or period (whether a past,
present or future year or period), and no additional payments will be made
thereunder on or after the Closing Date in respect of a redetermination of Tax
liabilities or otherwise.
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7.4 CARRYFORWARDS AND CARRYBACKS. Buyer will cause Quail to elect,
where permitted by law, to carry forward any net operating loss, net capital
loss, charitable contribution or other item arising after the Closing Date that
could, in the absence of such an election, be carried back to a taxable period
of Quail ending on or before the Closing Date. Buyer, on its own behalf and on
behalf of its affiliates, hereby waives any right to use or apply any net
operating loss, net capital loss, charitable contribution or other item of Quail
for any Tax year ending on any date following the Closing Date to any period of
Quail ending on or before the Closing Date.
7.5 REFUNDS. Asahi will be entitled to retain, or receive immediate
payment from Buyer or any of its affiliates (including Quail) of any refund or
credit arising with respect to Quail (including, refunds and credits arising by
reason of amended tax returns filed after the Closing Date or otherwise)
relating to Taxes with respect to any Tax period ending on or before the Closing
Date. Buyer and Quail will be entitled to retain, or receive immediate payment
from Asahi of, any refund or credit with respect to Taxes with respect to any
taxable period beginning after the Closing Date relating to Quail. Buyer and
Asahi will equitably apportion any refund or credit with respect to Taxes with
respect to any taxable period that includes (but does not end on) the Closing
Date (a "Straddle Period"). Any outside costs and expenses incurred in
connection with any refund or credit shall be apportioned equitably between the
parties.
7.6 TAX COOPERATION. From and after the Closing Date, each of Buyer and
Asahi will provide the other party with such information and records and make
such of its representatives available as may reasonably be requested by such
other party in connection with the preparation of any tax return or any audit or
other proceeding that relates to Quail. Buyer will prepare or cause Quail to
prepare, on or before June 30, 2000 or as otherwise agreed, in a manner
consistent with past practice, the Tax work paper preparation package or
packages necessary to enable Asahi to prepare tax returns Asahi is obligated to
prepare or cause to be prepared.
7.7 TAX INDEMNIFICATION.
(a) Asahi will indemnify, defend and hold the Buyer and its affiliates
harmless from and against (i) all liability for income Taxes of Quail for (A)
any taxable period that ends on the Closing Date (B) the portion of any Straddle
Period ending on the Closing Date and (C) to the extent that the Closing Date
does not occur during 1999, all liability for income Taxes of Quail for 1999,
and (ii) all liability (as a result of Treasury Regulation Section 1.1502-6(a)
or comparable provisions of state or foreign law) for Taxes of Asahi or any
other person (other than Quail) which is or has ever been affiliated with Quail,
or with whom Quail otherwise joins or has ever joined (or is or has ever been
required to join) in filing any consolidated, combined or unitary tax return,
prior to the Closing. Notwithstanding the foregoing, Asahi will not indemnify,
defend or hold harmless Buyer or any of its affiliates (including Quail) from
any liability for Taxes attributable to any action taken after the Closing by
Buyer, any of its affiliates (including Quail), or any transferee of Buyer or
any of its affiliates (other than any such action expressly required or
otherwise expressly contemplated by this Agreement) (a "BUYER TAX ACT").
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(b) Buyer will indemnify, defend and hold Asahi and its affiliates
harmless from and against (i) except to the extent Asahi is otherwise required
to indemnify Buyer for such Tax pursuant to Section 7.7(a), all liability for
Taxes of Quail for any taxable period, (ii) all liability for Taxes attributable
to a Buyer Tax Act and (iii) all liability for Taxes attributable to an election
by Buyer under Section 338 of the Code with respect to the purchase of the
Quail.
(c) The obligations of each party to indemnify, defend and hold
harmless the other party and other persons, pursuant to Sections 7.7(a) and
7.7(b), will terminate upon the expiration of all applicable statutes of
limitations (giving effect to any extensions thereof), PROVIDED, HOWEVER, that
such obligations to indemnify, defend and hold harmless will not terminate with
respect to any individual item as to which an indemnified party shall have,
before the expiration of the applicable period, previously made a claim by
delivering a notice (stating in reasonable detail the basis of such claim) to
the applicable indemnifying party.
(d) In the case of any Straddle Period:
(i) the periodic Taxes of Quail that are not based on income or
receipts (E.G., property Taxes) for the portion of any Straddle Period ending on
the Closing Date shall be computed based on the ratio of the number of days in
such portion of the Straddle Period and the number of days in the entire taxable
period;
(ii) Taxes of Quail for the portion of any Straddle Period ending on
the Closing Date (the "PRE-CLOSING TAX PERIOD") (other than Taxes described in
Section 7.7(d)(i) will be computed as if such taxable period ended as of the
close of business on the Closing Date[, and, in the case of any Taxes of Quail
attributable to the ownership by Quail of any equity interest in any partnership
or other "flowthrough" entity as if a taxable period of such partnership or
other "flowthrough" entity ended as of the close of business on the Closing
Date]; and
(iii) Taxes of Quail for which a consolidated, combined or joint Tax
Return is filed will be computed in accordance with the principles of Treasury
Regulation Section 1.1502-76 as if separate returns had been filed for Quail for
such Pre-Closing Tax Period and all prior taxable periods.
(e) Any indemnity payment required to be made pursuant to this
Section 7.7 will be paid within 30 days after the indemnified party makes
written demand upon the indemnifying party, but in no case earlier than five
business days prior to the date on which the relevant Taxes are required to be
paid (or would be required to be paid if no such Taxes are due) to the relevant
taxing authority (including estimated Tax payments).
7.8 TIMING ADJUSTMENTS. In the event that a final determination
(which shall include the execution of a Form 870-AD or successor form) results
in a timing difference (E.G., an acceleration of income or delay of deductions)
that would increase Asahi's liability for Taxes pursuant to this Agreement or
results in a timing difference (E.G., an acceleration of deductions or delay of
income) that would increase Buyer's liability for Taxes pursuant to
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this Agreement, Buyer or Asahi, as the case may be, will promptly make payments
to Asahi or Buyer as and when Buyer or Asahi, as the case may be, actually
realizes any Tax benefits as a result of such timing difference (or under such
other method for determining the present value of any such anticipated Tax
benefits as agreed to by the parties). In determining the amount of any such Tax
benefit, Buyer or Asahi, as the case may be, will be deemed to be subject to the
applicable Federal, state and local Income Taxes at the maximum statutory rate
then in effect.
7.9 TAX CONTESTS.
(a) If a claim is made by any taxing authority which, if successful,
might result in an indemnity payment pursuant to Section 7.7, the indemnified
party will promptly notify the indemnifying party of such claim (a "TAX CLAIM");
PROVIDED, HOWEVER, that the failure to give such notice will not affect the
indemnification provided hereunder except to the extent the indemnifying party
has actually been prejudiced as a result of such failure.
(b) With respect to any Tax Claim relating to a taxable period ending
on or before the Closing Date or to any other taxable period in which Quail
joined in filing any consolidated, combined or unitary tax return, Asahi will
control all proceedings and may make all decisions taken in connection with such
Tax Claim (including selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner, provided however, that neither Asahi nor any of its
appointed representatives shall, without the prior written consent of Buyer,
which consent shall not be unreasonably withheld, enter into any settlement of
any contest or otherwise compromise any issue that affects or may affect the tax
liability of Quail for any taxable year or other taxable period or portion
thereof ending after the Closing Date. Except as provided in the first sentence
of this Section 7.9(b), Buyer and its duly appointed representatives will
control all proceedings and make all decisions taken in connection with such Tax
Claim (including selection of counsel) and without limiting the foregoing, may
in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion either pay the Tax Claim and sue for a
refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner with respect to any taxable year or other taxable
period in which Quail did not join in filing any consolidated tax return ending
after the Closing Date. Asahi will keep Buyer informed in respect of all
material aspects of such Tax Claims.
(c) Except as otherwise provided in Section 7.9(b), Asahi and Buyer
will jointly control and participate in all proceedings taken in connection with
any Tax Claim relating to Taxes of Quail for any Straddle Period. Neither Asahi
nor Buyer will settle any such Tax Claim without the prior written consent of
the other (not to be unreasonably withheld).
(d) Each of Buyer, Quail and their respective affiliates, on the one
hand, and Asahi and its respective affiliates, on the other, will cooperate in
contesting any Tax Claim, which cooperation will include the retention and (upon
request) the provision to the
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requesting party of records and information which are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim.
7.10 TAX DEFINITIONS. For purposes of this Agreement, (a) "Tax" or
"Taxes" means all taxes, charges, duties, fees, levies or other assessments,
including income, excise, property, sales, value added, profits, license,
withholding, payroll, employment, net worth, capital gains, transfer, stamp,
social security, environmental, occupation and franchise taxes, imposed by any
governmental entity, and including any interest, penalties and additions
attributable thereto; (b) "Buyer Tax Act" shall have the meaning ascribed in
Section 7.7(a) of this Agreement; (c) "Pre-Closing Tax Period" shall have the
meaning ascribed in Section 7.7(d)(ii) of this Agreement; (d) "Straddle Period"
shall have the meaning ascribed in Section 7.5 of this Agreement; and (e) "Tax
Claim" shall have the meaning ascribed in Section 7.9(a) of this Agreement.
Section 8. EXPENSES AND LIABILITIES.
Each party hereto will pay its own expenses, and Asahi shall pay the
expenses of Quail, in connection with the negotiation, documentation and closing
of this Agreement and the transactions contemplated hereby, including the fees
and disbursements of its respective counsel; provided, however, that in the
event this Agreement is terminated pursuant to Section 9(d), then Asahi shall
promptly pay Buyer a termination fee of $125,000 (the "Termination Fee") and
provided further, that Asahi shall pay no Quail expenses unless such expenses
have been submitted to it for payment at the Closing. Buyer shall pay and shall
indemnify Asahi and Quail for any and all transfer taxes arising from the
purchase and sale of the Shares pursuant hereto. This Agreement operates as a
full release, effective as of the Closing hereunder, of all obligations and
liabilities of Asahi with respect to Quail, other than those obligations and
liabilities expressly set forth herein.
Section 9. TERMINATION.
This Agreement may be terminated at any time prior to the Closing,
whether before or after approval of the terms of this Agreement by the
stockholders of Asahi:
(a) by mutual written consent of Buyer and Asahi, by action of their
respective Boards of Directors;
(b) by Buyer or Asahi if the Closing shall not have been consummated on
or before December 31, 1999; provided, however, that neither Buyer nor Asahi may
terminate this Agreement pursuant to this Section 9(b) if such party shall have
materially breached this Agreement.
(c) by Buyer or Asahi if any court of competent jurisdiction or other
governmental authority has issued an order, decree or ruling, or taken any other
action restraining, enjoining or otherwise prohibiting the Closing and such
order, decree, ruling or
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other action shall have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement shall have used its reasonable
best efforts to remove or lift such order, decree, ruling or other action;
(d) by Asahi if (i) Asahi's Board of Directors approves an
Acquisition Proposal (as defined in the Merger Agreement (but with respect to
Quail, not Asahi)), for which all financing is then, in the judgment of the
Asahi Board of Directors, reasonably obtainable, on terms which a majority of
the members of Asahi's Committee of Independent Directors has determined in good
faith after consultation with outside legal counsel that failure to take such
action would create a reasonable possibility of a breach of the fiduciary duties
of Asahi's Board of Directors, and (ii) such Acquisition Proposal is, in the
written opinion of Asahi's financial advisor, more favorable from a financial
point of view to Asahi's stockholders than the transactions contemplated by this
Agreement; provided, however; that the termination described in this Section
9(d) shall not be effective unless and until Asahi shall have paid to Buyer the
Termination Fee; or
(e) by either Asahi or Buyer if the required approval of Asahi's
stockholders of the Merger described herein shall not have been obtained at a
duly held stockholders' meeting, including any adjournments thereof.
Section 10. DISPUTE RESOLUTION.
10.1 MEDIATION. Except as otherwise expressly provided herein, in the
event of any dispute, controversy or claim between Buyer and Asahi arising under
this Agreement (a "Dispute"), Buyer and Asahi agree (i) to negotiate in good
faith so as to use their best efforts for a period of thirty (30) days to settle
any Dispute between them harmoniously and without mediation or arbitration, and
(ii) in the event such Dispute is not settled within such thirty (30) day
period, to retain a professional mediator who shall be afforded sixty (60) days
to resolve any Dispute by mediation in Boston, Massachusetts, and whose fees
shall be borne equally by the Parties. Failing such harmonious resolution, the
Parties expressly agree to comply with the arbitration procedure set forth in
Section 10.2 hereof.
10.2 ARBITRATION.
(a) Except as otherwise expressly provided herein, any Dispute which
is not resolved in accordance with Section 10.1 hereof shall, except as provided
in Section 10.3 hereof, be settled by an arbitrator by arbitration in Boston,
Massachusetts, in accordance with the Rules for Commercial Arbitration of the
American Arbitration Association (the "Rules") as amended from time to time and
as modified by this Agreement. The arbitrator shall apply Massachusetts law.
(b) The arbitrator shall be selected by the mediator referred to in
Section 10.1. The arbitrator shall possess substantive legal experience in the
principal issues in Dispute. Within thirty (30) days after the designation of
the arbitrator, the Parties shall meet with the arbitrator, at which time the
Parties shall be required to set forth in writing all disputed issues and a
proposed ruling on each such issue. After the appointment of the arbitrator, the
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Parties shall have the right to take such depositions and to obtain discovery
regarding the subject matter of the arbitration as would be available to them
under the Rules, and the arbitrator shall have the power and authority to
enforce the Parties' respective discovery obligations in accordance with the
provisions of the Rules; PROVIDED, HOWEVER, that depositions shall not be taken
unless leave to do so is first granted by the arbitrator.
(c) Except as may otherwise be agreed in writing by the Disputing
Parties or as ordered by the arbitrator upon substantial justification (such as
to allow reasonable discovery as provided herein), the hearings of the Dispute
shall be held and concluded within one hundred twenty (120) days of submission
of the Dispute to arbitration. The arbitrator shall render their final award
within thirty (30) days following conclusion of the hearing. The arbitrator
shall state the factual and legal basis for the award. The decision of the
arbitrator shall be final and binding except as provided in the Federal
Arbitration Act, 9 U.S.C. ss. 1, ET SEQ., and except for errors of law based on
findings of fact. Final judgment may be entered upon such an award in any court
of competent jurisdiction, but entry of such judgment shall not be required to
make such award effective.
10.3 INJUNCTIVE RELIEF.
(a) Nothing in this Section 10 shall limit any right that the
Parties may otherwise have to seek to obtain preliminary injunctive relief in
order to preserve the status quo pending the disposition of any mediation
process or arbitration proceeding.
(b) For purposes of injunctive relief only, each of the Parties
hereby consents to the exclusive jurisdiction of the United States District
Court for the District of Massachusetts and any court of general jurisdiction in
and for Boston, Massachusetts (and of the appropriate appellate courts
therefrom) and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue in any such
court or that any such proceeding which is brought in any such court has been
brought in an inconvenient forum. Subject to applicable Law, process in any such
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Nothing herein shall affect the
right of any party to serve legal process in any other manner permitted by law
or at equity.
10.4 LEGAL FEES. The prevailing party in any legal action brought by
one party against the other arising out of this Agreement shall be entitled, in
addition to any other rights and remedies available to it at law or in equity,
to reimbursement for its costs and expenses (including court costs and
reasonable fees for attorneys and expert witnesses) incurred with respect to any
such action. The term "prevailing party" for the purposes of this Section shall
include a defendant who has by motion, judgment, verdict or dismissal by the
court, successfully defended against any claim that has been asserted against
it.
Section 11. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and such notice shall be given by delivery in hand; by fax
(with evidence of
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transmission); by certified mail, postage prepaid, return receipt requested; or
by private courier requesting evidence of receipt as part of its service,
addressed as follows:
If to Buyer: Quail Acquisition Corporation
35 Green Street
Malden, MA 02148
Attention: Leslie B. Lewis
Fax: 781-324-3407
with a copy to: Francis J. Feeney, Jr., Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Fax: 617-951-1295
If to Asahi: Asahi/America, Inc.
35 Green Street
Malden, MA 02148
Attention: Kozo Terada
Fax: 781-321-4421
with a copy to: Burton Winnick, Esq.
Gadsby & Hannah LLP
225 Franklin Street
Boston, MA 02110
Fax: 617-345-7050
or to such other address or fax number as may be designated in writing by any
party from time to time in accordance herewith, and any notice shall be deemed
delivered upon the earliest to occur of delivery by hand, when so faxed, when so
placed in the mails or when delivered to such delivery service as aforesaid.
Notice shall be effective if delivered in the manner provided above even if the
party listed to receive a copy of the notice does not receive it.
Section 12. MISCELLANEOUS.
12.1 AMENDMENTS. This Agreement covers the entire understanding of the
parties hereto, superseding all prior agreements or understandings relating to
any of the subject matters hereof, and no modification or amendment of its terms
and conditions, including this Section 12.1, shall be effective unless in
writing and signed by the parties or their respective duly authorized agents.
12.2 SUCCESSORS AND ASSIGNS. This Agreement inures to the benefit of,
and is binding upon, the successors, permitted assigns, distributees and
personal representatives of the parties hereto.
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12.3 HEADINGS. This Agreement shall not be interpreted by reference to
any of the titles or headings to the sections or paragraphs of this Agreement,
which have been inserted for convenience purposes only and are not deemed a part
hereof.
12.4 GENDER AND NUMBER. This Agreement shall be construed by the actual
gender and/or number of the person, persons, entity and/or entities referenced
herein, regardless of the gender and/or number used in such reference.
12.5 SEVERABILITY. This Agreement shall be fully enforceable and
effective as to the parties hereto as to its remaining provisions in the event
any provision is held to be invalid, illegal or unenforceable.
12.6 GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts made and to be performed therein, without giving effect
to any principle of conflict-of-laws that would require the application of the
laws of any other jurisdiction.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement shall become effective at
such time as counterparts thereof have been executed and delivered by the
parties and it shall not be a condition to its effectiveness that each of the
parties has executed the same counterpart.
12.8 ENTIRE AGREEMENT. This Agreement supersedes any and all oral or
written agreements heretofore made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof. No provision of this Agreement may be waived, modified or amended except
by a writing executed by all parties hereto.
12.9 CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" shall mean including
without limitation.
# # #
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf by their duly authorized officers under seal, as of the
day and year first above written.
BUYER:
QUAIL ACQUISITION CORPORATION
By: /s/ Leslie B. Lewis
--------------------------------
Name: Leslie B. Lewis
Title:
ASAHI:
ASAHI/AMERICA, INC.
By: /s/ Kozo Terada
--------------------------------
Name: Kozo Terada
Title: Treasurer and CFO
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SCHEDULE I
"AFFILIATE" means any person, entity or group controlling, controlled
by or under common control with, the specified person or entity, and "control"
of a person or entity (including, with correlative meaning, the terms
"controlled by" and "under common control with") means (a) the beneficial
ownership of 10% or more of the voting securities of such person or entity, (b)
the status of being a director, officer, executor, trustee or other fiduciary of
such person or entity, or (c) the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person or entity, whether through the ownership of voting securities, by
contract or otherwise.
"CORPORATE DOCUMENTS" means a corporation's Charter, Certificate of
Incorporation, Articles of Incorporation or Articles of Organization, as the
case may be, and bylaws, and any and all amendments thereto.
"LAWS" means all applicable laws, rules, regulations, codes,
injunctions, judgments, orders, decrees, rulings, interpretations,
constitutions, ordinances, common law, or treaties, of any federal, state, local
municipal and foreign, international, or multinational government or
administration and related agencies.
"MANAGEMENT SHAREHOLDERS" means T.J. Hammer, John E. Lawrence, Leslie
B. Lewis and others who agree to subscribe for equity from Buyer.
"MATERIAL" means the existence of a fact or condition which results in
a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means with respect to any Person (including,
without limitation, Quail), any materially adverse effect on such Person's
business, assets, liabilities, condition (financial or otherwise), or results of
operations which has a determinable cost in excess of Ten Thousand Dollars
($10,000)).
"MERGER" means the merger of Midnight Acquisition Corp. with and into
Asahi in accordance with the terms of that certain Agreement and Plan of Merger
dated August 9, 1999 among Midnight Acquisition Holdings, Inc., Midnight
Acquisition Corp. and Asahi.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger
dated August 9, 1999 among Midnight Acquisition Holdings, Inc., Midnight
Acquisition Corp. and Asahi.
"MERGER CLOSING DATE" means the date of closing of the Merger.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability corporation, limited liability partnership, institution, entity,
party, or government (whether national, federal,
<PAGE>
state, provincial, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
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Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 9,
1999, by and between ASAHI/AMERICA, INC., a Massachusetts corporation (the
"Company"), and LESLIE B. LEWIS, an individual (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently Chairman, Chief Executive
Officer and President of the Company;
WHEREAS, pursuant to the Agreement and Plan of Merger among
Midnight Acquisition Holdings, Inc., Midnight Acquisition Corp. and Midnight
dated as of the date hereof (the "Merger Agreement"), Midnight Acquisition Corp.
will merge with and into the Company with the Company being the surviving entity
(the "Merger"). Pursuant to the Merger, each outstanding share of common stock,
no par value, of the Company (the "Company Common Stock") shall be converted
into the right to receive the Merger Consideration (as defined in the Merger
Agreement);
WHEREAS, the Company desires to retain the Executive as Chief
Executive Officer and President of the Company as of the Effective Time (as
defined in the Merger Agreement), on the terms and conditions set forth below in
this Agreement;
WHEREAS, the Executive is willing to provide his services as
an employee of the Company for the inducements and on the terms and conditions
set forth below in this Agreement; and
WHEREAS, the parties hereto desire to replace the existing
Employment Agreement dated as of January 1, 1996, as amended (the "Prior
Agreement"), among the parties to this Agreement, effective as of the Effective
Time.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, with effect at the Effective Time,
the parties hereto agree as follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions of
this Agreement, the Company employs the Executive and the Executive accepts
employment with the Company in the capacity hereinafter set forth.
(a) TERM OF EMPLOYMENT. The initial term of
Executive's employment by the Company under this Agreement shall
commence as of the Effective Time and shall continue until the third
anniversary of the Effective Time (the "Initial Termination Date"),
unless terminated earlier pursuant to Section 3. The term shall
automatically be extended for an additional one (1) year period
commencing on the Initial Termination Date and each anniversary thereof
until
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notice of non-extension is given by either party to the other at least
forty-five (45) days prior to the Initial Termination Date or
subsequent anniversary of the Initial Termination Date, as applicable.
The last day on which the Executive is employed under this Agreement
should either party terminate this Agreement as hereinafter provided or
should the employment term not be renewed is hereinafter called the
"Employment Termination Date." The term of employment of the Executive
under this Agreement, including any annual extensions, is referred to
in this Agreement as the "Employment Period."
(b) DUTIES. The Executive shall be employed as Chief
Executive Officer and President of the Company. In that capacity, he
shall be responsible, subject to the direction and control of the Board
of Directors of the Company or its designee (the "Board"), for the
supervision and control of the operation, finances, personnel and
management of the Company, including, without implication of
limitation, (i) the selection, hiring and firing of all personnel of
the Company, (ii) the operation, control and selection of the Company's
facilities, including the selection and purchase of equipment,
fixtures, inventory and parts, and the implementation of all
modifications, alterations and renovations of the Company's facilities
and equipment, and (iii) the selection of all products and services
offered for sale by the Company and the implementation of such sales,
including responsibility for advertising and marketing of products and
directing the Company's sales force. The Executive shall also promote
the business objectives of the Company and its subsidiaries and
affiliates ("Affiliates"), except that the Executive shall not promote
the business objectives of any Affiliate (with the exception of Quail
Piping Products, Inc. ("Quail")) where such objectives are inconsistent
with the business objectives of the Company or where such promotion
would violate the Executive's fiduciary duties to the Company.
At all times during the Employment Period, except for
illness and permitted vacation periods, during the Executive's
employment with the Company, the Executive shall: (i) devote his full
time and attention during normal business hours to the business and
best interests of the Company; and (ii) discharge such executive and
administrative duties as may be assigned to him by the Board as are
reasonably consistent with the Executive's title and office and report
to and obey the lawful directions of the Board, provided that such
instructions do not violate or cause a violation of law and do not
constitute a breach of the directors' fiduciary duties to the Company.
The foregoing shall not be construed to prohibit the Executive from:
(i) serving as a director of any corporation which is not a competitor
of the Company, provided that such service by the Executive does not
materially interfere with the performance by the Executive of his
duties hereunder and the Executive has obtained the prior consent of
the Company, which consent shall not be unreasonably withheld; or (ii)
engaging in civic, educational, religious, charitable or other
community or non-profit activities that do not impair the Executive's
ability to fulfill the Executive's duties and responsibilities under
this Agreement. It is agreed that, subject to Section 3(b), the
Executive serving as Chairman and Member of the Board of Directors of
Quail during the Employment Period will not be a violation of this
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Agreement provided that (i) he does not perform management functions
for Quail, (ii) he performs no duties other than chairing and attending
board meetings, and (iii) his title, position and/or responsibilities
as such Chairman and Member do not impair his ability to perform his
duties under this Agreement.
2. COMPENSATION. Until the termination of the Executive's
employment hereunder, in consideration for the services of the Executive
hereunder, the Company shall compensate the Executive as follows:
(a) BASE COMPENSATION. During the Employment Period,
the Company will pay to the Executive a base salary at the annual rate
of Three Hundred Thirty Thousand Dollars ($330,000), payable
semi-monthly or in such other manner as the Executive and the Company
may mutually agree (the "Base Salary"). The Base Salary may be
increased from time to time at the sole discretion of the Board. The
Board shall annually review the Executive's job performance and shall
annually consider increasing the Executive's Base Salary. Without
limiting the Board's discretion concerning increases to the Executive's
Base Salary, the Board shall consider the Company's past practice with
respect to executive salary increases in making salary increase
decisions. Nothing herein shall be construed as guaranteeing the
Executive the right to receive any such salary increases.
(b) BONUS. The Executive shall also be eligible to
receive a bonus payable on or prior to the 120th day following the end
of each calendar year during which this Agreement is in effect or,
notwithstanding the foregoing, with respect to any portion of the bonus
which may be in dispute and which has been challenged by institution of
the dispute mechanism set forth in paragraph 2(d) below, ten (10) days
after the rendering of a determination pursuant to paragraph 2(d)
below. The bonus which shall be payable to the Executive for the fiscal
year ended December 31, 1999 ("Fiscal 1999") shall be determined by
computing an amount equal to (i) 10% multiplied by (ii) the amount of
net valve sales of the Company in Fiscal 1999 in excess of $18,650,000.
For example, if the net valve sales for Fiscal 1999 is $19,650,000, the
bonus would be $100,000 (10% x 1,000,000), subject to adjustment in
accordance with the next paragraph.
In addition, the 1999 Bonus shall be adjusted
according to the selling, general and administrative costs ("SG&A")
incurred by the Company in 1999, as follows: (i) 1% of any increase of
SG&A over $10,800,000 (1998 actual) shall be deducted from the 1999
Bonus; or (ii) 1% of any decrease of SG&A under $10,800,000 shall be
added to the 1999 Bonus. For example, if there is an increase in SG&A
of $100,000 over $10,800,000, the bonus described in the above example
would be reduced by $1,000. It is agreed that the SG&A shall not
include any of the costs incurred by the Company in connection with the
transaction described In the recitals to this Agreement and in
connection with this Agreement, including without limitation, any and
all attorneys' fees incurred by the Company in connection therewith.
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The bonus payable for the two-year period remaining
in the initial term of this Employment Agreement shall be determined
through good faith negotiations between the Executive and the Company
at the end of Fiscal 1999. The bonus amount for any employment term
following the Initial Termination Date shall be negotiated in good
faith between the Executive and the Company at the time the employment
term is extended.
(c) OTHER BENEFITS. During the Executive's employment
with the Company, the Executive shall be entitled to the following
benefits at the cost of the Company, except as otherwise provided in
(ii) below:
(i) five (5) weeks vacation time per
calendar year, accruing on January 1 of each year during his
employment with the Company, with unused vacation, at the
election of the Executive, to be paid in cash or carried
forward to the next year;
(ii) participation in all employee life,
medical and dental insurance, retirement and profit sharing
plans and other benefit programs now or hereafter maintained
by the Company for senior executives of the Company according
to the terms of those plans as amended from time to time by
the Company; PROVIDED, HOWEVER, that the Executive will in no
event be entitled to benefits in amounts or of the type less
or worse than those which he was entitled to receive from the
Company as of December 1, 1992;
(iii) use of an automobile, the lease or
finance costs of which shall not exceed $1,000 per month;
(iv) payment for or reimbursement for all
reasonable and properly documented expenses incurred or paid
by him in connection with the performance of his duties
hereunder;
(v) payment for or reimbursement for all
reasonable and properly documented expenses incurred or paid
by him for financial planning, income tax preparation and
estate planning services; PROVIDED, HOWEVER, such amount under
this clause shall in no event annually exceed $10,000; and
(vi) participation in a term life insurance
program with a face amount of at least ten (10) times the
Executive's then current Base Salary, provided that the
Executive shall be entitled to name the beneficiary of that
policy.
(d) All determinations of the bonus amount under
Section 2(b) and elsewhere in this Agreement shall be made in good
faith by the Board, subject to the provisions herein, in accordance
with generally accepted accounting principles consistently applied and
subject to normal year-end adjustments within ninety (90) days of the
end of the Company's fiscal year.
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(e) (i) The Company shall maintain the existing key
man insurance, Variable Universal Life Policy with Jefferson
Pilot Financial formerly Chubb Life Insurance Company of
America, Policy No. 6700345 (the "Policy"), on the life of
Executive in the amount of $5,000,000, with the cash surrender
value thereof to be payable to the Company, for the period
ending on December 31, 2005. If the Executive is employed with
the Company as of January 1, 2006 (whether or not he remains
employed after that date) (a) any cash surrender value of such
policies in excess of the aggregate of the premiums paid for
the period through December 31, 2005 (the "Excess Value") will
be used by the Company to fund a retirement plan for the
Executive, and (b) the beneficiary of the Policy shall be
changed to the beneficiary or beneficiaries designated by the
Executive. Failing such designation, the proceeds shall be
payable to the estate of the Executive. In such event, the
Policy shall not be terminated and the Company shall pay any
further premiums due (if any) to insure the Policy remains in
effect.
(ii) The Company shall be prohibited from
terminating, canceling or amending the existing Policy, making
loans against the Policy or making any withdrawal of the cash
surrender values at any time.
(iii) If the Executive leaves the employ of
the Company at any time with Good Reason (as said term is
defined in Article 3(c) herein) or due to a Change of Control
(as said term is defined in Article 3(e)(i) herein), the
Company shall continue to pay the premiums under the Policy
for the remainder of the ten (10) year premium period. During
such period, the beneficiary designation shall be changed so
that the company receives the benefits to the extent of
premiums paid and the Executive shall designate the
beneficiaries for the balance of the insurance proceeds.
Failing such designation the proceeds shall be payable to the
estate of the Executive. At the end of the ten (10) year
premium period, the Policy shall not be terminated and the
Executive, at his option, may pay any further premiums due (if
any) to insure the Policy remains in effect.
(iv) In the event that before January 1,
2006, the Executive voluntarily resigns his position with the
Company (except for events which constitute resignation for
Good Reason or Change of Control) or is no longer employed due
to the expiration of the Agreement, the Executive shall have
the option, but not the obligation, to continue to pay any
further premiums due (if any) to insure the Policy remains in
effect. In such instance, the Policy shall not be terminated
and (a) any cash surrender value of such policies in excess of
the aggregate of the premiums paid for the period through the
date of resignation or employment expiration (the "Excess
Value") will be used by the Company to fund a retirement plan
for the Executive, and (b) the beneficiary of the Policy shall
be changed to the beneficiary or beneficiaries designated by
the Executive. Failing such designation, the proceeds shall be
payable to the estate of the Executive.
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(v) The Company agrees to cooperate with the
Executive in replacing the Policy with another insurance
and/or another unfunded deferred compensation arrangement
which is mutually agreeable to the Company and the Executive
which is tax advantageous to the Executive, provided that the
amount of such new policy, if any, shall not exceed
$5,000,000. Under no circumstances shall the Company be
required to establish a funded retirement plan.
3. TERMINATION. The Executive's employment hereunder shall
commence on the Effective Time and continue until the expiration of the
Employment Period, except that the employment of the Executive hereunder shall
terminate earlier:
(a) DEATH OR DISABILITY. Upon the death of the
Executive during the Employment Period or, at the option of the
Company, in the event of the Executive's disability, upon thirty (30)
days' written notice from the Company. The Executive shall be deemed
disabled if an independent medical doctor (selected by mutual agreement
of the Executive and the Company) after consultation with the
Executive's physician and examination of the Executive certifies that
the Executive has for 180 consecutive days or for a non-consecutive
period of 180 days during any twelve (12) month period been mentally or
physically disabled in a manner which renders him unable to perform his
responsibilities under this Agreement.
(b) FOR CAUSE. For "Cause" immediately upon written
notice by the Board to the Executive, specifying in detail the basis
for such Cause. For purposes of this Agreement, "Cause" shall mean:
(i) a breach of any material provision of
this Agreement, including without implication of limitation
any breach of Sections 1(b) and/or 4(a) through (d) hereof
which breach, if curable, is not cured within thirty (30) days
after written notice thereof, specifying the particulars of
such breach, is given to the Executive by the Board; provided,
however, with regard to any alleged breach under Section 1(b),
the determination by the Board shall be made in its sole
discretion exercised in good faith;
(ii) one or more acts of dishonesty or fraud
by the Executive during the Employment Period in the
performance of his duties on behalf of the Company;
(iii) any plea of NOLO CONTENDERE, guilty
plea or any conviction of the Executive of any felony or any
other crime which conviction has, or is reasonably likely to
have, a material adverse effect on the Company or its business
or reputation;
(iv) any material act or omission by the
Executive during the Employment Period involving willful
malfeasance or gross negligence in the performance of his
duties hereunder which breach, if curable, is not cured
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within thirty (30) days after written notice thereof,
specifying the particulars of such breach, is given to the
Executive by the Board;
(v) the repeated failure of the Executive to
follow the reasonable instructions of the Board, which
instructions shall have been on at least one occasion set
forth in a resolution or a written communication of the Board
delivered to the Executive; PROVIDED, HOWEVER, that compliance
with such instructions would not violate or cause a violation
of law, would not constitute a breach of fiduciary duty to the
Company and would not otherwise be inconsistent with this
Agreement; or
(vi) the inability of the Executive as a
result of continued alcohol or drug use to carry out the
responsibilities of his office.
(c) RESIGNATION; TERMINATION WITHOUT CAUSE. Upon
ninety (90) days' written notice by either the Company or the Executive
to the other party hereto, except that the Executive may terminate his
employment with Good Reason upon thirty (30) days' written notice to
the Company. For purposes of this Agreement, the term "Good Reason"
shall mean the occurrence of any of the events or conditions described
in subparagraphs (i) through (iv) hereof without the Executive's
express written consent:
(i) a material adverse change in the
Executive's status, title, position, scope of authority or
responsibilities (including reporting responsibilities); the
assignment to the Executive of any duties or responsibilities
which are materially inconsistent with such status, title,
position, authorities or responsibilities; or any removal of
the Executive from or failure to reappoint or reelect him to
any of such positions, except in connection with the
termination of his employment for Cause, as a result of his
death or disability or by the Executive other than for Good
Reason;
(ii) the relocation of the Company's
principal executive offices to a location outside a 30-mile
radius of 120 Cabot Street, Chestnut Hill, Massachusetts, or
the Company's requiring Executive to be based at any place
other than the Company's principal executive offices, except
for reasonably required travel on the Company's business which
is not substantially greater than such travel requirements
prior to the date hereof; or
(iii) any material breach by the Company of
any provision of this Agreement, including without implication
of limitation a reduction by the Company in the Executive's
compensation or a material adverse change in the level of
benefits as set forth in Section 2 hereof.
The Executive shall provide the Company with reasonable notice and an
opportunity to cure any of the events listed in Section 3(c) which would
constitute Good Reason for his resignation and shall not be entitled to
compensation pursuant to this Section 3(c) unless the
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Company fails to cure within a reasonable period, but in no event shall such
period exceed thirty (30) days following the occurrence of the event(s) at
issue.
(d) RIGHTS AND REMEDIES ON TERMINATION.
(i) If the Executive's employment hereunder
is terminated pursuant to Section 3(a) as a result of the
Executive's death or disability, on or prior to the Initial
Termination Date, then the Executive (or his estate) shall be
entitled to receive Death or Disability Pay consisting of the
continuation of the Executive's Base Salary in effect at the
time of such termination for a period (the "Severance Period")
beginning on the date the Executive terminates employment and
ending on the latest of (1) the last day of the 24th month
following such termination date or (2) the Initial Termination
Date less any payments received by the Executive under any
applicable disability policy maintained by the Company, and a
lump sum amount equal to the bonus payable to the Executive
for the last year prior to the termination, which bonus shall
be paid no later than thirty (30) days after the date such
amount has been determined.
(ii) If the Executive's employment hereunder
is terminated on or prior to the Initial Termination Date: (1)
by the Company pursuant to Section 3(c) or (2) by the
Executive for Good Reason pursuant to Section 3(c), then the
Executive shall be entitled to receive Severance Pay
consisting of the continuation of the Executive's Base Salary
for the Severance Period defined in (i) above and a lump sum
amount equal to the bonus payable to the Executive for the
last year prior to the termination, which bonus shall be paid
no later than thirty (30) days after the date such amount has
been determined. In addition, the Company shall provide the
Executive with a reasonable office and secretarial services
throughout the Severance Period.
(iii) In addition to the amounts due to
Executive pursuant to paragraph 3(d)(ii) of this Agreement, if
the Executive's employment is terminated (A) by the Company
pursuant to Section 3(c) effective on or after the second
anniversary of the Effective Time and before the Initial
Termination Date, (B) on or after the Initial Termination Date
by either party for any reason other than by the Company for
Cause, or (C) upon expiration of the initial term without
renewal, then the Company shall pay the Executive $1,000,000
(the "Non-Compete Consideration"). If the Executive's
employment is terminated in the circumstances provided in
Section 3(d)(iii)(A) or (C), then the Non-Compete
Consideration shall be paid to the Executive within seven
calendar days of such termination. On or before the 45th day
prior to the Initial Termination Date, the Executive and the
Company shall discuss and agree, if at all possible, on the
manner of payment and any investment of the Non-Compete
Consideration in the event that the Non-Compete Consideration
is not paid to the Executive prior to the Initial Termination
Date. The Company agrees to cooperate with the Executive in
structuring the timing and/or manner of payment of the
Non-Compete
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Consideration in a way which is tax advantageous to the
Executive, provided there is no additional cost to the
Company. If required to do so, the Company shall withhold any
taxes from the disbursement of the Non-Compete Consideration.
In no event will the Non-Compete Consideration be payable in
the event the Executive's employment is terminated by the
Company for Cause.
(iv) In the event of a termination of the
Executive's employment entitling the Executive to rights
pursuant to Section 3(d)(i), (ii) or (iii) above, the
Executive and/or any members of his family insured through the
Company (the "Insured Parties") shall have the option to
continue their medical and dental insurance coverage pursuant
to the law known as "COBRA", PROVIDED, HOWEVER, that the
Company shall continue to pay on the Insured Parties' behalf
the same portion of their medical and dental insurance
premiums that it paid during the Employment Period if they
elect to continue coverage pursuant to COBRA during the period
that such COBRA otherwise applies. Any share of premium
payments to be paid by the Insured Parties shall be deducted
from the Death or Disability Pay, the Severance Pay or the
Non-Compete Consideration as if the Executive remained
actively employed. Notwithstanding the foregoing, in the event
that the Executive receives any equivalent medical and/or
dental coverage from any other source, then the Company shall
no longer be obligated to provide such coverage.
(v) Except as otherwise set forth in this
Section 3(d) or 3(e) below, the Executive shall not be
entitled to any severance or other compensation after the
termination of his employment with the Company other than
payment of his Base Salary through the date of termination,
payment for then accrued but unused vacation pay as calculated
pursuant to Section 2(c)(i), provision of other benefits
pursuant to Section 2(c)(ii) and (iii) through the date of
termination, any expense reimbursements under Section 2(c)(iv)
and (v) for expenses incurred prior to termination, and the
option to continue the life insurance coverage provided
pursuant to Section 2(c)(vi) at his own expense after the
termination of his employment with the Company.
(e) TERMINATION PURSUANT TO A CHANGE OF CONTROL. If
there is a Change of Control, as defined in Section 3(e)(i) below,
during the Executive's employment with the Company, the provisions of
this Section 3(e) shall apply and shall continue to apply throughout
the remainder of the Employment Period. If, within one (1) year
following a Change of Control, the Executive's employment is terminated
by the Company without Cause (pursuant to Section 3(c) above), or if
the Executive resigns his employment for Good Reason following the
occurrence of any of the events listed in Section 3(c) above, in lieu
of any payments under Section 3(d) above, the Company shall pay to the
Executive (or the Executive's estate, if applicable) a lump sum amount
equal to 2.99 times the Executive's "base amount"
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within the meaning of Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended (the "Code").
(i) "Change of Control" shall mean the
occurrence of one or more of the following events:
(1) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")) other than Asahi Organic Chemicals Industry
Co., Ltd. (formerly known as Asahi Yukizai Kogyo Co.,
Ltd.) ("AOC") becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of the Company), directly or indirectly,
of securities of the Company, or any successor to the
Company through merger, consolidation, amalgamation
or the sale of substantially all of the assets of the
Company, representing fifty percent (50%) or more of
the combined voting power of the Company's or any
such successor to the Company's then outstanding
securities; or
(2) the stockholders of the Company
approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's
assets (other than to a company beneficially owned
more than 50% by AOC) is consummated.
(ii) It is the intention of the Executive
and of the Company that no payments by the Company to or for
the benefit of the Executive under this Agreement shall be
nondeductible to the Company by reason of the operation of
Section 280G of the Code relating to parachute payments or any
like statutory or regulatory provision. Accordingly, and
notwithstanding any other provision of this Agreement or any
such agreement or plan, if by reason of the operation of said
Section 280G or any like statutory or regulatory provision,
any such payments exceed the amount which can be deducted by
the Company, such payments shall be reduced to the maximum
amount which can be deducted by the Company. To the extent
that payments exceeding such maximum deductible amount have
been made to or for the benefit of the Executive, such excess
payments shall be refunded to the Company with interest
thereon at the applicable Federal rate determined under
Section 1274(d) of the Code, compounded annually, or at such
other rate as may be required in order that no such payments
shall be nondeductible to the Company by reason of the
operation of said Section 280G or any like statutory or
regulatory provision. To the extent that there is more than
one method of reducing the payments to bring them within the
limitations of said Section 280G or any like statutory or
regulatory provision, the Executive shall determine which
method shall be followed, provided that if the Executive fails
to make such determination within forty-five (45) days after
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the Company has given notice of the need for such reduction,
the Company may determine the method of such reduction in its
sole discretion.
4. COVENANTS OF THE EXECUTIVE.
(a) NON-SOLICITATION OF CUSTOMERS OR EMPLOYEES OF THE
COMPANY. During the Employment Period and at all times thereafter,
except in connection with a dispute arising under this Agreement or the
terms and conditions of the Executive's employment, the Executive will
not disparage the Company or any of its Affiliates. During the
Non-Solicitation Period (as defined below), the Executive shall not,
and shall use his best efforts to cause each other business or entity
with which he is or shall become associated in any capacity not,
directly or indirectly to employ any person (other than the Executive's
son, Robert Lewis, and his secretary, Marjorie Martinetti) who at any
time during the Executive's final two years of employment with the
Company was employed in any capacity by the Company or any of its
Affiliates. During the Non-Solicitation Period, the Executive shall
not, and shall use his best efforts to cause each other business or
entity with which he is or shall become associated in any capacity not,
(i) directly or indirectly to solicit for employment any person (other
than the Executive's son, Robert Lewis, and his secretary, Marjorie
Martinetti) who at any time during the Executive's final two years of
employment with the Company was employed in any capacity by the Company
or any of its Affiliates (with the exception of Quail); (ii) to
directly or indirectly solicit any person or entity who at any time
during the Executive's final two years of employment with the Company
was a customer of the Company or its Affiliates (with the exception of
Quail) in respect of the products or services supplied by the Company
or its Affiliates (with the exception of Quail); or (iii) directly or
intentionally indirectly interfere or seek to interfere with the
continuance of supplies to the Company or its Affiliates (or with the
terms relating to such supplies) from any persons or entities who have
been supplying materials or services to the Company during the
Executive's final two years of employment with the Company.
For purposes of this Agreement, the term
"Non-Solicitation Period" shall mean the period of time during which
the Executive is actively employed by the Company and (i) with respect
to termination of the Executive's employment hereunder for "Cause"
pursuant to Section 3(b) or by the Executive pursuant to Section 3(c)
other than for Good Reason, a period beginning on the date of the
termination and ending six (6) months following the expiration of the
Employment Period in effect at the time of the termination; or (ii)
with respect to termination on or prior to the Initial Termination
Date, as a result of the Executive's disability pursuant to Section
3(a), by the Company without Cause pursuant to Section 3(c) or by the
Executive for Good Reason pursuant to Section 3(c), the period during
which the Executive receives Disability Pay or Severance Pay pursuant
to Section 3(d) hereof.
(b) CONFIDENTIALITY. Without the specific prior
written consent of the Company, the Executive shall not, directly or
indirectly, at any time after the date hereof, use or divulge to any
person, any confidential information concerning the
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business, affairs, customers or clients of the Company or any of its
Affiliates, including, without limitation, customer lists, names and
addresses, sales targets and statistics, market share statistics,
surveys and reports, insofar as the same have come to the Executive's
knowledge during his employment with the Company, all of which
information is confidential and proprietary to the Company and shall
remain the sole and exclusive property of the Company. Notwithstanding
the foregoing, the Executive shall have the right to use the generic
knowledge and expertise acquired by him during his employment with the
Company so as to enable him to be otherwise gainfully employed within
the Company's industry, subject to the non-competition agreement set
forth in (d) below. The Company also expressly agrees that the
Executive may disclose information as may be required by law or to
comply with legal process.
(c) INTELLECTUAL PROPERTY. The Executive shall as
soon as practicable disclose to the Company all ideas, inventions and
business plans developed by the Executive during his employment with
the Company which relate directly or indirectly to the business or then
currently anticipated business of the Company or its Affiliates,
including, without limitation, any process, operation, product or
improvement ("Intellectual Property"). The Executive agrees that such
Intellectual Property will be the property of the Company and that the
Executive shall, without further payment to the Executive at the
Company's request and cost, do whatever is reasonably necessary for the
Company to secure the rights thereto by patent, copyright or otherwise
for the Company.
(d) NON-COMPETE. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business and,
in consideration of the payment by the Company to the Executive of
amounts that may hereafter be paid to the Executive pursuant to
Sections 3(d)(ii) or (iii) hereof, the Executive agrees that (1) during
any period in which Disability Pay or Severance Pay is paid and (2) if
the Executive receives the Non-Compete Consideration pursuant to
Section 3(d) of this Agreement, for a period of five years, the
Executive will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of
America in which the Company is conducting business or proposes to
conduct business as of the date on which the Executive's employment
with the Company is terminated and any states contiguous therewith
(these areas are hereinafter collectively referred to as the "Covered
Area"). For purposes of this Agreement, (i) "Covered Business" shall
mean the provision of the products and services supplied by the Company
or any of its Affiliates (excluding any products or services provided
by Quail as of the Effective Time); and (ii) the phrase "engage,
directly or indirectly" shall mean engaging directly or having an
interest, directly or indirectly, as owner, partner, shareholder,
independent contractor, capital investor, lender, person who renders
consultation services or advice or otherwise (other than as the holder
of less than 5% of the outstanding stock of a publicly-traded
corporation), either alone or in association with others, in the
operation of any aspect of any type of business or enterprise engaged
in any aspect of the Covered Business. The Executive shall be deemed
engaged in business in the Covered Area if his place
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of business is located in the Covered Area or if he or his business
solicits customers located anywhere in, or delivers products anywhere
in, the Covered Area.
5. REPRESENTATION AND WARRANTIES.
(a) THE COMPANY. The Company hereby represents
and warrants to the Executive as follows:
(i) the Company is duly organized, validly
existing and in good standing under the laws of the
Commonwealth of Massachusetts;
(ii) this Agreement has been duly
authorized, executed and delivered by the Company; and
(iii) the execution and delivery of this
Agreement by the Company, the performance by the Company of
its obligations hereunder and the consummation by the Company
of the transactions contemplated hereby will not violate any
agreement to which the Company is a party or any provision of
its Articles of Organization or By-Laws.
(b) THE EXECUTIVE. The Executive hereby
represents and warrants to the Company as follows:
(i) the Executive has full legal capacity
to enter into this Agreement;
(ii) this Agreement has been duly executed
and delivered by the Executive;
(iii) the execution and delivery of this
Agreement by the Executive, the performance by the Executive
of his obligations hereunder and the consummation by the
Executive of the transactions contemplated hereby will not
violate any agreement to which he is a party; and
(iv) the Executive has made such
investigations of the business and properties of the Company
as he deems necessary or appropriate before entering into this
Agreement.
6. SUCCESSORS: ASSIGNMENT.
(a) THE COMPANY. Except as herein provided, the
Company may not assign any of its rights or obligations under this
Agreement without the written consent of the Executive; PROVIDED,
HOWEVER, that the Company may assign this Agreement without such
consent if assigned to the acquiring party as part of a transfer by the
Company of all or substantially all of its assets and the acquiring
party consents in writing to be bound by this Agreement. A change in
control of the Company or merger of the Company with and into any other
corporation (whether or not the Company shall be the surviving entity)
shall not be deemed an assignment of this Agreement.
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(b) THE EXECUTIVE. Neither this Agreement, nor
any right, obligation or interest hereunder, may be assigned by the
Executive, his beneficiaries, or his legal representatives.
7. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered by hand, or three business days after being mailed by first-class
certified mail, postage prepaid and return receipt requested, addressed as
follows:
If to the Company:
Asahi/America, Inc.
35 Green Street
Malden, Massachusetts 02148
Attention: President
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: David M. Wilf, Esq.
and
Testa, Hurwitz & Thibeault LLP
High Street Tower
Boston, Massachusetts 02110
Attention: F. George Davitt, Esq.
If to the Executive:
Leslie B. Lewis
120 Cabot Street
Chestnut Hill, Massachusetts 02167
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: David S. Rosenthal, Esq.
8. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts without giving effect to the conflicts of law principles thereof.
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9. EXPENSES. All costs and expenses (including
attorneys' fees) incurred by the Company and the Executive in connection with
the negotiation and preparation of this Agreement shall be paid by the Company.
10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties and their affiliates relating to the subject matter
hereof and supersedes all prior agreements, representations, warranties and
understandings, written or oral with respect thereto including, without
limitation, the Prior Agreement. The Executive acknowledges that (i) he has no
right to payments that may arise on account of the transactions contemplated by
the Merger Agreement other than on account of his stock in the Company and has
no other rights pursuant to the Prior Agreement, (ii) "Good Reason" does not
exist based upon the transactions contemplated in the Merger Agreement and (iii)
any accrued but unpaid salaries, accrued vacation days and unreimbursed expenses
(as described in Section 2(c)) shall carry over from the Prior Agreement.
11. SEVERABILITY.
(a) GENERALLY. If any term or provision of this
Agreement or the application thereof to any person, property or
circumstances shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or
provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
(b) DURATION AND SCOPE OF CERTAIN COVENANTS. Without
limiting Section 11(a) hereof, if any court or arbitrator determines
that any of the covenants contained in Section 4 hereof, or any part of
such covenants, are unenforceable because of the duration or geographic
scope of such provision, such court or arbitrator shall have the power
to and is hereby requested to modify the duration or scope of such
provisions as the case may be to the extent necessary to make such
provision enforceable, and in its modified form, such provision shall
then be enforceable.
12. ARBITRATION. In the event of any dispute arising out
of or relating to this Agreement or in the case of breach hereof, the parties
shall try in the first instance to arrive at an amicable settlement, within
sixty (60) days after notice thereof has been given in writing by the
complaining party. Should this fail, the dispute or breach shall be referred to
and finally settled by arbitration which shall be held in Boston, Massachusetts
and conducted in the English language in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA"); PROVIDED,
HOWEVER, that disputes with regard to the determination of any bonus amount
hereunder shall be resolved in accordance with the procedures set forth in
Section 2(d) hereof. The AAA shall select three arbitrators (or in the event of
a monetary dispute involving less than $25,000, one arbitrator) to arbitrate the
disputed matter. The arbitration decision shall be binding and final and
judgment on any award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Each side shall bear the cost of its respective
attorneys' fees associated with the foregoing procedures.
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13. REMEDIES: EQUITABLE RELIEF. The Executive
acknowledges and agrees that the covenants and obligations of the Executive
contained in Section 4 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests of
the Company and its Affiliates and that a breach of any of the terms of such
covenants and obligations will cause the Company irreparable injury for which
adequate remedies at law are not available. The Executive therefore consents to
injunctive relief, a restraining order, an order of specific performance or any
other equitable relief (together, "Equitable Relief") with respect to any of its
obligations under Section 4. As to such obligations, any order for Equitable
Relief shall be in lieu of damages except for damages accrued up to the date of
compliance with the order. The Executive hereby waives any claim or defense
therein that the Company has an adequate remedy at law or that money damages
would provide an adequate remedy. It shall, however, be the election of the
Company as to whether or not to seek Equitable Relief. An order for Equitable
Relief shall be among the remedies which can be granted pursuant to an
arbitration instituted under Section 12 hereof and enforced by any court of
competent jurisdiction. Additionally, solely for the purpose of provisional
relief pending a determination on the merits pursuant to the arbitration process
provided for in Section 12 hereof, the Company may seek from an appropriate
court Equitable Relief.
14. AMENDMENTS, MISCELLANEOUS, ETC. Neither this
Agreement, nor any term hereof, may be amended, modified, waived, discharged or
terminated except by an instrument in writing signed by the party against which
such change, waiver, discharge or termination is sought to be enforced. The
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. All references to Sections shall be to Sections of this Agreement.
15. EFFECTIVENESS. This Agreement shall be effective
only as of the Effective Time, and prior to such time, this Agreement shall have
no force or effect.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement under seal as of the date first written above.
ASAHI/AMERICA, INC.
By: /s/ Kozo Terada
----------------------------------
Name: Kozo Terada
Title: VP, CFO, Treasurer
/s/ Leslie B. Lewis
--------------------------------------
LESLIE B. LEWIS
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