SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 21, 1998
(December 17, 1998) -----------------
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BORG-WARNER AUTOMOTIVE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-12162 13-3404508
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(State or Other (Commission File Number) IRS Employer
Jurisdiction of Identification
Incorporation) Number
200 South Michigan Avenue, Chicago, Illinois 60604
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (312) 322-8500
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 4
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Item 5. Other Events.
On December 18, 1998, Borg-Warner Automotive, Inc.
("Borg-Warner"), and Kuhlman Corporation ("Kuhlman") announced that they have
entered into an Agreement and Plan of Merger, dated as of December 17, 1998 (the
"Merger Agreement"), pursuant to which BWA Merger Corp., a newly formed wholly
owned subsidiary of Borg-Warner, will be merged with and into Kuhlman.
The Merger Agreement and the press release announcing the
entering into of the Merger Agreement are attached hereto as exhibits and are
incorporated herein by reference. The foregoing description of the Merger
Agreement is qualified in its entirety by reference to exhibit 2 hereof.
Item 7. Exhibits.
2. Merger Agreement and Plan of Merger, dated as of
December 17, 1998, among Borg-Warner Automotive,
Inc., BWA Merger Corp., and Kuhlman Corporation.
99. Borg-Warner Automotive, Inc. Press Release dated
December 18, 1998.
PAge 2 of 4
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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, thereunto duly authorized.
Dated: December 21, 1998
BORG-WARNER AUTOMOTIVE, INC.
By /s/ Vincent M. Lichtenberger
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Name: Vincent M. Lichtenberger
Title: Assistant Secretary
Page 3 of 4
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EXHIBIT LIST
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Page No.
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2. Merger Agreement, and Plan of Merger, dated as of
December 17, 1998, among Borg-Warner Automotive,
Inc., BWA Merger Corp., and Kuhlman Corporation.
99. Borg-Warner Automotive, Inc. Press Release dated
December 18, 1998.
Page 4 of 4
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
BORG-WARNER AUTOMOTIVE, INC.
("Purchaser"),
BWA MERGER CORP.
a wholly owned direct subsidiary of Purchaser
("Subcorp"),
and
KUHLMAN CORPORATION
("target")
December 17, 1998
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TABLE OF CONTENTS
PAGE
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PRELIMINARY STATEMENTS.................................................... 1
AGREEMENT .................................................... 1
ARTICLE I. THE MERGER.................................................... 1
1.1 The Merger..................................................... 1
1.2 Effective Time................................................. 1
1.3 Effects of the Merger.......................................... 2
1.4 Certificate of Incorporation and By-Laws....................... 2
1.5 Directors and Officers of the Surviving Corporation............ 2
ARTICLE II. CONVERSION OF SECURITIES .................................... 2
2.1 Conversion of Capital Stock.................................... 2
2.2 Election Procedures............................................ 3
2.3 Exchange Ratio; Fractional Shares; Adjustments................. 6
2.4 Exchange of Certificates....................................... 7
(a) Exchange Agent..................................... 7
(b) Exchange Procedures................................ 7
(c) Distributions with Respect to Unexchanged Shares... 8
(d) No Further Ownership Rights in Target Common Stock. 8
(e) Termination of Exchange Fund....................... 9
(f) No Liability....................................... 9
(g) Investment of Exchange Fund........................ 9
(h) Withholding Rights................................. 9
2.5 Treatment of Stock Options..................................... 10
2.6 Treatment of Stock Appreciation Rights......................... 10
2.7 Treatment of Awards Under Long-Term Incentive Plan............. 10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
SUBCORP .................................................... 11
3.1 Organization and Standing...................................... 11
3.2 Corporate Power and Authority.................................. 11
3.3 Capitalization of Purchaser and Subcorp........................ 11
3.4 Conflicts; Consents and Approvals.............................. 12
3.5 Purchaser SEC Documents........................................ 13
3.6 Compliance with Law............................................ 14
3.7 Registration Statement; Proxy Statement........................ 14
3.8 Litigation; Products Liability................................. 14
3.9 No Material Adverse Change..................................... 14
3.10 Environmental Compliance....................................... 15
3.11 Board Recommendation........................................... 15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET ................... 16
4.1 Organization and Standing...................................... 16
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4.2 Subsidiaries................................................... 16
4.3 Corporate Power and Authority.................................. 17
4.4 Capitalization of Target....................................... 17
4.5 Conflicts; Consents and Approvals.............................. 18
4.6 No Material Adverse Change..................................... 18
4.7 Target SEC Documents........................................... 18
4.8 Taxes.......................................................... 19
4.9 Compliance with Law............................................ 20
4.10 Intellectual Property.......................................... 20
4.11 Registration Statement; Proxy Statement........................ 21
4.12 Litigation; Products Liability................................. 21
4.13 Employee Benefit Plans......................................... 21
4.14 Contracts...................................................... 25
4.15 Labor Matters.................................................. 26
4.16 Permits........................................................ 26
4.17 Reserved....................................................... 27
4.18 Title to Properties and Assets................................. 27
4.19 Environmental Compliance....................................... 27
4.20 Opinion of Financial Advisor................................... 27
4.21 Board Recommendation; Required Vote............................ 28
4.22 Section 203 of DGCL; Rights Agreement.......................... 28
4.23 Brokerage and Finder's Fees.................................... 28
ARTICLE V. COVENANTS OF THE PARTIES ..................................... 29
5.1 Mutual Covenants................................................ 29
(a) HSR Act Filings; Reasonable Best Efforts;
Notification....................................... 29
(b) Public Announcements............................... 31
(c) Registration Statement/Proxy Statement............. 31
(d) Change of Control.................................. 32
5.2 Covenants of Purchaser.......................................... 32
(a) Conduct of Purchaser's Operations.................. 32
(b) Indemnification; Directors'and Officers'Insurance.. 32
(c) Merger Sub......................................... 33
(d) NYSE Listing....................................... 33
(e) Employees and Employee Benefits.................... 33
(f) Contacts with Target's Customers and Suppliers..... 33
5.3 Covenants of Target............................................. 34
(a) Target Stockholders Meeting........................ 34
(b) Conduct of Target's Operations..................... 34
(c) No Solicitation.................................... 37
(d) Access............................................. 38
(e) Subsequent Financial Statements.................... 39
(f) Affiliates of Target............................... 39
ARTICLE VI. CONDITIONS .................................................. 39
6.1 Conditions to the Obligations of Each Party..................... 39
6.2 Conditions to Obligations of Target............................. 40
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6.3 Conditions to Obligations of Purchaser and Subcorp.............. 40
ARTICLE VII. TERMINATION AND AMENDMENT .................................. 42
7.1 Termination..................................................... 42
7.2 Effect of Termination........................................... 43
7.3 Amendment....................................................... 44
7.4 Extension; Waiver............................................... 44
ARTICLE VIII. MISCELLANEOUS .............................................. 45
8.1 Survival of Representations and Warranties...................... 45
8.2 Notices......................................................... 45
8.3 Interpretation.................................................. 46
8.4 Counterparts.................................................... 47
8.5 Entire Agreement................................................ 47
8.6 Third-Party Beneficiaries....................................... 47
8.7 Governing Law................................................... 47
8.8 Consent to Jurisdiction; Venue.................................. 47
8.9 Specific Performance............................................ 48
8.10 Assignment...................................................... 48
8.11 Expenses........................................................ 48
Exhibit A - Form of Affiliate Letter...................................... A-1
Exhibit B - Form of Subcorp Bylaws........................................ B-1
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into as of the 17th day of December, 1998, by and among Borg-Warner
Corporation, a Delaware corporation ("Purchaser"), BWA Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Purchaser ("Subcorp"), and Kuhlman
Corporation, a Delaware corporation ("Target").
PRELIMINARY STATEMENTS
A. Purchaser desires to combine its businesses with the
businesses operated by Target through the merger of Subcorp with and into
Target, with Target as the surviving corporation (the "Merger"), pursuant to
which each share of Target Common Stock (as defined in Section 4.4(a))
outstanding at the Effective Time (as defined in Section 1.2) will be converted
into the right to receive the Merger Consideration (as defined in Section
2.4(b)) as more fully provided herein.
B. Target desires to combine its businesses with the
businesses operated by Purchaser and for the holders of shares of Target Common
Stock ("Target Stockholders") to receive the Merger Consideration and to have a
continuing equity interest in the combined Purchaser/Target businesses through
the ownership of Purchaser Common Shares (as defined in Section 3.3(a)).
C. The respective Boards of Directors of Purchaser, Subcorp
and Target have determined the Merger to be desirable and in the best interests
of their respective shareholders and, by resolutions duly adopted, have approved
and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the
mutual and dependent promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), Subcorp shall be merged with and into Target at
the Effective Time. As a result of the Merger, the separate corporate existence
of Subcorp shall cease and Target shall continue its existence under the laws of
the State of Delaware. Target, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. As promptly as possible on the Closing
Date (as defined below), the parties shall cause the Merger to be consummated by
filing with the Secretary of
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State of the State of Delaware (the "Delaware Secretary of State") a certificate
of merger (the "Certificate of Merger") in such form as is required by and
executed in accordance with Section 251 of the DGCL. The Merger shall become
effective (the "Effective Time") when the Certificate of Merger has been filed
with the Delaware Secretary of State or at such later time as shall be agreed
upon by Purchaser and Target and specified in the Certificate of Merger. The
date on which the Effective Time occurs is herein referred to as the "Effective
Date." Prior to the filing referred to in this Section 1.2, a closing (the
"Closing") shall be held at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, or such other place as the parties
may agree as soon as practicable (but in any event within ten business days)
following the date upon which all conditions set forth in Article VI have been
satisfied or waived, or at such other date as Purchaser and Target may agree;
provided, that the conditions set forth in Article VI have been satisfied or
waived at or prior to such date. The date on which the Closing takes place is
referred to herein as the "Closing Date."
1.3 Effects of the Merger. From and after the Effective
Time, the Merger shall have the effects set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and By-Laws. The
Certificate of Merger shall provide that at the Effective Time (i) the
Certificate of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be amended as of the Effective
Time so as to contain the provisions, and only the provisions, contained
immediately prior thereto in the Certificate of Incorporation of Subcorp, except
for Article I thereof, which shall continue to read "The name of the corporation
is `Kuhlman Corporation'", and (ii) the By-Laws of Subcorp in effect immediately
prior to the Effective Time, which shall be in the form attached as Exhibit A
hereto, shall be the By-Laws of the Surviving Corporation; in each case, until
amended in accordance with the DGCL.
1.5 Directors and Officers of the Surviving Corporation.
From and after the Effective Time, the officers of Target shall be the officers
of the Surviving Corporation and the directors of Subcorp shall be the directors
of the Surviving Corporation, in each case, until their respective successors
are duly elected and qualified. On or prior to the Closing Date, Target shall
deliver to Purchaser evidence satisfactory to Purchaser of the resignations of
the directors of Target, such resignations to be effective as of the Effective
Time.
ARTICLE II.
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, Subcorp or
Target or their respective shareholders:
(a) Each share of common stock, $0.01 par value, of Subcorp
("Subcorp Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, $0.01
par value, of the Surviving Corporation.
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Such newly issued shares shall thereafter constitute all of the issued
and outstanding capital stock of the Surviving Corporation.
(b) Each share of capital stock of Target held in the
treasury of Target shall be cancelled and retired and no payment shall
be made in respect thereof.
(c) Each outstanding share of Target Common Stock which under
the terms of Section 2.2 is to be converted into the right to receive
Purchaser Common Shares shall, subject to Section 2.3, be converted into
and become the right to receive a number of Purchaser Common Shares
equal to the Exchange Ratio (as defined in Section 2.3) (the "Stock
Consideration").
(d) Each outstanding share of Target Common Stock which under
the terms of Section 2.2 is to be converted into the right to receive
cash shall be converted into the right to receive $39.00 in cash (the
"Cash Consideration");
(e) Each outstanding share of Target Common Stock the holder
of which has perfected his right to dissent under applicable law and has
not effectively withdrawn or lost such right as of the Effective Date
(the "Dissenting Shares") shall not be converted into or represent a
right to receive Purchaser Common Shares and/or cash hereunder, and the
holder thereof shall be entitled only to such rights as are granted by
applicable law. Target shall give Purchaser prompt notice upon receipt
by Target of any such written demands for payment of the fair value of
such shares of Target Common Stock and of withdrawals of such notice and
any other instruments provided pursuant to applicable law (any
shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). Any payments made in respect of Dissenting
Shares shall be made by the Surviving Corporation.
(f) If any Dissenting Shareholder shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such
payment at or prior to the Effective Date, such holder's shares of
Target Common Stock shall be converted into a right to receive cash
and/or Purchaser Common Shares in accordance with the applicable
provisions of this Agreement. If such holder shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such
payment after the Effective Date, each share of Target Common Stock of
such holder shall be converted on a share by share basis into the right
to receive the Cash Consideration.
2.2 Election Procedures.
(a) Subject to the allocation and election procedures set
forth in this Section 2.2, each record holder (or beneficial owner
through appropriate and customary documentation and instructions)
immediately prior to the Effective Time of shares of Target Common Stock
shall be entitled either (i) to elect to receive the Cash Consideration
for each such share of Target Common Stock ("Cash Election Shares"), or
(ii) to elect to receive the Stock Consideration for each such share of
Target Common Stock ("Stock Election Shares"), or (iii) to indicate that
such record holder has no preference as to the receipt of
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cash or Purchaser Common Shares for each such share of Target Common
Stock ("Non-Election Shares"). All such elections shall be made on a
form furnished by Purchaser for that purpose (a "Form of Election") and
reasonably satisfactory to Target. If more than one Certificate shall be
surrendered for the account of the same holder, the number of Purchaser
Common Shares, if any, to be issued to such holder in exchange for the
certificates representing the shares of Target Common Stock (the
"Certificates") which have been surrendered shall be computed on the
basis of the aggregate number of shares of Target Common Stock
represented by all of the Certificates surrendered for the account of
such holder. Holders of record of shares of Target Common Stock who hold
such shares as nominees, trustees or in other representative capacities
(each, a "Representative") may submit multiple Forms of Election,
provided that such Representative certifies that each such Form of
Election covers all shares of Target Common Stock held by such
Representative for a particular beneficial owner.
(b) Not later than the 25th business day prior to the
anticipated Effective Date or such date as the parties agree in writing,
Purchaser shall mail a Form of Election and a letter of transmittal to
record holders of Target Common Stock as of the record date for the
Target Stockholders Meeting (as defined below). Elections shall be made
by holders of shares of Target Common Stock by delivering the Form of
Election to Harris Trust and Savings Bank, or such other bank or trust
company designated by Purchaser and who is reasonably satisfactory to
Target (the "Exchange Agent"). To be effective, a Form of Election must
be properly completed, signed and submitted to the Exchange Agent by
5:00 p.m. (New York City time) on the last business day prior to the
date of the Target Stockholders Meeting (as defined below) or such other
time and date as Purchaser and Target may mutually agree (the "Election
Deadline"), and accompanied by (1)(x) the Certificates as to which the
election is being made or (y) an appropriate guarantee of delivery of
such Certificates as set forth in such Form of Election from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States,
provided such Stock Certificates are in fact delivered to the Exchange
Agent within three New York Stock Exchange ("NYSE") trading days after
the date of execution of such guarantee of delivery (a "Guarantee of
Delivery") and (2) a properly completed and signed letter of
transmittal. Failure to deliver Certificates covered by any Guarantee of
Delivery within three NYSE trading days after the date of execution of
such Guarantee of Delivery shall be deemed to invalidate any otherwise
properly made election. Purchaser will have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The
good faith decision of Purchaser (or the Exchange Agent) in such matters
shall be conclusive and binding. Neither Purchaser nor the Exchange
Agent will be under any obligation to notify any person of any defect in
a Form of Election submitted to the Exchange Agent. The Exchange Agent
shall also make all computations contemplated by Section 2.2(c) and all
such computations shall be conclusive and binding on the Target
Stockholders in the absence of manifest error. Any Form of Election may
be changed or revoked prior to the Election Deadline. In the event a
Form of Election is revoked prior to the Election Deadline, Pur-
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chaser shall, or shall cause the Exchange Agent to, cause the
Certificates representing the shares of Target Common Stock covered by
such Form of Election to be promptly returned without charge to the
person submitting the Form of Election upon written request to that
effect from such person. For purposes hereof, if a Target Stockholder
does not submit a Form of Election which is received by the Exchange
Agent prior to the Election Deadline (including a holder who submits and
then revokes his or her Form of Election and does not resubmit a Form of
Election which is timely received by the Exchange Agent), or if a Target
Stockholder submits a Form of Election without the corresponding
Certificates or a Guarantee of Delivery, then such Target Stockholder's
shares of Target Common Stock shall be deemed to be Non-Election Shares.
If any Form of Election is defective in any manner that the Exchange
Agent cannot reasonably determine the election preference of the
stockholder submitting such Form of Election, the purported election set
forth therein shall be deemed to be of no force and effect and then such
Target Stockholder's shares of Target Common Stock shall, for purposes
hereof, be deemed to be Non-Election Shares.
(c) Within five business days after the Election Deadline
(the "Measurement Date"), the Exchange Agent shall effectuate the
allocation among holders of Target Common Stock of rights to receive
Purchaser Common Shares or cash in the Merger in accordance with the
Forms of Election as follows:
(i) If the number of Stock Election Shares is less than
or equal to 3,846,154 (the "Stock Conversion Number"), then:
(1) all Stock Election Shares will be converted
into the right to receive Purchaser Common
Shares,
(2) the Exchange Agent will select first from
among the Non-Election Shares by a random
selection process as shall be mutually
determined by Purchaser and Target as
shall be further described in the Election
Form, then (if necessary) will allocate
pro rata from among the Cash Election
Shares (provided that each holder of such
Cash Election Shares holds 1,000 or more
shares of Target Common Stock), and then
(if necessary) will allocate pro rata from
among the remaining Cash Election Shares,
a sufficient number of such shares ("Stock
Designated Shares") such that the number
of Stock Designated Shares will, when
added to the number of Stock Election
Shares, equal as closely as practicable
the Stock Conversion Number, and all Stock
Designated Shares will be converted into
the right to receive Purchaser Common
Shares, and
(3) the Cash Election Shares (subject to the
provisions of Sections 2.1(e) and (f) with
respect to any Dissenting Shares) and the
Non-Election Shares which are not Stock
Designated Shares will be converted into
the right to receive cash; or
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(ii) If the number of Stock Election Shares is greater
than the Stock Conversion Number, then:
(1) the Exchange Agent will allocate pro rata
first from among the Stock Election Shares
(provided that each holder of such Stock
Election Shares holds less than 1,000
shares of Target Common Stock) and then
(if necessary) will allocate pro rata from
among the remaining Stock Election Shares,
a sufficient number of such shares ("Cash
Designated Shares") such that when the
number of Cash Designated Shares is
subtracted from the number of Stock
Election Shares, the remaining Stock
Election Shares will equal as closely as
practicable the Stock Conversion Number
and all such remaining Stock Election
Shares will be converted into the right to
receive Purchaser Common Shares, and
(2) the Cash Election Shares, Non-Election
Shares, and Cash Designated Shares will be
converted into the right to receive cash.
2.3 Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall mean the quotient (rounded to
the nearest 1/100,000) obtained by dividing (i) $39.00 by (ii) the
average of the high and low sales prices of Purchaser Common Stock as
reported on the New York Stock Exchange ("NYSE") Composite Tape (the
"NYSE Composite Tape") on each of the twenty consecutive trading days
immediately preceding the third trading date prior to the Closing Date
(the "Purchaser Share Price").
(b) No certificates for fractional Purchaser Common Shares
shall be issued as a result of the conversion provided for in Section
2.1(c) and such fractional share interests will not entitle the owner
thereof to vote or have any rights of a holder of Purchaser Common
Shares. In lieu of any such fractional Purchaser Common Shares, the
holder of a certificate previously evidencing Target Common Stock, upon
presentation of such fractional interest represented by an appropriate
certificate for Target Common Stock to the Exchange Agent pursuant to
Section 2.3, shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the Purchaser
Share Price) of such fractional interest. Such payment with respect to
fractional shares is merely intended to provide a mechanical rounding
off of, and is not a separately bargained for, consideration. If more
than one certificate representing shares of Target Common Stock shall be
surrendered for the account of the same holder, the number of Purchaser
Common Shares for which certificates have been surrendered shall be
computed on the basis of the aggregate number of shares represented by
the certificates so surrendered.
(c) In the event that prior to the Effective Time Purchaser
shall declare a stock dividend or other distribution payable in
Purchaser Common Shares or securities convertible into Purchaser Common
Shares, or effect a stock split, reclassification, combination or other
change with respect to Purchaser Common Shares, the Exchange Ratio and
Cash
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Consideration set forth in this Article II shall be adjusted to reflect
such dividend, distribution, stock split, reclassification, combination
or other change.
2.4 Exchange of Certificates.
(a) Exchange Agent. Immediately prior to the Effective Time,
Purchaser shall deposit with the Exchange Agent for the benefit of
Target Stockholders, for exchange in accordance with this Section 2.4,
(i) certificates representing the aggregate Stock Consideration issuable
pursuant to Sections 2.1 and 2.2, (ii) cash representing the aggregate
Cash Consideration to which Target Stockholders who have properly
completed, signed and submitted Forms of Election shall be entitled
pursuant to Sections 2.1 and 2.2 and (iii) from time to time, (X) cash
representing the aggregate Cash Consideration to which Target
Stockholders who submit letters of transmittal after the Effective Time
shall be entitled pursuant to Sections 2.1 and 2.2 and (Y) cash in an
amount reasonably expected to be paid pursuant to Section 2.3(b) (such
Purchaser Common Shares and cash, together with any dividends or
distributions with respect thereto, the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record
of a Certificate or Certificates which prior thereto represented Target
Common Stock who did not submit such Certificate or Certificates to the
Exchange Agent with such holder's properly submitted Form of Election:
(i) a letter of transmittal (which shall specify, as shall the Form of
Election, that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent, and shall be in such form and have such other
customary provisions as Purchaser may reasonably specify) and (ii)
instructions for effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter
of transmittal, the holder of such Certificate shall be entitled to
receive in exchange therefor (i) a certificate or certificates
representing that whole number of Purchaser Common Shares which such
holder has the right to receive pursuant to Sections 2.1 or 2.2 in such
denominations and registered in such names as such holder may request
and/or a check representing the Cash Consideration which such holder has
the right to receive pursuant to Sections 2.1 or 2.2 plus (ii) the
amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after giving
effect to any required withholding tax (the Purchaser Common Shares and
cash referred to in clause (i) being collectively referred to as the
"Merger Consideration"). The shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or
accrued on the Cash Consideration or the cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, payable
to holders of shares of Target Common Stock. In the event of a transfer
of ownership of shares of Target Common Stock that is not registered on
the transfer records of Target, a certificate representing the proper
number of Purchaser Common Shares, and/or a check for the Cash
Consideration which such holder has the right to receive pursuant to
Sections 2.1 or 2.2 plus the cash to be paid in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, may be
issued to such transferee if the
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Certificate representing such shares of Target Common Stock held by such
transferee is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall
be deemed at any time after the Effective Time to represent only the
right to receive upon surrender the Merger Consideration plus the cash
in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided in this Article II. If any
Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Purchaser, the posting
by such person of a bond in such reasonable amount as Purchaser may
direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will deliver in exchange
for such lost, stolen or destroyed Certificate, a certificate
representing the proper number of Purchaser Common Shares, and/or check
for the Cash Consideration which such holder has the right to receive
pursuant to Sections 2.1 or 2.2 plus the cash to be paid in lieu of
fractional shares, if any, with respect to the shares of Target Common
Stock formerly represented thereby, and unpaid dividends and
distributions on Purchaser Common Shares, if any, as provided in this
Article II.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time with
respect to Purchaser Common Shares having a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate, and no cash payment in lieu of fractional shares shall be
paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.4. Subject to the effect of
Applicable Laws (as defined in Section 4.9), following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole Purchaser Common Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective
Time theretofore payable with respect to such whole Purchaser Common
Shares and not paid, less the amount of any withholding taxes that may
be required thereon, and (ii) at the appropriate payment date subsequent
to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
Purchaser Common Shares, less the amount of any withholding taxes which
may be required thereon.
(d) No Further Ownership Rights in Target Common Stock. All
Purchaser Common Shares issued and/or Cash Consideration paid upon
surrender of Certificates in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of
Target Common Stock represented thereby, and, as of the Effective Time,
the stock transfer books of Target shall be closed and there shall be no
further registration of transfers on the stock transfer books of Target
of shares of Target Common Stock outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Section 2.4. Certificates surrendered for
exchange by any person identified as
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an "affiliate" in the letter provided to Purchaser pursuant to Section
5.3(f) shall not be exchanged until Purchaser has received written
undertakings from such person in the form attached as Exhibit B to this
Agreement.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to Target Stockholders six months after
the date of the mailing required by Section 2.4(b) shall be delivered to
Purchaser, upon demand thereby, and holders of Certificates previously
representing shares of Target Common Stock who have not theretofore
complied with this Section 2.4 shall thereafter look only to Purchaser
for payment of any claim to the Merger Consideration and cash in lieu of
fractional shares thereof, or dividends or distributions, if any, in
respect thereof.
(f) No Liability. None of Purchaser, the Surviving
Corporation or the Exchange Agent shall be liable to any person in
respect of any shares of Target Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any cash, any cash in
lieu of fractional shares or any dividends or distributions with respect
to whole shares of Target Common Stock in respect of such Certificate
would otherwise escheat to or become the property of any Governmental
Authority (as defined in Section 3.4(d)), any such cash, dividends or
distributions in respect of such Certificate shall, to the extent
permitted by Applicable Laws, become the property of Purchaser, free and
clear of all claims or interest of any person previously entitled
thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Purchaser,
on a daily basis. Any interest and other income resulting from such
investments shall be paid to Purchaser upon termination of the Exchange
Fund pursuant to Section 2.4(e). In the event the cash in the Exchange
Fund shall be insufficient to fully satisfy all of the payment
obligations to be made by the Exchange Agent hereunder, then Purchaser
shall promptly deposit cash into the Exchange Fund in an amount which is
equal to the deficiency in the amount of cash required to fully satisfy
such payment obligations.
(h) Withholding Rights. Each of the Surviving Corporation,
Subcorp and Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder
of shares of Target Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code") and the rules and
regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation, Subcorp or Purchaser, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Target Common Stock in
respect of which such deduction and withholding was made by the
Surviving Corporation, Subcorp or Purchaser, as the case may be.
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2.5 Treatment of Stock Options. (a) Prior to the
Effective Time, the Board of Directors of Target (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary (including obtaining the consent of holders) to provide for
the cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") outstanding immediately prior to the Effective Time
heretofore granted under any stock option or similar plan of Target or under any
agreement, without any payment therefor except as otherwise provided in this
Section 2.5. Immediately prior to the Effective Time, all Options (whether
vested or unvested) which are listed in Section 2.5 of the disclosure schedule
delivered by Target to Purchaser and dated the date hereof (the "Target
Disclosure Schedule") shall be cancelled (and to the extent formerly so
exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in cash
by Target (less any applicable withholding taxes), promptly following the
Effective Time, equal to the product of (i) the total number of shares of Target
Common Stock subject to such Option (whether vested or unvested) and (ii) the
excess, if any, of $39.00 over the exercise price per share of Target Common
Stock subject to such Option.
2.6 Treatment of Stock Appreciation Rights. Prior to the
Effective Time, the Board of Directors of Target (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary (including obtaining the consent of holders) to provide for
the cancellation, effective at the Effective Time, of all the outstanding stock
appreciation rights (the "SARs") outstanding immediately prior to the Effective
Time heretofore granted under any compensation, incentive, employee or similar
plan of Target or under any agreement, without any payment therefor except as
otherwise provided in this Section 2.6. Immediately prior to the Effective Time,
all SARs (whether vested or unvested) which are listed in Section 2.6 of the
Target Disclosure Schedule shall be cancelled (and to the extent formerly so
exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in cash
by Target (less any applicable withholding taxes), immediately prior to the
Effective Time, equal to the excess, if any, of $39.00 over the price of Target
Common Stock on the date of grant of such SAR.
2.7 Treatment of Awards Under Long-Term Incentive Plan.
Prior to the Effective Time, the Board of Directors of Target (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary (including obtaining the consent of holders) to
provide, with respect to all currently outstanding Awards (as defined in the
Target Long-Term Incentive Plan dated August 8, 1996, as amended January 1, 1998
and November 20, 1998) (other than Options) granted prior to the Effective Time,
that (i) each such Award that is listed on Section 2.7 of the Target Disclosure
Schedule shall be canceled, immediately prior to the Effective Time, and shall
entitle the holder thereof to the immediate payment of the amount of cash set
forth in Section 2.7 of the Target Disclosure Schedule, which amount constitutes
the full payment of any consideration due under such Awards, and (ii) all other
such Awards (including any Awards granted pursuant to the New Two-Year
Management Incentive Arrangement $56 Target) shall be canceled immediately prior
to the Effective Time with no further consideration.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUBCORP
In order to induce Target to enter into this Agreement,
Purchaser and Subcorp hereby represent and warrant to Target that the statements
contained in this Article III are true, correct and complete.
3.1 Organization and Standing. Each of Purchaser and
Subcorp is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation with full corporate power and
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
Purchaser and Subcorp is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of the business conducted by it or the
property it owns, leases or operates, requires it to so qualify, except where
the failure to be so qualified or in good standing in such jurisdiction would
not have a Material Adverse Effect (as defined in Section 8.3) on Purchaser or
Subcorp, as the case may be. Purchaser is not in default in the performance,
observance or fulfillment of any provision of the Purchaser Restated Certificate
of Incorporation, as amended (the "Purchaser Articles"), or the Purchaser
By-Laws (the "Purchaser By-Laws"), and Subcorp is not in default in the
performance, observance or fulfillment of any provisions of its Certificate of
Incorporation or By-Laws. Purchaser has heretofore made available or furnished
to Target a complete and correct copy of (i) the Purchaser Articles and the
Purchaser By-Laws, each as in effect as of the date of this Agreement and (ii)
the Certificate of Incorporation of Subcorp.
3.2 Corporate Power and Authority. Each of Purchaser and
Subcorp has all requisite corporate power and authority to enter into and
deliver this Agreement to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Purchaser and Subcorp have been duly authorized by all necessary corporate
action on the part of each of Purchaser and Subcorp. This Agreement has been
duly executed and delivered by each of Purchaser and Subcorp, and constitutes
the legal, valid and binding obligation of each of Subcorp and Purchaser
enforceable against each of them in accordance with its terms.
3.3 Capitalization of Purchaser and Subcorp.
(a) As of December 1, 1998, Purchaser's authorized capital
stock consisted solely of (A) 50,000,000 shares of common stock, $0.01
par value ("Purchaser Common Shares"), of which (i) 23,381,373 shares
were issued and outstanding, (ii) 371,992 shares were issued and held in
treasury (which does not include Purchaser Common Shares reserved for
issuance as set forth in clause (a)(iii) below) and (iii) 1,400,050
shares were reserved for issuance upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by
Purchaser, (B) 25,000,000 shares of non-voting common stock, $0.01 par
value ("Purchaser Non-Voting Common Shares"), of which (i) 1,500
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shares were issued and outstanding and (ii) none were reserved for
issuance, and (C) 5,000,000 shares of Preferred Stock, $0.01 par value,
of which (i) none was issued and outstanding and (ii) 500,000 shares
were designated as Series A Junior Participating Preferred Stock
reserved for issuance under the Rights Agreement, dated as of July 22,
1998, between Purchaser and ChaseMellon Shareholder Services, LLC, as
rights agent (the "Purchaser Rights Agreement"). Each outstanding share
of Purchaser capital stock is, and all Purchaser Common Shares to be
issued in connection with the Merger will be, duly authorized and
validly issued, fully paid and nonassessable, and each outstanding share
of Purchaser capital stock has not been, and all Purchaser Common Shares
to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. Section 3.3 to the
disclosure schedule delivered by Purchaser to Target and dated the date
hereof (the "Purchaser Disclosure Schedule") sets forth the aggregate
amount of outstanding options relating to the issuance by Purchaser of
any equity securities of Purchaser, together with the average weighted
exercise price thereof. The issuance and sale of all of the shares of
capital stock described in this Section 3.3 have been in material
compliance with federal and state securities laws. The Purchaser Common
Shares to be issued in the Merger in accordance with this Agreement will
be, when so issued, duly authorized, validly issued, fully paid and
nonassessable with preferred share purchase rights issuable pursuant to
the Purchaser Rights Agreement attached thereto. As of the date hereof,
Purchaser has not agreed to register any securities under the Securities
Act of 1933, as amended (together with the rules and regulations
thereunder, the "Securities Act") or under any state securities law or
granted registration rights to any person or entity (which rights are
currently exercisable or will become exercisable between the date hereof
and December 31, 2000).
(b) Subcorp's authorized capital stock consists solely of
1,000 shares of Subcorp Common Stock, of which, as of the date hereof,
100 were issued and outstanding and none were reserved for issuance. As
of the date hereof, all of the outstanding shares of Subcorp Common
Stock are owned free and clear of any liens, claims or encumbrances by
Purchaser.
3.4 Conflicts; Consents and Approvals. Except as set forth in
Section 3.4 to the Purchaser Disclosure Schedule, neither the execution and
delivery of this Agreement by Purchaser or Subcorp nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of
the Purchaser Articles or the Purchaser By-Laws or the Certificate of
Incorporation or By-Laws of Subcorp;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving
of notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Purchaser or any
of its subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, contract,
under-
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taking, agreement, lease or other instrument or obligation to which
Purchaser or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Purchaser or any of its subsidiaries or
any of their respective properties or assets; or
(d) require any action or consent or approval of, or review
by, or registration or filing by Purchaser or any of its affiliates
with, any third party or any local, domestic, foreign or multi-national
court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or authority (a
"Governmental Authority"), other than (i) authorization for inclusion of
the Purchaser Common Shares to be issued in the Merger and the
transactions contemplated hereby on the NYSE, subject to official notice
of issuance, (ii) actions required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (together with the rules and
regulations thereunder, the "HSR Act"), (iii) registrations or other
actions required under federal and state securities laws as are
contemplated by this Agreement, or (iv) consents or approvals of any
Governmental Authority set forth in Section 3.4 to the Purchaser
Disclosure Schedule;
except in the case of clauses (b), (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser or a material adverse effect on the ability of the parties to
consummate the transactions contemplated hereby.
3.5 Purchaser SEC Documents. Purchaser has timely filed with
the Securities and Exchange Commission (the "Commission") all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1996 under the Exchange Act or the Securities Act (such documents, as
supplemented and amended since the time of filing, collectively, the "Purchaser
SEC Documents"). The Purchaser SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively and, in the case of any
Purchaser SEC Document amended or superseded by a filing prior to the date of
this Agreement, then on the date of such amending or superseding filing) (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 Securities Exchange Act of 1934 (together with the rules and
regulations thereunder, the "Exchange Act") and the Securities Act, as the case
may be. The financial statements of Purchaser included in the Purchaser SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any Purchaser SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were 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
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or, in the case of unaudited statements, as permitted by Form 10-Q of the
Commission), and fairly present (subject, in the case of unaudited statements,
to normal, recurring audit adjustments) the consolidated financial position of
Purchaser and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. No subsidiary of Purchaser is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the Commission, the NYSE, any other stock exchange or any other
comparable Governmental Authority.
3.6 Compliance with Law. Purchaser and each of its
subsidiaries is in compliance, and at all times since January 1, 1996 has been
in compliance, with all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any Governmental Authority (collectively, "Applicable Laws") relating to
Purchaser and each of its subsidiaries or their respective business or
properties, except where the failure to be in compliance with such Applicable
Laws (individually or in the aggregate) would not have a Material Adverse Effect
on Purchaser. No investigation or review by any Governmental Authority with
respect to Purchaser or any of its subsidiaries is pending, or, to the knowledge
of Purchaser, threatened, nor has any Governmental Authority indicated in
writing an intention to conduct the same, other than those the outcome of which
would not have a Material Adverse Effect on Purchaser.
3.7 Registration Statement; Proxy Statement. None of the
information provided in writing by Purchaser for inclusion in the registration
statement on Form S-4 (such registration statement as amended, supplemented or
modified, the "Registration Statement") to be filed with the Commission by
Purchaser under the Securities Act, including the prospectus relating to
Purchaser Common Shares to be issued in the Merger (as amended, supplemented or
modified, the "Prospectus") and the proxy statement and form of proxies relating
to the vote of Target Stockholders with respect to the Merger (as amended,
supplemented or modified, the "Proxy Statement"), at the time the Registration
Statement becomes effective or, in the case of the Proxy Statement, at the date
of mailing and at the date of the Target Stockholders Meeting (as defined in
Section 5.3(a)) to consider the Merger and the transactions contemplated
thereby, will 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 Registration Statement and Proxy Statement, except for such
portions thereof that relate only to Target, will each comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act.
3.8 Litigation; Products Liability. There is no suit, claim,
action, proceeding, hearing, notice of violation, demand letter or investigation
(an "Action") pending or, to the knowledge of Purchaser (or its executive
officers or directors), threatened against Purchaser, any of its subsidiaries or
any of their respective executive officers or directors that, individually or in
the aggregate, would have a Material Adverse Effect on Purchaser or a material
adverse effect on the ability of Purchaser to consummate the transactions
contemplated hereby. Neither Purchaser nor any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree that, individually or in the
aggregate, that would have a Material Adverse Effect on Purchaser or a material
adverse effect on the ability of Purchaser to consummate the transactions
contemplated
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hereby. There is no Action presently pending or, to the knowledge of Purchaser
(or its executive officers or directors), threatened against Purchaser or any of
its subsidiaries relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including, without limitation, any
failure to warn or alleged breach of express or implied warranty or
representation, relating to any product manufactured, distributed or sold by or
on behalf of Purchaser or any of its subsidiaries, which if adversely
determined, would have a Material Adverse Effect on Purchaser.
3.9 No Material Adverse Change. Since January 1, 1998, there
has been no material adverse change in the business, results of operations or
financial condition of Purchaser other than any events, occurrences or
developments that would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Purchaser or a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby.
3.10 Environmental Compliance.
(a) To the knowledge of Purchaser, each of Purchaser and its
subsidiaries is, and has been, and each of Purchaser's former
subsidiaries, while subsidiaries of Purchaser, was in compliance with
all applicable Environmental Laws, except for possible noncompliance
which individually or in the aggregate would not have a Material Adverse
Effect on Purchaser. The term "Environmental Laws" means any federal,
state, local or foreign statute, code, ordinance, rule, regulation,
policy, guideline, permit, consent, approval, license, judgment, order,
writ, decree, injunction or other authorization, including the
requirement to register underground storage tanks, relating to: (A)
emissions, discharges, releases or threatened releases of Hazardous
Material (as defined below) into the environment, including, without
limitation, into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater,
publicly-owned treatment works, septic systems or land; or (B) the
generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material.
(b) During the period of ownership or operation by Purchaser
and its subsidiaries of any of their respective current or previously-
owned properties, there have been no releases of Hazardous Material in,
on, under or affecting such properties or, to the knowledge of
Purchaser, any surrounding site, except in each case for those which
individually or in the aggregate would not have a Material Adverse
Effect on Purchaser. Prior to the period of ownership or operation by
Purchaser and its subsidiaries of any of their respective current or
previously-owned properties, to the knowledge of Purchaser, there were
no releases of Hazardous Material in, on, under or affecting any such
property or any surrounding site, except in each case for those which
individually or in the aggregate would not have a Material Adverse
Effect on Purchaser. The term "Hazardous Material" means (1) hazardous
materials, contaminants, constituents, medical wastes, hazardous or
infectious wastes and hazardous substances as those terms are defined in
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., the Comprehensive Environmental Response, Compensation
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and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. Section 9601 et seq., the Clean Water
Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., or any other statute relating to the protection of
the environment or human health or safety, or in any regulation
promulgated thereunder, (2) petroleum, including crude oil and any
fractions thereof, (3) natural gas, synthetic gas and any mixtures
thereof, (4) asbestos and/or asbestos-containing material and (5) PCBs,
or materials or fluids containing PCBs in excess of 50 ppm.
3.11 Board Recommendation. The Board of Directors of
Purchaser, at a meeting duly called and held, has by unanimous vote determined
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together, are fair to and in the best interests of Purchaser and
its stockholders.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF TARGET
In order to induce Subcorp and Purchaser to enter into this
Agreement, Target hereby represents and warrants to Purchaser and Subcorp that
the statements contained in this Article IV are true, correct and complete.
4.1 Organization and Standing. Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease, use and operate
its properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Target and each subsidiary of Target is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to be so qualified
or in good standing in such jurisdiction would not have a Material Adverse
Effect on Target. Target is not in default in the performance, observance or
fulfillment of any provision of its Certificate of Incorporation (the "Target
Certificate"), or its By-Laws, as in effect on the date hereof (the "Target
By-Laws"). Target has heretofore furnished or made available to Purchaser a
complete and correct copy of the Target Certificate and the Target By-Laws.
Listed in Section 4.1 to the Target Disclosure Schedule is each jurisdiction in
which Target or a subsidiary of Target is qualified to do business and, whether
Target (or the subsidiaries of Target) is in good standing as of the date of the
Agreement.
4.2 Subsidiaries. Target does not own, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other entity or enterprise, except for the
subsidiaries set forth in Section 4.2 to the Target Disclosure Schedule. Target
is not subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such entity or any other person. Except as set forth in Section 4.2 to the
Target Disclosure Schedule, Target owns, directly or indirectly, each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of
Target's subsidiaries. Except as set forth in
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Section 4.2 to the Target Disclosure Schedule, each of the outstanding shares of
capital stock of each of Target's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
Target free and clear of all liens, pledges, security interests, claims or other
encumbrances. The following information for each subsidiary of Target is set
forth in Section 4.2 to the Target Disclosure Schedule, as applicable: (i) its
name and jurisdiction of incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the number of issued and outstanding
shares of capital stock or share capital and the record owner(s) thereof. Other
than as set forth in Section 4.2 to the Target Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of Target nor
are there outstanding any securities that are convertible into or exchangeable
for any shares of capital stock of any subsidiary of Target, and neither Target
nor any subsidiary of Target has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of any
subsidiary of Target or any predecessor thereof.
4.3 Corporate Power and Authority. Target has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to authorization of the Merger
and the transactions contemplated hereby by Target Stockholders, to consummate
the transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Target have been duly authorized by all necessary corporate
action on the part of Target, subject to authorization of the Merger and the
transactions contemplated hereby by Target Stockholders. This Agreement has been
duly executed and delivered by Target and constitutes the legal, valid and
binding obligation of Target enforceable against it in accordance with its
terms.
4.4 Capitalization of Target. As of November 30, 1998,
Target's authorized capital stock consisted solely of (a) 40,000,000 shares of
common stock, par value $1.00 per share ("Target Common Stock"), of which (i)
16,851,870 shares were issued and outstanding, (ii) 72,388 shares were issued
and held in treasury (which does not include shares of Target Common Stock
reserved for issuance set forth in clause (iii) below), (iii) 2,085,215 shares
were reserved for issuance upon the exercise of outstanding Target Options, and
(iv) 95,877 shares were reserved for issuance pursuant to outstanding grants
under Target's Long-Term Incentive Plan, and (b) 2,000,000 shares of preferred
stock, par value $1.00 per share ("Target Preferred Stock"), of which (i) none
was issued and outstanding, and (ii) 200,000 shares were designated as Series A
Junior Participating Preferred Stock (the "Series A Preferred Stock") reserved
for issuance pursuant to the rights issued under the Target Rights Agreement (as
defined in Section 4.22). Since November 30, 1998, Target has not issued any
additional shares of capital stock except for the issuance of Target Common
Stock in connection with the exercise of Target Options. Each outstanding share
of Target capital stock is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any preemptive or similar
rights. Other than as set forth in the first sentence hereof or in Section 4.4
to the Target Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale, repurchase or
transfer of any securities of Target, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
Target, and neither Target nor any sub-
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sidiary of Target has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of Target or any
predecessor. The issuance and sale of all of the shares of capital stock
described in this Section 4.4 have been in material compliance with federal and
state securities laws. Target has previously provided Purchaser with schedules
setting forth the names of, and the number of shares of each class (including
the number of shares issuable upon exercise of Target Options and the exercise
price and vesting schedule with respect thereto) and the number of options held
by, all holders of options to purchase Target capital stock. Section 4.4 to the
Target Disclosure Schedule sets forth the average exercise price for outstanding
Target Options. Except as set forth in Section 4.4 to the Target Disclosure
Schedule, Target has not agreed to register any securities under the Securities
Act or under any state securities law or granted registration rights to any
person or entity; copies of all such agreements have previously been provided to
Purchaser. No Purchase Rights have been granted pursuant to the Kuhlman
Corporation Employee Stock Purchase Plan (as that term is defined in such plan),
and there exists no obligation to grant any such Purchase Rights.
4.5 Conflicts; Consents and Approvals. Except as set forth in
Section 4.5 to the Target Disclosure Schedule, neither the execution and
delivery of this Agreement by Target, nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of,
the Target Certificate or the Target By-Laws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the giving
of notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Target or any of
its subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
Target or any of its subsidiaries is a party involving more than
$500,000;
(c) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Target or any of its subsidiaries or
any of their respective properties or assets; or
(d) require any action or consent or approval of, or review
by, or registration or filing by Target or any of its affiliates with,
any third party or any Governmental Authority, other than (i)
authorization of the Merger and the transactions contemplated hereby by
Target Stockholders, (ii) actions required by the HSR Act, (iii)
registrations or other actions required under federal and state
securities laws as are contemplated by this Agreement and (iv) consents
or approvals of any Governmental Authority set forth in Section 4.5 to
the Target Disclosure Schedule;
except in the case of clauses (c) and (d) for any of the foregoing that would
not, individually or in the aggregate, have a Material Adverse Effect on Target
or a material adverse effect on the ability of the parties to consummate the
transaction contemplated hereby.
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4.6 No Material Adverse Change. Since January 1, 1998, there
has been no material adverse change in the business, results of operations or
financial condition of Target other than any events, occurrences or developments
that would not, individually or in the aggregate, have or reasonably be expected
to have a Material Adverse Effect on Target or a material adverse effect on the
ability of Target to consummate the transactions contemplated hereby.
4.7 Target SEC Documents. Target has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since June 1, 1996 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Target SEC Documents"). The Target SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any Target SEC Document amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amending or superseding filing) (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. The financial statements of Target included in the
Target SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and, in the case of any Target SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were 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 unaudited statements, as permitted by Form 10-Q of
the Commission), and present fairly (subject, in the case of unaudited
statements, to normal, year-end adjustments), in all material respects, the
financial position of Target and its consolidated subsidiaries as at the dates
thereof and the results of their operations and their cash flows for the periods
then ended. No subsidiary of Target is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the Commission, the NYSE, any other stock exchange or any other
comparable Governmental Authority.
4.8 Taxes.
(a) Each of Target and its subsidiaries has duly and timely
filed or caused to be duly and timely filed all federal, state, local
and foreign Tax Returns required to be filed by them, and has paid or
withheld or caused to be paid or withheld all Taxes of any nature
whatsoever, with any related penalties, interest and liabilities that
are either shown on those Tax Returns as due and payable or are or were
otherwise required to be paid, other than Taxes being contested in good
faith and for which adequate reserves have been established and
reflected in the Target SEC Documents, except where the failure to file,
pay or withhold would not, individually or
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in the aggregate, have a Material Adverse Effect. All such Tax Returns
are complete and accurate, except for failures that would not,
individually or in the aggregate, have a Material Adverse Effect. There
are no claims, assessments or audits pending or threatened against
Target or any of its subsidiaries for any alleged deficiency in any Tax
that, if upheld, would, individually or in the aggregate, have a
Material Adverse Effect, and there are no threatened Tax claims or
assessments against Target or any of its subsidiaries that, if upheld,
would, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Section 4.8(a) to the Target Disclosure Schedule,
there are no waivers or extensions of any applicable statute of
limitations to assess any Taxes. Except as set forth in Section 4.8(a)
to the Target Disclosure Schedule, there are no outstanding requests for
any extension of time within which to file any Tax Return or within
which to pay any Taxes shown to be due on any Tax Return. There are no
liens for any Taxes upon the assets of Target or any of its subsidiaries
(other than statutory liens for Taxes not yet due and payable) which
would, individually or in the aggregate, have a Material Adverse Effect
on Target. Except as set forth in Section 4.8(a) to the Target
Disclosure Schedule, the federal income Tax Returns of Target and each
of its subsidiaries consolidated in such Tax Returns have been examined
by and settled with the IRS for all years through and including the year
ended December 31, 1995. Neither Target nor any of its subsidiaries has
ever filed an election under Section 341(f) of the Code to be treated as
a consenting corporation.
(b) Neither Target nor any of its subsidiaries has any
liability for Taxes of any person (other than Target and its
subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
comparable provision of state, local or foreign law). Except as set
forth in Section 4.8(b) to the Target Disclosure Schedule, neither
Target nor any of its subsidiaries is or, since December 31, 1988, has
ever been a party to, or bound by, any Tax sharing, Tax indemnity, cost
sharing, or similar agreement or policy relating to Taxes.
(c) Target and its subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
shareholder or other third party, except where the failure to withhold
or pay would not, individually or in the aggregate, have a Material
Adverse Effect on Target.
(d) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, property, sales,
use, transfer, license, payroll, withholding, export, import, customs,
capital stock and franchise taxes or duties, imposed by the United
States or any state, local or foreign government or subdivision or
agency thereof, including any interest, penalties or additions thereto.
For purposes of this Agreement, the term "Tax Return" means any report,
return or other information or document required to be supplied to a Tax
authority in connection with Taxes.
4.9 Compliance with Law. Target and each of its subsidiaries
is in compliance, and at all times since January 1, 1996 has been in compliance,
with all Applicable Laws relating to Target and each of its subsidiaries or
their respective business or properties, except where the failure to be in
compliance with such Applicable Laws (individually or in the aggregate) would
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not have a Material Adverse Effect on Target. No investigation or review by any
Governmental Authority with respect to Target or any of its subsidiaries is
pending, or, to the knowledge of Target, threatened, nor has any Governmental
Authority indicated in writing an intention to conduct the same, other than
those the outcome of which would not have a Material Adverse Effect on Target.
4.10 Intellectual Property. To Target's knowledge, there is
no infringement or unlawful use by any person or entity of any of the
Intellectual Property, other than any infringement or use that would not have a
Material Adverse Effect on Target. Except as would not have a Material Adverse
Effect on Target, Target has the defensible right to use, whether through
ownership, licensing or otherwise, all Intellectual Property necessary for the
operation of the business of Target and its subsidiaries in substantially the
same manner as such business is presently conducted. Except as would not have a
Material Adverse Effect on Target, the making, using, selling, manufacturing,
marketing, licensing, reproduction, distribution, or publishing of any process,
machine, manufacture, composition of matter, or material that was, within the
last six (6) years, that is currently or that is planned to be manufactured,
used or sold by Target or its subsidiaries, did not, does not and will not
infringe any domestic or foreign patent, trademark, service mark, trade name,
copyright or other intellectual property right of any third party, and does not
and will not involve the misappropriation or improper use or disclosure of any
trade secrets, confidential information or know-how of any third party. For
purposes of this Section 4.10, "Intellectual Property" shall mean all
intellectual property or other proprietary rights of Target or any of its
subsidiaries of every kind, including, all domestic or foreign patents, domestic
or foreign patent applications, inventions (whether or not patentable),
processes, products, technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks, trademark registrations and
applications, service marks, service mark registrations and applications, trade
names, trade dress, copyright registrations, customer lists, marketing and
customer information, licenses, technical information (whether confidential or
otherwise), software, and all documentation thereof.
4.11 Registration Statement; Proxy Statement. None of the
information provided in writing by Target for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Proxy
Statement, at the date of mailing and at the date of the Target Stockholders
Meeting, will 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. The Registration Statement and Proxy Statement, except for such
portions thereof that relate only to Purchaser and its subsidiaries, will each
comply as to form in all material respects with the provisions of the Securities
Act and the Exchange Act.
4.12 Litigation; Products Liability. There is no Action
pending or, to the knowledge of Target, threatened against Target, any of its
subsidiaries or any of their respective executive officers or directors that,
individually or in the aggregate, would have a Material Adverse Effect on Target
or a material adverse effect on the ability of Target to consummate the
transactions contemplated hereby. Neither Target nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree that, individually
or in the aggregate, that would have a Ma-
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terial Adverse Effect on Target or a material adverse effect on the ability of
Target to consummate the transactions contemplated hereby. There is no Action
presently pending or, to the knowledge of Target, threatened against Target or
any of its subsidiaries relating to any alleged hazard or alleged defect in
design, manufacture, materials or workmanship, including, without limitation,
any failure to warn or alleged breach of express or implied warranty or
representation, relating to any product manufactured, distributed or sold by or
on behalf of Target or any of its subsidiaries, which if adversely determined,
would have a Material Adverse Effect on Target.
4.13 Employee Benefit Plans.
(a) Each "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit, bonus, incentive, stock
option (or other equity-based), severance, change in control, welfare
(including post-retirement medical and life insurance), deferred
compensation, and fringe benefit plans, programs, policies and
arrangements (whether or not subject to ERISA) maintained, sponsored,
contributed to, or required to be contributed to, by Target or any of
its subsidiaries or any trade or business, whether or not incorporated,
that would be deemed a "single employer" within the meaning of Section
4001 of ERISA with, or part of the same group described in Section
414(b), (c), (m) or (o) as, Target or any of its subsidiaries (an "ERISA
Affiliate") for the benefit of any employee or former employee of Target
or any of its subsidiaries or any of their respective ERISA Affiliates
(collectively, the "Plans") has been operated in accordance with its
terms and is in compliance (including the making of governmental
filings) with all applicable laws, including ERISA and the applicable
provisions of the Code, except for failures that would not have a
Material Adverse Effect. Each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code (the "Qualified Plans")
has been determined by the Internal Revenue Service to be so qualified
or has been or will be submitted to the Internal Revenue Service for a
determination within the remedial amendment period, and since the date
of such determination, no event has occurred except for changes for
which the remedial amendment period under Section 401(b) of the Code has
not expired that would adversely affect a Qualified Plan's qualified
status. No "reportable event," as that term is defined in Section
4043(c) of ERISA (for which the 30-day notice requirement to the Pension
Benefit Guaranty Corporation ("PBGC") has not been waived), has occurred
with respect to any plan that is subject to Title IV of ERISA that
presents a risk of liability to any governmental entity or other person
that would have a Material Adverse Effect. There are no pending or, to
Target's knowledge, threatened claims (other than routine claims for
benefits), audits, investigations or litigation by, on behalf of,
against or relating to, any of the Plans or any trusts related thereto
or fiduciaries thereof that would have a Material Adverse Effect. Except
as disclosed in Section 4.13(a)(i) to the Target Disclosure Schedule, no
Plan is a "multiemployer plan" (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan") and none of Target, its subsidiaries nor any of their
respective ERISA Affiliates has, at any time since January 1, 1993,
contributed to or been obligated to contribute to any Multiemployer Plan
or Multiple Employer Plan. With respect to each Plan that is a
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Multiemployer Plan, except as set forth in Section 4.13(a)(ii) of the
Target Disclosure Schedule or as would not have a Material Adverse
Effect: (i) if Target or any of its subsidiaries or any of their
respective ERISA Affiliates were to experience a withdrawal or partial
withdrawal from such plan, no withdrawal liability under Title IV of
ERISA would be incurred; and (ii) none of Target and its subsidiaries,
nor any of their respective ERISA Affiliates has received any
notification, nor has any reason to believe, that any such Plan is in
reorganization, has been terminated, is insolvent, or could reasonably
be expected to be in reorganization, to be insolvent, or to be
terminated.
(b) No Plan has incurred an "accumulated funding deficiency"
(as defined in Section 302 of ERISA or Section 412 of the Code), whether
or not waived that (either alone or together with any other such claims)
presents a risk of liability that would have a Material Adverse Effect
on Target. Neither Target nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA except for required premium payments
to the PBGC, which payments have been made when due, and no events have
occurred (i) that could reasonably be expected to give rise to any
liability of Target or any of its subsidiaries or any of their
respective ERISA Affiliates under Title IV of ERISA, under section 302
of ERISA, under sections 412 and 4971 of the Code, or for a violation of
the continuation coverage requirements of section 601 et seq. of ERISA
and section 4980B of the Code that (either alone or together with any
other such claims) presents a risk of liability that would have a
Material Adverse Effect on Target or (ii) that could reasonably be
expected to result in any claim being made against the Purchaser, Target
or any of its subsidiaries, or any of their respective ERISA Affiliates
by the PBGC that (either alone or together with any other such claims)
presents a risk of liability that would have a Material Adverse Effect
on Target.
(c) With respect to each Plan that is subject to Title IV of
ERISA, (i) Target has made available to Purchaser copies of the most
recent actuarial valuation report prepared for the Plan before the date
of this Agreement, (ii) the assets and liabilities in respect of the
accrued benefits as set forth in the most recent actuarial valuation
report prepared by the Plan's actuary fairly presented the funded status
of the Plan in all material respects as at the valuation date stated in
said report, (iii) since the date of the valuation report there has been
no adverse change in the funded status of any of those Plans that would
have a Material Adverse Effect and (iv) the PBGC has not instituted
proceedings to terminate any such Plan and no condition exists that
presents a material risk that such proceedings will be instituted or
which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such
Plan.
(d) Neither Target nor any of its subsidiaries nor any of
their respective ERISA Affiliates has failed to make any contribution or
payment to any Plan, or committed any other action or failure to act,
that has resulted or could result in the imposition of a lien or the
posting of a bond or other security under ERISA or the Code that would
have a Material Adverse Effect on Target.
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(e) Section 4.13(e) to the Target Disclosure Schedule lists
all material Plans covering individuals who are or were employed in the
United States. With respect to each material Plan maintained or
sponsored by Target or any of its subsidiaries, Target has made
available to Purchaser a true, correct and complete copy of the
following (where applicable), except to the extent filed with the
Commission: (i) each writing constituting a part of such Plan, including
without limitation all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description, if any; (iv) the
most recent annual financial report, if any; and (v) the most recent
determination letter from the Internal Revenue Service, if any.
(f) Except for contributions or premiums that would not, in
the aggregate, have a Material Adverse Effect on Target all
contributions required to be made to any Plan and all premiums due or
payable with respect to insurance policies funding any Plan, for any
period through the date hereof have been timely made or paid in full and
through the Closing Date will be timely made or paid in full.
(g) Except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title 1 of ERISA and except as
set forth in Section 4.13(g)(i) to the Target Disclosure Schedule,
neither Target nor any of its subsidiaries has any material liability
for life, health, medical or other welfare benefits to retirees, former
employees or beneficiaries or dependents thereof which are not reflected
in the financial statement included in the Target SEC Documents. Except
as set forth in Section 4.13(g)(ii) to the Target Disclosure Schedule,
to the knowledge of Target there has been no communication to employees
of Target or its subsidiaries that could reasonably be expected to
promise or guarantee such employees retiree health or life insurance
benefits or other retiree death benefits on a permanent basis.
(h) Section 4.13(h) to the Target Disclosure Schedule sets
forth, for each executive officer of Target and for all other employees
of and consultants to Target and its subsidiaries as a group, (i) the
amount of severance pay and a reasonable good faith estimate of other
benefits that would be due to each such executive officer and the terms
and conditions of such severance pay and other benefits that would be
due to such other employees, in each case upon an involuntary
termination of employment as of the Closing, and (ii) with respect to
all other payments and benefits that will or could become payable, the
vesting, payment or delivery of which will or could be accelerated, or
the amount or value of which will or could be increased, as a result of
the execution and delivery of this Agreement, or shareholder approval or
consummation of the transactions contemplated hereby, either alone or as
a result of one or more such events together with any other events, the
amount of such payments, a reasonable good faith estimate of the amount
of such benefits and the timing of such payments and benefits. A copy of
all agreements and documents providing for any payments or benefits
disclosed pursuant to this Section 4.13(h) has been provided or made
available to Purchaser. Section 4.13(h) to the Target Disclosure
Schedule incorporates a report setting forth Target's reasonable good
faith estimate, based upon the information available to Target as of the
date hereof and the as-
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sumptions set forth in such report, of all amounts, paid or payable by
Target or any of its subsidiaries in connection with the transactions
contemplated hereby either solely as a result thereof or as a result of
such transactions in conjunction with any other events that will be
"excess parachute payments" within the meaning of Section 280G of the
Code.
(i) Except as set forth in Section 4.13(i) to the Target
Disclosure Schedule, to the knowledge of Target no officer, director, or
employee of Target or any of its subsidiaries or affiliates, or any
immediate family member of any of the foregoing or any party in interest
under ERISA, has engaged in a nonexempt prohibited transaction under
ERISA with respect to Target Plans.
(j) All Plans subject to the laws of any jurisdiction outside
of the United States (i) have been maintained in accordance with all
material applicable requirements of local law, (ii) if they are intended
to qualify for special tax treatment under local law, meet all
requirements for such treatment, and (iii) if they are intended to be
funded and/or book-reserved, are funded in accordance with all material
requirements of local law and/or book reserved, as appropriate, based
upon reasonable actuarial assumptions.
(k) The Change in Control Agreements dated as of February 20,
1996, between Target and the individuals listed on Schedule 4.13(k) to
the Target Disclosure Schedule, respectively (each such agreement, a
"Change in Control Agreement" and collectively, the "Change in Control
Agreements," and each such individual, an "Executive") each provide, or
have been amended effective no later than the date hereof to provide,
the following: (i) it shall be a condition to the right of the Executive
who is a party to the Change in Control Agreement to receive payments
and benefits thereunder that (A) such Executive exercise stock options
after the date hereof and on or before December 31, 1998, as
contemplated by the Change in Control Analysis incorporated in Section
4.13(h) of the Target Disclosure Schedule (such stock options, the
"Exercised Options"), and (B) the Executive not voluntarily terminate
employment with Target prior to the end of the first day immediately
following the Effective Date (for these purposes, a termination of
employment due to death or disability shall not constitute a voluntary
termination of employment); (ii) the Company shall make a loan to the
Executive in an amount equal to the exercise price for the Exercised
Options, payable at the Effective Time and otherwise as contemplated by
the Change in Control Analysis; (iii) provided there is no attempt to
amend or terminate the Change in Control Agreements after the Effective
Time, no cash payments shall be made to the Executive pursuant to the
Change in Control Agreement until the 91st day following the Effective
Date (other than any required gross-up payments with respect to any
taxes that are due or required to be withheld before such 91st day);
(iv) the Executive shall not be entitled to any severance pay or
severance benefits under any plan, program, policy, arrangement or
agreement other than his Change in Control Agreement, the Company's
automobile policy and benefits under the Directors and Officers Health
Incentive Plan; and (v) the benefits to which the Executive is entitled
under the Change in Control Agreement shall include only life, health,
accidental death and
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disability benefits under plans in which the Executive was participating
at the time of the change in control.
4.14 Contracts. Section 4.14 to the Target Disclosure
Schedule lists as of the date hereof all written or oral contracts, agreements,
guarantees, leases and executory commitments other than Plans (each a
"Contract") to which Target or any of its subsidiaries is a party and that fall
within any of the following categories: (a) joint venture, partnership and like
agreements, (b) Contracts containing covenants purporting to limit the freedom
of Target or any of its subsidiaries to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (c) Contracts
that after the Effective Time would have the effect of limiting the freedom of
Purchaser or its subsidiaries (other than Target and its subsidiaries) to
compete in any line of business in any geographic area or to hire any individual
or group of individuals, (d) Contracts providing for "earn-outs", (e) any
Contract providing for "savings guarantees", "performance guarantees", or other
contingent payments by Target or any of its subsidiaries, other than normal
product warranties, involving more than $1 million, (f) Contracts with or for
the benefit of any affiliate of Target or immediate family member thereof (other
than subsidiaries of Target) involving more than $50,000 in the aggregate per
affiliate, (g) any Contract for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Target and each of its subsidiaries or otherwise related to the
businesses of Target and each of its subsidiaries, which is not cancellable by
Target or such subsidiary without penalty in excess of 2% of the aggregate of
all amounts payable under such Contract, and under the terms of which Target or
any of its subsidiaries: (i) is likely to pay or otherwise give consideration of
more than $1,000,000 during the calendar year ended December 31, 1998, (ii) is
likely to pay or otherwise give consideration of more than $2,000,000 over the
remaining term of such Contract, or (iii) is a party for a term of five (5)
years or more and which involves more than $1,000,000 over such term, (h) any
Contract for the sale of inventory or other personal property or for the
furnishing of services by Target or any of its subsidiaries which is not
cancellable by Target or such subsidiary without penalty in excess of 2% of the
aggregate of all amounts payable under such Contract and which: (i) is likely to
involve consideration of more than $3,000,000 during the calendar year ended
December 31, 1998, (ii) is likely to involve consideration of more than
$6,000,000 over the remaining term of the Contract, or (iii) has a term of five
(5) years or more and involves more than $1,000,000 over such term, (i) any
Contract or agreement relating to indebtedness for borrowed money of Target or
any of its subsidiaries or to any direct or indirect guaranty by Target or any
of its subsidiaries of indebtedness for borrowed money of any other person in
excess of $1 million, and (j) any other Contract or agreement, whether or not
made in the ordinary course of business, which is material to Target or the
conduct of the business of Target or the absence of which would have a Material
Adverse Effect on Target. All such Contracts are valid and binding obligations
of Target and, to the knowledge of Target, the valid and binding obligation of
each other party thereto and is in full force and effect and shall continue in
full force and effect without penalty, acceleration, termination or other
adverse consequence except to the extent that any consents set forth in Section
4.14 to the Target Disclosure Schedule are not obtained. Neither Target nor, to
the knowledge of Target, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition that with
the passage of time or giving of notice (or both) would constitute a default
under or permit the termination of, any such Contract except such violations or
defaults
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under or terminations that, individually or in the aggregate, would not have a
Material Adverse Effect on Target. Set forth in Section 4.14 to the Target
Disclosure Schedule is the amount of the annual premium currently paid by Target
for its directors' and officers' liability insurance.
4.15 Labor Matters. Except as set forth in Section 4.15 of
the Target Disclosure Schedule, (i) neither Target nor any of its subsidiaries
have any labor contracts or collective bargaining agreements with any persons
employed by Target or any of its subsidiaries or any persons otherwise
performing services primarily for Target or any of its subsidiaries, (ii) there
is no labor strike, dispute or stoppage pending or, to the knowledge of Target,
threatened against Target or any of its subsidiaries, and neither Target nor any
of its subsidiaries has experienced any labor strike, dispute or stoppage or
other material labor difficulty involving its employees since January 1, 1996
which would have a Material Adverse Effect on Target, and (iii) since January 1,
1996, no campaign or other attempt for recognition has been made by any labor
organization or employees with respect to employees of Target or any of its
subsidiaries.
4.16 Permits. Target and its subsidiaries are in possession
of all material franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on their
respective businesses as they are now being conducted (collectively, the "Target
Permits"), and there is no Action pending or, to the knowledge of Target,
threatened regarding any of the Target Permits. Neither Target nor any of its
subsidiaries is in conflict with, or in default or violation of any of the
Target Permits, except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
Target.
4.17 Reserved.
4.18 Title to Properties and Assets.
(a) Target and its subsidiaries have good and marketable
title to, or valid leasehold interests in, all their material
properties and material assets except for such as are no longer used or
useful in the conduct of their businesses or as have been disposed of
in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or
impediments that, in the aggregate, would not have a Material Adverse
Effect on Target. All such material properties and assets, other than
properties and assets in which Target or any of its subsidiaries has
leasehold interests, are free and clear of all liens, encumbrances,
leases, options, charges, covenants, easements and restrictions of any
kind ("Liens"), except for Liens that, in the aggregate, would not have
a Material Adverse Effect on Target.
(b) Each of Target and each of its subsidiaries has complied
in all material respects with the terms of all material leases to which
it is a party and under which it is in occupancy, and all such leases
are in full force and effect. Each of Target and each of its
subsidiaries enjoys peaceful and undisturbed possession under all such
material leases.
(c) All real and personal property and fixtures of Target and
its subsidiaries (exclusive of inventories) that are significant to the
operations of Target and its subsidi-
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aries are in good condition and repair, ordinary wear and tear excepted,
or are currently being repaired or replaced in a manner that will ensure
the continuing and normal operations of Target and its subsidiaries.
4.19 Environmental Compliance.
(a) To the knowledge of Target, each of Target and its
subsidiaries is, and has been, and each of Target's former subsidiaries,
while subsidiaries of Target, was in compliance with all applicable
Environmental Laws, except for possible noncompliance which individually
or in the aggregate would not have a Material Adverse Effect on Target.
(b) During the period of ownership or operation by Target and
its subsidiaries of any of their respective current or previously-owned
properties, there have been no releases of Hazardous Material in, on,
under or affecting such properties or, to the knowledge of Target, any
surrounding site, except in each case for those which individually or in
the aggregate would not have a Material Adverse Effect on Target. Prior
to the period of ownership or operation by Target and its subsidiaries
of any of their respective current or previously-owned properties, to
the knowledge of Target, there were no releases of Hazardous Material
in, on, under or affecting any such property or any surrounding site,
except in each case for those which individually or in the aggregate
would not have a Material Adverse Effect on Target.
4.20 Opinion of Financial Advisor. Target has received the
written opinion of The Robinson-Humphrey Company, LLC (the "Financial Advisor"),
to the effect that, as of the date of this Agreement, the Merger Consideration
is fair to the Target Stockholders from a financial point of view, and such
opinion has not been withdrawn or revoked or modified in any material respect.
4.21 Board Recommendation; Required Vote. The Board of
Directors of Target, at a meeting duly called and held, has by unanimous vote of
those directors present (who constituted 100% of the directors then in office)
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together are fair to and in the best interests of
the Target Stockholders, and (ii) resolved to recommend that the holders of the
shares of Target Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger (the "Target Board Recommendation").
The affirmative vote of holders of a majority of the outstanding shares of
Target Common Stock to approve the Merger is the only vote of the holders of any
class or series of Target Common Stock necessary to adopt the Agreement and
approve the transactions contemplated hereby.
4.22 Section 203 of DGCL; Rights Agreement. Prior to the date
hereof, the Board of Directors of Target has taken all action necessary to
exempt under or make not subject to (x) the provisions of Section 203 of the
DGCL and (y) any other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares: (i) the
execution of this Agreement, (ii) the Merger and (iii) the transactions
contemplated hereby. The Rights Agreement, dated as of April 30, 1997 (the
"Target Rights Agreement"), between Target and Harris Trust Savings Bank as
rights agent, has been amended so that Pur-
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chaser and Subcorp are each exempt from the definition of "Acquiring Person"
contained in the Target Rights Agreement, no "Stock Acquisition Date" or
"Distribution Date" or "Triggering Event" (as such terms are defined in the
Target Rights Agreement) will occur as a result of the execution of this
Agreement or the consummation of the Merger pursuant to this Agreement and the
Target Rights Agreement will expire immediately prior to the Effective Time, and
the Target Rights Agreement, as so amended, has not been further amended or
modified. Copies of all such amendments to the Target Rights Agreement have been
previously provided to Purchaser.
4.23 Brokerage and Finder's Fees. Except for Target's
obligations to the Financial Advisor (copies of all agreements relating to such
obligations having previously been provided to Purchaser), neither Target nor
any of its subsidiaries nor any stockholder, director, officer or employee
thereof, has incurred or will incur on behalf of Target or any of its
subsidiaries, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Mutual Covenants.
(a) HSR Act Filings; Reasonable Best Efforts; Notification.
(i) Each of Purchaser and Target shall (A) make or cause
to be made the filings required of such party or any of its
subsidiaries or affiliates under the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable, (B)
comply at the earliest practicable date with any request for
further information or documents received by such party or any
of its subsidiaries from Federal Trade Commission, the
Department of Justice or any other Governmental Authority in
respect of such filings or such transactions, including without
limitation a request for additional information and documents
under the HSR Act, and (C) cooperate with the other party in
connection with any such filing (including, with respect to the
party making a filing, providing copies of all such documents to
the non-filing party and its advisors prior to filing (other
than documents containing confidential business information that
shall be shared only with outside counsel to the non-filing
party) and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith) and in
connection with resolving any investigation or other inquiry of
any such agency or other Governmental Authority under any
Antitrust Laws (as defined in Section 5.1(a)(ii)) with respect
to any such filing or any such transaction. Each party shall use
its reasonable best efforts to furnish to each other all
information required for any application or other filing to be
made pursuant to any Applicable Law in connection with the
Merger and the other transactions contemplated by this
Agreement. Each party shall promptly inform the other party of
any
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communication with, and any proposed understanding, undertaking,
or agreement with, any Governmental Authority regarding any such
filings or any such transaction. Neither party shall
independently participate in any meeting with any Governmental
Authority in respect of any such filings, investigation, or
other inquiry without giving the other party prior notice of the
meeting and, to the extent permitted by such Governmental
Authority, the opportunity to attend and/or participate. The
parties hereto will consult and cooperate with one another, in
connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with
proceedings under or relating to the HSR Act or other Antitrust
Laws.
(ii) Each of Purchaser and Target shall use its
reasonable best efforts to resolve such objections, if any, as
may be asserted by any Governmental Authority with respect to
the transaction contemplated by this Agreement under the HSR
Act, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other
federal, state or foreign statues, rules, regulations, orders,
decrees, administrative or judicial doctrines or other laws that
are designed to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade
(collectively, "Antitrust Laws"). In connection therewith, if
any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any
Antitrust Law, each of Purchaser and Target shall cooperate and
use its reasonable best efforts vigorously to contest and resist
any such action or proceeding, including any legislative,
administrative or judicial action, and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or
other order whether temporary, preliminary or permanent (each an
"Order"), that is in effect and that prohibits, prevents, or
restricts consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation,
by vigorously pursuing all available avenues of administrative
and judicial appeal and all available legislative action, unless
by mutual agreement Purchaser and Target decide that litigation
is not in their respective best interests. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in
this Section 5.1(a) shall limit a party's right to terminate
this Agreement pursuant to Section 7.1, so long as such party
has up to then complied in all material respects with its
obligations under this Section 5.1(a). Each of Purchaser and
Target shall use all reasonable best efforts to take such action
as may be required to cause the expiration of the notice periods
under the HSR Act or other Antitrust Laws with respect to such
transactions as promptly as possible after the execution of this
Agreement.
(iii) Each of the parties agrees to use its reasonable
best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (A) the
obtaining of all other necessary actions or nonactions, waivers,
consents, licenses, per-
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mits, authorizations, orders and approvals from Governmental
Authorities and the making of all other necessary registrations
and filings (including other filings with Governmental
Authorities, if any), (B) the obtaining of all consents,
approvals or waivers from third parties related to or required
in connection with the Merger that are necessary to consummate
the Merger and the transactions contemplated by this Agreement
or required to prevent a Material Adverse Effect on Purchaser or
Target from occurring prior to or after the Effective Time, (C)
the preparation of the Proxy Statement, the Prospectus and the
Registration Statement, and (D) the execution and delivery of
any additional instruments necessary to consummate the
transaction contemplated by, and to fully carry out the purposes
of, this Agreement.
(iv) Notwithstanding anything to the contrary in this
Agreement, (A) neither Purchaser nor any of its subsidiaries
shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or
assets, or to take or agree to take any action or agree to any
limitation that would reasonably be expected to have a Material
Adverse Effect on either Purchaser or Target or a material
adverse effect on the assets, liabilities, results of operations
or financial condition of either Purchaser or Target, (B) prior
to the Effective Time, neither Target nor its subsidiaries shall
be required to hold separate (including by trust or otherwise)
or to divest any of their respective businesses or assets, or to
take or agree to take any other action or agree to any
limitation that would reasonably be expected to have a Material
Adverse Effect on Target and its subsidiaries taken as a whole,
(C) Purchaser shall not be required to take any action that
would reasonably be expected to substantially impair the overall
benefits expected, as of the date hereof, to be realized from
consummation of the Merger and (D) neither party shall be
required to waive any of the conditions to the Merger set forth
in Article VI as they apply to such party.
(b) Public Announcements. Unless otherwise required (as
advised by counsel) by Applicable Laws or requirements of the NYSE (and,
in that event, only if time does not permit), at all times prior to the
earlier of the Effective Time or termination of this Agreement pursuant
to Section 7.1, Purchaser and Target shall consult with each other
before issuing any press release or similar communication or making any
public filing with the Commission or other Governmental Authority with
respect to the Merger and shall not issue any such press release or
communication or make such filing prior to such consultation.
(c) Registration Statement/Proxy Statement. (i) As promptly
as practicable after the execution of this Merger Agreement, Target and
Purchaser shall prepare and Target shall file with the Commission
preliminary proxy materials which shall constitute the preliminary Proxy
Statement and a preliminary prospectus with respect to the Purchaser
Common Shares to be issued in connection with the Merger. Each party
will notify the other promptly of the receipt of any comments from the
Commission and of any request by the Commission for amendments or
supplements to the Registration Statement or the Proxy Statement or for
additional information, and will supply the other with copies of all
correspondence between such party or any of its representatives and the
Commission, with
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<PAGE>
respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy Statement shall comply in all
material respects with all applicable requirements of law. Whenever any
event occurs which is required to be set forth in an amendment or
supplement to the Registration Statement or the Proxy Statement,
Purchaser or Target, as the case may be, shall promptly inform the other
of such occurrences and cooperate in filing with the Commission and/or
mailing to the shareholders of Target such amendment or supplement to
the Proxy Statement. As promptly as practicable after comments are
received from the Commission with respect to the preliminary proxy
materials and after the furnishing by Target and Purchaser of all
information required to be contained therein, Target shall file with the
Commission the definitive Proxy Statement and Purchaser shall file with
the Commission the Registration Statement and Purchaser and Target shall
use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable.
(ii) Target and Purchaser shall make all necessary
filings with respect to the Merger, under the Securities Act and the Exchange
Act and the rules and regulations thereunder, under applicable blue sky or
similar securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto.
(d) Change of Control. Target and Purchaser mutually
acknowledge and agree that the consummation of the Merger will
constitute a change of control for purposes of all plans and agreements
of Target and its subsidiaries which provide for payments or benefits to
employees of Target and its subsidiaries upon a change of control of
Target and which have been disclosed to Purchaser. Target and Purchaser
further acknowledge and agree that upon consummation of the Merger,
Target or Purchaser will be obligated to honor all severance or Change
in Control Agreement payment obligations of Target that are listed on
Section 5.1(d) to the Target Disclosure Schedule, and that neither
Target or Purchaser shall seek to amend or terminate these obligations
following the Effective Time. Target shall use, and shall cause its
subsidiaries to use, reasonable best efforts in consultation with
Purchaser to minimize the amounts paid or payable by Target and its
subsidiaries that will be "excess parachute payments" within the meaning
of Section 280G of the Code; provided, that: (i) any actions to
implement the foregoing covenant shall be taken only with the consent of
Purchaser; (ii) such actions shall include paying bonuses with respect
to 1998 on or before December 31, 1998, if and to the extent requested
by Purchaser; and (iii) such reasonable best efforts shall not include
reducing or eliminating any severance or bonus payments that would
otherwise be paid to any executive officer or other employee of Target
or any of its subsidiaries.
5.2 Covenants of Purchaser.
(a) Conduct of Purchaser's Operations. During the period from
the date of this Agreement to the Effective Time, Purchaser shall use
its reasonable best efforts to maintain and preserve its business
organization and to retain the services of its officers and key
employees and maintain relationships with customers, suppliers and other
third parties to the end that their goodwill and ongoing business shall
not be impaired in any material respect.
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<PAGE>
During the period from the date of this Agreement to the Effective Time,
Purchaser shall not (i) make any amendment to the Purchaser Articles
that changes the fundamental attributes of the Purchaser Common Shares,
(ii) make any material changes to the Certificate of Incorporation of
Subcorp, (iii) make, declare or pay any extraordinary cash dividend,
other than extraordinary dividends between Purchaser and a subsidiary of
Purchaser, (iv) take any action that is material and adverse to the
Target Stockholders as prospective stockholders of Purchaser and that
affects Target Stockholders disproportionately as compared to the
current stockholders of Purchaser, (v) permit or cause any subsidiaries
to do any of the foregoing or agree or commit to any of the foregoing,
or (vi) agree in writing or otherwise to take any of the foregoing
actions.
(b) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Purchaser shall
cause, the Surviving Corporation to indemnify and hold harmless
the present and former officers and directors of Target in
respect of acts or omissions occurring prior to the Effective
Time to the extent provided under the Target Certificate or the
Target By-Laws, and, in any event, to the fullest extent
permitted by law, and
(ii) To the extent not obtained by Target prior to the
Effective Time, Purchaser shall use its best efforts to cause
the Surviving Corporation or Purchaser to obtain and maintain in
effect for a period of six years after the Effective Time
policies of directors' and officers' liability (including
fiduciary and crime) insurance at no cost to the beneficiaries
thereof with respect to acts or omissions occurring prior to the
Effective Time with substantially the same coverage and
containing substantially similar terms and conditions as
existing policies; provided, however, that neither the Surviving
Corporation nor Purchaser shall be required to pay an aggregate
premium for such insurance coverage in excess of 125% of the
amount set forth in Section 4.14 to the Target Disclosure
Schedule. In the event that Target determines to obtain such
coverage prior to the Effective Time, it will not spend more
than 125% of the amount set forth in Section 4.14 to the Target
Disclosure Schedule.
(c) Merger Sub. Prior to the Effective Time, Subcorp shall
not conduct any business or make any investments other than as
specifically contemplated by this Agreement and will not have any assets
(other than a de minimis amount of cash paid to Subcorp for the issuance
of its stock to Purchaser) or any material liabilities. Purchaser will
take all action necessary to cause Subcorp to perform its obligations
under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
(d) NYSE Listing. As promptly as practicable after the
execution of this Agreement, Purchaser shall prepare and file with the
NYSE a listing application covering the Purchaser Common Shares to be
issued in connection with the Merger. Purchaser shall use its reasonable
best efforts to cause the Purchaser Common Shares issuable pursuant to
the Merger to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the Effective Time.
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(e) Employees and Employee Benefits. For a period of six
months after the Effective Date, Purchaser shall provide, or shall cause
the Surviving Corporation to provide, generally to the officers and
employees of the Surviving Corporation and its subsidiaries health and
welfare benefits on terms and conditions in the aggregate that are no
less favorable as those provided under Target's health and welfare plans
as of the date hereof.
(f) Contacts with Target's Customers and Suppliers. Purchaser
and Target acknowledge the need for a smooth transition of ownership of
the businesses of Target and its subsidiaries and that contact with the
customers or suppliers of Target or its subsidiaries during the period
from the date of this Agreement to the Effective Time may be desirable
to ensure such a transition. From the date of this Agreement to the
earlier of the Effective Time or the termination of this Agreement,
Purchaser shall not, without the prior written consent of Target (which
may be withheld or delayed in the sole discretion of Target), contact
customers or suppliers of Target or any of its subsidiaries. On a case
by case basis, Target shall consider requests by Purchaser for joint
Purchaser and Target contacts with customers or suppliers of Target or
its subsidiaries but Target shall have no obligation to consent to any
such request. Notwithstanding the foregoing, Purchaser shall be entitled
to contact its current and prospective customers to conduct its business
in the ordinary course.
5.3 Covenants of Target.
(a) Target Stockholders Meeting. Target shall take all action
in accordance with the federal securities laws, the DGCL and the Target
Certificate and the Target By-Laws necessary to duly call, give notice
of, convene and hold a special meeting of Target Stockholders (the
"Target Stockholders Meeting") to be held on the earliest practicable
date determined in consultation with Purchaser to consider and vote upon
approval of the Merger, this Agreement and the transactions contemplated
hereby. Target shall solicit the approval of the Merger, this Agreement
and the transactions contemplated hereby, by the Target Stockholders,
and the Board of Directors of Target shall recommend approval of the
Merger, this Agreement and the transactions contemplated hereby by the
Target Stockholders (to the extent such recommendation has not been
previously withdrawn pursuant to Section 5.3(c)).
(b) Conduct of Target's Operations. During the period from
the date of this Agreement to the earlier of the Effective Time or the
termination of this Agreement, Target shall conduct its operations in
the ordinary course of business consistent with past practice and shall
use its reasonable best efforts to maintain and preserve its business
organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships
with customers, suppliers, lessees, licensees and other third parties,
and to maintain all of its material operating assets in their current
condition (normal wear and tear excepted), to the end that its goodwill
and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, Target shall not,
except as otherwise expressly contemplated by this Agreement and the
transactions con-
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templated hereby or as set forth in Section 5.3(b) to the Target
Disclosure Schedule, without the prior written consent of Purchaser:
(i) do or effect any of the following actions with
respect to its or its subsidiaries' securities: (A) adjust,
split, combine or reclassify its capital stock, (B) make,
declare or pay any dividend or distribution on, or, directly or
indirectly, redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock, other
than regular quarterly dividends on Target Common Stock and
dividends declared and paid by any of Target's directly or
indirectly wholly owned subsidiaries, (C) grant any person any
right or option to acquire any shares of its capital stock, (D)
issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any securities or
obligations convertible into or exchangeable or exercisable for
any shares of its capital stock or such securities, including
pursuant to any employee stock purchase plans (except pursuant
to the exercise of Target Options that are outstanding as of the
date hereof and disclosed in Section 4.4 hereof), (E) reprice
any Target Options, or (F) enter into any agreement,
understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock;
(ii) except for the asset sales on the terms and subject
to the conditions as set forth in Section 5.3(b)(ii) to the
Target Disclosure Schedule, directly or indirectly sell,
transfer, lease, pledge, mortgage, encumber or otherwise dispose
of any of its property or assets other than in the ordinary
course of business or as part of an asset replacement or
retirement program which is out of the ordinary course of
business but consistent with past practice;
(iii) make or propose any changes in the Target
Certificate or the Target By-Laws;
(iv) merge or consolidate with any other person;
(v) acquire a material amount of assets or capital stock
of any other person;
(vi) amend or modify, or propose to amend or modify, the
Target Rights Agreement, as amended as of the date hereof;
(vii) incur, create, assume or otherwise become liable
for any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible or
liable for the obligations of any other individual, corporation
or other entity, other than in the ordinary course of business,
consistent with past practice;
(viii) create any subsidiaries, except in connection
with the restructuring of Target's fuel tank division as
previously disclosed to Purchaser;
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(ix) increase the compensation or benefits payable or to
become payable to its directors, officers or, except in the
ordinary course of business consistent with past practice, other
employees (whether from Target or any of its subsidiaries), or
pay or award any benefit not required by any existing plan or
arrangement to any officer, director or employee (including,
without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance
units pursuant to the Plans or otherwise), or grant any
severance or termination pay to any officer, director or other
employee of Target or any of its subsidiaries (other than as
required by existing agreements or policies described in Section
5.3(b)(ix) to the Target Disclosure Schedule), or enter into any
employment or severance agreement with, any director, officer or
other employee of Target or any of its subsidiaries or
establish, adopt, enter into, amend, or waive any performance or
vesting criteria under any Plan for the benefit or welfare of
any current or former directors, officers or employees of Target
or its subsidiaries or their beneficiaries or dependents,
except, in each case to the extent required by applicable law or
regulation;
(x) change any method or principle of tax or financial
accounting in a manner that is inconsistent with past practice
except to the extent required by United States generally
accepted accounting principles as advised by Target's regular
independent accountants; make any Tax election (unless required
by law), settle or compromise any Tax liability of Target or any
of its subsidiaries or any pending or threatened suit, action or
claim relating to any potential or actual Tax liability of
Target or any of its subsidiaries, change any method of
accounting for Tax purposes or file (other than in a manner
consistent with past practice) any Tax Return;
(xi) settle any Actions, whether now pending or
hereafter made or brought involving, individually or in the
aggregate, an amount in excess of $100,000;
(xii) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to any
confidentiality agreement to which Target is a party;
(xiii) enter into any confidentiality agreements or
arrangements other than in the ordinary course of business
consistent with past practice (other than as permitted, in each
case, by Section 5.3(c));
(xiv) write up, write down or write off the book value
of any assets, individually or in the aggregate, in excess of
$100,000 except for depreciation and amortization in accordance
with generally accepted accounting principles consistently
applied;
(xv) incur or commit to any capital expenditures
individually in excess of (x) $1,000,000, provided that such
capital expenditure is reflected in the budget previously
provided to Purchaser (the "Budget") or (y) $100,000 if such
capital expenditure is not reflected in the Budget, or in the
aggregate in excess of $5,000,000;
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(xvi) except as permitted in Section 5.2(b)(ii), make
any payments in respect of policies of directors' and officers'
liability insurance (premiums or otherwise) other than premiums
paid in respect of its current policies not in excess of the
amount paid prior to the date of this Agreement;
(xvii) materially accelerate or delay collection of
notes or accounts receivable in advance of or beyond their
regular due dates or dates when the same would have been
collected in the ordinary course of business consistent with
past practice or otherwise change the terms thereof including by
offering discounts other than in the ordinary course of business
and consistent with past practice;
(xviii) materially delay or accelerate payment of
accounts payable beyond or in advance of its due date or the
date such liability would have been paid in the ordinary course
consistent with past practice;
(xix) take any action to exempt or make not subject to
(x) the provisions of Section 203 of the DGCL or (y) any other
state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote
shares, any person or entity (other than Purchaser or its
subsidiaries) or any action taken thereby, which person, entity
or action would have otherwise been subject to the restrictive
provisions thereof and not exempt therefrom;
(xx) enter into any transaction or agreement, or amend
any existing agreement between Target or any of its subsidiaries
and any director or executive officer of Target;
(xxi) take any action that would reasonably be likely to
result in the representations and warranties set forth in
Article IV becoming false or inaccurate in any material respect;
(xxii) enter into or carry out any other material
transaction other than in the ordinary and usual course of
business;
(xxiii) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or
(xxiv) agree in writing or otherwise to take any of the
foregoing actions.
(c) No Solicitation. Target agrees that, during the term of
this Agreement, 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 knowingly facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the
making of any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving Target, or
acquisition of any capital stock (other than upon exercise of Target
Options that are outstanding as of the date hereof) or all or any
material portion of the assets of Target and its
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subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions
with any person (other than Purchaser, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect
to any Competing Transaction 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 that, at any time prior to the approval of the Merger by the
Target Stockholders, notwithstanding any restriction contained in
Section 5.3(b), Target may furnish information to, and negotiate or
otherwise engage in discussions with, any party who delivers a written
proposal for a Competing Transaction which was not solicited, initiated,
knowingly facilitated or encouraged after the date of this Agreement if
and so long as the Board of Directors of Target determines in good
faith, after consultation with and receipt of advice from its outside
counsel (who may be its regularly engaged outside counsel) that the
failure to take such action would likely constitute a breach of its
fiduciary duties under Applicable Law. Target will immediately cease all
existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any proposal for a Competing
Transaction and request the return of all confidential information
regarding Target provided to any such parties prior to the date hereof
pursuant to the terms of any confidentiality agreements or otherwise. In
the event that prior to the approval of the Merger by the Target
Stockholders the Board of Directors of Target receives a Superior
Proposal (as defined below) that was not solicited, initiated, knowingly
facilitated or encouraged after the date of this Agreement, and the
Board of Directors of Target determines in good faith after consultation
with its outside counsel (who may be its regularly engaged outside
counsel) that the failure to take such action would likely constitute a
breach of its fiduciary duties under Applicable Law, the Board of
Directors of Target may (subject to this and the following sentences)
withdraw, modify or change, in a manner adverse to Purchaser, the Target
Board Recommendation and/or recommend a Superior Proposal to the Target
Stockholders and/or comply with Rule 14e-2 promulgated under the
Exchange Act with respect to a Competing Transaction, provided that it
gives Purchaser five business days' prior written notice of its
intention to do so (provided that the foregoing shall in no way limit or
otherwise affect Purchaser's right to terminate this Agreement pursuant
to Section 7.1(d) at such time as the requirements of such subsection
have been met). Any such withdrawal, modification or change of the
Target Board Recommendation shall not change the approval of the Board
of Directors of Target for purposes of causing any state takeover
statute or other state law to be inapplicable to the transactions
contemplated hereby, including the Merger. From and after the execution
of this Agreement, Target shall promptly (but in any event within two
calendar days) advise Purchaser in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals
relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and
promptly furnish to Purchaser a copy of any such written proposal in
addition to any information provided to or by any third party relating
thereto. In addition, Target shall promptly (but in any event within two
calendar days) advise Purchaser, in writing, if the Board of Directors
of Target shall make any determination as to any Competing Transaction
as contemplated by the proviso to the first sentence of this Section
5.3(c). As used herein, the term "Superior Proposal" means a Competing
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Transaction that the Board of Directors of Target determines is, after
consulting with and receipt of advice from the Financial Advisor (or any
other nationally recognized investment banking firm), more favorable to
Target Stockholders from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms
and conditions proposed by Purchaser in response to such Competing
Transaction), and that sufficient financing commitments have been
obtained with respect to such Competing Transaction that it reasonably
expects a transaction pursuant to such proposal could be consummated.
(d) Access. Target shall permit representatives of Purchaser
to have appropriate access at all reasonable times to Target's premises,
properties, books, records, contracts and documents. In addition to the
foregoing, with respect to environmental investigations, Purchaser shall
at all reasonable times and in all reasonable respects (i) have access
to Target's facilities, (ii) be entitled to interview Target's personnel
located at such facilities or located at any of Target's other premises,
(iii) be entitled to interview any of Target's consultants hired in
connection with any environmental matters, (iv) be entitled to review
environmental documents (including the results of any phase one or phase
two environmental assessments), and (v) be entitled to conduct phase one
environmental assessments where existing phase one environmental
assessments are not, in the reasonable judgment of Purchaser, complete
or timely. Purchaser and Target agree to use their reasonable best
efforts to share information that might otherwise be subject to
attorney/client privilege in a manner which would not waive any such
attorney/client privilege. Information obtained by Purchaser pursuant to
this Section 5.3(d) shall be subject to the provisions of the
confidentiality agreement between Purchaser and Target dated August 28,
1998 (the "Confidentiality Agreement"), which agreement remains in full
force and effect. No investigation conducted pursuant to this Section
5.3(d) shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(e) Subsequent Financial Statements. Target shall provide to
Purchaser a copy of Target's financial statements for any period ending
after the date of this Agreement prior to making publicly available its
financial results for any such period and prior to filing any Target SEC
Documents after the date of this Agreement.
(f) Affiliates of Target. Target shall use its reasonable
best efforts to cause each such person who may be at the date of the
Target Stockholders Meeting an "affiliate" of Target for purposes of
Rule 145 under the Securities Act to execute and deliver to Purchaser at
or prior to the Closing the written undertakings in the form attached
hereto as Exhibit A (the "Target Affiliate Letter"). No later than 10
days prior to such date, Target, after consultation with its outside
counsel, shall provide Purchaser with a letter (reasonably satisfactory
to outside counsel to Purchaser) specifying all of the persons or
entities who, in Target's opinion, may be deemed to be "affiliates" of
Target under the preceding sentence. The foregoing notwithstanding, the
Purchaser shall be entitled to place legends as specified in the Target
Affiliate Letter on the certificates evidencing any of the Purchaser
Common Shares to be received by any such "affiliate" of Target specified
in such letter pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the trans-
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fer agent for the Purchaser Common Shares, consistent with the terms of
the Target Affiliate Letter, regardless of whether such person has
executed the Target Affiliate Letter.
ARTICLE VI.
CONDITIONS
6.1 Conditions to the Obligations of Each Party. The
obligations of Target, Purchaser and Subcorp to consummate the Merger shall be
subject to the satisfaction of the following conditions:
(a) This Agreement, the Merger and the transactions
contemplated hereby shall have been approved and adopted by the Target
Stockholders in the manner required by any Applicable Law.
(b) Any applicable waiting periods under the HSR Act or
similar foreign laws relating to the Merger and the transactions
contemplated by this Agreement shall have expired or been terminated and
any other approvals of any Governmental Authority shall have been
obtained.
(c) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit or enjoin the
consummation of the Merger or the transactions contemplated by this
Agreement or limit the ownership or operation by Purchaser, Target or
any of their respective subsidiaries of any material portion of the
business or assets of Purchaser or Target.
(d) There shall not be pending any Action instituted by any
Governmental Authority challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions
contemplated by this Agreement.
(e) The Commission shall have declared the Registration
Statement effective under the Securities Act, and no stop order or
similar restraining order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the Commission or any
state securities administrator.
(f) The Purchaser Common Shares to be issued in the Merger
shall have been approved for listing on the NYSE, subject to official
notice of issuance.
6.2 Conditions to Obligations of Target. The obligations of
Target to consummate the Merger and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by
Target:
(a) Each of the representations and warranties of each of
Purchaser and Subcorp set forth in Article III shall be true and correct
in all respects (but without regard to any
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materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) on the date of
this Agreement and on and as of the Closing Date as though made on and
as of the Closing Date (except for representations and warranties made
as of a specified date, the accuracy of which will be determined as of
the specified date), except where any such failure of the
representations and warranties in the aggregate to be true and correct
in all respects would not reasonably be expected to have a Material
Adverse Effect on Purchaser.
(b) Each of Purchaser and Subcorp shall have performed in all
material respects all obligations and agreements and shall have complied
in all material respects with all covenants to be performed and complied
with by it hereunder at or prior to the Effective Time.
(c) Each of Purchaser and Subcorp shall have furnished Target
with a certificate dated the Closing Date signed on behalf of it by the
Chief Executive Officer or Treasurer to the effect that the conditions
set forth in Sections 6.2(a) and (b) have been satisfied.
6.3 Conditions to Obligations of Purchaser and Subcorp.
The obligations of Purchaser and Subcorp to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by Purchaser:
(a) Each of the representations and warranties of Target set
forth in Article IV (other than the representations and warranties of
Target set forth in Section 4.4) shall be true and correct in all
respects (but without regard to any materiality qualifications or
references to Material Adverse Effect contained in any specific
representation or warranty) on the date of this Agreement and on and as
of the Closing Date as though made on and as of the Closing Date (except
for representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date), except
where any such failure of the representations and warranties in the
aggregate to be true and correct in all respects would not reasonably be
expected to have a Material Adverse Effect on Target. The
representations and warranties of Target set forth in Sections 4.4 of
this Agreement shall be true and correct in all respects on the date of
this Agreement and on and as of the Closing Date as though made on and
as of the Closing Date (except for representations and warranties made
as of a specified date, the accuracy of which will be determined as of
the specified date).
(b) The representations and warranties of Target set forth in
Section 4.19 shall be true and correct in all respects (but without
regard to any materiality qualifications or references to Material
Adverse Effect contained in any specific representation or warranty) on
the date of this Agreement and on and as of the Closing Date as though
made on and as of the Closing Date, except where such failure of the
representations and warranties in the aggregate to be true and correct
in all respects would not in the reasonable judgment of Purchaser result
in cost, expense or liability ("Environmental Liability") exceeding
Target's and its subsidiaries' aggregate amount of reserves for
environmental matters by more than $10 million on an after-tax basis. In
determining Target's Environmental Liability, an
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item of cost, expense or liability shall be disregarded to the extent
that such item is covered by (i) existing insurance where the insurance
carrier has acknowledged the coverage or (ii) environmental insurance
purchased by Target from an insurance carrier reasonably acceptable to
Purchaser after the date hereof and prior to the Effective Time. In the
event that Target purchases such coverage prior to the Effective Time,
it will not spend more than $2 million in premiums and such premiums
shall be included in any determination of Target's Environmental
Liabilities pursuant to this Section 6.3(b). Purchaser's determination
of Target's Environmental Liability shall be substantially consistent
with the written assessment of an independent consulting firm to be
mutually selected from the following: Dames and Moore, Karemida
Environmental, or Montgomery Watson.
(c) Target shall have performed in all material respects all
obligations and agreements and shall have complied in all material
respects with all covenants to be performed and complied with by it
hereunder at or prior to the Effective Time.
(d) The agreement for purchase and sale of real property (the
"Real Estate Agreement") which is contemplated to be entered into
pursuant to the letter agreement of even date herewith among Target,
Purchaser, and Subcorp shall have been entered into, the closing under
the Real Estate Agreement shall have occurred, and Target shall have
received final payment of the $1,957,000 cash purchase price (net of any
closing costs or other expenses) pursuant to the terms of the Real
Estate Agreement.
(e) Target shall have furnished Purchaser with a certificate
dated the Closing Date signed on its behalf by its Chairman and Chief
Executive Officer, President or Chief Financial Officer to the effect
that the conditions set forth in Sections 6.3(a), (b) and (d) have been
satisfied.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by Target Stockholders):
(a) by mutual written consent of Purchaser and Target;
(b) by either Purchaser or Target if there shall be any law
or regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if any judgment, injunction, order or decree of a court
or other competent Governmental Authority (which the parties shall have
used all reasonable efforts to resist, resolve or lift, as applicable,
in accordance with Section 5.1(a)) enjoining Purchaser or Target from
consummating the Merger shall have been entered and such judgment,
injunction, order or decree shall have become final and nonappealable;
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(c) by either Purchaser or Target if the Merger shall not
have been consummated before the later of May 31, 1999 or thirty (30)
days after the receipt of all required approvals of any Governmental
Authority, provided, however, that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any party whose
failure or whose affiliate's failure to perform any material covenant or
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date;
(d) by Purchaser if (i) the Board of Directors of Target
shall withdraw, modify or change the Target Board Recommendation in a
manner adverse to Purchaser, (ii) if the Board of Directors of Target
approves or recommends any Competing Transaction, or (iii) Target shall
have exercised a right with respect to a Superior Proposal referenced in
Section 5.3(c) and shall, directly or through its representatives,
continue discussions with any third party concerning a Superior Proposal
for more than 10 business days after the date of receipt of such
Superior Proposal;
(e) by Purchaser or Target if at the Target Stockholders
Meeting (including any adjournment or postponement thereof) the
requisite vote of the Target Stockholders to approve the Merger and the
transactions contemplated hereby shall not have been obtained;
(f) by Purchaser or Target if there shall have been a breach
by the other of any of its representations and warranties, covenants or
agreements contained in this Agreement, which under Section 6.3(a) or
6.2(a) excuses Purchaser or Target, respectively, from its obligation to
complete the Merger, and such breach shall not have been cured within 30
days after notice thereof shall have been received by the party alleged
to be in breach;
(g) by Purchaser if on the date on which the Closing would
otherwise occur, the Purchaser Share Price shall be less than $40;
provided that Target shall receive at least two business days' prior
written notice of its intent to effect such termination pursuant to this
Section 7.1(g); or
(h) by Target in order to permit Target to enter into an
agreement providing for a Competing Transaction that the Board of
Directors of Target has determined to be a Superior Proposal; provided,
however that the obligation of Target to pay to Purchaser the fees and
expenses provided for in Sections 7.2(b) and (e) shall survive any such
termination.
7.2 Effect of Termination.
(a) In the event of the termination of this Agreement
pursuant to Section 7.1, this Agreement, except for the provisions of
the second sentence of Section 5.3(d) and the provisions of Sections 7.2
and 8.11, shall become void and have no effect, without any liability on
the part of any party or its directors, officers or stockholders.
Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve
any party to this Agreement of liability for a material breach of any
provision of this Agreement and provided, further, however, that if it
shall be judicially determined that termination of this Agreement was
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caused by an intentional breach of this Agreement, then, in addition to
other remedies at law or equity for breach of this Agreement, the party
so found to have intentionally breached this Agreement shall indemnify
and hold harmless the other parties for their respective out-of-pocket
costs, fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors as well as fees and expenses
incident to negotiation, preparation and execution of this Agreement and
related documentation and shareholders' meetings and consents ("Costs").
(b) In the event that (i) this Agreement is terminated
pursuant to Section 7.1(c) and the Target Stockholders Meeting has not
been held prior to May 31, 1999 and at any time prior to such
termination there shall have been made to Target or publicly disclosed a
Competing Transaction with respect to Target, or (ii) this Agreement is
terminated pursuant to Section 7.1(d)(i), 7.1(d)(ii) or 7.1(h), then
Target will, in the case of a termination by Purchaser, within three
business days following any such termination or, in the case of a
termination by Target concurrently with such termination, pay to
Purchaser in cash by wire transfer in immediately available funds to an
account designated by Purchaser (i) in reimbursement for Purchaser's
expenses an amount equal to the aggregate amount of Purchaser's Costs
incurred in connection with pursuing the transactions contemplated by
this Agreement, including, without limitation, legal, accounting and
investment banking fees, up to but not in excess of $4 million in the
aggregate and (ii) a termination fee in an amount equal to $15 million.
(c) In the event that this Agreement is terminated pursuant
to Section 7.1(e) and no event has occurred that would permit Purchaser
to terminate this Agreement under Sections 7.1(d)(i), 7.1(d)(ii) or
7.1(h), then Target shall pay to Purchaser in cash by wire transfer in
immediately available funds to an account designated by Purchaser in
reimbursement for Purchaser's expenses an amount equal to the aggregate
amount of Purchaser's Costs incurred in connection with pursuing the
transactions contemplated by this Agreement, including, without
limitation, legal, accounting and investment banking fees, up to but not
in excess of $4 million in the aggregate.
(d) In the event that this Agreement is terminated pursuant
to Section 7.1(c) (and the Target Stockholders Meeting has not been held
prior to May 31, 1999), 7.1(d) or 7.1(h) and prior to 18 months after
the date of such termination Target consummates a Competing Transaction
with a party who made to Target or publicly disclosed a proposal with
respect to a Competing Transaction prior to the termination of this
Agreement, then in addition to any amounts payable pursuant to Section
7.2(b) or 7.2(c), Target will concurrently with the consummation of such
transaction, pay to Purchaser in cash by wire transfer in immediately
available funds to an account designated by Purchaser an additional
termination fee in an amount equal to $10 million.
(e) In the event that this Agreement is terminated pursuant
to Section 7.1(g), then Purchaser shall pay to Target in cash by wire
transfer in immediately available funds to an account designated by
Target in reimbursement for Target's expenses an amount equal to the
aggregate amount of Target's Costs incurred in connection with pursuing
the
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transactions contemplated by this Agreement, including, without
limitation, legal, accounting and investment banking fees, up to but not
in excess of $4 million in the aggregate and, for purposes hereof, shall
also be deemed to include reimbursement by Target to its executive
employees for taxes paid in connection with the exercise of stock
options in December 1998.
(f) In the event that this Agreement is terminated pursuant
to one or more provisions of Section 7.1 and a termination fee is
payable pursuant to one or more provisions of Section 7.2, any such
termination fee shall not exceed $25 million in the aggregate, not
including reimbursement of Costs.
7.3 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 adoption of this Agreement by Target Stockholders,
but after any such approval, no amendment shall be made which by law requires
further approval or authorization by the Target Stockholders without such
further approval or authorization. Notwithstanding the foregoing, this Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective
Time, Purchaser (with respect to Target) and Target (with respect to Purchaser
and Subcorp) by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such party, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements 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.
ARTICLE VIII.
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after the Effective Time or after the termination of this Agreement.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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(a) if to Purchaser or Subcorp:
Borg-Warner Automotive, Inc.
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: Laurene H. Horiszny
Telecopy No.: (312) 322-8621
with a copy to
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Elliott V. Stein, Esq.
Telecopy No.: (212) 403-2000
(b) if to Target:
Kuhlman Corporation
3 Skidaway Village Square
Savannah, Georgia 31411
Attention: Richard A. Walker
Telecopy No.: (912) 598-0737
with a copy to
Rudnick & Wolfe
203 N. LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Stephen A. Landsman, Esq.
Telecopy No.: (312) 236-7516
8.3 Interpretation.
(a) When a reference is made in this Agreement to an Article
or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of
contents contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
(b) For the purposes of any provision of this Agreement,
"Material Adverse Change" or "Material Adverse Effect" means, when used
with respect to Target or Pur-
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chaser, any change or effect that is, or would reasonably be expected to
be, materially adverse to the business, assets, condition (financial or
otherwise) or results of operations of Target and its subsidiaries,
taken as a whole, or Purchaser and its subsidiaries, taken as a whole,
as the case may be. In determining whether a Material Adverse Change or
Material Adverse Effect has occurred such determination shall be made on
an after-tax basis and in addition, an item of loss, expenses or
liability shall be disregarded to the extent (i) of the aggregate
reserve for the category of such item established in the financial
statements of Target most recently filed with the Commission prior to
the date of this Agreement, (ii) such item is covered by insurance or
any other third party indemnification, contribution or reimbursement
obligation and the insurance carrier or third party, as the case may be,
has acknowledged the coverage or indemnification, contribution or
reimbursement obligation, as the case may be, (iii) disclosure of such
item has been made in the Target SEC Documents filed prior to the date
of this Agreement, (iv) disclosure of such item has been made in the
Target Disclosure Schedule or (v) such item represents professional and
advisory fees and similar expenses incurred in connection with the
Merger provided such amounts are less than $2 million in the aggregate.
(c) For purposes of this Agreement, a "subsidiary" when used
with respect to any party means any corporation or other organization,
incorporated or unincorporated, (i) of which such party or another
subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any
subsidiary of such party do not have 50% or more of the voting interests
in such partnership) or (ii) 50% or more of the securities or other
interests of which having by their terms ordinary voting power to elect
at least 50% of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or one or more
of its subsidiaries (or if there are no such voting securities or
interests, 50% or more of the equity interests of which is directly or
indirectly owned or controlled by such party or one or more of its
subsidiaries).
(d) For purposes of this Agreement, "knowledge" or any
similar phrase when used (i) in relation to Target means the actual
knowledge (excluding thereby any implied imputed, constructive or other
type of knowledge) of any executive officer of Target and the presidents
of each of Kuhlman Electric Corporation, Coleman Cable Systems, Inc.,
Transpro Group, Inc., and Schwitzer, Inc. and (ii) in relation to
Purchaser means the knowledge of any executive officer of Purchaser.
8.4 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
8.5 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein), the Confidentiality Agreement
and the confidentiality agreement between Purchaser and Target dated December 1,
1998 constitute the entire agreement among the parties and supersede all prior
agreements and understandings, agreements or representations by or among the
parties, written and oral, with respect to the subject matter hereof and
thereof.
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8.6 Third-Party Beneficiaries. Except for the agreement
set forth in Section 5.1(d) or 5.2(b), nothing in this Agreement, express or
implied, is intended or shall be construed to create any third-party
beneficiaries.
8.7 Governing Law. Except to the extent that the laws of
the jurisdiction of organization of any party hereto, or any other jurisdiction,
are mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court
sitting in the City of Wilmington, Delaware.
8.8 Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of
Delaware, for the purpose of any action or proceeding arising out of or
relating to this Agreement and each of the parties hereto irrevocably
agrees that all claims in respect to such action or proceeding may be
heard and determined exclusively in any Delaware state or federal court
sitting in the City of Wilmington, Delaware. Each of the parties hereto
agrees that a final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the
service of any summons and complaint and any other process in any other
action or proceeding relating to the Merger, on behalf of itself or its
property, by the personal delivery of copies of such process to such
party. Nothing in this Section 8.8 shall affect the right of any party
hereto to serve legal process in any other manner permitted by law.
8.9 Specific Performance. The transactions contemplated
by this Agreement are unique. Accordingly, each of the parties acknowledges and
agrees that, in addition to all other remedies to which it may be entitled, each
of the parties hereto is entitled to a decree of specific performance, provided
such party is not in material default hereunder.
8.10 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 Purchaser may assign its
rights, interests or obligations hereunder to any of its subsidiaries or
affiliates. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.11 Expenses. Subject to the provisions of Section 7.2,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses, except that those expenses incurred in connection with
filing, printing and mailing the Registration Statement and the Proxy Statement
(including filing fees related thereto) will be shared equally by Purchaser and
Target.
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IN WITNESS WHEREOF, Purchaser, Subcorp and Target have signed
this Agreement as of the date first written above.
BORG-WARNER AUTOMOTIVE, INC.
By: /s/ John F. Fiedler
----------------------------------------
Name: John F. Fiedler
Title: Chairman and Chief
Executive Officer
BWA MERGER CORP.
By: /s/ John F. Fielder
----------------------------------------
Name: John F. Fiedler
Title: Chairman and Chief
Executive Officer
KUHLMAN CORPORATION
By: /s/ Robert S. Jepson, Jr.
----------------------------------------
Name: Robert S. Jepson, Jr.
Title: Chairman and Chief
Executive Officer
EXHIBIT 99
IMMEDIATE RELEASE
CONTACT
Borg-Warner Automotive
Mary Brevard
Phone: 312/322-8683
BORG-WARNER AUTOMOTIVE TO ACQUIRE KUHLMAN CORPORATION
ACQUISITION EXPANDS BWA GROWTH PLATFORM;
GLOBALIZES TURBOCHARGER BUSINESS
Chicago, Illinois, December 18, 1998 -- Borg-Warner Automotive, Inc. (NYSE: BWA)
today announced that it has entered into a definitive agreement to acquire
Kuhlman Corporation (NYSE: KUH), a leading supplier of turbochargers and other
highly engineered components for commercial vehicles, for $39 per share, or $660
million. The merger transaction includes both cash and $150 million of BWA stock
and the assumption of debt.
Significant synergies are anticipated in the near future and the
transaction is expected to be accretive in 1999. The transaction is subject to
approval by Kuhlman shareholders and customary regulatory review. It is expected
to close in the first quarter of 1999.
"We are delighted to finish 1998 with a very strategic acquisition,"
said John F. Fiedler, chairman and chief executive officer. "Kuhlman's products
are complementary to ours. The acquisition continues to position us to take
advantage of the growth of direct-injected diesel engines worldwide and provides
immediate new growth opportunities in air and fluid components for commercial
vehicles. Like BWA, Kuhlman is a respected technology leader with excellent
profitability in its businesses. With our expertise in automotive engine systems
and the Kuhlman entree into commercial vehicles, this purchase will
significantly strengthen BWA's growth platform, expand our customer base and
enhance our ability to outpace vehicle industry growth in both sales and
earnings. As a result of the acquisition, we also expect our engine components
and systems businesses to increase from 15% to about half of our revenue."
Robert S. Jepson, Jr., chairman and chief executive officer of Kuhlman
Corporation, stated that, "We at Kuhlman Corporation found Borg-Warner
Automotive's offer attractive and felt compelled to accept it as being in the
best interests of our shareholders. Recent and continuing changes in
transportation and automotive industries favor larger and internationally based
organizations. Our Schwitzer Group and its employees will now be part of a much
larger organization which will be well-positioned to thrive and to be more
responsive to the global needs of its customers."
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Borg-Warner Automotive Acquires Kuhlman Corporation - Page 2
Borg-Warner Automotive's John Fiedler added: "The acquisition of
Kuhlman Corporation will result in the creation of a fifth operating unit for
BWA in turbochargers. Their Schwitzer turbocharger unit in the U.S., combined
with our turbocharger business in Europe, will make us a global leader with
sufficient scale to capitalize on growing worldwide demand. In addition, we can
build on their fuel systems and cooling operations to create an international
air and fluid management business in both light and commercial vehicles."
Kuhlman Corporation's Schwitzer Group represents about $460 million or
60% of anticipated 1998 revenue of $765 million. The largest part of the segment
is turbochargers, followed by fuel systems and fans/drives and HVAC. Customers
include major original equipment commercial vehicle makers in North America and
Europe.
Fiedler noted that Kuhlman's $300 million electrical transformer and
wire and cable businesses are outside BWA's strategic focus and will be sold.
Morgan Stanley Dean Witter is acting as financial advisor to Borg-Warner
Automotive and has been retained to facilitate the sale.
Kuhlman Corporation is headquartered in Savannah, Georgia. Its
Schwitzer Group of vehicle products employs about 2,600 people in 17 facilities
in 4 countries.
Chicago-based Borg-Warner Automotive, Inc. is a product leader in
highly engineered components and systems primarily for automotive powertrain
applications. The company operates manufacturing facilities in 12 countries
serving North America, Europe and Asia.
####
Statements contained in this news release may contain forward-looking statements
as contemplated by the 1995 Private Securities Litigation Reform Act that are
based on management's current expectations, estimates and projections. Words
such as "expects," "anticipates," "intends," "plans," "believes," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ materially from those
projected or implied in the forward-looking statements. Such risks and
uncertainties include: fluctuations in domestic or foreign automotive
production, the continued use of outside suppliers by original equipment
manufacturers, fluctuations in demand for vehicles containing the Company's
products, general economic conditions, as well as other risks detailed in the
Company's filings with the Securities and Exchange Commission, including the
Cautionary Statements filed as Exhibit 99.1 to the Form 10-K for the fiscal year
ended December 31, 1997.
NOTE: Borg-Warner Automotive press releases are available on the Internet via
Company News On-Call:http://www.prnewswire.com or via fax, 800-758-5804, ext.
120941.
