EXHIBIT 7.1
AGREEMENT AND PLAN OF MERGER
Dated January 6, 1997
By and Among
DYNAMET INCORPORATED,
THE SHAREHOLDERS OF DYNAMET INCORPORATED
and
XXXXXXXXX TECHNOLOGY CORPORATION
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TABLE OF CONTENTS
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Page
ARTICLE I
THE TRANSACTION..............................................................1
1.1. Merger.......................................................1
1.2. Closing......................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DI AND DI SHAREHOLDERS ....................3
2.1. Organization, Qualification, Authority
and Good Standing ...........................................3
2.2. Capitalization...............................................3
2.3. Subsidiaries and Affiliates..................................4
2.4. Authorization and Enforceability.............................4
2.5. No Violation of Laws or Agreements...........................4
2.6. Financial Statements.........................................5
2.7. Undisclosed Liabilities......................................5
2.8. No Changes...................................................6
2.9. Taxes........................................................8
2.10. Inventories..................................................9
2.11. Accounts Receivable..........................................9
2.12. No Pending Litigation or Proceedings........................10
2.13. Contracts; Compliance.......................................10
2.14. Compliance with Laws........................................11
2.15. Consents....................................................12
2.16. Title.......................................................12
2.17. Real Estate.................................................13
2.18. Transactions with Related Parties...........................13
2.19. Condition of Assets.........................................13
2.20. Compensation Arrangements; Bank Accounts,
Directors, Officers and Fiduciaries.........................14
2.21. Labor Relations.............................................14
2.22. Insurance...................................................14
2.23. Patents and Intellectual Property Rights....................15
2.24. Employee Benefit Plans......................................15
2.25. Environmental Matters.......................................17
2.26. Brokers.....................................................20
2.27. Disclosure..................................................20
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CTC.......................................20
3.1. Organization, Qualification, Authority
and Good Standing of CTC....................................20
3.2. Organization, Qualification, Authority
and Good Standing of Merger Sub.............................20
3.3. Capitalization..............................................21
3.4. Authorization...............................................21
3.5. No Viloation of Laws or Agreements..........................21
3.6. Financial Statements; 1934 Act Filings......................22
3.7. Consents....................................................22
3.8. Brokers.....................................................23
3.9. Disclosure..................................................23
ARTICLE IV
CERTAIN OBLIGATIONS OF DI AND DI SHAREHOLDERS
PENDING CLOSING 23
4.1 Conduct of Business Pending Closing.........................23
4.2 Insurance; Environmental Permits............................24
4.3 Fulfillment of Agreements...................................25
4.4 Access, Information and Documents...........................25
4.5 H-S-R Act Compliance........................................25
4.6 Delivery of Financial Statements for
Subsequent Periods..........................................25
4.7 Environmental Lists.........................................26
ARTICLE V
CERTAIN OBLIGATIONS OF CTC PENDING CLOSING..................................26
5.1 Fulfillment of Agreements...................................26
5.2 H-S-R Act Compliance........................................26
5.3 Formation of Merger Sub.....................................26
5.4 Listing of CTC Stock........................................26
5.5 Delivery of 1934 Act Reports for
Subsequent Periods..........................................27
5.6 Environmental Audit.........................................27
5.7 Agreements..................................................28
5.8 Confidentiality.............................................28
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION..........................................29
6.1 Conditions Precedent to Obligation of CTC...................29
6.2 Conditions Precedent to Obligation of
DI and DI Shareholders......................................31
6.3 Termination.................................................32
ARTICLE VII
RESTRICTIONS ON TRANSFER OF CTC STOCK; REGISTRATION RIGHTS;
BOARD REPRESENTATION........................................................33
7.1 Restrictions on Transfer and Certain Activities.............33
7.2 Registration of CTC Stock...................................39
7.3 Board Representation........................................41
7.4 No Disposition Inconsistent with Reorganization.............42
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ARTICLE VIII
SURVIVAL AND INDEMNIFICATION................................................43
8.1 Nature and Survival of Representations......................43
8.2 Indemnification by DI Shareholders..........................43
8.3 Indemnification by CTC......................................43
8.4 Notification of Actions; Control of
Proceedings and Cooperation.................................44
8.5 Limitations.................................................45
8.6 Satisfaction of Claims with CTC Stock.......................45
8.7 Definition of Material Adverse Effect.......................45
ARTICLE IX
MISCELLANEOUS 46
9.1 Costs, Expenses and Taxes...................................46
9.2 Further Assurances; Cooperation.............................46
9.3 Option to Purchase or Sell Forged Products Assets...........46
9.4 Post-Closing Access; Preservation of Books
and Records.................................................46
9.5 Communications..............................................47
9.6 Assignability; Successors and Assigns.......................48
9.7 Governing Law; Remedies.....................................48
9.8 Headings....................................................48
9.9 Amendment and Waiver........................................48
9.10 Entire Agreement............................................48
9.11 Execution in Counterparts...................................49
9.12 Appointment of Agent for Delivery...........................49
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EXHIBITS
Section Where
Designation Description First Referenced
=============== ====================================== =====================
A Plan of Merger Preamble
B Forms of Consulting and 1.2(b)(iii)
Non-Competition Agreements
C Form of Opinion of Counsel for DI 6.1(c)
D Opinion of Counsel for CTC 6.2(c)
E Form of Option Agreement 9.3
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SCHEDULES
Section Where
Designation Description First Referenced
=============== ======================================= =====================
2.01 Jurisdictions Where Qualified 2.1
2.02 Capital Stock 2.2
2.03 Affiliated Company 2.3
2.05 Violation of Laws or Agreements 2.5
2.06 Financial Disclosure 2.6
2.07 Disclosed Liabilities 2.7
2.08 Changes Since Balance Sheet Date 2.8
2.09 Taxes 2.9
2.10 Inventories 2.10
2.11 Accounts Receivable 2.11
2.12 Pending Litigation or Proceedings 2.12
2.13 Contracts, Leases and Other 2.13
Commitments
2.14 Permits & Registrations 2.14
2.15 Necessary Consents and Approvals 2.15
2.16 Liens 2.16
2.17 Real Estate Interests 2.17
2.18 Permitted Related Party Transactions 2.18
2.20 Compensation Arrangements and Bank 2.8(n)
Accounts
2.21 Labor Relations 2.21
2.22 Insurance Policies 2.22
2.23 Patents and Intellectual Property 2.23
Rights
2.24 ERISA Disclosures 2.24
2.25 Environmental Matters 2.25
4.01 Property Distribution 4.1
5.07 Employment Agreements and Programs 5.7
9.03 FPD Assets and Liabilities 9.3
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INDEX OF DEFINED TERMS
----------------------
The following terms used herein are defined in the Sections indicated:
Section in
Term Which Defined
=========================================== =================
DI Preamble
DI Shareholders Preamble
Warranting Shareholders Preamble
CTC Preamble
Merger Preamble
Merger Sub Preamble
Plan of Merger Preamble
DI Stock 1.1(b)
CTC Stock 1.1(b)
CTC Market Price 1.1(b)
Closing 1.2(a)
Closing Date 1.2(a)
time of Closing 1.2(a)
Effective Time 1.2(a)
State Merger Filings 1.2(b)(i)
Exchange Agent 1.2(b)(ii)
Disclosure Statement 2.1
Material Adverse Effect 2.5
Financial Statements 2.6
GAAP 2.6
Balance Sheet 2.6
Balance Sheet Date 2.6
Ordinary Course of Business 2.7
Related Party 2.8(n)
Taxes 2.9(a)
Tax 2.9(a)
Code 2.9(d)
Proceedings 2.12
Permits and Licenses 2.14
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H-S-R Act 2.15
Real Properties 2.17
Permitted Related Party Transactions 2.18
ERISA 2.24(a)
Benefit Plans 2.24(a)
affiliate 2.24(i)
Former Affiliate 2.24(i)
Environmental Laws 2.25(a)
Environmental Permits 2.25(a)
Management 2.25(c)
Managed 2.25(c)
Hazardous Substances 2.25(c)
PCBs 2.25(f)
ACM 2.25(f)
CERCLA 2.25(g)
CERCLIS 2.25(g)
Released 2.25(h)
NYSE 3.3
CTC MAE 3.5
Most-Recent 10-Ks 3.6
SEC 3.6
1934 Act 3.6
CTC Financial Statements 3.6
Permitted Distributions 4.1(c)(vi)
Aggregate AAA Value 4.1(c)(vi)
FTC 4.5
AT Division 4.5
NYSE Application 5.4
Environmental Auditors 5.6
Environmental Report 5.6
Merger Shares 7.1(a)(i)
1933 Act 7.1(a)(i)
Rule 144 7.1(a)(i)
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Limited 144 Resale Period 7.1(a)(ii)
Response Period 7.1(a)(iii)
Repurchase Right 7.1(a)(iii)
Offered Merger Shares 7.1(a)(iii)
Unrestricted Permitted Transferee 7.1(e)(i)
Permitted Transferee 7.1(e)(ii)
Affiliate 7.1(e)(iii)
Disposition 7.1(e)(iii)
Standstill Term 7.1(f)(i)
CTC Change of Control Event 7.1(f)(ii)
CTC Voting Securities 7.1(f)(iii)
voting power 7.1(f)(iii)
Participating Sellers 7.2(c)
DI Designee 7.3(a)
Damages 8.2(a)
Indemnitee 8.4
Indemnitor 8.4
FPD Assets 9.3
Stelkast Preferred Stock 9.3
Agent for Delivery 9.12(a)
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER dated January 6, 1997 by and among
DYNAMET INCORPORATED, a Pennsylvania corporation ("DI"), XXXXX X. XXXXXX, XXXXX
X. XXXXXXXX, XXX X. XXXXXX, and XXXX X. XXXXXXXX, individually and as trustees,
holders of all of the issued and outstanding shares of capital stock of DI
(collectively, the "DI Shareholders," with Messrs. Rossin and Xxxxxxxx being
hereinafter sometimes referred to as the "Warranting Shareholders") and
XXXXXXXXX TECHNOLOGY CORPORATION, a Delaware corporation ("CTC").
The parties hereto desire to provide for the merger (the "Merger")
of DI with and into a newly-formed corporation to be organized as a wholly-owned
subsidiary of CTC ("Merger Sub") pursuant to the Plan of Merger attached hereto
as Exhibit A (the "Plan of Merger") and further to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the Merger, all for the purpose of effecting a reorganization
under the provisions of sections 368(a)(1)(A) and (a)(2)(D) of the Internal
Revenue Code of 1986, as amended.
INTENDING TO BE LEGALLY BOUND, the parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1. Merger.
(a) Effective Date. At the time of Closing (as hereinafter defined)
hereunder, DI will be merged into Merger Sub pursuant to the terms of the Plan
of Merger.
(b) Conversion of DI Capital Stock. As a result of the Merger, each
share of Common Stock, par value $5 per share, of DI ("DI Stock") outstanding at
the time of Closing hereunder will be converted into (i) the right to receive
$166.0581 in cash and (ii) 9.0704 shares of Common Stock, par value $5 per
share, of CTC ("CTC Stock"); provided, however, that in the event that the
average of the closing sale prices of CTC Stock as reported on the New York
Stock Exchange Composite Tape for the most recent 15 days on which trading in
CTC Stock has occurred ending on the day immediately preceding the Closing Date
(as hereinafter defined) (the "CTC Market Price"), is greater than $40 or less
than $28, DI and CTC shall each have the right to terminate this Agreement
pursuant to Section 6.3(a)(iv) hereof.
(c) Fractional Shares. No fractional shares of CTC Stock will be
issued as a result of the Merger; fractional
interests will be provided for in accordance with the terms of the Plan of
Merger.
1.2. Closing.
(a) Time and Place. The closing under this Agreement (the "Closing")
will take place at 10:00 a.m., local time, on the later to occur of February 28,
1997 or the third business day after all consents and authorizations referred to
in Sections 6.1(e) and 6.2(e) have been obtained and the parties have otherwise
determined that all conditions to Closing contemplated by Article VI hereof not
theretofore waived have been or can be satisfied, at the offices of Xxxxxxxxxxx
& Xxxxxxxx LLP, 1500 Xxxxxx Building, Pittsburgh, Pennsylvania, or at such other
time, date or place as the parties may mutually agree. The date on which and the
time of day at which Closing occurs are sometimes respectively referred to
herein as the "Closing Date" and the "time of Closing." The Closing will be
deemed to be effective as of the close of business on the Closing Date, such
time being sometimes referred to herein as the "Effective Time."
(b) Deliveries and Proceedings at the Closing. At the time of Closing:
(i) Filing of Articles and Certificate of Merger. Articles of merger
and a certificate of merger (collectively, the "State Merger Filings"),
having been duly executed and delivered by the parties thereto, shall be
filed with the Department of State of the Commonwealth of Pennsylvania and
the Office of the Secretary of State of the State of Delaware,
respectively, thereby effecting the Merger.
(ii) Exchange of Stock Certificates and Cash. Upon receipt of notice
of the effectiveness of the Merger, Xxxxx X. Xxxxxx, as Agent for Delivery
(as hereinafter defined) for those holders of DI Stock who have duly
appointed him as such, will surrender to CTC or to the Exchange Agent
designated pursuant to Paragraph 4(a) of the Plan of Merger (the "Exchange
Agent"), if so designated, certificates representing all the shares of DI
Stock of which each such holder is then the registered owner, in exchange
for which CTC or the Exchange Agent will deliver to the Agent for Delivery
a stock certificate for the number of shares of CTC Stock to which such
holder is entitled by the terms of this Agreement and the Plan of Merger,
with each such stock certificate to be registered in the name of the
appropriate holder and to bear the legend referred to in Section 7.1(b)
hereof and shall wire transfer the amount of the cash payment for such
holder in immediately available funds to an account designated by such
holder no later than two days prior to the Closing Date.
(iii) Execution of Consulting and Non-Competition Agreements.
Consulting and Non-Competition Agreements in substantially the forms
attached hereto as Exhibits B-1 and B-2
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will be executed and delivered by CTC, DI and Messrs. Rossin and Xxxxxxxx,
respectively.
(iv) Other Deliveries. The Closing certificates, opinions of counsel
and other documents required to be delivered pursuant to this Agreement
will be exchanged.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF DI AND DI SHAREHOLDERS
Each DI Shareholder hereby individually and severally and not jointly
represents to CTC that such DI Shareholder has full legal right, power and
authority to execute and deliver this Agreement and perform such DI
Shareholder's obligations hereunder, without need for any consent, approval,
authorization or order of any court or governmental agency or body.
Each of DI and the Warranting Shareholders hereby individually and
severally and not jointly represents and warrants to CTC as follows:
2.1. Organization, Qualification, Authority and Good Standing. DI is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased, to
carry on its business as and where now being conducted, to enter into this
Agreement and the Plan of Merger, and to perform its obligations hereunder and
thereunder. DI is duly qualified and in good standing as a foreign corporation,
duly authorized to do business, in those jurisdictions referred to in Schedule
2.01 of the Disclosure Statement delivered by DI to CTC in connection with this
Agreement (the "Disclosure Statement"), except where the failure to be so
qualified, in good standing and duly authorized is not likely to have a Material
Adverse Effect (as hereinafter defined). The copies of DI's articles of
incorporation and bylaws, as amended to date, which have been delivered to CTC
are correct and complete and such instruments are in full force and effect on
the date hereof.
2.2. Capitalization. Schedule 2.02 of the Disclosure Statement sets
forth the authorized and outstanding capital stock of DI. All of such
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable, were not issued in violation of the terms of any agreement or
other understanding binding upon DI and were issued in compliance with all
applicable federal and state securities or "blue sky" laws and regulations.
There are no outstanding or unexercised options, warrants, rights, agreements,
calls, commitments or demands of any character relating to the capital stock of
DI to which DI is a party or of which DI has knowledge and there are no
securities
3
convertible into or exchangeable for any of DI's capital stock issued by DI.
2.3. Subsidiaries and Affiliates. DI does not directly or indirectly
control any other corporation or business organization with the exception of
those listed on Section 2.03 of the Disclosure Statement, which are not material
to the core business of DI.
2.4. Authorization and Enforceability. The execution, delivery and
performance of this Agreement by DI have been duly authorized by the Board of
Directors of DI and have been duly approved by all necessary action on the part
of the holders of DI Stock. This Agreement has been and the Plan of Merger will
be duly executed and delivered by DI and each of them constitutes or will
constitute, when so executed and delivered, the legal, valid and binding
obligation of DI, enforceable in accordance with its terms except as such
enforceability may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, arrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of creditors generally
or providing for the relief of debtors, (ii) the refusal of a particular court
to grant equitable remedies, including, without limitation, specific performance
or injunctive relief, and (iii) general principles of equity (regardless whether
such remedies are sought in a proceeding in equity or at law).
2.5. No Violation of Laws or Agreements. Except as disclosed on
Schedule 2.05 of the Disclosure Statement, the execution and delivery of this
Agreement by DI do not, and its consummation of the transactions contemplated
hereby and its compliance with the terms, conditions and provisions of this
Agreement will not, (a) contravene any provision of the articles of
incorporation or bylaws of DI; (b) conflict with or result in a breach of or
constitute a default (or an event which would with the passage of time or the
giving of notice or both constitute a default) under any of the terms,
conditions or provisions of any material indenture, mortgage, loan or credit
agreement or other agreement or instrument to which DI is a party or by which it
or any of its assets may be bound, or any judgment or order to which DI is
subject of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation,
any of which contraventions, conflicts, breaches or defaults, individually or in
the aggregate, is likely to have a material adverse effect on the financial
condition of DI or the results of its operations (a "Material Adverse Effect");
(c) result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon the assets of DI or give to others any interest or
right therein which is likely to have a Material Adverse Effect; (d) result in
the maturation or acceleration of any liability of DI with a value in excess of
$500,000 (or give others the right to cause such a
4
maturation or acceleration) which is likely to have a Material Adverse Effect;
or (e) result in the termination of or loss of any right (or give others the
right to cause such a termination or loss) under any material agreement or
contract to which DI is a party or by which it may be bound which is likely to
have a Material Adverse Effect.
2.6. Financial Statements. The books of account and related records of
DI fairly and accurately reflect in reasonable detail its assets, liabilities
and transactions. DI has delivered to CTC the following financial statements of
DI (the "Financial Statements"):
(a) Audited balance sheets as at December 31, 1995 and 1994, and
related statements of income, shareholders' equity and cash flows for the years
then ended, audited by Price Waterhouse LLP; and
(b) Unaudited balance sheet as at November 30, 1996 and related
statements of income, shareholders' equity and cash flows for the eleven months
then ended.
The Financial Statements (i) have been prepared in accordance with the books and
records of DI and (ii) except as disclosed on Schedule 2.06 of the Disclosure
Statement, present fairly in all material respects the financial condition of DI
as at the respective dates and the results of operations, shareholders' equity
and cash flows for the periods covered thereby, in accordance with generally
accepted accounting principles ("GAAP") consistently applied. All references in
this Agreement to the "Balance Sheet" shall mean the balance sheet of DI as at
December 31, 1995 included in the Financial Statements, and all references to
the "Balance Sheet Date" shall mean December 31, 1995.
2.7. Undisclosed Liabilities. As of the date hereof, DI has no
liability or obligation of any nature, whether due or to become due, absolute,
contingent or otherwise (including liabilities for or in respect of federal,
state, local or foreign taxes or any interest or penalties relating thereto)
that would be required to be disclosed on a balance sheet and related notes
thereto prepared in accordance with GAAP, except liabilities (a) reflected on
the Balance Sheet and related notes thereto, (b) incurred in the Ordinary Course
of Business (as hereinafter defined) since the Balance Sheet Date and
appropriately reflected on DI's books of account, or (c) as disclosed on
Schedule 2.07 of the Disclosure Statement. For purposes of this Agreement,
"Ordinary Course of Business" shall mean with respect to any transaction, series
of transactions or activities undertaken by DI that such transactions or
activities are consistent in amount or volume, timing and purposes with similar
transactions or activities undertaken by DI in the 24-month period ended on the
Balance Sheet Date.
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2.8. No Changes. Except as contemplated by this Agreement or as
disclosed on Schedule 2.08 of the Disclosure Statement, from the Balance Sheet
Date to the date hereof, DI has conducted its business only in the Ordinary
Course of Business. Without limiting the generality of the foregoing sentence,
except as disclosed on such Schedule 2.08, between the Balance Sheet Date and
the date of this Agreement there has not been:
(a) Any change in the financial condition, assets, liabilities, net
worth or business of DI except changes in the Ordinary Course of Business,
which, individually or in the aggregate, has had or is likely to have a Material
Adverse Effect;
(b) Any damage, destruction or loss, whether or not covered by
insurance, which has had or is likely to have a Material Adverse Effect;
(c) Any entering into a material mortgage or pledge of, or any
granting of a material security interest in, any of DI's tangible or intangible
assets except in the Ordinary Course of Business;
(d) Any strike, walkout, labor trouble or any similar event,
development or condition which has had a Material Adverse Effect;
(e) Any declaration, setting aside or payment of a dividend or other
distribution in respect of any capital stock of DI, or any direct or indirect
redemption, purchase or other acquisition by DI of any such stock or any rights
or options to purchase such stock or securities convertible into or exchangeable
for such stock;
(f) Any material increase in the salaries or other compensation
payable or to become payable to, or any material advance (excluding advances in
the Ordinary Course of Business) or loan to, any officer or director of DI
(except normal merit increases made in the Ordinary Course of Business), or any
payments to any pension, retirement, profit sharing, bonus or similar plan
except payments in the Ordinary Course of Business made pursuant to the plans
described on Schedule 2.24 of the Disclosure Statement, or any other payment of
any kind to (or on behalf of) any such officer or director other than payment of
base compensation and reimbursement for reasonable business expenses in the
Ordinary Course of Business or as disclosed on Schedule 2.08 of the Disclosure
Statement;
(g) Any making or authorization of any single capital expenditure by
DI in excess of $250,000;
(h) Any cancellation or waiver of any right material to the operation
of the business of DI or any cancellation
6
(other than upon satisfaction) or any waiver of any material debts or claims or
any cancellation or waiver of any debts or claims against any Related Party (as
such term is hereinafter defined), except in the Ordinary Course of Business;
(i) Any sale, transfer or other disposition of any material assets of
DI, except in the Ordinary Course of Business;
(j) Any payment, discharge or satisfaction of any material liability
or obligation (whether accrued, absolute, contingent or otherwise) by DI, other
than the payment, discharge or satisfaction of liabilities or obligations in the
Ordinary Course of Business;
(k) Any change or, to the knowledge of DI or either of the Warranting
Shareholders, threat of any change in any of the relations of DI with its
significant suppliers, clients or customers other than in the Ordinary Course of
Business;
(l) Any material write-off as uncollectible of any notes or accounts
receivable of DI or material write-downs of the value of any assets or inventory
by DI other than in the Ordinary Course of Business;
(m) Any change by DI in any method of accounting or keeping its books
of account or accounting practices or policies or method of application thereof,
including but not limited to changes in estimates or valuation methods;
(n) Any material payment, loan or advance to, or sale, transfer or
lease of any properties or assets (whether real, personal or mixed, tangible or
intangible) to, or the entering into of any agreement, arrangement or
transaction with, any Related Party, except for (i) advisory fees disclosed on
Schedule 2.08 of the Disclosure Statement and (ii) compensation to the officers
and employees of DI at rates not exceeding the rates of compensation disclosed
on Schedule 2.20 of the Disclosure Statement or expense or other advances to
such persons made in the Ordinary Course of Business (as used herein, a "Related
Party" means any of the officers, directors or shareholders of DI, any
affiliate, associate or relative of DI or of any shareholder of DI, or any of
their respective officers or directors, or any business or entity in which any
shareholder of DI or any affiliate, associate or relative of any such person or
of DI has any direct or indirect interest); or
(o) Any disposition of, or failure to keep in effect any rights in, to
or for the use of, any patent, trademark, service xxxx, trade name or copyright,
other than in the Ordinary Course of Business, except for any such disposition
or failure that is likely to have a Material Adverse Effect.
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2.9. Taxes.
(a) DI has (i) timely filed all federal, state and local or foreign
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other tax returns or extensions in respect thereof (all the
foregoing taxes, including interest and penalties thereon and including
estimated taxes, being hereinafter collectively referred to as "Taxes" and
individually referred to as a "Tax") and (ii) paid all Taxes which are shown to
have become due pursuant to such returns or extensions and (iii) paid all other
Taxes for which a notice of assessment or demand for payment has been received,
other than any such Taxes which DI is disputing in good faith proceedings. All
such returns are correct and complete in all material respects, have been
prepared in accordance with all applicable laws and requirements and accurately
reflect in all material respects the taxable income (or other measure of Tax) of
the party filing the same. The accruals for Taxes contained in the Balance Sheet
are adequate to cover all liabilities for Taxes for all periods ending on or
before the Balance Sheet Date and nothing has occurred subsequently to make any
of such accruals inadequate. All Taxes for periods beginning after the Balance
Sheet Date and ending on the date hereof have been paid or are adequately
reserved against on the books of DI.
(b) DI has filed all information returns or reports, including 1099
forms, which are required to be filed and has accurately reported all
information required to be included on such returns or reports. True copies of
federal and state income tax returns of DI for each of the years ended December
31, 1994 and 1995 will be delivered to CTC within twenty (20) days of the
signing of this Agreement. Except as disclosed on Schedule 2.09 of the
Disclosure Statement, there are no proposed assessments of Tax against DI, or
proposed adjustments with respect to any tax returns filed by DI, or proposed
adjustments to the manner in which any Tax of DI is determined pending. Except
as disclosed on such Schedule 2.09, each Tax return of DI has been audited by
the relevant authorities (and all deficiencies or proposed deficiencies
resulting from such audits have been paid or are adequately provided for or
reserved against in the Financial Statements), or the statute of limitations
with respect to such Tax return has expired, and no Tax return is under
examination by any taxing authority, and no notification of intention to examine
has been received from any taxing authority. No claim has been made by any
taxing authority in a jurisdiction where DI does not file tax returns that DI is
or may be subject to taxation by that jurisdiction.
(c) There is no agreement or arrangement with any person or entity
pursuant to which DI would have any obligation with respect to Taxes of another
person following the Closing.
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(d) Except as disclosed on Schedule 2.09 of the Disclosure Statement,
DI has never (i) filed any consent agreement under section 341(f) of the
Internal Revenue Code of 1986 or any predecessor or successor statute (the
"Code"), (ii) executed or had executed by a parent company a waiver or consent
extending any statute of limitation for the assessment or collection of any Tax
which waiver or consent remains in effect, (iii) joined in or been required to
join in filing a consolidated federal income tax return or consolidated or
combined state income tax return, (iv) applied for a tax ruling, (v) entered
into a closing agreement with any taxing authority, or (vi) filed or been the
subject of an election under section 338(g) or section 338(h)(10) of the Code or
caused or been the subject of a deemed election under section 338(e) thereof. DI
timely and properly filed an election to be taxed as an "S corporation" within
the meaning of section 1361 of the Code for federal income tax purposes
effective for the taxable year beginning January 1, 1993 and has continued to be
taxed as an "S corporation" at all times thereafter. DI timely and properly
elected or otherwise qualified under the income tax laws of the states of
Pennsylvania and Florida to be taxed as an "S corporation" (or analogous
provisions) effective for the taxable year beginning January 1, 1993 and has
continued to be taxed as an "S corporation" (or analogous provisions) at all
times thereafter in such jurisdictions.
2.10. Inventories. Except for the inventory relating to the Forged
Products Division, all of the inventories of DI reflected on the Balance Sheet
are valued on a last in, first out (LIFO) basis. Except as disclosed on Schedule
2.10 of the Disclosure Statement, all of the finished goods inventories of DI
reflected on the Balance Sheet and all such inventories acquired since the
Balance Sheet Date consist of items of a quality and quantity generally useable
and merchantable in the Ordinary Course of Business, and all of the raw
materials and work in process inventory of DI reflected in the Balance Sheet and
all such inventories acquired since the Balance Sheet Date are reasonably
expected to be consumed in the Ordinary Course of Business (taking into account
any reserves accrued by the Company). Except as set forth on such Schedule 2.10,
no material portion of the finished goods inventory of DI is consigned to any
third party or is located anywhere other than on the Real Properties (as
hereinafter defined) or in transit.
2.11. Accounts Receivable. All of the trade accounts and notes
receivable of DI reflected on the Balance Sheet as well as those arising after
the Balance Sheet Date represent amounts receivable for merchandise actually
delivered or services actually provided (or, in the case of non-trade accounts
or notes, represent amounts receivable in respect of other bona fide business
transactions), have arisen in the Ordinary Course of Business, are not subject
to any counterclaims or offsets (except to the extent adequately reserved) and
have been billed and are generally due within 30 days (90 days in the case of
foreign customers) after
9
such billing. Except as set forth on Schedule 2.11 of the Disclosure Statement,
to the knowledge of DI and each of the Warranting Shareholders, all such
receivables were at the Balance Sheet Date and are presently fully collectible
in the Ordinary Course of Business except to the extent reserved on the Balance
Sheet or since the Balance Sheet Date on DI's books of account.
2.12. No Pending Litigation or Proceedings. Except as set forth on
Schedule 2.12 of the Disclosure Statement, there are no actions, suits,
investigations or proceedings pending or, to the knowledge of DI or either of
the Warranting Shareholders, threatened against DI, any of its directors or
officers, or any of its assets (including with respect to claims involving
alleged defects in products sold to consumers) or affecting its ability to
consummate the transactions contemplated by this Agreement, at law or in equity,
by or before any court, arbitrator, governmental department, agency or
instrumentality (collectively, "Proceedings"), other than those which are not
likely to have a Material Adverse Effect. There are presently no outstanding
judgments, decrees or orders of any court, arbitrator or any governmental or
administrative agency against DI or any of its assets.
2.13. Contracts; Compliance. Except as listed on Schedule 2.13 of the
Disclosure Statement or as reflected on the Balance Sheet, DI is not a party to
or bound by any written agreement or contract of the following types:
(a) mortgages, indentures, security agreements or other agreements and
instruments relating to the borrowing of money or the extension of credit
involving more than $250,000, individually;
(b) employment and consulting agreements;
(c) union or other collective bargaining agreements;
(d) guaranty, surety and accommodation agreements;
(e) sales agency, manufacturer's representative and distributorship
agreements;
(f) licenses of patent, trademark and other intellectual property
rights;
(g) agreements, orders or commitments for the purchase of services,
raw materials, supplies or finished products from any one supplier or related
suppliers for an amount in excess of $250,000;
10
(h) agreements, orders or commitments for the sale of products or
services in excess of $250,000 to a single customer or purchaser;
(i) contracts or options relating to the sale by DI of any material
asset, other than sales of inventory in the Ordinary Course of Business;
(j) agreements or commitments for capital expenditures in excess of
$250,000 for any single project;
(k) joint venture agreements;
(l) agreements, arrangements or understandings with any Related Party;
(m) lease agreements under which it is either lessor or lessee;
(n) non-competition and non-disclosure or secrecy agreements;
(o) agreements, contracts or commitments for any charitable,
educational or political contribution; and
(p) other agreements, contracts and commitments which involve payments
or receipts of more than $500,000 in any single year and which were entered into
other than in the Ordinary Course of Business.
All such agreements and contracts are in full force and effect; DI has complied
in all material respects with all provisions thereof; DI is not in material
default under any of the terms thereof; and no event has occurred that with the
passage of time or the giving of notice or both would constitute a material
default by DI under any provision thereof.
2.14. Compliance with Laws. Schedule 2.14 of the Disclosure
Statement sets forth a list of all material permits, certificates, licenses,
orders, registrations, franchises, authorizations and other approvals from all
federal, state, local and foreign governmental and regulatory bodies held by DI,
other than Environmental Permits (as hereinafter defined) which are separately
addressed in Sections 2.25 and 4.7, (collectively, "Permits and Licenses"). All
Permits and Licenses are in full force and effect and DI is in substantial
compliance with the terms and conditions thereof except where the failure to be
in compliance is not likely to have a Material Adverse Effect. DI holds and is
in substantial compliance with all Permits and Licenses required under all laws,
rules and regulations applicable to DI except where the failure to so hold or be
in compliance is not likely to have a Material Adverse Effect. Except as
disclosed on such Schedule 2.14, DI has substantially complied with and is in
substantial
11
compliance with all applicable federal, state and local laws, rules, regulations
and orders (including those relating to occupational safety and health and equal
employment practices and excluding all laws referred to in Section 2.17 and all
Environmental Laws (as hereinafter defined)) presently in effect and those no
longer in effect if the applicable statute of limitations for violations has not
yet lapsed except where the failure to be in compliance is not likely to have a
Material Adverse Effect. Except as disclosed on Schedule 2.14 of the Disclosure
Statement, no notice, citation, summons, order or request for information has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or, to the knowledge of DI or either of the
Warranting Shareholders, threatened by any governmental, administrative or other
entity with respect to any (a) alleged violation by DI of any law, rule,
regulation or order of any governmental, administrative or other entity or (b)
alleged failure by DI to have any Permit or License required in connection with
its business.
2.15. Consents. Except as (a) required by the HartScott-Xxxxxx
Antitrust Improvements Act of 1976, as amended ("H-S-R Act"), (b) contemplated
by Section 1.2(b)(i) hereof, and (c) disclosed on Schedule 2.15 of the
Disclosure Statement, no consent, approval or authorization of, or registration
or filing with, any person, including any governmental authority or other
regulatory agency, is required to be obtained or made by DI in connection with
the execution and delivery of this Agreement and the Plan of Merger by DI or the
consummation by DI of the Merger or the other transactions contemplated hereby
except for any consents, approvals, authorizations or registrations the failure
to obtain which and any filings the failure to make which are not likely to have
a Material Adverse Effect.
2.16. Title. DI has good insurable and valid title (fee or leasehold)
to all of its properties and assets, including the properties and assets
reflected on the Balance Sheet (except those disposed of in the Ordinary Course
of Business since the Balance Sheet Date), and none of such properties or assets
is subject to any material mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, right of way, easement, claim,
security interest or charge except for (a) minor imperfections of title, none of
which individually or in the aggregate materially detracts from the value of or
impairs the current use of the affected properties or impairs any current
operations of DI, (b) liens for current taxes and assessments not yet due and
payable or for taxes, assessments, governmental charges or levies, the validity
of which are being contested in good faith by appropriate proceedings, (c)
mechanics', carriers', workmen's, repairmen's or other similar liens arising in
the Ordinary Course of Business, or (d) as disclosed on Schedule 2.16 of the
Disclosure Statement.
12
2.17. Real Estate. Schedule 2.17 of the Disclosure Statement sets
forth a list and summary description of all real properties owned (beneficially
or of record) or leased by DI, and identifies all title insurance policies
covering any of, and all leases relating to, such properties (the "Real
Properties"). The use and operation of each Real Property substantially complies
with all applicable material building, zoning, safety and other laws,
ordinances, regulations, codes, permits, licenses and certificates (excluding
Environmental Laws and Environmental Permits) and all restrictions and
conditions affecting title except where the failure to be in compliance is not
likely to have a Material Adverse Effect. DI has not received any notice for
assessments for public improvements against any of the Real Properties which
remain unpaid except as disclosed in such Schedule 2.17, and, to the knowledge
of DI and each of the Warranting Shareholders, no such assessment has been
proposed. Except as disclosed in such Schedule 2.17, DI has not received any
notice or order of any governmental, zoning or other public authority which (a)
relates to violations of building, safety, fire or other ordinances or
regulations, (b) claims any defect or deficiency with respect to any of the Real
Properties or (c) requests the performance of any repairs, alterations or other
work to or in any of such Real Properties or in the streets bounding the same.
There is no pending condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of any of the Real Properties and there
is no indication that any such proceeding is contemplated.
2.18. Transactions with Related Parties. Except as disclosed on
Schedule 2.18 of the Disclosure Statement (the transactions so disclosed being
hereinafter referred to as "Permitted Related Party Transactions"), no Related
Party has:
(a) borrowed money from or loaned money to DI which has not been
repaid;
(b) any contractual or other claim, express or implied, of any kind
whatsoever against DI;
(c) any interest in any property or assets used by DI in its business;
or
(d) engaged in any other transaction with DI or Subsidiary (other than
employment relationships at the salaries disclosed in Schedule 2.20 of the
Disclosure Statement).
2.19. Condition of Assets. The buildings, machinery, equipment, tools,
furniture and improvements of DI reflected in the Balance Sheet are in good
operating condition and repair (reasonable wear and tear excepted) and are
suitable for the purposes for which they are used in the business of DI (other
than any such assets disposed of in the Ordinary Course of Business).
13
2.20. Compensation Arrangements; Bank Accounts, Directors, Officers
and Fiduciaries. Schedule 2.20 of the Disclosure Statement sets forth the
following information:
(a) the names and current annual salaries, including any bonus and
commissions, if applicable, of all present officers and employees of DI whose
current annual salary, including any promised, expected or customary bonus,
equals or exceeds $75,000, together with a statement of the full amount of all
remuneration paid by DI to each such person during the 12 month period ending
December 31, 1995 and, on an estimated basis, for the 12 month period ending
December 31, 1996;
(b) the name of each bank in which DI has an account or safe deposit
box, the identifying numbers or symbols thereof and the names of all persons
authorized to draw thereon or to have access thereto; and
(c) the names and titles of all directors and officers of DI and of
each trustee, fiduciary or plan administrator of each employee benefit plan of
DI.
2.21. Labor Relations. Except as disclosed on Schedule 2.21 of the
Disclosure Statement, (a) no employee of DI is represented by any union or other
labor organization, (b) there is no unfair labor practice complaint against DI
pending before the National Labor Relations Board; (c) there is no labor strike,
dispute, slow-down or stoppage actually pending against or involving DI; (d) no
grievance which is likely to have a Material Adverse Effect is pending; and (e)
no private agreement restricts DI from relocating, closing or terminating any of
its operations or facilities. As a result of the Merger, Merger Sub will become
the successor in interest to DI as a party to all collective bargaining
agreements referred to on such Schedule 2.21 without the need for the consent of
or further action by any other party thereto.
2.22. Insurance. Schedule 2.22 of the Disclosure Statement contains a
list of all property and casualty and workers compensation insurance policies
(and does not include any life insurance policies) in force at the date of this
Agreement of which DI is the owner, insured or beneficiary, indicating for each
policy the carrier, the insured, risks insured, premium rate, deductible
amounts, expiration date and any pending claims thereunder. All such policies
are and will be outstanding and will be in full force and effect until the
respective termination dates indicated on such Schedule 2.22. There has not been
any failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy, except where
such failure is not likely to have a Material Adverse Effect. Except as set
forth on such Schedule 2.22, there are no outstanding unpaid premiums or claims
under such policies with respect to the coverage afforded DI.
14
2.23. Patents and Intellectual Property Rights. Schedule 2.23 of the
Disclosure Statement contains a list of all patents, patent applications,
trademarks and trade names, copyrights, patent and trademark licenses, service
marks, logos and the like owned by DI. To the knowledge of DI and each of the
Warranting Shareholders, no claim has been made that any of them infringes the
patents, trademarks or other rights of others. To the knowledge of DI and each
of the Warranting Shareholders, the manufacture or sale of any products now or
heretofore manufactured or sold by DI did not and does not infringe (nor has any
claim been made that any such action infringes) the patents or rights of others.
DI owns or possesses licenses or other rights to use all patents, patent
applications, copyrights, trademarks, trade names and other intellectual
property necessary to conduct its business as presently conducted.
2.24. Employee Benefit Plans.
(a) The only employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), welfare benefit plans (as defined in Section 3(1) of ERISA), bonus,
stock purchase, stock ownership, stock option, deferred compensation, incentive
or other compensation plans and arrangements, and other material employee fringe
benefit plans presently maintained or contributed to by DI, other than a
multiemployer plan as defined in Section 3(37) of ERISA, are those listed on
Schedule 2.24 of the Disclosure Statement (the "Benefit Plans"), and a complete
copy of each of such plans will be furnished to CTC within twenty (20) days of
the signing of this Agreement.
(b) Each of the Benefit Plans is in compliance in all material
respects with the applicable provisions of ERISA and those provisions of the
Code applicable to the Benefit Plans.
(c) Except as disclosed in Schedule 2.24 of the Disclosure Statement
and except where the failure so to do is not likely to have a Material Adverse
Effect, all contributions to the Benefit Plans which may have been required to
be made in accordance with the Benefit Plans and, when applicable, Section 302
of ERISA or section 412 of the Code, have been timely made. All such
contributions to the Benefit Plans, except those that are not yet, but will be,
required to be made prior to the time of Closing are properly accrued and
reflected on the Balance Sheet or are disclosed on such Schedule 2.24.
(d) Except as disclosed on Schedule 2.24 of the Disclosure Statement
and except where the failure so to do is not likely to have a Material Adverse
Effect, all material reports, returns and similar documents with respect to the
Benefit Plans required to be filed with any governmental agency or distributed
to any Benefit Plan participant have been duly and timely filed or distributed.
15
(e) Except as disclosed on Schedule 2.24 of the Disclosure Statement,
all of the Benefit Plans which are pension benefit plans are qualified and
exempt from federal income taxes under sections 401(a) and 501(a), respectively,
of the Code, and no such qualification with respect to any such Benefit Plan has
been revoked nor, to the knowledge of DI or either of the Warranting
Shareholders, has any such revocation been threatened in writing.
(f) Each of the Benefit Plans has been administered at all times, and
in all material respects, in accordance with its terms except that in any case
in which any Benefit Plan is currently required to comply with a provision of
ERISA or of the Code but is not yet required to be amended to reflect such
provision, it has been administered in accordance with such provision. Except as
disclosed on Schedule 2.24 of the Disclosure Statement, there are no pending
investigations by any governmental agency involving the Benefit Plans, no
termination proceedings involving the Benefit Plans, and no pending or, to the
knowledge of DI or either of the Warranting Shareholders, threatened claims
(except for claims for benefits payable in the normal operation of the Benefit
Plans), suits or proceedings against any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan which could give rise to any material
liability.
(g) None of the Benefit Plans nor, to the knowledge of DI or either of
the Warranting Shareholders, any trusts created thereunder or any trustee,
administrator or other fiduciary thereof has engaged in a "prohibited
transaction" (as such term is defined in section 4975 of the Code or Section 406
of ERISA) which could subject any thereof to the tax or penalty on prohibited
transactions imposed by such section 4975 or the sanctions imposed under Title I
of ERISA. Except as indicated on Schedule 2.24 of the Disclosure Statement,
neither any of the Benefit Plans nor any such trust has been terminated nor have
there been any "reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect to either thereof.
(h) No Benefit Plan is or ever has been subject to Title IV of ERISA
other than the Dynamet Powder Products Defined Benefit Pension Plan, which was
terminated in December, 1995.
(i) At no time since September 2, 1974 has (i) DI, (ii) any other
employer (an "Affiliate") that is, together with DI, treated as a "single
employer" under section 414(b), 414(c) or 414(m) of the Code, or (iii) any
employer which was at any time after September 2, 1974 an Affiliate of DI (a
"Former Affiliate") incurred any liability which could subject CTC to liability
under Section 4062 of ERISA.
(j) Except as to (i) the National Industrial Group MultiEmployer Group
Pension Plan as to which DI was obligated to make contributions through
September, 1995, and (ii) the UIU
16
MultiEmployer Group Pension Plan to which DI has been obligated to contribute
subsequent to September 30, 1995, as reflected on Schedule 2.24 of the
Disclosure Statement, at no time since September 26, 1980, has DI or any
Affiliate or Former Affiliate been required to contribute to, or incurred any
withdrawal liability, within the meaning of Section 4201 of ERISA, to, any
multiemployer pension plan, within the meaning of Section 3(37) of ERISA, which
liability has not been fully paid as of the date hereof, nor has any such
employer announced an intention to withdraw, but not yet completed such
withdrawal, from any multiemployer plan.
(k) Each Benefit Plan that is a "group health plan", within the
meaning of Section 607(1) of ERISA and which is subject to section 4980B of the
Code (or section 162(k) as in effect prior to 1989), has complied with the
continuation coverage requirements of those provisions and Part 6 of Title I of
ERISA.
(l) There are no "leased employees" within the meaning of section
414(n) of the Code who perform services for DI.
(m) No Benefit Plan provides for "parachute payments" within the
meaning of section 280G of the Code. There is no plan, fund or arrangement under
which any employee of DI is entitled to claim or receive severance pay or
benefits, except for non-qualified supplemental retirement plans for one retired
executive employee and two active executive employees as disclosed on Schedule
2.24 of the Disclosure Statement.
(n) After Closing, neither DI nor CTC shall have any obligations to
make payments, contributions or transfers in respect of any Benefit Plan on
account of service performed before the time of Closing, except for (i) monthly
contributions and (ii) annual contributions to the Dynamet defined contribution
plans listed on Schedule 2.24 of the Disclosure Statement, to be made, in both
cases, in the Ordinary Course of Business and consistent with past practices.
2.25. Environmental Matters. Except as disclosed on Schedule 2.25 of
the Disclosure Statement:
(a) DI is in compliance with all applicable environmental statutes,
rules, regulations, ordinances and common laws and settlement agreements,
consent decrees or orders of any governmental entity to which DI is a party, all
as in effect as of the date hereof ("Environmental Laws"), except where the
failure to be in compliance is not likely to have a Material Adverse Effect. DI
holds and is in compliance with all environmental permits, certificates,
licenses, approvals, registrations and authorizations required for its business
as currently operated and required under Environmental Laws ("Environmental
Permits"), which are in full force and effect as of the date hereof, except
where the failure of such Environmental Permits to be so held or in full force
and
17
effect or of the Company to be in compliance therewith is not likely to have a
Material Adverse Effect.
(b) DI has made timely application for renewals of all such
Environmental Permits as are to expire by December 31, 1996, except
Environmental Permits, for which, by their terms or by operation of law, renewal
applications need not be made before their expiration or the failure to renew
which is not likely to have a Material Adverse Effect. To the knowledge of DI
and each of the Warranting Shareholders, all such Environmental Permits should
be renewed in the ordinary course and should not be renewed with conditions
which would require the expenditure of money in such amounts or result in
changes that are likely to have a Material Adverse Effect.
(c) No notice of violation, citation, summons or order has been
received, no complaint has been served, no penalty has been assessed and, to the
knowledge of DI, no investigation or review is pending or has been threatened by
any governmental or other entity within the five-year period immediately
preceding the date hereof or if prior to that time period which remains
unresolved, which could require DI to expend money or abide by conditions
contained in settlement agreements or consent decrees to which DI is a party to
an extent which is likely to have a Material Adverse Effect on Merger Sub as the
successor to DI following the Merger: (i) with respect to any alleged violation
by DI or any of its predecessors in interest of any Environmental Law; or (ii)
with respect to any alleged failure by DI to have complied with any
Environmental Permit required in connection with its business; or (iii) with
respect to any use, possession, generation, treatment, storage, recycling,
transportation or disposal (collectively, "Management" or when used as a verb,
"Managed") or Release (as hereinafter defined) of any hazardous or toxic or
polluting substance or waste, pollutant or contaminant, including, without
limitation, petroleum products and radioactive materials, ("Hazardous
Substances") by or on behalf of DI or any of its predecessors in interest.
(d) DI has not received any request for information, notice of claim,
demand or notification that it is or may be potentially responsible, with
respect to any investigation or clean-up of any threatened or actual release of
any Hazardous Substance within the five-year period immediately preceding the
date hereof or if prior to that time period which remains unresolved, which
could require DI to expend money to an extent which is likely to
18
have a Material Adverse Effect on Merger Sub as the successor to DI following
the Merger.
(e) DI has not and, to the knowledge of DI or either of the Warranting
Shareholders, no one else has generated, treated, stored for more than 90 days,
recycled or disposed of any Hazardous Substances on any property now or
previously owned or leased by DI, except for any such actions which are not
likely to have a Material Adverse Effect on Merger Sub as the successor to DI
following the Merger.
(f) No polychlorinated biphenyls ("PCBs") or asbestos-containing
materials ("ACM") are present at any property now owned or leased by DI, nor, to
the knowledge of DI, were PCBs or ACM present at any property during the time in
which DI previously owned or leased such property, nor are there any underground
storage tanks owned or operated by DI at any property now or previously owned or
leased by DI or, to the knowledge of DI or either of the Warranting
Shareholders, by anyone else at any property now owned or leased by DI, except
for the presence of any such PCBs, ACM or tanks which are not likely to have a
Material Adverse Effect.
(g) To the knowledge of DI or either of the Warranting Shareholders,
no Hazardous Substance Managed by or on behalf of DI or any predecessor in
interest of DI has come to be located at any site which is listed under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, ("CERCLA"), the Comprehensive Environmental Response Compensation and
Liability Information System ("CERCLIS") or on any similar published state list,
or which is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against DI, CTC or Merger Sub for
cleanup costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under CERCLA.
(h) To the knowledge of DI or either of the Warranting Shareholders,
no Hazardous Substance has been released, spilled, leaked, discharged, disposed
of, pumped, poured, emitted, emptied, injected, leached, dumped or allowed to
escape ("Released") at, on, about or under any property now or previously owned
or leased by DI or any predecessor in interest of DI which is likely to have a
Material Adverse Effect on Merger Sub as the successor to DI following the
Merger.
(i) To the knowledge of DI or either of the Warranting Shareholders,
during the last three years ending on the date hereof, no written notification
of a Release or threat of Release of a Hazardous Substance has been filed by or
on behalf of DI in relation to any property now or previously owned or leased by
DI. No property now or previously owned or leased by DI is, to the knowledge of
DI or either of the Warranting Shareholders, listed on the National Priority
List promulgated pursuant to CERCLA, on CERCLIS, or on any similar published
state list of sites requiring investigation or cleanup.
(j) To the knowledge of DI or either of the Warranting Shareholders,
there are no environmental liens on any properties now owned or leased by DI and
no governmental actions have been taken or are in process or pending which could
subject any of such properties to such liens.
19
(k) DI would not be required to place any notice or restriction
relating to the presence of Hazardous Substances in the deed to any property now
owned by it, and, to the knowledge of DI or either of the Warranting
Shareholders, no property now or previously owned by DI has such a notice or
restriction in its deed.
(l) Except as listed in Schedule 2.25 of the Disclosure Statement and
heretofore made available for review by CTC, there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other analyses,
other than those required to be done routinely pursuant to Environmental Permits
or Environmental Laws, conducted in relation to any property or business now or
previously owned or leased by DI which have been performed by or on behalf of DI
or, to the knowledge of DI or either of the Warranting Shareholders, by any
other person.
2.26. Brokers. Neither DI nor any DI Shareholder has made any
agreement or taken any other action which might cause anyone to become entitled
to a broker's fee, commission or other similar compensation as a result of the
transactions contemplated hereby.
2.27. Disclosure. No representation or warranty by DI or either of the
Warranting Shareholders in this Agreement and no Schedule furnished or to be
furnished to CTC pursuant hereto knowingly contains or will contain as of the
time made or provided any untrue statement of a material fact or knowingly omits
or will omit as of the time made or provided to state any material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CTC
CTC hereby represents and warrants to DI and the DI Shareholders as
follows:
3.1. Organization, Qualification, Authority and Good Standing of CTC.
CTC is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased, to
carry on its business as and where now being conducted, to enter into this
Agreement and the Plan of Merger, and to perform its obligations hereunder and
thereunder.
3.2. Organization, Qualification, Authority and Good Standing of
Merger Sub. At the time of Closing, Merger Sub will be a corporation duly
organized, validly existing and in good standing
20
under the laws of the State of Delaware and will have all requisite power and
authority to enter into the Plan of Merger and to perform its obligations
thereunder.
3.3. Capitalization. CTC's authorized capital stock consists solely of
2,000,000 shares of Preferred Stock, par value $5 per share, of which 451.40
have been issued and are outstanding as Series A Convertible Preferred Shares
and 50,000,000 shares of CTC Stock, of which 16,626,844 are issued and
outstanding and of which an additional 2,930,916 are held in CTC's treasury as
of the date hereof. All of such outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable, were not issued in violation
of the terms of any agreement or other understanding binding upon CTC and are
duly listed upon and admitted to trading on the New York Stock Exchange (the
"NYSE").
3.4. Authorization and Enforceability. The execution, delivery and
performance by CTC of this Agreement and each of the other instruments to be
delivered by CTC at Closing have been duly authorized by all necessary corporate
action on the part of CTC, and this Agreement constitutes, and each of such
other instruments, when executed and delivered, will constitute, the legal,
valid and binding obligation of CTC, enforceable in accordance with its terms
except as such enforceability may be limited or affected by (i) bankruptcy,
insolvency, reorganization, moratorium, liquidation, arrangement, fraudulent
transfer, fraudulent conveyance and other similar laws (including court
decisions) now or hereafter in effect and affecting the rights and remedies of
creditors generally or providing for the relief of debtors, (ii) the refusal of
a particular court to grant equitable remedies, including, without limitation,
specific performance or injunctive relief, and (iii) general principles of
equity (regardless whether such remedies are sought in a proceeding in equity or
at law).
3.5. No Violation of Laws or Agreements. The execution and delivery of
this Agreement by CTC do not, and its consummation of the transactions
contemplated hereby and its compliance with the terms, conditions and provisions
of this Agreement will not, (a) contravene any provision of CTC's certificate of
incorporation or bylaws; (b) conflict with or result in a breach of or
constitute a default (or an event which would with the passage of time or the
giving of notice or both constitute a default) under any of the terms,
conditions or provisions of any material indenture, mortgage, loan or credit
agreement or other agreement or instrument to which CTC or any of its
subsidiaries is a party or by which any of them or any of their assets may be
bound, or any judgment or order to which CTC or any of its subsidiaries is
subject of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation,
any of which contraventions, conflicts, breaches or defaults, individually or in
the aggregate, is likely to have a materially adverse effect on the financial
condition of CTC and its subsidiaries or the results of their operations taken
as a whole (a
21
"CTC MAE"), (c) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of their assets or give to others
any interest or right therein which is likely to have a CTC MAE, (d) result in
the maturation or acceleration of any liability or obligation of any of them in
excess of $500,000 (or give others the right to cause such a maturation or
acceleration) which is likely to have a CTC MAE, or (e) result in the
termination of or loss of any right (or give others the right to cause such a
termination or loss) under any material agreement or contract to which any of
them is a party or by which any of them may be bound which is likely to have a
CTC MAE.
3.6. Financial Statements; 1934 Act Filings. CTC has delivered to DI
copies of its 1995 and 1996 Annual Reports to Shareholders, its proxy statements
for its 1994, 1995 and 1996 annual meetings of stockholders, its Form 10-K
Annual Reports for the years ended June 30, 1995 and 1996 (collectively, the
"MostRecent 10-Ks") as filed with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and all
its Form 10-Q Quarterly Reports and Form 8-K Current Reports filed under the
1934 Act since June 30, 1996. All such documents fairly present the information
contained therein as at their respective dates and for their respective periods
and no statement or information set forth therein or included as a part thereof
knowingly contains any untrue statement of a material fact or knowingly omits to
state any material fact necessary to make it not misleading or necessary to
provide proper information with respect to the matters covered thereby. The
consolidated financial statements as at and for the three years ended June 30,
1996, audited by Coopers & Xxxxxxx, which are included in the Most-Recent 10-Ks
(the "CTC Financial Statements") (a) have been prepared in accordance with the
books and records of CTC and its consolidated subsidiaries and (b) present
fairly in all material respects the financial condition of CTC and its
consolidated subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods covered thereby, in accordance with
GAAP consistently applied since the beginning of the periods covered thereby.
3.7. Consents. Except as (a) required by the H-S-R Act and (b)
contemplated by Sections 1.2(b)(i), 5.3 and 5.4 hereof, no consent, approval or
authorization of, or registration or filing with, any person, including any
governmental authority or other regulatory agency, is required to be obtained or
made by CTC or Merger Sub in connection with the execution, delivery,
negotiation and performance of this Agreement and the Plan of Merger by CTC and
Merger Sub or the consummation by CTC and Merger Sub of the transactions
contemplated hereby and thereby except for any consents, approvals,
authorizations or registrations the failure to obtain which and any filings the
failure to make which are not likely to have a CTC MAE.
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3.8. Brokers. CTC has not made any agreement or taken any other action
which might cause anyone to become entitled to a broker's fee or commission from
DI or any DI Shareholder as a result of the transactions contemplated by this
Agreement.
3.9. Disclosure. No representation or warranty by CTC in this
Agreement and no Schedule furnished or to be furnished to DI pursuant hereto
knowingly contains or will contain as of the time made or provided any untrue
statement of a material fact or knowingly omits or will omit as of the time made
or provided to state any material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE IV
CERTAIN OBLIGATIONS OF DI AND
DI SHAREHOLDERS PENDING CLOSING
4.1. Conduct of Business Pending Closing. From and after the date
hereof and pending Closing, unless CTC shall otherwise consent or agree in
writing and except as otherwise provided in this Agreement, DI covenants and
agrees that:
(a) Ordinary Course. The business of DI will be conducted only in the
Ordinary Course of Business.
(b) Preservation of Business. DI will use diligent efforts to preserve
the business organization of DI intact, to keep available to CTC the services of
the present officers and employees of DI and to preserve for the benefit of CTC
the good will of the material suppliers, customers and others having business
relations with DI, to the extent consistent with the Ordinary Course of
Business.
(c) Material Transactions. DI will not:
(i) Enter into any contract or commitment the performance of which may
extend beyond the Closing Date, except those made in the Ordinary Course of
Business;
(ii) Enter into any employment or consulting contract or arrangement
with any person which is not terminable, without penalty or other owed
compensation, at will;
(iii) Incur or create any mortgage, pledge, lien, restriction,
encumbrance, tenancy, license, encroachment, covenant, condition,
right-of-way, easement, claim, security interest, charge or other matter
affecting title on any of its assets or other property other than in the
Ordinary Course of Business;
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(iv) Waive or permit the loss of any substantial right except to the
extent consistent with the Ordinary Course of Business;
(v) Guarantee or become a co-maker or accommodation maker or otherwise
become contingently liable in connection with any liability or obligation
of any person or business entity except in the Ordinary Course of Business;
(vi) Except for distributions ("Permitted Distributions") to the DI
Shareholders of cash and the property comprised exclusively of the assets
of DI described on Schedule 4.01 of the Disclosure Statement, the aggregate
fair market value of which, together with the amount of such cash, shall
not, as of the Closing Date, exceed the good faith estimate of the
Warranting Shareholders of the amount of the accumulated adjustments
account (as defined in section 1368(e)(1) of the Code) of DI (the
"Aggregate AAA Value") as of such date, take any action set forth in
Section 2.8(e);
(vii) Take any action set forth in Section 2.8(f), (g), (i) or (m);
(viii) Enter into any transaction with, or make any payment to, any
Related Party, except for those Permitted Related Party Transactions
contemplated by Schedules 2.18 and 2.20 of the Disclosure Statement; or
(ix) Amend its articles of incorporation or bylaws;
provided, however, that if and to the extent that the aggregate amount of
Permitted Distributions is not equal to the Aggregate AAA Value, as determined
by an audit of such value to be conducted by the independent auditors for CTC as
soon as practicable after the Closing but in any case prior to June 30, 1997, if
such amount exceeds such Aggregate AAA Value, such excess shall be repaid by the
DI Shareholders to Merger Sub and, if such amount is less than such Aggregate
AAA Value, such difference shall be paid by Merger Sub to the DI Shareholders.
4.2. Insurance; Environmental Permits.
(a) Maintenance of Policies. Except as otherwise indicated on Schedule
2.22 of the Disclosure Statement, DI shall maintain in full force and effect the
policies of insurance listed on such Schedule 2.22 or will obtain, prior to the
lapse of any such policy, substantially similar coverage with insurers of
recognized standing. DI shall promptly advise CTC in writing of any change of
insurer or type of coverage in respect of the policies listed on such Schedule
2.22.
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(b) Permit Transfers. To the extent practicable and permitted by or
under applicable Environmental Laws, DI will prepare and file all applications
for transfer of its Environmental Permits to Merger Sub in adequate time for
transfer to occur as of the time of Closing hereunder.
4.3. Fulfillment of Agreements. DI shall use its reasonable commercial
efforts to (i) cause all of the conditions precedent to the obligation of CTC
under Section 6.1 of this Agreement which are within its control or influence to
be satisfied at or prior to the time of Closing, and (ii) conduct its business
in such a manner that at the time of Closing the representations and warranties
of DI and the Warranting Shareholders contained in this Agreement shall be true
and correct in all material respects as though such representations and
warranties were made on the Closing Date. DI will promptly notify CTC in writing
of any event or fact which is or is likely to cause a breach of any of the
representations, warranties, covenants or agreements of DI and the Warranting
Shareholders and shall promptly advise CTC in writing of the occurrence of any
condition that is materially adverse to the business, operations, properties,
assets or condition (financial or otherwise) of DI.
4.4. Access, Information and Documents. DI will provide to CTC and to
CTC's counsel, accountants and other representatives reasonable access during
normal business hours to all properties, books, tax returns, contracts,
commitments, records, documents, officers, personnel and accountants of DI and
will furnish to CTC all such documents and copies of documents (certified to be
true copies if requested) and all information with respect to the affairs of DI
as CTC may reasonably request, including, without limitation, access to perform
such inspections and surveys as CTC deems necessary in the conduct of the
environmental examination and study contemplated by Section 5.6 hereof.
4.5. H-S-R Act Compliance. DI shall promptly file with the Federal
Trade Commission ("FTC") and the Antitrust Division of the Department of Justice
("AT Division") the notifications required by the H-S-R Act in respect of the
Merger, shall not intentionally delay submission of information requested by FTC
or AT Division under the H-S-R Act and shall use its reasonable commercial
efforts to obtain early termination of the applicable waiting period.
4.6. Delivery of Financial Statements for Subsequent Periods. DI will
deliver to CTC promptly after the close of each of its interim accounting
periods hereafter until the Closing Date copies of interim financial statements
for such period comparable to those described in Section 2.6 and, if otherwise
available prior to the Closing Date, its audited balance sheet as at December
31, 1996, and related statements of income, shareholders' equity and cash flows
for the year then ended, audited by Price Waterhouse LLP.
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4.7. Environmental Lists. (a) Within twenty (20) business days of the
date hereof, DI shall deliver to CTC a true and complete list of all
Environmental Permits held by it. Such list shall set forth, to the extent known
by DI, which Environmental Permits may be transferred to Merger Sub as of the
Closing Date without the prior approval of any governmental department,
commission, board, agency or instrumentality.
(b) Within twenty (20) business days of the date hereof, DI shall
deliver to CTC a true and complete list of each entity that has recycled,
treated, stored, disposed of or transported any Hazardous Substance generated by
DI based on either the documents retained by DI at its principal executive
offices or the knowledge of Xxxxxx X. Xxxxxxx.
ARTICLE V
CERTAIN OBLIGATIONS OF CTC PENDING CLOSING
5.1. Fulfillment of Agreements. CTC shall use its reasonable
commercial efforts to (i) cause all of the conditions precedent to the
obligations of DI and the DI Shareholders under Section 6.2 of this Agreement
which are within its control or influence to be satisfied at or prior to the
time of Closing and (ii) conduct its business in such a manner that at the time
of Closing the representations and warranties of CTC contained in this Agreement
shall be true and correct in all material respects as though such
representations and warranties were made on the Closing Date. CTC will promptly
notify DI in writing of any event or fact which is or is likely to cause a
breach of any of its representations, warranties, covenants or agreements.
5.2. H-S-R Act Compliance. CTC shall promptly file with the FTC and
the AT Division the notifications required by the H-S-R Act in respect of the
Merger, shall not intentionally delay submission of information requested by FTC
or AT Division under the H-S-R Act and shall use its reasonable commercial
efforts to obtain early termination of the applicable waiting period.
5.3. Formation of Merger Sub. Prior to the time of Closing, CTC shall
cause Merger Sub to be incorporated and organized under the laws of the State of
Delaware and thereafter to execute and deliver the Plan of Merger. Immediately
after the incorporation of Merger Sub, CTC shall purchase all of the authorized
shares of capital stock of Merger Sub and shall make no disposition or transfer
of such shares pending the Closing.
5.4. Listing of CTC Stock. Upon receipt of the requisite financial
statements of DI in appropriate form and any other necessary background
information relating thereto, CTC will promptly file with the NYSE an
Application for Additional Listing
26
for the shares of CTC Stock to be issued and delivered pursuant hereto and the
Plan of Merger (the "NYSE Application") and, to the extent reasonably requested,
DI and the DI Shareholders will use their reasonable commercial efforts to
assist CTC in the preparation and filing of the NYSE Application.
5.5. Delivery of 1934 Act Reports for Subsequent Periods. CTC will
deliver to DI and the DI Shareholders (i) promptly after the filing thereof with
the SEC copies of all its Form 10-Q Quarterly Reports and Form 8-K Current
Reports (if any) filed under the 1934 Act prior to Closing and (ii) promptly
after the distribution thereof any interim financial reports or other
communications distributed generally to the holders of CTC Stock.
5.6. Environmental Audit. CTC has engaged Dames & Xxxxx (the
"Environmental Auditors") for the purpose of conducting a site assessment or
assessments of the Real Properties and compliance audit of DI and rendering to
counsel for CTC a report thereon (the "Environmental Report"). In performing
such assessments, CTC shall cause the Environmental Auditors not to conduct
their work in any manner that could create an unsafe or hazardous condition on
any Real Property and shall cause the Environmental Auditors not to interfere
unreasonably with the conduct of DI's business. CTC shall cause all work
performed by the Environmental Auditors to be done in accordance with all
applicable laws, shall be solely responsible for all fees and expenses of the
Environmental Auditors and shall not permit (i) any claims to be made against DI
with respect to the activities being performed by the Environmental Auditors or
their contractors or agents, except to the extent that such claims are for
negligent or willful misconduct by DI's employees, or (ii) any liens to be
created against any Real Property by the Environmental Auditors or their
contractors or agents. Prior to the commencement of any work by the
Environmental Auditors on the Real Properties, CTC shall (i) deliver to DI's
counsel evidence that the Environmental Auditors have in full force and effect
workers' compensation insurance in at least the amount required by applicable
laws and a comprehensive general liability policy with a single incident limit
of at least $2,000,000 in respect of the injury or death of any one person or
damage to property and DI shall be named as an additional insured thereunder;
and (ii) provide DI with a copy of the proposed scope of the work for the site
assessment or assessments in accordance with this Section. DI shall not be
liable to CTC or the Environmental Auditors, their contractors or agents and CTC
shall release, indemnify and hold DI harmless from any claims by any person on
account of any injury, damages or loss to personal property resulting from,
incident to or arising out of the performance of any assessment or any entry
upon the Real Properties in accordance with this Section and from all costs
incurred by DI in defending against any such claim. CTC shall keep DI informed
in a timely manner as to the findings of the Environmental Auditors and shall
arrange to have provided to DI's counsel copies of the final
27
written report prepared by the Environmental Auditors promptly following receipt
thereof by CTC or its counsel. CTC shall insure that all factual information is
reported accurately and completely by the Environmental Auditors in the
Environmental Report consistent with the information supplied by DI or developed
by the Environmental Auditors from published databases or information contained
in governmental agency files, to the extent that such information accurately
describes the state of affairs, and that no legal conclusions are contained in
the Environmental Report. Within ten days of its receipt of the Environmental
Report, DI will provide to CTC notice of incomplete or erroneous factual
information or legal conclusions with appropriate supporting information, if
any, contained in the Environmental Report. Any such incomplete or erroneous
factual information shall be corrected and any such legal conclusions shall be
removed and the Environmental Report shall be reissued. Once the Environmental
Report is reissued, all copies of the original version shall be destroyed. All
information obtained by CTC or the Environmental Auditors shall be treated as
confidential in accordance with Section 5.8 and CTC shall instruct the
Environmental Auditors, their representatives, employees and contractors
regarding the confidentiality of all such information.
5.7. Agreements. After the Closing, CTC shall, and shall cause Merger
Sub to, honor all employment agreements and supplemental employee retirement
programs of DI set forth in Schedule 5.7 of the Disclosure Statement.
5.8. Confidentiality. CTC shall use all information and documents
obtained prior to the date hereof from DI or its representative or pursuant to
Section 4.4 or in accordance with Section 5.6 only in connection with the
transactions contemplated by this Agreement and shall not use them for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement. Prior to the Effective Time, CTC shall keep all such information and
documents confidential and shall not (except as required by applicable law,
regulation or legal process, and then only after compliance with the procedure
set forth below), without DI's prior written consent, disclose any such
information or documents in any manner whatsoever, other than any information or
documents which (i) are or become publicly available other than as a result of a
disclosure by CTC or any of its representatives or (ii) are or become available
to CTC on a nonconfidential basis from a source (other than DI or any of its
representatives) which, to CTC's knowledge, is not prohibited from disclosing
such information to CTC by a legal, contractual or fiduciary obligation to DI.
In the event that, prior to the Effective Time, CTC or any of its
representatives is requested pursuant to, or required by, applicable law,
regulation or legal process to disclose any of such information and documents,
CTC will notify DI promptly so that DI may seek a protective order or other
appropriate remedy or, in its sole discretion, waive compliance with the terms
of this Section 5.8. CTC agrees not to oppose any action to obtain a protective
28
order or other appropriate remedy. In the event that no such protective order or
other remedy sought is obtained, CTC will furnish only that portion of such
information and documents which CTC is advised by counsel is legally required
and will exercise all reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such information and documents. If this
Agreement is terminated, CTC shall return all such information and documents to
DI and convey and release to DI whatever right, title and interest CTC may have
in such documents and information.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.1. Conditions Precedent to Obligation of CTC. The obligation of CTC
to proceed with the Closing under this Agreement is subject to the fulfillment,
prior to or at the time of Closing, of the following conditions (any one or more
of which may be waived in whole or in part by CTC at CTC's option):
(a) Representations and Warranties of DI and Warranting Shareholders.
The representations and warranties of DI, the DI Shareholders and the Warranting
Shareholders contained in Article II of this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though such representations and warranties had been made on such date, and CTC
shall have received a certificate to such effect with respect to the
representations and warranties of DI signed by the Chairman of the Board and
President of DI.
(b) Performance and Compliance. DI and the DI Shareholders shall have
in all material respects performed all of the covenants and complied with all of
the provisions required by this Agreement to be performed or complied with by
any of them at or before Closing, and CTC shall have received a certificate to
such effect signed by the Chairman of the Board and President of DI with respect
to DI and by each of the DI Shareholders with respect to himself or herself.
(c) Opinion of Counsel for DI. CTC shall have received from
Xxxxxxxxxxx & Xxxxxxxx LLP, counsel for DI, an opinion dated the Closing Date in
substantially the form of Exhibit C hereto.
(d) Satisfactory Instruments. All instruments and documents required
to be delivered on the part of DI and the DI Shareholders to effectuate and
consummate the transactions contemplated hereby to be consummated at or prior to
the time of Closing shall be delivered to CTC and shall be in form and substance
reasonably satisfactory to CTC and its counsel.
29
(e) Required Consents. All consents and approvals of all governmental
departments, agencies and authorities required for the consummation of the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law, the ending of which are necessary for the consummation
of such transactions, shall have expired or been terminated.
(f) Litigation. No order of any court, arbitrator or governmental,
regulatory or administrative agency or commission shall be in effect which
restrains or prohibits the Merger or any of the other transactions contemplated
hereby or which would limit or adversely affect CTC's ownership or control of
the business of DI, and there shall not be pending any action or proceeding by
or before any court, arbitrator or governmental, regulatory or administrative
agency or commission challenging any of the transactions contemplated by this
Agreement or seeking monetary relief by reason of the consummation of such
transactions.
(g) Related Party Indebtedness. Except as expressly contemplated by
this Agreement, DI shall have been discharged in full as a guarantor of any
indebtedness of any Related Party, and there shall be no outstanding debts,
obligations or amounts due existing between any Related Party and DI other than
debts, obligations or amounts incurred in the Ordinary Course of Business.
(h) Consulting and Non-Competition Agreements. Each of Messrs. Rossin
and Xxxxxxxx shall have executed and delivered Consulting and Non-Competition
Agreements with DI and CTC in substantially the forms attached hereto as
Exhibits B-1 and B-2, respectively.
(i) Approval of NYSE Listing Application. The NYSE Listing Application
to be filed by CTC pursuant to Section 5.4 hereof shall have been duly approved
by the NYSE and CTC shall have received written notice of such approval.
(j) Environmental Report. The Environmental Auditors shall have
delivered their final Environmental Report which Environmental Report discloses
no fact, event or condition which would make any of the representations and
warranties contained in Section 2.25 not true and correct in all material
respects on the Closing Date; provided, that for purposes of this Section 6.1(j)
any qualification or limitation of the representations and warranties contained
in Section 2.25 on account of the knowledge of DI or either of the Warranting
Shareholders shall be disregarded and that, except to the extent that any
inspections, investigations, studies, audits, tests, reviews or other analyses
that are listed on Schedule 2.25 of the Disclosure Statement in response to
Section 2.25(l) hereof or any information contained therein are specifically
referred to elsewhere in such Schedule 2.25, for purposes of this Section 6.1(j)
any information set forth therein shall be disregarded.
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6.2. Conditions Precedent to Obligations of DI and DI Shareholders.
The obligations of DI and the DI Shareholders to proceed with the Closing under
this Agreement is subject to the fulfillment, prior to or at the time of
Closing, of the following conditions (any one or more of which may be waived in
whole or in part by DI at DI's option):
(a) Representations and Warranties of CTC. The representations and
warranties of CTC contained in Article III of this Agreement shall be true and
correct in all material respects on the Closing Date with the same force and
effect as though such representations and warranties had been made on such date,
and CTC shall have delivered to the DI Shareholders a certificate to such effect
signed by its Chairman of the Board and President.
(b) Performance and Compliance. CTC shall have in all material
respects performed all of the covenants and complied with all of the provisions
required by this Agreement to be performed or complied with by it at or before
Closing, and CTC shall have delivered to the DI Shareholders a certificate to
such effect signed by its Chairman of the Board and President.
(c) Opinion of Counsel for CTC. The DI Shareholders shall have
received from Dechert Price & Xxxxxx, counsel for CTC, an opinion dated the
Closing Date and in form and substance reasonably satisfactory to the DI
Shareholders, to the effects set forth in Exhibit D hereto.
(d) Satisfactory Instruments. All instruments and documents required
to be delivered on CTC's part to effectuate and consummate the transactions
contemplated hereby to be consummated at or prior to the time of Closing shall
be delivered by CTC and shall be in form and substance reasonably satisfactory
to the DI Shareholders and their counsel.
(e) Required Consents. All consents and approvals of all governmental
departments, agencies and authorities required for the consummation of the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law, the ending of which are necessary for the consummation
of such transactions, shall have expired or been terminated.
(f) Litigation. No order of any court, arbitrator or governmental,
regulatory or administrative agency or commission shall be in effect which
restrains or prohibits the transactions contemplated hereby, and there shall not
be pending any action or proceeding by or before any court, arbitrator or
governmental, regulatory or administrative agency or commission challenging any
of the transactions contemplated by this Agreement or seeking monetary relief by
reason of the consummation of such transactions.
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(g) Approval of NYSE Listing Application. The NYSE Listing Application
to be filed by CTC pursuant to Section 5.4 hereof shall have been duly approved
by the NYSE and DI shall have received written notice of such approval.
(h) Consulting and Non-Competition Agreements. Each of CTC and DI
shall have executed and delivered the Consulting and Non-Competition Agreements
with Messrs. Rossin and Xxxxxxxx in substantially the forms attached hereto as
Exhibits B-1 and B-2, respectively.
6.3. Termination.
(a) When Agreement May Be Terminated. This Agreement may be terminated
at any time prior to Closing:
(i) By mutual written consent of CTC and DI;
(ii) By CTC if there has been a material misrepresentation or a
material breach by DI or the DI Shareholders of any of their warranties or
covenants, or if any of the conditions specified in Section 6.1 hereof
shall not have been fulfilled by the time required and shall not have been
waived by CTC;
(iii) By DI if there has been a material misrepresentation or a
material breach by CTC of any of its warranties or covenants, or if any of
the conditions specified in Section 6.2 hereof shall not have been
fulfilled by the time required and shall not have been waived by DI in
writing;
(iv) By CTC or DI if the CTC Market Price is greater than $40 or less
than $28; or
(v) By CTC or DI if Closing shall not have occurred prior to or on
March 30, 1997; provided, that CTC or DI may terminate this Agreement
pursuant to this subparagraph (v) only if the Closing shall not have
occurred by such date for a reason other than a willful or grossly
negligent failure by the party seeking to terminate this Agreement to
provide for the satisfaction of the conditions to the obligation of the
other party to proceed with Closing as set forth in Section 6.1 or 6.2
hereof, respectively, which were in the control of the party seeking to
terminate this Agreement.
(b) Effect of Termination. In the event of any termination of this
Agreement by either DI or CTC as herein provided, there shall be no liability on
the part of either DI or CTC, except for liabilities arising from a willful or
deliberate breach of this Agreement with respect to which a claim has accrued
prior to such termination. If this Agreement is terminated as provided in this
Section 6.3: (i) CTC and DI shall deliver all documents, work papers and other
material relating to the
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transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same or will deliver to such party a duly
executed officer's certificate to the effect that all copies of such material
have been destroyed; (ii) no information received by any party hereto with
respect to the business of the other party or its affiliated companies (other
than information which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public distribution or
filed or available as public information with any governmental authority) shall
at any time be used for the advantage of, or disclosed to third parties by, such
party for any reason whatsoever; (iii) CTC shall deliver to DI all studies,
reports or other documents prepared in connection with its investigation in
accordance with Section 5.6; and (iv) the obligations of CTC under this Section
and Sections 5.6 and 5.8 shall survive for a period of five years following such
termination.
ARTICLE VII
RESTRICTIONS ON TRANSFER OF CTC STOCK;
REGISTRATION RIGHTS; BOARD REPRESENTATION
7.1. Restrictions on Transfer and Certain Activities.
(a) Representations of DI Shareholders. Each DI Shareholder hereby
covenants and represents that such DI Shareholder:
(i) understands that the shares of CTC Stock which such DI Shareholder
is to receive pursuant to Article I hereof and the Plan of Merger (the
"Merger Shares") have not been registered under the Securities Act of 1933,
as amended (the "1933 Act"), and, when delivered in accordance with the
terms of this Agreement, will be "restricted securities" (securities
acquired from an issuer in a transaction not involving any public offering)
as defined in Rule 144 of the General Rules and Regulations of the SEC
under the 1933 Act ("Rule 144");
(ii) has no present plan or intention to effect any transfer of the
Merger Shares to any person or other entity (including a Permitted
Transferee as hereinafter defined), and, except as otherwise contemplated
by the provisions of Section 7.2 hereof, will hold the Merger Shares for a
minimum of two years following the Closing Date (unless the holding period
applicable to resales of restricted securities (the "Limited 144 Resale
Period") is reduced from two years to one year as proposed in SEC 1933 Act
Release No. 7187 (6-27-95), in which case such two-year period shall be
automatically reduced to one year), and will not consummate any sale or
transfer of any Merger Shares in the absence of registration thereof under
the 1933 Act (other than in accordance with the provisions of Rule 144),
unless and until such
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DI Shareholder shall have delivered to CTC an opinion of Xxxxxxxxxxx &
Xxxxxxxx LLP, or other counsel chosen by such DI Shareholder, which counsel
shall be reasonably satisfactory to CTC and its counsel, to the effect that
such sale or transfer may be effected without registration under the 1933
Act;
(iii) undertakes that, throughout the Standstill Term (as hereinafter
defined), such DI Shareholder will not agree to or arrange for or effect
the transfer (other than pursuant to the procedures contemplated by Section
7.2) in a single transaction or related series of transactions (other than
a disposition to a Permitted Transferee) to a single purchaser or related
or affiliated group of purchasers of more than the maximum number of Merger
Shares which such DI Shareholder could then sell or transfer in a
transaction or transactions effected in full compliance with Rule
144(e)(1), assuming that such Rule was then applicable, unless and until
such DI Shareholder first advises CTC of the intention so to do in writing
and provides CTC with an opportunity to respond to such advice within ten
business days of receipt thereof by CTC (the "Response Period") by agreeing
to repurchase (the "Repurchase Right") such Merger Shares (the "Offered
Merger Shares") at the same price offered by such purchaser or group;
provided, however, that such DI Shareholder will be obligated to effect
such sale to CTC only if capital gain treatment of the transaction is
assured under section 302(b) of the Code; and
(iv) throughout the Standstill Term, except with the prior express
written consent of CTC or in the capacity of a DI Designee (as defined in
Section 7.3), neither such DI Shareholder nor any of such DI Shareholder's
affiliates (as hereinafter defined), will, nor will such DI Shareholder or
any of such affiliates assist or encourage others to, directly or
indirectly:
(A) effect, or offer, seek or propose to effect, or cause to be
effected, any (i) acquisition of ownership (including, but not limited
to, "beneficial ownership" as defined in Rule 13d-3 under the 0000
Xxx) by such DI Shareholder of any additional shares of CTC Stock
(which hereby waives any right such DI Shareholder might otherwise
have as a DI Designee to participate in CTC's Non-Qualified Stock
Option Plan for Non-Employee Directors) or any other CTC Voting
Securities (as hereinafter defined) other than CTC Voting Securities
issued pursuant to a stock split or dividend or distribution in
respect of CTC Stock or any material portion of CTC's assets or any
rights or options to acquire such ownership (including from a third
party); or (ii) tender or exchange offer, merger or other business
combination involving CTC or any of its subsidiaries (which shall not
prevent any DI Shareholder from accepting any such offer or voting for
and participating in any such merger or other business combination;
provided, however, that such DI Shareholder shall advise CTC with
reasonable promptness of such DI Shareholder's intention to accept
34
any tender or exchange offer in order to permit CTC to exercise the
Repurchase Right with respect to the applicable Merger Shares, and
such DI Shareholder shall not accept such offer until the final day
prior to its then-scheduled expiration); or (iii) recapitalization or
restructuring resulting in an increase in the proportional percentage
of CTC Voting Securities held by such DI Shareholder or liquidation,
dissolution or other extraordinary transaction involving CTC or any of
its subsidiaries (which shall not prevent any DI Shareholder from
voting for and participating in any such transaction);
(B) make or in any way participate in any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A
under the 0000 Xxx) or become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11 under
the 0000 Xxx) with respect to CTC; seek to advise or influence
any person (within the meaning of Section 13(d)(3) of the 1934
Act), other than members of the initial "group" referred to in
clause (C), with respect to the voting of any CTC Voting
Securities; or execute any written consent in lieu of a meeting
of holders of CTC Voting Securities;
(C) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the 0000 Xxx) with
respect to any CTC Voting Securities or otherwise act (other than
by the voting of CTC Voting Securities), alone or in concert with
others, to seek to control or influence CTC's Board of Directors,
management or corporate policies, other than any such actions
undertaken solely with other DI Shareholders and their Permitted
Transferees; or
(D) enter into any negotiations, arrangements, agreements or
understandings with any third party with respect to any of the
foregoing.
(b) Legend on Certificates. The certificates representing the Merger
Shares will bear the following legend:
"The shares of stock evidenced by this certificate have not been
registered pursuant to the Securities Act of 1933, as amended, and are
transferable only upon such registration or upon proof of exemption therefrom.
Certain conditions precedent to the transfer of these shares are set forth in an
Agreement and Plan of Merger dated January 6, 1997 among Dynamet Incorporated,
the shareholders of Dynamet Incorporated and Xxxxxxxxx Technology Corporation
(which Agreement and Plan of Merger is on file with Xxxxxxxxx Technology
Corporation)."
(c) Stop Transfer Instructions. At the time of the delivery of the
certificates representing the Merger Shares, stop transfer instructions with
respect to such certificates will be given by CTC to the transfer agent for CTC
Stock.
35
(d) Procedure for Repurchases by CTC. In the event that CTC elects to
exercise its Repurchase Right with respect to Offered Merger Shares under
subsection (a)(iii), CTC will within the Response Period deliver to the
disposing DI Shareholder written notice stating the date, time and place for the
closing of the repurchase transaction, which date shall not be more than five
business days after the notice date. Such notice shall be accompanied by an
opinion of Dechert Price & Xxxxxx, or other counsel reasonably satisfactory to
the disposing DI Shareholder, to the effect that the repurchase by CTC will
result in capital gain treatment to such DI Shareholder under section 302(b) of
the Code. Unless otherwise agreed, the purchase price for the Offered Merger
Shares shall be paid in full at such closing by certified check or wire transfer
against delivery of the appropriate stock certificates, duly endorsed or
accompanied by duly executed stock transfer powers. If CTC does not deliver such
notice and opinion within the Response Period, the disposing DI Shareholder
shall be free to dispose of the Offered Merger Shares to any third party
(subject to compliance with all applicable federal and state securities laws),
and CTC will take all action necessary to permit such disposition to be effected
without further restrictions, including removal of the legend contemplated by
subsection (b) hereof and voiding of the stop transfer instructions contemplated
by subsection (c).
(e) Permitted Transferees.
(i) Nothing in this Section 7.1 shall prevent the disposition of
Merger Shares by a DI Shareholder or a Permitted Transferee to one or more
of his, her or its Permitted Transferees, to another DI Shareholder or to
CTC; provided, however, that each such DI Shareholder or Permitted
Transferee (except a Permitted Transferee pursuant to clause (D), (E), (F)
or (G) of subsection (e)(ii), hereinafter referred to as an "Unrestricted
Permitted Transferee") shall take such Merger Shares subject to and be
fully bound by the terms of this Agreement applicable to such person with
the same effect as if such person were a party hereto; and provided,
further, that
(A) no such transferee (other than an Unrestricted Permitted
Transferee) shall be a Permitted Transferee unless such transferee
executes a representation letter embodying the substantive provisions
of Article VII of this Agreement, reasonably satisfactory in form and
substance to CTC, and
(B) no disposition shall be effected except in compliance with
the registration requirements of the 1933 Act or pursuant to an
available exemption therefrom.
(ii) "Permitted Transferee" shall mean:
(A) in the case of any DI Shareholder or Permitted Transferee who
is a natural person, his or her spouse or
36
lineal descendants, any trust for his or her benefit or the benefit of
his or her spouse or lineal descendants or the benefit of any
combination thereof, or any corporation or partnership in which the
direct and beneficial owners of all of the equity interests are any
combination of such individual DI Shareholder or Permitted Transferee
and his or her spouse and lineal descendants and any trusts for the
benefit of any combination of such persons; provided, that any such
trust, partnership or corporation shall not be subject to any
obligations inconsistent with the obligations of a DI Shareholder or
Permitted Transferee under this Agreement;
(B) in the case of any DI Shareholder or Permitted Transferee who
is a natural person, his or her heirs, executors, administrators or
personal representatives upon the death of such DI Shareholder or
Permitted Transferee or upon the incompetency or disability of such DI
Shareholder or Permitted Transferee for purposes of the protection and
management of his or her assets;
(C) in the case of any DI Shareholder or Permitted Transferee
that is a corporation, partnership or trust, its shareholders,
partners or beneficiaries, as the case may be (other than any person
who becomes a shareholder, partner or beneficiary solely to enable
him, her or it to become a Permitted Transferee) and, in the case of
any DI Shareholder or Permitted Transferee, any affiliate thereof;
(D) the Rossin Foundation or any other charitable, religious or
philanthropic organization qualified under section 501(c)(3) of the
Code and any charitable remainder trust as defined in Section 664 of
the Code, either of which is an affiliate of any DI Shareholder, which
shall be an Unrestricted Permitted Transferee only with respect to the
initial 200,000 Merger Shares transferred thereto, and which shall
acquire any additional Merger Shares subject to the general
restrictions of subsection (e)(i);
(E) any charitable, religious or philanthropic organization
qualified under section 501(c)(3) of the Code and any charitable
remainder trust as defined in Section 664 of the Code, other than the
Rossin Foundation or any other such organization which is an affiliate
of any DI Shareholder;
(F) any person or other entity if such person or other entity
takes such Merger Shares in a transaction in accordance with Section
7.2 hereof or another public offering under the 1933 Act or in a
transaction in accordance with Rule 144; or
(G) any person acquiring Merger Shares from any DI Shareholder or
Permitted Transferee after full compliance with subsection (d) hereof.
(iii) As used in this Section 7.1, "affiliate" means any person
controlling, controlled by or under common control
37
with a specified person. "Disposition" includes any sale, exchange,
assignment, hypothecation, gift, donation or any voting trust or other
agreement or arrangement with respect to the transfer of voting rights or
any other beneficial interest in any of the Merger Shares.
(f) Duration of Standstill Term.
(i) The period during which the provisions of this Section 7.1 shall
be effective (the "Standstill Term") shall begin on the Closing Date and
shall end on the earlier to occur of (A) the date upon which the percentage
of the voting power of the CTC Voting Securities held by the DI
Shareholders and their Permitted Transferees bound by the provisions of
Article VII of this Agreement is less than 5% of the voting power of all
outstanding CTC Voting Securities or (B) the tenth anniversary of the
Closing Date; provided, however, that the Standstill Term shall terminate
immediately upon CTC's failure to honor or to carry out its obligations
with respect to the election of a DI Designee to the CTC Board of Directors
under Section 7.3(a) hereof or the occurrence of a CTC Change of Control
Event (as hereinafter defined).
(ii) As used in this Section 7.1, a "CTC Change of Control Event"
means a transaction or series of transactions (including any tender or
exchange offer, merger, sale of assets or other business combination,
contested election of directors or any combination thereof) as the result
of which (A) any person, together with all affiliates of such person, or
group (other than CTC, any subsidiary of CTC, any employee benefit plan of
CTC or of any subsidiary of CTC, any person or entity organized, appointed
or established by CTC for or pursuant to the terms of any such employee
benefit plan or any group of which any DI Shareholder is a member and in
which such DI Shareholder participates in his capacity as a stockholder of
the Company) shall become the beneficial owner of 30% or more of the voting
power of all CTC Voting Securities then outstanding, other than a
transaction to which CTC is a party and in connection with which such
person or group enters into a "standstill" agreement with CTC which has a
duration not less than the remaining term of the Standstill Term and
contains covenants and conditions, which shall not thereafter be modified
or waived prior to the end of the Standstill Term, relating to the sale and
acquisition of CTC Voting Securities and the exercise of voting rights
which are at least as restrictive as those contained herein; or (B) during
any period of two consecutive calendar years there is a change of 50% or
more in the membership of the Board of Directors of CTC from the directors
in office at the beginning of such period except for changes approved by at
least two-thirds of the directors then in office who were directors at the
beginning of the period; or (C) persons who were the holders of CTC Voting
Securities immediately prior to such transaction do not, immediately
thereafter, own more than 50% of the voting power of the reorganized,
merged, consolidated, combined
38
or acquiring corporation's then outstanding voting securities. A CTC Change
of Control Event shall be deemed to have occurred on the date upon which
any of the foregoing results is consummated or becomes effective.
(iii) "CTC Voting Securities" shall mean CTC Stock and any other
securities of CTC entitled to vote generally for the election of directors
of CTC; and "voting power" means, with respect to any CTC Voting Security,
the maximum number of votes that such security is entitled to cast
generally for the election of directors.
7.2. Registration of CTC Stock.
(a) Form S-3 or Other Registration Statement on Demand. On one
occasion at any time after the first to occur of (i) the first anniversary of
the Closing Date or (ii) the death of either Xxxxx or Xxx Xxxxxx, CTC will file
with the SEC within 60 days after being so requested by the holders of a
majority of the Merger Shares then held by the DI Shareholders a registration
statement on Form S-3 (or, if such form shall not then be available for use by
CTC in connection with such proposed offering, on any other appropriate form)
under the 1933 Act and will include therein such number of the Merger Shares as
the DI Shareholders shall designate in writing to CTC no later than ten days
prior to the proposed date of such filing. CTC will use its reasonable
commercial efforts to have such registration statement declared effective as
promptly as practicable after the filing thereof, subject to the provisions
hereinafter set forth.
(b) Additional Registration Rights. If, at any time, CTC files a
registration statement (including a registration statement filed under Rule 415
under the 1933 Act), contemplating a public offering of CTC Voting Securities,
other than in connection with a business acquisition or combination transaction
or a stock purchase, stock option or other employee benefit plan or a dividend
reinvestment plan, the DI Shareholders will have the right to have all or a
portion of the Merger Shares included in such registration to the extent
designated in writing to CTC within ten days following receipt of notice by DI
Shareholders of the proposed registration from CTC; provided however, that the
period during which CTC shall be required to keep such registration statement
effective shall be limited to 90 days; and provided, further, that CTC may delay
the filing or suspend the effectiveness of such registration statement for a
reasonable period of time if it reasonably believes that such filing would
require the disclosure of information then held confidential or would disrupt or
prejudice the negotiation or completion of any contemplated or pending
financing, acquisition, disposition or other significant corporate transaction,
and that CTC may exclude all or a portion of such Merger Shares from any
offering under such registration statement if it is advised by the managing
underwriter for such offering if the offering is underwritten that the inclusion
of such shares or
39
such portion in the offering would prejudice or impair the marketability
thereof, so long as any such reduction is effected pro rata with the shares of
any other shareholder exercising rights similar to the rights provided in this
Section 7.2(b).
(c) Undertakings of Participating Sellers. As a condition of any such
registration under Section 7.2(a) or (b), the DI Shareholders electing to
participate therein (the "Participating Sellers") will (i) furnish such
information to CTC and take such additional action as CTC and its counsel may
reasonably request in connection with such registration statement and the
offering contemplated thereby; (ii) agree to indemnify CTC (to the extent
reasonably deemed necessary by CTC) with respect to the accuracy of any
information so furnished; (iii) pay all (or a pro rata portion, if CTC itself,
or other holders of CTC Stock, elect to participate in such registration, of)
the underwriting discounts and commissions or brokerage commissions, and the
fees and expenses of their own counsel in excess of $10,000, it being understood
that all other costs and expenses associated with such registration, including
SEC registration fees, printing costs and blue sky fees and expenses will be
borne by CTC; and (iv) cooperate with CTC and its representatives to cause such
registration statement to become effective at the earliest practicable time.
Upon request, CTC will furnish the Participating Sellers with such number of
copies of the prospectus related to any such registration statement as the
Participating Sellers may reasonably request.
(d) Indemnification by CTC. In connection with any offering and
registration statement contemplated by the foregoing provisions, CTC shall
indemnify each Participating Seller against any and all loss, liability, claim,
damage and expense whatsoever (i) arising out of any untrue statement of a
material fact contained in such registration statement at the time it becomes
effective or the final prospectus or any supplement thereto is filed in
connection with such registration statement, or any omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon and in
conformity with information furnished to CTC by a Participating Seller for use
in such registration statement, prospectus or supplement, or (ii) arising out of
any violation by CTC of any law or rule or regulation relating to action or
inaction required of CTC in connection with such registration statement or the
offering thereunder; provided, however, that CTC shall not be liable hereunder
with respect to any claim made against any Participating Seller unless CTC shall
be notified in writing of the existence of the claim within thirty days after
the assertion thereof in writing; and provided, further, that CTC shall be
entitled to participate at its own expense in the defense or, if it so elects
within thirty days after receipt of such notice, to assume the defense of any
suit brought to enforce any such claim. If a Participating Seller's right to the
indemnification hereinbefore
40
provided for is for any reason held unenforceable although otherwise applicable
in accordance with its terms, CTC will contribute to the loss, liability, claim,
damage or expense for which such indemnification is held unenforceable in such
proportion as is appropriate to reflect the relative benefits to CTC, on the one
hand, and such Participating Seller, on the other hand, of the transaction
giving rise to such loss, liability, claim, damage or expense and the relative
fault of CTC, on the one hand, and such Participating Seller, on the other hand,
with respect to such loss, liability, claim, damage or expense, as well as any
other relevant equitable considerations.
(e) Underwritten Offerings. In any case where the shares of CTC Stock
registered pursuant to this Section 7.2 are to be sold and distributed by means
of or as part of an underwritten public offering,
(i) if the offering is pursuant to Section 7.2(a), the managing
underwriter shall be X. X. Xxxxxx Securities Inc. or such other investment
banking firm of national reputation as CTC shall select and to the
selection of whom the majority of Participating Sellers shall consent
(which consent shall not be unreasonably withheld);
(ii) CTC will use its best efforts to cause the registration statement
to remain current (including the filing of necessary supplements or
post-effective amendments) throughout the period commencing on the initial
effective date thereof and ending on the earlier of (A) the date on which
the underwriting distribution is completed or (B) the expiration of nine
months; and
(iii) CTC will agree to indemnify all participating underwriters and
controlling persons thereof, such indemnification to be in substantially
the form and to the effect customarily proposed by the managing underwriter
in similar transactions, with such modifications therein as may be agreed
upon by such underwriters and CTC.
7.3. Board Representation.
(a) Designation of Candidate. CTC will cause Xxxxx X. Xxxxxx or, if he
is unable for any reason to serve, a person designated by the DI Shareholders
then holding a majority of the Merger Shares and reasonably acceptable to CTC,
to be elected to CTC's Board of Directors as of the Closing Date. Thereafter,
during the Standstill Term and subject to the further provisions hereof, CTC's
Corporate Governance Committee (or any other committee of its Board of Directors
exercising a similar function) shall recommend to CTC's Board of Directors that
such person or any other person designated by the DI Shareholders then holding a
majority of the Merger Shares after consultation with and reasonably acceptable
to CTC (any such person including Xx. Xxxxxx being hereinafter referred to as
the "DI Designee") be included and
41
such person shall be included in the slate of nominees recommended by CTC's
Board of Directors to stockholders for election as directors at each annual
meeting of stockholders of CTC at which members of the class of directors to
which the DI Designee is originally appointed are to be elected, commencing with
the next annual meeting of stockholders. In the event that any DI Designee shall
cease to serve as a director for any reason, the vacancy resulting thereby shall
be filled by another DI Designee. Upon expiration of the Standstill Term, CTC
shall have no further obligations under this Section 7.3.
(b) Acceptability. Notwithstanding the provisions of this Section 7.3,
the DI Shareholders shall not be entitled to designate any person as the DI
Designee to CTC's Board of Directors if the election of such person as a
director would result in any violation of any applicable law or order. CTC shall
not be obligated to elect to its Board of Directors any person whose service as
a member thereof would have or be reasonably likely to have a material adverse
effect on CTC's conduct of its business or such Board's ability to carry out or
discharge its responsibilities. If any such person has been designated by the DI
Shareholders and rejected by CTC, the DI Shareholders shall be permitted to
designate a substitute DI Designee in accordance with this Section.
7.4. No Disposition Inconsistent with Reorganization. Notwithstanding
any provisions set forth in this Article VII to the contrary, the DI
Shareholders will make no disposition of any of the Merger Shares which, on a
stand-alone basis or together with any other dispositions previously made by the
DI Shareholders, would disqualify the Merger as a reorganization under sections
368(a)(1)(A) and (a)(2)(D) of the Code, and in no event will the aggregate
number of Merger Shares disposed of by the DI Shareholders in the first year of
the Standstill Term (including dispositions to Permitted Transferees) exceed
630,000, except dispositions occasioned by the death of a DI Shareholder or a
Permitted Transferee or as otherwise contemplated by Section 7.2(a).
42
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1. Nature and Survival of Representations. The representations,
warranties, covenants and agreements of CTC, DI, the Warranting Shareholders and
the DI Shareholders contained in this Agreement and all statements contained in
any Schedule hereto or any certificate or financial statement delivered pursuant
to this Agreement shall be deemed to constitute representations, warranties,
covenants and agreements of the party delivering the same. All such
representations and warranties shall survive the Closing hereunder for a period
extending until February 28, 1998, except those set forth in (a) Section 2.27,
which, in the event of fraud, shall survive until February 28, 2000, (b) Section
2.14, which shall survive until February 28, 1999 and (c) Section 2.25, which
shall not survive the Closing.
8.2. Indemnification by DI Shareholders. Subject to the terms and
conditions of this Article VIII, the DI Shareholders shall severally (in
proportion to their respective DI stockholdings) indemnify, defend and hold
harmless CTC and DI from and against:
(a) any loss, liability, claim, obligation, fine, penalty, damage,
deficiency or cost of investigation, remediation or other response activity
(collectively, "Damages") arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement (other
than Section 4.7) on the part of DI and the DI Shareholders contained in this
Agreement or in any certificate furnished to CTC pursuant hereto; and
(b) any actions, judgments, costs and expenses (including reasonable
attorneys' fees and all other expenses incurred in investigating, preparing for
or defending any litigation, settlement or other proceeding) incident to any of
the foregoing or the enforcement of this Section 8.2;
provided, however, that, notwithstanding anything to the contrary contained
herein, no DI Shareholder shall have any obligation to indemnify, defend or hold
harmless CTC or DI from and against any (i) Damages arising out of, resulting
from or otherwise relating to (x) any violation of, default under, breach of, or
conflict with, any Environmental Law or Environmental Permit or (y) the subject
matter of Section 2.25 in any manner or (ii) any actions, judgments, costs and
expenses (including reasonable attorneys' fees and all other expenses incurred
in investigating, preparing for or defending any litigation, settlement or other
proceeding) incident to any of the foregoing.
8.3. Indemnification by CTC. (a) CTC shall indemnify, defend and hold
harmless the DI Shareholders from and against:
43
(i) any Damages arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement on
the part of CTC contained in this Agreement or in any certificate furnished
pursuant hereto; and
(ii) any actions, judgments, costs and expenses (including reasonable
attorneys' fees and all other expenses incurred in investigating, preparing
for or defending any litigation, settlement or other proceeding) incident
to any of the foregoing or the enforcement of this Section.
(b) CTC and DI shall indemnify, defend and hold harmless Xx. Xxxxxx
and Xx. Xxxxxxxx from and against any Damages arising out of or resulting from
any third-party or governmental claims relating to any violations or alleged
violations of Environmental Laws or Environmental Permits by DI prior to the
Closing Date and any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing for or defending any litigation, settlement or other proceeding)
incident to any of the foregoing or the enforcement of this Section other than
any such Damages, actions, judgments, costs or expenses arising out of or
resulting from or otherwise incident to any such claims relating to any such
violations by DI's Forged Products Division if the transactions contemplated by
Section 9.3 are consummated.
8.4. Notification of Actions; Control of Proceedings and Cooperation.
A party potentially entitled to indemnification ("Indemnitee") hereunder shall
give the party under the obligation to provide indemnification hereunder
("Indemnitor") written notice of any third-party claim for which the Indemnitee
may be entitled to indemnification hereunder specifying the nature of the claim
in reasonable detail and amount, all to the extent known, within 60 days after
the Indemnitee has knowledge of such third-party claim. The Indemnitor shall
have the right, by giving written notice to the Indemnitee within 30 days after
receipt of the notice hereinbefore described, to assume control of such defense
using counsel of its choice at its expense. If the Indemnitor shall not so
assume control of such defense, or, having assumed control, shall fail to defend
the claim diligently, the Indemnitee shall retain or reassert control and
dispose of the claim without in any way affecting its rights to indemnification
hereunder. The parties hereto will cooperate with one another in any defense and
the Indemnitee, with respect to any claim, shall be entitled to participate at
its own expense in the defense of any such claim following assumption of control
of such defense of any such claim by Indemnitor as hereinbefore provided. Except
as hereinbefore provided, neither Indemnitee nor Indemnitor shall enter into any
agreement, compromise or settlement in respect of any such claim without first
obtaining the other party's written consent thereto, which consent shall not be
unreasonably withheld.
44
8.5. Limitations. With respect to any Damages resulting from
misrepresentations and breaches of warranties of any party hereto, (a) any
calculation of such Damages or costs shall take into account any actual tax
benefit realized or tax cost incurred by either the Indemnitee or the Indemnitor
in connection therewith, (b) such Damages or costs shall only be a basis for a
claim against an Indemnitor to the extent that the aggregate dollar amount of
all Damages and costs incurred by an Indemnitee for which such Indemnitee is
otherwise entitled to indemnification hereunder have exceeded $1,000,000, and
(c) only claims with respect to Damages of which an Indemnitor receives written
notice from an Indemnitee prior to the expiration of the relevant survival
period specified in Section 8.1 shall survive such expiration and be enforceable
as otherwise provided in this Article VIII. Any such written notice, to be
effective, must specify with reasonable detail the nature and amount of the
indemnity claim.
8.6. Satisfaction of Claims with CTC Stock. Any obligation of any DI
Shareholder under this Article VIII may be discharged by payment in cash or, in
whole or in part at the election of such DI Shareholder, by the delivery to CTC,
in negotiable form and free from any lien, security interest, encumbrance or
claim, of a certificate or certificates representing on the date of delivery
thereof to CTC such number of shares of CTC Stock as shall have an aggregate
fair market value (as hereinafter defined) on such date equal to that portion of
the obligation for which such election has been made. For purposes of this
Section 8.6, the term fair market value of one share of CTC Stock shall mean,
with respect to any particular date, the average of the closing sale prices of
CTC Stock as reported on the New York Stock Exchange Composite Tape for the
immediately preceding ten days on which trading in CTC Stock occurred.
8.7. Definition of Material Adverse Effect. For purposes of the
determination of any Damages and the application of the indemnification
provisions of this Article VIII only, the term "Material Adverse Effect" as such
term appears in the representations and warranties of DI and the Warranting
Shareholders in Article II hereof (or any qualification or limitation of any
such representations and warranties as to materiality) shall exclude the assets,
liabilities, revenues and income attributable to DI's Forged Products Division
if the transactions contemplated by Section 9.3 are consummated.
45
ARTICLE IX
MISCELLANEOUS
9.1. Costs, Expenses and Taxes. CTC and DI will each pay all its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and by the Plan of Merger, including (a) all costs and
expenses stated herein to be borne by a party, and (b) all accounting, legal and
appraisal fees and settlement charges.
9.2. Further Assurances; Cooperation. At and after the Closing, each
party hereto will execute and deliver such further instruments and documents and
perform such acts as may be reasonably necessary or appropriate to cause the
satisfactory completion and consummation of the transactions contemplated by
this Agreement and the Plan of Merger. Following the Closing Date, CTC will use
its best efforts to have the DI Shareholders released from any personal
guarantees which any of them may have previously given in connection with
financing for DI to the extent such guarantees are disclosed in the Disclosure
Statement, and CTC will indemnify and hold harmless such DI Shareholders from
and against liability thereunder after the Closing Date to the extent so
disclosed.
9.3. Option to Purchase or Sell Forged Products Assets. Pursuant to
the Option Agreement in substantially the form attached hereto as Exhibit E, CTC
and Merger Sub will have the option to require Xx. Xxxxxxxx to purchase from
Merger Sub and Xx. Xxxxxxxx will have the option to require CTC and Merger Sub
to sell at any time during the 60-day period immediately following the Closing
Date the assets of DI's Forged Products Division (the "FPD Assets") and its
holding of preferred stock of Stelkast Corporation (the "Stelkast Preferred
Stock"), all as more fully described in Schedule 9.03 of the Disclosure
Statement. The purchase price for the FPD Assets and Stelkast Preferred Stock
shall consist of $2,600,000 in cash and the assumption by the purchaser of
specified liabilities, including long-term debt of approximately $1,022,000,
accounts payable and accrued expenses, as described on such Schedule 9.03.
9.4. Post-Closing Access; Preservation of Books and Records. CTC
shall, following the Closing, give to the DI Shareholders and their respective
authorized representatives such reasonable access, during normal business hours
and upon prior written notice, to books and records of DI (including, without
limitation, all books of account and tax records) as the DI Shareholders may
reasonably request in connection with (a) the preparation and filing of
individual tax returns and (b) the verification of any claim of CTC for
indemnification under this Agreement and shall permit the DI Shareholders to
make copies of such books and records.
46
9.5. Communications. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) personally delivered, (ii) sent by facsimile transmission
(with transmission confirmed), (iii) sent by overnight courier (with delivery
confirmed) or (iv) mailed by United States first-class, certified or registered
mail, postage prepaid, to the other parties at the following addresses (or at
such other address as shall be given in writing by any party to the others):
(a) If to DI and the DI Shareholders, to:
Dynamet Incorporated
000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx,
Chairman of the Board
Fax Number: 000-000-0000
With required copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax Number: 000-000-0000
(b) If to CTC, to:
Xxxxxxxxx Technology Corporation
000 X. Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx,
Vice President, General
Counsel and Secretary
Fax Number: 000-000-0000
With required copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Fax Number: 000-000-0000
47
9.6. Assignability; Successors and Assigns. Except as hereinafter
contemplated, this Agreement and the rights of the parties hereunder may not be
assigned by any party without the prior written consent of the other parties.
Notwithstanding the foregoing, nothing herein contained shall prohibit the
assignment by CTC of certain or all of its rights hereunder to Merger Sub or one
or more other wholly-owned subsidiaries of CTC; provided, however, that no such
assignment shall limit or affect CTC's obligations hereunder; nor shall any
assignment by operation of law in connection with the merger, consolidation or
dissolution of any party hereto be prohibited. Subject to the foregoing, this
Agreement and all rights and powers granted and obligations created hereby will
bind and inure to the benefit of the parties hereto and their respective
successors, assigns and personal representatives.
9.7. Governing Law; Remedies. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed wholly within such
jurisdiction, without regard to the conflicts of laws provisions thereof. The
parties acknowledge that a breach by a party hereto of the provisions of Article
VII will cause irreparable damage to the other parties, the exact amount of
which will be difficult or impossible to ascertain, and that such other parties'
remedies at law for any such breach will be inadequate. Accordingly, upon breach
or threatened breach of the covenants and undertakings contained in Article VII,
such other parties shall be entitled to injunctive or other equitable relief in
any court of the United States or any state thereof having jurisdiction.
9.8. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
9.9. Amendment and Waiver. CTC and DI may by mutual written agreement
amend this Agreement in any respect. CTC and DI may also (a) extend the time for
the performance of any of the obligations of any other party, and (b) waive (i)
any inaccuracies in representations by any other party, (ii) compliance by any
other party with any of the agreements contained herein and performance of any
obligations by such other party, and (iii) the fulfillment of any condition that
is required prior to the performance by such party of any of its obligations
under this Agreement. To be effective, any such amendment or waiver must be
signed by an authorized representative of the party against whom enforcement of
the same is sought.
9.10. Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, each of which is hereby incorporated herein, set forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the
48
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written with respect to the subject matter hereof.
9.11. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be termed an original and all of
which together shall constitute one and the same instrument.
9.12. Appointment of Agent for Delivery.
(a) Each DI Shareholder hereby irrevocably constitutes and appoints
Xxxxx X. Xxxxxx his or her agent and attorney-in-fact (the "Agent for Delivery")
to effectuate the delivery to CTC of the DI Stock held by him or her as
contemplated by Section 1.2(b)(ii) hereof, the receipt from CTC of the cash
payment and stock certificate contemplated by such Section and the delivery to
such DI Shareholder of such cash payment and stock certificate. Any action taken
by the Agent for Delivery pursuant to the authority granted hereby will be
effective and absolutely binding on each DI Shareholder and without recourse
notwithstanding any contrary action of or direction from such DI Shareholder,
except in the case of willful misconduct or actions taken in bad faith by the
Agent for Delivery. The death or incapacity of any DI Shareholder will not
terminate the authority and agency of the Agent for Delivery. CTC will not be
obligated to inquire into the authority of the Agent for Delivery and will be
fully protected in dealing with the Agent for Delivery in lieu of the several DI
Shareholders as to matters set forth herein.
(b) The Agent for Delivery is hereby fully authorized by the DI
Shareholders for each of them and in their respective names to:
(i) Receive all notices or documents given or to be given to the DI
Shareholders in connection with this Agreement or the transactions
contemplated hereby;
(ii) Deliver at the Closing on behalf of the DI Shareholders
certificates for the shares of DI Stock owned by each in exchange for the
cash payment and a certificate for the shares of CTC Stock to which such DI
Shareholder is entitled, all as contemplated by Section 1.2;
(iii) Sign and deliver to CTC at the Closing a receipt for the cash
payment and the certificate representing such shares of CTC Stock;
(iv) Deliver to CTC at the Closing all such other certificates and
documents to be delivered to CTC by such DI Shareholder as hereinbefore
provided; and
49
(v) Deliver to each DI Shareholder, personally or by registered mail
addressed to the address of each such DI Shareholder on the books of DI,
the cash and stock certificate referred to in subparagraph (ii) above.
50
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
DYNAMET INCORPORATED
By: /s/ Xxxxx X. Xxxxxx
----------------------
Xxxxx X. Xxxxxx
Chairman of the Board
/s/ Xxxxx X. Xxxxxx
----------------------
Xxxxx X. Xxxxxx
/s/ Xxx X. Xxxxxx
----------------------
Xxx X. Xxxxxx,
individually and as
Trustee under the irrevocable
Deeds of Trust each dated
July 12, 1989 for the
benefit of Xxxxxxxxx Xxxxxx
Xxxxxxxx and Xxxxxxxxx Xxx
Xxxxxxxx, respectively.
/s/ Xxxxx X. Xxxxxxxx
-----------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxx X. Xxxxxxxx
-----------------------
Xxxx X. Xxxxxxxx,
individually and as
Trustee under the irrevocable
Deeds of Trust each dated
July 12, 1989 for the
benefit of Xxxxxxxxx Xxxxxx
Xxxxxxxx and Xxxxxxxxx Xxx
Xxxxxxxx, respectively.
XXXXXXXXX TECHNOLOGY CORPORATION
By: /s/ Xxxxxx X. Xxxxx
----------------------
Xxxxxx X. Xxxxx
Chairman of the Board,
President & Chief Executive
Officer
51
