EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
ASTOR CORPORATION,
AAC ACQUISITION CORP.
and
ADCO TECHNOLOGIES INC.
Section Page
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties of the Company . . . . . . . . . . . 11
4. Representations and Warranties of the Buyer Parties . . . . . . . . 20
5. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . 21
6. Covenants of the Buyer Parties . . . . . . . . . . . . . . . . . . 26
7. Conditions Precedent to the Buyer Parties' Obligations . . . . . . 27
8. Conditions Precedent to the Company's Obligations . . . . . . . . . 28
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 31
11. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBITS
A Certificate of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 12th day of July 1996
by and among ASTOR CORPORATION, a Delaware corporation (the "Buyer"), AAC
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of the
Buyer (the "Acquisition Company" and, together with the Buyer, the "Buyer
Parties"), and ADCO TECHNOLOGIES INC., a Delaware corporation (the "Company").
BACKGROUND
The Boards of Directors of the Company, the Buyer and the Acquisition
Company, have approved a merger (the "Merger") of the Acquisition Company with
and into the Company in accordance with the Delaware General Corporation Law
(the "DGCL"), on the terms and conditions set forth herein.
WITNESSETH:
In consideration of the mutual promises, representations and warranties,
covenants, payments and actions herein provided, the parties hereto, each
intending to be legally bound hereby, do agree as follows:
1. DEFINITIONS.
For convenience, certain terms used in this Agreement are listed in
alphabetical order and defined or referred to below (such terms as well as any
other terms defined elsewhere in this Agreement shall be equally applicable to
both singular and plural forms of the terms defined).
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" is defined in Section 5.4.
"Affiliates" means, with respect to a particular party, any Persons
controlling, controlled by or under common control with that party.
"Agreement" means this Agreement and Plan of Merger and the exhibits and
schedules hereto.
"Assets" means all of the assets, properties and rights of every kind and
description, real and personal, tangible and intangible, that are owned by any
Company Parties, taken as a whole.
"Benefit Plans" means all employee benefit plans of any Company Party
within the meaning of Section 3(3) of ERISA and any related or separate
Contracts, plans, trusts, programs, policies, arrangements, practices, customs
and understandings that provide benefits of economic
value to any present or former employee of any Company Party, or current or
former beneficiary, dependent or assignee of any such employee or former
employee.
"Bridge Financing" is defined in Section 4.4.
"Business" means the entire business and operations of the Company Parties,
taken as a whole.
"Buyer" is defined above in the preamble.
"Buyer Financing" means the Bridge Financing and the Buyer Parties' Rule
144A financing for the Transactions.
"Buyer Parties" is defined above in the preamble.
"Certificate of Merger" is defined in Section 2.2.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 2.9.
"Closing Date" is defined in Section 2.9.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Shares" means the issued and outstanding shares of Common Stock.
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company.
"Company" is defined above in the preamble.
"Company Balance Sheet" is defined in Section 3.6.
"Company Balance Sheet Date" is defined in Section 3.6.
"Company Disclosure Documents" is defined in Section 3.8.
"Company Parties" means the Company and the Subsidiary.
"Company Representatives" means the Affiliates, officers, directors,
employees, attorneys, accountants, financial advisors and agents of any Company
Party and any other Person who has entered into the Stockholders Agreement with
Buyer on or about the date hereof.
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"Company's knowledge", "knowledge of the Company" and similar terms
relating to the knowledge of any Company Party mean the actual knowledge of any
officer or director of the Company.
"Confidential Information" means any confidential information or trade
secrets of any Company Party, including personnel information, know-how and
other technical information, customer lists, customer information and supplier
information.
"Contract" means any written or oral contract, agreement, lease, instrument
or other commitment that is binding on any Person or its property under
applicable Law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any Person or its property under applicable Law.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or right to receive damages or payment of
penalties.
"DGCL" is defined above in the Background section.
"Disclosure Schedule" is defined in Section 3.
"Effective Time" is defined in Section 2.2.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other encumbrance on any
property or property interest.
"Environmental Law" means any Federal, State, interstate or local Law,
regulation, rule, requirement, administrative interpretation, directive,
judgment, decree, order, policy, guidance, permit or license pertaining to the
protection of human health or the environment, or the regulation of Hazardous
Substances, including without limitation, the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA"), the Clean Air Act, the Water Pollution Control Act,
the Safe Drinking Water Act, and the Toxic Substances Control Act ("TSCA").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statements" is defined in Section 3.6.
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"GAAP" means generally accepted accounting principles.
"Governmental Entity" means any Federal, State, interstate or local
political subdivision, body, department, agency, or instrumentality.
"Governmental Permits" is defined in Section 3.14.
"Hazardous Substance" means any substance or material: (i) the presence of
which requires investigation or remediation under any Environmental Law; (ii)
the generation, storage, treatment, transportation, disposal, remediation,
removal, handling or management of which is regulated by any Environmental Law;
(iii) that is defined as a "hazardous waste" or "hazardous substance" under any
Environmental Law; or (iv) that contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
"Holder" is defined in Section 2.11(a).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976.
"HSR Compliance" means compliance with the HSR Act.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, trade secrets, know-how and other intellectual
property.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state or foreign governmental agency or body, including those covering
environmental, energy, safety, health, transportation, bribery, recordkeeping,
zoning, antidiscrimination, antitrust and wage and hour matters.
"Liability" means any liability, indebtedness, guaranty, endorsement or
other obligation of or by any Person, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business,
Assets, financial condition or results of operations of the Company Parties,
taken as a whole.
"Material Contracts" is defined in Section 3.15(a).
"Merger Consideration" is defined in Section 2.6(a).
"Option" is defined in Section 2.6(b).
"Option Cancellation Acknowledgement" is defined in Section 2.6(b).
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"Option Plans" means the Company's 1993 Stock Option Plan, the Company's
1994 Stock Option Plan and the Company's 1994 Non-Employee Director Stock Option
Plan.
"Option Shares" is defined in Section 2.6(b).
"Patents" means all patents and patent applications.
"Paying Agent" means a financial institution that is reasonably acceptable
to the Buyer and the Company.
"Paying Agent Agreement" means an agreement among the Buyer, the Company
and the Paying Agent with respect to payment of the Merger Consideration, in a
form reasonably acceptable to the Company, the Buyer and the Paying Agent and
consistent with the terms hereof.
"Person" means any natural person, corporation, partnership, limited
liability company, proprietorship, association, trust, Governmental Entity or
other legal entity.
"Prime Rate" means the prime lending rate as announced from time to time in
THE WALL STREET JOURNAL.
"Prior Confidentiality Agreement" means the Confidentiality Agreement,
dated March 29, 1996, between Aurora Capital Partners, L.P. and ▇▇▇▇▇▇▇▇
Wertheim with respect to the Company.
"Real Property" is defined in Section 3.12.
"Returns" means any returns, reports, forms or statements (including any
information returns) required to be filed with any Taxing Authority.
"▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ Wertheim & Co. Incorporated.
"SEC" means the United States Securities and Exchange Commission.
"Securityholder Documents" is defined below in Section 2.11(a).
"Series A Subsidiary Preferred Stock" means the Series A Cumulative
Redeemable Preferred Stock, par value $0.01 per share, of the Subsidiary.
"Series B Subsidiary Preferred Stock" means the Series B Redeemable
Preferred Stock, par value $0.01 per share, of the Subsidiary.
"Severance Agreements" means the Change of Control Agreements, dated
February 13, 1996, between the Company and each of the Persons identified on the
Disclosure Schedule.
"Shares is defined in Section 2.6(a).
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"Subsidiary" means Adco Products, Inc., a Michigan corporation.
"Subsidiary Preferred Stock" means the Series A Subsidiary Preferred Stock
and the Series B Preferred Stock.
"Surviving Corporation" is the Company at the Effective Time.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, capital, sales, use, AD VALOREM, value
added, franchise, bank shares, withholding, payroll, employment, disability,
workers' compensation, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax or additional amounts with
respect thereto.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Termination Date" is defined in Section 2.8(a).
"Transactions" means the Merger and the other transactions contemplated by
this Agreement.
"Transaction Document" means this Agreement, the Certificate of Merger and
any other documents contemplated hereby.
2. THE MERGER.
2.1 THE MERGER. Upon the terms and subject to the conditions hereof, and
in accordance with the relevant provisions of the DGCL, the Acquisition Company
shall be merged with and into the Company as soon as practicable, but in any
event within five business days, following the satisfaction or waiver of the
conditions set forth in Sections 7 and 8. Following the Merger, the Company
shall continue as the surviving corporation (the "Surviving Corporation") under
the name "Adco Technologies Inc." and shall continue its existence under the
laws of the State of Delaware, and the separate corporate existence of the
Acquisition Company shall cease.
2.2 EFFECTIVE TIME. The Merger shall be consummated by filing with the
Delaware Secretary of State a certificate of merger in the form attached hereto
as Exhibit A (the "Certificate of Merger"), as is required by, and executed in
accordance with, the relevant provisions of the DGCL. The Merger shall be
effective at the time of such filing (the "Effective Time").
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 259 of the DGCL.
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2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of the Acquisition Company shall be the Certificate of
Incorporation of the Surviving Corporation. The Bylaws of the Acquisition
Company shall be the Bylaws of the Surviving Corporation.
2.5 DIRECTORS AND OFFICERS. The Disclosure Schedule sets forth the names
of the Persons who shall be the directors and officers of the Surviving
Corporation at the Effective Time.
2.6 CONVERSION OF SHARES AND OPTIONS.
(a) Each Common Share issued and outstanding immediately prior to the
Effective Time (collectively, the "Shares") (other than Dissenting Shares, as
defined in Section 2.10) shall, by virtue of the Merger and without any action
on the part of the Holder (defined below) thereof, be converted into the right
to receive, except as otherwise provided in Section 2.11, $10.25 in cash (the
"Merger Consideration"). Any Common Share held in the treasury of the Company
shall be cancelled.
(b) Each option to acquire Common Shares that is outstanding
immediately prior to the Effective Time (an "Option") shall, by virtue of the
Merger and without any action on the part of the Holder thereof except as
provided below in this paragraph (b), be converted into the right to receive a
net amount in cash equal to the Merger Consideration allocable to the Common
Shares then subject to the Option (the "Option Shares") minus the aggregate
exercise price of the Option for acquisition of the Option Shares, upon delivery
of an executed acknowledgement of the cancellation of the Option (an "Option
Cancellation Acknowledgement"). All Options and any other rights that any other
Person may have under any of the Option Plans (except for the right to receive
cash as provided in this Section 2) shall terminate to the extent such Options
and any such other rights shall not have been exercised by the Effective Time.
(c) The aggregate Merger Consideration will be payable upon the
surrender of the certificates and other documentation specified in Section 2.11.
(d) The Buyer shall take all steps necessary to provide the Surviving
Corporation with funds, as of the Effective Time, in an amount sufficient to
make all the payments contemplated by this Section 2.6 at the Effective Time in
accordance with Section 2.9 and Section 2.11.
2.7 CONVERSION OF ACQUISITION COMPANY CAPITAL STOCK. Each share of capital
stock of the Acquisition Company issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the Holder (defined below) thereof, be converted into the right to receive
one share of common stock of the Surviving Corporation.
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2.8 STOCKHOLDERS' MEETINGS; SECURITIES AND EXCHANGE COMMISSION FILINGS.
(a) Consistent with applicable law, the Company shall cause a meeting
of its stockholders to be duly called and held as soon as reasonably practicable
(and in any event before October 31, 1996 (the "Termination Date")) for the
purpose of considering and taking action upon this Agreement and the Merger (the
"Special Meeting"). Subject to the fiduciary duties of the Board of Directors of
the Company, under applicable Law, as determined by such directors, in good
faith after consultation with and based upon the written advice of independent
legal counsel, the Board of Directors of the Company will recommend that its
stockholders approve this Agreement and the Merger and the Board of Directors of
the Company and the Company shall use commercially reasonable efforts to obtain
stockholder approval of this Agreement and the Merger.
(b) The Buyer will promptly prepare and file with the SEC and all
securities exchanges, if any, on which the Company's shares are listed for
trading the documents, schedules and amendments and supplements thereto required
to be filed with respect to the Transactions. In connection with approval of
this Agreement and the Merger, the Company will promptly prepare and file with
the SEC a preliminary proxy statement relating to the Transactions, which shall
consist of proxy materials for use in soliciting the vote of the stockholders of
the Company (the "Preliminary Proxy Statement"), and will use all reasonable
efforts to respond to the comments of the SEC after consultation with the Buyer
and to cause a definitive proxy statement (such proxy statement and any
amendments or supplements thereto are referred to herein as the "Definitive
Proxy Statement") to be mailed to the Company's stockholders as soon as
reasonably practicable. The Preliminary Proxy Statement submitted to the SEC and
the Definitive Proxy Statement mailed to the Company's stockholders shall be
subject to prior review by and approval of the Buyer, which approval may not be
unreasonably withheld.
(c) The stockholder vote required for the adoption of this Agreement
and the Merger by the Company shall be the vote required by the DGCL. Subject to
the fiduciary duties of the Board of Directors of the Company under applicable
Law, as determined by such directors. in good faith after consultation with and
based upon the written advice of independent legal counsel.,(i) the Definitive
Proxy Statement shall contain the determinations and recommendations of the
Board of Directors of the Company set forth in Section 3.5 hereof and (ii) the
Company shall use commercially reasonable efforts to solicit from holders of
Common Shares proxies in favor of adoption and approval of this Agreement and
the Merger, and shall take all other reasonable action necessary or helpful to
secure the vote of holders of Common Stock required by the DGCL to effect the
Merger.
(d) The Buyer, as the sole stockholder of the Acquisition Company,
hereby approves the Merger and this Agreement.
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2.9 CLOSING.
(a) As soon as practicable, but in any event after September 15, 1996
and within five business days, after the satisfaction or waiver of the
conditions set forth in Sections 7 and 8, a closing (the "Closing") will be held
at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (or such other place as the parties may agree). The date on which the
Closing occurs is hereinafter referred to as the "Closing Date." At the Closing,
the respective designated parties thereto shall deliver (i) the documents
referred to in Sections 7 and 8, and (ii) the Certificate of Merger, executed
and otherwise prepared for filing. The Surviving Corporation shall also deliver
at the Closing by a wire transfer of same day funds the Merger Consideration
payable to those Holders who have delivered the appropriate documents under
Section 2.11 and to the Paying Agent the aggregate Merger Consideration that may
be payable in accordance with the Paying Agent Agreement to all other Holders
upon delivery of the appropriate documents under Section 2.11.
(b) Contemporaneously with the Closing, the Surviving Corporation
shall deliver to the Delaware Secretary of State a duly executed and verified
Certificate of Merger, as required by the DGCL, and the parties shall take all
such other and further actions as may be required by applicable Law to make the
Merger effective upon the terms and subject to the conditions hereof.
2.10 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, the Shares that are issued and outstanding immediately prior to the
Effective Time and that are held by a stockholder who did not vote in favor of
the Merger and who complies with all of the relevant provisions of Section 262
of the DGCL (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration, unless and until such Holder shall have failed
to perfect or shall have effectively withdrawn or lost such Holder's rights to
appraisal under the DGCL; and any such Holder shall have only such rights in
respect of the Dissenting Shares owned by such Holder as are provided by Section
262 of the DGCL. If any such Holder shall have failed to perfect or shall have
effectively withdrawn or lost such right, such Holder's Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive the Merger Consideration
without any interest thereon, pursuant to the terms of Section 2.6. The Company
shall give the Buyer prompt notice of any demand received by the Company for
appraisal of Shares, and, prior to the Effective Time, the Buyer shall have the
right to direct all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company will not, except with the prior written
consent of the Buyer, voluntarily make any payment with respect to, or settle or
offer to settle, any claim made by any Holders owning the Dissenting Shares.
2.11 EXCHANGE OF SHARES AND OPTIONS.
(a) At and after the Effective Time, the Surviving Corporation shall
pay to each record holder (a "Holder"), as of the Effective Time, of (i) an
outstanding certificate or certificates that immediately prior to the Effective
Time represented Shares (the "Certificates"), or (ii) an Option, upon the
Holder's delivery of the respective Securityholder Documents (defined
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below), an amount in same day funds equal to the product of the number of Shares
represented by such Certificate, or Option Shares subject to such Option,
multiplied by the Merger Consideration. In the case of an Option, however, the
aggregate exercise price for the Option Shares shall be deducted from such
payment. The documents to be delivered by Holders of Shares or Options at and
after the Effective Time (the "Securityholder Documents") shall be (A) in the
case of Shares, the Certificates representing the Shares and a duly executed
letter of transmittal in the form provided by the Company, and (B) in the case
of the Options, a duly executed Option Cancellation Acknowledgement. All such
surrendered Certificates shall be cancelled upon their delivery. Except as
provided in Section 2.11(c), the Surviving Corporation shall pay any transfer or
similar taxes required by reason of the exchange of Shares and Options.
(b) With respect to each Certificate not so surrendered at the
Closing, the Surviving Corporation shall promptly thereafter mail to the Holder
thereof, a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss of title to such Certificate shall pass, only upon
proper delivery of the Certificate and such letter of transmittal to the
Surviving Corporation) and instructions for delivering such Certificate in
exchange for payment of the Merger Consideration. Upon delivery to the Surviving
Corporation of such Certificate, together with such letter of transmittal, the
Holder of the Certificate shall be paid in exchange therefor cash in an amount
equal to the product of the number of Shares represented by such Certificate
multiplied by the Merger Consideration, and such Certificate shall then be
cancelled. The Company shall follow a similar procedure with respect to any
Options to the extent that the respective Securityholder Documents shall not
have been delivered at the Effective Time.
(c) No interest will be paid or accrued on the amounts payable upon
the surrender of the Securityholder Documents. If payment is to be made to a
Person other than the Person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such payment shall pay any transfer or similar
taxes required by reason of the payment to a Person other than the Holder of the
Certificate surrendered or shall establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.11, each Certificate (other
than Certificates evidencing Dissenting Shares) shall represent for all
purposes, and until the respective Securityholder Documents are delivered with
respect to Options, such Option shall represent for all purposes, the right to
receive payment of the amounts specified in Section 2.6 in respect of such
Shares or Options.
(d) Any portion of the funds deposited with the Paying Agent which
remain undistributed to the Holders of Shares or Options for six months after
the Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any Holder of Shares or Options who has not theretofore complied with this
Section 2.11 shall thereafter look only to the Surviving Corporation for payment
of the sums to which such Holder is entitled pursuant to this Agreement.
(e) Neither the Buyer nor the Surviving Corporation shall be liable
to any Holder of Shares or Options for any cash delivered by the Paying Agent or
the Surviving
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Corporation in good faith to a public official pursuant to an applicable
abandoned property, escheat or similar law.
(f) The Buyer or the Surviving Corporation (or the Paying Agent on
their behalf) shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any Holder of Shares or Options
such amounts, if any, as the Buyer or the Surviving Corporation is required to
deduct and withhold with respect to the making of such payment under the Code or
any provisions of any Law related to Taxes. To the extent that amounts are so
withheld by the Buyer or the Surviving Corporation (or the Paying Agent on their
behalf), such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Holder of the relevant Shares or Options in
respect of which such deduction and withholding was made by the Buyer or the
Surviving Corporation (or the Paying Agent on their behalf).
2.12 NO FURTHER TRANSFER OF SHARES. After the Effective Time, there shall
be no transfers of Shares that were outstanding immediately prior to the
Effective Time on the stock transfer books of the Surviving Corporation. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, they shall be cancelled and exchanged for cash as
provided in this Section 2. At the Effective Time, the stock ledger of the
Company shall be closed.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer and the Acquisition
Company as follows, except to the extent specified on the disclosure schedule
that the Company has provided to the Buyer on the date hereof (the "Disclosure
Schedule") or to the extent specified in the Company Disclosure Documents
(defined below):
3.1 CORPORATE. Each Company Party is a corporation duly organized, validly
existing and in good standing under the Laws under which it was incorporated.
Each Company Party is qualified to do business as a foreign corporation in any
jurisdiction where it is required to be so qualified, except where the failure
to so qualify would not have a Material Adverse Effect. The Charter Documents
and Bylaws of each Company Party that have been delivered to the Buyer have been
duly adopted and are current, correct and complete. Each Company Party has all
necessary power and authority to own, lease and operate its properties and other
assets and to carry on the Business as it is now being conducted. The Disclosure
Schedule lists (or the Company Disclosure Documents list) with respect to each
Company Party its name, jurisdiction of incorporation, officers and directors
and the states in which qualified to do business as a foreign corporation.
3.2 AUTHORIZATION. The Company has the requisite corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions to be performed by it. Such execution,
delivery and performance by the Company have been duly authorized by all
necessary corporate action. other than stockholder approval in accordance with
the DGCL. Each Transaction Document executed and delivered by the Company
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as of the date hereof has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. Any Transaction Document executed and
delivered by the Company after the date hereof will be duly executed and
delivered by the Company and will constitute a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
3.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except for HSR Compliance and
for any items specified in the Disclosure Schedule, neither the execution and
delivery by the Company of the respective Transaction Documents to which it is
or will be a party, nor the consummation of the Transactions, will require any
filing, consent or approval under or constitute a Default under (a) any
Regulation or Court Order to which either Company Party is subject, (b) the
Charter Documents or Bylaws of either Company Party or (c) any material Contract
or other material document to which either Company Party is a party or by which
any of its Assets may be subject.
3.4 CAPITALIZATION AND STOCK OWNERSHIP. As of the date hereof, (a) the
total authorized capital stock of the Company consists of (i) 9,000,000 shares
of Common Stock, of which 5,150,000 shares are issued and outstanding, and (ii)
100,000 shares of Preferred Stock, par value $0.01 per share, no shares of which
are issued and outstanding, and (b) Options to acquire 293,318 Option Shares are
outstanding. Except as set forth in the immediately preceding sentence, there
are outstanding (i) no shares of capital stock or voting securities of the
Company, (ii) no securities of either Company Party convertible into, or
exercisable for the purchase of, or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options or other rights to acquire
from either Company Party, and no obligations of the Company to issue, any
capital stock, voting securities or securities convertible into, or exercisable
for the purchase of, or exchangeable for capital stock or voting securities of
the Company and (iv) no equity equivalents, interest in the ownership or
earnings of the Company or other similar rights. The outstanding shares of
Common Stock are all duly and validly authorized and issued, fully paid and
non-assessable. The Options are owned of record by the Persons listed in the
Disclosure Schedule or the Company Disclosure Documents, in the amounts shown
therein and with the respective option prices set forth therein. There are no
outstanding obligations of either Company Party to repurchase, redeem or
otherwise acquire any Shares.
3.5 BOARD RECOMMENDATION. By a vote of the directors present at a meeting
of the Company's Board of Directors (which meeting was duly called and held and
at which a quorum was present), the Board of Directors of the Company
unanimously (a) approved and adopted this Agreement, including the Merger and
the other Transactions, and determined that the Merger is fair to the
stockholders of the Company, (b) resolved to recommend approval and adoption of
this Agreement, including the Merger and the other Transactions, by the
stockholders of the Company, (c) took all corporate actions required to be taken
by the Board of Directors for the consummation of the Transactions and all
actions required to render the provisions of Section 203 of the DGCL restricting
business combinations with interested stockholders inapplicable to the Merger.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ has delivered to the Company's Board of Directors its oral
opinion
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on the date hereof to the effect that on such date, the Merger Consideration is
fair to the holders of the Common Shares from a financial point of view.
3.6 FINANCIAL STATEMENTS. The Company has delivered to the Buyer audited
financial statements of the Company consisting of consolidated balance sheets as
of the end of its fiscal year in 1994 and 1995 and the related statements of
income, retained earnings, stockholders' equity and cash flows for the fiscal
years then ended, certified by Ernst & Young LLP (the "Audited Statements"). The
Company has also delivered to the Buyer an unaudited balance sheet, and
statements of income and cash flows as of March 31, 1996 and for the fiscal
quarterly period then ended (the "Interim Statements"). The Audited and Interim
Statements are referred to herein as the "Financial Statements." The Audited
Financial Statements and the Interim Statements have been prepared in conformity
with GAAP consistently applied, and when read together with any related notes
thereto, the Audited Financial Statements and the Interim Statements fairly
present in all material respects the financial position of the Company at such
dates and the results of operations for the periods ended on such dates, subject
in the case of the Interim Statements to normal year-end audit adjustments,
which adjustments will not in the aggregate be materially adverse to the
consolidated financial position or results of operations of the Company. For
purposes of this Agreement, the balance sheet of the Company as of March 31,
1996 is referred to as the "Company Balance Sheet" and the date thereof is
referred to as the "Company Balance Sheet Date."
3.7 PROXY MATERIALS. The Definitive Proxy Statement will not, at the date
when the Definitive Proxy Statement is first mailed to the Company's
stockholders and at the date of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty regarding information
with respect to the Buyer or any of its officers, directors or affiliates or
associates (as such terms are defined in Rule 12b-2 of the Exchange Act). At the
date the Definitive Proxy Statement is mailed to the Company's stockholders, the
Definitive Proxy Statement will comply, as to form, in all material respects,
with the requirements of all applicable Laws, including the 1934 Act and the
rules and regulations promulgated by the SEC thereunder.
3.8 COMPANY DISCLOSURE DOCUMENTS. The Company has filed all required
forms, reports, statements, schedules and other documents with the SEC since the
effective date of the Company's first Registration Statement on Form S-1
(collectively, the "Company Disclosure Documents"). The Company has furnished to
the Buyer such Registration Statement on Form S-l, including its final
prospectus dated February 14, 1995 and the Exhibits to such Registration
Statement, its Annual Report on Form 10-K for the fiscal year ended December 31,
1995, and its Quarterly Report on Form 10-Q for the period ending March 31,
1996, which are part of the Company Disclosure Documents. The Company has not
held any meetings of its stockholders (whether annual or special) since February
14, 1995. Each of such Company Disclosure Documents, at the time it was filed,
complied in all material respects with all applicable requirements of the 1933
Act and the 1934 Act, and with the forms, rules and regulations of the SEC
promulgated thereunder, and did not contain at the time filed any untrue
statement of a
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material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made. not misleading, except for the
omission of the Severance Agreements therefrom.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. There are no Liabilities of any
Company Party except (a) to the extent reflected in the Company Balance Sheet,
(b) those Liabilities described in this Agreement, the Disclosure Schedule or
the Company Disclosure Documents, (c) those Liabilities incurred in the ordinary
course of business since the Company Balance Sheet Date, (d) those Liabilities
not required under GAAP to be reflected in the Financial Statements and that
would not, individually or in the aggregate, have a Material Adverse Effect and
(e) Liabilities related to this Agreement and the Transactions.
3.10 TAXES. (a) Except for Returns for Taxes or Tax Assessments that are
not material, each Company Party has duly filed all Returns required to be
filed, and has paid all Taxes that have become due pursuant to such returns or
pursuant to any assessment received by any Company Party.
(b) Each Company Party has duly withheld or collected all material
taxes and other assessments and levies that such Company Party has been required
by law to withhold or to collect, and such Company Party has paid over such
amounts to the proper governmental authorities or is properly holding such
amounts for such payment.
(c) To the knowledge of the Company, there are no proceedings or
other actions for the assessment and collection of additional Taxes of any kind
for any period for which returns have or should have been filed.
(d) The reserves for Taxes (as opposed to any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) in
the Financial Statements are sufficient for all unpaid Taxes, whether or not
disputed, of any Company Party.
(e) Except as described in the Disclosure Schedule, no Company Party
is a party to an agreement extending the time within which to file any Tax
Return or extending the statute of limitations for any period with respect to
any Tax to which any Company Party may be subject. No claim has ever been made
by any Taxing Authority in a jurisdiction in which any Company Party does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction
except for any such case where the amount of such taxation would not be
material.
(f) The Company has delivered to the Buyer complete and correct
copies of all federal, state, local and foreign income Tax Returns filed, and
all Tax examination reports and statements of deficiencies assessed against or
agreed to, by any Company Party for all taxable periods ended on or after
December 31, 1991.
(g) No Company Party has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
require it to make any payments, that are not deductible under Section 280G of
the Code.
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(h) There are no material Encumbrances of any sort on the Assets of
any Company Party except for Encumbrances for Taxes not yet due and payable. The
Company has no knowledge of any reasonable basis for the assertion of any claim
relating or attributable to Taxes that, if adversely determined, would result in
any material Encumbrance on the Assets of any Company Party.
(i) None of the Assets of any Company Party constitutes tax-exempt
bond financed property or tax-exempt use property, with the meaning of Section
168 of the Code. No Company Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code.
(j) No Company Party is a "consenting corporation" within the meaning
of Section 341(f)(1) of the Code, or comparable provisions of any state
statutes, and none of the Assets of any Company Party is subject to an election
under Section 341(f) of the Code or comparable provisions of any state statutes.
(k) The Company is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
(1) Except as described in the Disclosure Schedule, no Company Party
is a party to a tax sharing or allocation agreement nor does any Company Party
have any obligation to pay any amounts under any such agreements. No Company
Party has any Liability for Taxes of any Person (i) under Section 1.1502-6 of
the Treasury Regulations (or any similar provision of state, local or foreign
law), (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise.
(m) The Company is not a party to any written, oral or implied
agreement or obligation to provide any "covered employee," as defined in Section
162(m)(3) of the Code, with remuneration in excess of $1 million, that would be
disallowed as a deduction for federal income tax purposes pursuant to Section
162(m) of the Code.
(n) The tax basis of the Assets of all Company Parties for purposes
of determining future amortization, depreciation, and other federal income tax
deductions is properly reflected, in all material respects, on the Company's tax
books and records.
3.11 TITLE TO ASSETS AND RELATED MATTERS. Each Company Party has good and
marketable title to all of its Assets, free from any Encumbrances except (a)
items specified in the Disclosure Schedule, (b) items described in any notes to
the Financial Statements, (c) minor matters that, in the aggregate, would not
have a Material Adverse Effect, and (d) constitutional and statutory liens
arising from the obligation to pay for the provision of materials or services
not yet in Default and state and local taxes not yet due.
-15-
3.12 REAL PROPERTY. The Disclosure Schedule describes (or the Company
Disclosure Documents describe) all real estate owned or leased by any Company
Party and used in the operation of the Business as well as any other real estate
that is in the possession of or leased by any Company Party (as tenant or
landlord) (collectively, the "Real Property"). Except as set forth in the
Disclosure Schedule, each Company Party has good and marketable title to any
Real Property listed on the Disclosure Schedule as owned by such Company Party,
free and clear of any Encumbrances other than minor matters that, in the
aggregate, would not have a Material Adverse Effect. In addition, except as set
forth in the Disclosure Schedule, (a) none of the buildings or structures
located on any Real Property nor any appurtenances thereto or equipment thereon,
nor the operation or maintenance thereof, violates in any material respect any
restrictive covenants or encroaches in any material respect on any property
owned by others; (b) nor does any building or structure of third parties
encroach in any material respect upon any such Real Property; (c) each Real
Property complies in all material respects with applicable zoning, building and
occupancy codes relating to the current operations thereon; (d) no Real Property
contains any material defect that would prevent the continued use and operation
of such Real Property; (e) there are no material Defaults by the tenant, or to
the Company's knowledge by the landlord under any lease of any portion of the
Real Property; and (f) the copies of such leases delivered pursuant to the terms
hereof are true, correct and complete in all material respects, except in the
case of any of such items in clauses (a) through (f) where such violations.
encroachments, events of non-compliance, defects, Defaults or inaccuracies,
individually and in the aggregate, would not have a Material Adverse Effect.
3.13 SUBSIDIARIES. Except for the Company's ownership of the Subsidiary, no
Company Party owns, directly or indirectly, any interest or investment (whether
equity or debt) in any corporation, partnership, limited liability company,
business trust, joint venture or other legal entity. The total authorized
capital stock of the Subsidiary consists of (a) 150,000 shares of common stock,
par value $1.00 per share, of which 116,189 shares are issued and outstanding
(the "Subsidiary Common Shares"), (b) 4,856 shares of Series A Subsidiary
Preferred Stock, of which 3,500 shares are issued and outstanding and (c) 1,356
shares of Series B Subsidiary Preferred Stock, of which 420 shares are issued
and outstanding. The Company owns all of the issued and outstanding Subsidiary
Common Shares, free and clear of any Encumbrances, and Nalco Chemical Company
owns of record all of the issued and outstanding Subsidiary Preferred Stock. The
Company has delivered to the Buyer true and correct copies of the [Certificate
of Designation] for the Series A Subsidiary Preferred Stock and the Series B
Subsidiary Preferred Stock. As of May 14, 1996 the aggregate redemption price
for all such shares was $3,920,000 and such aggregate redemption price increases
by $767.12 each day after May 14, 1996 that such shares remain outstanding.
Except as set forth in the immediately preceding sentence, there are outstanding
(i) no shares of capital stock or voting securities of the Subsidiary, (ii) no
securities of either Company Party convertible into, or exercisable for the
purchase of, or exchangeable for shares of capital stock or voting securities of
the Subsidiary, (iii) no options or other rights to acquire from either
Subsidiary Party, and no obligations of the Subsidiary to issue, any capital
stock, voting securities or securities convertible into, or exercisable for the
purchase of, or exchangeable for capital stock or voting securities of the
Subsidiary and (iv) no equity equivalents, interest in the ownership or earnings
of the Subsidiary or other similar rights. All of the Subsidiary Common Shares
are duly and validly authorized and issued, fully paid and non-
-16-
assessable. There are no outstanding obligations of either Company Party to
repurchase, redeem or otherwise acquire any capital stock or voting securities
of the Subsidiary.
3.14 LEGAL PROCEEDINGS; COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS.
(a) Except as described in the Disclosure Schedule, there is no
Litigation that is pending or, to the Company's knowledge, threatened against
any Company Party or any of their respective Assets. To the Company's knowledge,
there has been no Default under any Laws applicable to any Company Party, except
for any Defaults that would not have a Material Adverse Effect. There has been
no Default with respect to any Court Order applicable to any Company Party.
Except as described in the Disclosure Schedule, neither Company Party is subject
to any Court Order which, insofar as can be reasonably foreseen, individually or
in the aggregate, in the future would have a Material Adverse Effect or would
prevent or delay the consummation of the Transactions.
(b) Without limiting the generality of Section 3.14(a), except as
described on the Disclosure Schedule and except for those situations that,
individually or in the aggregate, would not have a Material Adverse Effect:
(i) all Company Parties are in compliance with all orders,
permits, conditions, standards, requirements and schedules required or imposed
under any Environmental Law;
(ii) no Company Party has received any notice, claim,
subpoena, or summons, or been threatened with any notice, claim, subpoena or
summons from any Person alleging: (a) any liability of any Company Party under
any Environmental Law or (b) any violation by any Company Party of any
Environmental Law;
(iii) there are and have been no facts, circumstances or
conditions (including any Hazardous Substances that have been released, disposed
of, emitted, treated, stored, generated, placed, deposited, discharged, or
spilled at, upon or under any facility owned, operated or leased by any Company
Party or any facility to which any Company Party has sent any Hazardous
Substance) that are reasonably likely to give rise to (x) any Liability of any
Company Party under any Environmental Law or (y) any violation by any Company
Party of any Environmental Law;
(iv) all Company Parties have all permits required under any
Environmental Law; and
(v) all Company Parties have delivered to Buyer all
environmental studies and reports in their possession with respect to any
facilities or real property ever owned, operated or leased by any Company Party.
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(c) Each Company Party has complied, in all material respects, with
all of its governmental permits, licenses, registrations, certificates of
occupancy, approvals and other authorizations (the "Governmental Permits").
3.15 CONTRACTS AND COMMITMENTS.
(a) All Contracts described in Item 601(b)(10) of Regulation S-K to
which any Company Party is a party or may be bound ("Material Contracts") have
been filed as exhibits to, or incorporated by reference in, the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 except for the
Severance Agreements. To the Company's knowledge, no Company Party has committed
a Default under any Material Contract, except for Defaults that, individually or
in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect. The Company has delivered or made available to the Buyer true
and complete copies of all Material Contracts.
(b) The Disclosure Schedule describes any Contract to which any
Company Party is a party or may be bound that limits or restrains any Company
Party from engaging or competing in any business or that creates a partnership,
joint venture, "teaming arrangement" or other similar arrangement.
(c) The Disclosure Schedule describes the Company's good faith
estimate of the fees and expenses that it will incur in connection with the
Transactions, including fees and expenses for its investment banker, accountants
and lawyers, printing, transfer agent, mailing and filing with the SEC.
3.16 EMPLOYEE RELATIONS. Except as described in the Disclosure Schedule, no
Company Party is (a) a party to, involved in or, to the Company's knowledge,
threatened by, any labor dispute or unfair labor practice charge, or (b)
currently negotiating any collective bargaining agreement, and no Company Party
has experienced any work stoppage during the last three years. The Company has
delivered to the Buyer a complete and correct list of the names and salaries,
bonus and other cash compensation of all employees (including officers) of the
Company Parties whose total cash compensation for 1995 exceeded, or whose total
compensation for 1996 is expected to exceed, $100,000.
3.17 ERISA.
(a) Except as set forth in the Disclosure Schedule, there are no
employment, consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements of any nature whatsoever
(collectively, "Employment Agreements") between either Company Party and any
current or former stockholder, officer, director, employee or Affiliate or
either Company Party are currently in effect. The Disclosure Schedule also
contains a complete list of all Benefit Plans sponsored or maintained by any
Company Party or under which any Company Party may be obligated. The Company has
delivered to the Buyer (i) accurate and complete copies of all Employment
Agreements and all Benefit Plan documents and of any summary plan descriptions,
summary annual reports and insurance contracts relating
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thereto, (ii) accurate and complete detailed summaries of all unwritten Benefit
Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all Benefit Plans for which
financial statements or actuarial reports are required or have been prepared and
(iv) accurate and complete copies of all annual reports for all Benefit Plans
(for which annual reports are required) prepared within the last two years.
Except as specifically disclosed in the Disclosure Schedule, there are no
Employment Agreements or any other similar agreements to which either Company
Party is a party under which the Merger or Transactions (i) will require any
payment by either Company Party or any consent or waiver from any stockholder,
officer, director, employee, consultant or other Person or (ii) will result in
any change in the nature of any rights of any stockholder, officer, director,
employee or agent of either Company Party as a result of the Merger or
consummation of the Transactions. Except as specifically disclosed in the
Disclosure Schedule, no individual shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any Benefit Plan,
including the right to receive any "parachute payment," as defined in Section
280G of the Code, or become entitled to severance, termination allowance or
similar payments as a direct result of the Merger or the Transactions.
(b) Except as described in the Disclosure Schedule, all Benefit Plans
conform in all material respects to, and are being administered and operated in
material compliance with, the requirements of ERISA, the Code and all other
applicable Laws. There have not been any "prohibited transactions," as such term
is defined in Section 4975 of the Code or Section 406 of ERISA involving any of
the Benefit Plans, that could subject any Company Party to any material penalty
or tax imposed under the Code or ERISA.
(c) Except as set forth in the Disclosure Schedule, any Benefit Plan
that is intended to be qualified under Section 401(a) of the Code and exempt
from tax under Section 501(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and such determination remains in effect and
has not been revoked. Nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption; or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any Benefit
Plan.
(d) Except as set forth in the Disclosure Schedule, no Company Party
has a current or contingent obligation to contribute to any multiemployer plan
(as defined in Section 3(37) of ERISA).
(e) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of any Company Party or any of such party's
officers, directors or employees under ERISA or any other applicable Laws, or
claiming benefit payments other than those made in the ordinary operation of
such plans. To the Company's knowledge, the Benefit Plans are not the subject of
any investigation, audit or action by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC"). Each
Company Party has made all required
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contributions under the Benefit Plans including the payment of any premiums
payable to the PBGC and other insurance premiums.
(f) With respect to any Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan"),
(i) each Welfare Plan for which contributions are claimed as deductions under
any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 498OB(g)(2) of the Code) complies, and in each and every
case has complied, with all of the material requirements of Section 4980B of the
Code, ERISA, Title XXII of the Public Health Service Act and the applicable
provisions of the Social Security Act, (iv) all Welfare Plans may be amended or
terminated at any time on or after the Closing Date, and (v) no such plan
provides benefits to retirees or the former employees of either Company Party or
the dependents of any of the foregoing.
3.18 PATENTS, TRADEMARKS. ETC. The Disclosure Schedule sets forth a
complete and correct list of each patent, patent application and docketed
invention, and all items which either Company Party claims as a trademark, trade
name or copyright, and all trade name registrations or applications, copyright
registrations or application for copyright registration, and each license or
licensing agreement for any of the foregoing to which either Company Party is a
party or by which either is bound. To the Company's knowledge, no Company Party
infringes upon or unlawfully or wrongfully uses any Intellectual Property owned
or claimed by another Person. Each Company Party either owns the entire right,
title and interest in, to and under, or has a valid license to use, any and all
Intellectual Property which is material to the conduct of the Business in the
manner that the Business is conducted.
3.19 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the Company
Parties have conducted the Business in the ordinary course, and except as
described on the Disclosure Schedule, there has not been with respect to any
Company Party:
(a) any material adverse change in its Business, Liabilities,
consolidated results of operations or consolidated financial
condition;
(b) any distribution or payment declared or made in respect of
its capital stock by way of dividends, purchase or redemption of
shares or otherwise;
(c) any increase in the compensation payable or to become
payable to any director, officer, employee or agent, except for merit
and seniority increases for non-officer employees made in the ordinary
course of business, nor any other change in any employment or
consulting arrangement;
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(d) any sale, assignment or transfer of Assets, or any additions
to or transactions involving any Assets, other than those made in the
ordinary course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held;
(f) any material change by either Company Party in its
accounting principles, methods or practices or the manner in which it
keeps its books and records or any material change by either Company
Party of its current general practices with regard to sales,
receivables, payables or accrued expenses.
(g) any Material Contract entered into by either Company Party,
or any waiver, amendment, termination or cancellation of any Material
Contract by either Company Party or any relinquishment of any rights
thereunder by either Company Party, other than, in each such case,
actions taken in the ordinary course of business consistent with past
practice; or
(h) any loan to or guarantee or assumption of any loan or
obligation on behalf of any director, officer, stockholder or employee
or either Company Party, except for travel advances occurring in the
ordinary course of business.
3.20 CORPORATE RECORDS. The minute books of the Company contain accurate,
complete and current copies of all Charter Documents and of all minutes of
meetings, resolutions and other proceedings of its Board of Directors and
stockholders. The stock record books of the Company are also complete, correct
and current.
3.21 FINDER'S FEES. Except for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the arrangements with
which have been disclosed to the Buyer in writing, no Person is or will be
entitled to any commission, finder's or other payment in connection with the
Transactions based on arrangements made by or on behalf of either Company Party.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES.
The Buyer and the Acquisition Company, jointly and severally, represent and
warrant to the Company as follows, and all such representations and warranties
shall be true and correct at and as of the Closing Date as though then made:
4.1 CORPORATE. Each Buyer Party is a corporation duly organized, validly
existing and in good standing under which it was incorporated.
4.2 AUTHORIZATION. Each Buyer Party has the requisite corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions to be performed by it. Such execution,
delivery and performance by each Buyer Party have been duly authorized by all
necessary corporate action, including any stockholder
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approval that may be required under applicable Law. Each Transaction Document
executed and delivered by any Buyer Party of the date hereof has been duly
executed and delivered by such Buyer Party and constitutes a valid and binding
obligation of such Buyer Party, enforceable against such Buyer Party in
accordance with its terms. Any Transaction Document executed and delivered by
any Buyer Party after the date hereof will be duly executed and delivered by
such Buyer Party and will constitute a valid and binding obligation of such
Buyer Party, enforceable against such Buyer Party in accordance with its terms.
4.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except for HSR Compliance,
neither the execution and delivery by any Buyer Party of the Transaction
Documents to which it is or will be a party, nor the performance of the
Transactions to be performed by any Buyer Party, will require any filing,
consent or approval under or constitute a Default under (a) any Law or Court
Order to which any Buyer Party is subject, (b) the Charter Documents or Bylaws
of any Buyer Party or (c) any material Contract or other material document to
which any Buyer Party is a party.
4.4 AVAILABLE FUNDS. The Buyer Parties have provided the Company with a
true, correct and complete copy of a commitment letter from a financial
institution regarding the Buyer Parties' "bridge" financing for the Transactions
(the "Bridge Financing").
4.5 FINDER'S FEES. No Person is or will be entitled to any commission,
finder's or other payment from any Seller Party in connection with the
Transactions based on arrangements made by or on behalf of any Buyer Party.
5. COVENANTS OF THE COMPANY.
5.1 CLOSING CONDITIONS. At and prior to the Closing, the Company shall use
commercially reasonable efforts to fulfill the conditions specified in Section 7
to the extent that the fulfillment of such conditions is within its control,
except that the Company shall not be required to pay or expend any material
amount of funds that may be necessary to correct any Default under its
representations and warranties or to fulfill any of such conditions. The
foregoing obligation includes refraining from any actions that would cause the
Company's representations and warranties to be inaccurate in any material
respect as of the Closing, executing and delivering the agreements and other
documents referred to in Section 7 and using commercially reasonable efforts to
prepare all necessary documentation. The Company shall give the Buyer prompt
written notice of any event or development that occurs or fails to occur (and
that is known to the Company) that gives the Company reason to believe that the
conditions set forth in Section 7 will not be satisfied prior to the Termination
Date.
5.2 CONDUCT OF THE BUSINESS. Except as otherwise expressly provided in
this Agreement, during the period from the date hereof to the Effective Time,
neither Company Party will conduct its operations otherwise than in the ordinary
course of business consistent with past practice. Without limiting the
generality of the foregoing, and except as otherwise contemplated by this
Agreement, neither Company Party will, without the prior written consent of the
Buyer:
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(a) amend or propose to amend its Charter Documents or Bylaws;
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including any stock
options or stock appreciation rights), except as required by the Options that
are outstanding and in effect as of the date hereof, or amend any of the terms
of any such securities or agreements that are outstanding as of the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock
except for the payment of dividends in accordance with past practice, or redeem
or otherwise acquire any of its securities or any securities of its
subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and the
Subsidiary taken as a whole; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to the Company and the
Subsidiary, taken as a whole, (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than loans or
advances to employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or advance); (iv)
pledge or otherwise encumber shares of capital stock of the Company or the
Subsidiary; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Encumbrance thereupon;
(e) except as may be required by applicable Law, enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any director, officer or
employee in any manner, or (except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensation expense to the Company, and
as required under existing agreements or in the ordinary course of business
generally consistent with past practice) increase in any manner the compensation
or fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including the granting of stock appreciation rights);
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets that in the aggregate are material to
the Company and the Subsidiary taken as a whole, or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice which would be material to the Company and its subsidiaries taken as a
whole;
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(g) except as may be required as a result of a change in Law or in
GAAP, change in any material respect any of the accounting principles or
practices used by it;
(h) revalue in any material respect any of its Assets, including
writing down the value of inventory or writing-off notes or accounts receivables
other than in the ordinary course of business;
(i) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any Material Contract
other than in the ordinary course of business consistent with past practice;
(iii) authorize any new capital expenditure or expenditures which, individually,
is in excess of $500,000 or, in the aggregate, are in excess of $1,000,000;
provided that none of the foregoing shall limit any capital expenditure already
included in the Company's 1996 capital expenditure budget previously provided to
the Buyer; or (iv) enter into or amend any Contract providing for the taking of
any action that would be prohibited hereunder;
(j) make any Tax election or settle or compromise any income tax
liability material to the Company Parties taken as a whole;
(k) pay, discharge or satisfy Liabilities, other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities
reflected or reserved against in, or identified by specific reference in, the
Financial Statements (or the notes thereto) or incurred in the ordinary course
of business consistent with past practice;
(l) settle or compromise any pending or threatened suit, action or
claim relating to the Transactions; or
(m) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.2(a) through 5.2(l) or any action that would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made or would result in any of
the conditions set forth in Section 7 not being satisfied.
Nothing contained in this Agreement shall give the Buyer Parties, directly or
indirectly, the right to control or direct any Company Party's operations prior
to the Effective Time. Prior to the Effective Time, each Company Party shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its operations.
5.3 ACCESS TO INFORMATION. The Company shall, and shall cause the
Subsidiary to, give the Buyer and its representatives (including the Buyer's
accountants, counsel and employees), upon reasonable notice and during normal
business hours, full access to the properties, contracts, books, records and
affairs of the Company and the Subsidiary. The Company shall cause its officers
and employees, and the officers and employees of the Subsidiary, to furnish to
the Buyer all documents, records and information (and copies thereof) as the
Buyer may reasonably request; it being understood that (a) the Company, in its
sole discretion may deny or restrict any access (i) involving possible breaches
of applicable confidentiality agreements with third parties, or
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possible waivers of any applicable attorney-client privileges or (ii) if any
Buyer Party is in material breach of this Agreement, (b) such investigations
shall not under any circumstances interfere with the Company's or the
Subsidiary's operations, activities or employees, and (c) such investigations
shall not be of a nature that in the opinion of the Company may violate
applicable antitrust or similar laws. If this Agreement is terminated pursuant
to Section 9.1, (x) the Buyer Parties shall, and shall cause their
representatives to, keep confidential any Confidential Information obtained from
any Company Party (except as may be specifically (and only to the extent)
required to be disclosed by applicable Law or administrative or legal process or
pursuant to any securities exchange rules), it being understood that the Buyer
Parties will notify the Company in writing prior to any proposed disclosure of
such Confidential Information in order to enable the Company to seek an
appropriate protective order; and (y) the Buyer Parties shall return to the
Company Parties all documents (and reproductions thereof) supplied to any Buyer
Party by any Company Party. The foregoing covenants relating to confidentiality
are in addition to those included in the Prior Confidentiality Agreement.
5.4 NO SOLICITATION. From and after the date hereof, the Company, without
the prior written consent of the Buyer, will not, and will not authorize any of
the Company Representatives to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate knowingly any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to an Acquisition Proposal
(defined below) from any Person, or engage in any discussion or negotiations
relating thereto or accept any Acquisition Proposal or make or authorize any
statement, recommendation or solicitation in support of any Acquisition
Proposal; provided, however, that notwithstanding any other provision hereof,
the Company may (a) at any time prior to the time the Company's stockholders
shall have voted to approve this Agreement, engage in discussions or
negotiations with a third party who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or with the
Company or any Company Representative after the date hereof) seeks to initiate
such discussions or negotiations and may furnish such third party information
concerning the Company, the Business or the Assets if, and only to the extent
that, (i)(x) the third party has first made an Acquisition Proposal in writing
that is financially superior to the Transactions and has demonstrated that the
funds necessary for the Acquisition Proposal are reasonably likely to be
available (as determined in good faith in each case by the Company's Board of
Directors after consultation with its financial advisors) and (y) the Company's
Board of Directors shall conclude in good faith, after considering applicable
provisions of state law, on the basis of written advice of outside counsel, that
such action is necessary for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law and (ii) prior to
furnishing such information to or entering into discussions or negotiations with
such Person, the Company (x) provides prompt notice to the Buyer to the effect
that it is furnishing information to or entering into discussions or
negotiations with such Person and (y) receives from such Person an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such Person than the terms contained in
Section 5.3 and the Prior Confidentiality Agreement; (b) comply with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer, or
(c) provided the Company terminates this Agreement pursuant to Section 9.1(h),
accept an Acquisition Proposal from a third party. The Company shall immediately
cease and terminate any existing solicitation, initiation,
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encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by the Company or any Company Representatives with respect to the
foregoing. The Company shall not release any third party from, or waive any
provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless its
Board of Directors shall conclude in good faith, after considering applicable
provisions of state law, on the basis of oral or written advice of outside
counsel, that such action is necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties. The Company shall notify the Buyer
orally and in writing of any such inquiries, offers or proposals (including the
terms and conditions of any such proposal, the identity of the Person making it
and a copy of any written Acquisition Proposal), within 24 hours of the receipt
thereof, shall keep the Buyer informed of the status and details of any such
inquiry, offer or proposal, and shall give the Buyer five days' advance notice
of any agreement to be entered into with, or any information to be supplied to,
any Person making such inquiry, offer or proposal. This Section 5.4, however,
shall not require the Company to identify any Person to whom it furnishes
information or enters into discussion or negotiations nor any Person who makes
any such inquiries, offers or proposals to the extent that identifying any such
Person would violate the terms of a confidentiality agreement with such Person
that was entered into prior to the date hereof. As used herein, "Acquisition
Proposal" shall mean a proposal or offer (other than by a Buyer Party) for a
tender or exchange offer, merger, consolidation or other business combination
involving any Company Party or any proposal to acquire in any manner a
substantial equity interest in, or all or any substantial part of the Assets of,
any Company Party.
5.5 ADDITIONAL AGREEMENTS. The Company will comply in all material
respects with all applicable Laws in connection with its execution, delivery and
performance of this Agreement and the Transactions. The Company shall use
commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals required under any Laws and to effect all
necessary registrations and filings under any Laws, and to use commercially
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the Transactions.
Without limiting the generality of the foregoing, the Company shall promptly
prepare and file a premerger notification in accordance with the HSR Act, shall
promptly comply with any requests for additional information, and shall use
commercially reasonable efforts to obtain termination of the waiting period
thereunder as promptly as practicable.
5.6 SUBSIDIARY PREFERRED STOCK. The Company shall cause the Subsidiary to
redeem on or before the Closing Date all of the issued and outstanding
Subsidiary Preferred Stock in accordance with the terms thereof as in effect on
the date of this Agreement.
6. COVENANTS OF THE BUYER PARTIES.
6.1 CLOSING CONDITIONS. At and prior to the Closing, each Buyer Party
shall use commercially reasonable efforts to fulfill the conditions specified in
Section 8 to the extent that the fulfillment of such conditions is within its
control, except that no Buyer Party shall be
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required to pay or expend any material amount of funds that may be necessary to
correct any Default under its representations and warranties or to fulfill any
of such conditions. The foregoing obligation includes refraining from any
actions that would cause any Buyer Party's representations and warranties to be
inaccurate in any material respect as of the Closing, executing and delivering
the agreements and other documents referred to in Section 8 and using
commercially reasonable efforts to prepare all necessary documentation. The
Buyer shall give the Company prompt written notice of any event or development
that occurs or fails to occur (and that is known to any Buyer Party) that gives
the Buyer reason to believe that the conditions set forth in Section S will not
be satisfied prior to the Termination Date.
6.2 BUYER FINANCING. The Buying Parties shall use commercially reasonable
efforts to obtain the Buyer Financing and shall notify the Company promptly of
any event or circumstances that give any Buyer Party a reason to believe that
the Buyer Financing may not be available.
6.3 INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE.
(a) For a period of six years after the Effective Time, the Buyer
shall cause the Surviving Corporation to (i) maintain in effect the current
provisions regarding indemnification of officers and directors contained in the
Charter Documents and Bylaws of each Company Party and any directors, officers
or employees indemnification agreements of any Company Party, and (ii) indemnify
the directors and officers of any Company Party to the fullest extent to which
any Company Party are permitted to indemnify such officers and directors under
their respective Charter Documents and Bylaws and applicable Law. The Buyer
hereby unconditionally and irrevocably guarantees for the benefit of such
directors, officers and employees the obligations of each Company Party under
the foregoing indemnification arrangements.
(b) For a period of four years after the Effective Time, the Buyer
shall cause the Surviving Corporation to maintain in effect the current policies
of directors' and officers' liability insurance and fiduciary liability
insurance maintained by any Company Party (provided that the Buyer may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate. no less
advantageous to the insured in any material respect) with respect to claims
arising from facts or events which occurred on or before the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 200% of the current annual
premiums paid by the Company (the "Premium Amount") to maintain or procure
insurance coverage pursuant hereto, and further provided that if the Surviving
Corporation is unable to obtain the insurance called for by this Section 6.3(b),
the Surviving Corporation will obtain as much comparable insurance as is
available for the Premium Amount per year.
6.4 BENEFIT PLANS. The Buyer will maintain, or cause the Surviving
Corporation to maintain, for a period of one year after the Effective Time,
Benefit Plans covering employees of any Company Parties that are no less
favorable, in the aggregate, to the employees covered by such plans than the
Benefit Plans of any Company Party in effect immediately prior to the
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Effective Time; provided, however, that the foregoing obligation shall not apply
to any Benefit Plans that provide for the issuance of stock or stock options of
any Company Party.
6.5 ADDITIONAL AGREEMENTS. Each Buyer Party will comply in all material
respects with all applicable Laws in connection with its execution, delivery and
performance of this Agreement and the Transactions. Each Buyer Party shall use
commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals required under any Laws and to effect all
necessary registrations and filings under any Laws, and to use commercially
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the Transactions.
Without limiting the generality of the foregoing, the Buyer shall promptly
prepare and file a premerger notification in accordance with the HSR Act, shall
promptly comply with any requests for additional information, and shall use
commercially reasonable efforts to obtain termination of the waiting period
thereunder as promptly as practicable.
7. CONDITIONS PRECEDENT TO THE BUYER PARTIES' OBLIGATIONS.
All obligations of the Buyer and the Acquisition Company to be performed on
the Closing Date shall be subject to the satisfaction (or waiver by the Buyer or
the Acquisition Company), prior thereto, of the following conditions:
7.1 REPRESENTATIONS TRUE AT CLOSING. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
material respects, on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such date except for (a) such
inaccuracies or breaches of warranty as to which the Buyer had actual knowledge
on or prior to the date hereof and (b) such inaccuracies or breaches of warranty
as would not, individually or in the aggregate, have a Material Adverse Effect.
7.2 PERFORMANCE OF COVENANTS. The Company shall have performed, in all
material respects, all covenants and agreements that are to be performed by it
under this Agreement on or prior to the Closing Date except for any breaches
thereof that do not or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
7.3 LITIGATION AFFECTING CLOSING. No Court Order shall have been issued or
entered that prohibits consummation of the Merger.
7.4 REGULATORY COMPLIANCE AND APPROVALS. All applicable waiting periods
under the HSR Act shall have expired or early termination thereof shall have
been granted with respect to the consummation of the Merger, and all
governmental consents and approvals legally required for the consummation of the
Merger and the Transactions contemplated hereby shall have been obtained and be
in effect at the Effective Time on terms and conditions that would not have a
material adverse effect on the Surviving Corporation.
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7.5 CERTIFICATES. The Company shall have delivered a certificate of an
executive officer of the Company to the effect that the conditions set in
Sections 7.1 and 7.2 have been satisfied.
7.6 OPINION OF COUNSEL TO THE COMPANY. ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
counsel to the Company, shall have delivered to the Buyer their opinion, dated
the Closing Date, with respect to those matters reasonably requested by the
Buyer.
7.7 STOCKHOLDER APPROVAL. This Agreement and the Transactions shall have
been approved and adopted by the requisite vote of the stockholders of the
Company pursuant to the DGCL and holders of not more than 10% of the Shares
shall have perfected their dissenter rights under the DGCL prior to the Closing
Date.
7.8 NO REGULATORY ACTION. No action shall have been taken, and no statute,
rule or law shall have been enacted, by any state, federal or foreign government
or governmental agency which would prevent the consummation of the Merger.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
All obligations of the Company to be performed on the Closing Date shall be
subject to the satisfaction (or waiver by the Company), prior thereto, of each
of the following conditions:
8.1 REPRESENTATIONS TRUE AT CLOSING. The representations and warranties of
the Buyer Parties set forth in this Agreement shall be true and correct in all
material respects, on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such date except for such inaccuracies or
breaches of warranty as to which the Company had actual knowledge on or prior to
the date hereof.
8.2 PERFORMANCE OF COVENANTS. The Buyer shall have performed in all
material respects all covenants and agreements that are to be performed by it
under this Agreement on or prior to the Closing Date.
8.3 LITIGATION AFFECTING CLOSING. No Court Order shall have been issued or
entered that prohibits consummation of the Merger.
8.4 REGULATORY COMPLIANCE AND APPROVALS. All applicable waiting periods
under the HSR Act shall have expired or early termination thereof shall have
been granted with respect to the consummation of the Merger.
8.5 CERTIFICATES. The Buyer shall have delivered a certificate of an
executive officer of the Buyer to the effect that the conditions set in Sections
8.1 and 8.2 have been satisfied.
8.6 APPROVAL OF MERGER. The Merger shall have been approved by the
stockholders of the Company in accordance with the DGCL.
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8.7 OPINION OF COUNSEL TO THE BUYER PARTIES. ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
counsel to the Buyer Parties, shall have delivered to the Company their opinion,
dated the Closing Date. with respect to those matters reasonably requested by
the Company.
8.8 STOCKHOLDER APPROVAL. This Agreement and the Transactions shall have
been approved and adopted by the requisite vote of the stockholders of the
Company pursuant to the DGCL.
8.9 NO REGULATORY ACTION. No action shall have been taken, and no statute,
rule or law shall have been enacted, by any state, federal or foreign government
or governmental agency that would prevent the consummation of the Merger.
9. TERMINATION.
9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any time
before the Effective Time, in each case as authorized by the respective Board of
Directors of the Company and the Buyer:
(a) By mutual written consent of each of the Company and the Buyer;
(b) By either the Company or the Buyer if the Merger shall not have
been consummated on or before the Termination Date; provided, however, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before the Termination Date;
(c) By either the Company or the Buyer if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a Court Order (which Court Order the parties shall use
commercially reasonable efforts to lift) that permanently restrains, enjoins or
otherwise prohibits the Transactions, and such Court Order shall have become
final and nonappealable;
(d) By the Company or the Buyer if the required approvals of the
stockholders of the Company shall fail to have been obtained at a duly held
stockholders' meeting of the Company, including any adjournments thereof;
(e) By the Buyer if the Company shall have breached, or failed to
comply with, any of its obligations under this Agreement or any representation
or warranty made by the Company shall have been incorrect when made, and such
breach, failure or misrepresentation is not cured by the earlier of the
Termination Date or 20 days after notice thereof, and in either case, any such
breaches, failures or misrepresentations, individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect;
(f) By the Company if the Buyer shall have breached, or failed to
comply with, in any material respect, any of its obligations under this
Agreement or any representation or
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warranty made by the Buyer shall have been incorrect in any material respect
when made, and such breach, failure or misrepresentation is not cured by the
earlier of the Termination Date or 20 days after notice thereof; or
(g) By the Company, prior to the approval of this Agreement by the
stock- holders of the Company, upon five days' prior notice to the Buyer, if, as
a result of a written Acquisition Proposal received by the Company from a Person
other than a party hereto or any of its Affiliates, the Board of Directors of
the Company determines in good faith that its fiduciary obligations under
applicable Law require that such Acquisition Proposal be accepted; provided,
however, that (i) such written Acquisition Proposal was received by the Company
without any solicitation, initiation, encouragement, discussion or negotiation,
directly or indirectly, by or with the Company or any Company Representative in
violation of the provisions of Section 5.4 of this Agreement, (ii) such
Acquisition Proposal is financially superior to the Transactions and the Person
proposing such Acquisition Proposal has demonstrated that the funds necessary
for such Acquisition Proposal are reasonably likely to be available (as
determined in good faith in each case by the Company's Board of Directors after
consultation with its financial advisors), and (iii) the Board of Directors of
the Company shall have concluded in good faith, after considering applicable
provisions of state law, on the basis of written advice of outside counsel, that
such action is necessary for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable Law.
9.2 EFFECT OF TERMINATION.
(a) If this Agreement is terminated under Section 9.1 hereof, this
Agreement shall become void and there shall be no Liability on the part of any
of the parties, except as set forth in this Section 9.2 and for any breach of
Sections 3.21, 4.5 or 11 or of the confidentiality covenants in Section 5.3.
(b) If this Agreement is terminated by the Company under Section
9.1(f) as a result of any Buyer Party's breach, the Buyer shall pay to the
Company a termination fee in an amount equal to the reasonable out-of-pocket
expenses of the Company Parties related to the Transactions, except that in the
case of a termination due to a breach existing on the date hereof that was known
to exist on the date hereof by any Buyer Party or a termination due to a wilful
breach by any Buyer Party or the unavailability of the Buyer Financing, the
Buyer shall pay to the Company a termination fee in an amount equal to such
expenses plus $2.0 million, in either case, in cash within 10 days after the
date on which the Agreement is terminated.
(c) If this Agreement is terminated by the Company under Section
9.1(g) hereof, the Company shall pay to the Buyer a termination fee in an amount
equal to the reasonable out-of-pocket expenses of the Buyer Parties related to
the Transactions plus $2.0 million, in cash within 10 days after the date on
which the Agreement is terminated. Such out-of-pocket expenses shall include any
fees, costs or other expenses related to the Buyer Financing other than the 1%
commitment fee with respect to the Bridge Financing to the extent that it
relates to financing of amounts greater than $60 million.
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(d) If this Agreement is terminated by the Buyer under Section 9.1(e)
as a result of the Company's breach, the Company shall pay to the Buyer a
termination fee in amount equal to the reasonable out-of-pocket expenses of the
Buyer Parties related to the Transactions. except that in the case of a
termination due to a breach existing on the date hereof that was known to exist
on the date hereof by either Company Party or a termination due to a wilful
breach by any Company Party, the Company shall pay to the Buyer a termination
fee in an amount equal to such expenses plus $2.0 million, in either case, in
cash within 10 days after the date on which the Agreement is terminated. Such
out-of-pocket expenses shall include any fees, costs or other expenses related
to the Buyer Financing other than the 1% commitment fee with respect to the
Bridge Financing to the extent that it relates to financing of amounts greater
than $60 million.
(e) The agreements contained in Sections 9.2(b), (c) and (d) are an
integral part of the Transactions and constitute liquidated damages and not a
penalty. If one party fails to promptly pay to the other any fee due under such
Sections 9.2(b), (c) or (d), the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the Prime
Rate plus 200 basis points from the date such fee was required to be paid.
10. PUBLIC ANNOUNCEMENTS.
The Buyer and the Company will consult with each other before issuing any
press release or making any public statement with respect to this Agreement and
the Transactions and, except as may be required by applicable law or stock
exchange regulations, will not issue any such press release or make any such
public statement prior to such consultation.
11. GENERAL.
11.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
11.2 FURTHER ASSURANCES. The parties hereto shall execute and deliver any
and all documents and take such other actions as may be necessary to complete
the Transactions.
11.3 BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement and all rights hereunder may not be assigned by any party hereto
without the written consent of the other parties. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person other than the Buyer
Parties and the Company Parties any rights or remedies of any nature whatsoever.
11.4 WAIVER OF CONDITIONS. Any party hereto may waive any condition
provided in this Agreement for its benefit.
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11.5 EXHIBITS. All of the Exhibits attached to this Agreement and the
Disclosure Schedule and any Revised Disclosure Schedule are hereby incorporated
herein and made a part hereof.
11.6 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such costs
and expenses.
11.7 ENTIRE AGREEMENT. This Agreement, the Prior Confidentiality
Agreement and the other Transaction Documents contain the entire agreement
among the parties hereto, and there are no agreements, representations or
warranties which are not set forth in such documents. All prior negotiations,
agreements and understandings are superseded hereby. This Agreement may not
be amended or revised except by a writing signed by all parties hereto.
11.8 NOTICES. Any notice, authorization, request or demand required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given on the earlier of the date when received at, or the fifth day
after the date when sent by registered or certified mail to, the respective
addresses or telecopy numbers specified for the parties below.
TO THE BUYER:
Astor Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Aurora Capital Partners L.P.
Suite 1000
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
Telecopy: 310-277-5591
and
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
-33-
TO THE COMPANY:
Adco Products, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇, President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Ventures, Ltd.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
11.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above.
Each such copy shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
11.10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time except
for the representations, warranties and agreements set forth in Sections 2 or
11.
11.11 AMENDMENT. This Agreement may be amended by the Boards of
Directors of the parties hereto at any time prior to the filing of the
Certificate of Merger, and any such amendment shall be by a written instrument
signed by the parties hereto; provided, however, that this Agreement may only be
amended without approval of the stockholders of the Company and the Acquisition
Company to the extent permitted by applicable law.
11.12 INTERPRETATION.
Unless the context of this Agreement clearly requires otherwise, (a) "or"
has the inclusive meaning frequently identified with the phrase "and/or," (b)
"including" has the inclusive meaning frequently identified with the phrase "but
not limited to" and (c) references to one gender include
-34-
all genders. The section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the construction of this
Agreement or the interpretation thereof in any respect. Section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified. Each accounting term used herein that is not specifically defined
herein shall have the meaning given to it under GAAP.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
Attest: ADCO TECHNOLOGIES INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------- -------------------------------
Attest: ASTOR CORPORATION
By:
----------------------------------- -------------------------------
Attest: AAC ACQUISITION CORP.
By:
----------------------------------- -------------------------------
-35-
all genders. The section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the construction of this
Agreement or the interpretation thereof in any respect. Section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified. Each accounting term used herein that is not specifically defined
herein shall have the meaning given to it under GAAP.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
Attest: ADCO TECHNOLOGIES INC.
By:
----------------------------------- -------------------------------
Attest: ASTOR CORPORATION
Illegible By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------- -------------------------------
Attest: AAC ACQUISITION CORP.
Illegible By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------- -------------------------------
-35-
Disclosure Schedule
to Agreement and Plan of Merger
dated as of July 12, 1996
by and between Astor Corporation,
AAC Acquisition Corporation and
Adco Technologies Inc. (the "Agreement")
Capitalized terms used but not otherwise defined in the Disclosure Schedule
have the meanings ascribed to such terms in the Agreement.
In no event shall the listing of agreements or other matters in the
Disclosure Schedule be deemed or interpreted to broaden or otherwise amplify the
Company's representations and warranties or covenants contained in the
Agreement, and nothing in the Disclosure Schedule shall influence the
construction or interpretation of any of the representations and warranties and
covenants contained in the Agreement. The headings contained in the Disclosure
Schedule are for convenience of reference only and shall not be deemed to modify
or influence the interpretation of the information contained in the Disclosure
Schedule and shall not be taken as an admission by the Company that such
disclosure is required to be made under the terms of any at such representations
and warranties or covenants.
All disclosures in the Disclosure Schedule made against representations and
warranties in the Agreement are made generally, and any such disclosure
contained in any particular section shall be deemed to be Included In any other
applicable section. Accordingly, any numbering or references herein to Sections
of the Agreement are for convenience only and do not in any way limit, and shall
not be regarded as limiting, the disclosure concerning such numbered or referred
to Sections.
* COMPANY PARTIES:
Adco Technologies Inc. (ATI) incorporated in Delaware.
Adco Products, Inc. (Adco) incorporated In Michigan.
* DIRECTORS OF ATI AND ADCO ARE:
▇. ▇. ▇▇▇▇▇, Chairman of the Board
▇. ▇. ▇▇▇
▇. ▇. ▇▇▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇
* OFFICERS OF ATI ARE:
▇. ▇. ▇▇▇▇▇, Chairman of the Board
▇. ▇. ▇▇▇, President
▇. ▇. ▇▇▇▇▇▇▇▇, Vice President and Treasurer
▇. ▇. ▇▇▇▇▇, Secretary
▇. ▇. ▇▇▇▇▇▇▇▇▇, Assistant Secretary
* OFFICERS OF ADCO ARE:
▇. ▇. ▇▇▇▇▇, Chairman of the Board
▇. ▇. ▇▇▇, President and Chief Executive Officer
▇. ▇. ▇▇▇▇▇, Executive Vice President
▇. ▇. ▇▇▇▇▇▇▇▇, Vice President, Research & Development
▇. ▇. ▇▇▇▇▇, Vice President, Chief Financial Officer, Secretary, and
Treasurer
J. R. ▇▇▇▇▇▇▇, Vice President, Operations
▇. ▇. ▇▇▇▇▇▇▇▇▇, Assistant Secretary
* Adco is registered to do business as a foreign corporation in:
Pennsylvania
Ohio
Texas
New Jersey
The consummation of the Transactions will terminate the indemnification
protection that the Company currently has from Nalco Chemical Company except as
set forth in Article X of the Agreement and Plan of Merger among Nalco Chemical
Company, the Company Parties, and a related company, dated May 14, 1993. This
termination could adversely affect claims for indemnification that are noted
below in this Disclosure Schedule and could impose dollar limitations on other
claims for indemnification also noted below.
S-l
The following is a list of options outstanding:
Exercise Date of
Name Options Price Grant
----------------------------------------------------------------------------
Sax 48,106 2.08 2/15/95
15,000 7.00 12/15/94
10,000 7.625 4/25/95
5,000 6.75 3/14/96
▇▇▇▇▇ 24,053 2.08 2/15/95
10,000 7.00 12/15/94
10,000 7.625 4/25/95
5,000 6.75 3/14/96
▇▇▇▇▇▇▇▇ 24,053 2.08 2/15/95
10,000 7.00 12/15/94
10,000 7.625 4/25/95
5,000 6.75 3/14/96
▇▇▇▇▇ 24,053 2.08 2/15/95
10,000 7.625 4/25/95
5,000 6.75 3/14/96
▇▇▇▇▇▇▇ 24,053 2.08 2/15/95
10,000 7.00 12/15/94
10,000 7.625 4/25/95
5,000 6.75 3/14/96
Buckhannon 250 6.75 3/14/96
▇▇▇▇▇▇ 375 6.75 3/14/96
▇▇▇▇▇▇▇ 250 6.75 3/14/96
▇▇▇▇▇▇▇ 350 6.75 3/14/96
▇▇▇▇▇▇ 375 6.75 3/14/96
▇▇▇▇▇▇ 375 6.75 3/14/96
Kapuga 375 6.75 3/14/96
▇▇▇▇▇, D. 250 6.75 3/14/96
▇▇▇▇▇, J. 250 6.75 3/14/96
Lamb 375 6.75 3/14/96
▇▇▇▇▇▇ 350 6.75 3/14/96
Mantek 350 6.75 3/14/96
▇'▇▇▇▇▇▇▇ 350 6.75 3/14/96
▇▇▇▇▇ ▇▇▇ 6.75 3/14/96
Reel 350 6.75 3/14/96
----------
Total 269,318
----------
▇▇▇▇▇▇▇▇, T. 4,000 7.00 12/15/94
▇▇▇▇▇▇▇, D. 4,000 7.00 12/15/94
▇▇▇▇▇▇▇▇▇, L. 4,000 7.00 12/15/94
Preston, S. 4,000 7.00 12/15/94
Simon, R. 4,000 7.00 12/15/94
▇▇▇▇▇▇, H. * 4,000 7.00 12/15/94
----------
Total 24,000
----------
Grand Total 293,318
----------
----------
* ex-director
S-2
* As of March 31, 1996, the following were contingent liabilities of the
Company:
1. H.E.R. OF TUPELO VS. INTERNATIONAL E.P.D.M.
Adco has been named as a possible defendant in a lawsuit between the above
referenced companies. H.E.R. claims that there were defects in the roofing
system installed by International. As Adco is one of three companies that
supplied material to International for this job, International is claiming
that if the plaintiff proves defective material, then the suppliers are
responsible. In addition, International wants to tender defense of
International to the three material suppliers. We have received no
correspondence since June 4, 1992.
2. SUNSHINE SUPPLY COMPANY, INC.
Adco sold a sealant used in dual glass installation to Sunshine Supply
Co. who in turn sold it to A & A Glass Co. A & A Glass alleges that in
March, 1990 the seal on one of the "dual units" was going bad due to
failure of the Adco material. They submitted a claim of $1,745 to
Sunshine for material and labor to replace the unit. Sunshine in turn
passed the ▇▇▇▇ to Adco to pay. We agreed to make the payment if they
would sign a release document, which they refused to do. Nothing
further has transpired to date. The last correspondence was December 7,
1992.
3. FRONTIER CHEMICAL SUPERFUND SITE
Adco has been notified that some of our material has been deposited in a
former waste processing/management facility in Niagara Falls, New York,
which has been named as a Superfund site by the EPA. We have small
amounts of our material there in drums (one 55 gl. and one 30 gl. drum)
and some liquids in storage tanks. Adco has been included in a de
minimis settlement with the EPA regarding the storage tank clean-up.
Our cost for the de minimis clean-up of the storage tank was
approximately $4,000. We are responsible for the actual costs of
disposing of the material in the drums. The projected cost of the drum
disposal to-date is approximately $4,500, which has already been paid.
4. ▇▇▇▇▇▇▇ DROP FORGE SITE, JACKSON, MI
Adco has been notified by the U.S. EPA of possible environmental
contaminants at the above mentioned site. There apparently is some
asphaltic material at the site from the owners of our facility prior to
Adco's start-up in 1971. In July 1994 Adco notified the EPA that we have
no recollection, and our records do not indicate, that Adco ever sent any
material of any kind to the mentioned site. We have not since received a
reply from the EPA. Clean-up work is well underway at the site, and other
companies have been contributing to the cost of the clean-up. Butzel,
Long is representing Adco in this manner. Nalco has been notified of a
possible claim for indemnification as a result of this matter.
S-3
5. ADCO NAMED AS A SITE OF ENVIRONMENTAL CONTAMINATION
Adco has been notified by the Michigan Department of Natural Resources that
our site has been named as a site of environmental contamination. Adco has
in turn notified Nalco of a possible claim for indemnification as a result
of this matter. We are currently working with ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇
to determine the source and extent of the contamination. The legal firm of
Butzel, Long is assisting Adco in its negotiations with the DNR regarding
the work which will be required, if any, at the site, as well as whether
Adco will receive any state moneys towards the clean-up.
6. ▇▇▇▇▇ AND COMPANY VS INTERNATIONAL EPDM
In July, 1995 Adco was been named as a third-party defendant in a claim
brought by ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ and Company, Inc. against
International EPDM regarding a faulty roof installed by International on
which there were some Adco products. We have notified our insurance
carrier of the third-party complaint. The insurance carrier will
coordinate legal defense. Nothing further has transpired since the
initial complaint.
7. INSULFOAM ROOF CLAIM
In January, 1994 Adco was notified by attorneys representing InsulFoam that
Adco seam tape use on their roof was failing and requested payment of
approximately $30,000 to repair the roof. Adco responded that we had
inspected the roof and found the tapes were not failing. Adco has not
received any further correspondence from InsulFoam or their legal counsel.
8. HOMOSSASSA SPRINGS POST OFFICE VS. INTERNATIONAL EPDM
In February, 1993, Adco was notified by International EPDM that a white
EPDM roof installed by International on a U.S. Post Office was failing.
After examination of the roof it was determined that the white EPDM roofing
sheets manufactured by Colonial were deteriorating. International has
asked both Adco and Colonial Rubber Works to pay for the repair of the
roof. It is Adco's belief that the failure of the white EPDM roofing
sheets was the cause of the roofing failure. Nalco has been notified of a
potential claim for indemnification for this matter. ▇▇▇▇▇▇, ▇▇▇▇▇ is
representing Adco in this matter.
9. JUDE PROPERTY
Drums from Adco were buried by ▇▇. ▇▇▇▇ in a sandstone quarry on Napoleon,
Michigan property. The company is not aware of any claim regarding this
property, and no public disclosure has been made regarding this matter.
S-4
10. INTERNATIONAL EPDM CLAIM FOR CREDITS
Since approximately 1993 International has been sending Adco credit memos
for repair and warranty work for claims they allege have incurred for
repairing roofs they have installed over the years using Adco tapes. Adco
has occasionally paid some claims and made some repairs on certain roofs
installed by International. On credits submitted by International which
were rejected by Adco for payment, International has accumulated the
credits and invoices Adco monthly for these claims. Adco has not made any
payments on any credits included in the invoice because it believes Adco
material was not at fault and that the roofs leak for various other
reasons, such as installation problems or deteriorating EPDM sheet. Also
has notified Nalco of a potential claim for indemnification in this matter,
and is being represented by ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇.
11. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ET AL VS. ADCO PRODUCTS, INC. ET AL
Adco has been named as a defendant, along with 92 other companies (such
as 3M, Dow, ▇▇ ▇▇▇▇▇▇, Occidental, DuPont etc.) by a group of defendants
in Texas. The suit involves alleged serious injuries, death, property
and other damages to the Plaintiffs or their decedents, arising out of
the ingestion, breathing, inhalation and other exposures to solvent
products that were manufactured, formulated, marketed, sold and/or
distributed in Nueces County, Texas. The plaintiffs allege that they
were exposed to these chemicals in the course of their work at the
Corpus Christi Army Depot and elsewhere in Nueces County, Texas where
they were disassembling, cleaning, maintaining, overhauling and storing
aircraft and other equipment. The Adco product involved appears to be
black lap sealant. The plaintiffs are suing for $500 million. We are
working with ▇▇▇▇▇▇, ▇▇▇▇▇ and our insurance company.
12. ▇▇▇▇▇▇▇ V. ADCO PRODUCTS, INC.
Adco has been named as a defendant where an installer of windshields
claims to have received an injury to his eye when a tube of Adco FC-2000
SS urethane adhesive "exploded" while he was installing a windshield.
▇▇. ▇▇▇▇▇▇▇ is seeking damages for the injury and impairment to his eye,
medical expenses paid and yet to be paid, pain and suffering from the
injury and any wages lost as a result of the claimed injury. Our
insurance company has been notified of the claim and is representing us
in this matter. This falls under the product liability coverage of our
insurance with a $50,000 deductible.
S-5
13. AMERICAN MARBLE
American Marble is a contractor that bought Adco AL-800 from Sunshine
Supply Company, which is an Adco distributor of the product. American
Marble used this product as an adhesive for marble countertops and
backsplashes installed in residential homes. The product caused staining
on the marble, and American Marble is seeking damages. Adco AL-800 was not
manufactured for, nor was it ever recommended to be used for, a marble
adhesive. The intended use of the product is as a sealant. The insurance
company has been put on notice and has hired a legal defense counsel.
14. POTENTIAL LABOR RELATED CLAIMS
The Company is aware of potential labor related claims regarding the
following employees:
a. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
b. ▇▇▇▇▇▇ ▇▇▇▇▇
c. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
* The 1995 state and federal tax return filing deadlines have been extended to
September 30, 1996. This has been prior company practice and is in the
ordinary course of business.
* Adco has filed for a potential refund of Michigan single business taxes paid
going back to 1991 under a ruling call "Guardian". If the state rules
favorably, Adco could receive a refund of up to approximately $80,000.
The company has entered into a tax sharing agreement with Nalco Chemical
Company dated January 31, 1994 regarding this refund.
* A legal description of the company's real property is attached hereto as
Appendix 1.
* The Company is a party to the following contracts which may limit or restrain
the company from competing or selling its products to certain markets:
1. A licensing contract with Vaber that gives Vaber exclusive rights to
manufacture, use and sell Adco products IGS-1 and IGS-3 in Italy.
2. An export agreement with ▇. ▇▇▇▇ which gives ▇. ▇▇▇▇ exclusive rights to
export certain of Adco's products to certain countries. Notice of
termination has been given so that the agreement will terminate
November 1, 1996.
S-6
* Estimate of expense to be incurred are as follows:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.:
fees $825,000
cost reimbursement 35,000
legal fees 10,000
--------
$870,000
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius $150,000
Ernst & Young $10,000
Printing and mailing $15,000
SEC filing fee $12,000
* The Company is a party to the following labor grievances:
1. A grievance dated June 6, 1996 regarding responsibility and duties
of maintenance employees assigned to the extruding, mixing and
urethane departments.
2. A grievance dated April 24, 1996 related to unpaid leave and the
Family and Medical Leave Act.
* The following is a list of all employment agreements:
1. The Company has Change in Control Agreements, dated February 13,
1996 with the following individuals:
a. ▇.▇. ▇▇▇▇▇
b. ▇.▇. ▇▇▇▇▇▇▇▇
c. ▇.▇. ▇▇▇▇▇
d. J.R. ▇▇▇▇▇▇▇
2. The Company has an employment agreement with ▇.▇. ▇▇▇▇▇ dated May
14, 1993.
* The Company has a deferred pension payment agreement with ▇.▇. ▇▇▇▇▇▇▇▇
dated November 30, 1993.
* The Company has a deferred compensation agreement with ▇.▇. ▇▇▇
S-7
* The following is a list of all Company benefit plans:
1. Adco Products, Inc. Union Employees Pension Plan
2. Adco Products, Inc. Retirement Savings Plan
3. Adco Products, Inc. Union Employees Retirement Savings Plan
4. Medical Benefits (Physicians Health Plan)
5. Long-Term Disability
6. Short-Term Disability
7. Accidental Death & Dismemberment
8. Life Insurance Plan
9. Flexible Spending Plan
10. Dental Plan
11. 1993 Stock Option Plan
12. 1994 Stock Option Plan
13. 1994 Non-Employee Director Stock Option Plan.
* The Company is delinquent in filing Form 990 with the IRS in regards to
the companies medical plan for the year ended December 31, 1993.
* Attached as Appendix 2 is a list of all Company patents.
* Since the balance sheet date, the Company has entered into a contract
with Exxon Chemical Company to purchase 2 million pounds of butyl
rubber.
S-8
Appendix 1
A. LEGAL DESCRIPTION
Commencing at the North 1/2 corner of Section 8, Town 3 South, Range 1 East,
Leoni Township, ▇▇▇▇▇▇▇ County, Michigan, thence along the North and South
1/2 line of said Section. South 0DEG.25' East 249.85 feet for a place of
beginning, thence along the South line of the Michigan Central Railroad
right-of-way, South 86DEG.03' East 1462.50 feet, thence due South 1008.02
feet, thence North 88DEG.51' West 1451.31 feet, thence along the North and
South 1/4 line of said Section. North 0DEG.25' West 1079.77 feet to the place
of beginning, being a part of the Northeast 1/2 of Section 8, Town 3 South,
Range 1 East.
Together with an easement for ingress and egress over the following described
property:
Land described as commencing at the South 1/2 corner of Section ▇, ▇▇▇▇ ▇
▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, thence along the South line of
said Section ▇, ▇▇▇▇▇ ▇▇▇▇▇.▇▇' ▇▇▇▇ 737.97 feet, thence North 1DEG.35' East
556.12 feet to the center line of Page Avenue to the place of beginning of
this description, thence South 1DEG.35' West 745.18 feet to the North line of
Michigan Central Railroad right-of-way; thence South 86DEG.03' East 50 feet,
thence North 1DEG.35' East parallel with the first described course to the
centerline of Page Avenue, thence Northwesterly along the centerline of Page
Avenue to the place of the beginning.
ALSO
Legal Description of Alternate Easement of Ingress and Egress:
Being a part of the North 1/2 of the Northeast 1/2 of Section 8, Town 3
South, Range 1 East, Leoni Township, ▇▇▇▇▇▇▇ County, Michigan. More
particularly described as:
Beginning at a point distant, on the South right-of-way line of the Con-rail
Railroad, South 00DEG.04'18" West 249.63 feet and ▇▇▇▇▇ ▇▇▇▇▇.▇▇'▇▇" ▇▇▇▇
1463.61 feet from the North 1/2 Post of said section; thence South
85DEG.38'14" East, along said railroad right-of-way, 885.58 feet; ▇▇▇▇▇
▇▇▇▇▇.▇▇'▇▇" ▇▇▇▇ 97.86 feet; South 88DEG.44'59" East, parallel with the
North line of the Northeast 1/2 210.03 feet to the East line of the Northeast
1/2 (said point being 452.32 feet South of the Northeast Corner of the
Northeast 1/2); South 00DEG.16'49" West, along the East line of the Northeast
1/2 20.00 feet; North 88DEG.44'59" West, parallel with the North line of the
Northeast 1/2, 217.46 feet; North 38DEG.36'30" West 98.34 feet; North
85DEG.38'14" West, parallel with the South right-of-way line of the Con-rail
Railroad, 877.82 feet; North 00DEG.16'49" East, parallel with the East line
of the Northeast 1/2 20.05 feet to a 1 inch pipe at the point of beginning.
Beginning at the Northeast corner of Section 8, thence South 00DEG.16'49"
West 445.97 feet to a point for the place of beginning of this description,
thence continuing South 00DEG.16'49" West 26 feet, thence North 89DEG.43'11"
West 300 feet, thence South 00DEG.16'49" West 74.80 feet, thence ▇▇▇▇▇
▇▇▇▇▇.▇▇'▇▇" ▇▇▇▇ (▇▇▇▇▇▇.▇▇'▇▇" W Record) 227.92 feet, thence South
00DEG.16'49" West 319.30 feet, thence North 88DEG.44'59" West 626.93 feet,
thence North 00DEG.16'49" East 545.90 feet to the South line of the Michigan
Central Railroad right-of-way, thence South 85DEG.38'14" East (S84DEG.45' E
Record) 957.20 feet, thence South 89DEG.43'11" East 200 feet to the place of
beginning being a part of Section ▇, ▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇▇▇▇ 1 East.
A-1
Appendix 1
[PLOT PLAN]
Appendix 2
World Wide Patents
Listing at 11-28-94
ARGENTINA Room Temperature Based Adhesion Composition and Method
# 316482
AUSTRALIA A One Component Sealant Composition
AUSTRALIA Polyurethane based adhesion composition and method
77329/91
CANADA Primerless Windshield Sealant Composition & Method
Application # 2010821-5
CANADA Fast-Cure polyurethane Sealant Composition containing
Patent # 1 330 846 Titanium Ester Accelerations
CANADA Fast-Cure polyurethane Sealant Composition containing
Patent # 608781-7 silyl-substituted piperazine accelerators
EUROPE Fast-cure polyurethane sealant composition containing
# 89117261.1 silyl-substituted guanidine accelerators
Designated to: Austria, Belgium, Switzerland, Germany, Spain, France,
Great Britain, Greece, Italy, Lichtenstein,
Luxembourg, Netherlands, Sweden
EUROPE Fast-cure polyurethane sealant composition
# 89113489.2 containing silyl-substituted piperazine accelerators
Designated to: Austria, Belgium, Switzerland, Germany, Spain, France,
Great Britain, Greece, Italy, Lichtenstein,
Luxembourg, Netherlands, Sweden
EUROPE Fast-cure polyurethane sealant composition
# 89113307.6 titanium ester accelerators
Designated to: Austria, Belgium, Switzerland, Germany, Spain, France,
Great Britain, Greece, Italy, Lichtenstein,
Luxembourg, Netherlands, Sweden
EUROPE Polymerization of acrylic ester pressure-sensitive
# 90121058.3 adhesive compositions
Designated to: Belgium, Germany, France, Great Britain, Italy, Sweden
EUROPE Room temperature moisture-curable primerless
#90106048.3 polyurethane-based adhesive composition and method
Designated to: Belgium, Germany, France, Great Britain, Spain, Italy,
Netherlands, Sweden
Appendix 2
U.S. ADCO PATENTS
LIST AT 11-28-94
Title Patent Date of Inventor
Number Patent Assignee
Tire Tread Adhesives 4,497,927 2-5-85 ▇▇▇ ▇. ▇▇▇,
▇. ▇▇▇▇▇▇▇▇
Nalco/Assign
Sealant Primer Composition Method 4,882,▇▇▇ ▇▇-▇▇-▇▇ ▇. ▇▇▇▇,
▇. ▇▇▇▇▇▇,
▇. ▇▇▇▇▇,
A. Ticu
BASF/Assign
Fast-Cure Polyurethane Sealant
Composition containing Titanium
Ester Accelerators 4,889,▇▇▇ ▇▇-▇▇-▇▇ J. Baghdachi
BASF/Assign
Fast-Cure Polyurethane Sealant
Composition containing silyl-
substituted piperazine accelerators 4,864,426 1-16-90 J. Baghdachi
▇. ▇▇▇▇▇▇▇
BASF/Assign
Translucent Pressure-Sensitive
Adhesive Systems 4,931,347 6-5-90 ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Nalco/Assign
Fast-Cure Polyurethane Sealant
Composition containing silyl-
substituted Guanidine accelerators 4,954,598 9-4-90 J. Baghdachi
▇. ▇▇▇▇▇▇▇
BASF/Assign
Ultraviolet Radiation
Photopolymerization of acrylic
ester pressure sensitive
adhesive formulation 4,968,558 11-6-90 ▇. ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Nalco/Assign
Caulking Gun Nozzle 5,000,361 3-19-91 ▇. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Adco/Assign
Fast-cure polyurethane sealant
composition containing silyl-
substituted guanidine accelerators 5,097,053 3-17-92 J. Baghdachi
▇. ▇▇▇▇▇▇▇
BASF/Assign
Appendix 2
Page 2 - U.S. patents at 11-28-94
Room temperature moisture -curable
primerless polyurethane based
adhesive composition and method 5,147,927 9-15-92 J. Baghdachi
▇. ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
BASF/Assign
Ultraviolet Radiation
Photopolymerization of Acrylic
Ester pressure sensitive adhesive
formulation 5,183,833 2-2-93 ▇. ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Adco/Assign
Polymer Adhesive Composition 5,225,512 7-6-93 J. Baghdachi
▇. ▇▇▇▇▇▇▇
BASF/Assign
Solvent-Based Adhesive composition
for roofing membranes 5,234,987 8-10-93 ▇. ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Adco/Assign
Adhesive Composition and Method
of providing water-tight joints
in single-ply roofing membranes 5,242,727 9-7-93 ▇. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Adco/Assign
Polyurethane based adhesion
composition and method 5,272,▇▇▇ ▇▇-▇▇-▇▇ J. Baghdachi
▇. ▇▇▇▇▇▇▇
Adco/Assign
Fortified Pressure Sensitive Adhesive 5,354,▇▇▇ ▇▇-▇▇-▇▇ ▇. ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇
Adco/Assign
Polyurethane Black Copolymer 5,368,▇▇▇ ▇▇-▇▇-▇▇ Jamil Baehdacki
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Pressure Sensitive Adhesive Systems
with Filler 5,385,772 1-31-95 ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Pressure Sensitive Adhesive System
with Filler 5,527,595 6-18-96 ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Page 2 - Worldwide Patents at 11-28-94
EUROPE Polyurethane based adhesion composition and method
#91108380.6
Designated to: Belgium, Germany, France, Great Britain, Spain, Italy,
Netherlands, Sweden
JAPAN Silane containing polyurethane polymer and adhesive
#US92/06807 composition
Application Numbers:
273646/89
202265/89
212873/89
084746/90
155711/91
KOREA
#014671/89 Fast-cure polyurethane sealant composition containing silyl-
substituted guanidine accelerators
#11089/89 Fast-cure polyurethane sealant compositions containing
titanium ester accelerators
#11892/89 Fast-cure polyurethane sealant compositions containing
silyl-substituted piperazine accelerators
#4245/90 Room temperature, moisture-curable, primerless,
polyurethane based adhesive composition and method.
/91 Polyurethane based adhesion composition and method
MEXICO
#182404 No description listed
NEW ZEALAND Room-temperature, moisture-curable primerless, polyurethane-
#233025 based adhesive composition and method
PHILIPPINES
Application Numbers
40866 and 42493 No description listed.
