AGREEMENT AND PLAN
OF MERGER
DATED AS OF
APRIL 30, 1999
AMONG
PENTAIR, INC.,
NORTHSTAR ACQUISITION COMPANY
AND
ESSEF CORPORATION
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
Section 1.1 The Merger...........................................................2
Section 1.2 Effective Time of the Merger.........................................2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles.............................................................2
Section 2.2 Regulations..........................................................2
Section 2.3 Board of Directors; Officer..........................................2
Section 2.4 Effects of Merger....................................................2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Shares of Company Common Stock.........................3
Section 3.2 Surrender and Payment................................................3
Section 3.3 Dissenting Shares....................................................5
Section 3.4 Stock Options........................................................5
Section 3.5 Shareholders' Meetings...............................................7
Section 3.6 Assistance in Consummation of the Merger.............................8
Section 3.7 Closing..............................................................8
Section 3.8 Filing of Certificate of Merger......................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.1 Organization and Qualification.......................................8
Section 4.2 Authority Relative to this Merger Agreemen...........................9
Section 4.3 Consents and Approvals; No Violations................................9
Section 4.4 Financial Advisor....................................................9
Section 4.5 Financing............................................................9
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and Qualification......................................10
Section 5.2 Capitalization......................................................10
i
Section 5.3 Subsidiaries........................................................10
Section 5.4 Authority Relative to this Merger Agreement.........................11
Section 5.5 Consents and Approvals; No Violations...............................11
Section 5.6 Reports and Financial Statements....................................12
Section 5.7 Absence of Certain Changes or Events................................12
Section 5.8 Litigation..........................................................12
Section 5.9 Information in Disclosure Documents.................................13
Section 5.10 Employee Benefit Plans..............................................13
Section 5.11 ERISA...............................................................14
Section 5.12 Company Action......................................................15
Section 5.13 Fairness Opinion....................................................15
Section 5.14 Financial Advisor...................................................15
Section 5.15 Compliance with Applicable Laws.....................................15
Section 5.16 Liabilities.........................................................16
Section 5.17 Taxes...............................................................16
Section 5.18 Certain Agreements..................................................17
Section 5.19 Patents, Trademark, Etc.............................................18
Section 5.20 Title to Assets; Liens..............................................18
Section 5.21 Required Vote.......................................................18
Section 5.22 Insurance...........................................................18
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger...............18
Section 6.2 Notice of Breach....................................................20
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information; Environmental and Year 2000 Compliance......20
Section 7.2 Shareholders'Meeting; Filings.......................................21
Section 7.3 Employment Arrangements.............................................21
Section 7.4 Employee Benefits...................................................21
Section 7.5 Indemnification.....................................................21
Section 7.6 Consents............................................................21
Section 7.7 Antitrust Filings...................................................21
Section 7.8 Additional Agreements...............................................21
Section 7.9 No Solicitation.....................................................21
Section 7.10 Split-Off of A&S....................................................21
Section 7.11 Confidentiality.....................................................21
ARTICLE VIII
CONDITIONS PRECEDENT
ii
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger..........21
Section 8.2 Conditions to Obligation of the Company to Effect the Merger........21
Section 8.3 Conditions to Obligation of Parent and Sub to Effect the Merger.....21
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination.........................................................21
Section 9.2 Effect of Termination...............................................21
Section 9.3 Amendment...........................................................21
Section 9.4 Waiver..............................................................21
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements..........21
Section 10.2 Notices.............................................................21
Section 10.3 Fees and Expenses...................................................21
Section 10.4 Publicity...........................................................21
Section 10.5 Specific Performance................................................21
Section 10.6 Interpretation......................................................21
Section 10.7 Third Party Beneficiaries...........................................21
Section 10.8 Miscellaneous.......................................................21
Section 10.9 Cure Period.........................................................21
Section 10.10 Validity............................................................21
Exhibit A Transition Agreement
Exhibit B Tax Sharing Agreement
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated
as of April 30, 1999, by and among PENTAIR, INC., a Minnesota corporation
("Parent"), NORTHSTAR ACQUISITION COMPANY, an Ohio corporation and a wholly
owned subsidiary of Parent ("Sub"), and ESSEF CORPORATION, an Ohio
corporation (the "Company").
RECITALS
WHEREAS, the respective boards of directors of Parent, Sub and the
Company have determined that it is fair to, and in the best interests of
their respective stockholders to consummate the acquisition of the Company
(other than the swimming pool installation business thereof) by Parent upon
the terms and subject to the conditions set forth herein; and
WHEREAS, as part of the Merger (as defined below), ▇▇▇▇▇▇▇ & Sylvan
Pools Corporation, an Ohio corporation and an indirect wholly-owned
subsidiary of the Company (including any successor in interest, "A&S"), will
be split-off from the Company, in a manner (as provided in the Transition
Agreement, dated as of the date hereof, among the Company, A&S and the Parent
attached hereto as Exhibit A (the "Transition Agreement")) whereby the holder
of shares of Company common stock, without par value ("Company Common Stock")
will receive 100% of the shares of common stock, without par value, of A&S
(the "Split-Off") in consideration for the redemption of a portion of their
shares of Company Common Stock; and
WHEREAS, in furtherance of the acquisition, the respective boards of
directors of Parent, Sub and the Company have approved the merger of Sub with
and into the Company (the "Merger") in accordance with the Ohio General
Corporation Law ("OGCL") whereby each issued and outstanding share of Company
Common Stock (other than shares of Company Common Stock held by the Company
as treasury stock or owned by Parent, Sub or any other Subsidiary (as defined
in Section 10.6 below) of Parent immediately prior to the Effective Time and
other than Dissenting Shares (as defined in Section 3.3 hereof)), will be
converted into the right to receive (i) the Cash Consideration (as defined in
Section 3.1(c) hereof) and (ii) the Split-Off Consideration (as defined in
Section 3.1(c) hereof) as set forth below; and
WHEREAS, as set forth in Section 7.10(a) hereof, as a condition to
and in consideration of the transactions contemplated hereby, following the
date hereof the Company, A&S and certain other parties will enter into a Tax
Sharing Agreement substantially in the form attached hereto as Exhibit B with
such changes as shall have been properly approved prior to the consummation
of the Merger (the "Tax Sharing Agreement" and together with the Transition
Agreement, hereafter collectively referred to as the "Ancillary Agreements");
and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
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NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the
conditions hereof and in accordance with the OGCL, at the Effective Time (as
defined below in Section 1.2), Sub shall be merged into the Company and the
separate existence of Sub shall thereupon cease, and the name of the Company,
as the surviving corporation in the Merger (the "Surviving Corporation"),
shall by virtue of the Merger be "Essef Corporation."
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective when a properly executed Certificate of Merger is duly filed with
the Secretary of State of the State of Ohio in accordance with the OGCL,
which filing shall be made as soon as practicable after the closing of the
transactions contemplated by this Merger Agreement in accordance with Section
3.8. When used in this Merger Agreement, the term "Effective Time" shall mean
the date and time at which such filing shall have been made.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 ARTICLES. The Surviving Corporation shall adopt the
Articles of Incorporation of Sub in effect immediately prior to the Merger as
the Articles of Incorporation of the Surviving Corporation until amended in
accordance with its terms and as provided by law and this Merger Agreement.
Section 2.2 REGULATIONS. The Surviving Corporation shall adopt
the Regulations of Sub as in effect at the Effective Time as the Regulations
of the Surviving Corporation.
Section 2.3 BOARD OF DIRECTORS; OFFICERS. The directors of Sub
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation and the officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected and qualified in the
manner provided in the Articles of Incorporation and Regulations of the
Surviving Corporation.
Section 2.4 EFFECTS OF MERGER. The Merger shall have the effects
set forth in the applicable provisions of the OGCL. Without limiting the
generality of the foregoing, and subject thereto at the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all restrictions, debts, liabilities and duties
of the Sub.
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ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF SHARES OF COMPANY COMMON STOCK. At the
Effective Time:
(a) CANCELLATION OF CERTAIN STOCK. Each share of Company Common
Stock held by the Company as treasury stock or owned by Parent, Sub or any
other Subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired and cease to exist, and no payment
shall be made with respect thereto; provided, that shares of Company Common
Stock held beneficially or of record by any plan, program or arrangement
sponsored or maintained for the benefit of employees of Parent or the Company
or any Subsidiaries thereof shall not be deemed to be held by Parent or the
Company regardless of whether Parent or Company has, directly or indirectly,
the power to vote or control the disposition of such shares of Company Common
Stock.
(b) CAPITAL STOCK OF SUB. Each share of common stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into and become one fully paid and non-assessable share of common stock, par
value $0.01, of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
(c) CONVERSION OF SHARES. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall, except
as otherwise provided in Sections 3.1(a) and 3.3 hereof, be converted into
the right to receive Nineteen Dollars and Nine Cents ($19.09) per share,
without interest (the "Cash Consideration") and 0.25 shares of A&S Common
Stock (as defined in the Transition Agreement) (the "Split-Off
Consideration").
Section 3.2 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent and Company shall jointly
appoint a depositary (the "Depositary") for the purpose of exchanging
certificates representing shares of Company Common Stock for the Cash
Consideration and the Split-Off Consideration. The Depositary shall be Bank
of America National Trust and Savings Association. Parent will pay to the
Depositary immediately prior to the Effective Time, the Cash Consideration,
and the Company shall cause A&S to deposit with the Depositary the Split-Off
Consideration (comprised of shares of A&S Common Stock and cash sufficient to
pay any fractional shares), to be paid in respect of the shares of Company
Common Stock. For purposes of determining the Cash Consideration and the
Split-Off Consideration to be so paid, Parent and Company shall assume that
no holder of shares of Company Common Stock will perfect his right to
appraisal of his shares of Company Common Stock. Promptly after the Effective
Time, Parent will send, or will cause the Depositary to send, but in no event
later than three (3) business days after the Effective Time, to each holder
of shares of Company Common Stock at the Effective Time a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing shares of Company Common Stock to
the Depositary) and instructions for use in effecting the surrender of shares
of Company Common Stock in exchange
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for the Cash Consideration and Split-Off Consideration, and no interest shall
accrue or be paid on any Cash Consideration payable upon the surrender of
certificates.
(b) Each holder of shares of Company Common Stock that have been
converted into the right to receive the Cash Consideration and Split-Off
Consideration, upon surrender to the Depositary of a certificate or
certificates properly representing such shares of Company Common Stock,
together with a properly completed letter of transmittal covering such shares
of Company Common Stock, will be entitled to receive the Cash Consideration
and Split-Off Consideration payable in respect of such shares of Company
Common Stock less any amounts required to be withheld under applicable
federal, state, local or foreign income tax regulations. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes, only the right to receive such Cash Consideration and
Split-Off Consideration. No certificates representing fractional shares of
A&S Common Stock shall be issued upon the surrender for exchange of shares of
Company Common Stock, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights as a shareholder of A&S.
Each holder of shares of Company Common Stock who would otherwise be entitled
to receive a fractional share of A&S Common Stock shall receive from the
Depositary an amount in cash (the "Fractional Share Payment") equal to the
product obtained by multiplying (i) the fractional share interest to which
such holder (after taking into account all shares of Company Common Stock
held at the Effective Time by such holder) would otherwise be entitled by
(ii) the mean between the high and low trading prices of A&S Common Stock on
the first full day of trading following the Closing (as defined in Section
3.7 below) (the "Trading Value").
(c) If any portion of the Cash Consideration and Split-Off
Consideration is to be paid to a Person other than the registered holder of
the shares of Company Common Stock represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to
such payment that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Depositary any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such shares of Company Common Stock or establish to the
satisfaction of the Depositary that such tax has been paid or is not payable.
For purposes of this Merger Agreement, "Person" means an individual, a
corporation, limited liability company, a partnership, an association, a
trust or any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration
of transfers of shares of Company Common Stock. If, after the Effective Time,
certificates representing shares of Company Common Stock are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth,
in this Article III. From and after the Effective Time, holders of
certificates theretofore evidencing shares of Company Common Stock shall
cease to have any rights as shareholders of the Company, except as provided
herein or by law.
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(e) Any portion of the Cash Consideration paid to the Depositary
pursuant to Section 3.2(a) that remains unclaimed by the holders of shares of
Company Common Stock one year after the Effective Time shall be returned to
the Surviving Corporation, including any interest thereon, and any portion of
the Split-Off Consideration (including, any interest on the cash deposited
for Fractional Share Payments) paid to the Depositary pursuant to Section
3.2(a) that remains unclaimed by the holders of shares of Company Common
Stock one year after the Effective Time shall be returned to A&S, upon
written demand, and any such holder who has not exchanged his shares of
Company Common Stock for the Cash Consideration and Split-Off Consideration
in accordance with this Section 3.2(a) prior to that time shall thereafter
look only to the Surviving Corporation for payment of the Cash Consideration
and A&S for payment of the Split-Off Consideration in respect of his shares
of Company Common Stock, without any interest thereon. Notwithstanding the
foregoing, Parent, Sub and the Surviving Corporation shall not be liable to
any holder of shares of Company Common Stock for any amount paid to a public
official pursuant to applicable abandoned property laws. Any Cash
Consideration or Split-Off Consideration remaining unclaimed by holders of
shares of Company Common Stock on the day immediately prior to such times as
such amounts would otherwise escheat to or become property of any
governmental entity shall, to the extent permitted by applicable law, in the
case of the Cash Consideration become the property of Parent, and in the case
of the Split-Off Consideration become the property of A&S, free and clear of
any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Cash Consideration and Split-Off
Consideration paid to the Depositary pursuant to Section 3.2(a) hereof to pay
for shares of Company Common Stock for which appraisal rights have been
perfected shall be returned to the Surviving Corporation and A&S,
respectively, upon written demand.
Section 3.3 DISSENTING SHARES. Notwithstanding Section 3.1 hereof,
shares of Company Common Stock issued and outstanding immediately prior to
the Effective Time and held by a holder who has properly exercised and
perfected appraisal rights under Section 1701.85 of the OGCL (the "Dissenting
Shares"), shall not be converted into the right to receive the Cash
Consideration and Split-Off Consideration, but the holders of Dissenting
Shares shall be entitled to receive such consideration as shall be determined
pursuant to said Section 1701.85; provided, however, that if any such holder
shall have failed to perfect or shall withdraw or lose his right to appraisal
and payment under the OGCL, such holder's shares shall thereupon be deemed to
have been converted as of the Effective Time into the right to receive the
Cash Consideration and Split-Off Consideration, without any interest thereon,
and such shares of Company Common Stock shall no longer be Dissenting Shares.
The Company shall give Parent (i) prompt notice of any written demands for
payment, withdrawals of demands for payment and any other instruments served
pursuant to the OGCL received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for payment
under the OGCL. The Company will not voluntarily make any payment with
respect to any demands for payment and will not, except with the prior
written consent of Parent, settle or offer to settle any such demands.
Section 3.4 STOCK OPTIONS.
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(a) Except as provided in Section 3.4(c) below, the Company shall
take all actions (including, but not limited to, obtaining any and all
consents from employees to the matters contemplated by this Section 3.4)
necessary to provide that all outstanding options and other rights to acquire
shares ("Stock Options") granted under any stock option or deferred
compensation plan, program or similar arrangement or any employment agreement
of the Company or any Subsidiaries other than options, if any, of A&S, each
as amended (the "Option Plans"), shall become fully exercisable and vested on
the date (the "Vesting Date") which shall be set by the Company and which, in
any event, shall be not less than thirty (30) days prior to the Effective
Time, whether or not otherwise exercisable and vested. All Stock Options
which are outstanding immediately prior to the Effective Time shall be
cancelled as of the Effective Time and the holders thereof shall be entitled
to receive from the Company, for each share of Company Common Stock subject
to such Stock Option, (i) an amount in cash equal to the difference between
the Cash Consideration and the exercise price per share of such Stock Option,
which amount shall be payable at the Effective Time, plus (ii) 0.25 shares of
A&S Common Stock (and in the case of fractional shares, the Fractional Share
Payment), which shall be held by the Depositary pending delivery after the
Effective Time. All applicable withholding taxes attributable to the payments
made hereunder or to distributions contemplated hereby shall be deducted from
the amounts payable under clauses (i) and (ii) above and all such taxes
attributable to the exercise of Stock Options on or after the Vesting Date
shall be withheld from the proceeds received in the Merger, in respect of the
shares of Company Common Stock issuable on such exercise.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, (i) the Option Plans
shall terminate as of the Effective Time and the provisions in any other
plan, program or arrangement, providing for the issuance or grant by the
Company or any of its Subsidiaries of any interest in respect of the capital
stock of the Company or any of its Subsidiaries shall be deleted as of the
Effective Time and (ii) the Company shall use all reasonable efforts to
ensure that following the Effective Time no holder of Stock Options or any
participant in the Option Plans or any other such plans, programs or
arrangements shall have any right thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof.
(c) (i) With respect to the employees identified on Schedule 3.4(c)
of the Company Disclosure Schedule who will remain as employees or
directors of A&S (the "Optionees" and individually an "Optionee"), the
Company agrees to take all actions (including, but not limited to,
obtaining any and all consents from the Optionees to the matters
contemplated by this Section 3.4(c) and causing A&S to take such
actions as are necessary to accomplish the matters contemplated by this
Section 3.4(c)) necessary to provide that (A) the Stock Options
identified on Schedule 3.4(c) of the Company Disclosure Schedule are
amended in such a fashion that each Optionee has the right under such
options to purchase (subsequent to the Merger) that number of shares of
Company Common Stock that represents the same proportionate interest in
the Company that such Optionee had the right to purchase prior to the
Merger (such option hereafter referred to as the "Post-Merger Company
Option") with appropriate adjustments (if necessary as specified below)
in the exercise price of such Option and (B) such Optionee is granted a
stock option (with terms equivalent to the terms in the Optionee's
option to purchase Company Common Stock and with an exercise price as
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specified in this Section 3.4(c)) to purchase that number of shares of
A&S Common Stock that represents a proportionate interest in A&S equal
to the proportionate interest in the Company that the Optionee's option
to purchase Company Common Stock represented (the "A&S Option").
(ii) (A) The amendment contemplated by Section 3.4(c)(i)(A)
shall be accomplished by reducing the option price of the Post-Merger
Company Option to a price equal to the option price (immediately before
the Merger) multiplied by a fraction, the numerator of which is the
aggregate value of Company Common Stock immediately subsequent to the
Merger (utilizing $19.09 as the per share value of such Common Stock)
and the denominator of which is the sum of such aggregate value of the
Company Common Stock and the aggregate value of A&S Common Stock
immediately subsequent to the Merger (based on the value of A&S Common
Stock as determined pursuant to Section 5 of the Tax Sharing Agreement)
and (B) the A&S Option shall have a per-share exercise price that bears
the same relation to the per-share value of A&S Common Stock as the
per-share exercise price of the Post-Merger Company Option (adjusted as
provided in clause (A)) bears to $19.09.
(iii) Immediately after the amendment contemplated in Section
3.4(c)(i)(A), all Post-Merger Company Options shall be cancelled and
the holders thereof shall be entitled to receive from the Company for
each share of Company Common Stock subject to such Post-Merger Company
Option an amount in cash equal to the difference between the Cash
Consideration and the exercise price of such Post-Merger Company
Option.
(iv) For all purposes of this Section 3.4(c), the term
"proportionate interest" shall be determined on the basis of the
percentage interest of Company or A&S Common Stock (as the case may be)
that such Optionee would own after the exercise of all Stock Options
(as defined in Section 3.4(a)) in the case of the Company and all A&S
Options in the case of A&S.
Section 3.5 SHAREHOLDERS' MEETINGS. (a) In order to consummate
the Merger, the Company, acting through its board of directors, shall, in
accordance with applicable law, the Company's Third Amended Articles of
Incorporation and its Regulations:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders for the purpose of considering and taking
action upon this Merger Agreement (the "Shareholders' Meeting");
(ii) subject to its fiduciary duties under applicable laws as
advised by counsel, include in the proxy statement or information
statement prepared by the Company for distribution to shareholders of
the Company in advance of the Shareholders' Meeting in accordance with
Regulation 14A promulgated under the Exchange Act (the "Company Proxy
Statement") the recommendation of its board of directors; and
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(iii) use its best efforts to (A) obtain and furnish the
information required to be included by it in the Company Proxy
Statement, and, after consultation with Parent, respond promptly to any
comments made by the Commission with respect to the Company Proxy
Statement and any preliminary version thereof and cause the Company
Proxy Statement to be mailed to its shareholders and (B) obtain the
necessary approvals of this Merger Agreement by its shareholders.
(b) Parent will provide the Company with information concerning
Parent and Sub required to be included in the Company Proxy Statement and
will vote, or cause to be voted, all shares of Company Common Stock owned by
it or its Subsidiaries in favor of approval and adoption of this Merger
Agreement.
Section 3.6 ASSISTANCE IN CONSUMMATION OF THE MERGER. Each of
Parent, Sub and the Company shall provide all reasonable assistance to, and
shall cooperate with, each other to bring about the consummation of the
Merger as soon as possible in accordance with the terms and conditions of
this Merger Agreement. Parent shall cause Sub to perform all of its
obligations in connection with this Merger Agreement.
Section 3.7 CLOSING. The closing (the "Closing") of the
transactions contemplated by this Merger Agreement shall take place (i) at
the offices of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at 9:00 A.M. local time on the second
business day after the day on which the last of the conditions set forth in
Article VII is fulfilled or waived, PROVIDED, HOWEVER, that the closing shall
take place on or within 10 days after the last day of a month, or (ii) at
such other time and place as Parent and the Company shall agree in writing
(the "Closing Date").
Section 3.8 FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof as soon as practicable following the
Closing, the Company shall execute and file a certificate of merger in the
manner required by the OGCL and the parties hereto shall take all such other
and further actions as may be required by applicable law to make the Merger
effective.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company, except as set
forth in a disclosure schedule delivered by Parent and Sub concurrently
herewith (the "Parent and Sub Disclosure Schedule"), as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and carry on its
business as it is now being conducted or currently proposed to be conducted.
Section 4.2 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. Each of
Parent and Sub has the corporate power to enter into this Merger Agreement
and to carry out its obligations hereunder. The
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execution and delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the boards of
directors of Parent and Sub. This Merger Agreement constitutes a valid and
binding obligation of each of Parent and Sub enforceable in accordance with
its terms except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. No other corporate proceedings on the
part of Parent or Sub are necessary to authorize the Merger Agreement and the
transactions contemplated hereby.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither Parent
nor Sub is subject to or obligated under (i) any charter, by-law, indenture
or other loan document provision or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to either of them or
any of Parent's Subsidiaries or their respective properties or assets, which
would be breached or violated, or under which there would be a default (with
or without notice or lapse of time, or both), or under which there would
arise a right of termination, cancellation or acceleration of any obligation
or the loss of a material benefit, by its executing and carrying out this
Merger Agreement other than, in the case of clause (ii) only, the laws and
regulations referred to in the next sentence. Except as referred to herein or
in connection, or in compliance, with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 (the "Exchange Act"), and other governmental approvals
required under the applicable laws of any foreign jurisdiction ("Foreign
Laws") and the environmental, corporation, securities or blue sky laws or
regulations of the various states ("State Laws") (all of which required
consents and approvals under Foreign Laws and State Laws are identified in
Schedule 4.3 to the Parent and Sub Disclosure Schedule), no filing by Parent
or Sub or registration by Parent with any public body or authority is
necessary for, nor is any authorization, consent or approval of any public
body or authority required to be obtained by Parent or Sub for, the
consummation of the Merger or the other transactions contemplated by this
Merger Agreement.
Section 4.4 FINANCIAL ADVISOR. Except for Credit Suisse First
Boston Corporation, financial advisor to Parent and Sub ("Credit Suisse First
Boston"), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of Parent and Sub.
Section 4.5 FINANCING. Sub currently has sufficient funds, or has
a firm written commitment from one or more financial institutions and/or from
Parent (copies of all of which have been delivered to the Company), to enable
it to finance the consummation of the Merger.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub, except as set
forth in a disclosure schedule delivered by the Company concurrently herewith
(the "Company Disclosure Schedule"), as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio and has all requisite corporate power and authority
to own, lease and operate its properties and carry on its business as it is
now being conducted or currently proposed to be conducted. The Company is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to so qualify would not have a Company
Material Adverse Effect (as defined in Section 10.6). Complete and correct
copies as of the date hereof of the articles of incorporation and regulations
of the Company and each of its Subsidiaries have, to the extent requested,
been delivered to Parent as part of the Company Disclosure Schedule.
Section 5.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 40,000,000 shares of Company Common Stock and 1,000,000
shares of Preferred Stock, without par value ("Company Preferred Stock"). As
of February 28, 1999 and as adjusted to reflect the stock dividend paid by
the Company on March 10, 1999 to the shareholders of record on February 19,
1999 (the "Stock Dividend"), 13,062,741 shares of Company Common Stock were
validly issued and outstanding, fully paid and nonassessable, 618,127 shares
of Company Common Stock were held in treasury, no shares of Preferred Stock
had been issued, and there have been no material changes (other than as a
result of the Stock Dividend) in such numbers of shares through the date
hereof. Except for Stock Option exercises, no shares of Company Common Stock
have been issued since February 28, 1999. Schedule 5.2 of the Company
Disclosure Schedule sets forth as of the date of this Merger Agreement each
outstanding Stock Option issued under the Option Plans, including the holder,
date of grant, exercise price and number of shares of Company Common Stock
subject thereto. Except for such Stock Options, there are no outstanding
options, warrants, calls or other rights, agreements or commitments
obligating the Company to issue, deliver or sell shares of its capital stock
or debt securities or obligating the Company to grant, extend or enter into
any such option, warrant, call or other such right, agreement or commitment.
Section 5.3 SUBSIDIARIES. Schedule 5.3 of the Company Disclosure
Schedule lists each Subsidiary of the Company. Each of such Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the corporate power to
carry on its business as it is now being conducted or currently proposed to
be conducted. Each of such Subsidiaries is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where the
failure to so qualify would not have a Company Material Adverse Effect. All
the outstanding shares of capital stock of each of such Subsidiaries are
validly issued, fully paid and nonassessable and those owned by the Company
or by a Subsidiary of the Company are owned free and clear of any liens,
claims or
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encumbrances. There are no existing options, warrants, calls or other rights,
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any of the Subsidiaries of the Company
other than A&S. Except as set forth in Schedule 5.3 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association
or entity.
Section 5.4 AUTHORITY RELATIVE TO THIS MERGER AGREEMENT. The
Company has the corporate power to enter into this Merger Agreement, subject
to the requisite approval of this Merger Agreement by the holders of Company
Common Stock, and to carry out its obligations hereunder. The execution and
delivery of this Merger Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the board of directors of
the Company and to the extent necessary by the board of directors of A&S.
This Merger Agreement constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability
of equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
Except for the requisite approval of the holders of Company Common Stock, no
other corporate proceedings on the part of the Company are necessary to
authorize this Merger Agreement and the transactions contemplated hereby.
Section 5.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The Company is
not subject to or obligated under (i) any charter, by-law, indenture or other
loan document provision or (ii) any other contract, license, franchise,
permit, order, decree, concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective properties or assets which would be breached
or violated, or under which there would be a default (with or without notice
or lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by its executing and carrying out this Merger Agreement,
other than, in the case of clause (ii) only, the laws and regulations
referred to in the next sentence. Except as referred to herein or, with
respect to the Merger or the transactions contemplated thereby, in
connection, or in compliance, with the provisions of the HSR Act, the
Securities Act, the Exchange Act, the Foreign Laws and the State Laws (all of
which required consents and approvals under Foreign Laws and State Laws are
identified in Schedule 5.5 to the Company Disclosure Schedule), no filing by
the Company or registration by the Company with any public body or authority
is necessary for, nor is any authorization, consent or approval of any public
body or authority required to be obtained by the Company for, the
consummation of the Merger or the other transactions contemplated hereby.
Section 5.6 REPORTS AND FINANCIAL STATEMENTS. The Company has
previously furnished Parent with true and complete copies of its (i) Annual
Reports on Form 10-K for the three years ended September 30, 1996, 1997, and
1998, as filed with the Commission, (ii) Quarterly Reports on Form 10-Q for
the quarters ended March 30, 1998, June 30, 1998, and December 31, 1998 as
filed with the Commission, (iii) proxy statements related to all meetings of
its shareholders (whether annual or special) since December 31, 1996 and (iv)
all other reports or registration statements filed by the Company with the
Commission since December 31, 1996 which are all the documents (other than
preliminary materials) that the Company was required to file with the
Commission since that
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date (such documents identified in clauses (i) through (iv) (except
registration statements on Form S-8 relating to employee benefit plans and
the Form S-1 (as defined in the Transition Agreement (or any other
registration statement contemplated to be filed pursuant to the terms of the
Transition Agreement)) being referred to herein collectively as the "Company
SEC Reports")). As of their respective dates, the Company SEC Reports
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Company SEC Reports, and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC
Reports comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto, and the financial statements included in the Company
SEC Reports have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly present the
financial position of the Company and its Subsidiaries as at the dates
thereof and the results of their operations and changes in financial position
for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any other
adjustments described therein.
Section 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Company SEC Reports, since December 31, 1998, there has not
been (i) any event, condition, transaction, commitment, dispute or other
circumstance (financial or otherwise) of any character (whether or not in the
ordinary course of business) individually or in the aggregate having a
Company Material Adverse Effect; (ii) any damage, destruction or loss,
whether or not covered by insurance, which, insofar as reasonably can be
foreseen, in the future would have a Company Material Adverse Effect; (iii)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the capital
stock of the Company; or (iv) any entry into any commitment or transaction
material to the Company and its Subsidiaries taken as a whole (including,
without limitation, any borrowing or sale of assets) except in the ordinary
course of business consistent with past practice.
Section 5.8 LITIGATION.
(a) Except as disclosed in the Company SEC Reports, there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
either alone or in the aggregate, has, or is reasonably likely to have, a
Company Material Adverse Effect or would prevent, delay or otherwise
interfere with any of the transactions contemplated by this Merger Agreement,
nor is there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company or any of its Subsidiaries having, or
reasonably likely to have, either alone or in the aggregate, a Company
Material Adverse Effect or would prevent, delay or otherwise interfere with
any of the transactions contemplated by this Merger Agreement. Schedule 5.8
of the Company Disclosure Schedule sets forth all claims with respect to the
Company or any of its Subsidiaries, whether or not accrued for or covered by
insurance, where
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the amount in controversy exceeds $200,000. Schedule 5.8 of the Company
Disclosure Schedule sets forth all claims with respect to Products (as
defined in 5.8(b)(i) below) liability that have not been accrued for by the
Company in its consolidated financial statements or are not covered by the
Company's insurance policies. There has not been any adverse change in the
number, type or severity of claims with respect to Products during the last
three years. To the knowledge of the Company, none of the Products is the
subject of any Recall Campaign (as defined in 5.8(b)(ii) below) and no facts
or conditions exist which could reasonably be expected to result in such a
Recall Campaign, in each case, where the costs of such a Campaign would
exceed $200,000.
(b) For purposes of this Section 5.8, capitalized terms have the
following meanings:
(i) "Products" shall mean any and all products currently or at
any time previously designed, manufactured, distributed or sold by the
Company or its Subsidiaries, or by any predecessor of the Company or
its Subsidiaries.
(ii) "Recall Campaign" shall mean any formal action by the
Company or its Subsidiaries to order the return of any Product from all
known customers for such Product for repair, substitution or
replacement.
Section 5.9 INFORMATION IN DISCLOSURE DOCUMENTS. None of the
information with respect to the Company or its Subsidiaries to be included or
incorporated by reference in the Company Proxy Statement or the Form S-1 (or
any other registration statement contemplated to be filed pursuant to the
terms of the Transition Agreement) will, in the case of the Company Proxy
Statement or any amendments or supplements thereto, and at the time of the
Shareholders' Meeting to be held in connection with the Merger, or in the
case of Form S-1 (or any other registration statement contemplated to be
filed pursuant to the terms of the Transition Agreement), at the time it
becomes effective and at the Effective Time contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company Proxy
Statement and the Form S-1 (or any other registration statement contemplated
to be filed pursuant to the terms of the Transition Agreement) will comply in
all material respects with the Exchange Act (and the rules and regulations
promulgated thereunder) and the Securities Act (and the rules and regulations
promulgated thereunder).
Section 5.10 EMPLOYEE BENEFIT PLANS. Except as disclosed in the
Company SEC Reports or as set forth in Schedule 5.10 of the Company
Disclosure Schedule, there are no employee benefit, compensation or severance
plans, agreements or arrangements, including "employee benefit plans," as
defined in Section 3(3) of Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and including, but not limited to, plans, agreements or
arrangements relating to former employees, including, but not limited to,
retiree medical plans or post-employment life insurance plans, maintained by
the Company or any of its Subsidiaries or collective bargaining agreements to
which the Company or any of its Subsidiaries is a party (together, the
"Company Benefit Plans"). To the knowledge of the Company, no default exists
with respect to the obligations of the Company or any of its Subsidiaries
under such Company Benefit Plans. Since December 31, 1998, there have been no
disputes or grievances subject to any grievance procedure, unfair labor
practice proceedings, arbitration or litigation occurring or threatened under
such Company Benefit Plans, which have not
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been finally resolved, settled or otherwise disposed of, nor is there any
default, or any condition which, with notice or lapse of time or both, would
constitute such a default, under any such Company Benefit Plans, by the
Company or its Subsidiaries or, to the knowledge of the Company and its
Subsidiaries, any other party thereto. Since December 31, 1998, there have
been no strikes, lockouts or work stoppages or slowdowns, or to the knowledge
of the Company and its Subsidiaries, jurisdictional disputes or organizing
activity occurring or threatened with respect to the business or operations
of the Company or its Subsidiaries. Except as disclosed in the Company SEC
Reports or as set forth in Schedule 5.10 of the Company Disclosure Schedule,
neither the execution of the Merger Agreement nor the consummation of the
transactions contemplated hereby will (either alone or upon the occurrence of
additional events or acts) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to
any employee of the Company or any of its Subsidiaries. Notwithstanding
anything stated in this Section 5.10 to the contrary, with respect to the
severance plans or arrangements for the officers of the Company and its
Subsidiaries, Schedule 5.10 of the Disclosure Schedule sets forth to the
knowledge of the Company only such plans or arrangements for which the costs
will exceed $100,000 per individual plan or arrangement or $500,000 in the
aggregate for all such plans or arrangements.
Section 5.11 ERISA. The Company Benefit Plans have been
administered in compliance in all material respects with applicable laws and
regulations such that no condition exists with respect to the Company Benefit
Plans that could have a Company Material Adverse Effect. Each of the Company
Benefit Plans which is intended to meet the requirements of Section 401(a) of
the Code has been determined by the Internal Revenue Service to be
"qualified," within the meaning of such section of the Code, and the Company
knows of no fact which is likely to have a material adverse effect on the
qualified status of such plans. To the knowledge of the Company, there are
not now nor have there been any non-exempt "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving the Company Benefit Plans which could subject the Company, its
Subsidiaries or Parent to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. Except as set forth in Schedule 5.11 of
the Company Disclosure Schedule, no Company Benefit Plan which is subject to
Title IV of ERISA has been completely or partially terminated, no proceedings
to completely or partially terminate any Company Benefit Plan have been
instituted within the meaning of Subtitle C of said Title IV of ERISA; and no
reportable event, within the meaning of Section 4043(c) of said Subtitle C
for which the 30-day notice requirement of ERISA has not been waived, has
occurred with respect to any Company Benefit Plan. Neither the Company nor
any of its Subsidiaries has made a complete or partial withdrawal, within the
meaning of Section 4201 of ERISA, from any multiemployer plan which has
resulted in, or is reasonably expected to result in, any withdrawal liability
to the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has engaged in any transaction described in Section 4069 of
ERISA within the last five (5) years. To the knowledge of the Company, there
does not now exist, nor do any circumstances exist that could result in, any
material liability of the Company or any of its Subsidiaries (or any entity,
trade or business that is or was at any time required to be aggregated with
the Company or any of its Subsidiaries under Section 414(b), (c), (m) or (o)
of the Code) under Title IV of ERISA, Section 302 of ERISA, Sections 412 and
4971 of the Code, the continuation coverage requirements of Section 601 ET
SEQ. of ERISA and Section 4980B of the Code, and similar provisions of
foreign laws or regulations, other than such liabilities that arise solely
out of, or relate solely to, the Company Benefit Plans, that would have a
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Company Material Adverse Effect or a Parent Material Adverse Effect (as
defined in Section 10.6) following the Effective Time.
Section 5.12 COMPANY ACTION. The board of directors of the Company
(at a meeting duly called and held) has by the requisite vote of directors
(a) determined that the Merger is advisable and fair and in the best
interests of the Company and its shareholders, (b) approved the Merger in
accordance with the provisions of Section 1701.78 of the OGCL, and (c)
recommended the approval of this Merger Agreement and the Merger by the
holders of the Company Common Stock and directed that the Merger be submitted
for consideration by the Company's shareholders entitled to vote thereon at
the Shareholders' Meeting.
Section 5.13 FAIRNESS OPINION. The Company has received the
opinion of Rhone Group LLC, financial advisor to the Company ("Rhone Group"),
dated the date hereof, to the effect that the Cash Consideration and
Split-Off Consideration to be received by the holders of shares of Company
Common Stock pursuant to the terms of this Merger Agreement are fair from a
financial point of view to such holders, a copy of which has been or will be
delivered to Parent.
Section 5.14 FINANCIAL ADVISOR. Except for Rhone Group, no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger or the transactions
contemplated by this Merger Agreement and the Transition Agreement based upon
arrangements made by or on behalf of the Company. Schedule 5.14 of the
Company Disclosure Schedule contains a true and correct copy of the Company's
engagement letter with Rhone Group.
Section 5.15 COMPLIANCE WITH APPLICABLE LAWS. (i) The Company and
its Subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals (the "Company Permits") of all courts, administrative agencies
or commissions or other governmental authorities or instrumentalities,
domestic or foreign (each, a "Governmental Entity") necessary for the
operation of the businesses of the Company and its Subsidiaries; (ii) to the
knowledge of the Company, the Company and its Subsidiaries are in compliance
with the terms of the Company Permits; (iii) except as disclosed in the
Company SEC Reports, the businesses of the Company and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity; and (iv) no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending, or
threatened, nor has any Governmental Entity indicated an intention to conduct
the same.
Section 5.16 LIABILITIES. As of December 31, 1998, neither the
Company nor any of its Subsidiaries had any liabilities or obligations
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are not disclosed
or provided for in the most recent Company SEC Reports or which could result
in a Company Material Adverse Effect. To the knowledge of the Company, there
was no basis, as of December 31, 1998, for any claim or liability (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial
statements prepared in accordance with GAAP which is not reflected in the
Company SEC Reports.
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Section 5.17 TAXES. Except as otherwise disclosed in Schedule 5.17
of the Company Disclosure Schedule or as reflected in the Company SEC Reports
and except for those matters which, either individually or in the aggregate,
would not result in a Company Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have
had filed on their behalf) or will file or cause to be filed, all Tax Returns
(as defined in Section 5.17(h)(iii) hereof) required by applicable law to be
filed by any of them prior to the Effective Time.
(b) The Company and each of its Subsidiaries have paid (or have had
paid on their behalf) all Taxes (as defined in Section 5.17(h)(ii) hereof)
due with respect to any period ending prior to or as of the Effective Time),
or where payment of Taxes is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established before the consummation of the Merger,
an adequate accrual for the payment of all such Taxes which have accrued
prior to the Effective Time other than Taxes directly attributable to the
transactions contemplated by the Transition Agreement.
(c) No Audit (as defined in Section 5.17(h)(i)) is pending with
respect to any Taxes due from the Company or any Subsidiary. There are no
outstanding waivers extending the statutory period of limitations relating to
the payment of Taxes due from the Company or any Subsidiary for any taxable
period ending prior to the Effective Time which are expected to be
outstanding as of the Effective Time.
(d) Neither the Company nor any Subsidiary is a party to, is bound
by, or has any obligation under, a tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes, other than the Tax Sharing Agreement.
(e) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(f) Neither the Company nor any of its Subsidiaries has received
any written notice of deficiency, assessment or adjustment from the Internal
Revenue Service or any other domestic or foreign governmental taxing
authority that has not been fully paid or finally settled, and any such
deficiency, adjustment or assessment shown on such schedule is being
contested in good faith through appropriate proceedings and adequate reserves
have been established on the Company's financial statements therefor. To the
knowledge of the Company, there are no other deficiencies, assessments or
adjustments threatened, pending or assessed with respect to the Company or
any of its Subsidiaries.
(g) Except as contemplated by this Agreement and the Ancillary
Documents or as disclosed in the Company SEC Reports, neither the Company nor
any of its Subsidiaries is a party to any agreement, contract or other
arrangement that would result, separately or in the aggregate, in the
requirement to pay any "excess parachute payments" within the meaning of
Section 280G of the
- 16 -
Code or any gross-up in connection with such an agreement, contract or
arrangement. Schedule 5.17 of the Company Disclosure Schedule lists any
agreement, contract or other arrangement in which the Company or any Retained
Subsidiary is a party providing for any such "excess parachute payments" or
gross-ups.
(h) For purposes of this Section 5.17, capitalized terms have the
following meanings:
(i) "Audit" shall mean any audit, assessment or other
examination of Taxes or Tax Returns by the Internal Revenue Service or
any other domestic or foreign governmental authority responsible for
the administration of any Taxes, proceedings or appeal of such
proceedings relating to Taxes.
(ii) "Taxes" shall mean all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise and other taxes, duties and
assessments, charges, or other fees imposed by a governmental
authority, together with any interest, additions to tax, or penalties
imposed with respect thereto.
(iii) "Tax Returns" shall mean all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules,
forms and information returns and any amended Tax Return relating to
Taxes.
Section 5.18 CERTAIN AGREEMENTS. Except as filed as an exhibit to
the Company SEC Reports, neither the Company nor any of its Subsidiaries is a
party to or bound by any contract, agreement, arrangement, commitment or
understanding (whether written or oral) which as of the date hereof, is a
"material contract" (as defined in Item 601(b)(10) of Regulation S-K of the
Commission). Schedule 5.18 to the Company Disclosure Schedule contains true
and correct copies of all indemnification agreements between the Company and
officers, directors and employees of the Company and its Subsidiaries.
Section 5.19 PATENTS, TRADEMARK, ETC. The Company and its
Subsidiaries owns or possesses adequate licenses or other valid rights to use
all patents, trademarks, trade names, service marks, trade secrets,
copyrights and licenses and other proprietary intellectual property rights
and licenses ("Intellectual Property Rights") as are necessary in connection
with the conduct of the businesses of the Company and its Subsidiaries. The
Company does not have any knowledge of any infringement by any other person
of the Company's or its Subsidiaries' Intellectual Property Rights and, to
the knowledge of the Company, the Company and its Subsidiaries are not
infringing the Intellectual Property Rights of another person.
Section 5.20 TITLE TO ASSETS; LIENS. The Company has good and
marketable title to all of its inventory, accounts receivable, property,
equipment and other assets, and except as disclosed in the Company's SEC
Reports such assets are free and clear of any mortgages, liens, charges,
encumbrances, or title defects of any nature whatsoever. The Company and its
Subsidiaries have valid and enforceable leases for the premises and the
equipment, furniture and fixtures purported to be leased by them.
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Section 5.21 REQUIRED VOTE. The affirmative vote of the holders of
shares of Company Common Stock representing at least two-thirds of the votes
entitled to be cast at the Shareholders' Meeting is required to approve this
Merger Agreement. No other vote of any class or series of stock of the
Company is required by law, the Third Amended Articles of Incorporation or
Regulations of the Company or otherwise in order for the Company to
consummate the Merger and the transactions contemplated hereby.
Section 5.22 INSURANCE. The Company has previously delivered to
Parent a schedule of all policies of property, casualty, worker's
compensation, product liability, general liability and other insurance as
maintained by the Company and its Subsidiaries. All such policies are valid,
outstanding and enforceable and no notice of cancellation or termination has
been received with respect to any such policy.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Prior to the Effective Time and except as provided in Section 7.10 or the
Transition Agreement, unless Parent shall otherwise agree in writing after
written notice provided by the Company specifying in reasonable detail the
basis for any action by the Company or its Subsidiaries outside the scope of
agreed upon activities set forth in this Section 6.1 and at Parent's
election, a meeting with officials from the Company or its Subsidiaries, as
the case may be, to discuss the basis for such action:
(i) the Company shall, and shall cause its Subsidiaries to,
carry on their respective businesses in the usual, regular and ordinary
course in the same manner as heretofore conducted, and shall, and shall
cause its Subsidiaries to, use their diligent efforts to preserve
intact their present business organizations, keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business
dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time. The Company
shall, and shall cause its Subsidiaries to (A) maintain insurance
coverages and its books, accounts and records in the usual manner
consistent with prior practices; (B) comply in all material respects
with all laws, ordinances and regulations of Governmental Entities
applicable to the Company and its Subsidiaries; (C) maintain and keep
its properties and equipment in good repair, working order and
condition, ordinary wear and tear excepted; and (D) perform in all
material respects its obligations under all contracts and commitments
to which it is a party or by which it is bound, in each case other than
where the failure to so maintain, comply or perform, either
individually or in the aggregate, would not reasonably be expected to
result in a Company Material Adverse Effect;
(ii) the Company shall not and shall not propose to (A) sell or
pledge or agree to sell or pledge any capital stock owned by it in any
of its Subsidiaries, (B) amend its Third Amended Articles of
Incorporation or Regulations, (C) split, combine or reclassify its
outstanding capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of the Company, or
- 18 -
declare, set aside or pay any dividend or other distribution payable
in cash, stock or property (other than dividends declared, set aside
or paid in a manner consistent with the Company's past practice), or
(D) directly or indirectly redeem, purchase or otherwise acquire or
agree to redeem, purchase or otherwise acquire any shares of Company
capital stock;
(iii) the Company shall not, nor shall it permit any of its
Subsidiaries to, (A) issue, deliver or sell or agree to issue, deliver
or sell any additional shares of, or rights of any kind to acquire any
shares of, its capital stock of any class, or any option, rights or
warrants to acquire, or securities convertible into, shares of capital
stock other than issuances of Company Common Stock pursuant to the
exercise of Stock Options, (B) except as provided for in the Company's
capital expenditure budget for the fiscal year ending September 30,
1999 (the "Capital Expenditure Budget"), acquire, lease or dispose or
agree to acquire, lease or dispose of any capital assets in excess of
$1,000,000 or any other assets other than in the ordinary course of
business, (C) incur additional indebtedness other than in the ordinary
course of business for working capital purposes or as provided for in
the Capital Expenditure Budget or encumber or grant a security interest
in any asset in connection with such indebtedness; or (D) enter into
any binding contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(iv) the Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof;
PROVIDED, HOWEVER, that if after notice provided by the Company to
Parent, Parent fails to agree to any such merger, consolidation or
acquisition and this Agreement is later terminated, Parent and its
respective Affiliates shall be precluded from undertaking such merger,
consolidation or acquisition for a period of three (3) years following
the date of such termination;
(v) except as set forth in Schedule 6.1 of the Company
Disclosure Schedule, the Company shall not, nor shall it permit, any of
its Subsidiaries to, except as required to comply with applicable law
and except as provided in Section 7.4 hereof, (A) adopt, enter into,
terminate, expand the applicability of or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other Company Benefit
Plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or former employee, (B)
increase in any manner the compensation or fringe benefit of any
director, officer or employee (except for normal increases in the
ordinary course of business that are consistent with past practice and
that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company and its Subsidiaries
relative to the level in effect prior to such amendment), (C) pay any
benefit not provided under any existing plan or arrangement, (D) grant
any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Company Benefit Plan (including,
without limitation, the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any
benefit plans or agreements or awards made thereunder) except in the
ordinary course of business
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or in a manner consistent with past practice, (E) take any action to
fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement
or Company Benefit Plan other than in the ordinary course of business
consistent with past practice, or (F) adopt, enter into, amend or
terminate any binding contract, agreement, commitment or arrangement
to do any of the foregoing; and
(vi) the Company shall not, nor shall it permit any of its
Subsidiaries to, make any investments in non-investment grade
securities; PROVIDED, HOWEVER, that the Company will be permitted to
create new wholly owned Subsidiaries in the ordinary course of
business.
Section 6.2 NOTICE OF BREACH. Each party shall promptly give
written notice to the other party upon becoming aware of the occurrence or,
to its knowledge, impending or threatened occurrence, of any event which
would cause or constitute a breach of any of its representations, warranties
or covenants contained or referenced in this Merger Agreement and will use
its best efforts to prevent or promptly remedy the same. Any such
notification shall not be deemed an amendment of the Company Disclosure
Schedule or the Parent and Sub Disclosure Schedule.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION; ENVIRONMENTAL AND YEAR 2000
COMPLIANCE.
(a) Upon reasonable notice delivered to and at reasonable times
scheduled as soon as practicable following such notice by the Company's Vice
President-Finance all in a manner that will minimize disruptions of the
business and operations of the Company and its Subsidiaries and that is
sensitive to time and resource demands of the peak business periods of the
Company's pool equipment segment, (i) between the date of this Agreement and
the Cut-Off Date (as defined in Section 7.1(b) below), the Company will give
Parent and its authorized representatives, including Dames & ▇▇▇▇▇ Group or
another mutually agreed upon nationally recognized environmental consultant
("Parent's Environmental Consultant") and Deloitte & Touche LLP or another
mutually agreed upon nationally recognized year 2000 consultant ("Parent's
Year 2000 Consultant"), access to all offices and other facilities and to
senior management of it and its Subsidiaries, and will cause its officers and
those of its Subsidiaries to furnish Parent with (A) such financial,
environmental and operating data and other information with respect to the
Company and its Subsidiaries as Parent may from time to time reasonably
request, or (B) any other financial, environmental and operating data which
materially impacts the Company and its Subsidiaries and (ii) between the
period beginning on the Cut-Off Date and continuing through the Effective
Time, the Company will give Parent full and complete access to the Company's
continuing businesses, personnel and records, including, without limitation,
a review of business plans, major customers and suppliers, potential
synergies and cost savings, post-acquisition management and organizational
configuration, key employees, and capital plans. Notwithstanding the
foregoing if during the period beginning on the date of this Agreement and
ending on the Cut-Off Date, the parties reasonably believe that the
Established Claims (as determined in Section 7.1(b) below) will not exceed
the Claim Basket (as defined and determined in Section 7.1(b) below), then
the Company will accommodate (subject to the notice requirements and
sensitivities described above) increased due diligence as contemplated in
clause
- 20 -
(ii) above by the Parent prior to the Cut-Off Date. Without limiting the
foregoing, between the date of this Merger Agreement and the Effective Time,
the Company promptly will provide Parent with monthly management reports,
including interim financial statements of the Company, and such other
management reports as and when they are available.
(b) In connection with the performance of its due diligence, Parent
shall have the right at any time prior to the thirtieth day following the
date of this Agreement (the "Cut-Off Date") to deliver to the Company a
written claim (the "Claim Notice") specifying an amount reasonably determined
to be necessary to indemnify Parent for (i) the Company's Environmental
Non-Compliance Costs (as defined in Section 7.1(c)(ii) below), or (ii) the
Company's Year 2000 Non-Compliance Costs (as defined in Section 7.1(c)(iv)
below); PROVIDED, HOWEVER, that if Parent's Environmental Consultant, based
on its initial environmental investigation, reasonably determines that
additional environmental investigation is required to assess the Company's
Environmental Non-Compliance Conditions (as defined in Section 7.1(c)(i)
below), then Parent shall have an additional fifteen (15) day period in which
to deliver to the Company a Claim Notice with respect to the Company's
Environmental Non-Compliance Conditions and the "Cut-Off Date" shall mean the
forty-fifth day following the date of this Agreement. The Claim Notice must
set forth in reasonable detail the nature of the claim and be accompanied by
reports of Parent's Environmental Consultant and Parent's Year 2000
Consultant with respect to the Company's Environmental Non-Compliance
Conditions and Year 2000 Non-Compliance Conditions (as defined in Section
7.1(c)(iii) below) providing reasonable backup for such claims. If the cost
of any claim resulting from the Environmental Non-Compliance Conditions at a
Company property or location is equal to or exceeds $1,000,000 (an
"Extraordinary Claim"), then the Company shall have five (5) days after the
Company's receipt of the Claim Notice to provide Parent with a written notice
disputing such Extraordinary Claims (a "Counter Notice"). After providing a
Counter Notice to Parent, the Company shall have the right to retain Earth
Sciences Consultants, Inc. ("Company's Environmental Consultant") to consult,
for a period of (15) days after the Company's receipt of the Claim Notice,
with Parent's Environmental Consultant as to the appropriateness of, and the
amount of costs of remediation associated with, such Extraordinary Claims as
set forth in Parent's Environmental Consultant's Report. Within five (5) days
after the end of such fifteen (15) day period, Parent shall provide to the
Company a revised Claim Notice (the "Final Claim Notice") reflecting any
modifications Parent's Environmental Consultant have made, in their sole
discretion, to their report after taking into account such consultation with
Company's Environmental Consultant. The dollar amount of damages with respect
to claims for the Company's Environmental Non-Compliance Conditions and Year
2000 Non-Compliance Conditions (each, an "Established Claim") shall be (i)
the dollar amount of damages claimed by Parent as set forth in its Claim
Notice in the case of claims for the Company's Year 2000 Non-Compliance
Conditions and (ii) the dollar amount of damages claimed by Parent as set
forth in its Claim Notice, or if such Claim Notice is disputed by the
Company, as set forth in the Final Claim Notice, in the case of claims for
the Company's Environmental Non-Compliance Conditions. If, as of ten (10)
days after delivery of the Final Claim Notice to the Company, the sum of all
Established Claims is less than the amount (the "Claim Basket") equal to (x)
$5,000,000 less (y) any Excess Transaction Costs (as determined pursuant to
Section 10.3(c)), then Parent agrees to absorb all such costs without further
remedy. If, on the other hand, as of ten (10) days after delivery of the
Final Claim Notice to the Company, the sum of all Established Claims equals
or exceeds the Claim Basket, then each of the Parent and the Company
- 21 -
shall have the right to terminate this Agreement pursuant to Sections
9.1(d)(ii) and 9.1(e)(ii), respectively. Notwithstanding the foregoing, if
the dollar amount of damages with respect to claims relating to the Company's
Environmental Non-Compliance Conditions and Year 2000 Non-Compliance
Conditions, as set forth in either the Claim Notice, or if such Claim Notice
is disputed by the Company the Final Claim Notice, equals or exceeds the
Claim Basket, then the Company shall have the right to terminate this
Agreement pursuant to Section 9.1(d)(ii) immediately upon receipt of such a
Claim Notice. This Section 7.1(b) shall constitute Parent's sole and
exclusive remedy with regard to the Company's Environmental Non-Compliance
Conditions and Year 2000 Non-Compliance Conditions and the Company's sole and
exclusive remedy with respect to disputes relating to claims with respect to
the Company's Environmental Non-Compliance Conditions and Year 2000
Non-Compliance Conditions.
(c) For purposes of this Section 7.1, capitalized terms have the
following meanings:
(i) "Environmental Non-Compliance Condition" shall mean (A)
the presence of a hazardous substance discharge at any property owned,
leased or previously owned or leased by the Company or its
Subsidiaries or their predecessors in interest or at any location
where the Company or its Subsidiaries could be held responsible for
investigation or cleanup activities resulting from actual or alleged
offsite disposal of hazardous substances or (B) non-compliance with
any federal, state, local or foreign statute, regulation,
administrative order, rule, law, license, permit or ordinance
concerning human health or safety or pollution or protection of the
environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing,
processing, emission, reporting, notification, discharge, release,
threatened release, control, or clean-up of any hazardous materials,
substances or wastes, including, for the purposes of this Section
7.1(c)(i), actual and reasonably anticipated fines, penalties and
forfeitures related to such Environmental Non-Compliance, as such
statutes, regulations and ordinances are enacted and in effect on or
prior to the Cut-Off Date.
(ii) "Environmental Non-Compliance Costs" shall mean an amount
reasonably determined based on good faith estimates and assumptions by
Parent and Parent's Environmental Consultant to be necessary to
indemnify Parent for any known or reasonably anticipated claims,
losses, damages, costs (including attorneys' and consultants' fees and
expenses) associated with any action that would need to be taken to
evaluate, defend a proceeding, investigate, remediate or otherwise
respond to, or liabilities resulting from, an Environmental
Non-Compliance Condition, that (i) is the subject of an environmental
claim by a third party, (ii) in the opinion of Parent's environmental
counsel, imposes upon the Company or its Subsidiaries a duty to act,
or (iii) in the opinion of Parent's Environmental Consultant or
environmental counsel, is of a nature or severity that it is proper
environmental compliance practice or necessary to act to avoid the
risk of either non-compliance with environmental law or for the
avoidance or mitigation of any environmental claims.
(iii) "Year 2000 Non-Compliance Condition" shall mean (A) with
respect to Date Data (as defined below), the failure of such data to
be in proper format for all dates in the twentieth and twenty-first
centuries, and (B) with respect to Date Sensitive Systems (as
- 22 -
defined below), the inability of each such system to accurately
process all Date Data, including for the twentieth and twenty-first
centuries, without loss of any functionality or performance,
including but not limited to calculating, comparing, sequencing,
storing and displaying such Date Data, when used as a stand-alone
system or in combination with other software or hardware. As used
herein, (x) "Date Data" means any data of the Company of any type
that includes date information or which is otherwise derived from,
dependent on or related to date information, and (y) "Date Sensitive
System" means any software, microcode or hardware system or component
or other personal property or equipment, including any electric or
electronically controlled system or component, that processes any
Date Data and that is installed, in development or on order by the
Company or any Subsidiary of the Company for their internal use, or
which the Company or any Subsidiary of the Company sells, leases,
licenses, assigns or otherwise provides, or the provision or
operation of which the Company and any Subsidiary of the Company
provides the benefit, to its customers, vendors, suppliers,
affiliates or any other third party.
(iv) "Year 2000 Non-Compliance Cost" shall mean an amount
reasonably determined to be necessary based on good faith estimates and
assumptions by Parent or Parent's Year 2000 Consultant to be necessary
to indemnify Parent for any known or reasonably anticipated claims,
losses, damages, costs (including attorneys' and consultants' fees and
expenses) associated with any actions to avoid disruption of the
Company's or its Subsidiaries' business as a result of, or liabilities
resulting from a Year 2000 Non-Compliance Condition; except as provided
for in, or demonstrated by the Company to be part of, the Capital
Expenditure Budget.
Section 7.2 SHAREHOLDERS' MEETING; FILINGS. (a) In connection
with the Shareholders' Meeting, the Company shall (i) use its reasonable
efforts to obtain the necessary approval by its shareholders of this Merger
Agreement and the transactions contemplated hereby and (ii) otherwise comply
in all material respects with all legal requirements applicable to such
meeting.
(b) Parent and the Company shall make all necessary filings with
respect to the Merger, under the Securities Act and the Exchange Act and the
rules and regulations thereunder, under applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto.
Section 7.3 EMPLOYMENT ARRANGEMENTS. After the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, honor in
accordance with their terms, all written or announced employment, severance,
consulting and other compensation contracts between the Company or any of its
Subsidiaries and any current or former director, officer or employee thereof,
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under any Company Benefit Plan, each as of
the date hereof except for changes thereto which are (i) not material, (ii)
permitted by this Merger Agreement, or (iii) otherwise agreed to by the
parties hereto.
Section 7.4 EMPLOYEE BENEFITS. Until December 31, 2000, Parent
shall provide, or shall cause the Surviving Corporation to provide, generally
to the officers and employees of the Surviving Corporation and its
Subsidiaries, employee benefits, including, without limitation, pension
benefits,
- 23 -
health and welfare benefits, severance arrangements, stock option plans and
other executive compensation arrangements, on terms and conditions in the
aggregate that are at least as favorable to employees as those provided under
the Company Benefit Plans as of the date hereof. To the extent Parent
provides employee benefit plans or arrangements maintained by the Parent to
employees of the Surviving Corporation and its Subsidiaries, Parent will give
full credit for purposes of eligibility and vesting under such employee
benefit plans or arrangements for such employees' service with the Company or
its Subsidiaries.
Section 7.5 INDEMNIFICATION. (a) From and after the Effective
Time, Parent shall indemnify, defend and hold harmless the officers,
directors and employees of the Company and its Subsidiaries (the "Indemnified
Parties") against all losses, expenses, claims, damages or liabilities (i)
arising out of the transactions contemplated by this Merger Agreement or
arising as a result thereof or (ii) otherwise arising prior to the Effective
Time to the fullest extent, in the case of (i) or (ii), permitted or required
under (A) applicable law, (B) any indemnification agreements between the
Company and any such person and (C) the Company's Third Amended Articles of
Incorporation and Regulations as filed in the Company SEC Reports as of the
Effective Time. Notwithstanding the foregoing, Parent shall have no
responsibility to indemnify, defend or hold harmless the Indemnified Parties
against any losses, expenses, claims, damages or liabilities (x) arising out
of the transactions contemplated by the Split-Off and the Transition
Agreement (including, without limitation, any liability with respect to the
Form S-1 (or any other registration statement filed pursuant to the terms of
the Transition Agreement) under the Securities Act) or (y) arising out of the
Company Proxy Statement.
(b) From and after the Effective Time, A&S shall indemnify, defend
and hold harmless Parent, the Company and their Subsidiaries, officers,
directors, employees, agents and representatives against all losses,
expenses, claims, damages or liabilities (i) arising out of the Split-Off and
the Transition Agreement (including, without limitation, any liability with
respect to the Form S-1 (or any other registration statement filed pursuant
to the terms of the Transition Agreement) under the Securities Act) or (ii)
arising out of the Company Proxy Statement, except, in each case, for
materials contained in the Form S-1 (or such other registration statement) or
the Company Proxy Statement provided in writing by the Parent to the Company.
Notwithstanding the foregoing, A&S shall have no responsibility to indemnify,
defend, or hold harmless the Company, its Subsidiaries, the Sub, Parent and
each of their respective directors, officers, employees, representatives,
advisors, agents and Affiliates with respect to any claims for Taxes arising
out of the Split-Off and the Transition Agreement, except to the extent
otherwise provided in the Tax Sharing Agreement.
(c) For a period of three (3) years after the Effective Time,
Parent agrees to cause the Surviving Corporation to maintain in effect the
current policies of directors and officers liability insurance maintained by
the Company (provided that Parent may substitute therefor policies with
reputable and financially sound carriers of at least the same coverage and
amounts containing terms and conditions which are no less advantageous) with
respect to claims arising from or related to facts or events which occurred
at or before the Effective Time.
- 24 -
(d) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Merger Agreement
is commenced, whether before or after the Effective Time, the parties hereto
agree to cooperate and use their respective reasonable efforts to vigorously
defend against and respond thereto.
(e) The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
Section 7.6 CONSENTS. Each of the parties shall cooperate and use
its reasonable best efforts to make all filings and obtain as promptly as
practicable all consents of any Governmental Entity or any other person
required in connection with, and waivers of any violations or rights of
termination that may be caused by, the consummation of the transactions
contemplated by this Agreement. Each of the parties hereto will furnish to
the other party such necessary information and reasonable assistance as such
other persons may reasonably request in connection with the foregoing.
Section 7.7 ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent
and Sub contained in Section 7.6 hereof, Parent, Sub and the Company will (i)
take promptly all actions necessary to make the filings required of Parent,
Sub or any of their affiliates under the applicable Antitrust Laws (as
defined in Section 7.7(d) hereof), (ii) comply at the earliest practicable
date with any request for additional information or documentary material
received by Parent, Sub or any of their affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant to
the HSR Act and from the Commission or any other Governmental Entity pursuant
to Antitrust Laws, and (iii) cooperate with the Company in connection with
any filing of the Company under applicable Antitrust Laws and in connection
with resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement or the Ancillary Agreements commenced by any
of the Federal Trade Commission, the Antitrust Division of the Department of
Justice, state attorneys general, the Commission, or any other Governmental
Entity.
(b) In furtherance and not in limitation of the covenants of Parent
and Sub contained in Section 7.6 and Section 7.7(a) hereof, Parent, Sub and
the Company shall each use all reasonable efforts to resolve such objections,
if any, as may be asserted with respect to the Split-Off, the Merger or any
other transactions contemplated by this Agreement or the Ancillary Agreements
under any Antitrust Law. If any administrative, judicial or legislative
action or proceeding is instituted (or threatened to be instituted)
challenging the Split-Off, the Merger or any other transactions contemplated
by this Agreement or the Ancillary Agreements as violative of any Antitrust
Law, Parent, Sub and the Company shall each cooperate to contest and resist
any such action or proceeding.
(c) Each of the Company, Parent and Sub shall promptly inform the
other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of
Justice, the Commission, any state attorney general or any other Governmental
Entity regarding any of the transactions contemplated hereby. Parent and/or
Sub will promptly advise the Company with respect to any understanding,
undertaking or agreement
- 25 -
(whether oral or written) which it proposes to make or enter into with any of
the foregoing parties with regard to any of the transactions contemplated
hereby.
(d) "Antitrust Law" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended,
and all other federal, state and foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that
are designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
Section 7.8 ADDITIONAL AGREEMENTS. (a) Subject to the terms and
conditions herein provided (including, without limitation, Section 7.6), each
of the parties hereto agrees to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Merger
Agreement, including, without limitation, (i) cooperating in the preparation
and filing of the Company Proxy Statement and any amendments thereof and (ii)
using all reasonable efforts to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings (including, but
not limited to, filings with all applicable Governmental Entities) and to
lift any injunction or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible), and the Split-Off.
Notwithstanding the foregoing, but subject to Section 7.6, there shall be no
action required to be taken and no action will be taken in order to
consummate and make effective the transactions contemplated by this Merger
Agreement or the Transition Agreement if such action, either alone or
together with another action, would be reasonably likely to result in a
Company Material Adverse Effect or a Parent Material Adverse Effect.
(b) In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Merger Agreement,
the proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
Section 7.9 NO SOLICITATION. (a) Neither the Company nor any of
its Subsidiaries shall, directly or indirectly, take (nor shall the Company
authorize or permit its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents
or affiliates, to take) any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal (as defined below), (ii) enter into
any agreement with respect to any Acquisition Proposal or (iii) participate
in any way in discussions or negotiations with, or furnish any information
to, any person in connection with, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal. The Company will promptly
communicate to Parent that such a solicitation or an inquiry has been
received by the Company, or that any such information has been requested from
it or that such negotiations or discussions have been sought to be initiated
with it and will keep Parent reasonably informed of the status and terms of
any Acquisition Proposal. As used herein, "Acquisition Proposal" shall mean
any proposed (A) merger, consolidation, share exchange or similar transaction
involving the Company or its Subsidiaries, (B) sale, lease or other
disposition, directly or indirectly, by merger, consolidation, share exchange
or otherwise of assets of the Company or its Subsidiaries representing 20% or
more of the consolidated assets of the Company and its Subsidiaries (other
than
- 26 -
A&S), (C) issue, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company, or
(D) transaction (including a tender offer or exchange offer) in which any
person would acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act) of, or the right to acquire beneficial
ownership, of (whether itself, as a member of any "group" (as such term is
defined under the Exchange Act) or otherwise) 20% or more of any class of
equity securities of the Company or its Subsidiaries.
(b) Notwithstanding anything in this Merger Agreement to the
contrary (including without limitation clause (a) of this Section 7.9), the
Company's board of directors may engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any Person relating to, or otherwise facilitate any effort or attempt
to make or implement, a written Acquisition Proposal which was not solicited
by the Company or which did not otherwise result in a breach of Section
7.9(a), if and only to the extent that (i) the Company's board of directors
determines in good faith after consultation with outside counsel that it is
necessary to do so to avoid a breach of its fiduciary duties to the Company
or its shareholders under applicable laws, (ii) the Company's board of
directors determines in good faith, after consultation with its financial
advisors and outside counsel, that such written proposal or indication of
interest constitutes a Superior Proposal (as defined below), (iii) the
Shareholders' Meeting shall not have occurred and (iv) the Company's board of
directors provides prior written notice to Parent of the information referred
to in the second sentence of Section 7.9(a). Prior to furnishing nonpublic
information to, or entering into discussions or negotiations with, any other
Persons, the Company shall obtain from such person or entity an executed
confidentiality agreement with terms no less favorable, taken as a whole, to
the Company than those contained in the Confidentiality Agreement, dated as
of October 21, 1998, between Parent and the Company (the "Confidentiality
Agreement"), but which confidentiality agreement shall not include any
provision calling for an exclusive right to negotiate with the Company, and
the Company shall advise Parent of the nature of such nonpublic information
delivered to such person reasonably promptly following its delivery to the
requesting party. Nothing in this Section 7.9 shall (x) permit either Parent
or the Company to terminate this Merger Agreement (except as specifically
provided in Article IX hereof) or (y) affect any other obligation of Parent
or the Company under this Merger Agreement.
(c) A "Superior Proposal" means a bona fide written Acquisition
Proposal which the Company's board of directors concludes in good faith
(after consultation with its financial advisors and outside counsel), taking
into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, (i) would, if consummated,
result in a transaction that is more favorable to the shareholders of the
Company than the transactions contemplated by this Merger Agreement and (ii)
is reasonably capable of being completed (PROVIDED that for purposes of this
definition, the term Acquisition Proposal shall have the meaning assigned to
such term in Section 7.9(a) except that the references to "20%" shall be
deemed references to "50%").
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Section 7.10 SPLIT-OFF OF A&S.
(a) Simultaneously with the execution hereof, the Company and A&S
are entering into the Transition Agreement. Immediately prior to the Closing
Date, the Company, A&S and certain other parties will enter into the Tax
Sharing Agreement. From and after the Effective Time, Parent shall cause the
Surviving Corporation to perform any and all obligations and agreements of
the Company set forth herein or in the Ancillary Agreements or in any other
agreements contemplated herein or therein.
(b) The Company, as promptly as practicable, shall use its best
efforts to cause the shares of A&S to be registered pursuant to the
Securities Act and thereafter effect the Split-Off in accordance with the
terms of the Transition Agreement including, without limitation, by preparing
and filing a registration statement on Form S-1 (or any other registration
statement contemplated to be filed pursuant to the terms of the Transition
Agreement) and using its respective best efforts to cause such registration
statement to be declared effective and preparing and making such other
filings as may be required under applicable state securities laws. The
Company shall promptly provide to Parent copies of all filings made with the
Commission in connection with the Split-Off, including, without limitation,
the Form S-1 (or any other registration statement contemplated to be filed
pursuant to the terms of the Transition Agreement) and any amendments
thereto, all comments made by the Commission with respect to such filings and
all Company responses to such Commission comments. Prior to making such
filings with the Commission or entering into any other agreement with A&S
other than the Transition Agreement, the Company shall consult with Parent
with respect to such filings and other agreements and provide Parent with a
reasonable opportunity to comment on such filings and other agreements.
(c) Parent shall, and shall cause the Surviving Corporation to,
treat the Split-Off for purposes of all federal and state taxes as an
integral part of the Merger and thus report the Split-Off as a redemption,
for purposes of Section 302(a) of the Code, of a number of shares of Company
Common Stock equal in value to the value of the A&S Common Stock distributed
in the Split-Off.
(d) The treatment of any decrease in the net tax benefit expected
to be received by Parent in this Merger as a result of the Split-Off is set
forth in Section 4 of the Tax Sharing Agreement and the treatment of any
increase in the net tax benefit expected to be received by Parent in this
Merger as a result of the Split-Off is set forth in Section 4.1 of the
Transition Agreement.
(e) Prior to the Effective Time, the Company and A&S may elect to
form a holding company for the ownership of the A&S Common Stock. In such
event, (i) the Company shall transfer the shares of A&S Common Stock to the
holding company and shares of common stock of the holding company will be
issued in substitution of the shares of A&S Common Stock in the Split-Off and
(ii) the benefits and obligations of A&S from the transactions contemplated
by the Transition Agreement and Tax Sharing Agreement shall inure to and be
binding upon the holding company; provided that A&S shall not be released
from its obligations under such Agreements.
Section 7.11 CONFIDENTIALITY. Parent, Sub and the Company agree
that the provisions of the Confidentiality Agreement shall remain binding and
in full force and effect (subject, however,
- 28 -
to the provisions of Section 7.9(b) hereof) and that the terms of the
Confidentiality Agreement are incorporated herein by reference.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) This Merger Agreement and the transactions contemplated hereby
shall have been approved and adopted by the requisite vote of the holders of
the Company Common Stock.
(b) No statute, rule, regulation, order or decree shall have been
enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or materially restricts the consummation of the
Merger.
(c) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and any
authorization, consent or approval required under any Antitrust Law shall
have been obtained or any waiting period applicable to the review of the
transactions contemplated hereby shall have expired or been terminated.
(d) The Split-Off Consideration shall have been deposited with the
Depositary.
(e) No preliminary or permanent injunction or other order by any
court or other judicial or administrative body of competent jurisdiction
which prohibits or prevents the consummation of the Merger shall have been
issued and remain in effect (each party, subject to Section 7.6, agreeing to
use its best efforts to have any such injunction lifted).
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the additional
following conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material respects
their agreements contained in this Merger Agreement and the Transition
Agreement required to be performed on or prior to the Effective Time.
(b) The representations and warranties of Parent and Sub contained
in this Merger Agreement shall be true in all material respects (except that
representations and warranties that expressly include a standard of
materiality shall be true in all respects) when made and on and as of the
Effective Time as if made on and as of such date, except for representations
and warranties which are by their express provisions made as of a specific
date or dates, which were or will be true in all material respects (except
that representations and warranties that expressly include a standard of
materiality were or will be true in all respects) at such time or times as
stated therein.
- 29 -
(c) The Company shall have received a certificate of the President
or Chief Executive Officer or a Vice President of Parent to the effect that
each of the conditions specified above in Sections 8.2(a) and (b) is
satisfied in all respects.
(d) The Cash Consideration shall have been deposited with the
Depositary.
Section 8.3 CONDITIONS TO OBLIGATION OF PARENT AND SUB TO EFFECT
THE MERGER. The obligation of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the
additional following conditions, unless waived by Parent:
(a) The Company and A&S shall have performed in all material
respects their agreements contained in this Merger Agreement and the
Transition Agreement required to be performed on or prior to the Effective
Time.
(b) The representations and warranties of the Company contained in
this Merger Agreement shall be true in all material respects (except that
representations and warranties that expressly include a standard of
materiality shall be true in all respects) when made and on and as of the
Effective Time as if made on and as of such date, except for representations
and warranties which are by their express provisions made as of a specific
date or dates which were or will be true in all material respects (except
that representations and warranties that expressly include a standard of
materiality were or will be true in all respects) at such date or dates.
(c) Parent and Sub shall have received a certificate of the
President and Chief Executive Officer or the Chief Financial Officer of the
Company to the effect that each of the conditions specified in Sections
8.3(a) and (b) is satisfied in all respects.
(d) Parent shall be reasonably satisfied with the final form of
promissory note referred to in Section 4(b)(v) of the Tax Sharing Agreement,
which promissory note shall be prepared by Parent and A&S in a manner
consistent with the terms set forth in Exhibit A to the Tax Sharing Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Merger Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
whether before or after approval by the shareholders of the Company:
(a) by mutual consent of the board of directors of Parent and the
board of directors of the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated on or before September 30, 1999; PROVIDED, that the
terminating party is not otherwise in material breach of its representations,
warranties or obligations under this Merger Agreement;
- 30 -
(c) by Parent or the Company if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the consummation of the
Split-Off or the Merger and such order, decree, ruling or other action is or
shall have become nonappealable;
(d) by the Company (i) if any of the conditions specified in
Sections 8.1 and 8.2 have not been met or waived by the Company at such time
as such condition is no longer capable of satisfaction or (ii) if the sum of
Established Claims exceeds the Claim Basket, PROVIDED, HOWEVER, that prior to
the exercise of this right of termination by the Company, Parent shall have
the right to waive the Claim Basket and elect to proceed with the
transactions contemplated by this Agreement without any adjustment to the
Cash Consideration; PROVIDED, FURTHER, that it shall be a condition to
termination by the Company pursuant to this Section 9.1(d)(ii) that the
Company shall have made all payments to Parent required by Section
10.3(b)(iii)(y);
(e) by Parent (i) if any of the conditions specified in Sections
8.1 and 8.3 have not been met or waived by Parent at such time as such
condition is no longer capable of satisfaction or (ii) if the sum of
Established Claims exceeds the Claim Basket, PROVIDED, HOWEVER, that prior to
the exercise of this right of termination by the Parent, the Company shall
have the right to elect to make a financial adjustment to the Cash
Consideration in an amount equal to the difference between the sum of
Established Claims and the Claim Basket;
(f) by Parent if the Company's board of directors shall have
withdrawn, modified in a manner adverse to Parent, or refrained from making
its recommendation concerning the Merger referred to in Section 3.5 hereof,
or shall have disclosed its intention to change such recommendation;
PROVIDED, that (i) Parent is not otherwise in material breach of its
representations, warranties or obligations under this Merger Agreement and
(ii) Parent has sufficient funds to enable it to finance the consummation of
the Merger;
(g) by Parent, if there has been a Company Material Adverse Change
other than as a result of the Company's Environmental Non-Compliance
Conditions or Year 2000 Non-Compliance Conditions.
(h) by Parent, upon becoming aware that the Company has entered
into a definitive agreement (other than a confidentiality agreement)
providing for, or if the Company's board of directors approves or recommends,
a Superior Proposal pursuant to Section 7.9;
(i) by the Company, at any time prior to the Shareholders' Meeting,
upon three business days' notice to Parent, if the Company's Board of
Directors shall approve a Superior Proposal; PROVIDED, HOWEVER, that (i) the
Company shall have complied with Section 7.9 and (ii) prior to any such
termination, the Company shall, and shall cause its financial and legal
advisors to, negotiate with Parent to make such adjustments in the terms and
conditions of this Merger Agreement as would enable Parent to match or exceed
the consideration offered pursuant to such Superior Proposal, net of amounts
payable by the Company under Section 10.3(b), in order to proceed with the
transactions contemplated hereby; PROVIDED, FURTHER, that it shall be a
condition to termination
- 31 -
by the Company pursuant to this Section 9.1(i) that the Company shall have
made all payments to Parent required by Section 10.3(b); or
(j) by either Parent or the Company, if the Shareholders' Meeting
shall have been concluded without having obtained votes of the Company's
shareholders sufficient for the requisite shareholder approval of this Merger
Agreement (PROVIDED that the terminating party is not otherwise in material
breach of its obligations under this Merger Agreement).
Section 9.2 EFFECT OF TERMINATION. In the event of termination of
this Merger Agreement by either Parent or the Company, as provided above,
this Merger Agreement shall forthwith become void and (except for the willful
breach of this Merger Agreement by any party hereto) there shall be no
liability on the part of either the Company, Parent or Sub or their
respective officers, directors or shareholders; PROVIDED that Sections
6.1(iv), 7.11, 9.2, 10.3, 10.7 and 10.8 shall survive the termination.
Section 9.3 AMENDMENT. This Merger Agreement may be amended by the
parties hereto, by or pursuant to action taken by their respective boards of
directors, at any time before or after approval hereof by the shareholders of
the Company, but, after such approval, no amendment shall be made which (i)
changes the consideration to be received by any class of capital stock of the
Company as provided in Section 3.1(c), (ii) alters or changes any term of the
Articles of Incorporation of the Surviving Corporation (except for such
changes that could otherwise be adopted by the directors of the Surviving
Corporation), or (iii) in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. This
Merger Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 9.4 WAIVER. At any time prior to the Effective Time, the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions contained herein; PROVIDED, HOWEVER, that if
such waiver shall materially adversely affect the rights of the shareholders
of the Company, then no such waiver shall be made without the approval of
such shareholders. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. No representations, warranties or agreements in this Merger
Agreement shall survive the Merger, except for the agreements contained in
Sections 3.3, 3.4, 3.8, 7.3, 7.4, 7.5, 7.6, 7.11, 10.1, 10.3, 10.7 and 10.8.
- 32 -
Section 10.2 NOTICES. All notices or other communications under
this Merger Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, telex, telecopy or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
(a) If to the Company, to:
Essef Corporation
c/o ▇▇▇▇▇▇▇ & Sylvan Pools Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
(b) If to Parent or Purchaser, to:
Pentair, Inc.
Waters Edge Plaza
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
- 33 -
with a copy to:
Pentair, Inc.
Waters Edge Plaza
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Esq.
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 10.2.
Section 10.3 FEES AND EXPENSES. (a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated by this Merger Agreement shall be
paid by the party incurring such expenses.
(b) Parent and the Company agree that (i) if the Company shall
terminate this Merger Agreement pursuant to Section 9.1(i); (ii) if (A)
Parent or the Company shall terminate this Agreement pursuant to Section
9.1(b), (B) at the time of the event giving rise to such termination the
Company shall have received a solicitation or inquiry giving rise to the
disclosure obligation set forth in the second sentence of Section 7.9(a) and
(C) within 12 months of the termination of this Merger Agreement, the Company
enters into a definitive agreement or consummates a merger, consolidation,
sale of substantially all of the assets of the Company or other change in
control transaction in connection with such solicitation or inquiry; (iii) if
(A) Parent or the Company shall terminate this Agreement pursuant to Section
9.1(f) or (h), (B) at the time of the event giving rise to such termination
the Company shall have received an Acquisition Proposal and (C) within 12
months of the termination of this Merger Agreement, the Company enters into a
definitive agreement with respect to such Acquisition Proposal or consummates
a transaction pursuant to such Acquisition Proposal; or (iv) if Parent or the
Company shall terminate this Merger Agreement pursuant to Section 9.1(d)(ii)
or (e)(ii), as the case may be, then the Company shall pay to an account
designated by Parent in immediately available funds an amount equal to (x) 3%
of the aggregate Cash Consideration to be paid to holders of Company Common
Stock pursuant to Article III in the case of any termination referred to in
clauses (i) or (iii) above; (y) 1 1/2% of the aggregate Cash Consideration in
the case of any termination referred to in clause (ii) above or (z) an amount
equal to the lesser of (1) the actual out-of-pocket costs and expenses
incurred by Parent in connection with this Merger Agreement and (2) $500,000
in the case of any termination referred to in clause (iv) above. The
Termination Fee shall be paid prior to, and shall be a condition to the
effectiveness of,
- 34 -
any termination referred to in clauses (i) or (iv) above. Any payment
required to be made pursuant to clauses (ii) and (iii) above shall be made on
the next business day after such a transaction pursuant to an Acquisition
Proposal is consummated.
(c) To the extent that the fees and expenses incurred after
December 31, 1998 by the Company to Rhone Group, Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P. and other advisers and service providers of the Company or its
Subsidiaries relating to the Split-Off and the Merger exceed $4,000,000, the
amount of the Claim Basket (as determined pursuant to Section 7.1(b)) shall
be reduced by the amount of the difference between (i) the sum of (x) the
fees and expenses relating to the Split-Off and the Merger actually incurred
after December 31, 1998 and (y) a good faith estimate of the fees and
expenses relating to the Split-Off and the Merger yet to be incurred, and
(ii) $4,000,000 ("Excess Transaction Fees"). Two business days prior to the
Cut-Off Date, the Company shall deliver to Parent a schedule that sets forth
the actual fees and expenses relating to the Split-Off and Merger incurred to
date after December 31, 1998 and an estimate of the additional fees and
expenses to complete the Split-Off and the Merger.
Section 10.4 PUBLICITY. So long as this Merger Agreement is in
effect, Parent, Sub and the Company agree to consult with each other before
issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Merger Agreement, and none
of them shall issue any press release or make any public statement prior to
such consultation, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange. The
commencement of litigation relating to this Merger Agreement or the
transactions contemplated hereby or any proceedings in connection therewith
shall not be deemed a violation of this Section 10.4.
Section 10.5 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Merger Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Merger Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 10.6 INTERPRETATION. (a) When a reference is made in this
Merger Agreement to subsidiaries of Parent or the Company, the word
"Subsidiaries" means corporations more than 50% of whose outstanding voting
securities are directly or indirectly owned by Parent or the Company, as the
case may be; provided, however, that in the case of the Company, A&S shall
not be considered as a Subsidiary. The headings contained in this Merger
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Merger Agreement.
(b) As used in this Merger Agreement, "Parent Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
assets, financial condition, and results of operations of Parent and its
subsidiaries taken as a whole (excluding the effect of a change in general
economic conditions).
- 35 -
(c) As used in this Merger Agreement, "Company Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
assets, financial condition, and results of operations of the Company and its
Subsidiaries (other than A&S) taken as a whole (excluding the effect of a
change in general economic conditions).
(d) As used in this Merger Agreement, "knowledge" shall mean, with
respect to the matter in question, the actual knowledge of such matter by an
executive officer, with respect to Parent, and by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇, with respect to the Company, as applicable.
(e) The inclusion of an item on any schedule to this Merger
Agreement shall not be deemed to be indicative of the materiality of such
item.
Section 10.7 THIRD PARTY BENEFICIARIES. Except as specifically
provided in Section 7.5, this Merger Agreement is not intended to confer upon
any other person any rights or remedies hereunder.
Section 10.8 MISCELLANEOUS. This Merger Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof; (b) shall not be assigned by operation of law or
otherwise, except that Sub shall have the right to assign to Parent or any
direct wholly owned Subsidiary of Parent any and all rights and obligations
of Sub under this Merger Agreement; and (c) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Ohio (without giving effect to the provisions thereof relating to
conflicts of law). This Merger Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
Section 10.9 CURE PERIOD. No party shall have any rights under
this Merger Agreement for any actual or threatened breach of a
representation, warranty, covenant or agreement contained herein, if such
breach is capable of being cured, until (i) the non-breaching party has
notified the breaching party of its determination of the existence (or
threatened existence) of a basis for termination, and (ii) the breaching
party shall have had a reasonable time (considering the nature of the breach
and the actions required for cure, but in no event longer than 15 days) to
cure such breach.
Section 10.10 VALIDITY. (a) The invalidity or unenforceability of
any provision of this Merger Agreement shall not affect the validity or
enforceability of the other provisions of this Merger Agreement, which shall
remain in full force and effect.
(b) In the event any court of competent jurisdiction holds any
provision of this Merger Agreement to be null, void or unenforceable, the
parties hereto shall negotiate in good faith the execution and delivery of an
amendment to this Merger Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof.
- 36 -
(c) Each party agrees that, should any court of competent
jurisdiction hold any provision of this Merger Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other
party shall not be entitled to specific performance of such provision or part
hereof or to any other remedy, including but not limited to money damages,
for breach thereof or of any other provision of this Merger Agreement or part
hereof as the result of such holding or order.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 37 -
IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
PENTAIR, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: Executive Vice President
---------------------------
NORTHSTAR ACQUISITION COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: President
---------------------------
ESSEF CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: President
---------------------------
- 38 -
EXHIBIT A
TRANSITION AGREEMENT
- 1 -
EXHIBIT B
TAX SHARING AGREEMENT
- 1 -
PARENT AND SUB DISCLOSURE SCHEDULE
- 1 -
COMPANY DISCLOSURE SCHEDULE
- 1 -
