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EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
ACQUISITION HOLDINGS, INC.,
ACQUISITION CORP.
AND
ATC GROUP SERVICES INC.
DATED AS OF NOVEMBER 26, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE OFFER............................................... 1
Section 1.01. The Offer............................................... 1
Section 1.02. Company Actions......................................... 2
ARTICLE II THE MERGER.............................................. 4
Section 2.01. The Merger.............................................. 4
Section 2.02. Closing................................................. 4
Section 2.03. Effective Time.......................................... 4
Section 2.04. Effects of the Merger................................... 4
Section 2.05. Certificate of Incorporation and By-laws................ 4
Section 2.06. Directors............................................... 4
Section 2.07. Officers................................................ 4
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...... 5
Section 3.01. Effect on Capital Stock................................. 5
Section 3.02. Exchange of Certificates................................ 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY........... 6
Section 4.01. Organization............................................ 7
Section 4.02. Subsidiaries............................................ 7
Section 4.03. Capitalization.......................................... 7
Section 4.04. Authority............................................... 7
Section 4.05. Consents and Approvals; No Violations................... 8
Section 4.06. SEC Reports and Financial Statements.................... 8
Section 4.07. Absence of Certain Changes or Events.................... 9
Section 4.08. No Undisclosed Liabilities.............................. 9
Section 4.09. Information Supplied.................................... 10
Section 4.10. Benefit Plans........................................... 10
Section 4.11. Other Compensation Arrangements......................... 11
Section 4.12. Litigation.............................................. 11
Section 4.13. Compliance with Applicable Law.......................... 11
Section 4.14. Tax Matters............................................. 12
Section 4.15. State Takeover Statutes................................. 13
Section 4.16. Brokers; Fees and Expenses.............................. 13
Section 4.17. Opinion of Financial Advisor............................ 13
Section 4.18. Intellectual Property................................... 13
Section 4.19. Labor Relations and Employment.......................... 13
Section 4.20. Change of Control....................................... 14
Section 4.21. Environmental Matters................................... 14
Section 4.22. Material Contracts...................................... 16
Section 4.23. Property................................................ 16
Section 4.24. Insurance............................................... 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........ 17
Section 5.01. Organization............................................ 17
Section 5.02. Authority............................................... 17
Section 5.03. Consents and Approvals; No Violations................... 17
Section 5.04. Information Supplied.................................... 18
Section 5.05. Interim Operations of Sub............................... 18
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PAGE
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Section 5.06. Financing............................................... 18
Section 5.07. Brokers................................................. 18
ARTICLE VI COVENANTS............................................... 18
Section 6.01. Conduct of Business of the Company...................... 18
Section 6.02. No Solicitation......................................... 20
Section 6.03. Other Actions........................................... 21
Section 6.04. Notice of Certain Events................................ 21
ARTICLE VII ADDITIONAL AGREEMENTS................................... 21
Section 7.01. Stockholder Approval; Preparation of Proxy Statement.... 21
Section 7.02. Access to Information................................... 22
Section 7.03. Reasonable Efforts; Financing........................... 22
Section 7.04. Options; Warrants....................................... 22
Section 7.05. Directors............................................... 24
Section 7.06. Fees and Expenses....................................... 24
Section 7.07. Indemnification; Insurance.............................. 24
Section 7.08. Certain Litigation...................................... 26
Section 7.09. Solvency Opinion........................................ 26
ARTICLE VIII CONDITIONS.............................................. 26
Conditions to Each Party's Obligation To Effect the
Section 8.01. Merger.................................................. 26
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................... 27
Section 9.01. Termination............................................. 27
Section 9.02. Effect of Termination................................... 28
Section 9.03. Amendment............................................... 28
Section 9.04. Extension; Waiver....................................... 28
ARTICLE X MISCELLANEOUS........................................... 28
Section 10.01. Nonsurvival of Representations and Warranties........... 28
Section 10.02. Notices................................................. 28
Section 10.03. Interpretation.......................................... 29
Section 10.04. Counterparts............................................ 30
Section 10.05. Entire Agreement; Third Party Beneficiaries............. 30
Section 10.06. Governing Law........................................... 30
Section 10.07. Publicity............................................... 30
Section 10.08. Assignment.............................................. 30
Section 10.09. Enforcement............................................. 30
EXHIBITS
Exhibit A--Conditions of the Offer...................................... 32
ii
This Agreement and Plan of Merger (this "Agreement") dated as of November
26, 1997, is among ACQUISITION HOLDINGS, INC., a Delaware Corporation
("Parent"), ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and ATC GROUP SERVICES INC., a Delaware
corporation (the "Company").
Whereas the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth in this Agreement;
Whereas, in furtherance of such acquisition, Parent proposes to cause Sub to
make a tender offer (as it may be amended from time to time as permitted under
this Agreement, the "Offer") to purchase all the outstanding shares of Common
Stock, par value $0.01 per share, of the Company (the "Company Common Stock";
all the outstanding shares of Company Common Stock being hereinafter
collectively referred to as the "Shares" and each holder thereof, a "Company
Stockholder") at a purchase price of $12 per share (the "Offer Price"), net to
the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in this Agreement; and the Board of Directors of the
Company has adopted resolutions approving the Offer and the Merger (as defined
below), recommending that the Company's stockholders accept the Offer and
approving the acquisition of Shares by Sub pursuant to the Offer;
Whereas the respective Boards of Directors of Parent, Sub and the Company
have each approved the merger of Sub into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement, whereby each
share of Company Common Stock, other than shares of Company Common Stock owned
directly or indirectly by Parent or the Company and Dissenting Shares (as
defined in Section 3.01(d)), will be converted into the right to receive the
price per share paid in the Offer; and
Whereas Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the
Merger and also to prescribe various conditions to the Offer and the Merger.
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
The Offer
Section 1.01. The Offer. (a) Subject to the provisions of this Agreement, as
promptly as practicable but in no event later than five business days after
the date of the public announcement by Parent and the Company of the execution
and delivery of this Agreement, Sub shall, and Parent shall cause Sub to,
commence the Offer. The obligation of Sub, and of Parent to cause Sub, to
commence the Offer and accept for payment, and pay for, any Shares tendered
pursuant to the Offer shall be subject to the conditions set forth in Exhibit
A (the "Offer Conditions") and to the terms and conditions of this Agreement;
provided, however, that paragraph (i) of the Offer Conditions shall apply only
to the obligation of Sub, and of Parent to cause Sub, to consummate the Offer.
Sub expressly reserves the right to modify the terms of the Offer, except
that, without the prior written consent of the Company, Sub shall not (i)
reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price,
(iii) add to or modify (other than waive) the Offer Conditions, (iv) except as
provided in the next sentence, extend the Offer, (v) change the form of
consideration payable in the Offer, (vi) amend any other term of or add any
new term to the Offer in any manner materially adverse to the holders of the
Shares or (vii) waive the Minimum Condition (as defined in Exhibit A).
(a) extend the Offer, if at the scheduled or extended expiration date of the
Offer any of the Offer Conditions shall not be satisfied or waived, until such
time as such conditions are satisfied or waived, (b) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Commission or the staff thereof
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applicable to the Offer, (c) extend the Offer from time to time until two
business days after the expiration of the waiting period under the HSR Act and
(d) extend the Offer for a period not to exceed 15 business days,
notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer, if, immediately prior to such expiration date
(as it may be extended), the Shares tendered and not withdrawn pursuant to the
Offer equal less than 90% of the outstanding Shares (on a fully diluted
basis). In addition, Sub shall be obligated to extend the Offer, if at the
scheduled expiration date of the Offer any of the Offer Conditions capable of
satisfaction shall not have been satisfied or waived, until the satisfaction
or waiver thereof; provided, however, that there shall be no such obligation
to extend the Offer beyond the 60th business day after the commencement of the
Offer. Subject to the terms and conditions of the Offer and this Agreement,
Sub shall, and Parent shall cause Sub to, accept for payment, and pay for, all
Shares validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer
promptly after the expiration of the Offer; provided, however, that in no
event shall the Offer expire prior to January 21, 1998.
(b) Parent and Sub shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer acceptable in
form and substance to the Company and within the time period set forth in
subsection (a) above, which shall contain an offer to purchase and a related
letter of transmittal (the "Letter of Transmittal") and summary advertisement
(such Schedule 14D-1 and the documents included therein pursuant to which the
Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). The Offer Documents shall be consistent with this
Agreement, shall add no conditions to the consummation of the Offer not set
forth in Exhibit A and shall add no provisions to the Offer materially adverse
to the Company Stockholders. Parent and Sub agree that the Offer Documents
shall comply as to form in all material respects with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder and the Offer Documents, on the date first published,
sent or given to the Company's stockholders, shall not 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 were made, not misleading, except that
no representation or warranty is made by Parent or Sub with respect to written
information supplied by the Company or any of its stockholders specifically
for inclusion or incorporation by reference in the Offer Documents. Parent,
Sub and the Company each agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Parent and Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents
as so corrected to be disseminated to holders of Shares, in each case as and
to the extent required by applicable securities laws. The Company and its
counsel shall be given reasonable opportunity to review and comment upon the
Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company. Parent and Sub agree to provide the Company and
its counsel any comments Parent, Sub or their counsel may receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments. Parent and Sub shall also provide the Company and its counsel
with copies of all written responses filed by Parent or Sub with the SEC and a
reasonable opportunity to review and comment upon such responses prior to
filing with the SEC.
(c) Parent shall provide or cause to be provided to Sub on a timely basis
the funds necessary to accept for payment, and pay for, all Shares that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer.
(d) The Company agrees that neither the Offer nor purchases of Shares
thereunder breach the terms of the Confidentiality Agreement (as defined in
Section 7.02 below).
Section 1.02. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board of Directors of the
Company (the "Board"), at a meeting duly called and held, upon recommendation
of a duly constituted special committee (the "Special Committee") of
independent directors, duly adopted resolutions approving this Agreement, the
Offer and the Merger, determining that the terms of the Offer and the Merger
are fair to, adequate and in the best interests of, the Company's stockholders
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and recommending that the Company's stockholders accept the Offer, tender
their Shares pursuant to the Offer and approve and adopt this Agreement, and
(ii) ▇▇▇▇▇▇ Brothers Inc. (the "Financial Advisor") has delivered to the Board
its opinion (the "Fairness Opinion") to the effect that, as of the date
thereof and based upon and subject to the matters set forth in such Fairness
Opinion, the consideration to be received by the Company Stockholders in the
Offer and the Merger is fair to the Company Stockholders from a financial
point of view. The Company represents that such approval constitutes approval
of the Offer, this Agreement and the transactions contemplated hereby,
including the Merger, for purposes of Section 203 of the Delaware General
Corporation Law, as amended (the "DGCL"), such that Section 203 of the DGCL
will not apply to the transactions contemplated by this Agreement.
(b) As promptly as practicable after the commencement of the Offer, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company will use its reasonable best efforts to cause the
Schedule 14D-9 to be filed on the same date as Sub's Tender Offer Statement on
Schedule 14D-1 is filed and mailed together with the Offer Documents; provided
that in any event the Schedule 14D-9 shall be filed and mailed no later than
10 business days following the commencement of the Offer. The Schedule 14D-9
shall comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not 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 were made, not misleading, except that no
representation or warranty is made by the Company with respect to information
supplied by Parent or Sub specifically for inclusion in the Schedule 14D-9.
Each of the Company, Parent and Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Parent and its counsel shall be given reasonable opportunity
to review and comment upon the Schedule 14D-9 prior to its filing with the SEC
or dissemination to stockholders of the Company. The Company agrees to provide
Parent and its counsel any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall furnish
or cause its transfer agent to furnish Sub as promptly as practicable with
mailing labels containing the names and addresses of the record holders of
Shares as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of stockholders,
security position listings and computer files and all other information in the
Company's possession or control regarding the beneficial owners of Shares, and
shall furnish to Sub such information and assistance (including updated lists
of stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Parent and Sub and their agents shall hold
in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request,
deliver, and will use their best efforts to cause their agents to deliver, to
the Company all copies of such information then in their possession or
control.
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ARTICLE II
The Merger
Section 2.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Sub shall be merged
with and into the Company at the Effective Time (as defined in Section 2.03).
Following the Effective Time, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL. At the election of Parent, any
direct or indirect wholly owned subsidiary (as defined in Section 10.03) of
Parent may be substituted for Sub as a constituent corporation in the Merger.
In such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
Section 2.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. (New York City time) on a date to be specified by Parent
or Sub, which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VIII (the
"Closing Date"), at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is agreed
to in writing by the parties hereto.
Section 2.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file
with the Secretary of State of Delaware a certificate of merger or other
appropriate documents as provided in Section 251 of the DGCL (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as Sub and the Company shall agree should be specified in
the Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
Section 2.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 2.05. Certificate of Incorporation and By-laws. (a) The Certificate
of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time so that ARTICLE
FOURTH of such certificate of incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock which the corporation
shall have authority to issue is 10,000 shares of Common Stock, par value $.01
per share" and, as so amended, such certificate of incorporation shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The By-Laws of the Company as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
Section 2.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be, and the Company shall
procure, prior to and as a condition to the Closing, the resignation of each
of its directors effective as of the Closing.
Section 2.07. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
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ARTICLE III
Effect of the Merger on the Capital Stock of theConstituent Corporations;
Exchange of Certificates
Section 3.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Shares
or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital stock
of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any subsidiary of the
Company and each Share that is owned by Parent, Sub or any other subsidiary of
Parent shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 3.01(d), each
Share issued and outstanding (other than Shares to be canceled in accordance
with Section 3.01(b)) shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, the price paid in the Offer
(the "Merger Consideration"). As of the Effective Time, all such Shares shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person
(a "Dissenting Stockholder") who complies with all the provisions of Delaware
law concerning the right of holders of Company Common Stock to dissent from
the Merger and require appraisal of their Shares ("Dissenting Shares") shall
not be converted as described in Section 3.01(c) but shall become the right to
receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the laws of the State of Delaware. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for appraisal
or fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the DGCL, his Shares shall be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
(e) Withholding Tax. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder
of shares of Common Stock outstanding immediately prior to the Effective Time
such amounts as may be required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Common Stock outstanding immediately prior to the Effective Time in
respect of which such deduction and withholding was made.
Section 3.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
federally insured bank or trust company with assets of not less than
$1,000,000,000 satisfactory to the Company to act as paying agent in the
Merger (the "Paying Agent"), and, from time to time on, prior to or after the
Effective Time, Parent shall make available, or cause the Surviving
Corporation to make available, to the Paying Agent funds in amounts and at the
times necessary for the payment of the Merger Consideration upon surrender of
certificates representing
5
Shares as part of the Merger pursuant to Section 3.01 (it being understood
that any and all interest earned on funds made available to the Paying Agent
pursuant to this Agreement shall be turned over to Parent).
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of transmittal in a form
mutually agreed upon by the Parent and Surviving Corporation (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, Parent or the Surviving Corporation shall pay or
cause to be paid to the holder of such Certificate in exchange therefor the
amount of cash into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 3.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
3.01. No interest will be paid or will accrue on the cash payable upon the
surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for any reason, they shall be canceled and exchanged as provided in this
Article III.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE IV
Representations and Warranties of the Company
Except as set forth in the schedules delivered to Parent in connection with
the execution of this Agreement setting forth exceptions to the Company's
representations and warranties set forth herein (the "Company Disclosure
Schedules"), the Company represents and warrants to Parent and Sub as set
forth below. The Company Disclosure Schedules will be arranged in sections
corresponding to sections of this Agreement to be modified by such disclosure
schedule. As used in this Agreement, "knowledge" means with respect to matters
6
relating to the Company, actual knowledge of any executive officer of the
Company or any individual in an equivalent position of the Company, or, in the
reasonable exercise of duty in the ordinary course of business of any such
officer, reason to know.
Section 4.01. Organization. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority would not have a material adverse effect (as defined
in Section 10.03) on the Company. The Company and each of its subsidiaries is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger. The Company has made available to Parent complete and
correct copies of its Certificate of Incorporation and By-laws and the
certificates of incorporation and By-Laws (or similar organizational
documents) of its subsidiaries.
Section 4.02. Subsidiaries. The subsidiaries of the Company are as set forth
on Schedule 4.02. All the outstanding shares of capital stock of each such
subsidiary, other than director qualifying shares of foreign subsidiaries, are
owned by the Company, by another wholly owned subsidiary of the Company or by
the Company and another wholly owned subsidiary of the Company, free and clear
of all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"), except for immaterial
Liens on outstanding shares of capital stock of foreign subsidiaries of the
Company, and are duly authorized, validly issued, fully paid and
nonassessable. Except for the capital stock of its subsidiaries, the Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any corporation, partnership, joint venture or other entity.
Section 4.03. Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock. At the close of
business on November 12, 1997, (i) 7,930,107 shares of Company Common Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held
by the Company in its treasury, (iii) except as set forth on Schedule 4.03,
750,070 shares of Company Common Stock were reserved for issuance upon
exercise of outstanding Options (as defined in Section 7.04) and (iv)
1,090,407 shares of Company Common Stock were reserved for issuance upon the
exercise of certain outstanding warrants. Except as set forth above and except
for Shares issued upon the exercise of Options or warrants, as of the date of
this Agreement, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of the Company may vote. Except as
set forth above, and except for obligations to grant options, subject to the
approval of the Board of Directors of the Company, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock
or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement, there
are not any outstanding contractual obligations (i) of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or (ii) of the Company to vote or to dispose of
any shares of the capital stock of any of its subsidiaries.
Section 4.04. Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the
7
Merger, the approval and adoption of the terms of this Agreement by the
holders of a majority of the Shares (the "Company Stockholder Approval")). The
execution, delivery and performance of this Agreement and the consummation by
the Company of the Merger and of the other transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (in each case, other than, with respect to the Merger, the
Company Stockholder Approval). This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of Parent and Sub, constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
Section 4.05. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act (including the filing with
the SEC of the Schedule 14D-9 and a proxy statement relating to any required
approval by the Company's stockholders of this Agreement (the "Proxy
Statement")), the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), Section 203 of the DGCL and the laws of other states
in which the Company is qualified to do or is doing business, state takeover
laws and foreign laws, neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or By-laws of the
Company or of the similar organizational documents of any of its subsidiaries,
(ii) require any filing with, or permit, authorization, consent or approval
of, any Federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material
adverse effect on the Company or prevent or materially delay the consummation
of the Offer and/or the Merger), (iii) except as set forth on Schedule 4.05,
result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound; provided, however, that certain contracts
and agreements, the material ones of which have been made available to Parent
by the Company, (A) provide for their termination or require consent upon a
change of control of the Company or (B) contain provisions restricting their
assignment pursuant to a merger, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
subsidiaries or any of their properties or assets, except in the case of
clauses (iii) or (iv) for violations, breaches or defaults that would not have
a material adverse effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger.
Section 4.06. SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1994, under the Exchange Act or
the Securities Act of 1933, as amended (the "Securities Act") (such forms,
reports, schedules, statements and other documents, including any financial
statements or schedules included therein, are referred to as the "Company SEC
Documents"). The Company SEC Documents, at the time filed, (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. Except to the
extent revised or superseded by a subsequently filed Company Filed SEC
Document (as defined in Section 4.07) (a copy of which has been made available
to Parent prior to the date hereof), the Company SEC Documents, considered as
a whole as of their date, do not contain an untrue statement of a material
fact or omit to state a material fact required to
8
be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that the foregoing does not cover
future events resulting from public announcement of the Offer and the Merger).
The financial statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section 4.07. Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Documents filed and publicly available prior to the date of
this Agreement (the "Company Filed SEC Documents"), and except as disclosed in
the Company's financial statements dated as of February 28, 1997 audited by
Deloitte & Touche LLP (the "Company Fiscal Year 1997 Financial Statements") (a
copy of which has been made available to Parent by the Company), and except as
disclosed on Schedule 4.07, since February 28, 1997, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been any material adverse change (as defined in
Section 10.03) with respect to the Company. Except as disclosed in the Company
Filed SEC Documents or the Company Fiscal Year 1997 Financial Statements, and
except as disclosed on Schedule 4.07, since February 28, 1997, there has not
been (i) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock or any redemption, purchase or
other acquisition of any of its capital stock, (ii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iii) (w) any granting
by the Company or any of its subsidiaries to any officer of the Company or any
of its subsidiaries of any increase in compensation, except in the ordinary
course of business (including in connection with promotions) consistent with
past practice, (x) any granting by the Company or any of its subsidiaries to
any such officer of any increase in severance or termination pay, except as
part of a standard employment package to any person promoted or hired (but not
including the five most senior officers) (y) except employment arrangements in
the ordinary course of business consistent with past practice with employees
other than any executive officer of the Company, any entry by the Company or
any of its subsidiaries into any employment, severance or termination
agreement with any such employee or executive officer or (z) any increase in
or establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit-sharing, stock option (including the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock appreciation
rights, performance awards or restricted stock awards), stock purchase or
other employee benefit plan or agreement or arrangement, except in the
ordinary course of business consistent with past practice, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a material adverse effect on the Company,
(v) any material payment to an affiliate of the Company or any of its
subsidiaries other than in the ordinary course of business consistent with
past practice, (vi) any revaluation by the Company of any of its material
assets, (vii) mortgage, lien, pledge, encumbrance, charge, agreement, claim or
restriction placed upon any of the material properties or assets of the
Company or any of its subsidiaries, (viii) any material change in accounting
methods, principles or practices by the Company or (ix) (A) any licensing or
other agreement with regard to the acquisition or disposition of any material
Intellectual Property Right (as defined in Section 4.18) or rights thereto
other than licenses or other agreements in the ordinary course of business
consistent with past practice or (B) any amendment or consent with respect to
any licensing agreement filed, or required to be filed, by the Company with
the SEC.
Section 4.08. No Undisclosed Liabilities. Except as set forth on Schedule
4.08 and except as and to the extent set forth in the Company Fiscal Year 1997
Financial Statements, as of February 28, 1997, and as disclosed in Company
Filed SEC Documents, neither the Company nor any of its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that would be required by generally
9
accepted accounting principles to be reflected on a consolidated balance sheet
of the Company and its subsidiaries (including the notes thereto). Since
February 28, 1997, except as and to the extent set forth in the Company Filed
SEC Documents and Schedule 4.08, neither the Company nor any of its
subsidiaries has incurred any liabilities of any nature, whether or not
accrued, contingent or otherwise, that would have a material adverse effect on
the Company. The consolidated indebtedness on the date hereof of the Company
and its subsidiaries is as set forth on Schedule 4.08.
Section 4.09. Information Supplied. None of the written information supplied
or to be supplied by the Company specifically for inclusion or incorporation
by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant
to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement")
or (iv) the Proxy Statement, will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the respective times the
Offer Documents, the Schedule 14D-9 and the Information Statement are filed
with the SEC or first published, sent or given to the Company's stockholders,
or, in the case of the Proxy Statement, at the time the Proxy Statement is
first mailed to the Company's stockholders or at the time of the Stockholders
Meeting (as defined in Section 7.01), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Schedule 14D-9,
the Information Statement and the Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
Section 4.10. Benefit Plans. (a) Each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (a "Welfare Plan") and each other
plan, pension or welfare arrangement or policy (written or oral) relating to
stock options, stock purchases, compensation, deferred compensation, bonuses,
severance, fringe benefits or other employee benefits, in each case maintained
or contributed to, or required to be maintained or contributed to, by the
Company or its subsidiaries for the benefit of any present or former employee,
officer or director (each of the foregoing, a "Benefit Plan") has been
administered in all material respects in accordance with its terms. The
Company and its subsidiaries and all the Benefit Plans are in compliance in
all material respects with the applicable provisions of ERISA, the Code, and
all other applicable laws.
(b) Schedule 4.10 attached hereto sets forth a complete list of each Benefit
Plan as well as each material employment, termination and severance agreement,
contract, binding arrangement and understanding (whether written or oral) with
employees of the Company and its subsidiaries.
(c) None of the Pension Plans is subject to Title IV of ERISA or Section 412
of the Code and none of the Company or any other person or entity that,
together with the Company, is treated as a single employer under Section 414
(b), (c), (m) or (o) of the Code (each, including the Company, a "Commonly
Controlled Entity"): (i) currently has an obligation to contribute to, or
during any time during the last six years had an obligation to contribute to,
a Pension Plan subject to Title IV of ERISA or Section 412 of the Code, or
(ii) has incurred any liability to the Pension Benefit Guaranty Corporation,
which liability has not been fully paid. All contributions and other payments
required to be made by the Company to any Pension Plan with respect to any
period ending before the Closing Date have been made or reserves adequate for
such contributions or other payments have been or will be set aside therefor
and have been or will be reflected in financial statements.
(d) Neither the Company nor any Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has withdrawn from any multiemployer plan where such withdrawal has
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) or "mass withdrawal liability" within the meaning of
PBGC Regulation 4219.2 that has not been fully paid.
10
(e) Each Benefit Plan (and its related trust) that is intended to be
qualified under Sections 401 and 501(a) of the Code has been determined by the
IRS to qualify under such sections and, to the knowledge of the Company,
nothing has occurred to cause the loss of such qualified status.
(f) Each Benefit Plan that is a Welfare Plan may be amended or terminated,
upon thirty (30) days notice, at any time after the Effective Time without
material liability to the Company or its subsidiaries.
(g) Except as set forth in Schedule 4.10, or as required under Section 4980B
of the Code, the Company does not have any obligation to provide post-
retirement health benefits.
(h) The Company has heretofore made available to Parent correct and complete
copies of each of the following:
(1) All written, and descriptions of all binding oral, employment,
termination and severance agreements, contracts, arrangements and
understandings listed on Schedule 4.10;
(2) Each Benefit Plan and all amendments thereto; the trust instrument
and/or insurance contracts, if any, forming a part of such Benefit Plan and
all amendments thereto;
(3) The most recent IRS Form 5500 and all schedules thereto, if any;
(4) The most recent determination letter issued by the IRS regarding the
qualified status of each such Pension Plan;
(5) The most recent accountant's report, if any; and
(6) The most recent summary plan description, if any.
Section 4.11. Other Compensation Arrangements. Except as disclosed in the
Company Filed SEC Documents or on Schedule 4.11, or except as provided in this
Agreement, as of the date of this Agreement, neither the Company nor any of
its subsidiaries is a party to any oral or written (i) consulting agreement
not terminable on not more than 60 calendar days notice (except for third
party agreements for the development of, and assignment to, the Company of
Intellectual Property in the ordinary course of business) and involving the
payment of more than $100,000 per annum, (ii) agreement with any executive
officer or other key employee of the Company or any of its subsidiaries (x)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement or (y) providing any term of employment
or compensation guarantee extending for a period longer than two years or the
payment of more than $100,000 per annum or (iii) agreement or plan, including
any stock option plan, stock appreciation right plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
Section 4.12. Litigation. Except as set forth on Schedule 4.12, there is no
suit, claim, action, proceeding or investigation pending before any
Governmental Entity or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries that could reasonably be
expected to have a material adverse effect on the Company. Neither the Company
nor any of its subsidiaries is subject to any outstanding order, writ,
injunction or decree that could reasonably be expected to have a material
adverse effect on the Company.
Section 4.13. Compliance with Applicable Law. Except as set forth on
Schedule 4.13, the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals that would not have a material adverse effect
on the Company. Except as set forth on Schedule 4.13, the Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not have a material adverse effect on the
Company. Except as disclosed in the Company Filed SEC Documents, and except as
set forth on Schedule 4.13, to the best knowledge of the Company, the
businesses of the Company and
11
its subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations that
would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. Except as
set forth on Schedule 4.13, as of the date of this Agreement, no investigation
or review by any Governmental Entity with respect to the Company or any of its
subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor has any Governmental Entity indicated an intention to conduct any such
investigation or review, other than, in each case, those the outcome of which
would not be reasonably expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or
the Merger.
Section 4.14. Tax Matters. (a) Except as set forth on Schedule 4.14, the
Company and each of its subsidiaries (and any affiliated group of which the
Company or any of its subsidiaries is now or has ever been a member) has
timely filed all Federal income tax returns and all other material tax returns
and reports required to be filed by it. All such returns are complete and
correct in all material respects. Except as set forth on Schedule 4.14, each
of the Company and its subsidiaries (i) has paid (or the Company has paid on
its subsidiaries' behalf) to the appropriate authorities all taxes that are
not immaterial and that are required to be paid by it (without regard to
whether a tax return is required), except taxes for which an adequate reserve
has been established on the financial statements contained in the Company
Filed SEC Documents or the Company Fiscal Year 1997 Financial Statements, and
(ii) has withheld and paid to the appropriate authorities all material
withholding taxes required to be withheld by it. The most recent financial
statements contained in the Company Filed SEC Documents reflect an adequate
reserve (in accordance with generally accepted accounting principles
consistently applied) for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through the date of
such financial statements.
(b) Except as disclosed in the Company Filed SEC Documents or Schedule 4.14,
no Federal income tax return or other material tax return of the Company or
any of its subsidiaries is under audit or examination by any taxing authority,
and no written or unwritten notice of such an audit or examination has been
received by the Company or any of its subsidiaries. Each material deficiency
resulting from any audit or examination relating to taxes by any taxing
authority has been paid, except for deficiencies being contested in good
faith. No material issues relating to taxes were raised in writing by the
relevant taxing authority in any completed audit or examination that can
reasonably be expected to recur in a later taxable period. The Federal income
tax returns of the Company and each of its subsidiaries do not contain any
positions that could give rise to a material substantial understatement
penalty within the meaning of Section 6662 of the Code.
(c) There is no agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any taxes and no power
of attorney with respect to any taxes has been executed or filed with any
taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for liens for
taxes not yet due.
(e) None of the Company or any of its subsidiaries is a party to or is bound
by any tax sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to taxes (including any advance pricing
agreement, closing agreement or other agreement relating to taxes with any
taxing authority).
(f) None of the Company or any of its subsidiaries shall be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method
of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of
the Code or comparable provisions of state, local or foreign tax law.
(g) Neither the Company nor any of its subsidiaries (i) is a party to a safe
harbor lease within the meaning of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982, (ii) is a "consenting corporation"
under Section 341(f) of the
12
Code, (iii) has agreed or is obligated to make any payments for services which
would not be deductible pursuant to Sections 162(a)(1), 162(m) or 280G of the
Code, (iv) has participated in an international boycott as defined in Section
999 of the Code, (v) is required to make any adjustment under Section 481(a)
of the Code by reason of a change in accounting method or otherwise, (vi) owns
any assets which directly or indirectly secure any debt the interest on which
is tax-exempt under Section 103(a) of the Code, or (vii) owns any asset which
is tax-exempt use property within the meaning of Section 168(h) of the Code.
(h) None of the Company or any of its subsidiaries is a party to any joint
venture, partnership or other arrangement or contract which is treated as a
partnership for tax purposes, or has elected to be treated as a branch or a
partnership pursuant to Treasury Regulation Section 301.7701-3.
(i) Each of the Company and its subsidiaries is a United States person
within the meaning of Section 7701(a)(30) of the Code.
(j) As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise, withholding and other
taxes, tariffs or governmental charges of any nature whatsoever.
Section 4.15. State Takeover Statutes. The Board of Directors of the Company
has approved the Offer, the Merger, this Agreement and the acquisition of
Shares by Sub pursuant to the Offer and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated by this Agreement the provisions of Section 203 of the DGCL. To
the actual knowledge of the Company without investigation, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Offer, the Merger, this Agreement, or any of the transactions
contemplated by this Agreement.
Section 4.16. Brokers; Fees and Expenses. No broker, investment banker,
financial advisor or other person, other than ▇▇▇▇▇▇ Brothers Inc., the fees
and expenses of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The estimated fees and
expenses incurred and to be incurred by the Company in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees of the Company's legal counsel, legal counsel for the Special Committee
and the legal counsel for its financial advisor) are set forth in a letter
dated November 26, 1997 from the Company to Parent.
Section 4.17. Opinion of Financial Advisor. The Special Committee has
received the opinion of ▇▇▇▇▇▇ Brothers Inc., dated November 26, 1997, to the
effect that, as of that date, the consideration to be received by the holders
of Shares pursuant to the Offer and the Merger is fair to such holders from a
financial point of view, and a complete and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, delivered to
Parent for inclusion in the Offer Documents.
Section 4.18. Intellectual Property. Except as set forth on Schedule 4.18,
the Company and its subsidiaries own or possess adequate licenses or other
rights to use all Intellectual Property Rights necessary to conduct the
Business, except where failure to own or possess such licenses or rights,
individually or in the aggregate, has not had, and would not have a material
adverse effect on the Company. Except as set forth on Schedule 4.18, to the
knowledge of the Company, the Intellectual Property Rights of the Company and
its subsidiaries do not conflict with or infringe upon any Intellectual
Property Rights of others to the extent that, if sustained, such conflict or
infringement, individually or in the aggregate, would have a material adverse
effect on the Company. For purposes hereof, "Intellectual Property Right"
means any trademark, service ▇▇▇▇, trade name, copyright, patent, software
license, other date base, invention, trade secret, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
Section 4.19. Labor Relations and Employment.
(a) Except as set forth on Schedule 4.19, (i) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending, or, to the best
knowledge of the Company, threatened against the Company or any of its
13
subsidiaries, and during the past three years there has not been any such
action; (ii) no union claims to represent the employees of the Company or any
of its subsidiaries; (iii) neither the Company nor any of its subsidiaries is
a party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company or
any of its subsidiaries; (iv) none of the employees of the Company or any of
its subsidiaries is represented by any labor organization and the Company does
not have any knowledge of any current union organizing activities among the
employees of the Company or any of its subsidiaries, nor are there
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed with the National Labor Relations Board or any other labor relations
tribunal; (v) the Company and its subsidiaries are, and have at all times
been, in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation except where the failure to be in compliance
would not have a material adverse effect on the Company; (vi) there is no
unfair labor practice charge or complaint against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, threatened before
the National Labor Relations Board or any similar state or foreign agency;
(vii) there is no grievance with respect to or relating to the Company or any
of its subsidiaries arising out of any collective bargaining agreement or
other grievance procedure; (viii) no charges with respect to or relating to
the Company or any of its subsidiaries are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (ix) neither the Company nor any of its
subsidiaries has received notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any of
its subsidiaries and no such investigation is in progress; and (x) there are
no complaints, lawsuits or other proceedings pending or to the knowledge of
the Company threatened in any forum by or on behalf of any present or former
employee of the Company or any of its subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
(b) To the knowledge of the Company, since the enactment of the Worker
Adjustment and Retraining Notification ("WARN") Act, there has not been (i) a
"plant closing" (as defined in the WARN Act) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of the Company or any of its subsidiaries; or (ii) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment or facility of
the Company or any of its subsidiaries; nor has the Company or any of its
subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth in Schedule 4.19, to the
knowledge of the Company, none of the employees of the Company or any of its
subsidiaries has suffered an "employment loss" (as defined in the WARN Act)
since three months prior to the date of this Agreement.
Section 4.20. Change of Control. Except as set forth on Schedule 4.20, the
transactions contemplated by this Agreement will not constitute a "change of
control" under, require the consent from or the giving of notice to a third
party pursuant to, permit a third party to terminate or accelerate vesting,
repayment or repurchase rights, or create any other detriment under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them or any
of their properties or assets may be bound, except where the adverse
consequences resulting from such change of control or where the failure to
obtain such consents or provide such notices would not, individually or in the
aggregate, have a material adverse effect on the Company.
Section 4.21. Environmental Matters.
(a) Except as set forth on Schedule 4.21, the Company and its subsidiaries
have been and are in compliance with all applicable Environmental Laws (as
this term and the other terms in this section are defined below), except for
such violations and defaults as would not, individually or in the aggregate,
have a material adverse effect on the Company.
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(b) Except as set forth on Schedule 4.21, the Company and its subsidiaries
possess all required Environmental Permits; all such Environmental Permits are
in full force and effect; there are no pending or threatened proceedings to
revoke such Environmental Permits and the Company and its subsidiaries are in
compliance with all terms and conditions thereof, except where the failure to
possess or comply with such Environmental Permits or the failure for such
Environmental Permits to be in full force and effect would not, individually
or in the aggregate, have a material adverse effect on the Company.
(c) Except as set forth on Schedule 4.21, and except for matters which would
not, individually or in the aggregate, have a material adverse effect on the
Company, neither the Company nor any of its subsidiaries has received any
written notification that the Company or any subsidiary as a result of any of
the current or past operations of the Business, or any property currently or
formerly owned or leased or used in connection with the Business, is or may be
adversely affected by any proceeding, investigation, claim, lawsuit or order
by any Governmental Entity or other person relating to whether (i) any
Remedial Action is or may be needed to respond to a Release or threat of
Release into the environment of Hazardous Substances arising out of or caused
by any current or past operations of the Company or any of its subsidiaries,
(ii) any Environmental Liabilities and Costs imposed by, under or pursuant to
Environmental Laws as in effect on or prior to the date hereof shall be
sought, or proceeding commenced, arising from the current or past operations
of the Business or (iii) the Company or any subsidiary is or may be a
"potentially responsible party" for a Remedial Action, pursuant to any
Environmental Law for the costs of investigating or remediating Releases or
threatened Releases into the environment of Hazardous Substances, whether or
not such Release or threatened Release has occurred or is occurring at
properties currently or formerly owned or operated by the Company and its
subsidiaries;
(d) Except as set forth on Schedule 4.21 and except for Environmental
Permits, none of the Company or its subsidiaries has entered into any written
agreement with any entity of persons including any Governmental Entity by
which the Company or any of its subsidiaries has assumed the responsibility,
either directly or by services rendered or as a guarantor or surety, to pay
for the remediation of any condition arising from or relating to a Release of
Hazardous Substances as defined under Environmental Laws as in effect on or
prior to the date hereof into the environment in connection with the Business,
including for cost recovery by third parties with respect to such Releases or
threatened Releases;
(e) Except as set forth on Schedule 4.21, there is not now and, to the
Company's knowledge, has not been at any time in the past, a Release in
connection with the current or former conduct of the Business of substances
that would constitute Hazardous Substances as regulated under Environmental
Laws as in effect on or prior to the date hereof for which the Company or any
of its subsidiaries is required or is reasonably likely to be required to
perform, at its own expense, or to pay for a Remedial Action pursuant to
Environmental Laws as currently in effect, or will incur Environmental
Liabilities and uncompensated costs that would, individually or in the
aggregate, have a material adverse effect on the Company.
(f) For purposes of hereof:
(i) "Business" means the current and former businesses of the Company and
its subsidiaries including, but not limited to, businesses or subsidiaries
that have been previously sold by the Company, its subsidiaries or any
predecessors thereto.
(ii) "Environmental Laws" means all Laws relating to the protection of
human health or the environment, or to any emission, discharge, generation,
processing, storage, holding, abatement, existence, Release, threatened
Release or transportation of any chemical or substance, including, but not
limited to, (i) CERCLA, the Resource Conservation and Recovery Act, the
Clean Water Act, the Clean Air Act, the Toxic Substances Control Act,
property transfer statutes or requirements and (ii) all other requirements
pertaining to reporting, licensing, permitting, investigation or
remediation of Hazardous Substances in the air, surface water, groundwater
or land, or relating to the manufacture, processing, distribution, use,
sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances or relating to human health or safety from exposure to
Hazardous Substances.
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(iii) "Environmental Liabilities and Costs" means all damages, natural
resource damages, claims, losses, expenses, costs, obligations, and
liabilities (collectively, "Losses"), whether direct or indirect, known or
unknown, current or potential, past, present or future, imposed by, under
or pursuant to Environmental Laws, including, but not limited to, all
Losses related to Remedial Actions, and all fees, capital costs,
disbursements, penalties, fines and expenses of counsel, experts,
contractors, personnel and consultants and the value of any services that
might be provided by the Company or any of its subsidiaries in lieu thereof
and expenditures necessary to cause any such property or the Company or any
subsidiary to be in compliance with requirements of Environmental Laws.
(iv) "Environmental Permits" means any federal, state, provincial or
local permit, license, registration, consent, order, administrative consent
order, certificate, approval or other authorization necessary for the
conduct of the Business as currently conducted, and wherever it is
currently conducted, under any applicable Environmental Law.
(v) "Governmental Entity" means any government or subdivision thereof,
domestic, foreign or supranational or any administrative, governmental or
regulatory authority, agency, commission, tribunal or body, domestic,
foreign or supranational.
(vi) "Hazardous Substances" means any substance that (a) is defined,
listed or identified or otherwise regulated under any Environmental Law
(including, without limitation, radioactive substances, polycholorinated-
biphenyls, petroleum and petroleum derivatives and products) or (b)
requires investigation, removal or remediation under applicable
Environmental Law.
(vii) "Laws" means all (A) constitutions, treaties, statutes, laws
(including, but not limited to, the common law), rules, regulations,
ordinances or codes of any Governmental Entity, (B) Environmental Permits,
and (C) orders, decisions, injunctions, judgments, awards and decrees of
any Governmental Entity.
(viii) "Release" means as defined in CERCLA.
(ix) "Remedial Action" means all actions required by any Governmental
Entity pursuant to Environmental Law or otherwise taken as necessary to
comply with Environmental Law to (i) clean up, remove, treat or in any
other way remediate any Hazardous Substances; (ii) prevent the release of
Hazardous Substances so that they do not migrate or endanger or threaten to
endanger public health or welfare or the environment; or (iii) perform
studies, investigations or monitoring in respect of any such matter.
Section 4.22. Material Contracts. (a) The Company has provided or made
available to Parent (i) true and complete copies of all written contracts and
agreements to which the Company or any subsidiary is a party and which are
material to the Company ("Material Contracts"), and (ii) with respect to such
Material Contracts that have not been reduced to writing, a written
description thereof which is listed on Schedule 4.22. Neither the Company nor
any of its subsidiaries is, or has received any notice or has any knowledge
that any other party is, in default in any respect under any such Material
Contract, except for those defaults which would not reasonably be likely,
either individually or in the aggregate, to have a material adverse effect
with respect to the Company; and there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute such a
material default.
(b) Except as set forth on Schedule 4.22, no officer or director of the
Company, no shareholder of the Company related to any such officer or
director, and no "associate" (as defined in Rule 14a-1 under the Exchange Act)
of any of them, has any interest in any material contract or agreement of, or
other business arrangement with, the Company, or in any material property
(including any real property and any material personal property, tangible or
intangible), used in or pertaining to the business of the Company.
Section 4.23. Property. Schedule 4.23 accurately identifies all real
property, leases and other rights in real property, structures and other
buildings of the Company and its subsidiaries. All properties and assets of
the Company and its subsidiaries, real and personal, material to the conduct
of their respective businesses are, except for changes in the ordinary course
of business since February 28, 1997, reflected in the balance sheet, and
except as set forth on Schedule 4.23, the Company and its subsidiaries have
good and marketable title to their respective
16
real and personal property reflected on the balance sheet or acquired by them
since the date of the balance sheet, free and clear of all mortgages, liens,
pledges, encumbrances, charges, agreements, claims, restrictions and defects
of title. All real property, structures and other buildings and material
equipment of each of the Company and its subsidiaries are currently used in
the operation of the Business, are adequately maintained and are in
satisfactory operating condition and repair for the requirements of the
Business as presently conducted.
Section 4.24. Insurance. Schedule 4.24 accurately identifies each material
insurance policy (including policies providing property, casualty,
environmental liability, liability, malpractice and workers compensation
insurance) and all other material types of insurance maintained by the Company
and its subsidiaries, together with carriers and liability limits for each
such policy. Each such policy is duly in force and no notice has been received
by the Company or any of its subsidiaries from any insurance carrier
purporting to cancel or reduce coverage under any such policy. The Company and
its subsidiaries are current in all premiums or other payments due thereunder
and no notice has been received by the Company or any of its subsidiaries from
any insurance carrier purporting to increase any such premiums in any material
respect. All insurance coverage held for the benefit of the Company or its
subsidiaries is adequate to cover risks customarily insured against by similar
companies in their industry.
ARTICLE V
Representations and Warranties of Parent and Sub
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 5.01. Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power and authority would not be reasonably expected to prevent or materially
delay the consummation of the Offer and/or the Merger.
Section 5.02. Authority. Parent and Sub have requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Sub and no other corporate proceedings on the part of Parent and
Sub are necessary to authorize this Agreement or to consummate such
transactions. No vote of Parent shareholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Sub, as the case may be, and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and Sub
enforceable against them in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
Section 5.03. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act (including the filing with
the SEC of the Offer Documents), the HSR Act, the DGCL, the laws of other
states in which Parent is qualified to do or is doing business, state takeover
laws and foreign laws, neither the execution, delivery or performance of this
Agreement by Parent and Sub nor the consummation by Parent and Sub of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective certificate of incorporation or By-
Laws of Parent and Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where
the failure to obtain such permits, authorizations, consents or approvals or
to make such filings would not be reasonably expected to prevent or materially
delay the consummation of the Offer and/or the Merger), (iii) result in a
violation or breach of, or constitute (with or
17
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of
its subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Offer and/or the Merger.
Section 5.04. Information Supplied. None of the information supplied or to
be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in the case of the
Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy Statement, at the time
the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
Section 5.05. Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
Section 5.06. Financing. The Parent, through its affiliate, WPG Corporate
Development Associates V., L.P., has received a "highly confident" letter from
BT Alex. ▇▇▇▇▇ Incorporated and a letter of commitment from Bankers Trust
Company with respect to the debt financing for the transactions contemplated
hereby (the "Financing Letters"). Executed copies of such letters are attached
hereto as Schedule 5.06. Assuming that the financing contemplated by the
Financing Letters is consummated in accordance with the terms thereof, the
funds to be borrowed and/or provided for thereunder, together with the equity
to be provided by Parent, its affiliates and management, will provide
sufficient funds to pay the Offer Price upon consummation of the Offer, the
Merger Consideration, the refinancing of certain indebtedness for borrowed
money of the Company which is required to be refinanced pursuant to the terms
of such indebtedness in connection with the Offer or the Merger, and all
related fees and expenses. As of the date of this Agreement, Parent is not
aware of any facts or circumstances that create a reasonable basis for Parent
to believe that Parent will not be able to obtain financing in accordance with
the terms of the Financing Letters. Parent agrees promptly to notify the
Company if the statements in the immediately preceding sentence are no longer
true and correct.
Section 5.07. Brokers. None of Parent, Sub, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any broker or finder in connection with the transactions
contemplated herein.
ARTICLE VI
Covenants
Section 6.01. Conduct of Business of the Company. Except as contemplated by
this Agreement or as expressly agreed to in writing by Parent, during the
period from the date of this Agreement until such time as Parent's designees
shall constitute a majority of the members of the Board of Directors of the
Company, the
18
Company will, and will cause each of its subsidiaries to, conduct its
operations according to its ordinary and usual course of business and
consistent with past practice and, subject to its obligations under Section
7.04(d), use its and their respective reasonable best efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and
others having business dealings with them and to preserve goodwill. Without
limiting the generality of the foregoing, and except as (x) otherwise
expressly provided in this Agreement, (y) required by law, or (z) set forth on
Schedule 6.01, the Company will not, and will cause its subsidiaries not to,
without the consent of Parent, which shall not be unreasonably withheld:
(i) except with respect to annual bonuses made in the ordinary course of
business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, pension, retirement, employment or
other employee benefit agreement, trust, plan or other arrangement for the
benefit or welfare of any director, officer or employee of the Company or
any of its subsidiaries or increase in any manner the compensation or
fringe benefits of any director, officer or employee of the Company or any
of its subsidiaries (except, in each case, for normal annual salary
increases and cost of living increases for the benefit of officers and
employees of the Company with positions below the level of vice president)
or pay any benefit not required by any existing agreement or place any
assets in any trust for the benefit of any director, officer or employee of
the Company or any of its subsidiaries (in each case, except with respect
to employees and directors in the ordinary course of business consistent
with past practice);
(ii) incur any indebtedness for borrowed money in excess of $500,000,
other than in consultation with Parent;
(iii) expend funds for individual capital expenditures in excess of
$50,000 or $2,000,000 in the aggregate for any 12-month period (to be
apportioned pro-rata over any period less than 12 months), other than in
consultation with Parent;
(iv) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets other than
immaterial properties or assets (or immaterial portions of properties or
assets), except in the ordinary course of business consistent with past
practice;
(v) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(vi) other than in connection with Options and warrants outstanding as of
the date hereof, authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock or
the capital stock of any of its subsidiaries, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or
any other securities or equity equivalents (including without limitation
stock appreciation rights) other than issuances upon exercise of Options or
Warrants;
(vii) amend its Certificate of Incorporation, By-Laws or equivalent
organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the Company;
(viii) make or agree to make any acquisition of assets which is material
to the Company and its subsidiaries, taken as a whole, except for (x)
purchases of inventory in the ordinary course of business, (y) pursuant to
purchase orders entered into in the ordinary course of business which do
not call for payments in excess of $50,000 per annum or (z) project-related
expenditures which, individually, do not exceed $250,000; or
19
(ix) settle or compromise any shareholder derivative suits arising out of
the transactions contemplated hereby or any other litigation (whether or
not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid.
Section 6.02. No Solicitation.
(a) From the date hereof until such time as Parent's designees shall
constitute a majority of the members of the Board of Directors of the Company,
the Company shall not, and shall not permit any of its subsidiaries, or any of
its or their officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its subsidiaries) to, directly or
indirectly, solicit or initiate any discussions or negotiations with, any
corporation, partnership, person or other entity or group (each, a
"Person"),concerning any offer or proposal which constitutes or is reasonably
likely to lead to any Acquisition Proposal (as defined below). Information may
be provided in response to a bona fide inquiry subject to the confidentiality
agreement referred to below, and negotiations may be conducted in response to
such inquiry. Upon having received a bona fide proposal that the Board of
Directors, consistent with its fiduciary duties and after the receipt of
advice from such Delaware counsel as may be appointed by the Board of
Directors concludes if consummated would be a Superior Proposal, the Board of
Directors may withdraw or modify its approval or recommendation of the Offer,
this Agreement or the Merger, approve or recommend the Superior Proposal or
terminate this Agreement pursuant to Section 9.01(d) hereof and shall promptly
notify Parent in writing of any such determination. For five (5) business days
after Parent has been informed by the Company of the above conclusion with
respect to such Superior Proposal, Parent shall have the right to match (the
"Counterproposal") the economic value of any such Superior Proposal. The
Company shall negotiate in good faith with respect to such Counterproposal.
Any information furnished to any Person in connection with an Acquisition
Proposal shall be provided pursuant to a confidentiality agreement in
customary form on terms not more favorable to such Person than the terms
contained in the Confidentiality Agreement (as defined in Section 7.02).
Subject to all of the foregoing requirements, the Company will immediately
notify Parent orally and in writing if any discussions or negotiations are
sought to be initiated, any inquiry or proposal is made, or any information is
requested by any Person with respect to any Acquisition Proposal or which
could lead to an Acquisition Proposal and immediately notify Parent of all
material terms of any proposal which it may receive in respect of any such
Acquisition Proposal, including the identify of the Person making the
Acquisition Proposal or the request for information, if known, and thereafter
shall inform Parent on a timely, ongoing basis of the status and content of
any discussions or negotiations with such a third party, including immediately
reporting any material changes to the terms and conditions thereof.
(b) For purposes hereof:
(i) "Acquisition Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of 15% or
more of any class of equity securities of the Company or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction the consummation
of which could reasonably be expected to impede, interfere with, prevent or
materially delay the Offer and/or the Merger or which would reasonably be
expected to dilute materially the benefits to Parent of the transactions
contemplated hereby; and
(ii) "Superior Proposal" means any bona fide written offer made by a
third party that is either fully financed or with respect to which a highly
confident and/or a commitment letter from a financial institution of
adequate sophistication and capitalization has been issued to acquire,
directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines
(after consultation with a nationally recognized investment bank) to be
economically superior to the transaction contemplated by this Agreement.
20
(c) Nothing contained in this Section 6.02 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so
to disclose would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law; provided, however, neither the Company nor
its Board of Directors nor any committee thereof shall, except as permitted by
Section 6.02(a), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer, this Agreement or the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
Section 6.03. Other Actions. The Company shall not, and shall not permit any
of its subsidiaries to, take any action that would, or that could reasonably
be expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not
so qualified becoming untrue in any material respect or (iii) any of the Offer
Conditions not being satisfied (subject to the Company's right to take actions
specifically permitted by Section 6.02).
Section 6.04. Notice of Certain Events. The Company and Parent shall
promptly notify each other of:
(i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Government Entity in
connection with the transactions contemplated by this Agreement;
(iii) any action, suits, claims, investigations or proceedings commenced
or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting
such party or any of its subsidiaries;
(iv) an administrative or other order or notification relating to any
material violation or claimed violation of law;
(v) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or
prior to the Closing Date; and
(vi) any material failure of any party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder;
provided, however, that the delivery of any notice pursuant to this Section
6.04 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
ARTICLE VII
Additional Agreements
Section 7.01. Stockholder Approval; Preparation of Proxy Statement. (a) If
the Company Stockholder Approval is required by law, the Company will, at
Parent's request, as soon as practicable following the acceptance for payment
of, and payment for, any Shares by Sub pursuant to the Offer and the
expiration of the Offer, duly call, give notice of, convene and hold a meeting
of its stockholders (the "Stockholders Meeting") for the purpose of obtaining
the Company Stockholder Approval. The Company will, through its Board of
Directors, recommend to its stockholders that the Company Stockholder Approval
be given. Notwithstanding the foregoing, if Sub or any other subsidiary of
Parent shall acquire at least 90% of the outstanding Shares, the parties
shall, at the request of Parent, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Stockholders Meeting in accordance with
Section 253 of the DGCL.
21
(b) If the Company Stockholder Approval is required by law, the Company
will, at Parent's request, as soon as practicable following the acceptance for
payment of, and payment for, any Shares by Sub pursuant to the Offer and the
expiration of the Offer, prepare and file a preliminary Proxy Statement with
the SEC and will use its best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments
to the satisfaction of the staff. The Company will notify Parent promptly of
the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply Parent with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Stockholders Meeting
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail
to its stockholders such an amendment or supplement. The Company will not mail
any Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer and
all other Shares owned by Parent or any subsidiary of Parent to be voted in
favor of the Company Stockholder Approval.
Section 7.02. Access to Information. From the date hereof until such time as
Parent's designees shall constitute a majority of the members of the Board of
Directors of the Company, the Company shall give Parent and Sub, their
counsel, financial advisors, auditors and other authorized representatives
full access to the offices, properties, books and record of the Company and
its subsidiaries during normal business hours, will furnish to Parent and Sub,
their counsel, financial advisors, financial institutions auditors and other
authorized representatives such financial and operating data and other
information as such may be reasonably requested and will instruct the
employees of the Company and its subsidiaries, their counsel and financial
advisors to cooperate with Parent and Sub in their investigation of the
Business; provided, that no investigation pursuant to this Section 7.02 shall
affect any representation or warranty given by the Company to Parent and Sub
hereunder; and provided, further, that any information provided to Parent
and/or Sub pursuant to this Section 7.02 shall be subject to the
confidentiality agreement, dated as of November 5, 1997 (the "Confidentiality
Agreement"), the terms of which shall continue to apply, except as otherwise
agreed by the Company, unless and until Parent and Sub shall have purchased a
majority of the outstanding Shares pursuant to the Offer and notwithstanding
termination of this Agreement.
Section 7.03. Reasonable Efforts; Financing. (a) Each of the Company, Parent
and Sub agree to use its reasonable best efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Offer and the Merger (which
actions shall include furnishing all information required under the HSR Act
and in connection with approvals of or filings with any other Governmental
Entity) and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon any of them or any of
their subsidiaries in connection with the Offer and the Merger. Each of the
Company, Parent and Sub will, and will cause its subsidiaries to, use its
reasonable best efforts to take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, Sub,
the Company or any of their subsidiaries in connection with the Offer and the
Merger or the taking of any action contemplated thereby or by this Agreement,
except that no party need waive any substantial rights or agree to any
substantial limitation on its operations or to dispose of any assets.
(b) Parent shall use reasonable efforts to cause the financing necessary for
satisfaction of the condition in subsection (i) of the Conditions of the Offer
on Exhibit A.
Section 7.04. Options; Warrants. (a) The Company shall amend (i) ATC Group
Services Inc. 1988 Incentive and Non-Statutory Stock Option Plan, (ii) ATC
Group Services Inc. 1993 Incentive and Non-Statutory Stock Option Plan, (iii)
ATC Group Services Inc. 1995 Nonqualified Stock Option Plan, and any other
program pursuant to which there are holders of options (the "Options") to
purchase Shares granted by the Company
22
(collectively, the "Stock Option Plans") to provide that all outstanding,
unexercised Options shall be immediately exercisable and that if the optionees
do not exercise their unexercised Options, each optionee shall receive, in
settlement of each Option held by such optionee, a "Cash Amount" (less any
applicable withholding taxes) with respect to the number of previously
unexercised Shares underlying the Option immediately prior to the Effective
Time. The Company shall use its commercially reasonable efforts to amend the
Stock Option Plans to provide that each Option shall terminate as of the
Effective Time. The Cash Amount payable for each Option shall equal the
product of (i) the Merger Consideration minus the exercise price per Share of
each such Option and (ii) the number of previously unexercised Shares covered
by each such Option.
(b) The Company shall provide notice to participants in the Stock Option
Plans and other holders of Options to purchase Shares granted by the Company
that the Company proposes to merge into another corporation; that the Optionee
under the plans or program may exercise his Options in full for all shares not
theretofore purchased by him prior to the Effective Time; and that the plans
and program have been amended to provide that to the extent an optionee does
not exercise such Options prior to the Effective Time, the optionee shall
receive, in settlement of each Option held by the optionee, a "Cash Amount"
(less any applicable withholding taxes) with respect to the number of
previously unexercised Shares underlying the Option immediately prior to the
Effective Time; that each Option shall terminate as of the Effective Time; and
that the Cash Amount payable for each Option shall equal the product of (i)
the Merger Consideration minus the exercise price per Share of each such
Option and (ii) the number of previously unexercised Shares covered by each
such Option.
(c) Except as may be otherwise agreed to by Parent or Sub and the Company,
the Company's Stock 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 of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted as of the Effective Time.
(d) The Company shall use its commercially reasonable efforts so that
following the Effective Time no holder of employee stock options will have any
right to receive Shares upon exercise of an employee stock option.
(e) Pursuant to the terms of (i) the warrant agreement, dated October 15,
1990, relating to 568,207 Class C Redeemable Common Stock Purchase Warrants,
(ii) warrant agreements relating to 490,500 warrants issued pursuant to the
merger between the Company and Aurora Environmental Inc. and (iii) the
consulting agreement, dated March 14, 1997, relating to 35,000 warrants issued
to First Montauk Securities Corp., the Company has issued warrants
(collectively, the "Warrants") to certain persons. The holders of the Warrants
shall be entitled either to exercise their Warrants for Shares in accordance
with the applicable agreement under which such Warrants were issued and tender
such Shares in the Offer or upon execution and delivery to the Company of a
cancellation agreement in form and substance reasonably satisfactory to the
Company, to receive from the Company at the Effective Time a Cash Amount equal
to the product of (i) the Merger Consideration minus the exercise price per
share of each such Warrant and (ii) the number of unexercised Shares covered
by each such Warrant.
(f) Notwithstanding anything to the contrary herein, if it is determined
that compliance with any of the foregoing would cause any individual subject
to Section 16 of the Exchange Act to become subject to the profit recovery
provisions thereof, any Options or Warrants held by such individual will be
canceled or purchased, as the case may be, at the Effective Time or at such
later time as may be necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive from the Company or
the Surviving Corporation an amount in cash or other consideration
satisfactory to the Surviving Corporation and such individual equal to the
excess, if any, of the Merger Consideration over the per Share exercise price
of such Option or Warrant multiplied by the number of Shares subject thereto
(less any applicable withholding taxes), and the parties hereto will cooperate
and take any and all necessary actions so as to achieve the intent of the
foregoing without giving rise to such profit recovery.
23
Section 7.05. Directors. Promptly upon the acceptance for payment of, and
payment for, 50.1% of the Shares by Sub pursuant to the Offer, Sub shall be
entitled to designate such number of directors on the Board of Directors of
the Company as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such directors, and the Company shall, at such
time, cause Sub's designees to be so elected by its existing Board of
Directors; provided, however, that in the event that Sub's designees are
elected to the Board of Directors of the Company, until the Effective Time
such Board of Directors shall have at least two directors who are directors on
the date of this Agreement and who are not officers of the Company (the
"Independent Directors"); and provided, further, that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director shall designate a person to
fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall
not be officers or affiliates of the Company or any of its subsidiaries, or
officers or affiliates of Parent or any of its subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action requested by
Parent necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect
to Sub's designees). In connection with the foregoing, the Company will
promptly, at the option of Parent, either increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or appointed
to, and to constitute a majority of, the Company's Board of Directors as
provided above.
Section 7.06. Fees and Expenses. (a) In addition to any other amounts which
may be payable or become payable pursuant to any other paragraph of this
Section 7.06, in the event that this Agreement is terminated for any reason
other than a material breach by Parent or Sub, the Company shall promptly
reimburse the Parent or Sub, as the case may be, upon receipt of reasonably
satisfactory back-up documentation, for all out-of-pocket expenses and fees
(including, without limitation, fees and expenses payable to all Governmental
Entities, banks, investment banking firms and other financial institutions,
and their respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents, experts
and consultants to Parent and its affiliates), whether incurred prior to, on
or after the date hereof, in connection with the Merger and the consummation
of all transactions contemplated by this Agreement, and the financing thereof,
up to a maximum of $2.5 million. Except as otherwise specifically provided for
herein, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
(b) In the event that (i) this Agreement is terminated pursuant to Section
9.01(d) or (e), or (ii) any Person (other than Parent or any of its
affiliates) shall have consummated an Acquisition Proposal within twelve
months following the termination of the Offer at a value at or above $12 per
share, then the Company shall pay to Parent, in the case of an event under (i)
above, promptly upon any such termination, and, in the case of an event under
(ii) above, at the time of any such consummation, a termination fee of $4.5
million (the "Termination Fee"); provided that in no event shall the aggregate
payment by the Company of fees and expenses and of the Termination Fee under
this Section 7.06 exceed $6.0 million.
(c) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees and
expenses) incurred in connection with such action.
Section 7.07. Indemnification; Insurance. (a) Parent and Sub agree that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors,
officers, employees, fiduciaries or agents (the "Indemnified Parties") of the
Company and its subsidiaries as provided in their respective certificates of
incorporation or by-laws (or similar organizational documents) or
24
existing indemnification contracts shall survive the Merger and shall continue
in full force and effect in accordance with their terms.
(b) It is understood and agreed that the Company shall, and from and after
the Effective Time, the Surviving Corporation and the Parent shall, indemnify,
defend and hold harmless the Indemnified Parties against all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments, fines or amounts that are paid in settlement in connection with
any pending, threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part or arising in whole or part out of the
fact that such person is or was a director, officer, employee or agent of the
Company or any of its subsidiaries or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise
or by reason of anything done or not done by such person in any such capacity
whether pertaining to any matter existing or occurring at or prior to the
Effective Time or any acts or omissions occurring or existing at or prior to
the Effective Time and whether asserted or claimed prior to, or at or after,
the Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement or the transactions contemplated hereby,
in each case to the fullest extent permitted by applicable law (and the
Company, the Surviving Corporation, and Parent, as the case may be, shall pay
expenses in advance of the final disposition of any such action or proceeding
to each Indemnified Party to the fullest extent permitted by applicable law).
In determining whether an Indemnified Party is entitled to indemnification
under this Section 7.07(b), if requested by such Indemnified Party such
determination shall be made by special, independent counsel selected by the
Surviving Corporation and the Parent and reasonably approved by the
Indemnified Party, and who has not otherwise performed services for the
Surviving Corporation, Parent or their respective affiliates within the last
three years. Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Parties (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain Squadron, Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇, LLP or
other counsel reasonably satisfactory to the Company (or the Surviving
Corporation after the Effective time), and the Company (or, after the
Effective Time, the Surviving Corporation and Parent) shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties as promptly as
statements therefor are received; and (ii) the Company (or, after the
Effective Time, the Surviving Corporation and the Parent) will use all
reasonable best efforts to assist in the vigorous defense of any such matter;
provided, that none of the Company, the Surviving Corporation or Parent shall
be liable for any settlement effected without its prior written consent, which
consent shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 7.07(b), upon learning of any such
claim, action, suit, proceeding or investigation, shall notify the Company
(or, after the Effective Time, the Surviving Corporation and Parent) (but the
failure so to notify shall not relieve a party from any liability which it may
have under this Section 7.07(b) except to the extent such failure prejudices
such party's position with respect to such claims) and shall deliver to the
Company (or, after the Effective Time, the Surviving Corporation and the
Parent) the undertaking contemplated by Section 145(e) of the DGCL, but
without any requirement for the posting of the bond. The Indemnified Parties
as a group may retain one law firm (plus local counsel, if necessary) to
represent them with respect to each such matter unless the use of the counsel
chosen to represent the Indemnified Parties would present such counsel with a
conflict of interest, or the representation of all of the Indemnified Parties
by the same counsel would be inappropriate due to actual or potential
differing interests between them, in which case such additional counsel as may
be required (as shall be reasonably determined by the Indemnified Parties and
the Company, the Surviving Corporation or Parent, as the case may be) and
satisfactory to the Company, the Surviving Corporation or Parent, as the case
may be, may be retained by the Indemnified Parties at the cost and expense of
the Company, the Surviving Corporation or Parent, as the case may be. The
Company and Sub agree that the foregoing rights to indemnification, including
provisions relating to advances of expenses incurred in defense of any action
or suit, existing in favor of the Indemnified Parties with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years
after the Effective Time; provided, however that all rights to indemnification
(including rights relating to advances of expenses) in respect of any
Indemnified Liabilities asserted or made within such period shall continue
until the disposition of such Indemnified Liabilities. Furthermore, the
provisions with respect to indemnification set forth in the Certificate of
Incorporation or Bylaws
25
of the Surviving Corporation shall not be amended for a period of six years
following the Effective Time to the extent that such amendment would adversely
affect the rights thereunder of individuals who at any time prior to the
Effective Time were directors, officers, employees or agents of the Company in
respect of actions or omissions occurring at or prior to the Effective Time.
(c) The Company (or, after the Effective Time, the Surviving Corporation and
Parent) shall indemnify any Indemnified Party against all reasonable costs and
expenses (including attorneys' fees and expenses), such amounts to be payable
in advance upon request as provided in Section 7.07(b), relating to the
enforcement of such Indemnified Party's rights under this Section 7.07 or
under the documents referred to in this Section 7.07, but only to the extent
that such Indemnified Party is ultimately determined to be entitled to
indemnification hereunder or thereunder. Any amounts due pursuant to the
preceding sentence shall be payable upon request by the Indemnified Party.
(d) For six years from the Effective Time, Parent shall, unless Parent
agrees in writing to guarantee the indemnification obligations set forth in
Section 7.07(a), maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy
of which has been heretofore delivered to Parent); provided, however, that in
no event shall Parent be required to expend in any one year an amount in
excess of 225% of the annual premiums currently paid by the Company for such
insurance (which the Company represents is currently not more than $98,250);
and, provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated only to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(e) This Section 7.07 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
(f) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties to any person, then, and in each case, proper provision shall be
made so that the successors and assigns of the Company and the Surviving
Corporation, as the case may be, shall assume the obligations set forth in
this Section 7.07.
Section 7.08. Certain Litigation. The Company agrees that it will not settle
any litigation commenced after the date hereof against the Company or any of
its directors by any stockholder of the Company relating to the Offer, the
Merger or this Agreement, without the prior written consent of Parent. In
addition, the Company will not voluntarily cooperate with any third party
which may hereafter seek to restrain or prohibit or otherwise oppose the Offer
or the Merger and will cooperate with Parent and Sub to resist any such effort
to restrain or prohibit or otherwise oppose the Offer or the Merger, unless
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that failing so to cooperate with such
third party or cooperating with Parent or Sub, as the case may be, would
constitute a breach of the director's fiduciary duties under applicable law.
Section 7.09. Solvency Opinion. Parent shall deliver to the Board any
solvency letter from any third party appraisal or similar form that Parent
provides to the providers of financing under the Financing Commitment.
ARTICLE VIII
Conditions
Section 8.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
26
(a) Company Stockholder Approval. If required by applicable law, the Company
Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other Governmental Entity or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
each of the parties shall have used reasonable efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for payment and
paid for Shares pursuant to the Offer.
(d) HSR Approvals. The applicable waiting periods under the HSR Act shall
have expired or been terminated.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company, by action of their
respective Boards of Directors;
(b) by Parent or the Company if the Merger shall not have been consummated
on or before June 30, 1998; provided, however, that neither Parent nor the
Company may terminate this Agreement pursuant to this Section 9.01(b) if such
party shall have materially breached this Agreement;
(c) by Parent or the Company if any court of competent jurisdiction in the
United States or other United States Governmental Entity has issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; provided, however, that the party seeking
to terminate this Agreement shall have used its reasonable best efforts to
remove or lift such order, decree, ruling or other action;
(d) by the Company if, prior to the consummation of the Offer, any person
has made a bona fide proposal relating to an Acquisition Proposal, or has
commenced a tender or exchange offer for the Shares, and the Company Board
concludes, consistent with its fiduciary duties and after the receipt of
advice from such Delaware counsel as may be appointed by the Board of
Directors, that such proposal if consummated would be a Superior Proposal;
(e) by Parent, if prior to the consummation of the Offer the Company Board
shall have (i) failed to recommend to the stockholders of the Company that
they accept the Offer, tender their Shares pursuant to the Offer and approve
and adopt this Agreement (the "Stockholder Acceptance"), (ii) withdrawn or
materially modified its approval or recommendation of this Agreement, the
Offer or the Merger, (iii) shall have approved or recommended a Superior
Proposal, (iv) shall have resolved to effect any of the foregoing or (v) shall
have otherwise taken steps to impede the Stockholder Acceptance;
(f) by the Parent, if prior to consummation of the Offer, there has been a
material violation or breach by the Company of any representation, warranty,
covenant or agreement contained in this Agreement (which violation or breach
is not cured by the Company within ten days after written notice reasonably
describing such breach); or
27
(g) by the Company, if prior to the consummation of the Offer, there has
been a material violation or breach by Parent or Sub of any representation,
warranty, covenant or agreement contained in this Agreement (which violation
or breach is not cured by Parent or Sub within ten days after written notice
reasonably describing such breach, other than the obligations contained in the
last sentence of Section 1.01(a), which shall have no cure period).
Section 9.02. Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Sub or
the Company or their respective officers or directors, except with respect to
the last sentence of Section 1.02(c), Section 4.16, Section 5.07, the last
clause of Section 7.02, Section 7.06, this Section 9.02 and Article X;
provided, however, that nothing herein shall relieve any party for liability
for any breach hereof.
Section 9.03. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after obtaining the Company Stockholder Approval (if
required by law), but, after any such approval, no amendment shall be made
which by law requires further approval by such shareholders without obtaining
such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Following the election or appointment of the Sub's designees pursuant to
Section 7.05 and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement or (iii)
extend the time for performance of Parent and Sub's respective obligations
under this Agreement.
Section 9.04. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of this Agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party. The failure of any party hereto to assert any of its rights hereunder
or otherwise shall not constitute a waiver of those rights.
ARTICLE X
Miscellaneous
Section 10.01. Nonsurvival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall terminate at the Effective Time or, in the
case of the Company, shall terminate upon the acceptance for payment of, and
payment for, Shares by Sub pursuant to the Offer, unless the survival thereof
is provided for by their terms.
Section 10.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by overnight courier (providing proof of delivery)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to:
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
28
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) if to the Company, to:
ATC Group Services Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Squadron, Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Section 10.03. Interpretation. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation". The
phrase "made available" in this Agreement shall mean that the information
referred to has been made available if requested by the party to whom such
information is to be made available. As used in this Agreement, the term
"subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
person. As used in this Agreement, "material adverse change" or "material
adverse effect" means, when used in connection with the Company, any change or
effect (or any development that, insofar as can reasonably be foreseen, is
likely to result in any change or effect) that, individually or in the
aggregate with any such other changes or effects, is materially adverse to the
business, financial condition or results of operations of the Company and its
subsidiaries taken as a whole. Notwithstanding the foregoing, a material
adverse change or material adverse effect shall not include any material
adverse change or material adverse effect caused by any change resulting from
the announcement of the Offer or the Merger.
29
Section 10.04. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 10.05. Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 7.07, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 10.06. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York without regard to any
applicable conflicts of law, except to the extent the DGCL shall be held to
govern the terms of the Merger.
Section 10.07. Publicity. Except as otherwise required by law or the rules
of the Nasdaq National Market, for so long as this Agreement is in effect,
neither the Company nor Parent shall, or shall permit any of its subsidiaries
to, issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld.
Section 10.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
any direct or indirect wholly owned subsidiary of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
Section 10.09. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or Delaware or in a New York or
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit to the personal jurisdiction of any Federal court located
in the States of New York or Delaware or any New York or Delaware state court
in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions contemplated
hereby in any court other than a Federal court sitting in the State of New
York or Delaware or a New York or Delaware state court and (iv) waives any
right to trial by jury with respect to any claim or proceeding related to or
arising out of this Agreement or any of the transactions contemplated hereby.
30
In Witness Whereof, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
Acquisition Holdings, Inc.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
Acquisition Corp.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
ATC Group Services Inc.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief
Executive Officer
Approved:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Member of the Special
Committee
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Member of the Special
Committee
31
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, and in
addition to (and not in limitation of) Sub's right to extend and amend the
Offer at any time in its sole discretion (subject to the provisions of this
Agreement), Sub shall not be required to accept for payment or, subject to
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for, and may
delay the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any Shares tendered pursuant to the Offer unless (i)
there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer such number of Shares that would constitute a majority
of the outstanding Shares (determined on a fully diluted basis for all
outstanding stock options and any other rights to acquire Shares) (the
"Minimum Condition") and (ii) any waiting period under the HSR Act applicable
to the purchase of Shares pursuant to the Offer shall have expired or been
terminated. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate the Offer if, at any time on or after the date of this
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exists:
(a) there shall be any action or proceeding commenced by any Governmental
Entity which has a reasonable likelihood of success and which, if decided
adversely to the Company, would have a material adverse effect on the Company,
(i) challenging the acquisition by Parent or Sub of any Shares under the Offer
or seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or the performance of any of the other transactions contemplated by
this Agreement, or seeking to obtain from the Company, Parent or Sub any
damages that are material in relation to the Company and its subsidiaries
taken as a whole, (ii) seeking to prohibit or impose any material limitations
on Parent's or Sub's ownership or operation (or that of any of their
respective Subsidiaries or affiliates) of all or a material portion of the
Company's businesses or assets, or to compel Parent or Sub or their respective
Subsidiaries and affiliates to dispose of or hold separate any material
portion of the business or assets of the Company and its Subsidiaries taken as
a whole, (ii) seeking to impose material limitations on the ability of Sub, or
render Sub unable, to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer and the Merger, (iii) seeking to impose
material limitations on the ability of Sub or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented to
the Company's stockholders, or (iv) which otherwise is reasonably likely to
have a material adverse effect on the Company;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any events after the date of this Agreement
that, either individually or in the aggregate, have caused or are reasonably
likely to cause a material adverse change with respect to the Company other
than a change resulting from the announcement of the Offer or the Merger;
(d)(i) the Board of Directors of the Company or any committee thereof shall
have publicly (including by amendment of its Schedule 14D-9) withdrawn or
modified in a manner adverse to Parent or Sub its approval or recommendation
of the Offer, the Merger or this Agreement, or approved or recommended any
Acquisition Proposal, (ii) the Company shall have entered into any agreement
with respect to any Superior Proposal in accordance with Section 6.02(a) of
this Agreement or (iii) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions;
32
(e) any of the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in any material respect, in each
case at the date of this Agreement and at the scheduled or extended expiration
of the Offer, except for such breaches that would, individually or in the
aggregate, not have a material adverse effect on the Company;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under this Agreement, except for such breaches that would, individually or in
the aggregate, not have a material adverse effect on the Company;
(g) this Agreement shall have been terminated in accordance with its terms;
(h) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange or on
NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) a commencement of a
war, armed hostilities or other international or national calamity directly
involving the armed forces of the United States that materially and adversely
affects the financial markets in the United States, (iv) any material
limitation (whether or not mandatory) by any governmental authority on the
extension of credit by banks or other lending institutions, (v) in the case of
any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(i) the Company shall fail to receive the proceeds of financing pursuant to
the Financing Letters set forth on Schedule 5.06 or involving such other
financing sources, as Parent and the Company shall reasonably agree and are
not materially more onerous, in amounts sufficient to consummate the
transactions contemplated by this Agreement, including, without limitation (i)
to pay, with respect to all Common Stock in the Merger, the Offer Price
pursuant to Section 1.01, (ii) to refinance the outstanding indebtedness of
the Company, (iii) to pay any fees and expenses in connection with the
transactions contemplated by this Agreement or the financing thereof and (iv)
to provide for the working capital needs of the Company following the Merger,
including, without limitation, if applicable, letters of credit.
The foregoing conditions are for the sole benefit of Parent and Sub, may be
asserted by Parent or Sub regardless of the circumstances giving rise to such
condition (including any action or inaction by Parent or Sub not in violation
of this Agreement) and may be waived by Parent or Sub in whole or in part at
any time and from time to time in the sole discretion of Parent or Sub,
subject in each case to the terms of this Agreement. The failure by Parent or
Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
33
