EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Among
ENVIRONMENTAL SYSTEMS PRODUCTS, INC.
STONE RIVET, INC.
and
ENVIROTEST SYSTEMS CORP.
Dated as of August 12, 1998
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Glossary of Defined Terms
(Not Part of this Agreement)
Defined Term Location of Definition
------------ ----------------------
Affiliate -section- 9.03(a)
Agreement Preamble
Acquisition Proposal -section- 6.05(a)
Beneficial Owner -section- 9.03(b)
Blue Sky Laws -section- 3.05(b)
Board Recitals
Business Day -section- 9.03(c)
CCA -section- 3.05(b)
Certificate of Merger -section- 2.02
Certificates -section- 2.09(b)
Class A Common Stock Recitals
Class B Common Stock Recitals
Class C Common Stock Recitals
Company Preamble
Company Benefit Plans -section- 3.10(a)
Company Common Stock Recitals
Company Stock Option -section- 1.03
Company Stock Option Plans -section- 1.03
Confidentiality Agreement -section- 6.04(b)
Control -section- 9.03(d)
CSFB -section- 1.02(a)
Debt Tenders -section- 6.08(c)
Delaware Law Recitals
Dissenting Shares -section- 2.08
Effective Time -section- 2.02
Environmental Laws -section- 9.03(e)
Environmental Permits -section- 3.16(b)
ERISA -section- 3.10(a)
Exchange Act -section- 1.02(b)
Financing Commitments -section- 4.04
Governmental Antitrust Authority -section- 6.08(b)
Governmental Order -section- 7.01(b)
Guarantor Subsidiary -section- 9.03(f)
Hazardous Substances -section- 9.03(g)
Holdings -section- 4.01
HSR Act -section- 3.05(b)
Indemnification Provisions -section- 6.07(a)
Intellectual Property -section- 9.03(h)
IRS -section- 3.10(a)
knowledge -section- 9.03(i)
known -section- 9.03(i)
Liens -section- 3.14(b)
Material Adverse Effect -section- 9.03(j)
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Merger Recitals
Merger Consideration -section- 2.06(a)
Minimum Condition -section- 1.01(a)
Notes -section- 6.08(c)
Offer Recitals
Offer Documents -section- 1.01(b)
Offer to Purchase -section- 1.01(b)
Option Spread -section- 1.03
Parent Preamble
Parent Audited Statements -section- 4.07
Parent Unaudited Statements -section- 4.07
Paying Agent -section- 2.09(a)
Payment Fund -section- 2.09(a)
Permitted Liens -section- 3.14(b)
Per Share Amount Recitals
Person -section- 9.03(k)
Plans -section- 3.10(a)
Proxy Statement -section- 3.12
Purchaser Preamble
Schedule 14D-9 -section- 1.02(b)
Schedule 14D-1 -section- 1.01(b)
SEC -section- 9.03(l)
SEC Rules -section- 9.03(m)
SEC Reports -section- 3.07(a)
Securities Act -section- 3.07(a)
Shares Recitals
Stockholders' Meeting -section- 6.01(a)
Subsidiary -section- 9.03(n)
Surviving Corporation -section- 2.01
Termination Fee -section- 8.03(a)
Transactions -section- 3.04
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TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER
SECTION 1.01. The Offer .............................................. 2
SECTION 1.02. Company Action ......................................... 3
SECTION 1.03. Employee Stock Options ................................. 5
ARTICLE II
THE MERGER
SECTION 2.01. The Merger ............................................. 5
SECTION 2.02. Effective Time; Closing ................................ 6
SECTION 2.03. Effect of the Merger ................................... 6
SECTION 2.04. Certificate of Incorporation; By-laws .................. 6
SECTION 2.05. Directors and Officers ................................. 6
SECTION 2.06. Conversion of Securities ............................... 6
SECTION 2.07. Employee Stock Options ................................. 7
SECTION 2.08. Dissenting Shares ...................................... 7
SECTION 2.09. Surrender of Shares; Stock Transfer Books .............. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries ........... 10
SECTION 3.02. Certificate of Incorporation and By-laws ............... 10
SECTION 3.03. Capitalization ......................................... 10
SECTION 3.04. Authority Relative to this Agreement ................... 11
SECTION 3.05. No Conflict; Required Filings and Consents ............. 11
SECTION 3.06. Compliance ............................................. 12
SECTION 3.07. SEC Filings; Financial Statements ...................... 13
SECTION 3.08. Absence of Certain Changes or Events ................... 14
SECTION 3.09. Absence of Litigation .................................. 14
SECTION 3.10. Employee Benefit Plans ................................. 14
SECTION 3.11. Labor Matters .......................................... 16
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement ....... 16
SECTION 3.13. Taxes .................................................. 17
SECTION 3.14. Property and Leases .................................... 17
SECTION 3.15. Intellectual Property .................................. 18
SECTION 3.16. Environmental Matters .................................. 18
SECTION 3.17. Brokers ................................................ 19
SECTION 3.18. Assets ................................................. 19
SECTION 3.19. Insurance .............................................. 19
SECTION 3.20. Takeover Statutes ...................................... 19
SECTION 3.21. Expenses ............................................... 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization ................................. 20
SECTION 4.02. Authority Relative to this Agreement ................... 20
SECTION 4.03. No Conflict; Required Filings and Consents ............. 21
SECTION 4.04. Financing .............................................. 21
SECTION 4.05. Offer Documents; Proxy Statement ....................... 21
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SECTION 4.06. Brokers ................................................ 22
SECTION 4.07. Financial Statements ................................... 22
SECTION 4.08. Absence of Certain Changes or Events ................... 23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger .. 23
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting .................................. 25
SECTION 6.02. Proxy Statement ........................................ 25
SECTION 6.03. Company Board Representation; Section 14(f) ............ 26
SECTION 6.04. Access to Information; Confidentiality ................. 27
SECTION 6.05. No Solicitation of Transactions ........................ 27
SECTION 6.06. Employee Benefits Matters .............................. 29
SECTION 6.07. Directors' and Officers' Indemnification and Insurance.. 29
SECTION 6.08. Further Action; Reasonable Best Efforts ................ 29
SECTION 6.09. Public Announcements ................................... 30
SECTION 6.10. Confidentiality Agreement .............................. 30
SECTION 6.11 Expenses ............................................... 30
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger ............................... 31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination ............................................ 31
SECTION 8.02. Effect of Termination .................................. 33
SECTION 8.03. Fees and Expenses ...................................... 33
SECTION 8.04. Amendment .............................................. 33
SECTION 8.05. Waiver ................................................. 34
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements.............................................. 34
SECTION 9.02. Notices ................................................ 34
SECTION 9.03. Certain Definitions .................................... 35
SECTION 9.04. Severability ........................................... 37
SECTION 9.05. Entire Agreement; Assignment ........................... 38
SECTION 9.06. Parties in Interest .................................... 38
SECTION 9.07. Governing Law .......................................... 38
SECTION 9.08. Headings ............................................... 38
SECTION 9.09. Counterparts ........................................... 38
ANNEX A
Conditions to the Offer
ANNEX B
Employee Benefit Matters
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SCHEDULES
3.01 Subsidiaries
3.03 Capitalization
3.05(a) Conflicts
3.05(b) Required Filings, Consents
3.06 Compliance
3.07(c) Financial Statements
3.08 Absence of Certain Changes or Events
3.09 Litigation
3.10 Employee Benefits
3.11 Labor Matters
3.13 Taxes
3.14(b) Property Matters
3.15 Intellectual Property Matters
3.16 Environmental Matters
3.19 Insurance
5.01(b) Conduct of Business Pending the Merger
5.01(e) Conduct of Business Pending the Merger
6.06 Employee Benefits Matters
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AGREEMENT AND PLAN OF MERGER dated as of August 12, 1998 (this
"Agreement") among ENVIRONMENTAL SYSTEMS PRODUCTS, INC., a Delaware corporation
("Parent"), STONE RIVET, INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and ENVIROTEST SYSTEMS CORP., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Company's common stock consists of three classes as follows:
Class A Common Stock, par value $.01 per share ("Class A Common Stock"), Class B
Common Stock, par value $.01 per share ("Class B Common Stock") and Class C
Common Stock, par value $.01 per share ("Class C Common Stock"; together with
Class A Common Stock and Class B Common Stock, being hereinafter collectively
referred to as "Company Common Stock"); and
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
shall make a cash tender offer (the "Offer") to acquire all the issued and
outstanding shares of the Company's Class A Common Stock (shares of Class A
Common Stock, being hereinafter collectively referred to as "Shares") for $17.25
per Share (such amount, or any greater amount per Share paid pursuant to the
Offer, being hereinafter referred to as the "Per Share Amount") net to the
seller in cash, upon the terms and subject to the conditions of this Agreement
and the Offer; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved and agreed to
recommend that holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Parent, Purchaser and the Company have each approved the merger (the
"Merger") of Purchaser with and into the Company in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law") upon the terms and
subject to the conditions set forth herein; and
WHEREAS, Parent and Purchaser are unwilling to enter into this Agreement
unless, contemporaneously with the execution and delivery hereof, certain
stockholders of the Company each enter into an agreement providing for certain
matters with respect to certain shares of the Company Common Stock beneficially
owned by them as set forth therein and such stockholders have each agreed to
execute and deliver such agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Upon the terms and subject to the conditions
of this Agreement, Purchaser shall commence the Offer as promptly as reasonably
practicable after the date hereof, but in no event later than five Business Days
after the initial public announcement of Purchaser's intention to
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commence the Offer. The obligation of Purchaser to accept for payment and pay
for Shares tendered pursuant to the Offer shall be subject to the condition (the
"Minimum Condition") that (i) at least the number of Shares, assuming conversion
of all shares of Class B Common Stock and Class C Common Stock into Shares, that
when added to any Shares already owned by Parent shall constitute 90 percent of
the then outstanding Shares on a primary basis, and (ii) 100 percent of the
Shares that are issuable upon conversion (and assuming conversion thereof) of
all of the then outstanding shares of Class B Common Stock and Class C Common
Stock, shall have been validly tendered and not withdrawn prior to the
expiration of the Offer and also shall be subject to the satisfaction of the
other conditions set forth in Annex A hereto. Purchaser expressly reserves the
right to waive any such condition, to increase the price per Share payable in
the Offer, and to make any other changes in the terms and conditions of the
Offer; provided, however, that the Minimum Condition may not be waived without
the prior approval of the Company (except that the Minimum Condition may be
waived without such prior approval if at least the number of Shares, assuming
conversion of all shares of Class B Common Stock and Class C Common Stock into
Shares, that when added to any Shares already owned by Parent shall constitute a
majority of the then outstanding Shares on a primary basis, shall have been
validly tendered and not withdrawn prior to the expiration of the Offer) and
that no change may be made which decreases the price per Share payable in the
Offer, reduces the maximum number of Shares to be purchased in the Offer,
imposes conditions to the Offer in addition to those set forth in Annex A hereto
or otherwise is materially adverse to the Company or the holders of Shares.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer for up to 30 Business Days beyond the scheduled
expiration date (the initial scheduled expiration date being September 30, 1998)
if, at the scheduled expiration date of the Offer, any of the conditions (other
than the Minimum Condition or the condition specified in paragraph (g) of Annex
A) to Purchaser's obligation to accept for payment, and to pay for, the Shares
shall not be satisfied or waived, (ii) extend the Offer for any period required
by the SEC Rules applicable to the Offer, (iii) extend the Offer for an
aggregate period of not more than ten Business Days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, if as of such date, the Minimum Condition shall not be satisfied or
waived or (iv) extend the Offer for so long as this Agreement shall remain in
effect if the condition specified in paragraph (g) of Annex A shall not be
satisfied or waived; provided, however, that (A) if the waiting period under the
HSR Act shall not have expired or been terminated on the scheduled expiration
date of the Offer or a temporary restraining order prohibiting the purchase of
the Shares shall have been issued by a court of competent jurisdiction, the
Purchaser shall extend the Offer from time to time until five Business Days
after the expiration or termination of the waiting period under the HSR Act or
the lifting of such temporary restraining order and (B) if the condition set
forth in paragraph (c) or (d) of Annex A shall not have been satisfied, the
Purchaser shall, so long as the breach can be cured and the Company is
vigorously attempting to cure such breach, extend the Offer from time to time
until five Business Days after such breach is cured. The Per Share Amount shall
be net to the seller in cash, upon the terms and subject to the conditions of
the Offer. Subject to the terms and conditions of the Offer, Purchaser shall
pay, as promptly as practicable after expiration of the Offer, for all Shares
validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Purchaser shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Parent, Purchaser and the
Company agree to correct promptly any information provided by any of them for
use in the Offer Documents which shall have become false or misleading, and
Parent and Purchaser 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 federal securities laws.
(c) In the event that, upon the expiration of the Offer (including any
extension thereof made in accordance with Section 1.01(a)), the Minimum
Condition shall not have been satisfied or waived, the Company shall file, and
Parent and Purchaser shall use all reasonable efforts to assist the Company in
filing, as promptly as practicable, but
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in no event later than five Business Days following such expiration date, the
Proxy Statement with the SEC under the Exchange Act pursuant to Section 6.02 for
the purpose of considering and taking action on this Agreement and the Merger.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board, at a meeting duly
called and held on August 12, 1998, has unanimously (A) determined that this
Agreement and the Transactions, including the Offer and the Merger, are fair to
and in the best interests of the holders of Shares, (B) approved and adopted
this Agreement and the Transactions (such approval and adoption having been made
in accordance with the provisions of -Section- 203 of Delaware Law) and (C)
recommended that the stockholders of the Company accept the Offer and approve
and adopt this Agreement and the Transactions, and (ii) Credit Suisse First
Boston ("CSFB") has delivered to the Board an opinion that the consideration to
be received by the holders of Shares pursuant to the Offer and the Merger is
fair from a financial point of view to the holders of Shares, a copy of the
written opinion of which shall be delivered to Purchaser promptly after the date
hereof. CSFB has agreed to permit the inclusion of its fairness opinion or
references thereto in the Offer Documents (subject to CSFB's review and
reasonable approval of the description of such fairness opinion). Subject to the
fiduciary duties of the Board under applicable law as determined by the Board in
good faith after receiving advice from independent counsel, the Company hereby
consents to the inclusion in the Offer Documents of the recommendation of the
Board described in the immediately preceding sentence. The Company has been
advised by each of its directors and executive officers that they intend either
to tender all Shares beneficially owned by them to Purchaser pursuant to the
Offer or to vote such Shares in favor of the approval and adoption by the
stockholders of the Company of this Agreement and the Transactions.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Board under applicable law as determined by the Board in good faith after
receiving advice from independent counsel, the recommendation of the Board
described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the
extent required by Rule 14d-9 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any other applicable federal
securities laws. The Company, Parent and Purchaser agree to correct promptly any
information provided by any of them for use in the Schedule 14D-9 which shall
have become false or misleading, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
(c) The Company shall promptly furnish to Purchaser mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish to Purchaser such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. 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 Offer or the Merger, Parent and Purchaser
shall hold in confidence the information contained in such labels, listings and
files, shall use such information only in connection with the Offer and the
Merger, and, if this Agreement shall be terminated in accordance with Section
8.01, shall deliver to the Company all copies of such information then in their
possession.
SECTION 1.03. Employee Stock Options. (a) Each stock option (a "Company
Stock Option") outstanding at the time of the purchase of Shares pursuant to the
Offer in accordance with Section 1.01,
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whether or not exercisable and whether or not vested, under any stock option
plan of the Company, or any of its Affiliates or any agreement to which the
Company or any of its Affiliates is a party (the "Company Stock Option Plans"),
shall be canceled by the Company immediately following the purchase of Shares
pursuant to the Offer in accordance with Section 1.01 and each holder of a
canceled Company Stock Option shall be entitled to receive immediately
thereafter from the Company in consideration for the cancellation of such
Company Stock Option an amount (the "Option Spread") equal to the product of (i)
the number of Shares previously subject to such Company Stock Option and (ii)
the excess, if any, of the Per Share Amount over the exercise price per share of
Company Common Stock previously subject to such Company Stock Option. The Option
Spread, after reduction for applicable tax withholding, if any, shall be paid in
cash. No interest shall accrue or be paid on the Option Spread for the benefit
of the holder of such canceled Company Stock Option.
(b) On the day immediately following the purchase of Shares pursuant to
the Offer in accordance with Section 1.01, Purchaser shall cause to be wired to
an account designated by the Company not less than three days prior to the
expiration of the Offer an amount sufficient to enable the Company to make the
payments required pursuant to Sections 1.03(a) and 6.06, but in no event shall
such amount to be wired exceed $10,500,000.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with Delaware Law, at the Effective Time
(as hereinafter defined) Purchaser shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or a certificate of merger or certificate of ownership and
merger (in either case, the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with, the relevant provisions of Delaware Law (the date and time of
such filing being the "Effective Time").
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Certificate of Incorporation; By-laws. (a) At the Effective
Time, the Certificate of Incorporation of the Company shall be restated in a
form acceptable to Purchaser and shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation; provided, however, that such restated Certificate
of Incorporation shall be in accordance with the provisions of Section 6.07
hereof.
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(b) The By-laws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.05. Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Purchaser, the Company or
the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be canceled pursuant to Section 2.06(b) and any Dissenting
Shares (as hereinafter defined)) shall be canceled and shall be converted
automatically into the right to receive an amount equal to the Per Share
Amount in cash (the "Merger Consideration") payable, without interest, to
the holder of such share of Company Common Stock, upon surrender, in the
manner provided in Section 2.09, of the certificate that formerly
evidenced such share of Company Common Stock;
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Purchaser, Parent
or any direct or indirect wholly owned Subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be canceled without
any conversion thereof and no payment or distribution shall be made with
respect thereto; and
(c) Each share of Common Stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into, and exchanged for, one validly issued, fully paid
and nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
SECTION 2.07. Employee Stock Options. In the event that the Company Stock
Options are not canceled pursuant to Section 1.03, each Company Stock Option
outstanding at the Effective Time, whether or not exercisable and whether or not
vested, under any Company Stock Option Plan, shall be canceled by the Company at
the Effective Time and each holder of a canceled Company Stock Option shall be
entitled to receive immediately thereafter from the Company in consideration for
the cancellation of such Company Stock Option the Option Spread. The Option
Spread, after reduction for applicable tax withholding, if any, shall be paid in
cash. No interest shall accrue or be paid on the Option Spread for the benefit
of the holder of such canceled Company Stock Option.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing an appraisal for such shares of
Company Common Stock in accordance with Section 262 of Delaware Law
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Merger Consideration. Such stockholders shall be
entitled to receive payment of the appraised value of such shares of Company
Common Stock held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of
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such shares of Company Common Stock under such Section 262 shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 2.09 of the
certificate or certificates that formerly evidenced such shares of Company
Common Stock.
(b) The Company shall give Purchaser (i) prompt notice of any written
demands for fair value, withdrawals of demands for fair value and any other
instruments served pursuant to applicable law received by the Company relating
to stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraised value under
Section 262 of Delaware Law. The Company shall not, except with the prior
written consent of Purchaser, voluntarily make any payment with respect to any
demands for appraised value of Dissenting Shares or offer to settle or settle
any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) As of the
Effective Time, Purchaser shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Parent or Purchaser to act as its paying
agent (the "Paying Agent"), for the benefit of the holders of shares of Company
Common Stock, for payment in accordance with this Article II, through the Paying
Agent, cash in an amount equal to the Per Share Amount multiplied by the number
of Shares (assuming the conversion of all issued and outstanding shares of Class
B Common Stock and Class C Common Stock into shares of Class A Common Stock
prior to the Effective Time) outstanding immediately prior to the Effective Time
(such cash being hereinafter referred to as the "Payment Fund"). The Paying
Agent shall, pursuant to irrevocable instructions, deliver the cash contemplated
to be paid pursuant to Sections 2.06(a) and 2.08 out of the Payment Fund. The
Payment Fund shall not be used for any other purpose. The Payment Fund shall be
invested by the Paying Agent as directed by the Surviving Corporation, provided
that such investments shall be in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, in commercial paper obligations rated
A-1 or P-1 or better by Xxxxx'x Investors Service, Inc. or Standard & Poor's
Rating Services, respectively, or in deposit accounts, certificates of deposit
or banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $500 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of shares of Company Common Stock entitled to receive the Merger
Consideration pursuant to Section 2.06(a) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates evidencing such shares of Company Common Stock (the "Certificates")
shall pass, only upon proper delivery of the Certificates to the Paying Agent)
and instructions for use in effecting the surrender of the Certificates pursuant
to such letter of transmittal. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly evidenced by such
Certificate, and such Certificate shall then be canceled. No interest shall
accrue or be paid on the Merger Consideration payable upon the surrender of any
Certificate for the benefit of the holder of such Certificate. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered on the stock transfer books of
the Company, it shall be a condition of payment that the Certificate so
surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such
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taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of shares of Company Common Stock (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all funds made available to it), and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat and other similar laws) only as general creditors thereof with respect
to any Merger Consideration that may be payable. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Share for any Merger Consideration delivered in respect of such
Share to a public official pursuant to any abandoned property, escheat or other
similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of shares of Company Common Stock on the
records of the Company. From and after the Effective Time, the holders of shares
of Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Company Common
Stock except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of the
Company and each Subsidiary of the Company is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals does
not, individually or in the aggregate, have a Material Adverse Effect. Each of
the Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that do not,
individually or in the aggregate, have a Material Adverse Effect. A true and
complete list of all the Subsidiaries, together with the jurisdiction of
organization of each Subsidiary and the percentage of the outstanding capital
stock of each Subsidiary owned by the Company and each other Subsidiary, is set
forth in Schedule 3.01. Except as disclosed in Schedule 3.01, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Certificate of
Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation and By-Laws or equivalent organizational documents are in full
force and effect, and neither the Company nor any Subsidiary is in violation of
any provision thereof.
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SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of 40,000,000 Shares, 5,000,000 shares of Class B Common Stock and
5,000,000 shares of Class C Common Stock. As of the date hereof, (i) 8,842,248
Shares, 1,249,749 shares of Class B Common Stock and 2,026,111 shares of Class C
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and nonassessable, (ii) 4,388,091 Shares, no shares of Class B Common Stock
and no shares of Class C Common Stock are held in the treasury of the Company,
(iii) no Shares, no shares of Class B Common Stock and no shares of Class C
Common Stock are held by the Subsidiaries, (iv) 2,830,285 Shares, no shares of
Class B Common Stock and no shares of Class C Common Stock are reserved for
issuance pursuant to currently outstanding stock options granted pursuant to the
Company's Stock Option Plans and (v) 589,660 Shares, no shares of Class B Common
Stock and no shares of Class C Common Stock are reserved for issuance pursuant
to stock options to be granted pursuant to the Company's Stock Option Plans.
Each of the outstanding shares of capital stock or other securities of each
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
owned by a direct or indirect wholly-owned subsidiary of the Company, free and
clear of any lien, pledge, security interest, claim or other encumbrance. Except
as set forth in this Section 3.03 or in the Certificate of Incorporation of the
Company, neither the Company nor any Subsidiary has granted any options,
warrants or other rights, or entered into any agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Schedule 3.03 contains a correct and complete list of all options
to purchase capital stock of the Company or any Subsidiary. Except as set forth
on Schedule 3.03, there are no outstanding contractual obligations of the
Company or any Subsidiary to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, or to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or any
Subsidiary or any other person other than to Subsidiaries in the ordinary course
of business consistent with past practice.
SECTION 3.04. Authority Relative to this Agreement. The Company has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby
(the "Transactions"). The execution and delivery of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly
and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Transactions (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding Shares if and to the extent required by applicable law, and the
filing and recordation of appropriate merger documents as required by Delaware
Law). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Purchaser, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws or equivalent organizational
documents of the Company or any Subsidiary, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected other than conflicts or violations that do not,
individually or in the aggregate, have a Material Adverse Effect, or (iii)
except as set forth on Schedule 3.05(a), result in any
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breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, require any third-party consents,
approvals, or authorizations, give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, other than
breaches, defaults or other occurrences that do not, individually or in the
aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States or Canadian federal, state or provincial governmental or
regulatory authority except (i) for applicable requirements, if any, of the
Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and state
takeover laws, the pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), and filing and recordation of appropriate merger
documents as required by Delaware Law and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Offer or the
Merger, or otherwise prevent the Company from performing its obligations under
this Agreement, and do not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.06. Compliance. (a) The business and operations of the Company
have been conducted in compliance with all applicable federal, state and local
statutes and regulations, except where the failure to so conduct such business
and operations would not, individually or in the aggregate, have a Material
Adverse Effect. Except for statutory or regulatory restrictions of the business
of the Company, no governmental authority has imposed any restrictions on the
Company's business, which restrictions either, individually or in the aggregate,
do not and, so far as the Company can reasonably foresee, will not have a
Material Adverse Effect.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect, (i) the Company has all approvals, permits and licenses from
federal, state and local government agencies and government-sponsored
enterprises which are required to conduct its business and (ii) all such
approvals, permits and licenses are in full force and effect and are being
complied with in all material respects.
(c) Neither the Company nor any Subsidiary is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or affected, except for any
such conflicts, defaults or violations that do not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) Each of the Company
and Envirotest Technologies, Inc., a Subsidiary of the Company, has filed all
forms, reports and documents required to be filed by it with the SEC since
September 30, 1996 and has heretofore made available to Parent, in the form
filed with the SEC, (i) the Company's Annual Reports on Form 10-K for the fiscal
years ended September 30, 1996 and 1997, (ii) all proxy statements relating to
the Company's meetings of stockholders (whether annual or special) held since
September 30, 1996, and (iii) all other forms, reports and other registration
statements filed by the Company with the SEC since September 30, 1996 (the
forms, reports and other documents referred to in clauses (i), (ii) and (iii)
above being referred to herein, collectively, as the "SEC
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Reports"). The SEC Reports (i) were prepared in accordance with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed 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 made therein, in the light of the
circumstances under which they were made, not misleading. Except for Envirotest
Technologies, Inc., no Subsidiary is required to file any form, report or other
document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and each fairly presented the consolidated
financial position, results of operations and cash flow of the Company and the
Subsidiaries or the Guarantor Subsidiaries as at the respective dates thereof
and for the respective periods indicated therein (except as otherwise noted
therein and subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which are not expected to have either
individually or in the aggregate a Material Adverse Effect).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the Subsidiaries as at September 30, 1997, including
the notes thereto, neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet prepared in
accordance with generally accepted accounting principles, except for liabilities
and obligations (i) that do not, individually or in the aggregate, have a
Material Adverse Effect or (ii) as set forth on Schedule 3.07(c).
SECTION 3.08. Absence of Certain Changes or Events. From September 30,
1997 through the date hereof, except as set forth on Schedule 3.08 or disclosed
in any SEC Report, there has not been (i) a Material Adverse Effect, (ii) any
material change by the Company in its accounting methods, principles or
practices, (iii) any entry by the Company or any Subsidiary into any contract
material to the Company and the Subsidiaries, taken as a whole, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities, (v) other than pursuant to the contractual
arrangements referred to in Section 3.10 and Annex B, any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company or any
Subsidiary, except in the ordinary course of business consistent with past
practice or (vi) any damage, destruction or other casualty loss with respect to
any material asset or property owned, leased or otherwise used by the Company or
any of its Subsidiaries, whether or not covered by insurance, which is
reasonably likely to have a Material Adverse Effect.
SECTION 3.09. Absence of Litigation. Except as set forth on Schedule 3.09
or disclosed in the SEC Reports, there is no claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary or any Company Benefit Plan, or any property or
asset of the Company or any Subsidiary or any Company Benefit Plan, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that, individually or in the aggregate, has a
Material Adverse Effect. Neither the Company nor any Subsidiary nor any property
or asset of the Company or any Subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award having, individually or in
the aggregate, a Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) With respect to each employee
benefit plan, program,
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arrangement and contract (x) covering one or more current or former officers or
employees of the Company or any of its Subsidiaries (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), whether
written or oral, or maintained or contributed to by the Company or any of its
Subsidiaries or (y) with respect to which the Company or any of its Subsidiaries
is a party or could incur liability under Section 4069, 4201 or 4212(c) of ERISA
or any material liability under any other applicable law (collectively, the
"Company Benefit Plans"), the Company has made available to Parent a true and
correct copy of (i) the most recent annual report (Form 5500) filed with the
Internal Revenue Service (the "IRS"), (ii) such Company Benefit Plan (or a
description thereof, if such Company Benefit Plan is not in writing), and any
amendments thereto, (iii) each related trust agreement, annuity contract or
other funding instrument, (iv) the most recent summary plan description (and
summary of material modifications), if a summary plan description (or summary of
material modifications) is required, (v) the most recent actuarial report or
valuation, if any, and (vi) the most recent determination letter or prototype
opinion letter, if any, issued by the IRS with respect to any Company Benefit
Plan qualified under Section 401(a) of the Code.
(b) Except as set forth on Schedule 3.10 or as would not have a Material
Adverse Effect, individually or in the aggregate, each Company Benefit Plan that
is intended to be "qualified" within the meaning of Section 401(a) of the Code
is so qualified.
(c) Except as set forth on Schedule 3.10 or as would not have a Material
Adverse Effect, individually or in the aggregate, each Company Benefit Plan
presently complies and has been maintained in compliance with its terms and,
both as to form and operation, with the requirements prescribed by any statutes,
orders, rules and regulations that apply to such Company Benefit Plan,
including, without limitation, ERISA and the Code. Except as set forth on
Schedule 3.10 or as would not have a Material Adverse Effect, individually or in
the aggregate, no Company Benefit Plan or related trust or other funding vehicle
is liable for any tax under Section 511 of the Code. Except as set forth on
Schedule 3.10, with respect to the Company Benefit Plans, no event has occurred
and, to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable law which would have a Material Adverse
Effect, individually or in the aggregate.
(d) The Company has made available to Parent (i) copies of all employment
agreements with officers of the Company and its Subsidiaries; (ii) copies of all
severance agreements, programs and policies of the Company and its Subsidiaries
with or relating to its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of the Company and its Subsidiaries with or
relating to its employees which contain change in control provisions. Schedule
3.10 contains a complete list of such agreements, programs and policies.
Schedule 6.06 contains a complete and accurate list of the names of all
individuals who are entitled to payments upon a change of control of the Company
and the respective amounts to which they are so entitled.
(e) Except as set forth on Schedule 3.10 or as otherwise required by law,
neither the Company, its Subsidiaries nor any Company Benefit Plan is obligated
to provide or provides medical or life insurance benefits to any person who is
or becomes a retiree or otherwise is or becomes a former employee of the Company
or any of its Subsidiaries.
(f) No Company Benefit Plan is a Multiemployer Plan (within the meaning of
Section 4001(a)(3) or 3(37) of ERISA), and neither the Company nor any of its
Subsidiaries has ever maintained, contributed to or been required to contribute
to or participated in any Multiemployer Plan.
SECTION 3.11. Labor Matters. Except as set forth in Schedule 3.11, (i)
there are no controversies
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pending, or, to the knowledge of the Company, threatened between the Company or
any Subsidiary and any of their respective employees, other than controversies
which, individually or in the aggregate, do not have a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary or, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees; and (iii) to the knowledge of the Company, there are no strikes,
slowdown, works stoppages or lockouts or, to the knowledge of the Company,
threats of any of the foregoing by, or with respect to, any employees of the
Company that would have a Material Adverse Effect.
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement. Neither
the Schedule 14D-9 nor any information supplied by the Company for inclusion in
the Offer Documents shall, at the respective times set out in the Schedule
14D-9, the Offer Documents or any amendments or supplements thereto that are
filed with the SEC or are first published, sent or given to stockholders of the
Company, 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 made therein, in the light of the circumstances under which they are
made, not misleading. Neither the proxy statement to be sent to the stockholders
of the Company in connection with the Stockholders' Meeting (as hereinafter
defined) nor the information statement to be sent to such stockholders, as
appropriate (such proxy statement or information statement, as amended or
supplemented, being referred to herein as the "Proxy Statement"), shall, at the
date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company, at the time of the Stockholders' Meeting
and at the Effective Time, be false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. The Schedule 14D-9 and the Proxy Statement shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 3.13. Taxes. The Company and the Subsidiaries have properly filed
on a timely basis all federal, state, local and foreign tax returns and reports
required to be filed and have paid and discharged all taxes shown as due
thereon, including, without limitation, the collection and remittance of all
amounts required to be withheld by the Company and its Subsidiaries, and have
paid all applicable ad valorem taxes as are due, other than (i) such payments as
are being contested in good faith by appropriate proceedings as set forth in
Schedule 3.13 and (ii) such filings, payments or other occurrences that,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Schedule 3.13, there are no outstanding agreements or
waivers extending the applicable statutory periods of limitation for the payment
of taxes. Except as set forth on Schedule 3.13, neither the IRS nor any other
taxing authority or agency, domestic or foreign, is now asserting or, to the
best knowledge of the Company, threatening to assert against the Company or any
Subsidiary any deficiency or claim for additional taxes or interest thereon or
penalties in connection therewith that individually or in the aggregate, would
have a Material Adverse Effect. Neither the Company nor any Subsidiary has made
an election under Section 341(f) of the Code. The Company shall deliver all
necessary certificates and documents confirming that no withholding under
Section 1445 of the Code is required in connection with the payment for shares
of Company Common Stock in the Offer or the Merger. Neither the Company nor any
of its Subsidiaries is a party to any tax-sharing or tax-allocation agreement
with any third party.
SECTION 3.14. Property and Leases. (a) The Company and the Subsidiaries
have sufficient title to all their properties and assets to conduct their
respective businesses as currently conducted with only such exceptions as,
individually or in the aggregate, do not have a Material Adverse Effect.
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(b) Each parcel of real property owned or leased by the Company or any
Subsidiary (i) is owned or leased free and clear of all mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company or
such Subsidiary consistent with past practice, and (D) all matters of record,
Liens and other imperfections of title and encumbrances which, individually or
in the aggregate, do not have a Material Adverse Effect or as set forth in
Schedule 3.14(b) (collectively, "Permitted Liens"), and (ii) is neither subject
to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the best knowledge of the Company, has any
such condemnation, expropriation or taking been proposed. With respect to each
parcel of real property owned by the Company or any of its Subsidiaries, except
as would not, individually or in the aggregate, have a Material Adverse Effect,
(x) there are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use or occupancy
of any material portion of such parcel and (y) there are no outstanding options
or rights of first refusal to purchase such parcel or any material portion
thereof or interest therein.
(c) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party
requiring rental payments in excess of $100,000 during the period of the lease,
and all amendments and modifications thereto are in full force and effect and
have not been modified or amended, and there exists no default under any such
lease by the Company or any Subsidiary, nor any event which with notice or lapse
of time or both would constitute a default thereunder by the Company or any
Subsidiary, except as, individually or in the aggregate, does not have a
Material Adverse Effect.
SECTION 3.15. Intellectual Property. (a) The Company and the Subsidiaries
own, or possess licenses or other valid rights to use, all Intellectual Property
that is material to the business of the Company and the Subsidiaries as
currently conducted, and the Company is unaware of any assertion or claim
challenging the validity of any of the foregoing, other than any assertion or
claim which, individually or in the aggregate, does not have a Material Adverse
Effect. The conduct of the business of the Company and the Subsidiaries as
currently conducted does not interfere with, misappropriate, violate or
otherwise conflict with any material Intellectual Property rights of third
parties, other than conflicts that, individually or in the aggregate, do not
have a Material Adverse Effect. Except as set forth in Schedule 3.15, to the
knowledge of the Company, neither it nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any Intellectual Property on
terms or in a manner which, individually or in the aggregate, has a Material
Adverse Effect.
(b) Schedule 3.15 identifies (i) each unexpired patent or registration
which has been issued to the Company or any of its Subsidiaries with respect to
any of its Intellectual Property, (ii) each pending patent application or
application for registration which the Company or any of the Subsidiaries has
made with respect to any of its Intellectual Property, and (iii) each material
license, agreement, or other permission which the Company or any of its
Subsidiaries has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions).
SECTION 3.16. Environmental Matters. Except as disclosed in Schedule 3.16
and except as would not, individually or in the aggregate, have a Material
Adverse Effect, (a) to the Company's knowledge, the Company and the Subsidiaries
are in compliance with all applicable Environmental Laws and
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have obtained and are in compliance with all governmental permits, licenses and
other authorizations required under any Environmental Law, (b) there are no
written claims pursuant to any Environmental Law pending or, to the Company's
knowledge, threatened, against the Company, (c) the Company has provided
Purchaser with copies of any and all environmental assessment or audit reports
or other similar studies or analyses generated within the last three years and
in the Company's possession, that relate to the Company, and (d) to the
Company's knowledge, no real property currently owned or operated by the Company
or any of its Subsidiaries is contaminated with any Hazardous Substance.
SECTION 3.17. Brokers. No broker, finder or investment banker (other than
CSFB) is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and CSFB pursuant to which
such firm would be entitled to any payment relating to the Transactions.
SECTION 3.18. Assets. Except for Permitted Liens and except as would not,
individually or in the aggregate, have a Material Adverse Effect, the Company
has good and valid title to or a valid leasehold interest in all of its personal
property and all equipment, fixtures, furnishings and other material items of
tangible personal property owned or used by the Company are in good operating
condition and repair, subject to normal wear and maintenance, and are usable in
the regular and ordinary course of the Company's business.
SECTION 3.19. Insurance. All material risks of the Company in respect of
its business are covered by valid and currently effective insurance policies or
binders of insurance or programs of self-insurance in such types and amounts as
are reasonable in the context of the businesses and operations engaged by the
Company. The Company has paid all premiums due under such policies and is not in
default with respect to its obligations under any such policies other than any
default that does not, individually or in the aggregate, have a Material Adverse
Effect. All programs of self-insurance are listed and described in Schedule
3.19.
SECTION 3.20. Takeover Statutes. To the knowledge of the Company, no "fair
price," "control share acquisition" or other similar anti-takeover statute or
regulation or any applicable anti-takeover provision in the Company's
Certificate of Incorporation or ByLaws is, or at the Effective Time will be,
applicable to the Company, the Shares, the Merger or the other Transactions.
SECTION 3.21. Expenses. Except for (i) fees and expenses payable to
attorneys and accountants, investment banks and financial advisors, (ii) costs
and expenses in connection with the printing and mailing of the Offer Documents,
the Schedule 14D-9 and the Proxy Statement, as well as any filing fees relating
thereto, and (iii) the payment to holders of Company Stock Options provided in
Section 2.07 and the change of control payments set forth on Schedule 6.06, the
Company will not incur any material costs and expenses in connection with the
Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that:
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SECTION 4.01. Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have an
adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions. Parent owns all of the issued and outstanding shares of Purchaser.
On or prior to earlier of the purchase of Shares pursuant to the Offer and the
Effective Time, Parent shall be an indirect, wholly owned Subsidiary of
Environmental Systems Products Holdings, Inc. a Delaware corporation
("Holdings"), Holdings has conducted no business and has incurred no
liabilities, other than, in each case, in connection with the Transactions.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes legal, valid
and binding obligations of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws of either Parent or
Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, require any third-party consents, approvals or
authorizations, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Purchaser is a
party or by which Parent or Purchaser or any property or asset of either of them
is bound or affected, except for any such violations, breaches, defaults or
other occurrences which would not, individually or in the aggregate, have an
adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
(b) The execution and delivery of this Agreement by Parent and Purchaser
do not, and the performance of this Agreement by Parent and Purchaser will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any United States or Canadian federal, state or provincial
governmental or regulatory authority except (i) for applicable requirements, if
any, of the Exchange Act, Blue Sky Laws and state takeover laws, the HSR Act,
and filing and recordation of appropriate merger documents as required by
Delaware Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, have an adverse effect on the ability of
Parent or Purchaser to perform their obligations hereunder, or prevent or
materially delay the consummation of the Transactions.
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SECTION 4.04. Financing. The Company has received a true and complete copy
of (i) a letter of commitment obtained by Parent from CSFB to provide debt
financing for the Transactions pursuant to senior secured credit facilities and
bridge loans and (ii) a letter of commitment obtained by Parent from Newmall
Limited to provide certain equity financing (collectively, the "Financing
Commitments"). Assuming that the financing contemplated by the Financing
Commitments is consummated in accordance with the terms thereof, the funds to be
borrowed and/or provided thereunder will provide sufficient funds to permit
Purchaser to acquire all the outstanding shares of Company Common Stock in the
Offer and the Merger.
SECTION 4.05. Offer Documents; Proxy Statement. The Offer Documents will
not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, 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 made therein, in the
light of the circumstances under which they are made, not misleading. The
information supplied by Parent for inclusion in the Proxy Statement will not, on
the date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company, at the time of the Stockholders' Meeting
and at the Effective Time, contain any statement which, at such time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, Parent and
Purchaser make no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in any
of the foregoing documents or the Offer Documents. The Offer Documents shall
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder.
SECTION 4.06. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or
Purchaser.
SECTION 4.07. Financial Statements. (a) Parent has furnished the Company
with audited balance sheets for the calendar year ended December 31, 1997,
together with the related consolidated statements of operations, stockholders'
equity and cash flows for the calendar year then ended, together with a report
of such entity's accountants with respect thereto (collectively, the "Parent
Audited Statements"). Parent has furnished the Company with unaudited interim
financial statements for the period ended June 30, 1998 (collectively, the
"Parent Unaudited Statements").
(b) Each of the Parent Audited Statements and the Parent Unaudited
Statements (including any notes thereto) was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and each fairly presented the consolidated
financial position, results of operations and cash flow of Parent and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (except as otherwise noted therein and
subject, in the case of the Parent Unaudited Statements, to normal and recurring
year-end adjustments which are not expected to have either, individually or in
the aggregate, a material adverse effect on the business, financial condition,
results of operations or prospects of Parent and its Subsidiaries, taken as a
whole).
(c) Except as and to the extent set forth on the consolidated balance
sheet of Parent as at December 31, 1997, including the notes thereto, neither
Parent nor any of its Subsidiaries has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be
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reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, except for liabilities and obligations that do not,
individually or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations or prospects of Parent.
SECTION 4.08. Absence of Certain Changes or Events. From December 31, 1997
through the date hereof, there has not been a material adverse effect on the
business, financial condition, results of operations or prospects of Parent and
its Subsidiaries, taken as a whole, and, to the knowledge of Parent, there is no
event or prospective event that reasonably would be expected to cause such an
effect.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
Except as set forth in Schedule 5.01, the Company agrees that, between the date
of this Agreement and the Effective Time, the Company shall use its reasonable
best efforts to preserve substantially intact the business organization of the
Company and the Subsidiaries and to preserve the current relationships of the
Company and the Subsidiaries with customers, suppliers, regulators, creditors,
lessors, employees, agents and other persons with which the Company or any
Subsidiary has significant business relations. Except as contemplated by this
Agreement, neither the Company nor any Subsidiary shall, between the date of
this Agreement and the Effective Time, directly or indirectly do, or propose to
do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to stock options outstanding on the date hereof) or (ii) any
assets of the Company or any Subsidiary for consideration in excess of
$1,000,000 in the aggregate except in the ordinary course of business
consistent with past practice or as set forth on Schedule 5.01(b);
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof; (ii)
except for borrowings under existing credit facilities not to exceed
$100,000 in the aggregate and excepting transactions between the Company
and any Subsidiary, incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person; (iii)
except for transactions between the Company and any Subsidiary, make any
loans or advances, for an amount in excess of
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$250,000 in the aggregate; (iv) except as set forth on Schedule 5.01(e),
authorize capital expenditures which are, in the aggregate, in excess of
$250,000 for the Company and the Subsidiaries; (v) except as set forth on
Schedule 5.01(e), acquire any assets for consideration in excess of
$250,000 in the aggregate except in the ordinary course of business
consistent with past practice; or (vi) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth
in this Section 5.01(e);
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any
Subsidiary who are not officers of the Company, or, other than in
accordance with existing policies and arrangements, grant any severance or
termination pay to, or enter into any employment or severance agreement
with any director, officer or other employee of the Company or any
Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(g) other than as required by generally accepted accounting
principles, make any change to its accounting policies or procedures;
(h) except as provided in Schedule 5.01, settle or compromise any
material claims or litigation or, except in the ordinary and usual course
of business, modify, amend or terminate any of its material contracts or
waive, release or assign any material rights or claims; or
(i) willfully take any action or omit to take any action that would
cause any representation or warranty of the Company herein to become
untrue in any material respect.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. (a) If required by applicable law in
order to consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable law and the Company's Certificate of Incorporation
and By-laws, (i) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as practicable following the
consummation or the termination of the Offer, as applicable, for the purpose of
considering and taking action on this Agreement and the transactions
contemplated hereby (the "Stockholders' Meeting") and (ii) subject to the
fiduciary duties of the Board under applicable law as determined by the Board in
good faith after receiving the advice of independent counsel, (A) include in the
Proxy Statement the recommendation of the Board that the stockholders of the
Company approve and adopt this Agreement and the Transactions and (B) use its
reasonable best efforts to obtain such approval and adoption. At the
Stockholders' Meeting, Parent and Purchaser shall cause all Shares then owned by
them and their Subsidiaries to be voted in favor of the approval and adoption of
this Agreement and the Transactions.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VII, to take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as soon as reasonably practicable
after such acquisition,
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without a meeting of the stockholders of the Company.
SECTION 6.02. Proxy Statement. If required by applicable law, the Company
shall, within the time period provided in Section 1.01(c) or as soon as
practicable following the consummation of the Offer, as applicable, file the
Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent,
Purchaser and the Company shall cooperate with each other in the preparation of
the Proxy Statement, and the Company shall notify Parent of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Parent promptly copies of all correspondence between the
Company or any representative of the Company and the SEC. The Company shall give
Parent and its counsel the opportunity to review the Proxy Statement prior to
its being filed with the SEC and shall give Parent and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of the Company,
Parent and Purchaser agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Stockholders' Meeting at the earliest practicable
time.
SECTION 6.03. Company Board Representation; Section 14(f). (a) Promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as shall give
Purchaser representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any Affiliate of Purchaser following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all actions necessary to cause Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors or both.
At such times, the Company shall use its reasonable best efforts to cause
persons designated by Purchaser to constitute the same percentage of each
committee of the Board as persons designated by Purchaser to constitute the
Board to the extent permitted by applicable law.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or By-laws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
waiver of any of the Company's rights hereunder shall require the concurrence of
a majority of the directors of the Company then in office who neither were
designated by Purchaser nor are employees of the Company.
SECTION 6.04. Access to Information; Confidentiality. (a) In connection
with their investigation of the business of the Company, Parent and Purchaser
have received from the Company certain estimates, projections and other
forecasts for the business of the Company, and certain plan and budget
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information, including, without limitation, estimates, projections, forecasts,
plans or budgets relating to the Company's Remote Sensing Technology. Each of
Parent and Purchaser acknowledges (i) that there are uncertainties inherent in
attempting to make such estimates, projections, forecasts, plans and budgets,
that it is familiar with such uncertainties, (ii) that it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts, plans and budgets so furnished to it, and
(iii) that it will not assert any claim against the Company or any of its
Affiliates or any of their respective directors, officers, employees, agents,
stockholders, consultants, investment bankers, accountants or representatives,
or hold the Company or any such persons liable with respect thereto, except for
claims based on fraud or intentional misrepresentation as to which the foregoing
clause (iii) is not applicable. Accordingly, the Company makes no representation
or warranty with respect to any estimates, projections, forecasts, plans or
budgets referred to in this Section 6.04(a).
(b) From the date hereof to the Effective Time, the Company shall, and
shall cause the Subsidiaries and the officers, directors, employees, auditors
and agents of the Company and the Subsidiaries to, afford the officers,
employees and agents of Parent and Purchaser and persons providing or committing
to provide Parent or Purchaser with financing for the Transactions reasonable
access at all reasonable times to the officers, employees, agents, properties,
offices and other facilities, books and records of the Company and each
Subsidiary, and shall promptly furnish Parent and Purchaser and persons
providing or committing to provide Parent or Purchaser with financing for the
Transactions with (i) a copy of each report, statement, schedule and other
document filed or received by the Company or any of its Subsidiaries pursuant to
the requirements of federal or state securities laws or filed with any other
governmental or regulatory authority and (ii) all financial, operating and other
data and information as Parent or Purchaser, through its officers, employees or
agents, may reasonably request.
(c) Purchaser agrees to be bound by the terms of the confidentiality
agreement, dated May 8, 1998 (the "Confidentiality Agreement"), between Parent
and the Company as if Purchaser was a party thereto. All information obtained by
Parent or Purchaser pursuant to this Section 6.04 shall be kept confidential in
accordance with the Confidentiality Agreement.
SECTION 6.05. No Solicitation of Transactions. (a) The Company agrees that
neither it nor any of its Subsidiaries nor any of their officers, directors or
agents shall, directly or indirectly, engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with
any Person relating to an Acquisition Proposal; provided, however, that nothing
contained herein shall prevent the Company or the Board from engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal or recommending such an Acquisition Proposal
to the stockholders of the Company (or withdrawing or modifying, in any manner
adverse to Parent and Purchaser, its approval or recommendation of the Offer,
the Agreement, the Merger or any other Transaction), if and only to the extent
that (i) the Board determines in good faith, after consultation with outside
legal counsel that such action is necessary in order for its directors to comply
with their fiduciary duties under applicable law and (ii) the Board determines
in good faith (after consultation with its financial advisor) that such
Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the financial capacity and any other relevant characteristics of the Person
making the proposal and would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than the
Transactions. The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company also
agrees that it will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring it
or any of its Subsidiaries to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of the Company or any of its
Subsidiaries. The
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Company agrees that it will notify Parent and Purchaser immediately if any
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussion or negotiations are sought to be
initiated or continued with any of its officers, director or agents, indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Parent and
Purchaser informed, on a current basis, on the status and material terms of any
such proposals or offers and the status of any such negotiations or discussions.
"Acquisition Proposal" shall mean (i) any proposal or offer from any person
relating to any direct or indirect acquisition or purchase of (A) all or a
substantial part of the assets of the Company, or (B) over 15% of the voting
securities of the Company; (ii) any tender offer or exchange offer as defined
pursuant to the Exchange Act that if consummated would result in any person
beneficially owning 15% or more of the voting securities of the Company; or
(iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company other than
the Transactions.
(b) Nothing contained in this Section 6.05 shall prohibit the Company or
Parent from taking and disclosing to their respective shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or issuing a
communication that meets the requirements of Rule 14d-9(e) promulgated under the
Exchange Act.
SECTION 6.06. Employee Benefits Matters. Annex B hereto sets forth certain
agreements among the parties hereto with respect to the Plans and other employee
benefits matters.
SECTION 6.07. Directors' and Officers' Indemnification and Insurance. (a)
The Certificate of Incorporation of the Surviving Corporation shall contain
provisions (collectively, "Indemnification Provisions") no less favorable with
respect to indemnification than are set forth in Article 8 of the Certificate of
Incorporation of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
the Effective Time were directors, officers, employees, fiduciaries or agents of
the Company, unless such modification shall be required by law. Parent hereby
agrees that, for a period of six years from the Effective Time, it shall
absolutely and unconditionally guarantee the prompt performance and satisfaction
of all obligations of the Surviving Corporation under the Indemnification
Provisions.
(b) Parent and the Surviving Corporation each shall use its best efforts
to maintain in effect for six years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that Parent and the Surviving Corporation may substitute
therefor policies of at least the same coverage containing terms and conditions
which are not materially less favorable) with respect to matters occurring prior
to the Effective Time; provided, however, that if the existing policies expire,
are terminated or canceled during such period Parent or the Surviving
Corporation will obtain substantially similar policies. Notwithstanding the
foregoing, in no event shall Parent or the Surviving Corporation be required to
expend pursuant to this Section 6.07(b) more than an amount per year equal to
200% of current annual premiums paid by the Company for such insurance (which
premiums the Company represents and warrants to be $232,000 in the aggregate);
provided, however, that, in the event of an expiration, termination or
cancellation of such current policies, Parent or the Surviving Corporation shall
be required to obtain as much coverage as is possible under substantially
similar policies for $464,000 in aggregate annual premiums.
SECTION 6.08. Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all
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things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using all reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and the Subsidiaries as are necessary
for the consummation of the Transactions and to fulfill the conditions to the
Offer and the Merger. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
their reasonable best efforts to take all such action.
(b) If any "fair price," "control share acquisition" or other similar
anti-takeover statute or regulation or any applicable anti-takeover provision in
the Company's Certificate of Incorporation or By-Laws is or may become
applicable to the Company or the Transactions, each of Parent and the Company
and its Board shall grant such approvals and take such actions as are necessary
so that the Transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise act to eliminate or minimize
the effects of such statute or regulation on the Transactions.
(c) The Company hereby consents to the making by Parent or an Affiliate of
Parent of tender offers (the "Debt Tenders") for the Company's outstanding
9-1/8% Senior Notes due 2001 and its 9-5/8% Senior Subordinated Notes due 2003
(the "Notes"). The Company agrees to reasonably assist Parent or such Affiliate
in the timely completion of the Debt Tenders and, without limiting the
generality of the foregoing, to promptly provide Parent or such Affiliate with
all information and documentation concerning the Company and the Notes as Parent
or such Affiliate may reasonably request in connection with the making of the
Debt Tenders.
SECTION 6.09. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any Transaction and shall not issue
any such press release or make any such public statement without the prior
consent of the other parties, except as may be required by law or any listing
agreement with a national securities exchange to which Parent or the Company is
a party.
SECTION 6.10. Confidentiality Agreement. The Company hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the consummation of each Transaction. Upon the acceptance for payment of
Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed to
have terminated without further action by the parties thereto.
SECTION 6.11 Expenses. (a) Except as set forth in Section 8.03 and in
Section 6.11(b), whether or not the Offer or Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the Transactions
shall be paid by the party incurring such cost or expense, except that the
expenses incurred in connection with printing and mailing the Offer Documents,
the Schedule 14D-9 and the Proxy Statement, as well as any filing fees relating
thereto, shall be shared equally by Parent and the Company.
(b) The Company has estimated that it will incur approximately $8,500,000
of costs and expenses in connection with the Transactions (including fees and
expenses payable to attorneys and accountants, investment banks and financial
advisors in connection therewith). The Company agrees that is shall not incur
costs and expenses in excess of such amount without obtaining the prior approval
of Parent.
ARTICLE VII
CONDITIONS TO THE MERGER
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SECTION 7.01. Conditions to the Merger. The respective obligations of each
party to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required
by Delaware Law;
(b) No Order. No United States or Canadian federal, state or
provincial governmental authority or other agency or commission or United
States or Canadian federal, state or provincial court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) (a "Governmental
Order") which is then in effect and has the effect of prohibiting
consummation of the Merger; and
(c) Offer. Either (i) Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall not be applicable to
the obligations of Parent or Purchaser if, in breach of this Agreement or
the terms of the Offer, Purchaser fails to purchase any Shares validly
tendered and not withdrawn pursuant to the Offer or (ii) the conditions to
the Offer (other than the Minimum Condition) shall have been satisfied.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company;
(b) By either Parent, Purchaser or the Company if (i) the Effective
Time shall not have occurred on or before December 31, 1998; provided,
however, that the right to terminate this Agreement under this clause (i)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date; or (ii) any
United States or Canadian federal, state or provincial court of competent
jurisdiction or other United States or Canadian federal, state or
provincial governmental authority shall have issued an order, decree,
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 non-appealable;
(c) By Parent if (i) due to an occurrence or circumstance that would
result in a failure to satisfy any condition (other than the Minimum
Condition or the condition specified in paragraph (g) of Annex A) set
forth in Annex A hereto, Purchaser shall have (A) terminated the Offer
without having accepted any Shares for payment thereunder or (B) failed to
pay for Shares pursuant to the
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Offer within 75 calendar days following the commencement of the Offer,
unless such failure to pay for Shares shall have been caused by or
resulted from the failure of Parent or Purchaser to perform in any
material respect any material covenant or agreement of either of them
contained in this Agreement or the material breach by Parent or Purchaser
of any material representation or warranty of either of them contained in
this Agreement; or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser or Parent its approval or recommendation
of the Offer, this Agreement, the Merger or any other Transaction in order
to approve or recommend any other Acquisition Proposal, or shall have
resolved to do any of the foregoing;
(d) By the Company, upon approval of the Board, if (i) Purchaser
shall have (A) failed to commence the Offer within 5 Business Days after
the initial public announcement of Purchaser's intention to commence the
Offer, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer
within 75 calendar days following the commencement of the Offer, unless
such failure to pay for Shares shall have been caused by or resulted from
the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in this Agreement or the material
breach by the Company of any material representation or warranty of it
contained in this Agreement; or (ii) prior to the purchase of Shares
pursuant to the Offer, the Board shall have withdrawn or modified in a
manner adverse to Purchaser or Parent its approval or recommendation of
the Offer, this Agreement, the Merger or any other Transaction in order to
approve or recommend any other Acquisition Proposal; or
(e) If the vote of the stockholders of the Company is required by
applicable law, by either Parent, Purchaser or the Company if this
Agreement and the Merger shall not have been approved by the required vote
of the Company's stockholders at the Stockholders' Meeting, or any
adjournment thereof.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall have no further
effect, and there shall be no further liability on the part of any party hereto,
except (i) as set forth in Sections 6.04, 8.03 and 9.01 and (ii) nothing herein
shall relieve any party from liability for any breach hereof.
SECTION 8.03. Fees and Expenses. (a) In the event that (x) this Agreement
is terminated pursuant to Section 8.01(c)(ii) or 8.01(d)(ii) and (y) at the time
of such termination a third party shall have made an Acquisition Proposal and
such Acquisition Proposal shall not have been rejected by the Company and
withdrawn by such third party then, the Company shall pay Parent promptly (but
in no event later than three Business Days after receipt of a request from
Parent), in cash a fee (the "Termination Fee") in the amount of $12,500,000.
(b) In the event that the Company shall fail to pay the Termination Fee
when due, the Company shall reimburse Parent and the Purchaser for the costs and
expenses actually incurred or accrued by Parent and Purchaser (including,
without limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.03, together with interest on
such unpaid Termination Fee, commencing on the date that the Termination Fee
became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in the City of New York, as such bank's Base
Rate.
SECTION 8.04. Amendment. Subject to Section 6.03, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to
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the Effective Time; provided, however, that, after the approval and adoption of
this Agreement and the transactions contemplated hereby by the stockholders of
the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.01, as the case may be, except that the agreements set forth in
Article II and Sections 6.06 and 6.07 shall survive the Effective Time
indefinitely and those set forth in Sections 6.04(b) and 8.03 shall survive
termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent or Purchaser:
Environmental Systems Products, Inc.
0 Xxxxxx Xxxx
Xxxx Xxxxxx, Xxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xx. Xxxxxxxx X. XxXxxxx,
President and Chief Executive Officer
with a copy to:
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxx X. Xxxxxx, Esq.
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if to the Company:
Envirotest Systems Corp.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Mr. Xxxx Xxxxxx,
Executive Vice President and Chief Development
Officer
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "Beneficial Owner" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its Affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
Affiliates or associates or person with whom such person or any of its
Affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "Business Day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Environmental Laws" means any federal, state or local law
relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health;
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(f) "Guarantor Subsidiaries" means the following Subsidiaries of the
Company: Envirotest Technologies, Inc., Envirotest Illinois, Inc., Remote
Sensing Technology, Inc., Envirotest Systems Corp. (a corporation
incorporated in the State of Washington), Envirotest Acquisition Corp. and
Envirotest Partners.
(g) "Hazardous Substances" means (A) those substances defined in or
regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all
regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum and
petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any
other contaminant; and (F) any substance with respect to which a federal,
state or local agency requires environmental investigation, monitoring,
reporting or remediation;
(h) "Intellectual Property" shall mean (a) inventions, whether or
not reduced to practice and whether or not yet made the subject of a
pending patent application or applications, (b) statutory invention
registrations, patents, patent registrations and patent applications and
all improvements to the inventions covered in each such registration,
patent or application, (c) trademarks, service marks, trade dress, logos,
trade names and corporate names (in each case, registered or otherwise),
including all associated goodwill, and registrations and applications for
registration thereof, (d) copyrights (registered or otherwise) and
registrations and applications for registration thereof, (e) moral rights
(including, without limitation, rights of paternity and integrity), and
waivers of such rights by others, (f) trade secrets and confidential
business information (including, without limitation, ideas, formulas and
composition, technology (including, without limitation, know-how),
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (g) computer software
programs and hardware, and (h) all rights to xxx for present and past
infringement of any of the Intellectual Property Rights hereinabove set
out.
(i) "knowledge" or "known" means, as for the Company with respect to
any matter in question, the best knowledge (after reasonable inquiry of
persons who, by virtue of their positions, could reasonably be expected to
have such knowledge of the subject matter) of the directors and executive
officers of the Company and the Subsidiaries;
(j) "Material Adverse Effect" means the result of one or more
events, changes or effects which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the business,
the financial condition, results of operations or prospects of the Company
and its Subsidiaries and Holdings, Parent, Purchaser and their
Subsidiaries, taken as a whole;
(k) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of
a government;
(l) "SEC" means the U.S. Securities and Exchange Commission;
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(m) "SEC Rules" means any rule, regulation or interpretation of the
SEC or the staff thereof; and
(n) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent, Holdings, Purchaser or any other person means an
Affiliate controlled by such person, directly or indirectly, through one
or more intermediaries.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes, except as set forth in Sections 6.04(c) and 6.10, all prior
statements, agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Purchaser may assign all or any of their rights and obligations
hereunder to any wholly owned subsidiary of Parent provided that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Sections 1.03, 2.07, 6.06 and 6.07 (which is
intended to be for the benefit of each of the persons covered thereby and may be
enforced by such persons).
SECTION 9.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Delaware state court.
SECTION 9.08. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.09. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ENVIRONMENTAL SYSTEMS PRODUCTS, INC.
By /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
STONE RIVET, INC.
By /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President and
Financial Officer
ENVIROTEST SYSTEMS CORP.
By /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman of the Board
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ANNEX A
Conditions to the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (x) the Minimum Condition shall
not have been satisfied, (y) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer,
or (z) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been any judgment, order or injunction entered
or issued by any United States or Canadian federal, state or provincial
court or governmental, administrative or regulatory authority or agency of
competent jurisdiction that (i) materially prohibits or limits the
ownership or operation by Parent or Purchaser, of all or a material
portion of the business or assets of the Company and the Subsidiaries,
taken as a whole, or compels Parent, Purchaser the Company or the
Subsidiaries, to dispose of or hold separate all or a material portion of
the business or assets of the Company and the Subsidiaries, taken as a
whole, or Parent and its Subsidiaries, taken as a whole, in each case as a
result of the Transactions; (ii) prohibits or makes illegal the acceptance
for payment, payment for or purchase of some or all of the Shares pursuant
to the Offer or the consummation of the Offer or the Merger; (iii) results
in a material delay in, or prevents, the acceptance of Shares for payment,
payment for purchase of some or all the Shares tendered pursuant to the
Offer; or (iv) imposes limitations on the ability of Parent or Purchaser
to exercise effectively full rights of ownership of any Shares, including
the right to vote any Shares acquired by Purchaser pursuant to the Offer
on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of this Agreement
and the Transactions;
(b) a Material Adverse Effect shall have occurred and be continuing;
(c) any representation or warranty of the Company in this Agreement
that is qualified by reference to a Material Adverse Effect shall not be
true and correct or any representation or warranty of the Company in this
Agreement that is not so qualified shall not be true and correct so as to
have a Material Adverse Effect, in each case as if such representation or
warranty was made as of such time on or after the date of this Agreement
(except for representations and warranties made as of a specific date
which shall be true and correct as of such date);
(d) the Company shall have failed to perform, or comply with, any
agreement or covenant of the Company to be performed or complied with by
it under this Agreement, which failure has a Material Adverse Effect;
(e) this Agreement shall have been terminated in accordance with its
terms;
(f) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder; or
(g) there shall have occurred and be continuing (a) any general
suspension of trading in
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securities on the New York or American Stock exchanges or in the NASDAQ
National Market System (other than circuit breakers), (b) the declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States, (c) the commencement of a war or other similar
international or national calamity or emergency, directly or indirectly
involving the United States, (d) any limitations (whether or not
mandatory) imposed by any governmental authority on the nature or
extension of credit or further extension of credit by banks or other
lending institutions, (e) in the case of the foregoing clauses (c) and
(d), a material escalation or worsening thereof, or (f) any other material
adverse change in banking or capital market conditions that has had a
material adverse effect on the syndication of leveraged bank credit
facilities or the consummation of high yield offerings, as the case may
be.
The foregoing conditions are for the sole benefit of Parent and Purchaser,
may be asserted by Parent or Purchaser regardless of the circumstances giving
rise to such condition and, subject to the terms and conditions of the
Agreement, may be waived by Parent and Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent and Purchaser. The
failure by Parent or Purchaser 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.
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ANNEX B
Employee Benefits Matters
1. In General
Parent hereby agrees that, for a period of one year immediately following
the Effective Time, it shall, or shall cause the Surviving Corporation and its
Subsidiaries to, maintain employee benefit plans, programs, contracts and
arrangements for the benefit of active and retired employees of the Company and
its Subsidiaries immediately prior to the Effective Time (including those on
leave of absence or disability immediately prior to the Effective Time) which in
the aggregate will provide compensation and benefits that are at least
substantially equivalent to the compensation and benefits provided to such
active and retired employees under the employee benefit plans, programs,
contracts and arrangements of the Company and its Subsidiaries as in effect
immediately prior to the Effective Time and that have been disclosed or made
available to Parent, other than employee benefit plans, programs, contracts or
arrangements providing for stock options, stock purchase rights, restricted
stock or other stock-based compensation. From and after the Effective Time,
Parent shall honor, and shall cause the Surviving Corporation and its
Subsidiaries to honor all contracts, agreements, arrangements, policies, plans
and commitments of the Company and its Subsidiaries in accordance with their
terms and as in effect immediately prior to the Effective Time which are
applicable to any current or former employees or directors of the Company or any
of its Subsidiaries and that have been disclosed or made available to Parent,
other than contracts, agreements, arrangements, policies, plans or commitments
providing for stock options which shall be treated in the manner set forth in
Section 1.03 or 2.07, as applicable.
2. Service Recognition
Employees of the Company and its Subsidiaries immediately prior to the
Effective Time (including those on leave of absence or disability immediately
prior to the Effective Time) shall receive credit for purposes of eligibility to
participate, vesting, benefit accrual and eligibility to receive benefits under
any employee benefit plan, program or arrangement established or maintained by
Parent, the Surviving Corporation or any of their respective subsidiaries for
service accrued or deemed accrued prior to the Effective Time with the Company
or any of its Subsidiaries; provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any such benefit or
to prevent a plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code from being so qualified.
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3. Certain Payments
Immediately following the purchase of Shares pursuant to the Offer in
accordance with Section 1.01, Parent or the Surviving Corporation shall make
payments as set forth in Schedule 6.06 to the employees listed therein.
