UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No.1)
Under the Securities Exchange Act of 1934
Dixon Ticonderoga Company
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(Name of Issuer)
Common Stock, $1.00 par value
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(Title of Class of Securities)
255860108
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(CUSIP Number)
Gino N. Pala
195 International Parkway
Heathrow, FL 32746
(407) 829-9000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy to:
Philip M. Shasteen, Esq.
Johnson, Pope, Bokor, Ruppel & Burns, LLP
403 East Madison Street, Suite 400
Tampa, Florida 33602
December 16, 2004
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(Date of Event which requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|.
SCHEDULE 13D
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CUSIP No. CUSIP # Page 2 of 5
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gino N. Pala
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
not applicable
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO |_|
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.
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7 SOLE VOTING POWER
47,600
NUMBER OF ---------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH ---------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 47,600
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10 SHARED DISPOSITIVE POWER
648,470
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
696,070
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.4%
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14 TYPE OF REPORTING PERSON*
IN
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This Amendment No. 1 to Schedule 13D is filed to report the execution by
Gino N. Pala (the "Reporting Person"), certain other stockholders of the Issuer
("Stockholders") and Pencil Acquisition Corp., a Delaware corporation
("Purchaser") of a Stock Purchase Agreement dated December 16, 2004 (the "Stock
Purchase Agreement"), in connection with an Agreement and Plan of Merger entered
into on December 16, 2004 (the "Merger Agreement") by the Issuer, the Purchaser
and Fila - Fabbrica Italiana Lapis ed Affini S.p.A., an Italian corporation
("Fila"). Pursuant to the Stock Purchase Agreement, the Reporting Person and the
Stockholders (i) agreed to sell their shares of common stock, $1.00 par value,
of the Issuer ( the "Shares" or the "Common Stock") to Purchaser (or, at
Purchaser's request, to tender their shares to Purchaser), (ii) appointed
designees of Purchaser as proxies with respect to voting all shares beneficially
owned by the Reporting Person, (iii) agreed to vote their shares in favor of the
proposed merger and the Merger Agreement and in opposition to any transaction
inconsistent with the proposed merger and the Merger Agreement, and (iv)
authorized the proxies to execute and deliver consents with respect to their
shares upon any and all such matters as each such proxy or its substitute shall
in its sole discretion deem proper. The Stock Purchase Agreement terminates in
the event the Merger Agreement is terminated.
This Amendment No.1 supplements and amends the Schedule 13D originally
filed by the reporting person on January 13, 2004 (the "Schedule 13D") relating
to the Common Stock. Only those items hereby reported are amended. Information
contained in this statement is as of the date hereof, unless otherwise expressly
provided herein.
Item 3. Source and Amount of Funds or Other Consideration.
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This Schedule is filed as a result of the Reporting Person entering into
the Stock Purchase Agreement.. The Reporting Person did not receive any funds in
connection with entering into the Stock Purchase Agreement.
Item 4. Purpose of the Transaction
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Item 4 is amended by substituting the following in place of Item 4 of the
original Schedule 13D filing:
On December 16, 2004, the Issuer ("Dixon"), Fila, and Purchaser entered
into the Merger Agreement, pursuant to which, among other things, Purchaser will
commence an offer to purchase for cash all of the Issuer's issued and
outstanding shares of common stock, par value $1.00 per share, at a price of
$7.00 per share. Purchaser's obligation to accept the tendered shares for
purchase is subject to, among other conditions set forth in Annex I of the
Merger Agreement, there being validly tendered and not withdrawn prior to the
expiration of the tender offer, at least 66 2/3% of the outstanding shares of
the Issuer's common stock. Because the obligations of the Reporting Person under
the Stock Purchase Agreement are related to the Merger Agreement, the Merger
Agreement is annexed hereto as Exhibit 1.
Concurrently with the execution and delivery of the Merger Agreement, the
Reporting Person and the Stockholders, in their capacities as stockholders,
entered into the Stock Purchase Agreement. Pursuant to the Stock Purchase
Agreement, the Reporting Person and the Stockholders (i) agreed to sell their
shares to Purchaser (or, at Purchaser's request, to tender their shares to
Purchaser), (ii) appointed designees of Purchaser as proxies with respect to
voting all shares beneficially owned by the Reporting Person, (iii) agreed to
vote their shares in favor of the proposed merger and the Merger Agreement and
in opposition to any transaction inconsistent with the proposed merger and the
Merger Agreement, and (iv) authorized the proxies to execute and deliver
consents with respect to their shares upon any and all such matters as each such
proxy or its substitute shall in its sole discretion deem proper. The Stock
Purchase Agreement also imposes restrictions on transfer of the shares subject
to the Stock Purchase Agreement.
Purchaser did not pay any additional consideration to the Reporting Person
or the Stockholders in connection with the execution and delivery of the Stock
Purchase Agreement. The purpose of the Stock Purchase Agreement is to increase
the likelihood that the tender offer and the merger provided for in the Merger
Agreement will be consummated. The Stock Purchase Agreement terminates in the
event the Merger Agreement is terminated. Shares subject to the Stock Purchase
Agreement represent approximately 28% of the outstanding shares of Dixon common
stock. The number of Shares beneficially owned by the Reporting Person and
subject to the Stock Purchase Agreement is 648,470.
The Stock Purchase Agreement is annexed hereto as Exhibit 2. The foregoing
description of the Merger Agreement and the Stock Purchase Agreement is
qualified by the full text of the Merger Agreement and the Stock Purchase
Agreement.
Item 5. Interest in Securities of the Issuer.
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Item 4 is amended by substituting the following in place of Item 4 of the
original Schedule 13D filing:
The amount of Shares beneficially owned by the Reporting Person on the
date hereof is as follows:
Aggregate Percent
Number of Class
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Beneficially owned............ 696,070 (1) 21.4%
Sole Voting Power............ 47,600 (2) 1.5%
Shared Voting Power......... 0 0%
Sole Dispositive Power...... 47,600 (2) 1.5%
Shared Dispositive Power... 648,470 (1) 20.2%
(1) Represents 485,670 Shares owned individually, 150,000 Shares owned
as trustee, and 12,800 Shares owned as custodian for grandchildren.
(2) Represents Shares subject to options exercisable within 60 days.
As a result of entering in the Stock Purchase Agreement, the Purchaser may
be deemed to beneficially own 648,470 Shares which are also beneficially owned
by the Reporting person, constituting approximately 20.2% of the outstanding
Shares. The Reporting Person had entered into an Option Agreement dared January
2, 2004 (the "Option Agreement") with Jarden Corporation, a Delaware corporation
("Jarden") which obligated the Reporting Person to vote in favor of a
transaction contemplated by any acquisition agreement that may have been entered
into with Jarden and granted to Jarden an option to purchase 440,000 Shares
owned by the Reporting Person at a price of $5.00 per share. Since the
termination of the Option Agreement on March 26, 2004 and until entering into
the Stock Purchase Agreement, the Reporting Person had the sole power to vote
and to dispose or direct the disposition of such Shares. If the merger is
consummated, the Reporting Person will not own beneficially or of record any
Shares of the Issuer.
Other than the Stock Purchase Agreement, the Reporting Person did not
effect any transactions in the class of securities reported hereby during the
past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
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Securities of the Issuer
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None, except as provided for in the Stock Purchase Agreement.
Item 7. Material to be Filed as Exhibits
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1. Merger Agreement dated December 16, 2004 between Dixon
Ticonderoga Corporation, Pencil Acquisition Corp., and the
Issuer, the Purchaser and Fila - Fabbrica Italiana Lapis ed
Affini S.p.A.
2. Stock Purchase Agreement dated December 16, 2004 between Gino N.
Pala, certain other stockholders of the Issuer, and Pencil
Acquisition Corp.
SIGNATURE
---------
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: December 22, 2004.
/s/ Gino N. Pala
Gino N. Pala
Merger Agreement, Exhibit 1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FILA - FABBRICA ITALIANA LAPIS ED AFFINI S.P.A.,
PENCIL ACQUISITION CORP
AND
DIXON TICONDEROGA COMPANY
dated as of December 16, 2004
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of December 16, 2004 (this
"Agreement"), is by and among Fila - Fabbrica Italiana Lapis Ed Affini S.p.A.,
an Italian corporation (the "Parent"), Pencil Acquisition Corp, a newly formed
Delaware corporation and wholly-owned subsidiary of the Parent (the "Merger
Sub"), and Dixon Ticonderoga Company, a Delaware corporation (the "Company").
RECITALS
WHEREAS, the respective boards of directors of the Parent, Merger Sub and
the Company have each determined that it is in the best interests of their
respective corporations and stockholders to approve the acquisition of the
Company by the Parent upon the terms and subject to the conditions set forth
herein;
WHEREAS, in furtherance thereof, this Agreement provides for Merger Sub to
commence a cash tender offer (the "Offer") to acquire all of the issued and
outstanding shares of common stock, par value $1.00 per share, of the Company
(the "Company Common Stock") for $7.00 per share in cash (such price, or any
such higher price per share as may be paid in the Offer, referred to herein as
the "Offer Price");
WHEREAS, the respective boards of directors of the Parent, Merger Sub, and
the Company have each approved, and have each declared advisable the merger of
Merger Sub with and into the Company, following consummation of the Offer, upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of Company Common Stock, other than shares
owned by the Parent, the Parent's Affiliates (including Merger Sub), the Company
or the Company's Subsidiaries, and other than Dissenting Shares (as defined
below), will be converted into the right to receive the Merger Consideration (as
defined below);
WHEREAS, the respective boards of directors of the Parent, Merger Sub, and
the Company have each determined that the Offer and the Merger (as defined
below) are consistent with, and in furtherance of, their respective business
strategies and goals;
WHEREAS, simultaneously with the execution of this Agreement Merger Sub and
certain of the Company's stockholders have entered into a stock purchase
agreement (the "Stock Purchase Agreement"); and
WHEREAS, the board of directors of the Company has determined that this
Agreement and the consideration to be paid for each share of Company Common
Stock in the Offer and the Merger are fair to the Company's stockholders and has
recommended that the stockholders accept the Offer, tender their shares of
Company Common Stock pursuant thereto, and vote in favor of the Merger and the
adoption of the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements in this Agreement, the parties, intending to be legally bound,
agree as follows:
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ARTICLE I
THE OFFER AND THE MERGER
1.1 The Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Section 6.1 of this Agreement and none of the
events set forth in Annex I shall have occurred and be continuing, then as
promptly as reasonably practicable following the execution of this Agreement
(but in no event later than fifteen (15) Business Days following the date
hereof), Merger Sub shall, and Parent shall cause Merger Sub to, commence
(within the meaning of Rule 14d-2 under the Exchange Act) the Offer to purchase
for cash all the shares of Company Common Stock at the Offer Price; provided,
however, that Merger Sub shall not commence the Offer prior to the tenth
Business Day following the date hereof without the prior written consent of the
Company. The obligations of Merger Sub to, and of Parent to cause Merger Sub to,
accept for payment, and pay for, shares of Company Common Stock validly tendered
pursuant to the Offer on or prior to the final expiration of the Offer and not
withdrawn shall be subject only to (i) there being validly tendered and not
withdrawn prior to the final expiration of the Offer that number of shares of
Company Common Stock which, together with the shares of Company Common Stock
then beneficially owned by the Parent or Merger Sub (including, without
limitation, the shares of Company Common Stock to be sold to Merger Sub pursuant
to the Stock Purchase Agreement), represents at least 66-2/3% of the outstanding
shares of Company Common Stock (the "Minimum Condition") and (ii) the other
conditions set forth in Annex I hereto. Subject to the terms of the Offer and
this Agreement, and the prior satisfaction or waiver by Parent or Merger Sub of
the Minimum Condition and the other conditions set forth in Annex I hereto as of
any expiration date of the Offer, Merger Sub shall, in accordance with the terms
of the Offer, promptly after the expiration of the Offer, consummate the Offer
and accept for payment and pay for, and Parent shall cause Merger Sub to accept
for payment and pay for, all shares of Company Common Stock validly tendered and
not withdrawn pursuant to the Offer (subject to the applicable provisions of
Rule 14d-11 under the Exchange Act, to the extent applicable). The Offer shall
be made by means of an offer to purchase (the "Offer to Purchase") containing
the terms set forth in this Agreement and having only the Minimum Condition and
the other conditions set forth in Annex I hereto. Each of Parent and Merger Sub
agrees that the Offer to Purchase will provide a statement in all appropriate
places therein to the effect that Merger Sub's obligation to purchase shares of
Company Common Stock pursuant to the Offer is not conditioned on any financing
arrangements or subject to any financing condition. Unless extended in
accordance with this Section 1.1(a), the Offer shall provide for an initial
expiration date of twenty (20) Business Days following the commencement of the
Offer (the "Initial Expiration Date"). Parent and Merger Sub shall have the
right to extend the Offer for one ten Business Day period for any reason in
their sole discretion. The latest time and date at which the Offer, as may be
extended beyond the Initial Expiration Date as permitted or required by this
Section 1.1(a), shall expire shall not be later than the Outside Date (except as
may otherwise be required by rule, regulation, interpretation, or position of
the SEC or its staff) and is herein referred to as the "Expiration Date." Merger
Sub expressly reserves the right to waive or modify the terms of the Offer,
except that, without the prior written consent of the Company (such consent to
be authorized by the board of directors of the Company or a duly authorized
committee thereof), neither Parent nor Merger Sub shall (i) amend or waive
satisfaction of the Minimum Condition, (ii) decrease the Offer Price, (iii)
change the form of consideration payable in the Offer, (iv) decrease the number
of shares of Company Common Stock sought in the Offer, (v) impose additional
conditions to the Offer, (vi) amend any of the conditions set forth in Annex I
3
in any manner adverse to the holders of the shares of Company Common Stock,
(vii) amend any other term of the Offer in a manner that is adverse to the
holders of the shares of Company Common Stock, or (viii) extend the Offer except
as expressly permitted or required by this Section 1.1(a). Each of Parent and
Merger Sub agree that they shall not terminate or withdraw the Offer unless, at
the Initial Expiration Date, the Minimum Condition shall not have been satisfied
or the other conditions to the Offer described in Annex I shall not have been
satisfied or earlier waived. Notwithstanding the foregoing:
(1) without limiting the right of Parent and Merger Sub to extend the Offer as
permitted by this Section 1.1(a), provided that this Agreement shall not have
been terminated in accordance with Section 6.1 hereof, at the request of the
Company, Merger Sub will, and Parent will cause Merger Sub to, extend the Offer
for one or more periods of ten (10) Business Days each, but in no event beyond
the Outside Date, if the conditions set forth in Annex I hereto are not
satisfied or, to the extent permitted by this Agreement, waived at or prior to
the time the Offer otherwise would expire, except to the extent any such
conditions that have not been waived are incapable of being satisfied.
(2) Parent and Merger Sub may (but shall not be obligated to), without the
consent of the Company, provided that this Agreement shall not have been
terminated in accordance with Section 6.1 hereof, extend the Offer
(A) beyond the Initial Expiration Date from time to time, for such
period or periods of time, no later than the Outside Date, as Parent
or Merger Sub reasonably believes are necessary to cause the
conditions to be satisfied if, at or prior to the time the Offer
otherwise would expire, any conditions to the Offer shall not have
been satisfied or, to the extent permitted by this Agreement, waived;
(B) for any period required by any rule, regulation, interpretation,
or position of the SEC or the staff thereof applicable to the Offer;
and
(C) beyond the latest Expiration Date that would otherwise be
permitted by this Section 1.1(a) on up to two occasions for periods of
ten (10) Business Days each, but in no event beyond the Outside Date,
if, on such Expiration Date, all of the conditions to the Merger Sub's
obligation to accept for payment and pay for shares of Company Common
Stock validly tendered pursuant to the Offer are satisfied or, to the
extent permitted by this Agreement, waived, but the number of shares
of Company Common Stock validly tendered (and not withdrawn) pursuant
to the Offer, together with the Company Common Stock then beneficially
owned by Parent and Merger Sub (including, without limitation, the
shares of Company Common Stock to be sold to Merger Sub pursuant to
the Stock Purchase Agreement), represents less than ninety percent
(90%) of the outstanding shares of Company Common Stock; provided,
however, that Merger Sub's decision to extend the Offer in the case of
this clause (C) shall constitute a waiver of the conditions set forth
in clauses (b) and (d) of Section (ii) of Annex I and of its right to
terminate the Agreement under Section 6.1(f) of the Agreement (except,
in the case of Section 6.1(f), any failure by the Company to perform a
covenant or agreement), but, in each case, such waiver shall apply
4
only to the extent that any Material Adverse Effect or any breach of
representation or warranty giving rise to the failure of such
condition or to such termination right resulted from events that
occurred after the time of such extension.
In the event the Minimum Condition is satisfied and Merger Sub purchases the
shares of Company Common Stock tendered pursuant to the Offer, Merger Sub may,
in its sole discretion, provide a subsequent offering period in accordance with
Rule 14d-11 promulgated under the Exchange Act (a "Subsequent Offering Period").
In addition, Merger Sub may increase the Offer Price (but not change any other
condition to the Offer) and extend the Offer to the extent required by law in
connection with such increase, in each case in its sole discretion and without
the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced,
Parent and Merger Sub shall file with the SEC, a Tender Offer Statement on
Schedule TO with respect to the Offer (together with all amendments and
supplements thereto and including the exhibits thereto, the "Schedule TO"). The
Schedule TO will comply as to form in all material respects with the provisions
of all applicable federal securities Laws and will contain or incorporate by
reference the summary term sheet required thereby and, as exhibits, the Offer to
Purchase, forms of the related letters of transmittal, and summary
advertisement, and all other ancillary Offer documents (which documents,
together with any amendments and supplements thereto, and any other SEC schedule
or form which is filed in connection with the Offer and related transactions,
are referred to collectively herein as the "Offer Documents"). Parent and Merger
Sub further agree to take all steps necessary to cause the Offer Documents to be
filed with the SEC and to be disseminated to the holders of the Company Common
Stock, together with the Schedule 14D-9, in each case, as and to the extent
required by applicable federal securities Laws. The Company shall provide Parent
and Merger Sub with any information regarding the Company or its Subsidiaries
that may be required by applicable Law or reasonably requested by Parent or
Merger Sub in order to effectuate the preparation and filing of the Offer
Documents. Parent and Merger Sub agree promptly to correct the Schedule TO or
the Offer Documents if and to the extent that any information shall have become
false or misleading in any material respect or as otherwise required by Law (and
the Company, with respect to written information supplied by it specifically for
use in the Schedule TO or the Offer Documents, shall promptly notify Parent of
any required corrections of such information and shall cooperate with Parent and
Merger Sub with respect to correcting such information). Parent and Merger Sub
further agree to take all steps necessary to cause the Schedule TO, as so
corrected, to be filed with the SEC and the Offer Documents, as so corrected, to
be disseminated to the holders of the Company Common Stock as required by
applicable federal securities Laws. Parent and Merger Sub shall consult with the
Company and its counsel with respect to the Offer Documents and shall afford the
Company and its counsel a reasonable opportunity to review and comment on the
Offer Documents and all documents required to be furnished by Parent or Merger
Sub under Rules 14d-2(b) and 14a-12 of the Exchange Act before they are
transmitted to or filed with the SEC or disseminated to the Company's
stockholders, and Parent and Merger Sub shall consider any such comments in good
faith. In addition, Parent and Merger Sub agree to provide in writing to the
Company and its counsel any comments or communications, written or oral, that
Parent, Merger Sub or their counsel may receive from time to time from the SEC
or its staff with respect to the Offer Documents promptly after Parent's or
Merger Sub's, as the case may be, receipt of such comments. Prior to responding
to any such comments, Parent and Merger Sub shall consult with the Company and
5
its counsel and provide them with a reasonable opportunity to review and
participate in any response to any such comments. Parent and Merger Sub shall
consider in good faith any suggestions from the Company or its counsel with
respect to such comments or response. Parent and Merger Sub shall provide the
Company and its counsel with copies of all correspondence between the Parent,
Merger Sub, their counsel, or their representatives, on the one hand, and the
SEC or its staff, on the other hand.
(c) Parent shall provide or cause to be provided to Merger Sub on
a timely basis all of the funds necessary to purchase all of the shares of
Company Common Stock that Merger Sub becomes obligated to purchase pursuant to
the Offer. Prior to the time the Offer expires, the Parent shall appoint a bank
or trust company in the United States reasonably acceptable to the Company to
act as the paying agent hereunder (the "Paying Agent") to receive in trust the
funds to which stockholders of the Company shall become entitled upon validly
tendering and not withdrawing prior to the final expiration of the Offer their
shares pursuant to the Offer. At or prior to the time the Offer expires, Parent
shall cause to be deposited with the Paying Agent the aggregate amount necessary
for payment in full of all consideration that holders of Company Common Stock
are entitled to receive pursuant to the Offer.
(d) If this Agreement has been terminated pursuant to Section 6.1
of this Agreement, Merger Sub shall, and the Parent shall cause Merger Sub to,
promptly terminate the Offer without accepting any of the shares of Company
Common Stock for payment.
1.2 Company Actions.
(a) Simultaneously with the filing of the Offer Documents with
the SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (together with all
amendments, supplements, and exhibits thereto, the "Schedule 14D-9"). The
Schedule 14D-9 will comply as to form in all material respects with the
provisions of all applicable federal securities Laws. The Schedule 14D-9 shall,
subject to the provisions of Section 4.3(e) of this Agreement, contain the
recommendation of the Company's board of directors that the stockholders of the
Company accept the Offer, tender their shares of Company Common Stock to Merger
Sub pursuant to the Offer, and approve and adopt this Agreement and the Merger
(the "Company Recommendation"). The Parent and Merger Sub shall provide the
Company with any information regarding Parent, Merger Sub, or their Affiliates
that may be required by applicable Law or reasonably requested by the Company in
order to effectuate the preparation and filing of the Schedule 14D-9. The
Company agrees to cause the Schedule 14D-9 to be filed with the SEC and
disseminated to the holders of shares of Company Common Stock, together with the
Offer Documents, in each case as and to the extent required by applicable
federal securities Laws. The Company, on the one hand, and Parent and Merger
Sub, on the other hand, agree promptly to correct any information provided by it
for use in the Schedule 14D-9 if it shall have become false or misleading in any
material respect or as otherwise required by Law. 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 the holders of the Company Common Stock as
required by applicable federal securities Laws. The Company shall consult with
Parent, Merger Sub, and their counsel with respect to the Schedule 14D-9 and
shall afford Parent, Merger Sub, and their counsel a reasonable opportunity to
review and comment on the Schedule 14D-9 before it is filed with the SEC. The
Company shall consider any such comments in good faith. In addition, the Company
agrees to provide in writing to Parent, Merger Sub and their counsel any
comments or communications, written or oral, that the Company or its counsel may
6
receive from time to time from the SEC or its staff with respect to the Schedule
14D-9 promptly after the Company's receipt of such comments. Prior to responding
to any such comments, the Company shall consult with Parent, Merger Sub and
their counsel and provide them with a reasonable opportunity to review and
participate in any response to such comments. The Company shall consider in good
faith any suggestions from Parent, Merger Sub or their counsel with respect to
such comments or response. The Company shall provide the Parent, Merger Sub, and
their counsel with copies of all correspondence between the Company, its
counsel, or its representatives, on the one hand, and the SEC or its staff, on
the other hand.
(b) In connection with the Offer, the Company will as promptly as
practicable furnish or cause to be furnished to Merger Sub any available listing
or electronic file containing the names and addresses of the record holders of
shares of Company Common Stock as of a recent date, together with copies of
security position listings, and shall promptly furnish or cause to be furnished
to Merger Sub such information and assistance (including, but not limited to,
updated lists of holders of shares of Company Common Stock and updated listings
of security positions) as Merger Sub may reasonably request for purposes of
communicating the Offer to the Company's stockholders. Except for such steps as
are reasonably necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer, the Parent and Merger Sub shall
hold in confidence the information contained in any such listings and files,
shall use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, shall, upon request, deliver to the
Company all copies of such information then in their possession or in the
possession of their agents or representatives. Parent and Merger Sub shall take
such action as is necessary to disseminate the Offer Documents and Company
Recommendation to holders of the Company Common Stock.
(c) Promptly upon the payment by Merger Sub for shares of Company
Common Stock pursuant to the Offer and the Stock Purchase Agreement and from
time to time thereafter, Merger Sub shall be entitled to designate such number
of directors of the Board of Directors of the Company (the "Board"), rounded to
the closest whole number, as is equal to the product of the number of directors
on the Board, after giving effect to such representation, and the percentage of
the outstanding Shares owned by Merger Sub, and the Company, upon request of
Merger Sub, subject to applicable law and the Company's Certificate of
Incorporation, shall promptly, at the Company's election, either increase the
size of the Board or secure the resignation of such number of directors as is
necessary to enable Merger Sub's designees to be elected or appointed to the
Board and shall use its reasonable best efforts to cause Merger Sub's designees
to be so elected or appointed.
(d) The Company's obligations to appoint designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
The Company shall promptly take all actions required pursuant to Section 14 (f)
and Rule 14f-1 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 so long as Parent and Merger Sub have provided the
Company on a timely basis all information required to be provided pursuant to
the last sentence of this subsection (d). Parent and Merger Sub will provide the
Company with all necessary assistance, in order to fulfill the Company's
obligations under this Section 1.2(d), and will supply to the Company in writing
and be solely responsible for any information with respect to either of them and
7
their nominees, officers, directors and affiliates required by Section 14 (f)
and Rule 14f-1.
(e) Anything in this Section 1.2 to the contrary notwithstanding,
if Merger Sub's designees are elected or appointed to the Company's Board, then
until the Effective Time, the Company's Board shall have at least two directors,
or such greater number as may be required by the rules of the American Stock
Exchange, who are Independent Directors. For purposes of this Agreement, the
term "Independent Director" shall mean a member of the Company's Board (i) who
(except as otherwise provided in this subsection (e)) was a member thereof on
the date hereof, (ii) who is not an Affiliate or Associate of Parent or Merger
Sub, (iii) who is not an employee of the Company or any of its Subsidiaries, and
(iv) who is otherwise considered an independent director within the meaning of
the rules of the American Stock Exchange. If the number of Independent Directors
shall be reduced below two, or such greater number as may be required by the
rules of the American Stock Exchange, the remaining Independent Director(s)
shall be entitled to designate persons to fill such vacancies who are not
Affiliates or Associates of Parent or Merger Sub and who otherwise are
considered independent directors within the meaning of the rules of the American
Stock Exchange, and such persons shall be deemed to be Independent Directors for
purposes of this Agreement. If there shall be no Independent Directors, then the
other directors shall use commercially reasonable efforts to designate two
persons, or such greater number as may be required by the rules of the American
Stock Exchange, to fill such vacancies who are not Affiliates or Associates of
Parent or Merger Sub and who otherwise are considered independent directors
within the meaning of the rules of the American Stock Exchange, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Following the purchase by Merger Sub of shares of Company Common Stock pursuant
to the Offer, and prior to the Effective Time, Parent and Merger Sub shall use
their reasonable best efforts to ensure that at least two Independent Directors
(or such greater number as may be required by the rules of the American Stock
Exchange) serve as directors of the Company until the Effective Time and neither
Parent nor Merger Sub will take any action to cause any Independent Director to
be removed as a director of the Company except for cause. The Independent
Directors shall form a committee that, during the period from the time shares of
Company Common Stock are accepted for purchase pursuant to the Offer until the
Effective Time, shall, to the extent permitted by the General Corporation Law of
the State of Delaware (the "DGCL") and this Agreement, have the sole power and
authority, by a majority vote of such Independent Directors, to cause the
Company to (a) agree to amend this Agreement or to extend the time for the
performance of any of the obligations or other acts of the Parent or Merger Sub
under the Offer, the Merger or this Agreement, or (b) exercise or waive any of
the Company's rights, benefits, or remedies under this Agreement except for the
right to terminate the Agreement. In addition, during the period from the time
shares of Company Common Stock are accepted for purchase pursuant to the Offer
until the Effective Time, any (a) amendment to the Company's Certificate of
Incorporation or Bylaws, (b) termination of this Agreement by the Company, (c)
other action that could adversely affect the interests of the holders of shares
of Company Common Stock (other than the Parent or Merger Sub), and (d) action
specified in the immediately preceding sentence with respect to which the DGCL
does not permit a committee of the Board to exercise sole power and authority,
shall require, in addition to any other affirmative vote required under the DGCL
or the Company's Certificate of Incorporation or Bylaws, the affirmative vote of
not less than a majority of the entire Board, which majority shall include the
concurrence of a majority of the Independent Directors, and neither Parent nor
Merger Sub shall approve (either in its capacity as a stockholder or as a party
to this Agreement, as applicable), and each shall use its reasonable best
8
efforts to prevent the occurrence of, any such actions, unless such action shall
have received the concurrence of a majority of the Independent Directors.
1.3 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with
and into the Company at the Effective Time (the "Merger"). At the Effective Time
the separate corporate existence of Merger Sub shall cease, the Company shall be
the surviving corporation (sometimes referred to as the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL.
1.4 Closing. The closing of the Merger (the "Closing") will take place at a
time and on a date to be specified by the parties (the "Closing Date"), which
shall be no later than the second Business Day following the later of: (a) the
expiration of the Offer (or the expiration of any Subsequent Offering Period if
Merger Sub elects to provide such a Subsequent Offering Period) and (b)
satisfaction or waiver of all of the conditions set forth in Article V (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions), unless another
time or date is agreed to by the parties. The Closing shall take place at the
offices of Shapiro Forman Allen & Miller LLP at 380 Madison Avenue, New York,
New York 10017, or such other location as agreed to by the parties.
1.5 Effective Time; Filing of Certificate of Merger. Subject to the
provisions of this Agreement, on the Closing Date, the parties shall cause the
Merger to be consummated by filing a properly executed certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware in accordance with the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at the
time of such filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, or at such later date or time as the Parent and the
Company shall agree and specify in the Certificate of Merger (the "Effective
Time").
1.6 Effects Of The Merger.
(a) The Merger shall have the effects set forth in this Agreement
and in the applicable provisions of the DGCL.
(b) At the Effective Time, (i) the certificate of incorporation
of the Company shall be amended and restated to read in its entirety as set
forth on Exhibit A hereto and (ii) the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
(c) Immediately prior to the Effective Time, each of the
directors of the Company shall resign such position. At the Effective Time, the
directors and officers of Merger Sub immediately prior to the Effective Time
shall become the initial directors and officers of the Surviving Corporation and
shall hold office in accordance with the certificate of incorporation and bylaws
of the Surviving Corporation until his or her death, disability, resignation or
removal or until his or her successor is duly elected and qualified, as the case
may be.
9
(d) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that consistent with the terms of this
Agreement any deeds, bills of sale, assignments, assurances in Law or any other
acts or things are necessary or desirable (i) to continue, vest, perfect or
confirm, of record or otherwise, the Surviving Corporation's right, title or
interest in, to or under any of the rights, properties, privileges, franchises
or assets of either of the constituent corporations acquired or to be acquired
by the Surviving Corporation by reason of, as a result of, or in connection
with, the Merger, or (ii) otherwise to carry out the purposes of this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of either of such constituent
corporations, all such deeds, bills of sale, assignments and assurances, and to
take and do, in the name and on behalf of each of such constituent corporations
or otherwise, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties, privileges, franchises or assets in the Surviving
Corporation or otherwise to carry out the intent of this Agreement.
1.7 The Proxy Statement; Special Meeting; Company Recommendation.
(a) If, after consummation of the Offer, a meeting of the
Company's stockholders is necessary to consummate the Merger and the Merger has
not become effective without a meeting of stockholders pursuant to Section
1.8(a) hereof and has not been approved by the Stockholders' Written Consent
pursuant to Section 1.8(b) hereof, then:
(1) As promptly as practicable after the consummation of the
Offer and if required by the Exchange Act, the Company shall prepare
and cause to be filed with the SEC a preliminary Proxy Statement in
connection with the Special Meeting (as defined below), and shall use
reasonable efforts to have the Proxy Statement cleared by the SEC as
soon as possible. As promptly as reasonably practicable after the
Proxy Statement has been cleared by the SEC, the Company shall mail
the definitive Proxy Statement to stockholders of the Company. Except
as permitted by Section 4.3(e), the Proxy Statement shall contain the
Company Recommendation. The Parent and Merger Sub shall provide the
Company with any information regarding Parent, Merger Sub, or their
Affiliates that may be required by applicable Law or reasonably
requested by the Company in order to effectuate the preparation and
filing of the Proxy Statement. The Company shall consult with the
Parent and Merger Sub with respect to the Proxy Statement and shall
afford the Parent and Merger Sub reasonable opportunity to review and
comment thereon prior to its finalization. The Company shall consider
any such comments in good faith. If, at any time prior to the Special
Meeting, any event shall occur which is required to be set forth in an
amendment or supplement to the Proxy Statement, the Company or the
Parent, as the case may be, shall promptly notify the other of such
event. In such case, the Company, with the cooperation of the Parent
and Merger Sub, will promptly prepare and mail such amendment or
supplement to its stockholders, and the Company shall consult with the
Parent and Merger Sub with respect to such amendment or supplement and
shall afford the Parent and Merger Sub reasonably opportunity to
comment thereon prior to such mailing. The Company shall consider any
such comments in good faith.
(2) Except as otherwise permitted in this Agreement, the Company
shall take all action reasonably necessary in accordance with the
DGCL, its certificate of incorporation, and its bylaws to cause a
10
special meeting of its stockholders to be duly called, noticed and
convened to consider the adoption of this Agreement (including any
postponement or adjournment thereof, the "Special Meeting"). Subject
to applicable Law, the Special Meeting shall be held (on a date
selected by the Company in consultation with the Parent) as promptly
as reasonably practicable after the acceptance of payment and purchase
of Company Common Stock by Merger Sub pursuant to the Offer and the
definitive Proxy Statement has been mailed to the stockholders of the
Company. Notwithstanding anything to the contrary contained in this
Agreement, the Company may adjourn or postpone the Special Meeting (i)
to ensure that any supplement or amendment to the Proxy Statement is
provided to its stockholders in advance of a vote on this Agreement,
or (ii) if as of the time for the Special Meeting as set forth in the
Proxy Statement there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such Special Meeting.
(b) The Parent shall cause all shares of Company Common Stock
beneficially owned by the Parent or any Affiliate of the Parent or over which
Parent or any of its Affiliates exercise voting control to be voted in favor of
the adoption of this Agreement at the Special Meeting.
(c) As soon as practicable after the Special Meeting, the Company
shall deliver to Parent a certificate of its corporate secretary setting forth
the voting results from the Special Meeting.
1.8 Merger Without Meeting of Stockholders.
(a) Notwithstanding anything in Section 1.7 of this Agreement to
the contrary, if Merger Sub shall have accepted for payment pursuant to the
Offer such number of shares of Company Common Stock which, when aggregated with
the shares of Company Common Stock otherwise beneficially owned by the Parent or
its Affiliates (including, without limitation, shares of Company Common Stock
sold to Merger Sub pursuant to the Stock Purchase Agreement), represents a
number of shares sufficient to enable Merger Sub (if all such shares of Company
Common Stock were owned by Merger Sub) to cause the Merger to become effective
without a meeting of stockholders of the Company pursuant to Section 253 of the
DGCL, then the parties will take all necessary and appropriate action to cause
the Merger to become effective pursuant to Section 253 of the DGCL as soon as
practicable after Merger Sub accepts for payment and pays for shares tendered in
the Offer (including, without limitation, causing any shares of Company Common
Stock beneficially owned by Parent or any of its Affiliates but not owned
directly by Merger Sub to be transferred to Merger Sub).
(b) Notwithstanding anything in Section 1.7 of this Agreement to
the contrary, if Merger Sub shall have accepted for payment pursuant to the
Offer such number of shares of Company Common Stock which, when aggregated with
the shares of Company Common Stock otherwise beneficially owned by the Parent or
its Affiliates or over which any of them exercises voting control (including,
without limitation, shares of Company Common Stock sold to Merger Sub pursuant
to the Stock Purchase Agreement), represents a number of shares equal to not
less than 66-2/3% of the then outstanding shares of Company Common Stock but
less than that number of shares sufficient to enable Merger Sub (if all such
shares of Company Common Stock were owned by Merger Sub) to cause the Merger to
11
become effective without a meeting of stockholders of the Company pursuant to
Section 253 of the DGCL, Merger Sub shall, and Parent shall cause its Affiliates
and any record holder of Company Common Stock over which Parent or any of its
Affiliates exercises voting control to, execute and deliver to the Company, in
accordance with Section 228 of the DGCL, a consent or consents in writing voting
all shares of Company Common Stock beneficially owned by Parent and any of its
Affiliates or over which Parent or any of its Affiliates exercises voting
control in favor of the approval and adoption of this Agreement and the Merger
(the "Stockholders' Written Consent"). Simultaneously with the filing of the
Company's Schedule 14D-9, the Company shall file with the SEC an information
statement on Schedule 14C pursuant to Section 14(c) of the Exchange Act and the
rules and regulations promulgated thereunder (the "Schedule 14C Information
Statement"). The Company shall use all reasonable efforts to respond as promptly
as practicable to any comments of the SEC or its staff with respect to the
Schedule 14C Information Statement. The Company shall promptly notify the Parent
upon the receipt of any comments from the SEC or its staff or any request from
the SEC or its staff for amendments or supplements to the Schedule 14C
Information Statement and shall provide the Parent with copies of all
correspondence between the Company and its representatives, on the one hand, and
the SEC and its staff, on the other hand. Notwithstanding the foregoing, prior
to filing or mailing the Schedule 14C Information Statement (or any amendment or
supplement thereto) or responding to any comments of the SEC or its staff with
respect thereto, the Company (i) shall consult with Parent, Merger Sub, and
their counsel and provide them with a reasonable opportunity to review and
comment on such document or response and (ii) shall consider any such comments
in good faith. Upon Parent's request, if the Offer is consummated but the number
of shares of Company Common Stock accepted for payment in the Offer, together
with the shares of Company Common Stock then beneficially owned by the Parent or
its Affiliates (including, without limitation, shares of Company Common Stock
sold to Merger Sub pursuant to the Stock Purchase Agreement) is less than 90% of
the Company Common Stock then outstanding, the Company shall cause the Schedule
14C Information Statement to be mailed to the Company's stockholders as promptly
as practicable following the Expiration Date and delivery by Merger Sub of the
Stockholders' Written Consent.
1.9 Conversion of Stock. As of the Effective Time, by virtue of the Merger
and without any action on the part of the Company, the Parent, Merger Sub or the
stockholders thereof:
(a) Each share of capital stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one fully paid and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than shares to be canceled in
accordance with Section 1.9(c) and Dissenting Shares, shall be converted into
the right to receive $7.00 in cash, payable to the holder thereof, without any
interest thereon (the "Merger Consideration"), as soon as reasonably practicable
after the surrender of the certificate(s) representing such Company Common Stock
as provided in Section 1.10. Notwithstanding the foregoing, if Parent or Merger
Sub increases the Offer Price as permitted by Section 1.1(a) of this Agreement,
then the Merger Consideration shall be the same cash amount as the Offer Price
paid to holders in connection with consummation of the Offer. At and after the
Effective Time, all shares of Company Common Stock shall no longer be
12
outstanding and shall automatically be canceled and shall cease to exist, and
each holder of a share certificate which immediately prior to the Effective Time
represented shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration to be
issued in consideration therefor upon surrender of such certificate in
accordance with Section 1.10, or in the case of holders of Dissenting Shares,
such rights as are granted pursuant to Section 262 of the DGCL and this
Agreement.
(c) Each share of Company Common Stock that is held in the
Company's treasury or owned or held by any Subsidiary of the Company, the
Parent, or any Affiliate of Parent shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered or deliverable
in exchange therefor.
1.10 Exchange Of Certificates.
(a) Prior to the Effective Time, the Parent shall appoint the
Paying Agent and authorize the Paying Agent to receive in trust the funds to
which stockholders of the Company shall become entitled upon surrender of the
certificates in accordance with this Section 1.10. At or prior to the Effective
Time, Parent shall cause to be deposited with the Paying Agent the aggregate
amount necessary for payment in full of all consideration that holders of
Company Common Stock and Eligible Options are entitled to receive pursuant to
Section 1.9 and Section 1.13, respectively, to be held for the benefit of, and
distribution to, such holders in accordance with this Agreement. The Paying
Agent shall agree to hold such funds (the "Payment Fund") for delivery as
contemplated by this Section 1.10. The Payment Fund shall be invested as
directed by Parent or the Surviving Corporation pending payment thereof by the
Paying Agent to holders of Company Common Stock and Eligible Options. Earnings
from such investments in excess of the aggregate Merger Consideration shall be
the sole and exclusive property of the Surviving Corporation, and no part of
such earnings shall accrue to the benefit of the holders of Company Common Stock
or Eligible Options. If for any reason (including losses) the Payment Fund is
inadequate to pay the cash amounts to which holders of shares of Company Common
Stock and Eligible Options shall be entitled, Parent and the Surviving
Corporation shall in all events remain liable for the payment thereof and Parent
shall take all steps necessary to enable and cause the Surviving Corporation to
provide to the Paying Agent on a timely basis, as and when needed after the
Effective Time, cash necessary to pay for the shares of Company Common Stock
converted into the right to receive cash pursuant to Section 1.9 and to pay the
cash amount due to holders of Eligible Options pursuant to Section 1.13. The
Payment Fund shall not be used for any purpose except as expressly provided in
this Agreement.
(b) As soon as reasonably practicable after the Effective Time,
but in no event later than ten (10) Business Days thereafter, the Paying Agent
shall mail to each holder of record of a certificate that immediately prior to
the Effective Time represented shares of Company Common Stock (other than
Parent, any Affiliate of Parent, the Company, any Subsidiary of the Company and
any holder of Dissenting Shares): (i) a letter of transmittal (a "Letter of
Transmittal"), which Letter of Transmittal shall specify that delivery shall be
effected, and risk of loss and title to each such certificate shall pass, only
upon delivery of such certificates to the Paying Agent, and contain such other
provisions as the Company and Parent may reasonably specify; and (ii)
instructions for use in surrendering such certificates in exchange for Merger
Consideration. Thereafter, upon surrender of a certificate representing Company
Common Stock for cancellation to the Paying Agent, together with a Letter of
Transmittal, duly executed, and such other documents as may reasonably be
13
required by the Paying Agent, the holder of such certificate shall (subject to
applicable abandoned property, escheat and similar Laws) receive in exchange
therefor the amount of cash equal to the product of (x) the Merger Consideration
and (y) the number of shares of Company Common Stock represented by such
certificate, and the certificate so surrendered shall be canceled. If a transfer
of ownership of shares of Company Common Stock has not been registered in the
transfer records of the Company, payment may be made to a Person other than the
Person in whose name the certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
Taxes required by reason of the payment to a Person other than the registered
holder of such certificate or establish to the satisfaction of the Parent that
such Taxes have been paid or are not applicable.
(c) All cash paid upon the surrender of certificates representing
Company Common Stock in accordance with the terms of this Article I shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such certificates,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
that may have been declared or made by the Company on such shares of Company
Common Stock and that remain unpaid at the Effective Time. If, after the
Effective Time, certificates representing Company Common Stock are presented to
the Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article I, except as otherwise
provided by Law.
(d) None of the Parent, Merger Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. No Person previously entitled to any amounts
payable pursuant to this Article I shall have any claim to such amount to the
extent such amount has escheated or become the property of, and paid to, any
Governmental Entity. At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require that the Paying Agent
deliver to it any funds (including any earnings received with respect thereto)
that had been made available to the Paying Agent and that have not been
disbursed to holders of certificates representing Company Common Stock or
holders of Eligible Options, and thereafter such holders shall be entitled to
look only to the Surviving Corporation (subject to abandoned property, escheat
or other similar Laws) as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their certificates.
(e) The Paying Agent shall be authorized to pay the Merger
Consideration attributable to any certificate(s) representing Company Common
Stock that have been lost, stolen or destroyed upon receipt of evidence of
ownership of the Company Common Stock represented thereby and of appropriate
indemnification and/or bond in each case reasonably satisfactory to the
Surviving Corporation.
(f) The Parent, the Surviving Corporation, and the Paying Agent
shall be entitled to deduct and withhold from amounts otherwise payable pursuant
to this Agreement to any holder of certificates previously representing Company
Common Stock or to any holder of Eligible Options such amounts as the Parent,
the Surviving Corporation, or the Paying Agent, respectively, reasonably
determines is required to be deducted and withheld with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended (the "Code"),
or any provision of state, local or foreign Tax Law. To the extent that amounts
14
are so withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of such certificates or of such
Eligible Options in respect of which such deduction and withholding was made by
the Parent, the Surviving Corporation, or the Paying Agent.
1.11 No Further Rights or Transfers. Except for the surrender of the
certificate(s) in exchange for the Merger Consideration or the perfection of
appraisal rights with respect to the Dissenting Shares, at and after the
Effective Time, each holder of shares of Company Common Stock issued and
outstanding immediately prior to the Merger shall cease to have any rights as a
stockholder of the Company, and no transfer of shares of Company Common Stock
issued and outstanding immediately prior to the Merger shall thereafter be made
on the stock transfer books of the Surviving Corporation.
1.12 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary
and unless otherwise provided by applicable Law, shares of Company Common Stock
that are owned by stockholders of the Company who have properly perfected their
rights of appraisal in accordance with the provisions of Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration, unless and until such stockholders shall have failed to
perfect or shall have effectively withdrawn or lost their rights of appraisal
under applicable law, but, instead, the holders thereof shall be entitled only
to such rights as are granted pursuant to Section 262 of the DGCL. If any such
holder shall have failed to perfect or shall have effectively withdrawn or lost
such right of appraisal, each share of Company Common Stock held by such
stockholder shall thereupon be deemed to have been converted into the right to
receive and become exchangeable for, as of the Effective Time, the Merger
Consideration, as provided in Section 1.9(b).
(b) The Company shall notify the Parent of any written demands
for appraisal with respect to any shares of Company Common Stock received by the
Company in accordance with Section 262 of the DGCL, and any withdrawals of such
written demands, and any other instruments served in connection with such
written demands pursuant to the DGCL. The Company shall give Parent the
opportunity to participate in all negotiations and proceedings with respect to
such demands for appraisal under the DGCL consistent with the obligations of the
Company thereunder, and shall keep Parent reasonably informed with respect to
such negotiations or proceedings. The Company shall not, except with the prior
written consent of the Parent, (x) voluntarily make any payment with respect to
any such demand for appraisal, (y) offer to settle or settle any such demand for
appraisal, or (z) waive any failure to timely deliver a written demand for
appraisal in accordance with the DGCL.
1.13 Stock Options and Purchase Plan.
(a) As soon as practicable following the date of this Agreement,
the Company shall take or cause to be taken such actions as are reasonably
required to ensure that (i) each holder (each, an "Optionee") of a Company Stock
Option that has not previously expired or been exercised in full as of or prior
to the Effective Time, whether vested or unvested (each such option, an
"Eligible Option"), shall have the right to irrevocably elect, no later than
immediately prior to the consummation of the Merger, to surrender following the
consummation of the Merger any Eligible Option then held by the Optionee in
exchange for the right to receive a cash payment equal to (x) the excess, if
15
any, of (A) the Merger Consideration over (B) the exercise price per share of
Company Common Stock subject to such Eligible Option, multiplied by (y) the
number of shares of Company Common Stock then issuable pursuant to the
unexercised portion of such Eligible Option, payable not later than five days
after the Effective Time, (ii) each Optionee shall have the right to purchase,
effective no later than immediately prior to the consummation of the Merger,
subject to the consummation of the Merger and in accordance with the terms of
the relevant plan or document, all or any part of the shares of Company Common
Stock subject to any Eligible Option held by the Optionee (that has not been
surrendered pursuant to (i) above), and each share of Company Common Stock so
purchased shall be converted, as of the Effective Time, into the right to
receive the Merger Consideration, all in accordance with Section 1.10 hereof,
and (iii) each Eligible Option (with respect to which an Optionee has not
exercised one of the rights set forth in subsection (i) or (ii) of this Section
1.13(a)) shall following the Merger confer upon the Optionee only the right to
receive upon exercise in accordance with the terms of the relevant plan or
document (including payment of the aggregate exercise price), for each share of
Company Common Stock that otherwise would be issuable pursuant to the
unexercised portion of such Eligible Option, the Merger Consideration.
(b) Prior to the Effective Time, the Company shall take or cause
to be taken such actions as are required to cause (i) the Company Stock Plans to
terminate as of the Effective Time, (ii) the provisions in any other Company
Benefit Plan providing for the issuance, transfer or grant of any shares of
capital stock of the Company or any interest in respect of any capital stock of
the Company to be terminated as of the Effective Time, and (iii) the exemption
set forth in Rule 16b-3(e) under the Exchange Act to be applicable to the
disposition of the Company Common Stock and Company Stock Options in or in
connection with the Merger as contemplated by this Agreement by all persons who
are officers or directors of the Company.
1.14 Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold, or cause to be deducted and withheld, from the
consideration payable pursuant to this Agreement to any holder of Company Common
Stock or Eligible Options such amounts as are required to be deducted and
withheld with respect to the making of such payment under the Code, or any other
provision of applicable state, local or foreign Tax Law. To the extent that
amounts are so deducted or withheld, such deducted and withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holders in
respect of which such deduction and withholding was made.
16
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger Sub, subject
to the exceptions disclosed in writing in the disclosure letter dated as of the
date hereof delivered to the Parent by the Company pursuant to, and as an
integral part of, this Agreement (the "Company Disclosure Letter"), as follows:
2.1 Organization, Standing and Corporate Power.
(a) Organization. Each of the Company and its Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction in which it is organized and is
qualified to do business as a foreign corporation or similar entity and in good
standing in the jurisdictions in which the ownership, leasing, or operation of
property or the conduct of its business requires its qualification as a foreign
corporation or similar entity, except where the failure so to qualify would not
have a Material Adverse Effect on the Company.
(b) Powers. Each of the Company and its Subsidiaries has the
requisite corporate or other entity power and authority to carry on its business
as it is now conducted.
(c) Certificate of Incorporations and Bylaws. Prior to the date
hereof, the Company has made available to the Parent complete and correct copies
of its certificate of incorporation and bylaws, as currently in effect.
2.2 Company Recommendation; Rights Agreement; Takeover Statutes.
(a) Recommendation. The board of directors of the Company, at a
meeting duly called and held, has (i) determined that each of the Offer, this
Agreement, and the Merger contemplated hereby is advisable and in the best
interests of the Company and its stockholders and is fair to the Company's
stockholders and (ii) resolved to make the Company Recommendation to the
Company's stockholders, and none of such determinations, approvals or
resolutions has been amended, rescinded, or modified as of the date of this
Agreement.
(b) Rights Agreement. Subject to the accuracy of the
representations and warranties contained in Sections 3.7 and 3.8 of this
Agreement, the Company and the board of directors of the Company have taken all
necessary action so that the approval, execution or consummation of the Offer,
this Agreement, the Stock Purchase Agreement and the Merger do not and will not
result in the ability of any Person to exercise any Right issued under the
Rights Agreement and do not and will not cause the Rights to separate from the
shares of Company Common Stock to which they are attached or to be triggered or
to become exercisable. The Company and the board of directors of the Company
have taken all actions necessary under the Rights Agreement so that neither the
execution of this Agreement or any amendments thereto, nor the consummation of
the Offer, the Stock Purchase Agreement or the Merger shall cause (i) Parent
and/or Merger Sub or their respective Affiliates or Associates to become an
Acquiring Person (as such terms are defined in the Rights Agreement) or (ii) a
Distribution Date, a Stock Acquisition Date, or a Triggering Event (as such
terms are defined in the Rights Agreement) to occur by reason of the approval,
execution, or consummation of this Agreement, the Offer, or the Merger.
17
(c) Takeover Law. Subject to the accuracy of the representations
and warranties contained in Sections 3.7 and 3.8 of this Agreement, the board of
directors of the Company has taken all actions required to be taken by it in
order to render the restrictions on business combinations contained in Section
203 of the DGCL inapplicable to the Offer, this Agreement, the Stock Purchase
Agreement and the Merger. No other state takeover, anti-takeover, moratorium,
fair price, interested stockholder, business combination or similar statute or
rule is applicable to the Offer, this Agreement, the Stock Purchase Agreement or
the Merger other than those that may be made applicable solely by reason of
Parent's or Merger Sub's (as opposed to the Company's or any of its
Subsidiaries') participation in the Offer or the Merger.
2.3 Subsidiaries. Section 2.3 of the Company Disclosure Letter sets forth a
true and complete list of each of the Company's Subsidiaries and the manner in
which the Company's ownership in such Subsidiary is held. Section 2.3 of the
Company Disclosure Letter lists all subsidiaries and divisions (it being
understood that a group of assets shall not be deemed to have been a "division"
unless the Company considered it to be such) of the Company owned and divested
by the Company since 1999 and the manner and to whom such subsidiary or division
was divested. Except as noted in Section 2.3 of the Company Disclosure Letter,
all of the outstanding shares of capital stock of, or other equity interests in,
each Subsidiary of the Company have been validly issued, are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of all pledges, claims, liens, charges, encumbrances, mortgages, security
interests or adverse claims of any kind or nature whatsoever (collectively,
"Liens") and free of any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests, except restrictions
arising under applicable securities laws. Other than the capital stock of, or
other equity interests in, its Subsidiaries, and other than securities held by
or through any Company Benefit Plan, the Company does not, directly or
indirectly, beneficially own any securities or other beneficial ownership
interests in any other entity.
2.4 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company
consists of (i) 8,000,000 shares of common stock, par value $1.00 per share, and
(ii) 100,000 shares of preferred stock, par value $1.00 per share, having such
rights and preferences as the Company's board of directors may designate. As of
the date hereof, 3,207,894 shares of the Company's common stock, par value $1.00
per share, are issued and outstanding; 502,415 shares of the Company's common
stock, par value $1.00 per share, are held in treasury; and no shares of the
Company's preferred stock, par value $1.00 per share, are outstanding. Section
2.4(a) of the Company Disclosure Letter sets forth all of the Company Stock
Options and the number of shares of Company Common Stock that are issuable in
respect of the Company Stock Options and the price at which each option is
exercisable.
(b) Issuance; Ownership. All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and not issued in violation of any preemptive rights. The Company
is not a party to any voting agreement with respect to the voting of any such
securities. Except for the Company Stock Options and Warrants, there are no
options, warrants, conversion rights or other rights to subscribe for or
purchase, or other contracts with respect to, any capital stock of the Company
or its Subsidiaries and there are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company or its Subsidiaries.
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(c) Voting Debt; Repurchase Obligations. As of the date hereof,
(i) no bonds, debentures, notes or other Indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) are issued or outstanding, and (ii) there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company.
2.5 Authorization; Enforceability. The execution and delivery by the
Company of this Agreement and the performance of this Agreement and consummation
of the Merger by the Company are within the corporate power and authority of the
Company and have been duly authorized by all necessary corporate action on the
part of the Company, subject, in the case of the Merger, to receipt of the
Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by each of the Parent and Merger Sub, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereafter in effect generally affecting the rights of creditors and subject to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.6 No Violation or Conflict. The execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement and consummation
of the Merger by the Company will not, except as disclosed in Section 2.6 of the
Company's Disclosure Letter (i) result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation under or to the loss
of a material benefit under or to the increase of obligations under any Material
Contract of the Company or its Subsidiaries, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries, (ii) result in any violation of any provision of the certificate
of incorporation or bylaws of the Company or the charter documents of its
Subsidiaries, (iii) violate any Existing Permits of the Company or its
Subsidiaries or any Law applicable to the Company or its Subsidiaries, other
than, in the case of clauses (i) and (iii), any such violations, defaults,
rights, losses or Liens that, individually and in the aggregate, would not (x)
have a Material Adverse Effect on the Company, (y) reasonably be expected to
significantly impair the ability of the Company to perform its obligations under
this Agreement or (z) reasonably be expected to prevent or materially delay the
consummation of the Merger.
2.7 Governmental Approvals. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement and consummation of
the Merger by the Company will not, require any consent of, or filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Exchange Act, the Securities Act and state
securities or "blue sky" Laws, (ii) for the filing of a certificate of merger as
required by the DGCL and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (iii) where
failure to obtain such Consents or make such filings or notifications would not
(x) have a Material Adverse Effect on the Company, (y) reasonably be expected to
significantly impair the ability of the Company to perform its obligations under
this Agreement or (z) reasonably be expected to prevent or materially delay the
consummation of the Merger, and (iv) as disclosed in Section 2.7 of the Company
Disclosure Letter.
2.8 SEC Documents. The Company has filed with the SEC all forms, reports,
19
schedules, statements and other documents (including exhibits and all other
information incorporated therein) required to be filed by it since September 30,
2002 (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein: (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (ii) complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act at the time
of such filing.
2.9 Financial Statements. (a) The Company's financial statements contained
in the Company SEC Documents comply in all respects with the applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and have been prepared in accordance with the applicable
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated therein). The
Company's financial statements fairly present, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof and the consolidated results of their operations and cash flows for
the periods indicated (subject, in the case of unaudited statements, to the
absence of footnotes and year-end adjustments).
(b) The unaudited balance sheet, results of operations and
statement of cash flows of the Company for the year ended September 2004, fairly
present, in all material respects, the consolidated financial position of the
Company and its Subsidiaries as of the date thereof and the consolidated results
of their operations and cash flows for the periods indicated (subject to the
absence of footnotes and year-end adjustments). The standard cost information
for the Company's products delivered to Parent prior to the execution of this
Agreement were derived from the Company's accounting books and records
maintained in the ordinary course of the Company's business, were prepared in
accordance with the Company's past practice with respect to similar information
and, on that basis, accurately reflect the cost to manufacture such products.
(c) The Company and its Subsidiaries have no Liabilities having a
value individually or in the aggregate in excess of $400,000, except, (i) to the
extent reflected on the September 30, 2004 balance sheet (including the draft
footnotes to the September 30, 2004 balance sheet delivered to Parent prior to
the execution of this Agreement), (ii) Liabilities incurred in the normal and
ordinary course of business of the Company since September 30, 2004, or (iii)
Liabilities disclosed in Section 2.9(c) of the Company Disclosure Letter. For
purposes of this Section 2.9(c), the term "Liabilities" means liabilities of any
kind or nature, whether known or unknown, absolute or contingent, other than
Liabilities otherwise disclosed in any other representation or warranty made in
this Agreement or in any other section of the Company Disclosure Letter.
2.10 Information Supplied; Content of Schedule 14D-9 and Proxy
Statement.
(a) Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents will, on the date filed with the SEC, or on the date first
published or sent to the Company's stockholders, or, if shares of Company Common
Stock are accepted for purchase pursuant to the Offer, on the date that the
20
Offer expires, or at the time of any amendment or supplement of the Offer
Documents, in each case, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Content of Schedule 14D-9 and Proxy Statement. The Schedule
14D-9, on the date it is filed with the SEC and, if shares of Company Common
Stock are accepted for purchase pursuant to the Offer, on the date that the
Offer expires, and at the time of any amendment or supplement of the Schedule
14D-9 will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub. The Proxy Statement, on the date
it is mailed to the stockholders of the Company, at the time of the Special
Meeting, and at the time of any amendment or supplement thereof will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Merger Sub. The Schedule 14D-9 and the Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act.
2.11 Absence of Certain Changes or Events. Except for changes set forth in
Section 2.11 of the Company Disclosure Letter, since June 30, 2004, the Company
and its Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practices, and since such date (i) there has not been any
Material Adverse Change to the Company and (ii) no action or event listed in
Section 4.1 has occurred.
2.12 Legal Proceedings. (a) Except as disclosed in Section 2.12(a) of the
Company Disclosure Letter, (i) there are no suits, actions, proceedings,
investigations, arbitrations or claims (collectively, "Legal Proceedings")
pending or threatened in writing against or affecting the Company or any of its
Subsidiaries that, individually or in the aggregate, would, if decided adversely
to the Company, have a Material Adverse Effect on the Company; and (ii) there
are no material judgments, settlements, decrees, injunctions, rules or orders of
any Governmental Entity or arbitrator outstanding against the Company or any of
its Subsidiaries that would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(b) The Company has delivered to Parent a complete list of all
actions pending as of the date hereof and of which the Company has received
notice, against the Company or any of its current or former Subsidiaries or
divisions alleging injury from exposure to silica, asbestos or mixed dust, which
list includes the name of the plaintiff, date of filing, and court in which each
case is pending. To date, the Company's out of pocket expenditure with respect
to the defense of all such claims has been less than $5,000, it being understood
that such amount does not include (i) fees paid to the Company's registered
agents in connection with service of process or (ii) fees and related expenses
paid to Kleinbard, Bell & Brecker LLP.
(c) The Company has made available to Parent all material
information in the Company's possession concerning the corporate history of New
Castle Refractories from the time of its acquisition in July 1963 by the Company
until its disposition on July 31, 2003.
21
2.13 Existing Permits and Violations of Law. The Company and each of its
Subsidiaries have all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities (the "Existing
Permits") required by Law which are material for the conduct of the business of
the Company and its Subsidiaries as currently conducted. The business of the
Company and its Subsidiaries is being conducted in material compliance with
applicable Law. No Governmental Entity has notified the Company or any of its
Subsidiaries of its intention to conduct an investigation or review with respect
to the Company or any of its Subsidiaries.
2.14 Environmental. Except as set forth in Section 2.14 of the Company
Disclosure Letter, (i) the Company and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws, (ii) the Company and
its Subsidiaries have obtained, and are in compliance in all material respects
with, all material permits, licenses, authorizations, registrations and other
governmental consents required by applicable Environmental Laws, (iii) neither
the Company nor any of its Subsidiaries has within the last five years received
any written communication from a governmental authority or third party that
alleges that the Company or any of its Subsidiaries is not in compliance with
applicable Environmental Law, (iv) neither the Company nor any of its
Subsidiaries has received any written communication from a governmental
authority or third party that alleges that the Company or any of its current or
former Subsidiaries is a potentially responsible party under the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, or
subject to corrective actions requirements under the Resource Conservation and
Recovery Act, or other similar laws of any state or country, (v) neither the
Company nor its Subsidiaries have received notice that any claims for personal
injury or property damage relating to Hazardous Materials have been asserted
against the Company or any of its Subsidiaries, (vi) neither the Company nor any
of its Subsidiaries has assumed or otherwise agreed to be responsible for any
liabilities arising under any Environmental Law, and (vii) the Company has
provided to Parent and Merger Sub copies of all legal opinions, environmental
reports and documents listed or referred to in Section 2.14 of the Company
Disclosure Letter. The representations and warranties in this Section 2.14 are
the Company's exclusive representations and warranties relating to environmental
matters.
2.15 Real Estate. All real property owned or leased by the Company or its
Subsidiaries is listed in Section 2.15 of the Company Disclosure Letter (the
"Real Estate"). The Company has valid fee simple title to or valid leaseholder
interests in (as the case may be) its Real Estate, free and clear of any Liens,
and the Real Estate is not subject to any leases, tenancies, encumbrances or
encroachments of any kind, excluding Permitted Liens, except as set forth in
Section 2.15 of the Company Disclosure Letter.
2.16 Title to Tangible Assets. Each of the Company and its Subsidiaries has
valid title to or leases each of the tangible assets used in the conduct of, and
that are material to, the business of the Company and its Subsidiaries as
presently conducted, free and clear of any Liens, except for Permitted Liens or
Liens listed on Section 2.16 of the Company Disclosure Letter.
2.17 Intellectual Property.
(a) The Company and its Subsidiaries have such ownership of or
such rights by license or otherwise in all patents and patent applications, mask
works, trademarks and service marks, trademark and service mark registrations
and applications, trade names, logos, brands, titles, copyrights, subsidiary
rights, copyright registrations and applications, trade secrets, names and
22
likenesses, know-how, proprietary processes, compositions of matter, formulae,
designs, computer software programs and other proprietary rights (collectively,
the "Intellectual Property Rights") as are necessary to conduct and permit the
conduct of the business of the Company and its Subsidiaries as currently
conducted, except where the failure to have such Intellectual Property Rights,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(b) Section 2.17(b) of the Company Disclosure Letter sets forth a
list of all (i) registered or applied for Intellectual Property Rights owned by
the Company and (ii) material Intellectual Property Rights licensed or otherwise
used by the Company in the conduct of its business.
(c) The manufacture, advertising, sale, distribution, promotion,
or offering of any products or services material to the Company now being
manufactured, offered or sold by the Company did not and does not infringe the
Intellectual Property Rights of others. Except as set forth on Section 2.17(c)
of the Company Disclosure Letter, during the period from November 1, 2003 to the
date of this Agreement, no third party has notified the Company or its
Subsidiaries in writing of any claim that any activities of the Company infringe
or constitute the unauthorized use of the Intellectual Property Rights of any
third party.
(d) Except as disclosed in Section 2.17(d) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
or bound by any Contract (i) pursuant to which the Company or any of its
Subsidiaries has assigned, transferred, licensed or granted to a third party any
Intellectual Property Right on an exclusive basis or agreed to forego using or
asserting rights to any Intellectual Property Rights or (ii) that contains any
"most favored nation" pricing provision in favor of a third-party in connection
with any Intellectual Property Right.
(e) Except as disclosed in Section 2.17(e) of the Company
Disclosure Letter, no third party is infringing on any material Intellectual
Property Rights of the Company or its Subsidiaries.
(f) The Company owns or has the right to use all software used in
the conduct of its business.
(g) To the Company's Knowledge, the Intellectual Property Rights
of the Company and its Subsidiaries that are registered in any jurisdictions are
not invalid or unenforceable, and those Intellectual Property Rights
constituting trade secrets used in the conduct of the business of the Company
and its Subsidiaries are non-public and have not been disclosed to third parties
without commercially reasonable restrictions on further disclosure.
2.18 Agreements; Documents; Minute Books.
(a) Material Contracts. Section 2.18(a) of the Company Disclosure
Letter sets forth the following written Contracts to which the Company or any of
its Subsidiaries is a party (the "Material Contracts"):
(i) any Contract (or group of related Contracts) not
terminable upon notice within one hundred eighty (180) days (other than purchase
contracts and orders for inventory in the ordinary course of business consistent
23
with past practice) that (A) contemplates or involves the payment or delivery of
cash or other consideration in an amount or having a value in excess of $100,000
in the aggregate in any twelve month period, or (B) contemplates or involves the
furnishing, performance, or receipt of services or the delivery of products or
materials by or to the Company or any of its Subsidiaries having a value in
excess of $100,000 in the aggregate in any twelve month period;
(ii) any Contract under which the consequences of a default
or termination would have a Material Adverse Effect on the Company;
(iii) any Contract (or group of related Contracts) for the
lease of personal property from or to third parties providing (A) for lease
payments in excess of $50,000 per annum, or (B) for a term of more than one
year;
(iv) any Contract establishing a partnership or joint
venture involving the Company or any of its Subsidiaries;
(v) any Contract (or group of related Contracts) under which
the Company or any of its Subsidiaries had a Lien imposed on any of their
assets;
(vi) any Contract for the sale of any asset or related group
of assets of the Company or any of its Subsidiaries (other than sales in the
ordinary course of business) having a sales value in excess of $100,000;
(vii) any Contract by which the Company has agreed to
indemnify and hold harmless any Person for any material liability or any
liability that would be material to the Company if it became required to
indemnify and hold harmless any such Person;
(viii) any Contract allowing an employee to terminate his
employment with the Company and receive payments from the Company upon a change
in control; and
(ix) any Contract with any consultant or independent
contractor for professional services having a remaining term of at least one
year and requiring payments of base salary or fee in excess of $75,000 per year
or aggregate payments of base salary in excess of $100,000.
Other than as set forth in Section 2.18(a) of the Company Disclosure Letter, the
Company is not party to any Material Contract. None of the Company or any of its
Subsidiaries is in violation of or in default under (nor does there exist any
condition that with the passage of time or the giving of notice or both would
cause such a violation of or default under) any Material Contract to which it is
a party or by which it or any of its properties or assets is bound, except for
violations or defaults that have not and would not, individually or in the
aggregate, result in a Material Adverse Effect on the Company. Each Material
Contract is in full force and effect, and is a legal, valid and binding
obligation of the Company or one of its Subsidiaries, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereafter in effect generally affecting the rights of creditors and subject to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Neither the Company nor any of
24
its Subsidiaries is a party to any oral contract that, if reduced to written
form, would be required to be listed in 2.18(a) of the Company Disclosure Letter
under the terms of this Section 2.18(a).
(b) Debt Instruments. Set forth in Section 2.18(b) of the Company
Disclosure Letter is (i) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments under which the
Company or any of its Subsidiaries has incurred, assumed, or guaranteed any
Indebtedness in excess of $200,000, and (ii) the respective principal amounts
currently outstanding thereunder.
(c) Guarantees. Except as set forth in Section 2.18(c) of the
Company Disclosure Letter and other than guarantees by Subsidiaries of the
Company of the Company's obligations or liabilities, none of the material
obligations or liabilities of the Company or any of its Subsidiaries is
guaranteed by any Person. The Company has not guaranteed the obligations of any
Person other than any current Subsidiary.
(d) Related Party Agreements. Except as disclosed in Section
2.18(d) of the Company Disclosure Letter, there are no outstanding loans or
advances from the Company or any of its Subsidiaries currently owed by
directors, officers, employees, or stockholders of the Company or any of its
Subsidiaries, or by any Affiliate of any director or officer of the Company or
any of its Subsidiaries, other than advances in the ordinary and usual course of
business to officers and employees for reimbursable business expenses. The
Company has possession of the stock certificates securing the loans made to the
Company's directors, officers, and employees described in Section 2.18(d) of the
Company Disclosure Letter.
(e) Documents Provided. All documents listed or described in the
Company Disclosure Letter have been previously furnished or made available to
Parent or its representatives. All such documents furnished to Parent are
correct and complete copies, and there are no amendments or modifications
thereto, except as expressly noted in the Company Disclosure Letter.
(f) Minute Books. The minute books of the Company and each of its
Subsidiaries contain accurate records of all corporate actions taken by the
directors and stockholders of the Company and each of its Subsidiaries since
January 1, 2001.
2.19 Insurance. Section 2.19 of the Company Disclosure Letter sets forth a
list of all current material policies or binders of fire, liability, product
liability, workmen's compensation, vehicular, directors' and officers' and other
insurance held by or on behalf of the Company or its Subsidiaries. Such policies
and binders are in full force and effect, are reasonably adequate for the
businesses engaged in by the Company or any of its Subsidiaries and are in
conformity in all material respects with the requirements of all Material
Contracts to which the Company or any of its Subsidiaries is a party and are
valid and enforceable in accordance with their terms. Neither the Company nor
any of its Subsidiaries is in default with respect to any provision contained in
any such policy or binder nor has the Company or any of its Subsidiaries failed
to give any notice or present any claim under any such policy or binder in due
and timely fashion. Except as set forth in Section 2.19 of the Company
Disclosure Letter, there are no outstanding unpaid claims under any such policy
or binder. Neither the Company nor any of its Subsidiaries has received notice
of cancellation or non-renewal of any such policy or binder. The Company has
given proper notice to its insurer of all claims that individually or in the
aggregate are material to the Company and its Subsidiaries. Except as disclosed
25
in Section 2.19 of the Company Disclosure Letter, the Company has not received
any notice from its insurers disclaiming coverage for any material claim of
which it has provided notice to its insurers.
2.20 Benefit Plans.
(a) Company Benefit Plans. Section 2.20(a) of the Company
Disclosure Letter contains a complete list of all "employee benefit plans" as
defined in Section 3(3) of ERISA (the "Company Employee Benefit Plans"),
"employee pension benefit plans" as defined in Section 3(2) of ERISA (the
"Company Employee Pension Plans"), and "employee welfare benefit plans" as
defined in Section 3(1) of ERISA (together with the Company Employee Benefit
Plans and the Company Pension Plans, the "Company Benefit Plans"), sponsored,
maintained or contributed to, or required to be contributed to, by the Company.
All Company Benefit Plans have been administered in compliance in all material
respects with their terms and the applicable provisions of ERISA and the Code.
With respect to each such Company Benefit Plan, (i) each Company Benefit Plan
which is intended to be qualified within the meaning of Section 401(a) of the
Code operates in all material respects in accordance with the requirements for
such qualifications and is the subject of a favorable determination letter as to
its qualification, and to the Company's Knowledge, nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification; (ii) all contributions, premiums or other payments
required under the terms of the Company Benefit Plans or Other Plans (as defined
below) or under applicable Law have been made within the time required by Law
and the terms of the Company Benefit Plans or Other Plans; (iii) there have been
no "prohibited transactions" (as described in Section 4975 of the Code or in
Part 4 of Subtitle B of Title I of ERISA) with respect to any Company Benefit
Plan; and (iv) there are no inquiries, proceedings, claims or suits pending or,
to the Company's Knowledge, threatened by any Governmental Entity or by any
participant or beneficiary against any of the Company Benefit Plans, the assets
of any of the trusts under such Company Benefit Plans or the Company Benefit
Plan sponsor or the Company Benefit Plan administrator, or against any fiduciary
of any of such Company Benefit Plans with respect to the design or operation of
the Company Benefit Plans, other than routine claims for benefits.
(b) Multiemployer Plans. Neither the Company nor any entity
required to be aggregated with the Company under Section 414(b), (c), (m), or
(o) of the Code ("ERISA Affiliate") contributes (or is obligated to contribute)
to a "multiemployer plan" as such term is defined in ERISA Section 3(37) and,
except as set forth in Section 2.20(b) of the Company Disclosure Letter, neither
the Company nor any ERISA Affiliate has contributed or been obligated to
contribute to such a plan during the six-year period ending on the Closing Date.
(c) Unsatisfied Liabilities. There are no unsatisfied liabilities
to participants, the IRS, the United States Department of Labor ("DOL"), the
Pension Benefit Guaranty Corporation ("PBGC") or to any other Person that have
been incurred as a result of the termination of any Company Benefit Plan
maintained by the Company or any ERISA Affiliate since January 1, 2001. With
respect to each Company Benefit Plan maintained by the Company or any ERISA
Affiliate which is subject to the minimum funding requirements of Part 3 of
Subtitle B of Title I of ERISA or subject to Section 412 of the Code, (i) there
does not exist any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code, whether or not waived; (ii) no
"reportable event," as defined in Section 4043(c) of ERISA for which notice has
26
not been waived by the regulations issued under such Section has occurred; and
(iii) all premiums to the PBGC have been timely paid in full.
(d) Consummation of the Transactions. Except as disclosed in
Section 2.20(d) of the Company Disclosure Letter, neither the execution of this
Agreement nor the consummation of the Merger will, either alone or in
combination with another event, (i) entitle any current or former employee,
officer, director, consultant or agent of the Company to severance pay,
unemployment compensation or any other payment, or (ii) accelerate the time of
payment or vesting of, or increase the amount of, compensation or benefits due
to any such individual.
(e) Continuing Coverage. The Company and its ERISA Affiliates are
in compliance in all material respects with respect to the "continuation
coverage requirement" of "group health plans" as set forth in Section 4980B of
the Code and Part 6 of Subtitle B of Title I of ERISA (sometimes referred to as
"COBRA") with respect to any Company Benefit Plan maintained by the Company or
any ERISA Affiliate to which such continuation coverage requirements apply. The
Company and its ERISA Affiliates are in compliance in all material respects with
respect to the health insurance obligations imposed by Section 9801 of the Code
and Part 7 of Subtitle B of Title I of ERISA with respect to any Company Benefit
Plan to which such insurance obligations apply. Neither the Company nor any
ERISA Affiliate has contributed to a nonconforming group health plan (as defined
in Section 5000(c) of the Code) and no ERISA Affiliate has incurred a Tax under
Section 5000(a) of the Code that is or is reasonably expected to become a
liability of the Company or an ERISA Affiliate. Other than such health
continuation coverage as required by Section 4980B of the Code or Part 6 of
Title I of ERISA and except as disclosed in Section 2.20(e) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries maintains
retiree life or retiree health plans providing for continuing coverage for any
employee or any beneficiary of an employee after the employee's termination of
employment.
(f) Other Plans. Section 2.20(f) to the Company Disclosure Letter
lists each other employee benefit plan, program or arrangement of any kind
maintained by the Company or any of its Subsidiaries that is not a Company
Benefit Plan (the "Other Plans") to which the Company contributes or has any
obligation to contribute, or with respect to which the Company has any liability
or potential liability. Each Other Plan (and each related trust, insurance
contract, or fund) of the Company has been maintained, funded and administered
in all material respects in accordance with the terms of such Other Plan and the
terms of any applicable collective bargaining agreement and complies in form and
in operation in all material respects with the requirements of all applicable
Laws.
(g) Title IV Plans. Except as disclosed in Section 2.20(g) of the
Company Disclosure Letter, neither the Company nor any ERISA Affiliate
maintains, contributes to, has any obligation to contribute to, or has any
liability, whether direct or indirect (including withdrawal liability as defined
in Section 4201 of ERISA) under or with respect to any plan covered by Title IV
of ERISA, nor has the Company nor any ERISA Affiliate maintained, contributed
to, had any obligation to contribute to, or had any liability, whether direct or
indirect (including withdrawal liability as defined in Section 4201 of ERISA)
under or with respect to any plan covered by Title IV of ERISA in the past seven
years. Except as disclosed in Section 2.20(g) of the Company Disclosure Letter,
no Company Benefit Plan of the Company or any ERISA Affiliate has been
completely or partially terminated under Title IV of ERISA; nor has any Plan
27
covered by Title IV of ERISA been the subject of a reportable event (as defined
in ERISA and PBGC regulations) in the past seven years. The Company and any
ERISA Affiliates have not incurred, and to the Company's Knowledge do not have
any reason to expect that they will incur, any liability to the PBGC or any
other violation under Title IV of ERISA (including any withdrawal liability as
defined in ERISA ss.4201) or under the Code with respect to any Plan or under
COBRA. There are no Liens with respect to any Plan, including Liens pursuant to
Sections 302 and 4068 of ERISA and Section 412 of the Code.
(h) International Plans. Each compensation and benefit plan
required to be maintained or contributed to by the Law or applicable rule of the
relevant jurisdiction outside of the United States (the "Company International
Plans") is listed in Section 2.20(h) of the Company Disclosure Letter. As
regards each such Company International Plan, unless disclosed in Section
2.20(h) of the Company Disclosure Letter, (i) each of the Company International
Plans is in compliance in all material respects with the provisions of the Laws
of each jurisdiction in which each such Company International Plan is
maintained, to the extent those Laws are applicable to the Company International
Plans; (ii) all contributions to, and payments from, the Company International
Plans which may have been required to be made in accordance with the terms of
any such Company International Plan, and, when applicable, the Law of the
jurisdiction in which such Company International Plan is maintained, have been
timely made or shall be made by the Closing Date, and all such contributions to
the Company International Plans, and all payments under the Company
International Plans, for any period ending before the Closing Date that are not
yet, but will be, required to be made, are reflected as an accrued liability in
the most recent audited financial statements in the Company SEC Documents; (iii)
there are no pending investigations by any Governmental Entity involving the
Company International Plans of which the Company has received notice, and no
pending claims (except for claims for benefits payable in the normal operation
of the Company International Plans), suits or proceedings against any Company
International Plan or asserting in writing any rights or claims to benefits
under any Company International Plan; and (iv) the consummation of the Merger
will not by itself create or otherwise result in any liability with respect to
any Company International Plan, other than the triggering of payment to
participants.
2.21 Labor Matters.
(a) Agreements; Employee Relations. Except as set forth in
Section 2.21(a) of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries is a party to, or bound by, any collective bargaining agreement
with employees or other Material Contract with a labor union or labor
organization. There are no strikes or lockouts by or with respect to any
employee of the Company or any of its Subsidiaries. To the Knowledge of the
Company, there is no union organizing effort pending or threatened against the
Company or any of its Subsidiaries.
(b) Proceedings. Except as disclosed in Section 2.21(b) of the
Company Disclosure Letter, there is no litigation pending or threatened in
writing against the Company or any of its Subsidiaries, at law or in equity,
alleging a violation of any applicable Law, rule or regulation respecting
employment and employment practices, terms and conditions of employment and
wages and hours, or unfair labor practice. Except as disclosed in Section
2.21(b) of the Company Disclosure Letter, there is no unfair labor practice or
labor arbitration proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries relating to their
28
business. Neither the Company nor any of its Subsidiaries has any liabilities
under the Worker Adjustment and Retraining Notification Act as a result of any
action taken by the Company.
(c) Compliance with Laws. The Company and its Subsidiaries are in
compliance in all material respects with all applicable Laws respecting (i)
employment and employment practices, (ii) terms and conditions of employment and
wages and hours, and (iii) unfair labor practices. All of the Company's products
were produced in compliance in all material respects with all applicable
requirements of (x) Sections 6, 7 and 12 of the Fair Labor Standards Act, as
amended (the "FLSA"), and all regulations and orders of the DOL issued under
Section 14 thereof; (y) state and local Laws pertaining to child labor, minimum
wage and overtime compensation; and (z) with respect to merchandise (including
components thereof) manufactured outside the United States, the wage and hour
Laws of the country of manufacture and without the use of child, prison or slave
labor. The Company has in effect a program of monitoring any sub-contractors who
performed work for it in connection with the production of merchandise for
compliance with the FLSA and comparable state, local and foreign Laws.
(d) Current Compensation. Section 2.21(d) of the Company
Disclosure Letter sets forth the current salary and benefits of the executive
officers listed in Section 2.21(d) of the Company Disclosure Letter.
2.22 Taxes.
(a) Tax Returns. For all years for which the applicable statutory
period of limitations has not expired, the Company and each of its Subsidiaries
have filed all material Tax Returns (including, but not limited to, income,
franchise, sales, payroll, employee withholding and social security and
unemployment) which were required to be filed by them and all such returns are
complete and correct in all material respects, or requests for extensions to
file such Tax Returns have been timely filed, granted and have not expired. The
Company and each of its Subsidiaries have paid (or caused to be paid) all Taxes
shown as due on such Tax Returns. The most recent financial statements contained
in Company SEC Documents reflect an adequate reserve (in addition to any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) for all Taxes not yet due and payable by the Company and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements.
(b) Deliveries. The Company has made available to Parent correct
and complete copies of all Tax Returns and Tax reports of the Company filed for
all periods not barred by the applicable statute of limitations, through the
date hereof.
(c) Audits. To the Company's Knowledge, no Tax Return of the
Company or any of its Subsidiaries is under audit or examination by any Taxing
authority, and no written notice of such an audit or examination has been
received by the Company or any of its Subsidiaries. There is no material
deficiency, refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing by the Company or any of its Subsidiaries.
Except as set forth in Section 2.22(c) of the Company Disclosure Letter, the
federal income Tax Returns of the Company and each of its Subsidiaries
consolidated in such Tax Returns have been either examined by and settled with
the IRS or closed by virtue of the applicable statute of limitations, and no
29
requests for waivers of the time to assess any such Taxes are pending.
(d) Liens. There are no Tax Liens upon any assets or properties
of the Company or any of its Subsidiaries necessary for the conduct of their
respective businesses as currently conducted, except for Liens for current Taxes
not yet due and payable and except for such claims which, individually or in the
aggregate, do not exceed $200,000.
(e) Income After the Effective Time. Except as disclosed in
Section 2.22(e) of the Company Disclosure Letter, for federal income tax
purposes, neither the Company nor any of its Subsidiaries will be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued (for purposes of the financial statements of
the Company included in Company SEC Documents) in a prior taxable period but was
not recognized for tax purposes in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or for any other reason.
2.23 Vote Required. If the Merger is not approved pursuant to Section 253
of the DGCL as provided in Section 1.8(a) hereof, then subject to the accuracy
of the representations and warranties of Parent and Merger Sub in Sections 3.7
and 3.8 of this Agreement, following consummation of the Offer, the affirmative
vote or consent of the holders of not less than 66-2/3 percent of the voting
power of all outstanding shares of Company Common Stock entitled to vote with
respect to the Merger in favor of the Merger (the "Company Stockholder
Approval") is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the Merger.
2.24 Brokers' and Finders' Fees. Except as described in Section 2.24 of the
Company Disclosure Letter, the Company has not incurred any brokers', finders',
investment bankers' or any similar fee in connection with the Offer or the
Merger. Prior to the date of this Agreement, the Company has made available to
the Parent correct and complete copies of all agreements under which any such
fees are payable and all indemnification and other agreements related to the
engagement of the Persons to whom such fees are payable.
2.25 Fairness Opinion. The Company has received the written opinion of
Sheldrick, McGehee & Kohler, Inc. to the effect that, as of the date of this
Agreement, based upon and subject to the assumptions and limitations set forth
in such opinion, the cash consideration to be received in the Offer and the
Merger by the Company's stockholders (other than Parent and its Affiliates) is
fair from a financial point of view to such stockholders.
2.26 Interests of Officers and Directors. None of the officers or directors
of the Company or any of its Subsidiaries has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company or any of its Subsidiaries, except for the normal rights
of a stockholder and rights under the Company Benefit Plans and the Company
Stock Options.
2.27 Absence of Questionable Payments. Neither the Company nor any of its
Subsidiaries nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries, has used any corporate or
other funds for unlawful contributions, payments, gifts, or entertainment, or
made any unlawful expenditures relating to political activity to government
30
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Section 30A of the Exchange Act. Neither the Company nor
any of its Subsidiaries nor, to the Company's Knowledge, any current director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
2.28 Anti-Dumping Notification. The Company received notification (the
"Anti-Dumping Notification") dated November 26, 2004 from the United States
Customs and Border Protection that the Company would receive, within fifteen
(15) days of the notice, a check in the amount of $1,113,853.28 in satisfaction
of its "Continued Dumping and Subsidiary Offset Claim." The Company has received
no notice that amends, modifies or supersedes the Anti-Dumping Notification.
ARTICLE III.
REPRESENTATION AND WARRANTIES OF PARENT AND MERGER SUB
The Parent and the Merger Sub jointly and severally represent and warrant
to the Company as follows:
3.1 Organization, Standing and Corporate Power. Each of the Parent and the
Merger Sub is a corporation or other entity duly organized, validly existing and
in good standing under the Laws of its jurisdiction of organization. Each of the
Parent and Merger Sub is qualified to do business as a foreign corporation or
other entity and is in good standing in the jurisdictions in which the
ownership, leasing, or operation of its property or the conduct of its business
requires its qualification as a foreign corporation or other entity, and has all
requisite corporate or other entity power and authority to carry on its business
as now being conducted, except where the failure to be so qualified and in good
standing or to have such power and authority would not reasonably be expected to
impair the ability of the Parent or Merger Sub to perform its obligations under
this Agreement.
3.2 Authorization; Enforceability. The execution and delivery of this
Agreement by each of the Parent and the Merger Sub and the performance of this
Agreement and consummation of the Offer and the Merger by each of Parent and
Merger Sub are within the respective corporate or other entity power and
authority of each of Parent and Merger Sub, and have been duly authorized by all
necessary entity action on the part of the Parent and Merger Sub. This Agreement
has been duly executed and delivered by each of the Parent and Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligation of each of the Parent and
Merger Sub, enforceable against each of them in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in effect generally
affecting the rights of creditors and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.3 No Violation or Conflict. The execution and delivery of this Agreement
by each of the Parent and Merger Sub does not, and the performance of this
Agreement and consummation of the Offer and the Merger by each of the Parent and
Merger Sub will not: (i) result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation under or to the loss of a
material benefit under, or to the increase of obligations under any Contract of
the Parent or Merger Sub, or result in the creation of any Lien upon any of the
properties or assets of the Parent or Merger Sub, (ii) result in any violation
31
of any provision of the certificate of incorporation or the bylaws or similar
organizational documents of the Parent or Merger Sub, (iii) violate any Existing
Permits of the Parent or Merger Sub or any Law applicable to the Parent or the
Merger Sub, other than, in the case of clauses (i) and (iii), any such
violations, defaults, rights, losses or Liens that, individually and in the
aggregate, would not (y) significantly impair the ability of the Parent or the
Merger Sub to perform its obligations under this Agreement or (z) prevent or
materially delay the consummation of the Offer or the Merger.
3.4 Governmental Approvals. The execution and delivery of this Agreement by
each of the Parent and Merger Sub do not, and the performance of this Agreement
and consummation of the Offer and the Merger by each of the Parent and Merger
Sub will not, require any consent of, or filing with or notification to, any
Governmental Entity, except for (i) applicable requirements, if any, of the
Exchange Act, the Securities Act and state securities or "blue sky" Laws, (ii)
filing of a certificate of merger as required by the DGCL and appropriate
documents with the relevant authorities of other states in which the Parent is
qualified to do business, and (iii) where failure to obtain such consents or
make such filings or notifications is not reasonably likely to (y) impair the
ability of the Parent or Merger Sub to perform its obligations under this
Agreement, or (z) prevent or materially delay the consummation of the Offer or
the Merger.
3.5 Information Supplied. None of the information supplied or to be
supplied by the Parent or Merger Sub for inclusion or incorporation by reference
in the Schedule 14D-9 (including, without limitation, all information required
by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder) will, at the
time it is filed with the SEC or, if shares of Company Common Stock are accepted
for purchase pursuant to the Offer, on the date that the Offer expires, or at
the time of any amendment or supplement thereof, in each case, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by the Parent or Merger Sub for inclusion
or incorporation by reference in the Proxy Statement will, at the time it is
filed with the SEC, at the time it is mailed to the Company's stockholders, at
the time of the Special Meeting, or at the time of any amendment or supplement
thereof, in each case, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
3.6 Information in the Offer Documents. The Offer Documents will comply as
to form in all material respects with the provisions of applicable federal
securities Laws and, on the date filed with the SEC, on the date first published
or sent or given to the Company's stockholders, and, if shares of Company Common
Stock are accepted for purchase pursuant to the Offer, on the date that the
Offer expires, and at the time of any amendment or supplement of the Offer
Documents, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by Parent or Merger
Sub with respect to information furnished by the Company expressly for inclusion
in the Offer Documents.
32
3.7 Ownership of Capital Stock of the Company. As of the date of this
Agreement and prior to consummation of the Offer, none of Parent or Merger Sub
or any of their respective Affiliates or Associates (i) owns or will own of
record or beneficially, directly or indirectly (within the meaning of the
general rules and regulations promulgated under the Exchange Act), or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in the case of either clause (i) or
(ii), shares of capital stock of the Company which exceed two percent (2%) of
the Company Common Stock, other than shares to be sold to Merger Sub pursuant to
the Stock Purchase Agreement.
3.8 Interested Stockholder. Immediately prior to the time of the actions of
the Company's board of directors described in Section 2.2(c) and at all times
during the preceding three years, neither the Parent nor Merger Sub (nor any of
their Affiliates or Associates, as those terms are defined in Section 203 of the
DGCL) is or has been an Interested Stockholder of the Company (within the
meaning of Section 203 of the DGCL). No other state takeover, anti-takeover,
moratorium, fair price, interested stockholder, business combination or similar
statute or rule is applicable to this Agreement, the Offer, or the Merger other
than those that may be made applicable solely by reason of the Company's or any
of its Subsidiaries' (as opposed to Parent's or Merger Sub's or any of their
Affiliates') participation in the Offer or the Merger.
3.9 Legal Proceedings. There are no Legal Proceedings pending or, to the
knowledge of the Parent or Merger Sub, threatened against or affecting the
Parent or any of its Subsidiaries that, individually or in the aggregate, would,
if decided adversely to the Parent or its Subsidiaries, significantly impair the
ability of Parent or Merger Sub to perform its obligations under this Agreement
or materially adversely affect or prevent or materially delay consummation of
the Offer or the Merger, nor is there any judgment, settlement, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Parent or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to significantly impair the ability of
Parent or Merger Sub to perform its obligations under this Agreement or
materially adversely affect or prevent or materially delay consummation of the
Offer or the Merger.
3.10 Limited Operations of Merger Sub. Merger Sub was formed in 2004 solely
for the purpose of engaging in the Offer and the Merger. Merger Sub has not
engaged in any other business activities. Except for (i) obligations or
liabilities incurred in connection with its organization, the Offer, and the
Merger and (ii) this Agreement and any other agreements and arrangements
contemplated hereby or entered into in furtherance hereof, Merger Sub has not
incurred any material obligations or liabilities or engaged in any business
activities.
ARTICLE IV.
COVENANTS
4.1 Conduct of Business by Company. Except as otherwise expressly
contemplated by this Agreement or as consented to in writing by the Parent,
during the period from the date of this Agreement to the earliest of (a) the
termination of this Agreement in accordance with Article VI, (b) the time that
Merger Sub's designees are elected or appointed to the Company's Board of
Directors pursuant to Section 1.2(c), or (c) the Effective Time, the Company
shall, and shall cause its Subsidiaries to, carry on their respective businesses
only in the ordinary course consistent with past practice and in compliance in
all material respects with all applicable Laws and regulations and, to the
extent consistent therewith, use commercially reasonable efforts to preserve
33
intact their current business organizations, use commercially reasonable efforts
to keep available the services of their current officers and other key employees
and preserve their relationships with those Persons having business dealings
with them. Without limiting the generality of the foregoing (but subject to the
above exceptions), during the period from the date of this Agreement to the
earlier of (a) the termination of this Agreement in accordance with Article VI
or (b) the Effective Time, the Company shall not, and shall not permit any of
its Subsidiaries to:
(a) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly-owned Subsidiary of the Company to
its parent, (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock, property or otherwise) in respect of, any
of its capital stock, (ii) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (iii) purchase,
redeem or otherwise acquire, directly or indirectly, for value any shares of
capital stock of the Company or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(b) issue, deliver, sell, pledge or otherwise encumber or subject
to any Lien (i) any shares of its capital stock, (ii) any other voting
securities, (iii) any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
or (iv) any "phantom" stock or stock rights, SARs or stock-based performance
units, other than the issuance of shares of Company Common Stock and associated
rights upon the exercise of Company Stock Options outstanding as of the date
hereof in accordance with their present terms;
(c) amend its certificate of incorporation, bylaws or other
comparable organizational documents;
(d) merge or consolidate with another Person, acquire, license or
agree to acquire or license any business, division or Person or any equity or
debt interest therein, acquire, license or agree to acquire or license any
assets, other than immaterial assets or assets acquired in the ordinary course
of business consistent with past practice, or enter into any joint venture,
partnership or similar arrangement;
(e) sell, lease, license out, sell and leaseback, mortgage or
otherwise encumber or subject to any Lien (other than any Lien imposed by Law,
such as a carriers', warehousemen's or mechanics' Lien) or otherwise dispose of
any of its properties or assets having a value of $200,000 or more, other than
sales or non-exclusive licenses out of finished goods or services in the
ordinary course of business consistent with past practice;
(f) repurchase or incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person other than in the ordinary
course of business consistent with past practice, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other Contract to maintain any financial
statement condition of another Person or enter into any Contract having the
economic effect of any of the foregoing, other than intercompany indebtedness
between the Company and any of its direct or indirect wholly-owned Subsidiaries
34
or between such Subsidiaries; provided, however, that upon notice to, and
consultation with, Parent, the Company and its Subsidiaries shall be permitted
to continue, renew, or extend for a period of no more than three (3) years any
existing revolving lines of credit on terms no less favorable in the aggregate
to the Company than currently exist;
(g) make any loans, advances or capital contributions to, or
investments in, any other Person, other than the Company or any direct or
indirect wholly-owned Subsidiary of the Company and except for investments in
publicly traded securities or other investments in the ordinary course of the
Company's cash management or benefit plan management systems;
(h) make or agree to make any new capital expenditures, or enter
into any Contract providing for payments by the Company or any of its
Subsidiaries which, individually, are in excess of $100,000 or, in the
aggregate, are in excess of $200,000, except for Contracts to purchase inventory
or supplies entered into in the ordinary course of business or renewals or
extensions of existing Contracts relating to capital projects already in
progress as of the date of this Agreement, which existing projects are
identified in Section 4.1(h) of the Company Disclosure Letter;
(i) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) or Legal Proceeding (whether or not commenced prior to
the date of this Agreement), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities recognized or disclosed in the
most recent consolidated financial statements (or the notes thereto) of the
Company included in Company SEC Documents or incurred in the ordinary course of
business since the date of such financial statements;
(j) except as required in order to comply with Law, (i)
establish, enter into, adopt, amend or terminate any Company Benefit Plan or
Company Stock Plan, (ii) change any actuarial or other assumption used to
calculate funding obligations with respect to any Company Pension Plan, or
change the manner in which contributions to any Company Pension Plan are made or
the basis on which such contributions are determined, or (iii) take any action
to accelerate any rights or benefits, or make any material determinations not in
the ordinary course of business consistent with past practice, under any
collective bargaining agreement or Company Benefit Plan, except in each case to
the extent required to comply with any changes in the Laws applicable to any
such Company Benefit Plan or Company Stock Plan;
(k) other than in the ordinary course of business consistent with
past practice (except with respect to directors and officers whose compensation
may not be increased), (i) increase the compensation, bonus or other benefits of
any current or former director, consultant or employee, (ii) grant any Person
any increase in severance or termination pay, or (iii) pay any benefit or amount
not required by an agreement, plan, or arrangement as in effect on the date of
this Agreement to any such Person;
(l) transfer or license to any Person or otherwise extend, amend
or modify or allow to revert, lapse or expire any material rights to the
Intellectual Property Rights of the Company and its Subsidiaries, other than in
the ordinary course of business consistent with past practice;
35
(m) increase the number of full-time, permanent employees of the
Company or any of its Subsidiaries other than as a result of hiring permanent
employees for annual salaries of less than $100,000 in the ordinary course of
business consistent with past practice;
(n) except insofar as may be required by a change in GAAP or
regulatory requirements, make any material changes in accounting methods,
principles or practices;
(o) authorize, or commit, resolve or agree to take, any of the
foregoing actions.
4.2 Advise of Changes. The Company shall promptly advise the Parent orally
and in writing to the extent it has Knowledge of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, and (iii) any change or
event that would have a Material Adverse Effect on the Company or the ability of
the conditions in Article V of this Agreement to be satisfied, but no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement.
4.3 No Solicitation by the Company.
(a) The Company shall not, nor shall any of its Subsidiaries, or
their directors, officers, employees, investment bankers, accountants, attorneys
or other professional advisors (collectively, the "Representatives") (i)
solicit, initiate, or knowingly encourage (including by way of furnishing
nonpublic information) any Acquisition Proposal, (ii) enter into, continue, or
otherwise participate in any discussions or negotiations regarding, or furnish
to any Person any nonpublic information with respect to, any Acquisition
Proposal, or (iii) enter into any agreement providing for an Acquisition
Proposal; provided, however, that neither this Section 4.3(a) nor any other
provision contained in this Agreement shall prohibit the Company, its
Subsidiaries, or their respective Representatives from furnishing information
regarding the Company to, or entering into discussions or negotiations with, any
Person in response to an Acquisition Proposal that the Company's board of
directors (or a committee thereof) determines in good faith, after consultation
with outside legal counsel, reasonably could be expected to lead to a Superior
Proposal if (1) none of the Company, its Subsidiaries, or any of their
Representatives shall have violated any of the restrictions set forth in this
Section 4.3(a) in a manner that resulted in the submission of such Acquisition
Proposal; (2) the board of directors of the Company (or a committee thereof)
determines in good faith, after consultation with outside legal counsel, that
failure to take such action is likely to constitute a breach of the fiduciary
duties of the board of directors of the Company under applicable Law; and (3)
the Company receives from such Person an executed confidentiality agreement (the
provisions of which are no less restrictive than the comparable provisions, and
do not omit any restrictive provisions, contained in the confidentiality
agreement between the Parent and the Company (the "Confidentiality Agreement")).
The Company shall notify Parent promptly (and at least 24 hours prior to
furnishing nonpublic information to, or entering into discussions or
negotiations with, any Person who has made or submitted an Acquisition Proposal)
of the Company's intention to furnish nonpublic information to, or enter into
36
discussions or negotiations with, any Person who has made or submitted an
Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" means any inquiry,
proposal, or offer from any third party relating to (i) any direct or indirect
acquisition or purchase of substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, or a majority of the equity securities of
the Company, (ii) any tender offer or exchange offer that if consummated would
result in any Person beneficially owning more than 50% of the Company's common
stock, or (iii) any merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution, or similar transaction involving the
Company, other than the Offer and the Merger.
For purposes of this Agreement, "Superior Proposal" means any offer made by a
third party to consummate an Acquisition Proposal on terms that the board of
directors of the Company (or a committee thereof) determines in good faith,
after consultation with outside legal counsel, to be more favorable to the
Company's stockholders than the Offer and the Merger (as the terms of the Offer
or the Merger may be amended in accordance with this Agreement) after
consideration of any factors permitted to be considered in such circumstances
under Delaware law, including without limitation, any condition for obtaining
financing and all financial, regulatory, legal and other aspects of such
proposal.
(b) The Company shall promptly (and in no event later than two
Business Days after receipt of any Acquisition Proposal or any request for
nonpublic information in connection with any Acquisition Proposal) advise Parent
in writing of any Acquisition Proposal or any request for nonpublic information
in connection with any Acquisition Proposal (including the identity of the
Person making or submitting such Acquisition Proposal or request, and the
principal terms of any such Acquisition Proposal) that is made or submitted by
any Person (other than Parent and its Affiliates) at any time prior to
consummation of the Merger.
(c) Nothing in this Section 4.3 or elsewhere in this Agreement
shall prohibit the Company or its board of directors from taking and disclosing
to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders required by applicable Law, or from making any disclosure
to the Company's stockholders if, in the good faith judgment of the Company's
board of directors (or a committee thereof), after consultation with outside
legal counsel, failure to make such other disclosure could create a reasonable
possibility of a breach of the Company's or board's obligations (including,
without limitation, any fiduciary obligations) under applicable Law.
(d) Notwithstanding anything to the contrary in this Section 4.3,
the fact that the Company, any of its Subsidiaries, or any of their
Representatives have had discussions or negotiations with Persons prior to the
date of this Agreement regarding a possible Acquisition Proposal shall not
prevent the Company from taking any of the actions specified in the proviso to
the first sentence of Section 4.3(a) with respect to a new Acquisition Proposal
submitted by any such Person after the date of this Agreement, that was not
solicited in violation of this Section 4.3.
(e) The board of directors of the Company may withdraw, amend, or
modify the Company Recommendation if, in the good faith judgment of the
37
Company's board of directors (or a committee thereof), after consultation with
outside legal counsel, failure to do so would likely constitute a breach of the
board's fiduciary obligations under applicable Law.
4.4 Access to Information; Confidentiality. Subject to the Confidentiality
Agreement, upon reasonable notice, the Company shall, and shall cause each of
its Subsidiaries to, afford to the Parent and to its Representatives, reasonable
access during normal business hours during the period prior to the Effective
Time to all its properties, books, contracts, commitments, managerial personnel
and records and, during such period, the Company shall, and shall cause each of
its Subsidiaries to, promptly furnish or make available to the Parent (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
Laws and (b) all other information concerning its business, properties and
personnel as the Parent may reasonably request. The Company shall authorize its
attorneys to cooperate with Parent and respond to Parent's inquiries regarding
legal matters affecting the Company. Notwithstanding anything in this Section
4.4 to the contrary, the Company and its attorneys shall not be required to (i)
provide access to or disclose information where such access or disclosure would
contravene any law, rule, regulation, order, decree or agreement, or (ii) take
any action or disclose any information that would be likely to result in a
waiver of any applicable privilege or immunity.
4.5 Filings and Consents; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner reasonably practicable, the Offer and the Merger, including using
reasonable best efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions to the Offer and the Closing
to be satisfied as promptly as practicable including, without limitation, (A)
any other filing necessary to obtain any consent of a Governmental Entity
necessary to consummate the Offer or the Merger, (B) any filings under any other
comparable pre-merger notification forms required by the merger notification or
control Laws of any applicable jurisdiction, as agreed by the parties hereto,
and (C) any filings required under the Securities Act of 1933, as amended, the
Exchange Act, any applicable state or securities or "blue sky" Laws and the
securities Laws of any foreign country, or any other legal requirement relating
to the Offer or the Merger; (ii) the obtaining of all actions or nonactions,
waivers, consents and approvals from Governmental Entities necessary to
consummate the Offer or the Merger and the making of all necessary registrations
and filings (including filings with Governmental Entities, if any) and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity; (iii) the
obtaining of all consents, approvals or waivers from third parties necessary to
consummate the Offer or the Merger (excluding any waiver or consent from the
Company's lenders); (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the Offer or the Merger, including seeking to prevent the
entry of any judgment, order, or decree of any court or other Governmental
Entity or other legal restraint or prohibition, in each case, preventing or
staying consummation of the Offer or the Merger, and to appeal, or otherwise
seek to have vacated or reversed, as promptly as practicable any such judgment,
order, decree, restraint, or prohibition that may be entered; and (v) the
38
execution and delivery of any additional instruments necessary to consummate the
Merger and to fully carry out the purposes of this Agreement, but the Parent
will not be required to agree to, or offer to, cease to conduct business or
operations in any jurisdiction in which the Parent, the Company or any of their
respective Subsidiaries conducts business or operations as of the date of this
Agreement.
(b) Each of the Parent, Merger Sub and the Company shall notify
the other promptly upon the receipt of (i) any comments from any officials of
any Governmental Entity in connection with any filings made pursuant hereto and
(ii) any request by any officials of any Governmental Entity for amendments or
supplements to any filings made pursuant to, or information provided to comply
in all material respects with, any legal requirements. Whenever any event occurs
that is required to be set forth in an amendment or supplement to any filing
made pursuant to Section 4.5(a), the Parent, Merger Sub or the Company, as the
case may be, shall promptly inform the other of such occurrence and cooperate in
filing with the applicable Governmental Entity such amendment or supplement.
(c) In connection with and without limiting the foregoing, the
Company and its board of directors shall (i) take all action reasonably
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger or this Agreement
(other than those that may be made applicable solely by reason of Parent's or
Merger Sub's (as opposed to the Company's or its Subsidiaries') participation in
the Offer or the Merger) and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger or this
Agreement (other than those that may be made applicable solely by reason of
Parent's or Merger Sub's (as opposed to the Company's or its Subsidiaries')
participation in the Offer or the Merger), take all action reasonably necessary
to ensure that the Offer and the Merger may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer and the Merger.
(d) Nothing in this Agreement shall require the Company, the
Parent or Merger Sub to commence any litigation in order to prevent (or remove)
the entry of any Restraint under antitrust or similar Laws.
4.6 Indemnification, Exculpation and Insurance.
(a) From the Effective Time through the sixth anniversary of the
date on which the Effective Time occurs, Parent and the Surviving Corporation
shall jointly and severally indemnify and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director or officer of the Company or any of its Subsidiaries
(the "Covered Persons"), against all claims, losses, liabilities, damages,
judgments, fines, and reasonable fees, costs, and expenses, including reasonable
attorneys' fees and disbursements (collectively, "Costs"), incurred in
connection with any claim, action, suit, proceeding, or investigation, whether
civil, criminal, administrative or investigative (a "Proceeding"), arising out
of or pertaining to the fact that the Covered Person is or was an officer,
director, employee or agent of the Company or any of its Subsidiaries, to the
fullest extent permitted under applicable Law. Each Covered Person shall be
entitled to advancement from the Surviving Corporation of reasonable expenses
(including attorneys' fees and disbursements) incurred in the defense of any
Proceeding arising out of or pertaining to the fact that the Covered Person is
39
or was an officer, director, employee or agent of the Company or any of its
Subsidiaries, such advancement to be made within twenty days of receipt by the
Surviving Corporation from the Covered Person of a request therefor, provided,
that any Covered Person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Covered Person is
not entitled to indemnification. Alternatively, the Surviving Corporation may
provide the defense of any such claim with counsel reasonably acceptable to the
Covered Person; provided, however, that if in the opinion of such Covered
Person's attorney (who is licensed to practice in the jurisdiction where the
proceeding is pending) there exists a conflict of interest between the Surviving
Corporation and such Covered Person, such Covered Person shall have the right to
engage separate counsel, the reasonable expenses (including attorneys' fees and
disbursements) of which shall be paid by the Surviving Corporation or, if not
paid by the Surviving Corporation, by the Company's insurance carrier
contemplated by Section 4.6(d). The Covered Person shall cooperate with the
Surviving Corporation, at the Surviving Corporation's expense, in connection
with the defense of any Proceeding.
(b) All rights to indemnification and advancement of expenses and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor of any Covered Person as provided in the
respective certificate of incorporation or bylaws (or comparable organizational
documents) of the Company and its Subsidiaries and any indemnification
agreements of the Company (as each is in effect prior to the date of this
Agreement), shall survive the Merger and shall continue in full force and effect
in accordance with their terms. The certificate of incorporation and bylaws of
the Surviving Corporation will contain provisions with respect to such
indemnification, advancement of expenses, and elimination of liability for
monetary damages at least as favorable in all material respects to the Covered
Persons as those set forth in the current certificate of incorporation and
bylaws of the Company, and for a period of six (6) years after the Effective
Time, any repeal, amendment or modification of the certificate of incorporation
or bylaws of the Surviving Corporation shall not adversely affect the rights
thereunder of the Covered Persons, except to the extent, if any, that such
modification is required by applicable law.
(c) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any Person or Persons, or otherwise dissolves or liquidates, then, and in
each such case, the Parent and the Surviving Corporation shall cause proper
provision to be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 4.6.
(d) Following the Effective Time, the Surviving Corporation shall
maintain, at no expense to the Covered Persons, directors' and officers'
liability insurance coverage for the Covered Persons for six (6) years following
the Effective Time with respect to claims arising from or related to facts or
events that occurred at or before the Effective Time, which insurance coverage
shall provide them with the same coverage and amounts and shall contain terms
and conditions that are in the aggregate no less advantageous to the Covered
Persons than those in effect on the date hereof, so long as the annual premium
therefor shall not be in excess of two hundred percent (200%) of the annual
premiums currently paid by the Company in respect of the current policy or
policies (the "Maximum Premium"). If such directors' and officers' liability
40
insurance coverage expires, is terminated or is canceled during such six (6)
year period or should the annual premium required to maintain such insurance
exceed the Maximum Premium, the Surviving Corporation shall obtain and maintain,
and the Parent shall cause the Surviving Corporation to obtain and maintain, at
no expense to the Covered Persons, as much directors' and officers' insurance
coverage as can be obtained and maintained for the remainder of such period for
an annualized premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous to the Covered Persons than the terms and
conditions of the coverage in effect on the date hereof. Notwithstanding
anything in this subsection (d) to the contrary, in lieu of maintaining
liability insurance coverage pursuant to this subsection (d), Merger Sub or the
Surviving Corporation may obtain, at no expense to the Covered Persons, a "tail"
policy for the Covered Persons that provides the same coverage and amounts and
contains terms and conditions that are in the aggregate no less advantageous to
the Covered Persons than those in effect on the date hereof with respect to
claims arising from or related to facts or events that occurred at or before the
Effective Time and that is effective for claims asserted during the full
six-year period referred to above.
(e) Notwithstanding anything herein to the contrary, if any claim
is asserted or any Proceeding is initiated or commenced against or involving a
Covered Person on or prior to the sixth anniversary of the Effective Time
(whether such claim or Proceeding is asserted, initiated, or commenced prior to,
at or after the Effective Time), the provisions of this Section 4.6 shall
continue in effect until final disposition of such claim or Proceeding.
(f) The provisions of this Section 4.6 are intended to be for the
benefit of, and will be enforceable by, each Covered Person, his or her heirs
and his or her representatives and are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Covered
Person may have by contract or otherwise.
4.7 Public Announcements. The Parent and the Company will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
Agreement, the Offer, the Stock Purchase Agreement or the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as either party may determine, upon advice of counsel, is
required by applicable Law, the SEC, court process or by obligations pursuant to
any listing or quotation agreement with any national securities exchange or
national trading system. The parties agree that the initial press release to be
issued with respect to the Agreement, the Offer, the Stock Purchase Agreement,
and the Merger shall be a joint press release in the form attached hereto as
Exhibit 4.7. This Section 4.7 supercedes any contradictory provision that may be
included in the Confidentiality Agreement, and no disclosure made by any of the
parties in accordance with this Section 4.7 shall be construed as being in
violation of the Confidentiality Agreement.
4.8 Rights Agreement. The board of directors of the Company shall take all
action necessary in order to prevent any Right (as defined in the Rights
Agreement) issued or issuable under the Rights Agreement from becoming
exercisable by virtue of this Agreement, the Offer, or the Merger, or the
combined effect of the foregoing, while this Agreement remains in effect or upon
its consummation.
4.9 Deposit. Immediately upon execution of this Agreement, the Parent shall
deposit with Wachovia Bank, National Association, as escrow agent, pursuant to
41
an escrow agreement substantially in the form attached hereto as Exhibit 4.9
(the "Escrow Agreement"), the amount of $800,000 in cash (the "Deposit"). In
accordance with the Escrow Agreement, the Deposit shall be returned to the
Parent within three (3) Business Days of termination of this Agreement pursuant
to Section 6.1 of this Agreement, unless payable to the Company pursuant to
Section 6.4(b) of this Agreement. At the time the Offer expires, upon the
written request of Parent, the Deposit may be delivered to the Paying Agent for
the purpose of purchasing shares of Company Common Stock in the Offer.
4.10 Audited Financial Statements. No later than the time the Company files
with the SEC its Form 10-K for the year ended September 30, 2004, the Company
shall deliver to Parent its financial statements for the fiscal year ended
September 30, 2004 together with the unqualified audit report of
PricewaterhouseCoopers. The Company's consolidated audited financial statements
for the year ended September 30, 2004 included in the Company's Form 10-K will
report net income and EBITDA (excluding (i) expenses related to the Transactions
contemplated by this Agreement and other efforts to achieve a sale of the
Company and (ii) costs associated with the claims giving rise to the
Anti-Dumping Notification) for the year ended September 30, 2004 of no less than
$1,050,000 and $8,500,000.00, respectively.
4.11 Stop Transfer Instructions. As soon as practicable after the date
hereof and as long as the Stock Purchase Agreement shall remain in effect, the
Company shall issue and deliver to the Company's transfer agent, stop transfer
instructions prohibiting the transfer of any shares of Company Common Stock to
be sold to Merger Sub pursuant to Section 1.01 of the Stock Purchase Agreement.
4.12 Transfer of Mexican Subsidiaries. At or before expiration of the
Offer, the Company shall cause Gino Pala to transfer to Massimo Candela each
share of each of the Company's Mexican Subsidiaries identified in Section 2.3 of
the Company Disclosure Letter.
4.13 Officer Certification. If the conditions referred to in clauses (b),
(c), (d), and (e) of Section (ii) of Annex I are satisfied as of the Expiration
Date, the Company shall cause its chief executive officer and chief financial
officer to certify on behalf of the Company that, as of the Expiration Date, the
conditions referred to in clauses (b), (c), (d), and (e) of Section (ii) of
Annex I have been satisfied. If any of the conditions referred to in clauses
(b), (c), (d), or (e) of Section (ii) of Annex I is not satisfied as of the
Expiration Date, then the Company shall deliver to Parent a written notice
specifying which of those conditions has not been satisfied.
ARTICLE V.
CONDITIONS PRECEDENT TO THE MERGER
5.1 Conditions to Each Party's Obligation to Consummate the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of the following
conditions (in addition to any other conditions set forth herein):
(a) The Company Stockholder Approval, if required for
consummation of the Merger, shall have been obtained, unless Merger Sub shall
have accepted for payment pursuant to the Offer such number of shares of Company
42
Common Stock which, when aggregated with the shares of Company Common stock
otherwise beneficially owned by Parent and its Affiliates, represents at least
90 percent of the outstanding shares of Company Common Stock.
(b) No judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court or
other Governmental Entity of competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger.
(c) Merger Sub shall have purchased, or caused to be purchased,
all Company Common Stock validly tendered and not withdrawn pursuant to the
Offer.
(d) The filing of the Certificate of Merger with the Secretary of
State of the State of Delaware shall have been made and shall have become
effective.
(e) If the Stockholders' Written Consent has been delivered to
the Company, then more than twenty (20) calendar days shall have elapsed since
the date that the Company sent or gave the Schedule 14C Information Statement to
its stockholders such that Rule 14c-2 promulgated under the Exchange Act is
satisfied in all respects.
ARTICLE VI.
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated prior to the Effective
Time, notwithstanding the requisite adoption of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (1) as a result of the
failure of any conditions set forth in Annex I, the Offer shall have terminated
or expired in accordance with its terms without Merger Sub having purchased
shares of Company Common Stock pursuant to the Offer or (2) the Offer shall not
have been consummated on or before the Outside Date; provided, however, that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the circumstances specified in
clause (1) or (2), as the case may be, of this Section 6.1(b);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a final and
nonappealable order, judgment, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or otherwise
prohibiting the Offer or the Merger;
(d) by either Parent or the Company, at any time prior to
consummation of the Offer, if the board of directors of the Company shall have
authorized the Company to enter into a written agreement for a transaction that
constitutes a Superior Proposal, and the Company shall have notified Parent in
writing that it intends to enter into such an agreement;
(e) by the Parent, at any time prior to consummation of the
Offer, if the board of directors of the Company or any committee thereof,
43
pursuant to Section 4.3(e) of this Agreement or otherwise, shall have withdrawn,
amended or modified, or resolved to withdraw, amend or modify, in a manner
adverse to the Parent, the Company Recommendation;
(f) by the Parent, at any time prior to consummation of the
Offer, if (i) any representation or warranty of the Company contained in the
Agreement that is qualified as to materiality shall not be true and complete in
all respects, or any representation or warranty of the Company contained in the
Agreement that is not so qualified shall not be true and complete in all
material respects, in each case as of the date of the Agreement and at any time
through the time the Offer expires (provided that, to the extent any such
representation or warranty speaks as of a specified date, it need be true and
complete only as of such specified date) and such breach is incapable of being
or has not been cured by the Company, in all material respects, by the earlier
of 20 calendar days after Parent has given written notice to the Company of such
breach or the Outside Date and such breach would cause the conditions set forth
in clause (d) of Section (ii) of Annex I not to be satisfied, or (ii) the
Company shall have breached or failed to perform in any material respect any of
its covenants or other agreements contained in this Agreement and such breach or
failure to perform is incapable of being or has not been cured by the Company,
in all material respects, by the earlier of 20 calendar days after Parent has
given written notice to the Company of such breach or failure to perform or the
Outside Date and such breach or failure to perform would cause the conditions
set forth in clause (e) of Section (ii) of Annex I not to be satisfied; provided
that neither Parent nor Merger Sub is then in material breach of any of its
representations, warranties, covenants or other agreements in this Agreement;
(g) by the Company, at any time prior to consummation of the
Offer, if (i) any representation or warranty of the Parent or Merger Sub
contained in the Agreement that is qualified as to materiality shall not be true
and complete in all respects, or any representation or warranty of the Parent or
Merger Sub contained in the Agreement that is not so qualified shall not be true
and complete in all material respects, in each case as of the date of the
Agreement and at any time through the time the Offer expires (provided that, to
the extent any such representation or warranty speaks as of a specified date, it
need be true and complete only as of such specified date) and such breach is
incapable of being or has not been cured by the Parent or Merger Sub, in all
material respects, by the earlier of 20 calendar days after the Company has
given written notice to the Parent of such breach or the Outside Date, or (ii)
the Parent or Merger Sub shall have breached or failed to perform in any
material respect any of its covenants or other agreements contained in this
Agreement and such breach or failure to perform is incapable of being or has not
been cured by the Parent or Merger Sub, in all material respects, by the earlier
of 20 calendar days after the Company has given written notice to the Parent of
such breach or failure to perform or the Outside Date; provided that the Company
is not then in material breach of any of its representations, warranties,
covenants or other agreements in this Agreement; and
(h) by the Company, if, without the Company's consent, Merger Sub
fails to commence the Offer as provided in Section 1.1 of this Agreement or if
Parent or Merger Sub makes any material changes to the Offer in contravention of
this Agreement; provided that any changes that are adverse to the holders of
Company Common Stock shall be deemed material for purposes of this subsection
(h).
6.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 6.1, this Agreement shall be of no further
force or effect, and no party hereto (and no stockholder, director, officer,
44
agent, consultant, or representative of such party) shall have any further
obligation or liability pursuant hereto; provided, however, that the
Confidentiality Agreement, Section 4.7 (Public Announcements), this Section 6.2,
Section 6.4 (Expenses; Termination Fees), and Article VII (General Provisions)
shall survive the termination of this Agreement and shall remain in full force
and effect.
6.3 Procedure for Termination. If a party has a right to terminate this
Agreement under Section 6.1, it may exercise that right only by delivering
written notice of such termination to the other parties, stating the subsection
or subsections of Section 6.1 that provide the basis for such termination.
6.4 Expenses; Termination Fees.
(a) Except as set forth in this Section 6.4, all fees and
expenses incurred in connection with this Agreement, the Offer and the Merger
shall be paid by the party incurring such expenses, whether or not the Offer and
the Merger are consummated.
(b) In the event the Agreement is validly terminated pursuant to
Section 6.1(g) or Section 6.1(h), the Company shall be entitled to retain the
Deposit as a non-refundable termination fee, and Parent shall reimburse the
Company for all reasonable and documented out-of-pocket expenses incurred by the
Company since September 1, 2004 in connection with this Agreement, the Offer and
the Merger in an aggregate amount not to exceed $750,000, which expenses shall
be reimbursed by Parent within three Business Days after the Company provides to
Parent a notice requesting reimbursement of expenses under this Section 6.4(b),
together with reasonable documentation of such expenses.
(c) In the event the Agreement is validly terminated pursuant to
Section 6.1(d) or Section 6.1(f) (and, with respect to termination pursuant to
Section 6.1(f), the Company's breach of any of its representations, warranties,
covenants or other agreements contained in this Agreement that creates such
right of termination under Section 6.1(f) shall give rise to a Material Adverse
Effect), the Company shall pay to Parent, within three Business Days of the
notice of termination, a non-refundable termination fee of $800,000 and shall
reimburse Parent for all reasonable and documented out-of-pocket expenses
incurred by Parent after September 1, 2004 in connection with this Agreement,
the Offer and the Merger in an aggregate amount not to exceed $750,000, which
expenses shall be reimbursed by the Company within three Business Days after
Parent provides to the Company a notice requesting reimbursement of expenses
under this Section 6.4(c), together with reasonable documentation of such
expenses. In the event the Agreement is validly terminated pursuant to Section
6.1(f) and the Company's breach of any of its representations, warranties,
covenants or other agreements contained in this Agreement that creates such
right of termination under Section 6.1(f) shall not give rise to a Material
Adverse Effect, the Company shall pay to Parent, within three Business Days of
the notice of termination, a non-refundable termination fee of $400,000 and
shall reimburse Parent for all reasonable and documented out-of-pocket expenses
incurred by Parent after September 1, 2004 in connection with this Agreement,
the Offer and the Merger in an aggregate amount not to exceed $750,000, which
expenses shall be reimbursed by the Company within three Business Days after
Parent provides to the Company a notice requesting reimbursement of expenses
under this Section 6.4(c), together with reasonable documentation of such
expenses.
45
(d) In the event the Agreement is validly terminated pursuant to
Section 6.1(e) by reason of a withdrawal by the Board of Directors of the
Company of the Company Recommendation, the Company shall pay to Parent, within
three Business Days of the notice of termination, a non-refundable termination
fee of $800,000 and shall reimburse Parent for all reasonable and documented
out-of-pocket expenses incurred by Parent after September 1, 2004 in connection
with this Agreement, the Offer and the Merger in an aggregate amount not to
exceed $750,000, which expenses shall be reimbursed by the Company within three
Business Days after Parent provides to the Company a notice requesting
reimbursement of expenses under this Section 6.4(d), together with reasonable
documentation of such expenses.
(e) If (i) prior to the Expiration Date an Acquisition Proposal
shall have been publicly disclosed, announced, commenced, submitted, or made by
a third party (other than by Parent or an Affiliate of Parent) and shall not
have been withdrawn or abandoned, and (ii) the Agreement is validly terminated
pursuant to Section 6.1(b) because the Minimum Condition has not been satisfied,
and at the time of termination, there are no Restraints in effect preventing
consummation of the Offer, and Parent is not in breach of any material
obligation under the Agreement, then the Company shall pay to Parent, within
three Business Days of the notice of termination, a non-refundable termination
fee of $800,000 and shall reimburse Parent for all reasonable and documented
out-of-pocket expenses incurred by Parent after September 1, 2004 in connection
with this Agreement, the Offer and the Merger in an aggregate amount not to
exceed $750,000, which expenses shall be reimbursed by the Company within three
(3) Business Days after Parent provides to the Company a notice requesting
reimbursement of expenses under this Section 6.4(e), together with reasonable
documentation of such expenses.
(f) If either the Parent or the Company fails to pay when due any
amount payable under this Section 6.4, then the party failing to pay such amount
shall reimburse the other party for all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) incurred in connection with the
collection of such overdue amount and the enforcement by the other party of its
rights under this Section 6.4.
(g) Payment of the fees and expenses described in this Section
6.4 shall constitute the sole and exclusive remedy of Parent and Merger Sub
against the Company and the Company against Parent and Merger Sub for any
damages suffered or incurred in connection with this Agreement, except that the
parties shall be entitled to the equitable remedies set forth in Section 7.11,
including injunction and specific performance, and all other remedies available
in equity to which a party is entitled. It is specifically agreed that any
amount to be paid pursuant to this Section 6.4 represents liquidated damages and
not a penalty.
ARTICLE VII.
GENERAL PROVISIONS
7.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 7.1
shall not limit any covenant or agreement of the parties that by its terms
contemplates performance after the Effective Time.
46
7.2 Amendment. This Agreement may be amended by the parties at any time
prior to the Effective Time; provided that after the Company Stockholder
Approval has been obtained, there shall not be made any amendment that by Law
requires further approval by the stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.3 Extension; Waiver. At any time prior to the Effective Time, a party may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement, or (c) subject to the proviso of Section
7.2, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if and to the extent set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
7.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, by facsimile (which is confirmed) or sent by
internationally recognized overnight courier (providing proof of delivery) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to the Parent or Merger Sub, to:
Mr. Alberto Candela
Mr. Massimo Candela
Fila - Fabbrica Italiana Lapis Ed Affini S.p.A.
Via Pozzone
5, Milano, Italy
Facsimile: 39 02 35 38 546
With a copy (which shall not constitute notice) to:
Robert W. Forman, Esq.
Shapiro Forman Allen Miller & McPherson LLP
380 Madison Avenue
New York, NY 10017
Facsimile: (212) 557-1275
and
Alessandro Marena
Studio legale Marena, Bonvinci, Aghina e Ludergnani
Via degli Omenoni, 2
20121 Milan
Italy
Facsimile: 39 02 72 02 39 04
(b) If to the Company, to:
47
Dixon Ticonderoga Company
Attention: Gino Pala
195 International Parkway
Heathrow, FL 32746
Facsimile: (407) 829-2574
With a copy (which shall not constitute notice) to each of:
Philip M. Shasteen, Esq.
Johnson, Pope, Bokor, Ruppel & Burns, LLP
100 N. Tampa Street, Suite 1800
Tampa, FL 33602
Facsimile: (813) 225-1857
and
Michael A. Pittenger, Esq.
Potter Anderson & Corroon LLP
1313 North Market Street
Hercules Plaza
P.O. Box 951 Wilmington, DE 19899 Facsimile: (302) 658-1192
7.5 Definitions. For purposes of this Agreement:
(a) Except as provided otherwise in Sections 2.2(b) and 3.7,
"Affiliate" shall mean, in relation to any party hereto, any entity directly or
indirectly, controlling, controlled by, or under common control with, such
party, where "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a party,
whether through the ownership of voting securities, by contract, as trustee or
executor, or otherwise.
(b) Except as provided otherwise in Sections 2.2(b) and 3.7,
"Associate" shall have the meaning set forth in Rule 12b-2 under the Exchange
Act.
(c) "Business Day" shall have the meaning set forth in Rule
14d-1(g)(3) under the Exchange Act.
(d) "Company Stock Options" shall mean outstanding stock options
granted pursuant to (i) the Company's Amended and Restated Stock Option Plan
(formerly known as the 1988 Executive Stock Plan) and (ii) the Company's 1999
Stock Option Plan, the plans in clauses (i) and (ii) being collectively referred
to as the "Company Stock Plans."
(e) "Contract" shall mean any written contract, agreement or
obligation of the Company or any of its Subsidiaries to which the Company or any
of its Subsidiaries is a party or by which the Company or any Subsidiary or any
of the assets of the Company or any of its Subsidiaries are bound.
48
(f) "Environmental Law" shall mean any federal, state, or local
law of the United States, Canada, Mexico, the Peoples Republic of China or the
United Kingdom, relating to (i) releases or threatened releases of Hazardous
Materials; (ii) the manufacture, handling, transport, use, treatment, storage or
disposal of Hazardous Materials; or (iii) pollution or protection of the
environment.
(g) "Environmental Lien" shall mean any Lien, whether recorded or
unrecorded, in favor of any Governmental Entity, relating to any liability of
the Company or any of its Subsidiaries, arising under any Environmental Law.
(h) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974 as in effect on the date hereof.
(i) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(j) "Existing Permits" shall mean those permits, licenses,
approvals, qualifications, authorizations, and registrations required by Law
that the Company and its Subsidiaries have or hold.
(k) "Governmental Entity" shall mean any federal, state, local or
foreign court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory authority or administrative agency.
(l) "Hazardous Materials" shall mean (i) those substances defined
in or regulated under any of the following United States federal statutes and
any similar statutes or statutes with similar purposes in the states or in
Canada, Mexico, the Peoples Republic of China or the United Kingdom, as each may
be amended from time to time, and all regulations promulgated 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, the Toxic Substances
Control Act and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) asbestos or silica or mixed
dust; and (iv) any regulated radioactive materials, hazardous or toxic
substances, wastes, or chemicals regulated by any Governmental Entity pursuant
to any Environmental Law.
(m) "Indebtedness" shall mean (i) all obligations for borrowed
money, or with respect to deposits or advances of any kind, (ii) all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (iii) all obligations upon which interest charges are customarily
paid, (iv) all obligations under conditional sale or other title retention
agreements relating to purchased property, (v) all obligations issued or assumed
as the deferred purchase price of property or services (excluding obligations to
creditors for raw materials, inventory, services and supplies incurred in the
ordinary and usual course of business), (vi) all capitalized lease obligations,
(vii) all obligations of others secured by a Lien, on property or assets,
whether or not the obligations secured thereby have been assumed, (viii) all
obligations under interest rate or currency hedging transactions (valued at the
termination value thereof), (ix) all obligations arising under letters of credit
(including standby and commercial), bankers' acceptances, bank guaranties,
49
surety bonds and similar instruments, (x) all guarantees and arrangements having
the economic effect of a guarantee of any indebtedness of any other Person and
(xi) net obligations under any swap or derivative agreement.
(n) "IRS" shall mean the Internal Revenue Service.
(o) "Knowledge" shall mean the actual knowledge of the directors
and officers of the Company and its Subsidiaries listed in Section 7.5 of the
Company Disclosure Letter.
(p) "Law" shall mean any foreign, federal, state or local
governmental law, rule, regulation or requirement, including any rules,
regulations and orders promulgated thereunder and any orders, decrees, consents
or judgments of any governmental regulatory agencies and courts having the force
of law, excluding any Environmental Law.
(q) "Lien" shall mean, with respect to any asset (real, personal
or mixed): (i) any mortgage, pledge, encumbrance, lien, easement, lease, title
defect or imperfection or any other form of security interest, whether imposed
by Law or by contract; and (ii) the interest of a vendor or lessor under any
conditional sale agreement, financing lease or other title retention agreement
relating to such asset.
(r) "Material Adverse Effect" or "Material Adverse Change" shall
mean any effect, change, event, circumstance or condition which when considered
with all other effects, changes, events, circumstances or conditions has
materially adversely affected or would reasonably be expected to materially
adversely affect the results of operations, financial condition, or business of
the Company, including its Subsidiaries together with it taken as a whole. For
purposes hereof, any of the foregoing shall constitute a "Material Adverse
Effect" or "Material Adverse Change" if, among other things, such effect,
change, event, circumstance or condition (i) does or would reasonably be
expected to result in the amount of the Company's EBITDA for the 12 months
ending September 30, 2004 being reduced by 5% or more from the amount of the
Company's EBITDA for the 12 months ending September 30, 2004, as reflected in
the September 30, 2004 financial statements referred to in Section 2.9(b)
hereof, or (ii) does or would reasonably be expected to result in the amount of
the Company's EBITDA for the 12 months ending September 30, 2005 being reduced
by 5% or more from the projected amount of the Company's EBITDA for the 12
months ending September 30, 2005, as reflected in the projections previously
delivered to Parent and Merger Sub. In no event shall any of the following,
considered alone without regard to any other effects, changes, events,
circumstances or conditions, constitute a Material Adverse Effect or a Material
Adverse Change: (i) a change in the trading prices of the Company's securities
between the date hereof and the Effective Time; (ii) effects, changes, events,
circumstances or conditions generally affecting the industry in which either the
Parent or the Company operate or arising from changes in general business or
economic conditions, provided such effects, changes, events, circumstances or
conditions do not disproportionately impact the Company and its Subsidiaries,
taken as a whole; (iii) any effects, changes, events, circumstances or
conditions resulting from any change in Law or GAAP, which affect generally
entities such as the Company; (iv) any effects, changes, events, circumstances
or conditions resulting from the announcement or pendency of the Offer or the
Merger other than a breach of a representation or warranty pursuant to this
Agreement which would occur except for clauses (iv) or (v) of this definition of
Material Adverse Effect and Material Adverse Change; and (v) any effects,
50
changes, events, circumstances or conditions resulting from actions taken by the
Parent or the Company in order to comply with the terms of this Agreement other
than a breach of a representation or warranty pursuant to this Agreement which
would occur except for clauses (iv) or (v) of this definition of Material
Adverse Effect and Material Adverse Change.
(s) "Outside Date" shall mean March 1, 2005; provided, however,
that if, on an Expiration Date occurring on or within ten (10) Business Days
prior to March 1, 2005, all conditions to Merger Sub's obligations to accept for
payment and pay for shares of Company Common Stock validly tendered pursuant to
the Offer are satisfied or, to the extent permitted by this Agreement, waived,
other than the condition set forth in Section (vi) of Annex I, then the Company
or Parent may elect, by notifying Parent or the Company, respectively, in
writing, to extend the Outside Date to a date up to ten (10) Business Days after
March 1, 2005, such date to be specified in such written notice.
(t) "Permitted Liens" shall mean those Liens affecting any of the
assets or properties of the Company or any of its Subsidiaries that do not
materially detract from the value of the property or assets of the Company
subject thereto and do not materially impair the business or operations of the
Company.
(u) "Person" shall mean a natural person, corporation,
partnership (general or limited), limited liability company, joint venture,
association, trust, unincorporated organization, Governmental Entity, agency or
branch or department thereof, or any other legal entity.
(v) "Proxy Statement" shall mean the proxy statement (as such
term is defined in Regulation 14(a)-1 under the Exchange Act) filed with the SEC
with respect to the Special Meeting, including the form of proxy, and all
amendments or supplements thereto, if any, similarly filed.
(w) "Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, emanation
or migration in, into, onto, or through the atmosphere, soil, surface water or
groundwater.
(x) "Rights" shall mean those Rights issued pursuant to the
Rights Agreement.
(y) "Rights Agreement" shall mean the Rights Agreement, dated as
of March 3, 1995, between the Company and First Union National Bank of North
Carolina, as Rights Agent, and any supplements or amendments thereto.
(z) "SEC" shall mean the Securities and Exchange Commission.
(aa) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(bb) An entity shall be deemed to be a "Subsidiary" of a Person
if such Person directly or indirectly owns, beneficially or of record, an amount
of voting securities or other interests in such entity that is sufficient to
enable such Person to elect at least a majority of the members of such entity's
51
board of directors or other governing body, or, if there are no such voting
interests, 50% or more of the equity or financial interests of such entity.
(cc) "Tax" shall include (i) all forms of taxation, whenever
created or imposed, and whether domestic or foreign, and whether imposed by a
national, federal, state, provincial, local or other Governmental Entity,
including all interest, penalties and additions imposed with respect to such
amounts, (ii) liability for the payment of any amounts of the type described in
clause (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (iii) liability for the payment of any amounts as
a result of being party to any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other Person with respect to the
payment of any amount described in clause (i) or (ii).
(dd) "Tax Law" shall mean any Law relating to Taxes.
(ee) "Tax Returns" shall mean all domestic or foreign (whether
national, federal, state, provincial, local or otherwise) returns, declarations,
statements, reports, schedules, forms and information returns relating to Taxes,
and any amended Tax Return.
(ff) "Warrants" shall mean those warrants issued pursuant to the
Amended and Restated Note and Warrant Purchase Agreement, dated as of October 3,
2002, by and between the Company and the institutional investors named therein.
7.6 Construction and Interpretation. When a reference is made in this
Agreement to a section or article, such reference shall be to a section or
article of this Agreement unless otherwise clearly indicated to the contrary.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
The words "hereof," "herein" and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise specified.
The plural of any defined term shall have a meaning correlative to such defined
term, and words denoting any gender shall include all genders and the neuter.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning. A reference to any party to this Agreement
or any other agreement or document shall include such party's successors and
permitted assigns. A reference to any legislation or to any provision of any
legislation shall include any modification, amendment or re-enactment thereof,
any legislative provision substituted therefor and all rules, regulations and
statutory instruments issued thereunder or pursuant thereto. The parties have
participated jointly in the negotiation and drafting of this Agreement. If there
is an ambiguity or a question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement. Each provision of this Agreement
shall be given full separate and independent effect. Although the same or
similar subject matters may be addressed in different provisions of this
Agreement, the parties intend that, except as expressly provided in this
Agreement, each such provision be read separately, be given independent
significance and not be construed as limiting any other provision in this
Agreement (whether or not more general or more specific in scope, substance or
context). No prior draft of this Agreement nor any course of performance or
52
course of dealing shall be used in the interpretation or construction of this
Agreement.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered (whether delivered electronically
or otherwise) one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
7.8 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement, and supersedes all prior agreements, negotiations and
understandings, whether written, electronic or oral, among the parties with
respect to the subject matter of this Agreement, and each party hereto
represents and acknowledges that it has not relied in any way upon any such
other agreements, negotiations or understandings, and (b) except for the
provisions in Article I and Section 4.6 (Indemnification, Exculpation and
Insurance), is not intended to confer upon any Person, other than the parties,
any rights or remedies.
7.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, without giving effect to any
other choice of law or conflict of law provision or rule (whether of the State
of Delaware or otherwise) that would cause the application of the Laws of any
jurisdiction, other than the State of Delaware.
7.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties hereto without the prior
written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
7.11 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the Court of Chancery of the State
of Delaware (or, in the case of claims as to which there is exclusive federal
question jurisdiction, in the United States District Court for the District of
Delaware), this being in addition to any other remedy to which any party may be
entitled at law or in equity, subject to Section 6.4(g) hereof. In addition,
each of the parties (a) consents to submit itself to the personal jurisdiction
of the Court of Chancery of the State of Delaware (or, in the case of claims as
to which there is exclusive federal question jurisdiction, in the United States
District Court for the District of Delaware), in connection with any dispute
that arises out of or relates to this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) agrees that it will not bring any action
arising out of or relating to this Agreement in any court other than the Court
of Chancery of the State of Delaware (or, in the case of claims as to which
there is exclusive federal question jurisdiction, in the United States District
Court for the District of Delaware). In the event the Court of Chancery of the
State of Delaware (or the Delaware Supreme Court) determines that the Court of
Chancery does not have or should not exercise subject matter jurisdiction with
respect to any particular action or proceeding (or part thereof) arising out of
or relating to this Agreement, then each of the parties (a) consents to submit
53
itself to the personal jurisdiction of the United States District Court for the
District of Delaware, if such court has subject matter jurisdiction, and to any
other court having subject matter jurisdiction and personal jurisdiction over
the parties hereto, if the United States District Court for the District of
Delaware does not have subject matter jurisdiction, in connection with such
action or proceeding (or part thereof), (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from the United States District Court for the District of Delaware and (c)
agrees that it will not bring such action or proceeding (or part thereof) in, or
transfer such action or proceeding (or part thereof) to, any court other than
the United States District Court for the District of Delaware as provided in
this Section 7.11 unless the United States District Court for the District of
Delaware does not have subject matter jurisdiction. EACH OF THE PARENT, MERGER
SUB, AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE NEGOTIATION OR ENFORCEMENT HEREOF. Each of the parties hereby consents to
service of any summons and complaint and any other process that may be served in
any action or proceeding arising out of or relating to this Agreement in the
Court of Chancery of the State of Delaware or the United States District Court
for the District of Delaware as is specified in this Section 7.11 by mailing by
certified or registered mail copies of such process to such party at its address
for receiving notice pursuant to Section 7.4 hereof. Nothing herein shall
preclude service of process by any other means permitted by Law.
7.12 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. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is
invalid, void or unenforceable, the parties agree that the court making such
determination shall have the power to and shall, subject to the discretion of
such court, reduce the scope, duration, area or applicability of the term or
provision, delete specific words or phrases, or replace any invalid, void or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
54
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
FILA - FABBRICA ITALIANA LAPIS ED AFFINI S.P.A.
By: /s/ Candela Massimo
-------------------
Name: Candela Massimo
Title: Managing Director
PENCIL ACQUISITION CORP
By: /s/ Candela Massimo
-------------------
Name: Candela Massimo
Title: President
DIXON TICONDEROGA COMPANY
By: /s/ Gino N. Pala
----------------
Name: Gino N. Pala
Title: Chairman
ANNEX I
CONDITIONS OF OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Merger Sub's right to extend and amend the Offer as
permitted by the Agreement and subject to any applicable rules and regulations
of the SEC, including Rule 14e(1)(c) under the Exchange Act, Merger Sub shall
not be required to accept for payment, or may delay the acceptance for payment
of, any validly tendered Company Common Stock if:
(i) by the expiration of the Offer (as it may be extended in accordance
with the requirements of Section 1.1) the Minimum Condition shall not
be satisfied;
(ii) any of the following events shall occur and be continuing as of the
Expiration Date:
(a) there shall be any Restraints in effect preventing the
consummation of the Offer;
(b) since the date of this Agreement, there shall have occurred any
Material Adverse Effect on the Company and any of its
Subsidiaries taken as a whole;
(c) the Company's board of directors shall have (i) withdrawn or
modified in a manner adverse to Parent and Merger Sub the Company
Recommendation, (ii) recommended any Acquisition Proposal, or
(iii) resolved to do any of the foregoing of this subsection (c);
(d) any representation or warranty of the Company contained in the
Agreement that is qualified as to materiality shall not be true
and complete in all respects or any representation or warranty of
the Company contained in the Agreement that is not so qualified
shall not be true and complete in all material respects, in each
case as of the time the Offer otherwise would expire (provided
that, to the extent any such representation or warranty speaks as
of a specified date, it need be true and complete only as of such
specified date);
(e) the Company shall have breached or failed, in any material
respect, to perform or to comply with its covenants and other
agreements to be performed or complied with by it under the
Agreement;
(f) all consents, permits and approvals of Governmental Entities and
other Persons necessary to permit Merger Sub to purchase the
shares of Company Common Stock validly tendered and not withdrawn
shall not have been obtained other than those the failure of
which to obtain, individually or in the aggregate, would not have
a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole; provided that in no event shall any consent of
any kind of the Company's lenders be a condition to consummation
of the Offer; or
(g) the Agreement shall have been validly terminated in accordance
with its terms;
(iii)any of the following have occurred and continue to exist (A) any
general suspension of trading in, or limitation on prices for,
securities on any major United States stock exchange or market,
(excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market
conditions), (B) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, or
(C) any material limitation (whether or not mandatory) by any United
States federal or United States state or governmental authority or
agency on the extension of credit by banks or other financial
institutions;
(iv) the Company has not filed with the SEC its Form 10-K for the year
ended September 30, 2004, accompanied by certifications, without
qualification, required under Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002;
(v) the Company's shareholders who are party to the Stock Purchase
Agreement with Merger Sub shall have failed to sell their stock
pursuant to such Stock Purchase Agreement; or
(vi) the number of shares of Company Common Stock validly tendered and not
withdrawn prior to the final expiration of the Offer, together with
the shares of Company Common Stock then beneficially owned by the
Parent or its Affiliates (including, without limitation, the shares of
Company Common Stock to be sold to Merger Sub pursuant to the Stock
Purchase Agreement), represents less than 90% of the shares of Company
Common Stock then outstanding and the Schedule 14C Information
Statement, as filed with the SEC, would not be permitted by applicable
SEC rules to be mailed to the Company's stockholders immediately after
the Offer is consummated and the Stockholders' Written Consent is
delivered to the Company.
The foregoing conditions are for the benefit of Parent and Merger Sub, may
be asserted by Parent or Merger Sub regardless of the circumstances giving rise
to such condition, and except for the Minimum Condition may be waived by Parent
or Merger Sub in whole or in part at any time and from time to time, subject in
each case to the terms of the Agreement. The failure by Parent or Merger Sub at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed.
Stock Purchase Agreement, Exhibit 2
-----------------------------------
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 16, 2004
among Pencil Acquisition Corp., a Delaware corporation (the "Purchaser"), and
the other persons executing this Agreement whose signatures appear on a
counterpart hereof (the "Stockholders").
WHEREAS, Dixon Ticonderoga Company, a Delaware corporation (the "Company"),
Fila-Fabbrica Italiana Lapis Ed Affini S.P.A., an Italian company and sole
stockholder of Purchaser, are concurrently herewith entering into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, for the acquisition by Parent of the Company
through a tender offer (the "Offer") made by Purchaser for all of the
outstanding shares of the Company's Common Stock, $1.00 par value ("Common
Stock"), and the subsequent merger (the "Merger") of Purchaser into the Company;
and
WHEREAS, each Stockholder is the beneficial owner of that number of shares
of Common Stock (the "Shares") and is also indebted to the Company in the amount
set forth on Annex I attached hereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations, warranties, and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE I. SALE AND PURCHASE OF THE SHARES
1.01 Subject to the terms and conditions of this Agreement, at the closing
provided for in Section 2.02 hereof (the "Closing"), each Stockholder will sell,
transfer, assign and deliver or cause to be delivered the Shares to Purchaser,
and Purchaser will purchase the Shares from each Stockholder. At Purchaser's
written request, each Stockholder shall tender to Purchaser in the Offer his or
her Shares subject to this Agreement
1.02 Subject to the terms and conditions of this Agreement, in reliance on
the representations, warranties and agreements of each Stockholder contained
herein and in full payment for the Shares, Purchaser will deliver at the Closing
by wire transfer of immediately available funds to each Stockholder an aggregate
amount equal to the product of (A) $7.00 in cash (or any higher price which may
be paid pursuant to the Offer) and (B) the number of Shares beneficially owned
by such Stockholder (such product, the "Purchase Price"). At the Closing, each
Stockholder will deliver, or cause to be delivered, to Purchaser certificates
representing the Shares duly endorsed to Purchaser or accompanied by stock
powers duly executed by such Stockholder in blank, together with a duly executed
Substitute Form W-9 or equivalent form for corporate entities. In the event that
any Stockholder receives, on or after the date hereof, any dividend or
1
distribution paid or distributed in respect of any Shares purchased hereunder at
any time, such Stockholder shall pay, or cause to be paid, to Purchaser such
dividend or distribution (and all dividends and distributions and amounts
received in respect of any securities or other assets which are themselves
payable pursuant to this sentence) upon either the Closing or promptly following
the receipt of any such dividend or distribution, whichever occurs last, it
being understood that nothing in this sentence shall require such Stockholder to
pay to Purchaser the Purchase Price received by it hereunder. In the event that,
after the date hereof, any Stockholder shall become the beneficial owner of any
shares of Common Stock in addition to the number of shares appearing opposite
such Stockholder's name at the foot of this Agreement, such additional shares of
Common Stock shall be deemed "Shares" subject to purchase and sale pursuant to
this Agreement and subject to all terms and conditions of this Agreement.
1.03 The Purchaser shall be entitled to withhold from the Purchase Price
due to any Stockholder, and to pay to the Company, the amount of any
indebtedness (plus accrued interest, the "Indebtedness") due from such
stockholder to the Company. The amount of any such Indebtedness is set forth on
Annex I hereto.
ARTICLE II. CONDITIONS TO PARTIES' OBLIGATIONS, ETC.
2.01 (A) The obligations of Purchaser to purchase and pay for the Shares
pursuant to this Agreement shall be subject to the fulfillment of the following
conditions: (a) no preliminary or permanent injunction or other order against
the delivery of the Shares or prohibiting the consummation of any of the
transactions contemplated hereby or by the Merger Agreement issued by any court
of competent jurisdiction shall be in effect, (b) the representations and
warranties made by each Stockholder in Article III hereof shall be true in all
2
material respects as of the date of this Agreement and as of the time of the
Closing, (c) all conditions to the Offer set forth in Exhibit A to the Merger
Agreement shall have been satisfied or waived, and (d) Purchaser, substantially
simultaneously with the purchase of the Shares pursuant to this Agreement, shall
have purchased all shares of Common Stock (if any) validly tendered and not
properly withdrawn pursuant to the terms of such Offer.
(B) The obligations of each Stockholder to sell the Shares pursuant to this
Agreement shall be subject to the fulfillment of the conditions set forth in
clause (a) of section 2.01(A) and to the further conditions that (i) the
representations and warranties made by Purchaser in Article IV hereof shall be
true in all material respects as of the date of this Agreement and as of the
time of the Closing, and (ii) Purchaser (or one of its affiliates) shall have
commenced the Offer and purchased all shares of Common Stock (if any) validly
tendered and not properly withdrawn pursuant to the terms of such Offer.
2.02 The Closing of the purchase by Purchaser of the Shares contemplated by
Section 1.01 of this Agreement shall take place substantially simultaneously
with the closing of the Offer and immediately following the satisfaction (or
waiver by the party entitled to the benefit thereof) of the conditions set forth
in this Article II. The Closing shall take place at the offices of the
Purchaser's attorneys, or at such other place as the parties hereto shall
mutually agree.
2.03 Upon the termination of the Merger Agreement pursuant to the
provisions of Article VI thereof, this Agreement also shall terminate without
any adverse consequence to the Stockholders and without any further action by
the parties hereto.
2.04 It is expressly understood and agreed that the Stockholders are
entering into this Agreement solely in their capacity as stockholders of the
Company, and nothing contained herein shall restrict or limit their rights,
duties or fiduciary obligations as directors or officers of the Company,
including without limitation their rights, duties and obligations under Section
4.3 of the Merger Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder represents and warrants to Purchaser as follows:
3
3.01 Such Stockholder has all necessary power and authority to execute and
deliver this Agreement and to sell, assign, transfer and deliver to Purchaser
the Shares pursuant to the terms and conditions of this Agreement. Such
Stockholder has sole voting power and sole power of disposition with respect to
all of the Shares with no restrictions material to this Agreement on the
Stockholder's voting rights or rights of disposition pertaining thereto, and the
Shares constitute all shares of Common Stock beneficially owned by the
Stockholder.
3.02 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
such Stockholder, and no other proceedings on the part of the Stockholder are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
such Stockholder and, assuming it has been duly and validly authorized, executed
and delivered by Purchaser, such agreement constitutes a valid and binding
agreement of such Stockholder, enforceable against the Stockholder in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect generally affecting the rights of creditors and subject to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Neither the execution and
delivery of this Agreement nor the consummation by such Stockholder of the
transactions contemplated hereby will conflict with or constitute a material
violation of or default under any contract, commitment, agreement, arrangement
or restriction of any kind to which such Stockholder is a party or by which such
Stockholder is bound. If this Agreement is being executed in a representative or
fiduciary capacity, the person signing this Agreement has full power and
authority to enter into and perform such agreement.
3.03 Each Stockholder has good title to the number of Shares appearing
opposite his or its name, free of all claims, liens, options, charges, security
interests or other legal or equitable rights and encumbrances of whatsoever
nature (collectively, "Encumbrances"), and there exist no restrictions on the
voting rights pertaining thereto, and Purchaser shall receive at the Closing
good title to all Shares purchased from such Stockholder, free of all
Encumbrances, and with no restriction on the voting rights pertaining thereto.
4
3.04 Such Stockholder's United States taxpayer identification number is as
set forth beneath his or its signature below or on Schedule I hereto. Such
Stockholder is not a foreign person as defined in Section 1445(f)(3) of the
Internal Revenue Code of 1986, as amended.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Stockholder as follows:
4.01 Purchaser is duly organized, validly existing and in good standing
under Delaware law and has all necessary power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
4.02 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
Purchaser and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Purchaser, and, assuming this Agreement has been duly and validly authorized,
executed and delivered by each Stockholder, this Agreement constitutes a valid
and binding agreement of Purchaser enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect generally affecting the rights of creditors and subject to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.03 Purchaser is acquiring the Shares for its own account and not with a
view to the public distribution thereof and will not offer to sell or otherwise
dispose of the Shares so acquired in violation of the Securities Act of 1933, as
amended.
ARTICLE V. COVENANTS OF THE STOCKHOLDERS
5.01 Each Stockholder hereby covenants and agrees that, on and after the
date hereof and during the term of this Agreement, such Stockholder will not
sell, transfer, assign, pledge, hypothecate or otherwise dispose of or limit its
right to vote in any manner, or otherwise encumber, any of the Shares which are
the subject matter of this Agreement, or enter into any agreement to do any of
the foregoing, except pursuant to Sections 1.01, 1.02 and 5.02 hereof. No
5
Stockholder will take any action that would have the effect of preventing or
disabling such Stockholder from performing his or its obligations under this
Agreement.
5.02 Subject in all respects to Sections 2.03 and 2.04 hereof, effective
upon the execution of this Agreement, each Stockholder appoints Greg Byrne and
Massimo Candela, and each of them, with power of substitution in each, as
proxies, (a) to vote the Shares at any meeting of stockholders of the Company or
any adjournment or adjournments thereof or (b) to execute and deliver consents
with respect to the Shares upon any and all such matters as each such proxy or
his substitute shall in his sole discretion deem proper. Each Stockholder
intends this proxy to be irrevocable and coupled with an interest. Each
Stockholder hereby revokes any proxy previously granted by such Stockholder with
respect to any of the Shares. Subject in all respects to Sections 2.03 and 2.04
hereof, effective upon the execution and delivery of this Agreement, each
Stockholder hereby agrees to vote the Shares in favor of the approval of the
Merger and adoption of the Merger Agreement at any meeting of stockholders of
the Company or any adjournment or adjournments thereof and in opposition to any
transaction or action inconsistent with the Merger or the Merger Agreement and,
if requested by Purchaser, to execute and deliver a consent to the approval of
the Merger and adoption of the Merger Agreement and in opposition to any
transaction or action inconsistent with the Merger or the Merger Agreement.
5.03 Each Stockholder shall, as soon as practicable after the execution and
delivery of this Agreement, take all reasonable action required, if any, (i) to
obtain all waivers, consents, approvals and agreements of any third parties,
including governmental authorities, necessary or advisable to authorize, approve
or permit the purchase and sale of Shares pursuant hereto, (ii) to release all
encumbrances, if any, on the Shares, and (iii) to cooperate with Purchaser in
defending any legal proceedings, whether judicial or administrative and whether
brought derivatively or on behalf of third parties (including government
agencies or officials), challenging this Agreement.
5.04 Simultaneously with the purchase of his Shares, each Stockholder who
is a director of the Company shall submit his written resignation as a director
of the Company effective as of the date of such resignation.
6
ARTICLE VI. MISCELLANEOUS
6.01 In the event the Company institutes any change in the Common Stock by
reason of a stock dividend, split-up, merger, recapitalization, combination,
conversion, exchange of shares or the like, the number and kind of Shares
subject hereto and the Purchase Price shall be appropriately adjusted to reflect
changes made in the Common Stock.
6.02 This Agreement will be governed by and construed in accordance with
the internal laws of the State of Delaware, without regard to the principles of
conflicts of law. This Agreement may be executed simultaneously in counterparts,
each of which will be deemed to be an original but all of which together will
constitute one and the same instrument.
6.03 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
6.04 From time to time, at Purchaser's request and without further
consideration, each Stockholder will execute and deliver to Purchaser such
documents and take such action as Purchaser may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Purchaser good title to the Shares being sold by such Stockholder, including,
but not limited to, using its best efforts to cause the Company's transfer agent
to transfer the Shares on the transfer books of the Company to Purchaser.
6.05 This Agreement will be binding upon, inure to the benefit of and be
enforceable by (i) each Stockholder and such Stockholder's heirs, beneficiaries,
representatives, successors and assigns, and (ii) Purchaser's successors and
permitted assigns. Each Stockholder agrees that damages would be an inadequate
remedy for breach of this Agreement and that the obligations of the parties
hereto shall be enforced by the remedies of specific enforcement and injunctive
relief. This Agreement may not be assigned by the parties hereto, except that
Purchaser may assign its rights hereunder to any direct or indirect subsidiary
of Purchaser.
6.06 In furtherance of this Agreement, each Stockholder hereby agrees to
cause, within five business days of the date hereof, all certificates for the
Shares to be legended to the effect that they are subject to the terms of this
Agreement (and that this Agreement places limits on the voting and transfer of
7
the Shares), and each Stockholder acknowledges that the Company, pursuant to
Section 4.11 of the Merger Agreement, is issuing stop transfer instructions to
the transfer agent for the Common Stock with respect to any transfer of Shares
other than to Purchaser or any its affiliates.
6.07 This Agreement, and the documents referred to herein or delivered
pursuant hereto which form a part hereof, contain the entire understanding of
the parties hereto with respect to its subject matter, and each party hereto
represents and acknowledges that it has not relied in any way upon any other
agreements or understandings. There are no restrictions, agreements, promises,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter. This Agreement may be amended only by a written
instrument duly executed by all parties hereto. Any condition to a party's
obligations hereunder may be waived by such party.
6.08 All notices, claims certificates, requests, demands and other
communications hereunder ("notices") will be given in writing and will be deemed
to have been duly given if delivered or mailed (registered or certified mail,
postage prepaid, return receipt requested) or by facsimile transmission as
6
follows (or at such other address for a party as shall be specified by like
notice):
(a) If to the Purchaser, to:
Robert W. Forman
Shapiro Forman Allen Miller & McPherson LLP
380 Madison Avenue
N ew York, NY 10017
Fax no. 212 557-1275
(b) If to any Stockholder, to the address set forth below such
Stockholder's signature below, with a copy to:
8
Vernon R. Proctor, Esquire
The Bayard Firm
222 Delaware Avenue, Suite 900
Wilmington, DE 19801
Fax. No. 302 658-6395
6.09 In the event any party shall commence any legal proceeding to enforce
its rights under this Agreement, the prevailing party or parties in such
proceeding shall be entitled all legal fees and expenses incurred by it or them
in connection with such proceeding from the other party or parties. A party
commencing any proceeding shall not be deemed to be a prevailing party unless it
shall have obtained a final judgment in its favor in such proceeding that is no
longer subject to appeal.
6.10 The parties agree to cooperate in connection with obtaining all
regulatory approvals, if any, required to be obtained in connection with this
Agreement, so as to minimize costs to be incurred by each of the parties.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
/s/ Gino N. Pala
----------------
Gino Pala
/s/ Gino N. Pala
----------------
Gino Pala, as trustee of the Janice Pala
Declaration of Trust
/s/ Richard F. Joyce
--------------------
Richard F. Joyce, individually and as
joint tenant with Deborah P. Joyce
/s/ Richard Asta
----------------
Richard Asta
/s/ Len Dahlberg
----------------
Len Dahlberg
/s/ John Adornetto
------------------
John Adornetto
/s/ Laura Hemmings
------------------
Laura Hemmings
/s/ Deborah P. Joyce
--------------------------------------
Deborah P. Joyce, (a) individually, (b) as
Trustee of the Second Janice Pala
Declaration of Trust, (c) as Custodian
Shares in the names of Ryan F. Joyce, Kyle
P. Joyce, Kevin M. Joyce and Daniel P. Joyce
and (d) as Joint Tenant With Richard F.
Joyce
10
PENCIL ACQUISITION CORP.
By: /s/ Massimo Candela
--------------------
11
ANNEX I
-------
Indebtedness (including
No. of Shares accrued interest
Stockholder Beneficially Owned through 11/30/04)
----------- ------------------ -----------------
Gino N. Pala 485,670 $208,997.38
Gino N. Pala as Trustee of
Janice Pala Trust dated
1/24/91 150,000
Gino N. Pala as Custodian
for Grandchildren 12,800
Richard F. Joyce 42,145 $133.618.83
Richard F. Joyce and
Debbie Joyce jointly 3,310
Debbie Joyce 2,900
Debbie Joyce as Trustee
for UA dated 5/11/92 97,420
Laura Hemmings 6,365 $19,087.04
Debbie Joyce as Custodian
for Ryan Joyce 5,800
Debbie Joyce as Custodian
for Kyle Joyce 9,120
Debbie Joyce as Custodian
for Kevin Joyce 9,120
Debbie Joyce as Custodian
for Daniel Joyce 9,120
Leonard D. Dahlberg, Jr. 8,094 $54,068.45
Richard A. Asta 58,145 $130,485.10
John Adornetto 11,815 $33,127.74
12