AGREEMENT AND PLAN OF MERGER
dated as of
June 4, 1999
among
HONEYWELL INC.,
ALLIEDSIGNAL INC.
and
BLOSSOM ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger.................................................2
SECTION 1.2 Conversion Of Shares.......................................2
SECTION 1.3 Surrender And Payment......................................3
SECTION 1.4 Stock Options and Equity Awards...........................5
SECTION 1.5 Adjustments................................................6
SECTION 1.6 Fractional Shares..........................................6
SECTION 1.7 Withholding Rights.........................................6
SECTION 1.8 Lost Certificates..........................................6
SECTION 1.9 Shares Held by Company Affiliates..........................7
SECTION 1.10 Appraisal Rights..........................................7
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Parent Name Change.........................................7
SECTION 2.2 Parent Board of Directors; CEO.............................7
SECTION 2.3 Certificate of Incorporation of the Surviving Corporation..8
SECTION 2.4 By-laws of the Surviving Corporation.......................8
SECTION 2.5 Directors and Officers of the Surviving Corporation........8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power..............................9
SECTION 3.2 Corporate Authorization....................................9
SECTION 3.3 Governmental Authorization................................10
SECTION 3.4 Non-Contravention.........................................10
SECTION 3.5 Capitalization............................................11
SECTION 3.6 Subsidiaries..............................................12
SECTION 3.7 Commission Filings........................................13
SECTION 3.8 Financial Statements......................................13
SECTION 3.9 Disclosure Documents......................................13
SECTION 3.10 Absence of Certain Changes...............................14
SECTION 3.11 No Undisclosed Material Liabilities......................15
SECTION 3.12 Litigation...............................................16
SECTION 3.13 Taxes....................................................16
SECTION 3.14 Employee Benefit Plans...................................17
SECTION 3.15 Compliance with Laws.....................................18
SECTION 3.16 Finders' or Advisors' Fees...............................18
SECTION 3.17 Environmental Matters....................................18
SECTION 3.18 Opinion of Financial Advisor.............................19
SECTION 3.19 Pooling; Tax Treatment...................................19
SECTION 3.21 Takeover Statutes and Charter Provisions.................19
SECTION 3.22 Rights Agreement.........................................20
SECTION 3.23 Intellectual Property Matters............................20
SECTION 3.24 Year 2000 Compliance Matters.............................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 4.1 Corporate Existence and Power.............................21
SECTION 4.2 Corporate Authorization...................................21
SECTION 4.3 Governmental Authorization................................22
SECTION 4.4 Non-Contravention.........................................23
SECTION 4.5 Capitalization............................................23
SECTION 4.6 Subsidiaries..............................................24
SECTION 4.7 Commission Filings........................................25
SECTION 4.8 Financial Statements......................................25
SECTION 4.9 Disclosure Documents......................................25
SECTION 4.10 Absence of Certain Changes...............................26
SECTION 4.11 No Undisclosed Material Liabilities......................27
SECTION 4.12 Litigation...............................................28
SECTION 4.13 Taxes....................................................28
SECTION 4.14 Employee Benefit Plans...................................28
SECTION 4.15 Compliance with Laws.....................................30
SECTION 4.16 Finders' or Advisors' Fees...............................30
SECTION 4.17 Environmental Matters....................................30
SECTION 4.18 Opinion of Financial Advisor.............................30
SECTION 4.19 Pooling; Tax Treatment...................................30
SECTION 4.21 Takeover Statutes........................................31
SECTION 4.22 Intellectual Property Matters............................31
SECTION 4.23 Year 2000 Compliance Matters.............................31
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 Conduct of the Company....................................32
SECTION 5.2 Company Stockholder Meeting; Proxy Material...............34
ARTICLE VI
COVENANTS OF PARENT
SECTION 6.1 Conduct of Parent.........................................35
SECTION 6.2 Obligations of Merger Subsidiary..........................38
SECTION 6.3 Director and Officer Liability............................38
SECTION 6.4 Parent Stockholder Meeting; Form S-4......................38
SECTION 6.5 Stock Exchange Listing....................................39
SECTION 6.6 Employee Benefits.........................................39
SECTION 6.7 Employment Agreement......................................42
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
SECTION 7.1 Reasonable Best Efforts...................................42
SECTION 7.2 Certain Filings...........................................44
SECTION 7.3 Access to Information.....................................44
SECTION 7.4 Tax and Accounting Treatment..............................44
SECTION 7.5 Public Announcements......................................45
SECTION 7.6 Further Assurances........................................45
SECTION 7.7 Notices of Certain Events.................................45
SECTION 7.8 Affiliates................................................46
SECTION 7.9 Payment of Dividends......................................46
SECTION 7.10 No Solicitation..........................................47
SECTION 7.11 Letters from Accountants.................................49
SECTION 7.12 Takeover Statutes........................................49
SECTION 7.13 Headquarters.............................................50
SECTION 7.14 Integration..............................................50
SECTION 7.15 Transfer Statutes........................................50
SECTION 7.16 Section 16(b)............................................50
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 Conditions to the Obligations of Each Party...............51
SECTION 8.2 Conditions to the Obligations of Parent and Merger
Subsidiary.............................................52
SECTION 8.3 Conditions to the Obligations of the Company..............53
ARTICLE IX
TERMINATION
SECTION 9.1 Termination...............................................54
SECTION 9.2 Effect of Termination.....................................55
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Notices..................................................55
SECTION 10.2 Non-Survival of Representations and Warranties..........56
SECTION 10.3 Amendments; No Waivers...................................57
SECTION 10.4 Expenses.................................................57
SECTION 10.5 Company Termination Fee..................................57
SECTION 10.6 Parent Termination Fee...................................59
SECTION 10.7 Successors and Assigns...................................60
SECTION 10.8 Governing Law............................................60
SECTION 10.9 Jurisdiction.............................................60
SECTION 10.10 Waiver of Jury Trial....................................61
SECTION 10.11 Counterparts; Effectiveness.............................61
SECTION 10.12 Entire Agreement........................................61
SECTION 10.13 Captions................................................61
SECTION 10.14 Severability............................................61
EXHIBITS
Exhibit A - Form of By-laws Amendment
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Parent Affiliate's Letter
Exhibit D - Form of Company Affiliate's Letter
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DEFINITIONS
Section
368 Reorganization......................................... SECTION 3.19(b)
Acquisition Proposal....................................... SECTION 7.10(b)
Affected Employees......................................... SECTION 6.6(b)
Agreement.................................................. Preamble
Canadian Act............................................... SECTION 4.3
Certificate ............................................... SECTION 1.2(c)
Change in Control.......................................... SECTION 6.6(a)
Closing.................................................... SECTION 1.1(d)
Closing Date............................................... SECTION 1.1(d)
Code....................................................... Recitals
Common Stock Issuance...................................... SECTION 4.2(a)
Common Stock Issuance Approval ............................ SECTION 4.2(a)
Commission................................................. Recitals
Company.................................................... Preamble
Company 10-K............................................... SECTION 3.6(b)
Company 10-Q............................................... SECTION 3.7(a)
Company Balance Sheet...................................... SECTION 3.8
Company Balance Sheet Date................................. SECTION 3.8
Company Commission Documents............................... SECTION 3.7(a)
Company Common Stock....................................... Recitals
Company Convertible Security............................... SECTION 3.5
Company Employee Plans..................................... SECTION 3.14(a)
Company Disclosure Schedules............................... Article III
Company Option Agreement................................... Recitals
Company Preferred Stock.................................... SECTION 3.5
Company Proxy Statement.................................... SECTION 3.9(a)
Company Rights............................................. SECTION 3.5
Company Rights Agreement................................... SECTION 3.5
Company Stock Option....................................... SECTION 1.4(a)
Company Stock Plans........................................ SECTION 1.4(a)
Company Stockholder Approval............................... SECTION 3.2
Company Stockholder Meeting................................ SECTION 5.2
Company Subsidiary Convertible Security.................... SECTION 3.6(b)
Confidentiality Agreement.................................. SECTION 7.3
Delaware Law............................................... SECTION 1.1(b)
EC Merger Regulation....................................... SECTION 3.3
Effective Time............................................. SECTION 1.1(a)
End Date................................................... SECTION 9.1(b)(i)
Environmental Laws......................................... SECTION 3.17(b)
ERISA...................................................... SECTION 3.14(a)
Exchange Act............................................... SECTION 3.3(f)
Exchange Agent............................................. SECTION 1.3(a)
Exchange Ratio............................................. SECTION 1.2(a)(iii)
Form S-4................................................... SECTION 4.9(a)
GAAP....................................................... Recitals
Hazardous Materials........................................ SECTION 3.17(b)
HSR Act.................................................... SECTION 3.3
Indemnitees................................................ SECTION 6.3(a)
Intellectual Property...................................... SECTION 3.23(b)
Lien....................................................... SECTION 3.4
Material Adverse Effect.................................... SECTION 3.1
Merger..................................................... Recitals
Merger Consideration....................................... SECTION 1.2(b)
Merger Subsidiary.......................................... Preamble
NYSE....................................................... SECTION 1.6
Option Agreements.......................................... Recitals
Parent..................................................... Preamble
Parent 10-K................................................ SECTION 4.6(b)
Parent 10-Q................................................ SECTION 4.7(a)
Parent Balance Sheet....................................... SECTION 4.8
Parent Balance Sheet Date.................................. SECTION 4.8
Parent Commission Documents................................ SECTION 4.7(a)
Parent Common Stock........................................ Recitals
Parent Convertible Security................................ SECTION 4.5
Parent Disclosure Schedules................................ Article IV
Parent Employee Plans...................................... SECTION 4.14(a)
Parent Option Agreement.................................... Recitals
Parent Preferred Stock..................................... SECTION 4.5
Parent Proxy Statement..................................... SECTION 4.9(a)
Parent Stockholder Approval................................ SECTION 4.2(a)
Parent Stockholder Meeting................................. SECTION 6.4(a)
Parent Subsidiary Convertible Security..................... SECTION 4.6(b)
Person..................................................... SECTION 1.3(c)
Securities Act............................................. SECTION 1.4(c)
Shares..................................................... Recitals
Subsidiary................................................. SECTION 3.6(a)
Superior Proposal.......................................... SECTION 7.10(b)
Surviving Corporation...................................... SECTION 1.1(b)
Tax Returns................................................ SECTION 3.13
Taxes...................................................... SECTION 3.13
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June
4, 1999 by and among HONEYWELL INC., a Delaware corporation (the
"Company"), ALLIEDSIGNAL INC., a Delaware corporation ("Parent"), and
BLOSSOM ACQUISITION CORP., a newly formed Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved this Agreement, and deem it
advisable and in the best interests of their respective stockholders to
consummate the merger of Merger Subsidiary with and into the Company on the
terms and conditions set forth in this Agreement (the "Merger");
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger qualify as a "reorganization" within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling of interests" under United States generally
accepted accounting principles ("GAAP") and the rules and regulations of
the Securities and Exchange Commission (the "Commission"); and
WHEREAS, as a condition and inducement to each of Parent's and the
Company's willingness to enter into this Agreement, concurrently with the
execution and delivery of this Agreement, Parent and the Company are
entering into (i) a Stock Option Agreement dated as of the date of this
Agreement (the "Parent Option Agreement"), pursuant to which the Company is
granting to Parent an option to purchase shares of common stock, par value
$1.50 per share, of the Company ("Company Common Stock") at $109.453 per
share, under certain circumstances, and (ii) a Stock Option Agreement dated
as of the date of this Agreement (the "Company Option Agreement" and,
together with the Parent Option Agreement, the "Option Agreements"),
pursuant to which Parent is granting to the Company an option to purchase
shares of the common stock, par value $1.00 per share, of Parent ("Parent
Common Stock") at $58.375 per share, under certain circumstances.
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein,
the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Subsidiary will file a certificate of merger with the Secretary
of State of the State of Delaware and make all other filings or recordings
required by Delaware Law to be made in connection with the Merger. The
Merger shall become effective at such time as the certificate of merger is
duly filed with the Secretary of State of the State of Delaware or, if
agreed to by the Company and Parent, at such later time as is specified in
the certificate of merger (the "Effective Time").
(b) At the Effective Time, Merger Subsidiary shall be merged
with and into the Company in accordance with the requirements of the
General Corporation Law of the State of Delaware (the "Delaware Law"),
whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation").
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be
subject to all of the restrictions, disabilities and duties of the Company
and Merger Subsidiary, all as provided under Delaware Law.
(d) The closing of the Merger (the "Closing") shall take place
(i) at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New
York Plaza, New York, New York, as soon as practicable, but in any event
within three business days, after the day on which the last to be fulfilled
or waived of the conditions set forth in Article VIII (other than those
conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and
time or on such other date as the Company and Parent may agree in writing
(the "Closing Date").
SECTION 1.2 Conversion Of Shares.
(a) At the Effective Time by virtue of the Merger and without
any action on the part of the holder thereof:
(i) each share of the Company Common Stock held by the
Company as treasury stock or owned by Parent or any subsidiary of
Parent or the Company immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto;
(ii) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
(iii) each share of Company Common Stock outstanding
immediately prior to the Effective Time shall, except as otherwise
provided in Section 1.2(a)(i), be converted into the right to receive
1.875 shares of Parent Common Stock (the "Exchange Ratio").
(b) All Parent Common Stock issued as provided in Section
1.2(a)(iii) shall be of the same class and shall have the same terms as the
currently outstanding Parent Common Stock. The shares of Parent Common
Stock to be received as consideration pursuant to the Merger with respect
to shares of Company Common Stock (together with cash in lieu of fractional
shares of Parent Common Stock as specified below) is referred to herein as
the "Merger Consideration."
(c) From and after the Effective Time, all shares of Company
Common Stock converted in accordance with Section 1.2(a)(iii) shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares (a "Certificate") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any
dividends payable pursuant to Section 1.3(f). From and after the Effective
Time, all certificates representing the common stock of Merger Subsidiary
shall be deemed for all purposes to represent the number of shares of
common stock of the Surviving Corporation into which they were converted in
accordance with Section 1.2(a)(ii).
SECTION 1.3 Surrender And Payment.
(a) Prior to the Effective Time, Parent shall appoint The Bank
of New York or such other exchange agent reasonably acceptable to the
Company (the "Exchange Agent") for the purpose of exchanging Certificates
for the Merger Consideration. Parent will make available to the Exchange
Agent, as needed, the Merger Consideration to be delivered in respect of
the shares of Company Common Stock. Promptly after the Effective Time,
Parent will send, or will cause the Exchange Agent to send, to each holder
of record of shares of Company Common Stock as of the Effective Time, a
letter of transmittal for use in such exchange (which shall specify that
the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) in such
form as the Company and Parent may reasonably agree, for use in effecting
delivery of shares of Company Common Stock to the Exchange Agent.
(b) Each holder of shares of Company Common Stock that have been
converted into a right to receive the Merger Consideration, upon surrender
to the Exchange Agent of a Certificate, together with a properly completed
letter of transmittal, will be entitled to receive the Merger Consideration
in respect of the shares of Company Common Stock represented by such
Certificate. Until so surrendered, each such Certificate shall, after the
Effective Time, represent for all purposes only the right to receive such
Merger Consideration.
(c) If any portion of the Merger Consideration is to be
registered in the name of a Person other than the Person in whose name the
applicable surrendered Certificate is registered, it shall be a condition
to the registration of the Merger Consideration that the surrendered
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such delivery of the Merger
Consideration shall pay to the Exchange Agent any transfer or other taxes
required as a result of such registration in the name of a Person other
than the registered holder of such Certificate or establish to the
reasonable satisfaction of the Exchange Agent that such tax has been paid
or is not payable. For purposes of this Agreement, "Person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock. If, after the
Effective Time, Certificates are presented to the Exchange Agent, the
Surviving Corporation or Parent, they shall be canceled and exchanged for
the Merger Consideration provided for, and in accordance with the
procedures set forth, in this Article I.
(e) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the
holders of shares of Company Common Stock one year after the Effective Time
shall be returned to Parent, upon demand, and any such holder who has not
exchanged his shares of Company Common Stock for the Merger Consideration
in accordance with this Section 1.3 prior to that time shall thereafter
look only to Parent for delivery of the Merger Consideration in respect of
such holder's shares. Notwithstanding the foregoing, Parent shall not be
liable to any holder of shares for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property laws.
(f) No dividends or other distributions with respect to shares
of Parent Common Stock shall be paid to the holder of any unsurrendered
Certificates until such Certificates are surrendered as provided in this
Section 1.3. Subject to the effect of applicable laws, following such
surrender, there shall be paid, without interest, to the record holder of
the shares of Parent Common Stock issued in exchange therefor (i) at the
time of such surrender, all dividends and other distributions payable in
respect of such Parent Common Stock with a record date after the Effective
Time and a payment date on or prior to the date of such surrender and not
previously paid and (ii) at the appropriate payment date, the dividends or
other distributions payable with respect to such Parent Common Stock with a
record date after the Effective Time but with a payment date subsequent to
such surrender. For purposes of dividends or other distributions in respect
of Parent Common Stock, all shares of Parent Common Stock to be issued
pursuant to the Merger shall be entitled to dividends pursuant to the
immediately preceding sentence as if issued and outstanding as of the
Effective Time.
SECTION 1.4 Stock Options and Equity Awards.
(a) At the Effective Time, each outstanding employee or director
option to purchase shares of Company Common Stock (a "Company Stock
Option") granted under the Company's plans or agreements pursuant to which
Company Stock Options or other stock-based awards of the Company have been
or may be granted (collectively, the "Company Stock Plans"), whether vested
or not vested, shall be deemed assumed by Parent. At and after the
Effective Time (1) each Company Stock Option then outstanding shall entitle
the holder thereof to acquire the number (rounded down to the nearest whole
number) of shares of Parent Common Stock determined by multiplying (x) the
number of shares of Company Common Stock subject to such Company Stock
Option immediately prior to the Effective Time by (y) the Exchange Ratio,
and (2) the exercise price per share of Parent Common Stock subject to any
such Company Stock Option at and after the Effective Time shall be an
amount (rounded down to the nearest one-hundredth of a cent) equal to (x)
the exercise price per share of Company Common Stock subject to such
Company Stock Option prior to the Effective Time, divided by (y) the
Exchange Ratio. Other than as provided above, as of and after the Effective
Time, each Company Stock Option shall be subject to the same terms and
conditions as in effect immediately prior to the Effective Time (including,
but not limited to, the acceleration of exercisability as of the date of
approval of the Merger by the shareholders of the Company), but giving
effect to the Merger. Prior to the approval of the Merger by the
shareholders of the Company, the Company shall take all actions necessary
to cause all restricted shares, restricted stock units and any other
stock-based awards outstanding under the Company Stock Plans and the
Honeywell Non-Employee Directors Fee and Stock Unit Plan which would
otherwise be settled in cash to be settled in shares of Parent Common Stock
(with, in the case of restricted stock units, each such unit representing
one share of Company Common Stock and with the number of shares of Parent
Common Stock to be issued reflecting the Exchange Ratio). To the extent
that any such award of restricted shares, restricted stock units or other
stock-based award does not become fully vested and free of restrictions in
connection with the transactions contemplated hereby, such award shall be
converted into a similar award for that number of shares of Parent Common
Stock equal to the product of (1) the number of shares of Company Common
Stock subject to the portion of such award which had not become fully
vested and free of restrictions and (2) the Exchange Ratio, and shall
otherwise remain subject to the terms and conditions in effect immediately
prior to the Effective Time (it being understood that any performance
criteria to which such award remains subject may be equitably adjusted by
the Management Development and Compensation Committee of Parent Board
(taking into account the recommendation of the Personnel Committee of the
Company Board) to reflect the consummation of the Merger).
(b) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock
for delivery upon exercise of Company Stock Options and settlement of other
stock-based awards of the Company at and after the Effective Time.
(c) On or as soon as practicable after the Effective Time,
Parent shall file with the Commission a registration statement on an
appropriate form or a post-effective amendment to a previously filed
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Parent Common Stock subject to
Company Stock Options and other stock-based awards of the Company, and
shall use its reasonable best efforts to maintain the current status of the
prospectus contained therein, as well as comply with any applicable state
securities or "blue sky" laws, for so long as such options or other
stock-based awards remain outstanding.
SECTION 1.5 Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent or the Company shall occur by
reason of any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any similar
transaction, or any stock dividend thereon with a record date during such
period, the Merger Consideration shall be appropriately adjusted to provide
the holders of shares of Company Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
SECTION 1.6 Fractional Shares. No fractional shares of Parent Common
Stock shall be issued in the Merger, but in lieu thereof, each holder of
shares of Company Common Stock otherwise entitled to a fractional share of
Parent Common Stock will be entitled to receive, from the Exchange Agent in
accordance with the provisions of this Section 1.6, an amount of cash,
without interest thereon (rounded to the nearest whole cent), equal to the
product of (i) such fraction of a share of Parent Common Stock, multiplied
by (ii) the average of the closing prices of the shares of Parent Common
Stock on the New York Stock Exchange (the "NYSE") Composite Transaction
Reporting System as reported in The Wall Street Journal (but subject to
correction for typographical or other manifest errors in such reporting)
over the ten trading-day period immediately preceding the Closing Date.
SECTION 1.7 Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any person pursuant to this Article 1 such amounts as
it is required to deduct and withhold with respect to the making of such
payment under any provision of federal, state, local or foreign tax law. To
the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares
of Company Common Stock in respect of which such deduction and withholding
was made by the Surviving Corporation or Parent, as the case may be.
SECTION 1.8 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming the Certificate to be lost, stolen or destroyed and, if
required by Parent or the Surviving Corporation, the posting by that Person
of a bond, in such reasonable amount as the Surviving Corporation may
direct (which shall not exceed amounts generally required by Parent from
holders of Parent Common Stock under similar circumstances), as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration to be paid in
respect of the Shares represented by such Certificates as contemplated by
this Article I.
SECTION 1.9 Shares Held by Company Affiliates. Anything to the
contrary in this Agreement notwithstanding, no shares of Parent Common
Stock (or certificates therefor) shall be issued in exchange for any
Certificate to any Person who may be an "affiliate" of the Company
(identified pursuant to Section 7.8) until the Person shall have delivered
to Parent and the Company a duly executed letter as contemplated by Section
7.8.
SECTION 1.10 Appraisal Rights. In accordance with Section 262 of the
Delaware Law, no appraisal rights shall be available to holders of shares
of Company Common Stock in connection with the Merger.
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Parent Name Change. At the Effective Time, Parent shall
cause its certificate of incorporation to be amended to change its name to
" Honeywell International Inc." by causing a Subsidiary of Parent to be
merged with and into Parent and having the terms of such merger provide for
such name change.
SECTION 2.2 Parent Board of Directors; CEO; By-law Amendment.
(a) Prior to the Effective Time, the Board of Directors of
Parent shall take all action necessary to cause the Board of Directors of
Parent to consist, as of the Effective Time, of fifteen directors, (x) nine
of whom shall be persons designated by Parent who were directors of Parent
prior to the Effective Time and (y) six of whom shall be persons designated
by the Company who were directors of the Company prior to the Effective
Time. No more than one person who is an officer of Parent shall be
designated by Parent, and no more than one person who is an officer of the
Company shall be designated by the Company, in each case pursuant to the
prior sentence. If any such persons are not able to serve, the party on
whose Board such person presently sits shall select a replacement. The
persons designated to serve as directors by each party shall be apportioned
proportionately among each of the three classes of directors; it being
understood, however, that Michael R. Bonsignore shall be elected to serve
as a member of the class with the longest tenure as of the Effective Time.
(b) Prior to the Effective Time, the Board of Directors of
Parent shall take all necessary actions to cause (x) the following
committees of the Board of Directors of Parent to exist as of the Effective
Time: Audit Committee, Corporate Governance Committee, Corporate
Responsibility Committee, Management Development and Compensation
Committee, Retirement Plans and Finance Committee and Technology Committee;
and (y) the Chairpersons of four of those committees to be persons
designated by Parent and the Chairpersons of two of those committees to be
persons designated by the Company.
(c) Prior to the Effective Time, the Board of Directors of
Parent shall take all action necessary (x) to cause Michael R. Bonsignore
to be elected as Chief Executive Officer of Parent as of the Effective
Time, (y) to cause Michael R. Bonsignore to be elected as Chairman of the
Board of Directors of Parent effective as of April 1, 2000 or such earlier
date as Lawrence A. Bossidy shall retire as Chairman of the Board of
Directors of Parent, and (z) to create an Executive Office (the "Executive
Office") as of the Effective Time consisting of Lawrence A. Bossidy until
his retirement as Chairman of the Board of Directors of Parent, Michael R.
Bonsignore as the Chief Executive Officer of Parent and, after the
retirement of Lawrence A. Bossidy, as Chairman of the Board of Directors of
Parent, and Robert D. Johnson and Giannantonio Ferrari, each of whom shall
be elected as a Chief Operating Officer and an Executive Vice President of
Parent.
(d) At the Effective Time, Parent shall cause its By-laws to be
amended to incorporate the provisions set forth in Exhibit A hereto (such
amendment of the By-laws of Parent being referred to herein as the "By-laws
Amendment").
SECTION 2.3 Certificate of Incorporation of the Surviving Corporation.
The certificate of incorporation of the Company in effect at the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
(until amended in accordance with applicable law), except that the first
sentence of Article FOURTH thereof shall be amended as of the Effective
Time to read in its entirety as follows: "The Corporation shall have the
authority to issue 1,000 shares of par value $1.50 per share designated as
Common Stock."
SECTION 2.4 By-laws of the Surviving Corporation. The by-laws of the
Company in effect at the Effective Time shall be the by-laws of the
Surviving Corporation (until amended in accordance with applicable law).
SECTION 2.5 Directors and Officers of the Surviving Corporation. From
and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (a) the
directors of Merger Subsidiary at the Effective Time shall be the directors
of the Surviving Corporation, who shall consist as of the Effective Time of
those people mutually agreed upon by the chief executive officers of the
Company and Parent, and (b) the officers of the Company at the Effective
Time shall be the officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as set forth
in the disclosure schedules delivered by the Company to Parent
simultaneously with the execution of this Agreement (the "Company
Disclosure Schedules") or the Company Commission Documents (as defined in
Section 3.7(a)) filed prior to the date of this Agreement:
SECTION 3.1 Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except for those the absence of
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. For
purposes of this Agreement, a "Material Adverse Effect" with respect to any
Person means a material adverse effect on the financial condition,
business, liabilities, properties, assets or results of operations, taken
as a whole, of this Person and its Subsidiaries, taken as a whole, except
to the extent resulting from any changes in general United States or global
economic conditions or general economic conditions in industries in which
the Person competes or resulting from the announcement of the transaction
or any action required to be taken by the terms hereof. The Company has
heretofore made available to Parent true and complete copies of the
Company's certificate of incorporation and by-laws as currently in effect.
SECTION 3.2 Corporate Authorization.
(a) The execution, delivery and performance by the Company of
this Agreement and the Option Agreements and the consummation by the
Company of the transactions contemplated hereby and thereby are within the
Company's corporate powers and, except for any required approval by the
Company's stockholders in accordance with Delaware Law (the "Company
Stockholder Approval") in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action. The
affirmative vote of holders of the outstanding shares of Company Common
Stock having votes representing a majority of the votes of all such
outstanding capital stock, voting together as a single class, in favor of
the approval and adoption of this Agreement and the Merger is the only vote
of the holders of any of the Company's capital stock necessary in
connection with consummation of the Merger. Assuming due authorization,
execution and delivery of this Agreement and the Option Agreements by
Parent and/or Merger Subsidiary, as applicable, each of this Agreement and
the Option Agreements constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights, and to general equity principles.
(b) The Company's Board of Directors, at a meeting duly called
and held, has (i) determined that this Agreement and the Option Agreements
and the transactions contemplated hereby and thereby (including the Merger)
are fair to and in the best interests of the Company's stockholders, (ii)
approved and adopted this Agreement and the Option Agreements and the
transactions contemplated hereby and thereby (including the Merger), and
(iii) resolved (subject to Section 5.2) to recommend that the Company
stockholders vote for the approval and adoption of this Agreement and the
Merger.
SECTION 3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the Option Agreements and
the consummation by the Company of the transactions contemplated hereby and
thereby require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing
of a certificate of merger in connection with the Merger in accordance with
Delaware Law, (b) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (c)
compliance with any applicable requirements of Council Regulation No.
4064/89 of the European Community, as amended (the "EC Merger Regulation"),
(d) compliance with any other applicable requirements of foreign anti-trust
or investment laws, (e) compliance with any applicable environmental
transfer statutes, (f) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), (g) compliance with any
applicable requirements of the Securities Act and (h) other actions or
filings which if not taken or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the Company's consummation of the Merger.
SECTION 3.4 Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the Option Agreements and the
consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (a) contravene or conflict with the certificate
of incorporation or by-laws of the Company, (b) assuming compliance with
the matters referred to in Section 3.3 and subject to receipt of the
Company Stockholder Approval, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company or any of its
Subsidiaries (as defined in Section 3.6), (c) subject to receipt of the
Company Stockholder Approval, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its Subsidiaries or to a loss of any
benefit to which the Company or any of its Subsidiaries is entitled under
any provision of any agreement, contract or other instrument binding upon
the Company or any of its Subsidiaries or any license, franchise, permit or
other similar authorization held by the Company or any of its Subsidiaries,
or (d) result in the creation or imposition of any Lien on any asset of the
Company or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to
in clause (c) or (d) that would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset other than any such mortgage, lien, pledge, charge, security interest
or encumbrance (i) for Taxes (as defined in Section 3.13) not yet due or
being contested in good faith or (ii) which is a carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like lien arising in the
ordinary course of business. Neither the Company nor any Subsidiary of the
Company is a party to any agreement that expressly limits the ability of
the Company or any Subsidiary of the Company to compete in or conduct any
line of business or compete with any Person or in any geographic area or
during any period of time except to the extent that any such limitation,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent or the Surviving Corporation immediately after the Effective
Time.
SECTION 3.5 Capitalization. The authorized capital stock of the
Company consists of 375,000,000 shares of Company Common Stock and
25,000,000 shares of preferred stock, par value $1.00 per share (of which
2,000,000 are designated "Series B Junior Participating Preferred Stock"
and the remaining shares of such preferred stock are not subject to any
designation) (the "Company Preferred Stock"). As of the close of business
on June 1, 1999, there were outstanding (i) 126,841, 802 shares of Company
Common Stock and (ii) no shares of Company Preferred Stock (all of the
Series B Junior Participating Preferred Stock being reserved for issuance
in accordance with the Rights Agreement (the "Company Rights Agreement"),
dated as of January 16, 1996, by and between the Company and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent, pursuant to which the
Company has issued rights to purchase the Series B Junior Participating
Preferred Stock ("Company Rights")) and no other shares of capital stock or
other voting securities of the Company were then outstanding. All
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except
for (a) Company Stock Options to acquire no more than 6,491,358 shares of
Company Common Stock issued pursuant to the Company Stock Plans, (b)
Company Rights none of which are exercisable, (c) the option granted
pursuant to the Parent Option Agreement, (d) stock units for no more than
231,954 shares of Company Common Stock and (e) shares issuable under the
Company's employee stock purchase plans in the ordinary course of business
consistent with past practice, as of the close of business on June 1, 1999,
there were no outstanding options, warrants or other rights to acquire from
the Company, and no preemptive or similar rights, subscription or other
rights, convertible or exchangeable securities, agreements, arrangements or
commitments of any character, relating to the capital stock of the Company,
obligating the Company to issue, transfer or sell, any capital stock,
voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company or obligating the Company
to grant, extend or enter into any such option, warrant, subscription or
other right, convertible or exchangeable security, agreement, arrangement
or commitment (each of the foregoing, a "Company Convertible Security").
Since the close of business on June 1, 1999, the Company has not issued any
shares of capital stock or any Company Convertible Securities other than
the issuance of Company Common Stock in connection with the exercise of the
Company Stock Options described in clause (a) above and/or as permitted by
Section 5.1 hereof. Except as required by the terms of any Company Stock
Options, the Blossom Non-Employee Directors Fee and Stock Unit Plan and/or
as permitted by Section 5.1, there are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any Company
Convertible Securities.
SECTION 3.6 Subsidiaries.
(a) Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for those the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. For purposes of this Agreement, the word "Subsidiary" when used
with respect to any Person means any other Person, whether incorporated or
unincorporated, of which (i) more than fifty percent of the securities or
other ownership interests or (ii) securities or other interests having by
their terms ordinary voting power to elect more than fifty percent of the
board of directors or others performing similar functions with respect to
such corporation or other organization, is directly owned or controlled by
such Person or by any one or more of its Subsidiaries. Each Subsidiary of
the Company is duly qualified to do business and is in good standing in
each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except
for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(b) Except for directors' qualifying shares and except as set
forth in the Company's annual report on Form 10-K for the fiscal year ended
December 31, 1998 (the "Company 10-K"), all of the outstanding capital
stock of, or other ownership interests in, each Significant Subsidiary (as
such term is defined in rule 12b-2 under the Exchange Act) of the Company
is, directly or indirectly, owned by the Company. All shares of capital
stock of, or other ownership interests in, Subsidiaries of the Company,
directly or indirectly, owned by the Company are owned free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests), except as would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. There are
no outstanding options, warrants or other rights to acquire from the
Company or any of its Subsidiaries, and, except as may be required by
applicable foreign corporate laws, no preemptive or similar rights,
subscriptions or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of any Subsidiary of the Company, obligating the Company or
any of its Subsidiaries to issue, transfer or sell, any capital stock,
voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities
or ownership interests in, any Subsidiary of the Company or obligating the
Company or any Subsidiary of the Company to grant, extend or enter into any
such option, warrant, subscription or other right, convertible or
exchangeable security, agreement, arrangement or commitment (each of the
foregoing, a "Company Subsidiary Convertible Security"). There are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire from any Person (other than the
Company or a wholly owned Subsidiary of the Company) any outstanding shares
of capital stock of any Subsidiary of the Company or any Company Subsidiary
Convertible Securities.
SECTION 3.7 Commission Filings.
(a) The Company has made available to Parent (i) its annual
reports on Form 10-K for its fiscal years ended December 31, 1996, 1997 and
1998, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended
after December 31, 1998, (iii) its proxy or information statements relating
to meetings of, or actions taken without a meeting by, the stockholders of
the Company held since December 31, 1998, and (iv) all of its other
reports, statements, schedules and registration statements filed with the
Commission since December 31, 1998 (the documents referred to in this
Section 3.7(a) being referred to collectively as the "Company Commission
Documents"). The Company's quarterly report on Form 10-Q for its fiscal
quarter ended April 4, 1999 is referred to as the "Company 10-Q".
(b) As of its filing date, each Company Commission Document
complied as to form in all material respects with the applicable
requirements of the Exchange Act and the Securities Act.
(c) As of its filing date, each Company Commission Document
filed pursuant to the Exchange Act did not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
(d) Each registration statement, as amended or supplemented, if
applicable, filed by the Company pursuant to the Securities Act since
December 31, 1996, as of the date such statement or amendment became
effective did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
SECTION 3.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in its annual
reports on Form 10-K and the quarterly reports on Form 10-Q referred to in
Section 3.7 present fairly, in all material respects, the financial
position of the Company and its subsidiaries as of the dates thereof and
their results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments and the absence of notes in the
case of any unaudited interim financial statements), in each case in
conformity GAAP applied on a consistent basis (except as may be indicated
in the notes thereto). For purposes of this Agreement, "Company Balance
Sheet" means the consolidated balance sheet of the Company as of April 4,
1999 set forth in the Company 10-Q and "Company Balance Sheet Date" means
April 4, 1999.
SECTION 3.9 Disclosure Documents.
(a) Neither the proxy statement of the Company (the "Company
Proxy Statement") to be filed with the Commission in connection with the
Merger, nor any amendment or supplement thereto, will, at the date the
Company Proxy Statement or any such amendment or supplement is first mailed
to stockholders of the Company or at the time such stockholders vote on the
adoption and approval of this Agreement and the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company Proxy Statement will, when filed, comply as to form in all material
respects with the requirements of the Exchange Act. No representation or
warranty is made by the Company in this Section 3.9 with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Merger Subsidiary for inclusion or incorporation by
reference in the Company Proxy Statement.
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Parent Proxy
Statement (as defined in Section 4.9) or in the Form S-4 (as defined in
Section 4.9) or any amendment or supplement thereto will, at the time the
Parent Proxy Statement or any such supplement or amendment thereto is first
mailed to the stockholders of Parent or at the time the stockholders vote
on the matters constituting the Parent Stockholder Approval (as defined in
Section 4.2) or at the time the Form S-4 or any such amendment or
supplement becomes effective under the Securities Act or at the Effective
Time, as the case may be, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.10 Absence of Certain Changes. Since the Company Balance
Sheet Date and, other than with respect to clause (a) below, prior to the
date hereof, the Company and its Subsidiaries have conducted their
respective businesses in the ordinary course, consistent with past
practice, and there has not been:
(a) any event, occurrence or development which, individually or
in the aggregate, would have a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company (other than regular quarterly cash dividends payable by the Company
in respect of the shares of Company Common Stock consistent with past
practice), or any repurchase (other than repurchases of Company Common
Stock which occurred subsequent to the Company Balance Sheet Date and prior
to the date hereof), redemption or other acquisition by the Company or any
of its Significant Subsidiaries of any outstanding shares of their capital
stock or any Company Convertible Securities or Company Subsidiary
Convertible Securities (except (x) as required by the terms of any Company
Stock Option, (y) in accordance with any dividend reinvestment plan as in
effect on the date of this Agreement in the ordinary course of the
operation of such plan consistent with past practice and/or (z) as
otherwise permitted by Section 5.1);
(c) any amendment of any material term of any outstanding
security of the Company or any of its Significant Subsidiaries;
(d) any transaction or commitment made, or any contract,
agreement or settlement entered into, by (or judgment, order or decree
affecting) the Company or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any material amount
of assets) or any relinquishment by the Company or any of its Subsidiaries
of any contract or other right, in either case, material to the Company and
its Subsidiaries taken as a whole, other than transactions, commitments,
contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice and those contemplated by this
Agreement;
(e) any change in any method of accounting or accounting
practice (other than any change for tax purposes) by the Company or any of
its Subsidiaries, except for any such change which is not material or which
is required by reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or
amendment to any such existing arrangement with) any director, officer or
employee of the Company or any of its Subsidiaries, (ii) entering into of
any employment, deferred compensation, supplemental retirement or other
similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of the Company or any of its
Subsidiaries, (iii) increase in, or accelerated vesting and/or payment of,
benefits under any existing severance or termination pay policies or
employment agreements or (iv) increase in or enhancement of any rights or
features related to compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any of its Subsidiaries,
in each case, other than in the ordinary course of business consistent with
past practice or as permitted by this Agreement; or
(g) any material Tax election made or changed, any material
audit settled or any material amended Tax Returns filed.
SECTION 3.11 No Undisclosed Material Liabilities. There are no
liabilities of the Company or any Subsidiary of the Company of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, other than:
(a) liabilities disclosed or provided for in the Company Balance
Sheet or in the notes thereto;
(b) liabilities incurred since such date in the ordinary course
of business;
(c) liabilities which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company;
(d) liabilities disclosed in the Company Commission Documents
filed prior to the date of this Agreement; and
(e) liabilities under this Agreement.
SECTION 3.12 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries or any of
their respective properties or any of their respective officers or
directors before any court or arbitrator or any governmental body, agency
or official except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger.
SECTION 3.13 Taxes. Except as provided for in the Company Balance
Sheet (including the notes thereto) or as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, (i) all Company
Tax Returns required to be filed with any taxing authority by, or with
respect to, the Company and its Subsidiaries have been filed in accordance
with all applicable laws; (ii) the Company and its Subsidiaries have timely
paid all Taxes shown as due and payable on the Company Tax Returns that
have been so filed, and, as of the time of filing, the Company Tax Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of the Company and its Subsidiaries
(other than Taxes which are being contested in good faith and for which
adequate reserves are reflected on the Company Balance Sheet); (iii) the
Company and its Subsidiaries have made provision for all Taxes payable by
the Company and its Subsidiaries for which no Company Tax Return has yet
been filed; (iv) the charges, accruals and reserves for Taxes with respect
to the Company and its Subsidiaries reflected on the Company Balance Sheet
are adequate under GAAP to cover the Tax liabilities accruing through the
date thereof; (v) there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to the Company or any of its
Subsidiaries in respect of any Tax where there is a reasonable possibility
of an adverse determination; and (vi) to the best of the Company's
knowledge and belief, neither the Company nor any of its Subsidiaries is
liable for any Tax imposed on any entity other than such Person, except as
the result of the application of Treas. Reg. Sections 1.1502-6 (and any
comparable provision of the tax laws of any state, local or foreign
jurisdiction) to the affiliated group of which the Company is the common
parent. For purposes of this Agreement, "Taxes" shall mean any and all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, excise, stamp,
real or personal property, ad valorem, withholding, social security (or
similar), unemployment, occupation, use, production, service, service use,
license, net worth, payroll, franchise, severance, transfer, recording,
employment, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, profits,
disability, sales, registration, value added, alternative or add-on
minimum, estimated or other taxes, assessments or charges imposed by any
federal, state, local or foreign governmental entity and any interest,
penalties, or additions to tax attributable thereto. For purposes of this
Agreement, "Tax Returns" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
SECTION 3.14 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Company Employee
Plans" shall mean and include: each material management, consulting,
non-compete, employment, severance or similar contract, plan, including,
without limitation, all Company Stock Plans, arrangement or policy
applicable to any director, former director, employee or former employee of
the Company and each material plan, program, policy, agreement or
arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms
of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life
insurance benefits) or other employee benefits of any kind, whether funded
or unfunded, which is maintained, administered or contributed to by the
Company or any Subsidiary and covers any employee or director or former
employee or director of the Company or any Subsidiary, or under which the
Company has any liability contingent or otherwise (including but not
limited to each material "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), but excluding any such plan that is a "multiemployer plan," as
defined in Section 3(37) of ERISA).
(b) Each Company Employee Plan has been established and
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to
such Plan, except where failure to so comply would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) Neither the Company nor any affiliate of the Company has
incurred a liability under Title IV of ERISA that has not been satisfied in
full, and no condition exists that presents a material risk to the Company
or any affiliate of the Company of incurring any such liability other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due). All contributions required to be made
under the terms of any Company Employee Plan maintained in the United
States have been made, and, where applicable to a Company Employee Plan,
the Company and its affiliates have complied with the minimum funding
requirements under Section 412 of the Code and Section 302 of ERISA with
respect to each such Company Employee Plan.
(d) Each Company Employee Plan which is intended to be qualified
under section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from federal income tax pursuant to section 501(a) of the
Code and, to the Company's knowledge, no circumstances exist which will
adversely affect such qualification or exemption.
(e) No director or officer or other employee of the Company or
any of its Subsidiaries will become entitled to any retirement, severance
or similar benefit or enhanced or accelerated benefit (including any
acceleration of vesting or lapse of repurchase rights or obligations with
respect to any Company Stock Plans or other benefit under any compensation
plan or arrangement of the Company) solely as a result of the transactions
contemplated hereby; and (ii) no payment made or to be made to any current
or former employee or director of the Company or any of its affiliates by
reason of the transactions contemplated hereby (whether alone or in
connection with any other event) will constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
(f) Since the Company Balance Sheet Date, there has been no
amendment to, or change in employee participation or coverage under, any
Company Employee Plan which would increase materially the expense of
maintaining such Company Employee Plan above the level of the expense
incurred in respect thereof for the 12 months ended on the Company Balance
Sheet Date.
(g) The Company and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign statutes, laws, (including
without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders and codes respecting employment,
employment practices, labor, terms and conditions of employment and wages
and hours, and no work stoppage or labor strike against the Company and its
Subsidiaries are pending or threatened, nor are the Company and its
Subsidiaries involved in or threatened with any labor dispute, grievance,
or litigation relating to labor matters involving any employees, in each
case except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. There are no suits, actions, disputes,
claims (other than routine claims for benefits), investigations or audits
pending or, to the knowledge of the Company, threatened in connection with
any Company Employee Plan, but excluding any of the foregoing which would
not have a Material Adverse Effect on the Company.
SECTION 3.15 Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations
except for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
SECTION 3.16 Finders' or Advisors' Fees. Except for Bear, Stearns &
Co. Inc., a copy of whose engagement agreement has been provided to Parent,
there is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of the Company or
any of its Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.17 Environmental Matters.
(a) Except for matters which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, (i) no written
notice, notification, demand, request for information, citation, summons,
complaint or order has been received by, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened by any Person against, the
Company or any of its Subsidiaries, and no penalty has been assessed within
the past three years against the Company or any of its Subsidiaries, in
each case, with respect to any matters relating to or arising out of any
Environmental Law; (ii) the Company and its Subsidiaries are in compliance
with all Environmental Laws; and (iii) to the knowledge of the Company,
there are no liabilities of or relating to the Company or any of its
Subsidiaries relating to or arising out of any Environmental Law and, to
the knowledge of the Company, there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"Environmental Laws" means federal, state, local and foreign statutes,
laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, codes, injunctions, permits and governmental agreements relating to
human health and the environment, including, but not limited to, Hazardous
Materials; and the term "Hazardous Material" means all substances or
materials regulated as hazardous, toxic, explosive, dangerous, flammable or
radioactive under any Environmental Law including, but not limited to: (i)
petroleum, asbestos, or polychlorinated biphenyls and (ii) in the United
States, all substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution
Contingency Plan, 40 C.F.R. ss. 300.5.
SECTION 3.18 Opinion of Financial Advisor. The Company has received
the opinion of Bear, Stearns & Co. Inc. to the effect that, as of the date
of its opinion, the Exchange Ratio is fair from a financial point of view
to the holders of shares of Company Common Stock.
SECTION 3.19 Pooling; Tax Treatment.
(a) The Company intends that the Merger be accounted for under
the "pooling of interests" method under the requirements of Opinion No. 16
(Business Combinations) of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the rules and regulations of
the SEC.
(b) Neither the Company nor any of its affiliates has taken or
agreed to take any action or is aware of any fact or circumstance with
respect to the Company or its affiliates that would prevent the Merger from
qualifying (i) for "pooling of interests" accounting treatment as described
in (a) above or (ii) as a reorganization within the meaning of Section 368
of the Code (a "368 Reorganization").
SECTION 3.20 Takeover Statutes and Charter Provisions. The Board of
Directors of the Company has taken the necessary action to render Section
203 of the Delaware Law, any other potentially applicable anti-takeover or
similar statute or regulation and the provisions of Sections A and B.2 of
Article EIGHTH of the Company's certificate of incorporation inapplicable
to this Agreement and the Parent Option Agreement and the transactions
contemplated hereby and thereby.
SECTION 3.21 Rights Agreement. The Board of Directors of the Company
has resolved to, and the Company promptly after the execution hereof will,
take all action necessary to render the rights issued pursuant to the terms
of the Company Rights Agreement inapplicable to the Merger, this Agreement,
the Parent Option Agreement and the other transactions contemplated hereby
and thereby and for the rights to expire as of the Effective Time.
SECTION 3.22 Intellectual Property Matters.
(a) The Company and its Subsidiaries own, free and clear of all
Liens, or have the right to use pursuant to valid license, sublicense,
agreement or permission all items of Intellectual Property (as defined in
Section 3.23(b)) necessary for their operations as presently conducted or
as contemplated to be conducted, except where the failure to have such
rights, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. The conduct of the Company's and its Subsidiaries'
businesses as currently conducted or contemplated to be conducted does not
interfere, infringe, misappropriate or violate any of the Intellectual
Property rights of any third party, except for interferences,
infringements, misappropriations and violations which, individually or in
the aggregate, would not have a Material Adverse Effect on the Company. To
the best of the Company's knowledge, no third party has interfered with,
infringed upon, misappropriated, diluted, violated or otherwise come into
conflict with any Intellectual Property rights of the Company or any of its
Subsidiaries, except for misappropriations and violations which,
individually or in the aggregate, would not have a Material Adverse Effect
on the Company.
(b) The term "Intellectual Property" as used in this Agreement
means, collectively, patents, trademarks, service marks, trade dress,
logos, trade names, Internet domain names, designs, slogans and general
intangibles of like nature, copyrights and all registrations, applications,
reissuances, continuations, continuations-in-part, revisions, extensions,
reexaminations and associated good will with respect to each of the
foregoing, computer software (including source and object codes), computer
programs, computer data bases and related documentation and materials,
data, documentation, technology, trade secrets, confidential business
information (including ideas, formulae, algorithms, models, methodologies,
compositions, know-how, manufacturing and production processes and
techniques, research and development information, drawings, designs, plans,
proposals and technical data, financial, marketing and business data and
pricing and cost information) and other intellectual property rights (in
whatever form or medium).
SECTION 3.23 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect
on the Company, all proprietary and third-party licensed computer systems
including computer hardware and software owned, leased or licensed by the
Company and computer software incorporated in products manufactured by the
Company and its Subsidiaries (a) will, prior to December 31, 1999,
accurately and without interruption recognize the advent of the year 2000
without any adverse change in operation associated with such recognition,
(b) can accurately and without interruption recognize and manipulate date
information relating to dates prior to, on and after January 1, 2000 and
(c) can accurately and without interruption interact with other year 2000
compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000
or to accurately and without interruption recognize and manipulate date
information relating to dates prior to, on or after January 1, 2000. The
costs of the adaptations to such computer systems, hardware and software
being made by the Company and its Subsidiaries in order to achieve year
2000 compliance are not expected to have a Material Adverse Effect on the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that except as set forth
in the disclosure schedules delivered by Parent to the Company
simultaneously with the execution of this Agreement (the "Parent Disclosure
Schedules") and Parent Commission Documents (as defined in Section 4.7)
filed prior to the date hereof:
SECTION 4.1 Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted, except
for those the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on Parent. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Since the date of its incorporation, Merger Subsidiary has not engaged in
any activities other than in connection with or as contemplated by this
Agreement. Parent has heretofore made available to the Company true and
complete copies of Parent's and Merger Subsidiary's certificate of
incorporation and by-laws as currently in effect. As of the date hereof,
neither Parent nor any of its Subsidiaries owns any shares of Company
Common Stock.
SECTION 4.2 Corporate Authorization.
(a) The execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement, and by Parent of the Option Agreements, and
the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby and thereby are within the corporate powers of Parent
and Merger Subsidiary and have been duly authorized by all necessary
corporate action, and, except for the required approval of Parent's
stockholders, for the issuance of Parent Common Stock (the "Common Stock
Issuance") in connection with the Merger (the "Common Stock Issuance
Approval" or the "Parent Stockholders Approval"), the Common Stock Issuance
is in accordance with the rules and regulations of the NYSE. The
affirmative vote of the holders of shares of Parent Common Stock having
votes representing a majority of the votes cast with respect to the Common
Stock Issuance, voting together as a single class, in favor of the Common
Stock Issuance (provided that the total number of the votes cast in favor
and against the Common Stock Issuance represents over 50% of all of votes
eligible to be cast by all holders of Parent Common Stock) is the only vote
of the holders of any of Parent's capital stock necessary in connection
with obtaining the Common Stock Issuance Approval. Assuming due
authorization, execution and delivery of this Agreement and the Option
Agreements by the Company, this Agreement constitutes a valid and binding
agreement of each of Parent and Merger Subsidiary and the Option Agreements
constitute valid and binding agreements of Parent, in each case enforceable
against such party in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The shares of Parent Common Stock issued
pursuant to the Merger, when issued in accordance with the terms hereof,
will be duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
(b) Parent's Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement and the Option Agreements and
the transactions contemplated hereby and thereby (including the Merger) are
fair to and in the best interests of Parent's stockholders, (ii) approved
this Agreement and the Option Agreements and the transactions contemplated
hereby and thereby (including the Merger, the Common Stock Issuance and the
By-laws Amendment), and (iii) resolved (subject to Section 6.4) to
recommend that Parent's stockholders vote in favor of the Common Stock
Issuance.
SECTION 4.3 Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement, and by
Parent of the Option Agreements, and the consummation by Parent and Merger
Subsidiary of the transactions contemplated hereby and thereby require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (a) the filing of a certificate of merger
in connection with the Merger, and a certificate of merger in connection
with the merger contemplated by Section 2.1, in each case in accordance
with Delaware Law, (b) compliance with any applicable requirements of the
HSR Act, (c) compliance with any applicable requirements of the EC Merger
Regulation, (d) compliance with any other applicable requirements of
foreign anti-trust or investments laws, (e) compliance with any applicable
environmental transfer statutes, (f) compliance with any applicable
requirements of the Exchange Act, (g) compliance with any applicable
requirements of the Securities Act, and (h) other actions or filings which
if not taken or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or prevent or materially delay Parent's
and/or Merger Subsidiary's consummation of the Merger.
SECTION 4.4 Non-Contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement, and by Parent of the
Option Agreements, and the consummation by Parent and Merger Subsidiary of
the transactions contemplated hereby and thereby do not and will not (a)
contravene or conflict with the certificate of incorporation or by-laws of
Parent or Merger Subsidiary, (b) assuming compliance with the matters
referred to in Section 4.3 and subject to receipt of the Parent Stockholder
Approval, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Parent or any of its Subsidiaries, (c)
subject to receipt of the Parent Stockholder Approval, constitute a default
under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Parent or any of its
Subsidiaries or to a loss of any benefit to which Parent or any of its
Subsidiaries is entitled under any provision of any agreement, contract or
other instrument binding upon Parent or any of its Subsidiaries or any
license, franchise, permit or other similar authorization held by Parent or
any of its Subsidiaries or (d) result in the creation or imposition of any
Lien on any asset of Parent or any of its Subsidiaries, except for such
contraventions, conflicts or violations referred to in clause (b) or
defaults, rights of termination, cancellation or acceleration, or losses or
Liens referred to in clause (c) or (d) that would not, individually or in
the aggregate, have a Material Adverse Effect on Parent. Neither Parent nor
any Subsidiary of Parent is a party to any agreement that expressly limits
the ability of Parent or any Subsidiary of Parent to compete in or conduct
any line of business or compete with any Person or in any geographic area
or during any period of time except to the extent that any such limitation,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent immediately after the Effective Time.
SECTION 4.5 Capitalization. The authorized capital stock of Parent
consists of 1,000,000,000 shares of Parent Common Stock and 20,000,000
shares of preferred stock, without par value (of which 51,250 are
designated "$91.25 Series A Cumulative Preferred Shares", 3,593,281 are
designated "$6.74 Series C Cumulative Convertible Preferred Shares",
984,089 are designated "$12 Series D Cumulative Convertible Preferred
Shares", 2,755,173 are designated "Adjustable Rate Series F Cumulative
Preferred Shares," 24,929 are designated "$86.25 Series G Cumulative
Preferred Shares", 968,754 are designated "8.25% Series AA Cumulative
Convertible Preferred Shares," and the remaining shares of such preferred
stock are not subject to any designation) ("Parent Preferred Stock"). As of
the close of business on June 3, 1999, there were outstanding 549,289,134
shares of Parent Common Stock, no shares of Parent Preferred Stock and no
other shares of capital stock or other voting securities of Parent were
outstanding. All outstanding shares of capital stock of Parent have been
duly authorized and validly issued and are fully paid and nonassessable.
Except for (a) employee or director stock options to acquire no more than
38,472,492 shares of Parent Common Stock, (b) shares of Parent Common Stock
to be issued in connection with the Merger, (c) the option granted pursuant
to the Company Option Agreement and (d) 1,458,867 shares issuable pursuant
to Parent's employee stock purchase plans in the ordinary course of
business consistent with past practice, as of the close of business on June
3, 1999, there were no outstanding options, warrants or other rights to
acquire from Parent, and no preemptive or similar rights, subscription or
other rights, convertible or exchangeable securities, agreements,
arrangements, or commitments of any character, relating to the capital
stock of Parent, obligating Parent to issue, transfer or sell any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Parent or obligating Parent to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible or exchangeable security, agreement, arrangement or commitment
(each of the foregoing, a "Parent Convertible Security"). Since the close
of business on June 3, 1999, Parent has not issued any shares of capital
stock or Parent Convertible Securities, other than in connection with the
exercise of employee stock options described in clause (a) above and/or as
permitted by Section 6.1 hereof. Except as required by the terms of any
employee or director stock options and/or as permitted by 6.1, there are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent and of
any Parent Convertible Securities.
SECTION 4.6 Subsidiaries.
(a) Each Subsidiary of Parent is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on Parent. Each Subsidiary of Parent is duly qualified to do business and
is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualifications necessary, except for those jurisdictions where failure to
be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
(b) Except for directors' qualifying shares and except as set
forth in Parent's annual report on Form 10-K for the fiscal year ended
December 31, 1998 ("Parent 10-K"), all of the outstanding capital stock of,
or other ownership interests in, each Significant Subsidiary of Parent is
owned, directly or indirectly, by Parent. All shares of capital stock of,
or other ownership interests in, Subsidiaries of the Parent owned, directly
or indirectly, by Parent are owned free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests), except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Parent. There are no outstanding options,
warrants or other rights to acquire, and, except as may be required by
applicable foreign corporate laws, no preemptive or similar rights,
subscriptions or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of any Subsidiary of Parent, obligating Parent or any of its
Subsidiaries to issue, transfer or sell, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any Subsidiary of Parent or obligating Parent or any
Subsidiary of Parent to grant, extend or enter into any such option,
warrant, subscription or other right, convertible or exchangeable security,
agreement, arrangement or commitment (each of the foregoing, a "Parent
Subsidiary Convertible Security"). There are no outstanding obligations of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise
acquire from any Person (other than Parent or a wholly owned Subsidiary of
Parent) any outstanding shares of capital stock of any Subsidiary of Parent
or any Parent Subsidiary Convertible Securities.
SECTION 4.7 Commission Filings.
(a) Parent has made available to the Company (i) its annual
reports on Form 10-K for its fiscal years ended December 31, 1996, 1997 and
1998, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended
after December 31, 1998, (iii) its proxy or information statements relating
to meetings, of, or actions taken without a meeting by, the stockholders of
Parent held since December 31, 1998, and (iv) all of its other reports,
statements, schedules and registration statements filed with the Commission
since December 31, 1998 (the documents referred to in this Section 4.7(a)
being referred to collectively as the "Parent Commission Documents").
Parent's quarterly report on Form 10-Q for its fiscal quarter ended March
31, 1999 is referred to as the "Parent 10-Q".
(b) As of its filing date, each Parent Commission Document
complied as to form in all material respects with the applicable
requirements of the Exchange Act and the Securities Act.
(c) As of its filing date, each Parent Commission Document filed
pursuant to the Exchange Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(d) Each registration statement, as amended or supplemented, if
applicable, filed by Parent pursuant to the Securities Act since December
31, 1996, as of the date such statement or amendment became effective did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION 4.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of
Parent (including any related notes and schedules) included in the annual
reports on Form 10-K and the quarterly reports on Form 10-Q referred to in
Section 4.7 present fairly, in all material respects, the financial
position of Parent and its subsidiaries as of the dates thereof and their
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments and the absence of notes in the case of any
unaudited interim financial statements), in each case in conformity with
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto). For purposes of this Agreement, "Parent Balance Sheet" means the
consolidated balance sheet of Parent as of March 31, 1999 set forth in the
Parent 10-Q and "Parent Balance Sheet Date" means March 31, 1999.
SECTION 4.9 Disclosure Documents.
(a) The proxy statement of Parent (the "Parent Proxy Statement")
to be filed with the Commission in connection with the Merger and the
Registration Statement on Form S-4 of Parent (the "Form S-4") to be filed
under the Securities Act relating to the issuance of Parent Common Stock in
the Merger, and any amendments or supplements thereto, will, when filed,
subject to the last sentence of Section 4.9(b), comply as to form in all
material respects with the applicable requirements of the Securities Act.
(b) Neither the Parent Proxy Statement nor any amendment or
supplement thereto, will, at the date the Parent Proxy Statement or any
such amendment or supplement is first mailed to stockholders of Parent or
at the time such stockholders vote on the matters constituting the Parent
Stockholder Approval, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Neither the Form S-4 nor any amendment or supplement thereto
will at the time it becomes effective under the Securities Act or at the
Effective Time contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. No representation or warranty is
made by Parent in this Section 4.9 with respect to statements made or
incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference in the Parent Proxy
Statement or the Form S-4.
(c) None of the information supplied or to be supplied by Parent
for inclusion or incorporation by reference in the Company Proxy Statement
or any amendment or supplement thereto will, at the date the Company Proxy
Statement or any amendment or supplement thereto is first mailed to the
stockholders of the Company or at the time the stockholders vote on the
adoption and approval of this Agreement and the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.10 Absence of Certain Changes. Since the Parent Balance
Sheet Date, and, other than with respect to clause (a) below, prior to the
date hereof, Parent and its Subsidiaries have conducted their respective
businesses in the ordinary course, consistent with past practice and there
has not been:
(a) any event, occurrence or development which, individually or
in the aggregate, would have a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Parent
(other than regular quarterly cash dividends payable by Parent in respect
of shares of Parent Common Stock consistent with past practice) or any
repurchase (other than repurchases of Parent Common Stock which occurred
subsequent to the Parent Balance Sheet Date and prior to the date hereof),
redemption or other acquisition by Parent or any of its Significant
Subsidiaries of any outstanding shares of its capital stock or any Parent
Convertible Securities (except (x) as required by the terms of any employee
or stock option plan or compensation plan or arrangement, (y) in accordance
with any dividend reinvestment plan as in effect as of the date of this
Agreement in the ordinary course of operation of such plan consistent with
past practice, and/or (z) as otherwise permitted by Section 6.1); or
(c) any amendment of any material term of any outstanding
security of Parent or any of its Significant Subsidiaries;
(d) any transaction or commitment made, or any contract,
agreement or settlement entered into, by (or judgment, order or decree
affecting) Parent or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any material amount
of assets) or any relinquishment by Parent or any of its Subsidiaries of
any contract or other right, in either case, material to Parent and its
Subsidiaries taken as a whole, other than transactions, commitments,
contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice and those contemplated by this
Agreement;
(e) any change prior to the date hereof in any method of
accounting or accounting practice (other than any change for tax purposes)
by Parent or any of its Subsidiaries, except for any such change which is
not material or which is required by reason of a concurrent change in GAAP;
or
(f) any (i) grant of any severance or termination pay to (or
amendment to any such existing arrangement with) any director, officer or
employee of Parent or any of its Subsidiaries, (ii) entering into of any
employment, deferred compensation, supplemental retirement or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of Parent or any of its Subsidiaries, (iii)
increase in, or accelerated vesting and/or payment of, benefits under any
existing severance or termination pay policies or employment agreements or
(iv) increase in or enhancement of any rights or features related to
compensation, bonus or other benefits payable to directors, officers or
employees of Parent or any of its Subsidiaries, in each case, other than in
the ordinary course of business consistent with past practice or as
permitted by this Agreement; or
(g) any material Tax election made or changed, any material
audit settled or any material amended Tax Returns filed.
SECTION 4.11 No Undisclosed Material Liabilities. There are no
liabilities of Parent or any Subsidiary of Parent of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the Parent Balance
Sheet or in the notes thereto;
(b) liabilities incurred since such date in the ordinary course
of business;
(c) liabilities which, individually or in the aggregate, would
not have a Material Adverse Effect on Parent;
(d) liabilities disclosed in the Parent Commission Documents
filed prior to the date of this Agreement; and
(e) liabilities under this Agreement.
SECTION 4.12 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Parent threatened
against or affecting, Parent or any of its Subsidiaries or any of their
respective properties or any of their respective officers or directors
before any court or arbitrator or any governmental body, agency or official
except as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or prevent or materially delay the consummation of
the Merger.
SECTION 4.13 Taxes. Except as provided for in the Parent Balance Sheet
(including the notes thereto) or as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (i) all Parent Tax
Returns required to be filed with any taxing authority by, or with respect
to, Parent and its Subsidiaries have been filed in accordance with all
applicable laws; (ii) Parent and its Subsidiaries have timely paid all
Taxes shown as due and payable on Parent Tax Returns that have been so
filed, and, as of the time of filing, the Parent Tax Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities and the status of Parent and its Subsidiaries (other than Taxes
which are being contested in good faith and for which adequate reserves are
reflected on the Parent Balance Sheet); (iii) Parent and its Subsidiaries
have made provision for all Taxes payable by Parent and its Subsidiaries
for which no Parent Tax Return has yet been filed; (iv) the charges,
accruals and reserves for Taxes with respect to Parent and its Subsidiaries
reflected on the Parent Balance Sheet are adequate under GAAP to cover the
Tax liabilities accruing through the date thereof; (v) there is no action,
suit, proceeding, audit or claim now proposed or pending against or with
respect to Parent or any of its Subsidiaries in respect of any Tax where
there is a reasonable possibility of an adverse determination; and (vi) to
the best of Parent's knowledge and belief, neither Parent nor any of its
Subsidiaries is liable for any Tax imposed on any entity other than such
Person, except as the result of the application of Treas. Reg. Sections
1.1502-6 (and any comparable provision of the tax laws of any state, local
or foreign jurisdiction) to the affiliated group of which Parent is the
common parent.
SECTION 4.14 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Parent Employee
Plans" shall mean and include: each material management, consulting,
non-compete, employment, severance or similar contract, plan, arrangement
or policy applicable to any director, former director, employee or former
employee of Parent and each material plan, program, policy, agreement or
arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms
of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life
insurance benefits) or other employee benefits of any kind, whether funded
or unfunded, which is maintained, administered or contributed to by Parent
or any Subsidiary and covers any employee or director or former employee or
director of Parent, or under which Parent or any Subsidiary has any
liability, contingent or otherwise (including but not limited to each
material "employee benefit plan," as defined in Section 3(3) of ERISA, but
excluding any such plan that is a "multiemployer plan," as defined in
Section 3(37) of ERISA).
(b) Each Parent Employee Plan has been established and
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to
such Plan, except where failure to so comply would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
(c) Neither Parent nor any affiliate of Parent has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and
no condition exists that presents a material risk to Parent or any
affiliate of Parent of incurring any such liability other than liability
for premiums due the Pension Benefit Guaranty Corporation (which premiums
have been paid when due). All contributions required to be made under the
terms of any Parent Employee Plan maintained in the United States have been
made, and, where applicable to a Parent Employee Plan, Parent and its
affiliates have complied with the minimum funding requirements under
Section 412 of the Code and Section 302 of ERISA with respect to each such
Parent Employee Plan.
(d) Each Parent Employee Plan which is intended to be qualified
under section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from federal income tax pursuant to section 501(a) of the
Code and, to Parent's knowledge, no circumstances exist which will
adversely affect such qualification or exception.
(e) No director or officer or other employee of Parent or any of
its Subsidiaries will become entitled to any retirement, severance or
similar benefit or enhanced or accelerated benefit (including any
acceleration of vesting or lapse of repurchase rights or obligations with
respect to any Parent Stock Plans or other benefit under any compensation
plan or arrangement of Parent) solely as a result of the transactions
contemplated in this Agreement.
(f) Since the Parent Balance Sheet Date, there has been no
amendment to, or change in employee participation or coverage under, any
Parent Employee Plan which would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the 12 months ended on the Parent Balance Sheet Date.
(g) Parent and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign statutes, laws (including,
without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders and codes respecting employment,
employment practices, labor, terms and conditions of employment and wages
and hours, and no work stoppage or labor strike against Parent and its
Subsidiaries is pending or threatened, nor is Parent or its Subsidiaries
involved in or threatened with any labor dispute, grievance or litigation
relating to labor matters involving any employees, in each case except as
would not, individually or in the aggregate, have a Material Adverse Effect
on Parent. There are no suits, actions, disputes, claims (other than
routine claims for benefits), investigations or audits pending or, to the
knowledge of the Company, threatened in connection with any Parent Employee
Plan, but excluding any of the foregoing which would not have a Material
Adverse Effect on Parent.
SECTION 4.15 Compliance with Laws. Neither Parent nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations
except for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent.
SECTION 4.16 Finders' or Advisors' Fees. Except for J.P. Morgan & Co.
Incorporated whose fees will be paid by Parent, there is no investment
banker, broker, finder or other intermediary which has been retained by or
is authorized to act on behalf of Parent or any of its Subsidiaries who
might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
SECTION 4.17 Environmental Matters. Except for matters which,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent, (i) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by,
and no investigation, action, claim, suit, proceeding or review is pending
or, to the knowledge of Parent or any of its Subsidiaries, threatened by
any Person against, Parent or any of its Subsidiaries, and no penalty has
been assessed within the past three years against Parent or any of its
Subsidiaries, in each case, with respect to any matters relating to or
arising out of any Environmental Law; (ii) Parent and its Subsidiaries are
in compliance with all Environmental Laws; and (iii) to the knowledge of
Parent, there are no liabilities of or relating to Parent or any of its
Subsidiaries relating to or arising out of any Environmental Law, and, to
the knowledge of Parent, there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability.
SECTION 4.18 Opinion of Financial Advisor. Parent has received the
opinion of J.P. Morgan & Co. Incorporated to the effect that, as of the
date of this Agreement, the consideration to be paid by Parent in the
Merger is fair, from a financial point of view, to Parent.
SECTION 4.19 Pooling; Tax Treatment.
(a) Parent intends that the Merger be accounted for as a
"pooling of interests" as described in Section 3.19(a).
(b) Neither Parent nor any of its affiliates has taken or agreed
to take any action or is aware of any fact or circumstance with respect to
Parent or its affiliates that would prevent the Merger from qualifying (i)
for "pooling of interests" accounting treatment as described in Section
3.19(a) or (ii) as a 368 Reorganization.
SECTION 4.20 Takeover Statutes. The Board of Directors of Parent has
taken the necessary action to render Section 203 of the Delaware Law, and
any other potentially applicable anti-takeover or similar statute or
regulation inapplicable to this Agreement and the Company Option Agreement
and the transactions contemplated hereby and thereby.
SECTION 4.21 Intellectual Property Matters. Parent and its
Subsidiaries own, free and clear of all Liens, or have the right to use
pursuant to valid license, sublicense, agreement or permission all items of
Intellectual Property necessary for their operations as presently conducted
or as contemplated to be conducted, except where the failure to have such
rights, individually or in the aggregate, would not have a Material Adverse
Effect on Parent. The conduct of Parent's and its Subsidiaries' businesses
as currently conducted or as contemplated to be conducted does not
interfere, infringe, misappropriate or violate any of the Intellectual
Property rights of any third party, except for interferences,
infringements, misappropriations and violations which, individually or in
the aggregate, would not have a Material Adverse Effect on Parent. To the
best of Parent's knowledge, no third party has interfered with, infringed
upon, misappropriated, diluted, violated or otherwise come into conflict
with any Intellectual Property rights of Parent or any of its Subsidiaries,
except for misappropriations and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
SECTION 4.22 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect
on Parent, all proprietary and third-party licensed computer systems
including computer hardware and software owned, leased or licensed by
Parent and computer software incorporated in products manufactured by
Parent and its Subsidiaries (a) will, prior to December 31, 1999,
accurately and without interruption recognize, the advent of the year 2000
without any adverse change in operation associated with such recognition,
(b) can accurately and without interruption recognize and manipulate date
information relating to dates prior to, on and after January 1, 2000 and
(c) can accurately and without interruption interact with other year 2000
compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000
or to accurately and without interruption recognize and manipulate date
information relating to dates prior to, on or after January 1, 2000. The
costs of the adaptations to such computer systems, hardware and software
being made by Parent and its Subsidiaries in order to achieve year 2000
compliance are not expected to have a Material Adverse Effect on Parent.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1 Conduct of the Company. From the date of this Agreement
until the Effective Time, the Company and its Subsidiaries shall, subject
to the last sentence of this Section 5.1, conduct their business in the
ordinary course consistent with past practice and shall use their
reasonable best efforts to preserve intact their business organizations and
relationships with third parties. Without limiting the generality of the
foregoing and subject to the last sentence of this Section 5.1, with the
prior written consent of Parent (which shall not be unreasonably withheld)
or as contemplated by this Agreement or the Option Agreements, from the
date of this Agreement until the Effective Time:
(a) the Company will not, and will not permit any of its
Subsidiaries to, adopt or propose any change in its certificate of
incorporation or by-laws;
(b) the Company will not, and will not permit any Subsidiary of
the Company to, adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than transactions between direct and/or indirect wholly
owned Subsidiaries of the Company);
(c) the Company will not, and will not permit any Subsidiary of
the Company to, issue, sell, transfer, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class or series of the Company or its any of its
Subsidiaries other than (i) issuances of Company Common Stock pursuant to
the exercise of Company Stock Options that are outstanding on the date of
this Agreement, or pursuant to Company Stock Options or other stock based
awards granted in accordance with clause (ii) below and (ii) additional
Company Stock Options or other stock-based awards to acquire shares of
Company Common Stock granted under the terms of any employee or director
stock option or compensation plan or arrangement of the Company as in
effect on the date of this Agreement in the ordinary course of business
consistent with past practice;
(d) the Company will not (i) split, combine, subdivide or
reclassify its outstanding shares of capital stock, or (ii) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock other than, subject to Sections
7.4 and 7.9, regular quarterly cash dividends payable by the Company in
respect of shares of Company Stock consistent with past practice;
(e) the Company will not, and will not permit any Subsidiary of
the Company to, redeem, purchase or otherwise acquire directly or
indirectly any of the Company's capital stock, Company Convertible
Securities or Company Subsidiary Convertible Securities, except for
repurchases, redemptions or acquisitions (x) required by or in connection
with the terms of any Company Stock Plan or (y) in accordance with any
dividend reinvestment plan as in effect on the date of this Agreement in
the ordinary course of the operations of such plan consistent with past
practice and, in the case of each of (x) and (y) above, only to the extent
consistent with Section 7.4;
(f) the Company will not amend the terms (including the terms
relating to accelerating the vesting or lapse of repurchase rights or
obligations) of any employee or director stock options or other stock based
awards;
(g) the Company will not, and will not permit any Subsidiary of
the Company to, (i) grant any severance or termination pay to (or amend any
such existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) enter into any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of the
Company or any of its Subsidiaries, (iii) increase any benefits payable
under any existing severance or termination pay policies or employment
agreements, (iv) increase (or amend the terms of) any compensation, bonus
or other benefits payable to directors, officers or employees of the
Company or any of its Subsidiaries or (v) permit any director, officer or
employee who is not already a party to an agreement or a participant in a
plan providing benefits upon or following a "change in control" to become a
party to any such agreement or a participant in any such plan, in the case
of each of clauses (i) through (iv), other than in the ordinary course of
business consistent with past practice but subject to Sections 7.4 and 7.9
and, in the case of the establishment of any retention and/or pay-to-stay
plans or individual severance arrangements that the Company reasonably
believes to be appropriate, after notice to Parent and the Company's
good-faith effort to obtain Parent's approval;
(h) the Company will not, and will not permit any of its
Subsidiaries to, acquire a material amount of assets or property of any
other Person except in the ordinary course of business consistent with past
practice;
(i) other than as contemplated by Section 7.1, the Company will
not, and will not permit any of its Subsidiaries to, sell, lease, license
o