Agreement and Plan of Merger

AGREEMENT AND PLAN OF MERGER


AMONG


HEAT HOLDINGS CORP.,


HEAT MERGER CORP.


AND


AAVID THERMAL TECHNOLOGIES, INC.


DATED AS OF AUGUST 23, 1999


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TABLE OF CONTENTS


Page


ARTICLE 1 - THE MERGER...................................................................................1
1.1. The Merger......................................................................................1
1.2. The Closing.....................................................................................1
1.3. Effective Time..................................................................................1
1.4. Actions by the Company..........................................................................2 ARTICLE 2 - CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.........................3
2.1. Certificate of Incorporation....................................................................3
2.2. Bylaws..........................................................................................3 ARTICLE 3 - DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION..........................................3
3.1. Directors.......................................................................................3
3.2. Officers........................................................................................3 ARTICLE 4 - EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY.............................3
4.1. Merger Sub Stock................................................................................3
4.2. Company Securities..............................................................................3
4.3. Exchange of Certificates Representing Common Stock..............................................5
4.4. Adjustment of Merger Consideration..............................................................6
4.5. Dissenting Company Stockholders.................................................................6 ARTICLE 5 - THE OFFER....................................................................................7
5.1. The Offer.......................................................................................7
5.2. Actions by Purchaser and Merger Sub.............................................................8
5.3. Company Actions................................................................................10
5.4. Directors......................................................................................11
5.5. Merger without Meeting of Stockholders.........................................................12 ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................12
6.1. Existence, Good Standing, Corporate Authority..................................................12
6.2. Authorization, Validity and Effect of Agreements...............................................13
6.3. Compliance with Laws...........................................................................13
6.4. Capitalization.................................................................................13
6.5. Subsidiaries...................................................................................14
6.6. No Violation...................................................................................15
6.7. Company Reports................................................................................15
6.8. Financial Statements...........................................................................15
6.9. Litigation.....................................................................................16
6.10. Absence of Certain Changes.....................................................................16
6.11. Taxes..........................................................................................18
6.12. Employee Benefit Plans.........................................................................19
6.13. Labor and Employment Matters...................................................................21
6.14. Brokers........................................................................................22
6.15. Licenses and Permits...........................................................................22
6.16. Intellectual Property..........................................................................22
6.17. Environmental Compliance and Disclosure........................................................24
6.18. Title to Assets................................................................................25
6.19. Material Contracts.............................................................................25
6.20. Required Vote of Company Stockholders..........................................................26
6.21. Inapplicability of Certain Restrictions........................................................26
6.22. Rights Plan....................................................................................26 ARTICLE 7 - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB..................................26
7.1. Existence, Good Standing, Corporate Authority..................................................26
7.2. Authorization, Validity and Effect of Agreements...............................................27


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7.3. No Violation...................................................................................27
7.4. Brokers, Finders or Financial Advisors.........................................................28
7.5. No Prior Activities............................................................................28
7.6. Financing......................................................................................28
7.7. Litigation.....................................................................................28 ARTICLE 8 - COVENANTS...................................................................................28
8.1. No Solicitation................................................................................29
8.2. Interim Operations.............................................................................31
8.3. Company Stockholder Approval, Proxy Statement..................................................34
8.4. Filings, Notices, Other Actions................................................................35
8.5. Access to Information..........................................................................36
8.6. Publicity......................................................................................36
8.7. Further Action; Cooperation Concerning Certain Litigation......................................37
8.8. Insurance, Indemnity...........................................................................37
8.9. Employee Benefit Plans.........................................................................39 ARTICLE 9 - CONDITIONS..................................................................................40
9.1. Conditions to Each Party's Obligation to Effect the Merger.....................................40
9.2. Conditions to the Obligations of Purchaser.....................................................41 ARTICLE 10 - TERMINATION, AMENDMENT, WAIVER.............................................................41
10.1. Termination....................................................................................41
10.2. Effect of Termination..........................................................................43
10.3. Amendment......................................................................................43
10.4. Extension; Waiver..............................................................................43 ARTICLE 11 - GENERAL PROVISIONS.........................................................................44
11.1. Nonsurvival of Representations and Warranties..................................................44
11.2. Notices........................................................................................44
11.3. Assignment, Binding Effect.....................................................................44
11.4. Entire Agreement...............................................................................45
11.5. Fees and Expenses..............................................................................45
11.6. Governing Law..................................................................................45
11.7. Headings.......................................................................................45
11.8. Interpretation.................................................................................45
11.9. Investigations.................................................................................46
11.10.Severability...................................................................................46
11.11.Enforcement of Agreement.......................................................................46
11.12.Counterparts...................................................................................47


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AGREEMENT AND PLAN OF MERGER


AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 23, 1999, between Heat Holdings Corp., a Delaware corporation ("Purchaser"), Heat Merger Corp., a Delaware corporation and a wholly owned subsidiary of Purchaser ("Merger Sub"), and Aavid Thermal Technologies, Inc., a Delaware corporation (the "Company").


RECITALS


WHEREAS, the Boards of Directors of Purchaser and the Company each have determined that it is in the best interests of their respective companies and stockholders for Purchaser to acquire the Company upon the terms and subject to the conditions set forth in this Agreement.


WHEREAS, the parties to this Agreement desire to make certain representations, warranties, covenants and agreements in connection herewith.


NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained in this Agreement, the parties to this Agreement hereby agree as follows:


ARTICLE 1
THE MERGER


1.1. THE MERGER. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into the Company in accordance with this Agreement and the applicable provisions of the General Corporation Law of the State of Delaware (the "DGCL"), and the separate corporate existence of Merger Sub shall thereupon cease (the "Merger"). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "Surviving Corporation"). The Merger shall have the effects specified in the DGCL.


1.2. THE CLOSING. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") shall take place at the offices of Bartlit Beck Herman Palenchar & Scott, 54 W. Hubbard Street, Chicago, Illinois, at 10:00 a.m., local time, as soon as practicable following the satisfaction (or waiver if permissible) of the conditions set forth in Article 9. The date on which the Closing occurs is hereinafter referred to as the "Closing Date."


1.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in Article 9 shall have been fulfilled or waived in accordance with this Agreement and this Agreement shall not have been terminated as provided in Article 10, the parties to this Agreement shall cause a Certificate of Merger meeting the requirements of Section 251


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of the DGCL to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL or at such later time which the parties to this Agreement shall have agreed upon and designated in such filing as the effective time of the Merger (the "Effective Time"). 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 Sub, all as provided under the DGCL.


1.4. ACTIONS BY THE COMPANY. The Company hereby approves of and consents to the Offer (as defined below), the Voting Agreements between Merger Sub and certain of the Company's stockholders pursuant to which, among other things, each such stockholder has agreed to vote all of his or its shares of the Common Stock of the Company, par value $.01 per share (the "Common Stock"), in favor of this Agreement and the Merger (the "Voting Agreements") and the Merger and represents and warrants that the Board of Directors of the Company (the "Board of Directors" or the "Board") at a meeting duly called and held has duly adopted, by unanimous vote (with one director not present), resolutions (i) approving this Agreement, the Offer and the Merger which approval satisfies in full the requirements of the DGCL and the Certificate of Incorporation of the Company with respect to the requisite approval of the board of directors, (ii) approving the Voting Agreements for the purposes of Section 203 of the DGCL, and (iii) determining that the Merger is advisable and that the terms of the Offer and Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders accept the Offer and approve the Merger and this Agreement; provided, that such recommendations may be withdrawn, modified or amended following receipt of an Acquisition Proposal (as defined in Section 8.1) if the Company has complied with the provisions of Section 8.1. The Company further represents and warrants that the Board of Directors has received the written opinion of Hambrecht & Quist, LLC (the "Financial Advisor") that, as of the date of such opinion and subject to the limitations set forth therein, the proposed Merger Consideration (as defined below) or the Offer Consideration (as defined below), as the case may be, to be received by the holders of shares of Common Stock pursuant to the Merger and the Offer is fair to such holders from a financial point of view (the "Fairness Opinion"). The Company hereby consents to the inclusion in the Proxy Statement (as defined below) and the Offer Documents (as defined below) of the recommendation of the Board of Directors described in the first sentence of this Section 1.4. The Company hereby represents and warrants that it has been authorized by the Financial Advisor to permit, subject to prior review and consent by the Financial Advisor (such consent not to be unreasonably withheld), references to the Fairness Opinion in the Offer Documents and the Schedule 14D-9 (as defined below) and the inclusion of the Fairness Opinion in the Proxy Statement.


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ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION


2.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the Surviving Corporation shall be the Certificate of Incorporation of Merger Sub (except that the name of the Surviving Corporation shall be Aavid Thermal Technologies, Inc.), until duly amended in accordance with applicable law.


2.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with applicable law.


ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION


3.1. DIRECTORS. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law.


3.2. OFFICERS. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law.


ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY


4.1. MERGER SUB STOCK. At the Effective Time, each share of common stock, $.01 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock, $.01 par value per share, of the Surviving Corporation.


4.2. COMPANY SECURITIES.


(a) At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock owned by Purchaser or Merger Sub or held by the Company, all of which shall be cancelled, and other than shares of Dissenting Common Stock (as defined below)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration from the Surviving


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Corporation. For purposes of this Agreement, the "Merger Consideration" shall mean either (i) if the Company has consummated the transactions contemplated by that certain Stock Purchase Agreement dated as of August 23, 1999 among the Company, Bowthorpe plc, Bowthorpe B.V., Bowthorpe International Inc., and Bowthorpe GmbH, as in effect on the date of this Agreement or as subsequently amended with the prior consent of the Purchaser (the "Thermalloy Agreement"), $25.50 per share of Common Stock or, (ii) if the Thermalloy Agreement has been terminated prior to the consummation of the transactions contemplated thereby, the Offer Consideration (as defined below), in each case in cash, without interest.


(b) As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time all shares of Common Stock converted in accordance with Section 4.2(a) shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of shares of Common Stock converted in accordance with Section 4.2(a) shall thereafter cease to have any rights with respect to such shares of Common Stock, except the right to receive, without interest, the Merger Consideration in accordance with Section 4.3 upon the surrender of a certificate or certificates (a "Certificate") representing such shares of Common Stock.


(c) Each share of Common Stock issued and held in the Company's treasury at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor.


(d) (i) At or immediately prior to the Effective Time, each outstanding employee stock option ("Options") to purchase shares of Common Stock granted under any employee stock option or compensation plan or arrangement of the Company (collectively, the "Stock Option Plans") shall be canceled, and each holder of any such Option, whether or not then vested or exercisable, shall be paid by the Company promptly after the Effective Time for each such Option an amount determined by multiplying (x) the excess, if any, of the Merger Consideration over the applicable per share exercise price of such Option by (y) the number of shares of Common Stock such holder could have purchased (assuming full vesting of all Options) had such holder exercised such Option in full immediately prior to the Effective Time.


(ii) Prior to the Effective Time, the Company shall use its reasonable best efforts (x) to obtain any consents from holders of Options to purchase shares of Common Stock granted under the Stock Option Plans and (y) make any amendments to the terms of the Stock Option Plans that, in the case of either clauses 4.2(d)(ii)(x) or 4.2(d)(ii)(y), are necessary to give effect to the transactions contemplated by Section 4.2(d)(i). Notwithstanding any other provision of this Section 4.2(d), payment may be withheld in respect of any Option until necessary consents are obtained.


(iii) At the Effective Time each outstanding warrant or similar right (other than the Options) to purchase or otherwise acquire shares of Common Stock (a "Company Warrant") shall be converted into and be exchangeable for the right to receive, in lieu of the shares of Common Stock theretofore purchasable upon the exercise of the


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Company Warrant, an amount in cash equal to the product of (i) the excess, if any, of the Merger Consideration over the per share exercise price for one share of Common Stock subject to such Company Warrant multiplied by (ii) the number of shares of Common Stock subject to such Company Warrant. At the Effective Time, each Company Warrant with an exercise price equal to or greater than the Merger Consideration shall be terminated without payment of any consideration. Prior to the Effective Time, the Company shall use its reasonable best efforts to obtain any necessary consents of each holder of a Company Warrant to the transactions contemplated by this Section 4.2(d)(iii). The Company shall provide to each holder of a Company Warrant any required notice under the Company Warrant.


4.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK.


(a) Prior to the Effective Time, Purchaser shall appoint a commercial bank or trust company having net capital of not less than $20 billion, or such other party reasonably satisfactory to the Company, to act as paying agent hereunder for payment of the Merger Consideration upon surrender of Certificates (the "Paying Agent"). Purchaser shall, or shall cause the Surviving Corporation to, provide the Paying Agent with cash in amounts necessary to pay for all the shares of Common Stock pursuant to Section 4.2(a) as and when such amounts are needed by the Paying Agent. Such amounts shall hereinafter be referred to as the "Exchange Fund." The Exchange Fund shall not be used for any other purpose than as specified in this Section 4.3(a).


(b) Promptly after the Effective Time, Purchaser shall cause the Paying Agent to mail to each holder of record of shares of Common Stock (other than holders of shares of Dissenting Common Stock) (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and which letter shall be in such form and have such other provisions as Purchaser may reasonably specify and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate to the Paying Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall promptly receive in exchange therefor the amount of cash into which shares of Common Stock previously represented by such Certificate shall have been converted pursuant to Section 4.2, and the shares represented by the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or will accrue on the cash payable upon surrender of any Certificate. In the event of a transfer of ownership of Common Stock which is not registered in the transfer records of the Company, payment may be made with respect to such Common Stock to such a transferee if the Certificate representing such shares of Common Stock is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.


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(c) At or after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged as provided in this Article 4.


(d) Any portion of the Exchange Fund (including the proceeds of any interest and other income received by the Paying Agent in respect of all such funds) that remains unclaimed by the former stockholders of the Company nine months after the Effective Time shall be delivered to the Surviving Corporation (subject to abandoned property, escheat or similar laws). Any former stockholders of the Company who have not previously complied with this Article 4 shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or similar laws) for payment of any Merger Consideration that may be payable in respect of each share of Common Stock such stockholder holds as determined pursuant to this Agreement, without any interest thereon. Any amounts remaining unclaimed by holders of Common Stock two years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental entity) shall, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any Person (as defined in Section 11.8) previously entitled thereto.


(e) None of Purchaser, the Company, the Surviving Corporation, the Paying Agent or any other Person shall be liable to any former holder of shares of Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.


(f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement.


4.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding shares of Common Stock shall have been changed into a different number of shares or a different class as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, split, combination, exchange, recapitalization or other similar transaction, the Merger Consideration shall be appropriately adjusted.


4.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of this Agreement to the contrary, if required by the DGCL but only to the extent required thereby, shares of Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by holders of such shares of


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Common Stock who have properly exercised appraisal rights with respect thereto in accordance with Section 262 of the DGCL (the "Dissenting Common Stock") will not be exchangeable for the right to receive the Merger Consideration, and holders of such shares of Dissenting Common Stock will be entitled to receive payment of the appraised value of such shares of Common Stock ...