CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
Among
CABLEVISION SYSTEMS CORPORATION,
CCG HOLDINGS INC.
and
CLEARVIEW CINEMA GROUP, INC.
Dated as of August 12, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "AGREEMENT"),
dated as of August 12, 1998, among Cablevision Systems Corporation, a Delaware
corporation ("PARENT"), CCG Holdings Inc, a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and Clearview Cinema Group,
Inc., a Delaware corporation (the "COMPANY" the Company and Merger Sub sometimes
being hereinafter collectively referred to as the "CONSTITUENT CORPORATIONS")
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Sub and the Company have approved the merger of the Company with Merger
Sub (the "MERGER") and approved and declared advisable the Merger upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, provided that the Average Parent Share Price (as defined in
Section 4.1(a)) is greater than or equal to the Floor Price (as defined in
Section 1.1), it is intended that, for federal income tax purposes, the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, certain stockholders of the Company
(the "SELLING STOCKHOLDERS") who own or control the right to vote Shares and
other Company Securities (each as defined in Section 4.1(a)) representing a
majority of the outstanding Shares on a fully diluted basis are entering into
one or more voting and option agreements with Parent (the "STOCKHOLDER
AGREEMENTS"), pursuant to which each of the Selling Stockholders has agreed to
vote all of the Shares and other Company Securities currently beneficially owned
and hereinafter acquired by him, her or it in favor of the Merger (and has
agreed, if so requested by Parent, to exercise any warrants to purchase Shares
so that he, she or it may vote such Shares together with other holders of Shares
at the Stockholders Meeting);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, Midmark Capital, L.P. (the
"WARRANTHOLDER"), the holder of a warrant (the "CLASS A WARRANT") to purchase
282,600 Shares, is entering into an agreement with the Company and Parent (the
"WARRANTHOLDER AGREEMENT"), pursuant to which the Warrantholder and the Company
have agreed that immediately prior to the Effective Time (as defined in Section
1.3) the Warrantholder shall surrender its Class A Warrant to the Company for
cancellation in exchange for payment by the Company of $1.00; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
I.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, the Company shall be merged with
and into Merger Sub and the separate corporate existence of the Company shall
thereupon cease. Merger Sub shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION"), and the
separate corporate existence of Merger Sub with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Delaware General Corporation Law,
as amended (the "DGCL"); PROVIDED, HOWEVER, that if the Average Parent Share
Price is less than $72.00 (the "FLOOR PRICE"), at Parent's sole option and
discretion, at the Effective Time (as defined in Section 1.3), Merger Sub will
be merged with and into the Company, the separate corporate existence of Merger
Sub shall cease, the Company shall be the Surviving Corporation and the separate
corporate existence of the Company shall continue unaffected by the Merger.
I.2. CLOSING. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 9:00 A.M. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "CLOSING
DATE").
I.3. EFFECTIVE TIME. As soon as practicable following the Closing,
the Company and Parent will cause a Certificate of Merger (the "DELAWARE
CERTIFICATE OF MERGER") to be executed, acknowledged and filed with the
Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Delaware Certificate of
Merger has been duly filed with the Secretary of State
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of Delaware (the "EFFECTIVE TIME").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
II.1. THE CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation (the
"CHARTER"), until duly amended as provided therein or by applicable law;
PROVIDED, HOWEVER, that if the Average Parent Share Price is less than the Floor
Price and Parent shall elect that Merger Sub merge with and into the Company at
the Effective Time, the Charter shall be amended and restated to be identical to
the certificate of incorporation of Merger Sub until duly amended as provided
therein or by applicable law.
II.2. THE BY-LAWS. The by-laws of Merger Sub in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"BY-LAWS"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
III.1. DIRECTORS. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
III.2. OFFICERS. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
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IV.1. EFFECT ON CAPITAL STOCK. At the Effective Time,
as a result of the Merger and without any action on the part of the
holder of any capital stock of the Company:
(a) MERGER CONSIDERATION. Subject to Section 4.1(b)
and Section 4.2,
(i) each share of the Common Stock, par value $.01 per share, of the
Company (the "SHARES") issued and outstanding at the Effective Time (other
than (A) Shares owned by Parent, Merger Sub or any other direct or
indirect subsidiary of Parent (collectively, the "PARENT COMPANIES") or by
the Company or any direct or indirect subsidiary of the Company
(collectively, the "COMPANY ENTITIES") and in each case not held on behalf
of third parties and (B) Shares ("DISSENTING SHARES") that are held by
stockholders ("DISSENTING COMMON STOCKHOLDERS") exercising appraisal
rights pursuant to Section 262 of the DGCL (collectively, "EXCLUDED
SHARES")) shall be converted into, and become exchangeable for, at the
option of the holder thereof (the "SHARE MERGER CONSIDERATION"), (A)
$24.25 in cash (the "SHARE CASH CONSIDERATION") or (B) that number of
shares of Class A Common Stock, par value $.01 per share, of Parent
("PARENT COMMON STOCK") (the "SHARE STOCK CONSIDERATION") equal to the
amount (rounded to four decimal places)(the "SHARE CONVERSION NUMBER")
derived by dividing $24.25 by the average (rounded to four decimal places)
of the average of the daily per share high and low sales prices, regular
way (the "AVERAGE PARENT SHARE PRICE") of Parent Common Stock as reported
on the American Stock Exchange, Inc. (the "ASE") composite transactions
reporting system (as reported in the New York City edition of THE WALL
STREET JOURNAL or, if not reported therein, another authoritative source)
on each of the ten (10) trading days (the "AVERAGING PERIOD") ending on
and including the third trading day prior to the Closing Date; PROVIDED,
however, that, if the Average Parent Share Price is less than the Floor
Price, the Share Merger Consideration shall be the Share Cash
Consideration and no holder of Shares shall have the option or right to
elect to receive (and Parent shall have no obligation to issue) Share
Stock Consideration;
(ii) each share of the Class A Convertible Preferred Stock, par
value $.01 per share, of the Company (the "CLASS A PREFERRED SHARES")
issued and outstanding at the Effective Time (other than (A) Class A
Preferred Shares owned by the Parent Companies or by the Company Entities
and in each case not held on behalf of third parties and (B) Class A
Preferred Shares ("DISSENTING CLASS A PREFERRED SHARES") that are held by
stockholders ("DISSENTING CLASS A PREFERRED STOCKHOLDERS") exercising
appraisal rights pursuant to Section 262 of the DGCL (collectively,
"EXCLUDED CLASS A PREFERRED SHARES") shall be converted into, and
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become exchangeable for, at the option of the holder thereof (the "CLASS A
PREFERRED SHARE MERGER CONSIDERATION"),(A) the amount, in cash (the "CLASS
A PREFERRED SHARE CASH CONSIDERATION"), derived by multiplying (x) the
number of Shares issuable upon conversion of a Class A Preferred Share
immediately prior to the Effective Time (the "CLASS A CONVERSION NUMBER")
by (y) the Share Cash Consideration or (B) the number of shares of Parent
Common Stock (the "CLASS A PREFERRED SHARE STOCK CONSIDERATION") equal to
the amount (rounded to four decimal places) derived by multiplying the
Class A Conversion Number and the Share Conversion Number; PROVIDED,
however, that, if the Average Parent Share Price is less than the Floor
Price, the Class A Preferred Share Merger Consideration shall be the Class
A Preferred Share Cash Consideration and no holder of Class A Preferred
Shares shall have the right or option to elect to receive (and Parent
shall have no obligation to issue) Class A Preferred Share Stock
Consideration;
(iii) each share of the Class B Nonvoting Cumulative Redeemable
Preferred Stock, par value $.01 per share, of the Company (the "CLASS B
PREFERRED SHARES") issued and outstanding at the Effective Time (other
than (A) Class B Preferred Shares owned by the Parent Companies or by the
Company Entities and in each case not held on behalf of third parties and
(B) Class B Preferred Shares ("DISSENTING CLASS B PREFERRED SHARES") that
are held by stockholders ("DISSENTING CLASS B PREFERRED Stockholders")
exercising appraisal rights pursuant to Section 262 of the DGCL
(collectively, "EXCLUDED CLASS B PREFERRED Shares") shall be converted
into, and become exchangeable for (the "CLASS B PREFERRED SHARE MERGER
CONSIDERATION"), the amount, in cash (the "CLASS B PREFERRED SHARE CASH
CONSIDERATION"), equal to the redemption price per Class B Preferred Share
that would be payable by the Company in accordance with the Certificate of
Designation of the Class B Preferred Shares if the Company were to redeem
the Class B Preferred Shares immediately prior to the Effective Time; and
(iv) each share of the Class C Convertible Preferred Stock, par
value $.01 per share, of the Company (the "CLASS C PREFERRED SHARES" and,
together with the Class A Preferred Shares and the Class B Preferred
Shares, the "PREFERRED SHARES" and, the Preferred Shares together with the
Shares, the "COMPANY Securities") issued and outstanding at the Effective
Time (other than (A) Class C Preferred Shares owned by the Parent
Companies or by the Company Entities and in each case not held on behalf
of third parties and (B) Class C Preferred Shares ("DISSENTING CLASS C
PREFERRED SHARES" and, together with the Dissenting Shares, the Dissenting
Class A Preferred Shares and the Dissenting Class B Preferred Shares, the
"DISSENTING SECURITIES") that are held by stockholders ("DISSENTING CLASS
C PREFERRED STOCKHOLDERS" and, together with the Dissenting Common
Stockholders, the Dissenting Class A Preferred Stockholders and the
Dissenting
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Class B Preferred Stockholders, the "DISSENTING SECURITYHOLDERS")
exercising appraisal rights pursuant to Section 262 of the DGCL
(collectively, "EXCLUDED CLASS C PREFERRED SHARES" and, together with the
Excluded Shares, the Excluded Class A Preferred Shares and the Excluded
Class B Preferred Shares, the "EXCLUDED SECURITIES") shall be converted
into, and become exchangeable for, at the option of the holder thereof
(the "CLASS C PREFERRED SHARE MERGER CONSIDERATION" and, together with the
Share Merger Consideration, the Class A Preferred Share Merger
Consideration and the Class B Preferred Stock Merger Consideration, the
"MERGER CONSIDERATION") (A) the amount, in cash (the "CLASS C PREFERRED
SHARE CASH CONSIDERATION" and, together with the Share Cash Consideration,
the Class A Preferred Share Cash Consideration and the Class B Preferred
Share Cash Consideration, the "SECURITY CASH CONSIDERATION"), derived by
multiplying (x) the number of Shares issuable upon conversion of a Class C
Preferred Share based on an exchange ratio of 51 Shares per Class C
Preferred Share (the "CLASS C CONVERSION NUMBER" and, together with the
Conversion Number and the Class A Conversion Number, the "SECURITY
CONVERSION NUMBER") by (y) the Share Cash Consideration and adding to such
amount the accrued but unpaid dividends on a Class C Preferred Share
through the Effective Time or (B) the number of shares of Parent Common
Stock (the "CLASS C PREFERRED SHARE STOCK CONSIDERATION" and, together
with the Share Stock Consideration and the Class A Preferred Share Stock
Consideration, the "SECURITY STOCK CONSIDERATION") equal to the amount
(rounded to four decimal places) derived by multiplying the Class C
Conversion Number and the Share Conversion Number and adding to such
number of shares of Parent Common Stock, the number of shares of Parent
Common Stock derived by dividing the amount of accrued but unpaid
dividends on a Class C Preferred Share through the Effective Time by the
Average Parent Share Price; PROVIDED, HOWEVER, that, if the Average Parent
Share Price is less than the Floor Price, the Class C Preferred Share
Merger Consideration shall be the Class C Preferred Share Cash
Consideration and no holder of Class C Preferred Shares shall have the
right or option to elect to receive (and Parent shall have no obligation
to issue) Class C Preferred Share Stock Consideration.
(b) CANCELLATION OF COMPANY SECURITIES. Each Excluded Security
issued and outstanding immediately prior to the Effective Time, shall, by virtue
of the Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist subject to the rights of the
holder thereof, if such holder is a Dissenting Securityholder, under Section 262
of the DGCL. At the Effective Time, all Company Securities shall no longer be
outstanding and shall be cancelled and retired and shall cease to exist, and
each certificate formerly representing any of such Company Securities (other
than Excluded Securities) (a "CERTIFICATE") shall, subject to the terms and upon
the
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conditions of this Agreement, thereafter represent only the right to receive the
applicable Merger Consideration and the right, if any, to receive pursuant to
Section 4.2(e) cash in lieu of any fractional shares into which such Company
Securities otherwise would have been converted pursuant to Section 4.1(a) and
any distribution or dividend pursuant to Section 4.2(c).
(c) MERGER SUB. At the Effective Time, each share of Common Stock,
par value $.01 per share (the "Merger Sub Shares"), of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain outstanding and
certificates evidencing any such shares of Merger Sub shall continue to evidence
shares of Common Stock of the Surviving Corporation; PROVIDED, HOWEVER, that if
the Average Parent Share Price is less than the Floor Price and Parent shall
elect that Merger Sub be merged with and into the Company at the Effective Time,
each Merger Sub Share outstanding immediately prior to the Effective Time shall
be converted into one share of common stock of the Surviving Corporation.
IV.2. ALLOCATION OF MERGER CONSIDERATION; ELECTION PROCEDURES. For
purposes of this Agreement "SHARE EQUIVALENTS" shall mean (i) with respect to
Shares, the number of outstanding Shares, (ii) with respect to Class B Preferred
Shares, the amount derived by multiplying (A) the number of outstanding Class B
Preferred Shares by (B) the amount derived by dividing the Class B Preferred
Share Cash Consideration by the Share Cash Consideration, and (iii) with respect
to the Class A Preferred Shares and the Class C Preferred Shares (the
"CONVERTIBLE PREFERRED SHARES"), the number of Shares into which such
outstanding Convertible Preferred Shares could be converted immediately prior to
the Effective Time.
(a) ALLOCATION.(i) If the holders of Shares and Convertible
Preferred Shares have the option to elect Security Cash Consideration or
Security Stock Consideration, the number of Shares and Convertible Preferred
Shares to be converted into the right to receive the applicable Security Stock
Consideration and the applicable Security Cash Consideration in the Merger shall
be determined as follows:
(ii) Subject to Section 4.2(a)(iv), notwithstanding anything in this
Agreement to the contrary, the aggregate number of Share Equivalents (the
"STOCK ELECTION NUMBER") represented by the Shares and Convertible
Preferred Shares to be converted into the right to receive the applicable
Security Stock Consideration shall be equal, as closely as practicable, to
forty-five percent (45%) of the sum of (A) the aggregate number of Share
Equivalents represented by outstanding Company Securities (treating any
Company Securities to be cancelled pursuant to Section 4.1(b) as not being
outstanding for this purpose) immediately prior to the Effective Time and
(B) the aggregate number of Share Equivalents represented by any Class B
Preferred Shares redeemed by the Company prior to the Effective
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Time.
(iii) Subject to Section 4.2(a)(iv), notwithstanding anything in
this Agreement to the contrary, the aggregate number of Share Equivalents
(the "CASH ELECTION NUMBER") represented by the Shares and Convertible
Preferred Shares to be converted into the right to receive the applicable
Security Cash Consideration shall equal, as closely as practicable, the
number of Share Equivalents represented by the difference between (A) the
aggregate number of Share Equivalents represented by outstanding Company
Securities immediately prior to the Effective Time and (B) the Stock
Election Number.
(iv) Notwithstanding anything in this Agreement to the contrary,
unless the Average Parent Share Price is less than the Floor Price, if,
absent this Section 4.2(a)(iv), as of the Effective Time the aggregate
value of the Security Stock Consideration (calculated using the most
recent available price for Parent Common Stock on the ASE) would be less
than 45% of the sum of (x) the aggregate value of the Security Cash
Consideration and (y) the aggregate value of the Security Stock
Consideration (calculated using the most recent available price for Parent
Common Stock on the ASE), then the Stock Election Number and the Cash
Election Number (but not the Security Conversion Numbers) shall be
adjusted as necessary so that, as of the Effective Time, the aggregate
value of the Security Stock Consideration (calculated using the most
recent available price for Parent Common Stock on the ASE) shall equal, as
closely as possible, 45% of the sum of (x) the aggregate value of the
Security Cash Consideration and (y) the aggregate value of the Security
Stock Consideration (calculated using the most recent available price for
Parent Common Stock on the ASE); PROVIDED, HOWEVER, that if the Stock
Election Number resulting from such adjustment would be greater than the
Stock Election Number that would have resulted pursuant to Section
4.2(a)(ii) (without regard to this Section 4.2(a)(iv)) if the Average
Parent Share Price had been equal to the Floor Price, then Parent, at its
sole discretion, shall have the option of either (i) adjusting the Stock
Election Number and the Cash Election Number as set forth above in this
Section 4.2(a)(iv) or (ii) treating the Average Parent Share Price as
being less than the Floor Price for all purposes of this Agreement,
including the availability of the election set forth in Section 1.1 and
the concomitant change in the form of the Merger Consideration to all cash
as set forth in the provisos to Sections 4.1(a)(i), (ii) and (iv).
(b) ELECTION AND PRORATION PROCEDURES.
(i) As of the Effective Time, Parent shall deposit, or shall cause
to be deposited, with an exchange agent selected by Parent, with the
Company's
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prior approval, which shall not be unreasonably withheld or delayed (the
"EXCHANGE AGENT"), for the benefit of the holders of Certificates
representing Company Securities issued and outstanding immediately prior
to the Effective Time, the shares of Parent Common Stock, cash and any
dividends or other distributions with respect to the Parent Common Stock
to be issued or paid pursuant to Section 4.1 and this Section 4.2 in
exchange for such Company Securities upon due surrender of such
Certificates pursuant to the provisions of this Article IV (such cash and
certificates representing shares of Parent Common Stock, together with any
dividends or other distributions payable with respect thereto, being
hereinafter referred to as the "EXCHANGE FUND").
(ii) Provided the Average Parent Share Price is greater than or
equal to the Floor Price, and subject to allocation and proration in
accordance with the provisions of this Section 4.2, each record holder of
Shares and Convertible Preferred Shares (other than Excluded Securities)
issued and outstanding immediately prior to the Election Deadline (as
defined below) shall be entitled (A) to elect to receive in respect of
each such Company Security (x) the applicable Security Cash Consideration
(a "CASH ELECTION") or (y) the applicable Security Stock Consideration (a
"STOCK ELECTION") or (B) to indicate that such record holder has no
preference as to the receipt of the applicable Security Cash Consideration
or the applicable Security Stock Consideration for such Shares or
Convertible Preferred Shares (a "NON-ELECTION"). Shares and Convertible
Preferred Shares in respect of which a Non-Election is made (including
Shares and Convertible Preferred Shares in respect of which such a
Non-Election is deemed to have been made pursuant to this Section 4.2 and
Section 4.3 (collectively, "NON-ELECTION SECURITIES") shall be deemed by
Parent, in its sole and absolute discretion, subject to Sections
4.2(b)(v)-(vii), to be, in whole or in part, Shares and Convertible
Preferred Shares in respect of which Cash Elections or Stock Elections
have been made.
(iii) Elections pursuant to Section 4.2(b)(ii) shall be made on a
form with such provisions as may be reasonably agreed upon by the Company
and Parent (a "FORM OF ELECTION") to be provided by the Exchange Agent for
that purpose to record holders of Shares and Convertible Preferred Shares
(other than holders of Excluded Securities), together with appropriate
transmittal materials, at the time of mailing to holders of record of
Company Securities of the Prospectus/Proxy Statement (as defined in
Section 6.3) in connection with the Stockholders Meeting referred to in
Section 6.4. Elections shall be made by mailing to the Exchange Agent a
duly completed Form of Election. To be effective, a Form of Election must
be (x) properly completed, signed and submitted to the Exchange Agent at
its designated office by 5:00 p.m. on the business day that is two trading
days prior to the Closing Date (which date shall be publicly announced by
Parent as
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soon as practicable but in no event less than ten trading days prior to
the Closing Date) (the "ELECTION DEADLINE") and (y) accompanied by the
Certificate(s) representing the Shares and Convertible Preferred Shares as
to which the election is being made (or by an appropriate guarantee of
delivery of such Certificate(s) by a commercial bank or trust company in
the United States or a member of a registered national security exchange
or of the National Association of Securities Dealers, Inc., PROVIDED that
such Certificates are in fact delivered to the Exchange Agent within five
trading days after the date of execution of such guarantee of delivery).
The Company shall use its best efforts to make a Form of Election
available to all Persons who become holders of record of Shares or
Convertible Preferred Shares (other than Excluded Securities) between the
date of mailing described in the first sentence of this Section
4.2(b)(iii) and the Election Deadline. Parent shall determine, in its sole
and absolute discretion, which authority it may delegate in whole or in
part to the Exchange Agent, whether Forms of Election have been properly
completed, signed and submitted or revoked. The decision of Parent (or the
Exchange Agent, as the case may be) in such matters shall be conclusive
and binding. Neither Parent nor the Exchange Agent will be under any
obligation to notify any Person of any defect in a Form of Election
submitted to the Exchange Agent. A holder of Shares or Convertible
Preferred Shares that does not submit an effective Form of Election prior
to the Election Deadline shall be deemed to have made a Non-Election.
(iv) An election pursuant to Section 4.2(b)(ii) may be revoked, but
only by written notice received by the Exchange Agent prior to the
Election Deadline. Any Certificate(s) representing Company Securities that
have been submitted to the Exchange Agent in connection with an election
shall be returned without charge to the holder thereof in the event such
election is revoked as aforesaid and such holder requests in writing the
return of such Certificate(s). Upon any such revocation, unless a duly
completed Form of Election is thereafter submitted prior to the Election
Deadline in accordance with paragraph (b)(iii), such Shares and
Convertible Preferred Shares shall be deemed Non-Election Securities. In
the event that this Agreement is terminated pursuant to the provisions
hereof and any Company Securities have been transmitted to the Exchange
Agent pursuant to the provisions hereof, such Company Securities shall
promptly be returned without charge to the Person (as defined below)
submitting the same.
(v) In the event that the aggregate number of Share Equivalents
represented by the outstanding Shares and Convertible Preferred Shares in
respect of which Cash Elections have been made exceeds the Cash Election
Number, (a) all Shares and Convertible Preferred Shares in respect of
which Stock Elections have been made or are deemed to have been made (the
"STOCK ELECTION SECURITIES") shall be converted into the right to receive
the applicable Securities
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Stock Consideration, and (b) all Non-Election Securities and Shares and
Convertible Preferred Shares in respect of which Cash Elections have been
made shall be converted into the right to receive the respective
applicable Security Stock Consideration or Security Cash Consideration in
the following order and manner:
(A) first, all Non-Election Securities shall be deemed to
be Shares and Convertible Preferred Shares in respect of which Stock
Elections have been made and treated as Stock Election Securities;
(B) second, if necessary, an aggregate number of shares and
Convertible Preferred Shares in respect of which Cash Elections have
been made shall be deemed converted into and treated as Stock
Election Securities, (such aggregate number to be apportioned
pro-rata among record holders of such Shares and Convertible
Preferred Shares, based on the number of Share Equivalents
represented thereby), so that the number of Share Equivalents
represented by the Shares and Convertible Preferred Shares so
converted, when added to the Share Equivalents represented by all
other Stock Election Securities (including Non-Election Securities
deemed to be Stock Election Securities), shall equal as closely as
practicable, the Stock Election Number; and
(C) third, any remaining Shares and Convertible Preferred
Shares in respect of which Cash Elections have been made and all
Class B Preferred Shares shall be converted into the right to
receive the applicable Security Cash Consideration.
(vi) In the event that the aggregate number of Share Equivalents
represented by the outstanding Shares and Convertible Preferred Shares in
respect of which Stock Elections have been made exceeds the Stock Election
Number, (a) all Shares and Convertible Preferred Shares in respect of
which Cash Elections have been made or are deemed to have been made (the
"CASH ELECTION SECURITIES") and all Class B Preferred Shares shall be
converted into the right to receive the applicable Securities Cash
Consideration, and (b) all Non-Election Securities and Shares and
Convertible Preferred Shares in respect of which Stock Elections have been
made shall be converted into the right to receive the respective
applicable Security Cash Consideration and Security Stock Consideration in
the following order and manner:
(A) first, all Non-Election Securities shall be deemed to
be Shares and Convertible Preferred Shares in respect of which Cash
Elections have been made and treated as Cash Election Securities;
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(B) second, if necessary, an aggregate number of shares and
Convertible Preferred Shares in respect of which Stock Elections
have been made shall be deemed converted into and treated as Cash
Election Securities, such aggregate number to be apportioned
pro-rata among record holders of such Shares and Convertible
Preferred Shares, based on the number of Share Equivalents
represented thereby), so that the number of Share Equivalents
represented by the Shares and Convertible Preferred Shares so
converted, when added to the Share Equivalents represented by all
Class B Preferred Shares and all other Cash Election Securities
(including Non-Election Securities to be deemed Cash Election
Securities), shall equal as closely as practicable the Cash Election
Number; and
(C) third, any remaining Shares and Convertible Preferred
Shares in respect of which Stock Elections have been made shall be
converted into the right to receive the applicable Security Stock
Consideration.
(vii) In the event that clauses (v) and (vi) of this Section 4.2(b)
are not applicable, all Non-Election Securities shall be deemed by Parent,
in its sole and absolute discretion, subject to Section 4.2(a), to be, in
whole or in part, Shares and Convertible Preferred Shares in respect of
which Cash Elections or Stock Elections have been made, as applicable.
(viii) The Exchange Agent, in consultation with Parent and the
Company, shall make all computations to give effect to this Section 4.2.
(ix) Subject to this Section 4.2(b) and Section 4.2(h), upon
surrender of a Certificate representing Stock Election Securities for
cancellation to the Exchange Agent together with a duly completed Form of
Election, the holder of such Certificate shall be entitled to receive (a)
a certificate representing that number of whole shares of Parent Common
Stock that such holder is entitled to receive pursuant to this Article IV,
(b) a check in the amount (after giving effect to any required tax
withholdings) of (x) any cash in lieu of fractional shares plus (y) any
unpaid non-stock dividends and any other dividends or other distributions
that such holder has the right to receive pursuant to the provisions of
this Article IV, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on any amount payable upon
due surrender of the Certificates representing Stock Election Securities.
In the event of a transfer of ownership of Company Securities that is not
registered in the transfer records of the Company, the applicable Stock
Merger Consideration payable in respect of such Company
-12-
Securities may be issued and/or paid to such a transferee if the
Certificate formerly representing such Company Securities is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. If any certificate for shares of Parent Common Stock
is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the Person (as defined below) requesting such exchange
shall pay any transfer or other taxes required by reason of the issuance
of certificates for shares of Parent Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of Parent or the Exchange Agent that such
tax has been paid or is not applicable.
(x) Subject to this Section 4.2(b) and Section 4.2(h), upon
surrender of a Certificate representing Cash Election Securities (or, if
the Average Parent Share Price is less than (or pursuant to Section
4.2(a)(iv), is, at Parent's option, treated as being less than) the Floor
Price, any Company Securities) for cancellation to the Exchange Agent
together with a duly completed Form of Election, the holder of such
Certificate shall be entitled to receive a check in the amount such holder
is entitled to receive pursuant to this Article IV, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Company Securities that is not registered in the transfer
records of the Company, the applicable Cash Merger Consideration payable
in respect of such Company Securities may be issued and/or paid to such a
transferee if the Certificate formerly representing such Company
Securities is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
For the purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including not-for-profit entity), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d) or
other entity of any kind or nature.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED COMPANY SECURITIES;
VOTING. (i) All shares of Parent Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time and
whenever a dividend or other distribution is declared by Parent in respect of
the Parent Common Stock, the record date for which is at or after the Effective
Time, that declaration shall include dividends or other distributions in respect
of all shares issuable pursuant to this Agreement. No dividends or other
distributions in respect of Parent Common Stock shall be paid to any holder of
any unsurrendered Certificate representing Stock Election Securities until such
Certificate is surrendered for exchange in accordance with this
-13-
Article IV. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be issued and/or paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (A) at the time of such surrender, the dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Parent Common Stock and not paid
and (B) at the appropriate payment date, the dividends or other distributions
payable with respect to such whole shares of Parent Common Stock with a record
date after the Effective Time but with a payment date subsequent to such
surrender.
(ii) Holders of unsurrendered Certificates representing Stock
Election Securities shall be entitled to vote after the Effective Time at
any meeting of Parent stockholders the number of whole shares of Parent
Common Stock represented by such Certificates, regardless of whether such
holders have exchanged their Certificates.
(d) TRANSFERS. After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Company Securities that were
outstanding immediately prior to the Effective Time.
(e) FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and any
holder of Company Securities entitled to receive a fractional share of Parent
Common Stock but for this Section 4.2(e) shall be entitled to receive a cash
payment in lieu thereof, which payment shall represent such holder's
proportionate interest in a share of Parent Common Stock based on the Average
Parent Share Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock)
that remains unclaimed by the stockholders of the Company for 180 days after the
Effective Time shall be paid to Parent. Any stockholders of the Company who have
not theretofore complied with this Article IV shall thereafter look only to
Parent for payment of their shares of Parent Common Stock and/or any cash,
dividends and other distributions in respect thereof payable and/or issuable
pursuant to Section 4.1 and this Section 4.2 upon due surrender of their
Certificates (or affidavits of loss in lieu thereof), in each case, without any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Company Securities for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) LOST, STOLEN OR DESTROYED. In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the
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Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond in customary amount 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 shares of Parent Common Stock and/or any cash payable
and any unpaid dividends or other distributions in respect thereof pursuant to
Sections 4.1 and this 4.2 deliverable in respect of the Company Securities
represented by such Certificate pursuant to this Agreement.
(h) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.8) of the Company shall not be exchanged until Parent has received
a written agreement from such Person as provided in Section 6.8.
IV.3. DISSENTERS' RIGHTS. No Dissenting Securityholder shall be
entitled to any Merger Consideration pursuant to this Article IV unless and
until such Person thereof shall have failed to perfect or shall have effectively
withdrawn or lost such Person's right to dissent from the Merger under the DGCL,
and any Dissenting Securityholder shall be entitled to receive only the payment
provided by Section 262 of the DGCL with respect to Company Securities owned by
such Dissenting Securityholder. If any Person who otherwise would be deemed a
Dissenting Securityholder shall have failed to perfect or shall have effectively
withdrawn or lost the right to dissent with respect to any Company Securities,
such Company Securities shall immediately become Non-Election Shares. The
Company shall give Parent (i) prompt notice of any written demands for
appraisal, attempted withdrawals of such demands, and any other instruments
served pursuant to applicable law received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal of
Dissenting Securities, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
IV.4. ADJUSTMENTS TO PREVENT. In the event that the Company changes
the number of Company Securities or securities convertible or exchangeable into
or exercisable for Company Securities, or Parent changes the number of shares of
Parent Common Stock or securities convertible or exchangeable into or
exercisable for shares of Parent Common Stock, issued and outstanding prior to
the Effective Time as a result of a reclassification, stock split (including,
without limitation, the Parent's publicly announced two-for-one stock split or
any reverse split), stock dividend or distribution, recapitalization, merger,
subdivision, issuer tender or exchange offer or other similar transaction, the
Merger Consideration and the Floor Price shall be equitably adjusted.
-15-
ARTICLE V
Representations and Warranties
V.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company on or prior to entering into this Agreement
(the "COMPANY DISCLOSURE LETTER"), the Company hereby represents and warrants to
Parent and Merger Sub that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with all
other such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' certificates of
incorporation and by-laws, each as amended to date. The Company's and its
Subsidiaries' certificates of incorporation and by-laws as so made available are
in full force and effect. Section 5.1(a) of the Company Disclosure Letter
contains a correct and complete list of each jurisdiction where the Company and
each of its Subsidiaries is organized and qualified to do business.
As used in this Agreement, the term (i) "SUBSIDIARY" means, with
respect to the Company, Parent or Merger Sub, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such party or by one
or more of its respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries and (ii) "COMPANY MATERIAL ADVERSE EFFECT" means a
material adverse effect on the financial condition, properties, business or
results of operations of the Company and its Subsidiaries taken as a whole or a
material condition, restriction or other limitation on Parent's ability to own,
operate or otherwise control the Company and its Subsidiaries or their
respective assets and businesses, taken as a whole; PROVIDED, HOWEVER, that a
Company Material Adverse Effect shall not include any effect upon the financial
condition, properties, business or results of operations of the Company, or any
of its Subsidiaries, resulting or arising from (A) changes in national economic
or business conditions generally or affecting the movie theater industry
specifically, or (B) the public announcement of the execution of the Merger
Agreement
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and the transactions contemplated thereby.
(b) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 12,500,000 shares consisting of 10,000,000 Shares, of which
2,304,802 Shares were outstanding as of the close of business on August 11,
1998, and 2,500,000 shares of Preferred Stock, par value $.01 per share, of
which 779 Class A Preferred Shares, 750 Class B Preferred Shares and 3,000 Class
C Preferred Shares were outstanding as of the close of business on August 11,
1998. All of the outstanding Shares and Preferred Shares have been duly
authorized and are validly issued, fully paid and nonassessable. Other than
467,400 Shares reserved for issuance upon conversion of the outstanding Shares
of Class A Preferred Shares and 367,347 Shares reserved for issuance upon
conversion of the outstanding Shares of Class C Preferred Shares, the Company
has no Shares or Preferred Shares reserved for issuance, except for 450,000
Shares reserved for issuance pursuant to options outstanding under the Company's
1997 Stock Incentive Plan, as amended and restated on April 28, 1998 (the "STOCK
PLAN"), 100,000 Shares reserved for issuance pursuant to warrants (the "IPO
WARRANTS") held by Prime Charter Ltd. and 282,600 Shares reserved for issuance
pursuant to the Class A Warrant. The Company Disclosure Letter contains a
correct and complete list of each outstanding option to purchase Shares under
the Stock Plan (each a "COMPANY OPTION"), including the holder, date of grant,
exercise price and number of Shares subject thereto. Each of the outstanding
shares of capital stock or other securities of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned by a direct or indirect wholly-owned subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other encumbrance
("LIENS"). Except as set forth above, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, agreements, arrangements or commitments to issue or sell any shares of
capital stock or other securities of the Company or any of its Subsidiaries or
any securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Company or any of its Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. The Company does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter ("VOTING DEBT"). The Securities (as defined in the Stockholders
Agreement) represent a majority of the outstanding Shares on a fully diluted
basis, excluding Options not scheduled to vest and become exercisable before
June 30, 1999.
(c) CORPORATE AUTHORITY; APPROVAL AND OPINION OF FINANCIAL ADVISOR.
(i) The Company has all requisite corporate power and authority and has taken
all corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and to consummate the Merger, subject only to
approval of this Agreement by the holders of a majority of the outstanding
Shares and Class A Preferred
-17-
Shares, voting together as a single class (the "COMPANY REQUISITE VOTE"). This
Agreement is 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 (the "BANKRUPTCY AND EQUITY EXCEPTION").
(ii) The Board of Directors of the Company (A) has unanimously
approved and declared advisable this Agreement and the Merger and the
other transactions contemplated hereby and (B) has received the opinion of
its financial advisors, Credit Suisse First Boston Corporation ("CSFB"),
to the effect that, as of the date of this Agreement, the Share Merger
Consideration to be received by the holders of Shares in the Merger is
fair to such holders from a financial point of view, a copy of the written
opinion of which will be delivered to Parent promptly after receipt
thereof by the Company. It is agreed and understood that such opinion is
for the benefit of the Company's Board of Directors and may not be relied
on by Parent or Merger Sub.
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the Exchange Act
and the Securities Act of 1933, as amended (the "SECURITIES ACT"), (C) to comply
with state securities or "blue-sky" laws, and (D) required to be made with the
ASE, no notices, reports or other filings are required to be made by the Company
or any of its Subsidiaries with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company or any of its
Subsidiaries from, any governmental or regulatory authority, agency, commission,
body or other governmental entity ("GOVERNMENTAL ENTITY"), in connection with
the execution and delivery of this Agreement by the Company and the consummation
by the Company of the Merger and the other transactions contemplated hereby,
except those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent the Company from consummating the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of (A) this Agreement
by the Company and (B) the Stockholders Agreements by the Selling
Stockholders do not, and the consummation (x) by the Company of the Merger
and the other transactions contemplated hereby and (y) the Selling
Stockholders of the transactions contemplated thereby, will not,
constitute or result in (A) a breach or violation of, or a default under,
the certificate of incorporation or by-laws of the Company or the
comparable governing instruments of any of its Subsidiaries, (B) a breach
or violation of, a default under, or the acceleration of
-18-
any obligations or the creation of a Lien on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("CONTRACTS") binding upon the Company or
any of its Subsidiaries or any Law (as defined in Section 5.1(i) or
governmental or non-governmental permit or license to which the Company or
any of its Subsidiaries is subject or (C) any change in the rights or
obligations of any party under any of the Contracts, except, in the case
of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate,
is not reasonably likely to have a Company Material Adverse Effect or
prevent the Company from consummating the transactions contemplated by
this Agreement and the Stockholders Agreements.
(e) COMPANY REPORTS; FINANCIAL STATEMENTS. The Company has delivered
to Parent and Merger Sub each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1997 (the "AUDIT DATE"),
including the Company's Annual Report on Form 10-KSB for the year ended December
31, 1997, and the Company's Quarterly Report on Form 10-QSB for the period ended
March 31, 1998, each in the form (including exhibits, annexes and any amendments
thereto) filed with the Securities and Exchange Commission (the "SEC")
(collectively, including any such reports filed subsequent to the date hereof
and as amended, the "COMPANY REPORTS"). As of their respective dates, (or, if
amended, as of the date of the latest of such amendments) the Company Reports
did not, and any Company Reports filed with the SEC subsequent to the date
hereof will not, 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 made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of income and of changes in financial position
included in or incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents, or will fairly present, the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
(f) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company
Reports filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in
-19-
any material transaction other than according to, the ordinary and usual course
of such businesses (other than the capital expenditures and transactions listed
in and permitted by Section 6.1(c)(iii) of the Company Disclosure Letter) and
there has not been (i) any change in the financial condition, properties,
business or results of operations of the Company and its Subsidiaries taken as a
whole or any development or combination of developments that, individually or in
the aggregate, has had or is reasonably likely to have a Company Material
Adverse Effect; (ii) any damage, destruction or other casualty loss with respect
to any asset or property owned, leased or otherwise used by the Company or any
of its Subsidiaries, whether or not covered by insurance other than any such
damage, destruction or casualty loss that, individually or in the aggregate has
not had or is not reasonably likely to have a Company Material Adverse Effect;
(iii) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company; or (iv) any change
by the Company in accounting principles, practices or methods. Section 5.1(f) of
the Company Disclosure Letter contains a list of the executive officers of the
Company and the annual compensation payable to each.
(g) LITIGATION AND LIABILITIES. Except as disclosed in the Company
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of the Company,
threatened against the Company or any of its Subsidiaries or (ii) liabilities,
whether or not accrued, contingent or otherwise and whether or not required to
be disclosed, or any other facts or circumstances of which the executive
officers of the Company have knowledge that could result in any claims against,
or liabilities of, the Company or any of its Affiliates, except for those that,
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect or prevent the Company from consummating the
transactions contemplated by this Agreement. For purposes of this Agreement
"knowledge" shall mean actual knowledge without investigation.
(h) EMPLOYEE BENEFITS.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, severance, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors,
consultants, former employees, former directors or former consultants of
the Company and its Subsidiaries and under which the Company and its
Subsidiaries may have liability (the "COMPENSATION AND BENEFIT PLANS") and
any trust agreement or insurance contract forming a part of such
Compensation and Benefit Plans has been made available to Parent prior to
the date hereof. The Compensation and Benefit Plans are listed
-20-
in Section 5.1(h) of the Company Disclosure Letter and any "change of
control" or similar provisions therein are specifically identified in
Section 5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans comply in all material
respects with all applicable law, including but not limited to the Code
and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Each Compensation and Benefit Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION
PLAN") and that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter (including a
determination that the related trust under such Compensation and Benefit
Plan is exempt from tax under Code Section 501(a) from the Internal
Revenue Service (the "IRS") for "TRA" (as defined in Rev. Proc. 93-39),
and the Company is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending
or, to the knowledge of the executive officers of the Company, threatened
litigation relating to the Compensation and Benefit Plans other than
routine claims for benefits. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any Compensation
and Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject the Company or any of its
Subsidiaries to a material tax or penalty imposed by either Section 4975
of the Code or Section 502 of ERISA.
(iii) Neither the Company nor any Subsidiary or any entity (an
"ERISA AFFILIATE") which is considered one employer with the Company under
Section 4001(b) of ERISA or Section 414 of the Code (an "ERISA AFFILIATE
PLAN") currently maintains a "single employer plan" within the meaning of
Section 4001(a)(15) of ERISA. Except as scheduled in the list under
Section 5.1(h)(iii) of the Company Disclosure Letter, none of the Company,
any of its Subsidiaries or any ERISA Affiliate has contributed, or been
obligated to contribute, to a multiemployer plan (within the meaning of
Section 3(37) of ERISA) under Subtitle E of Title IV of ERISA at any time
since September 26, 1980. There is no pending investigation or enforcement
action by the Department of Labor or IRS or any other governmental agency
with respect to any Compensation and Benefit Plan.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan, including any multiemployer plan (within
the meaning of Section 3(37) of ERISA), as of the date hereof have been
timely made or have been reflected on the Company's financial statements.
(v) Neither the Company nor its Subsidiaries have any obligations
-21-
for retiree health and life benefits under any Compensation and Benefit
Plan, other than benefits mandated by Section 4980 B of the Code except as
set forth in the Company Disclosure Letter. The Company or its
Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
(vi) The consummation of the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreements will not,
directly or indirectly (including, without limitation, as a result of any
termination of employment following the Effective Time) (x) entitle any
employees, consultants or directors of the Company or its Subsidiaries to
any payment (including severance pay or similar compensation) or any
increase in compensation, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans other than the Stock Plan or (z) result in
any breach or violation of, or a default under, any of the Compensation
and Benefit Plans.
(vii) The Company and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees.
(viii) With respect to each Compensation and Benefit Plan, if
applicable, the Company has provided, made available, or will make
available upon request, to Purchaser, true and complete copies of
existing: (A) two most recent Forms 5500 filed with the IRS; (B) most
recent actuarial report and financial statement; (C) the most recent
summary plan description; (D) most recent determination letter issued by
the IRS; (E) any Form 5310 or Form 5330 filed with the IRS; and (F) most
recent nondiscrimination tests performed under ERISA and the Code
(including 401(k) and 401(m) tests).
(ix) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which
would not reasonably be expected to be deductible as a result of the
limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(x) With respect to the Company's Deferred Compensation Plan listed
as item #2 of the Compensation and Benefit Plans listed in Section
5.1(h)(i) of the Company Disclosure Letter, there is no liability, vested
or unvested, to any individual under said plan of deferred compensation.
(i) COMPLIANCE WITH LAWS; PERMITS. Except as set forth in the
Company Reports filed prior to the date hereof, the businesses of each of the
Company
-22-
and its Subsidiaries have not been, and are not being, conducted in violation of
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit (other than "Environmental Laws" as defined in Section 5.1(k))
of any Governmental Entity (collectively, "LAWS"), except for violations that,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect or prevent the Company from consummating the
transactions contemplated by this Agreement. Except as set forth in the Company
Reports filed prior to the date hereof, no investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the executive officers of the Company,
threatened except for those the outcome of which are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent the Company from consummating the transactions contemplated by this
Agreement. No material change is required in the Company's or any of its
Subsidiaries' processes, properties or procedures in connection with any such
Laws except for such changes the failure to make, individually or in the
aggregate, would not be reasonably be likely to have a Company Material Adverse
Effect; and the Company has not received any notice or communication of any
material noncompliance with any such Laws that has not been cured as of the date
hereof. The Company and its Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently conducted
other than those the absence of which has not had and is not reasonably likely
to have a Company Material Adverse Effect.
(j) TAKEOVER STATUTES. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (including
Section 203 of the DGCL) (each a "TAKEOVER Statute") or any anti-takeover
provision in the Company's certificate of incorporation and by-laws is, or at
the Effective Time will be, applicable to the Company, the Company Securities,
the Merger or the other transactions contemplated by this Agreement and the
Stockholders Agreements. Assuming the accuracy of Parent's representations and
warranties contained in Section 5.2(j) (Ownership of Shares), the Board of
Directors of the Company has taken all action so that Parent will not be
prohibited from entering into a "business combination" with the Company as an
"interested stockholder" (in each case as such term is used in Section 203 of
the DGCL) as a result of the execution of this Agreement, the Stockholders
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(k) ENVIRONMENTAL MATTERS. Except as disclosed in the Company
Reports prior to the date hereof and except for such matters that, alone or in
the aggregate, are not reasonably likely to have Company Material Adverse
Effect; (i) the Company and its Subsidiaries are in compliance with, and to the
knowledge of the executive officers of the Company have at all times been in
compliance with, all
-23-
applicable Environmental Laws; (ii) the Company and its Subsidiaries are not
responsible or liable for the release or threatened release of any Regulated
Substance into the environment (including indoor and outdoor air, soil,
subsurface strata, surface water or groundwater) at any property currently or
formerly owned or operated by the Company or any of its Subsidiaries, where such
release may reasonably be expected to give rise to claims, costs or requirements
under applicable Environmental Laws for the investigation, removal, or
remediation of such Regulated Substances by the Company or any of its
Subsidiaries, or claims for personal injury or property damage; (iii) neither
the Company nor any of its Subsidiaries has received any notice, demand, letter,
claim or request for information alleging that the Company or any of its
Subsidiaries are in violation of any applicable Environmental Law, or are
subject to liability under any Environmental Law for the release or threatened
release of, or exposure to, any Regulated Substance at, or for the
investigation, removal or remediation of any Regulated Substance at, any
property currently or formerly owned or operated by the Company or its
Subsidiaries or at any facility owned or operated by a third party; (iv) to the
knowledge of the executive officers of the Company, neither the Company nor any
of its Subsidiaries are liable under any Environmental Law for the release or
threatened release of any Regulated Substance at any property currently or
formerly owned or operated by the Company or any of its Subsidiaries or at any
facility owned or operated by a third party; (v) neither the Company nor any of
its Subsidiaries is subject to any order, decree, injunction, consent order or
agreement with any Governmental Entity relating to liability under any
Environmental Law; (vi) neither the Company nor any of its Subsidiaries has
entered into any agreement with a third party under which the Company or any of
its Subsidiaries is obligated to indemnify such third party for liabilities
arising under applicable Environmental Laws or relating to the investigation,
removal or remediation of Regulated Substances; (vii) to the knowledge of the
executive officers of the Company, none of the properties currently owned or
leased by the Company or any of its Subsidiaries contains any underground
storage tanks or friable asbestos-containing materials requiring abatement, and
none of such properties contain any equipment containing polychlorinated
biphenyls for which the Company or any of its Subsidiaries are responsible;
(viii) to the knowledge of the executive officers of the Company, there are no
other circumstances or conditions involving the Company or any of its
Subsidiaries that could reasonably be expected to result in any claim,
liability, investigation, cost or restriction on the ownership, use, or transfer
of any property currently owned or lease by the Company or any of its
Subsidiaries pursuant to any Environmental Law; and (ix) the Company has
delivered to Parent copies of all environmental reports, studies, assessments,
sampling data, permits and other governmental approvals in its possession
relating to environmental conditions at the properties currently or formerly
owned or leased by the Company or any of its Subsidiaries, or to the compliance
of the operations of the Company and its Subsidiaries with applicable
Environmental Laws.
As used herein, the term "ENVIRONMENTAL LAW" means any applicable
-24-
federal, state, local or foreign statute, law, ordinance, regulation, order,
common law or published policy having the force of law relating to: (A) the
protection, investigation or restoration of the environment, health, safety, or
natural resources or (B) the generation, use, storage, treatment, processing,
disposal, release or threatened release of any Regulated Substance.
As used herein, the term "REGULATED SUBSTANCE" means (A) any
substance, hazardous material, pollutant, contaminant, toxic substance, toxic
pollutant, solid waste, municipal waste, industrial waste or hazardous waste
that is regulated or defined as such or otherwise regulated pursuant to any
applicable Environmental Law; and (B) any petroleum product or by-product,
asbestos-containing material, polychlorinated biphenyls, or radioactive
material.
(l) TAX MATTERS. As of the date hereof, neither the Company nor any
of its Affiliates has taken or agreed to take any action, nor do the executive
officers of the Company have any knowledge of any fact or circumstance, that
would prevent the Merger and the other transactions contemplated by this
Agreement from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(m) TAXES. Except as provided in Section 5.1(m) the Company
Disclosure Letter:
(i) the Company and each of its Subsidiaries have filed all Tax
Returns (as defined below) which are required by all applicable laws to be
filed by them and such Tax Returns were complete and correct in all
material respects, and have paid, or made adequate provision for the
payment of, all material Taxes (as defined below) which have or may become
due and payable pursuant to said Tax Returns and all other Taxes imposed
to date other than those Taxes being contested in good faith and for which
adequate provision has been made on the most recent balance sheet included
in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are required
by law to withhold and collect have been duly withheld and collected, and
have been paid over, in a timely manner, to the proper Taxing Authorities
(as defined below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries has executed
any waiver to extend, or otherwise taken or failed to take any action that
would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for
the fiscal years prior to and including the most recent fiscal year;
-25-
(iv) the Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code. The Company has at all times been
taxable as a Subchapter C corporation under the Code;
(v) the Company has never been a member of any consolidated group
(other than with its Subsidiaries) for Tax purposes. The Company is not a
party to any tax sharing agreement or arrangement, other than with its
Subsidiaries;
(vi) no material liens for Taxes exist with respect to any of the
assets or properties of the Company or its Subsidiaries, except for
statutory liens for Taxes not yet due or payable or that are being
contested in good faith;
(vii) all of the U.S. federal income Tax Returns filed by or on
behalf of each of the Company and its Subsidiaries have been examined by
and settled with the Internal Revenue Service, or the statute of
limitations with respect to the relevant Tax liability has expired, for
all taxable periods through and including the period ending on the date on
which the Effective Time occurs;
(viii) all Taxes due with respect to any completed and settled
audit, examination or deficiency litigation with any Taxing Authority have
been paid in full;
(ix) there is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes and during the past three
years no Taxing Authority has given written notice of the commencement of
any audit, examination, deficiency or refund litigation, with respect to
any Taxes;
(x) the Company is not bound by any currently effective private
ruling, closing agreement or similar agreement with any Taxing Authority
with respect to any material amount of Tax;
(xi) the Company shall not be required to include in a taxable
period ending after the Effective Time any taxable income attributable to
income that economically accrued in a prior taxable period as a result of
Section 481 of the Code, the installment method of accounting or any
comparable provision of state or local Tax law;
(xii) immediately following the Merger, the Company will not have
any material amount of income or gain that has been deferred under
Treasury Regulation Section 1.1502-13, or any material excess loss account
in a Subsidiary
-26-
under Treasury Regulation Section 1.1502-19.
As used in this Agreement, (i) the term "TAX" (including, with
correlative meaning, the terms "TAXES" and "TAXABLE") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, gains, sales, use, leasing, lease, user, ad valorem, transfer,
recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by such Person,
payroll, employment, unemployment, social security, excise, severance, stamp,
occupation, premium, environmental or windfall profit tax, custom, duty or other
tax, or other like assessment or charge of any kind whatsoever, together with
any interest, levies, assessments, charges, penalties, additions to tax or
additional amounts imposed by any Taxing Authority, (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in (a) of this definition and (c) any liability of such
Person for the payment of any amounts of the type described in (a) as a result
of any express or implied obligation to indemnify any other Person; (ii) the
term "TAX RETURN(S)" shall mean all returns, consolidated or otherwise
(including without limitation informational returns), required to be filed with
any Taxing Authority; and (iii) the term "TAXING AUTHORITY" shall mean any
authority responsible for the imposition or collection of any Tax.
(n) LABOR MATTERS. Neither the Company nor any of its Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor, as of the date hereof, is the Company or any of its
Subsidiaries the subject of any material proceeding asserting that the Company
or any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor is there
pending or, to the knowledge of the executive officers of the Company,
threatened, nor has there been for the past five years, any labor strike,
dispute, walk-out, work stoppage, slow-down or lockout involving the Company or
any of its Subsidiaries.
(o) INSURANCE. All material fire and casualty, director and officer,
general liability, and business interruption, and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries have
been issued by companies reasonably believed by the executive officers of the
Company to be reputable. Such policies insure the Company or such Subsidiary and
the directors and officers of the Company and its Subsidiaries (as the case may
be) for losses customarily insured against by other Persons engaged in similar
lines of business and are reasonable in both scope and amount, in light of the
risks attendant to the businesses conducted by the Company and its Subsidiaries
and except as would not, individually or in the aggregate, be reasonably likely
to have a Company Material Adverse Effect or prevent the Company
-27-
from consummating the transactions contemplated by this Agreement, are in
compliance with all requirements under any leases, mortgages or other
contractual obligations of the Company and its Subsidiaries pertaining to
insurance matters.
(p) INTELLECTUAL PROPERTY.
(i) The Company and/or each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or
materials that are used in the business of the Company and its
Subsidiaries, except for any such failures to own, be licensed or possess
that, individually or in the aggregate, are not reasonably likely to have
a Company Material Adverse Effect.
(ii) Except as disclosed in Company Reports filed prior to the date
hereof or as is not reasonably likely to have a Company Material Adverse
Effect:
(A) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any third-party patents,
trademarks, service marks, copyrights, trade secrets or computer
software (collectively, "THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS");
(B) no claims with respect to (I) the patents, registered
and material unregistered trademarks and service marks, registered
copyrights, trade names, and any applications therefor, trade
secrets or computer software owned by the Company or any of its
Subsidiaries (collectively, the "COMPANY INTELLECTUAL PROPERTY
RIGHTS"); or (II) Third-Party Intellectual Property Rights are
currently pending or, to the knowledge of the executive officers of
the Company, are threatened by any Person;
(C) the executive officers of the Company do not know of
any valid grounds for any bona fide claims (I) to the effect that
the sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by the Company or any
of its Subsidiaries, infringes on any copyright, patent, trademark,
service mark or trade secret of any Person; (II) against the use by
the Company or any of its Subsidiaries of any Company Intellectual
Property Right or Third-Party Intellectual Property Right used in
the business of the Company or any of its
-28-
Subsidiaries as currently conducted or as proposed to be conducted;
(III) challenging the ownership, validity or enforceability of any
of the Company Intellectual Property Rights; or (IV) challenging the
license or legally enforceable right to use of the Third-Party
Intellectual Rights by the Company or any of its Subsidiaries; and
(D) to the knowledge of the executive officers of the
Company, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property Rights
by any third party, including any employee or former employee of the
Company or any of its Subsidiaries.
(q) RIGHTS PLAN. The Company has not adopted or
otherwise implemented a stockholder rights plan or other similar
agreement or instrument.
(r) BROKERS AND FINDERS. Neither the Company nor any of its
officers, directors (with respect to officers and directors, in such capacity as
officers or directors) or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders, fees in
connection with the Merger or the other transactions contemplated in this
Agreement except that the Company has engaged CSFB as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(s) INTERESTED TRANSACTIONS. To the knowledge of the executive
officers of the Company and except as set forth in the Company Reports prior to
the date hereof, no director or officer of the Company or any Subsidiary, (a)
owns, directly or indirectly, any 5% or greater interest in, or is a director,
officer, substantial stockholder or employee of, or consultant to, any
competitor or supplier of the Company or any Subsidiary, or is in any way
associated with or involved in the business conducted by the Company other than
in such capacity as a director or officer of the Company or a Subsidiary or a
stockholder of the Company, or (b) owns, directly or indirectly, in whole or in
part, any property, asset or right, tangible or intangible, which is associated
with any property, asset or right owned by the Company or a Subsidiary or which
the Company or a Subsidiary is presently operating.
(t) CONTRACTS. Except as set forth in Section 5.1(t) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has or is
bound by:
(i) except for Compensation and Benefit Plans and leases covering
the Company Leased Real Property (as defined in Section 5.1(u), any
agreement, contract or commitment that involves the payment of an amount
or value in excess of $50,000 annually, unless terminable by the Company
or its relevant
-29-
Subsidiary on not more than 90 days notice;
(ii) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(iii) any agreement, contract or commitment to be performed relating
to capital expenditures in excess of $50,000 individually or $500,000 in
the aggregate;
(iv) any agreement, indenture or instrument relating to indebtedness
for borrowed money or the deferred purchase price of property;
(v) any loan or advance to (other than advances to employees in the
ordinary course of business in amounts of $20,000 or less to any
individual and $50,000 in the aggregate), or investment in (other than
investments in subsidiaries), any Person, or any agreement, contract or
commitment relating to the making of any such loan, advance or investment
or any agreement, contract or commitment involving a sharing of profits
(except for bonus arrangements with employees entered into in the ordinary
course of business consistent with past practice);
(vi) except for guarantees of Subsidiary obligations by the Company,
any guarantee or other contingent liability in respect of any indebtedness
or obligation of any Person;
(vii) any management service, consulting or any other similar type
of contract, involving payments of more than $25,000 annually, unless
terminable by the Company on not more than 90 days notice,
(viii) any agreement, contract or commitment limiting the ability of
the Company or any of its subsidiaries to engage in any line of business
or to compete with any Person;
(ix) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by the Company or any of its
subsidiaries other than in the ordinary course of business; or
(x) any material amendment, modification or supplement in respect of
any of the foregoing.
Except as otherwise set forth in Section 5.1(t) of the Company
Disclosure
-30-
Letter, each contract or agreement set forth in Section 5.1(t) of the Company
Disclosure Letter is in full force and effect and (A) there exists no default or
event of default or event, occurrence, condition or act (including consummation
of the Merger) on the part of the Company or any Subsidiary which, with the
giving of notice, the lapse of time or both, would become a default or event of
default thereunder and (B) no approval or consent of, or notice to, any person
is needed in order that each such contract or agreement shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination by reason of the consummation of the Merger and the
other transactions contemplated by this Agreement, except, in the case of each
of (A) and (B), such defaults or required approvals or consents (i) as to which
requisite waivers, consents or approvals have been obtained or (ii) which are
curable and are cured within the applicable period for cure permitted under such
contracts or agreements.
(u) REAL PROPERTY. (i) Section 5.1(u)(i) of the Company Disclosure
Letter lists all real property leased, licensed or occupied under other
occupancy agreements or concession agreements by the Company or any of its
Subsidiaries (the "COMPANY LEASED REAL Properties") and all real property owned
by the Company or any of its Subsidiaries (the "COMPANY OWNED REAL PROPERTIES,"
and together with the Company Leased Real Properties, the "COMPANY REAL
PROPERTIES"). For each Company Leased Real Property, Section 5.1(u)(i) of the
Company Disclosure Letter sets forth the following information: (A) the address
of the property; (B) the name of the landlord, manager or payee, as appropriate;
(C) the name of the tenant; (D) the date of the lease and all amendments
thereto; (E) the current expiration date of such lease; (F) any options to
extend the term of such lease; (G) if a theater site, the number of screens at
such theater; (H) whether the theaters on such site are operating or
non-operating; (I) whether the landlord's consent is required as a result of the
Merger; (J) any landlord right to terminate the lease (other than arising from a
default, casualty, or condemnation); (K) any tenant radius restrictions set
forth in such lease; (L) whether the landlord or the tenant has sent to the
other party under such lease a notice of default or a notice of termination of
such lease which remains uncured and, if so, specifying the alleged default; (M)
whether the tenant under such lease is obligated to purchase such property; (N)
whether such lease is required to be accounted for under GAAP as a capitalized
lease; (O) whether there are any leasehold mortgages secured by such lease and
whether the consent of the mortgagee is required in connection with the Merger;
and (P) whether the rent, common area charges, taxes or other payments due under
such lease are in arrears in excess of 30 days; (Q) the amount of any security
deposit posted with the landlord; (R) any existing guarantees given by the
Company in connection with such lease or any leasehold mortgage; (S) whether the
showing of movies is a permitted use under the lease; (T) any expansion
obligations of the tenant under the lease; (U) the amount of any brokerage
commissions owed by the tenant in connection with such lease; (V) any
obligations of the tenants under the leases to construct, remodel or expand
theaters; or (W) any material construction expected or
-31-
budgeted to be undertaken by the Company or any Subsidiary with respect to any
Company Leased Property within the next twelve months (for purposes of this
item, Parent and Merger Sub are referred to Sections 5.1(u)(i) and
6.1(c)(iii)(B) of the Company Disclosure Letter); (X) material violations of law
known to the executive officers of the Company after inquiry of District
Managers (exclusive of Environmental Laws whare are exclusively addressed in
Section 5.1(k) hereof) which the tenant is obligated to cure; and (Z) any
permits required for use or occupancy of the leased premises which are not in
full force and effect. For each Company Owned Real Property, Section 5.1(u)(i)
of the Company Disclosure Letter lists: (a) the address for each such property
and (b) whether the consent of any mortgage or lien holder of such property is
required as a result of the Merger. Except for such exceptions as would not have
a Company Material Adverse Effect and except for (I) the items set forth in
Section 5.1(u)(i) of the Company Disclosure Letter; (II) zoning and planning
restrictions, easements, permits and other restrictions or limitations of public
record affecting the use of such properties; provided, that individually and in
the aggregate, such restrictions, easements and permits do not materially impair
the use of such properties as motion picture theaters or for such other purposes
as such properties are currently being used; (III) mechanic's liens or other
similar encumbrances arising in the ordinary course of business and securing
obligations of the Company or its Subsidiaries not yet due and payable; and (IV)
other encumbrances on the assets of the Company or its Subsidiaries that
individually and in the aggregate do not materially impair the ability of the
owner to obtain financing by using such assets as collateral, (x) the Company or
one of its Subsidiaries has good, marketable and insurable title to the Company
Owned Real Properties, (y) the Company Owned Real Properties are free and clear
of all mortgages, liens, leases, tenancies, security interests, options to
purchase or lease or rights of first refusal and material violations of law
(exclusive of Environmental Laws whare are exclusively addressed in Section
5.1(k) hereof) and reasonably expected by the Company to require the expenditure
of in excess of $25,000 per matter to resolve and (z) except for any matter of
public record affecting the use of such properties, such properties are free and
clear of all covenants, conditions, encumbrances, restrictions, rights-of-way,
easements, servitudes, judgments or other imperfections of title. The items
listed in subsections (I) through (IV) above are hereinafter collectively
referred to as the "COMPANY PERMITTED ENCUMBRANCES." With respect to the Company
Leased Real Properties, to the knowledge of the executive officers of the
Company as at the date hereof, all such leases are in full force and effect.
Except for such exceptions as would not have a Company Material Adverse Effect,
(a) all such leases are the result of bona fide arm's-length negotiations
between the parties and (b) Company and the Company Subsidiaries are not in
arrears in the payment of rents, common area charges, real estate taxes or other
amounts due under any such leases in excess of 10 days. As at the date hereof,
except for such exceptions as would not have a Company Material Adverse Effect,
with respect to each Company Leased Real Property or as otherwise disclosed in
the Company Disclosure Letter, so long as the tenant performs all of its
obligations under
-32-
such lease within applicable notice and grace periods, (a) the rights of Company
or any Company Subsidiary under such lease cannot be legally terminated by the
landlord thereof and (b) Company's or such Subsidiary's possession of such
Company Leased Real Property and the use and enjoyment thereof cannot be legally
disturbed by any landlord. Except for such exceptions as would not have a
Company Material Adverse Effect, the Company is not obligated to purchase any
Company Leased Real Property, and no Company Leased Real Property is required to
be accounted for under GAAP as a capitalized lease. To the knowledge of the
executive officers of the Company, except for such exceptions as would not have
a Company Material Adverse Effect, there are no intended public improvements
that will result in any material charge being levied against, or in the creation
of any encumbrances upon the Company Owned Real Properties or any portion
thereof, and there are no options, rights of first refusal, rights of first
offer or other similar rights with respect to the Company Owned Real Properties.
Section 5.1(u)(i) of the Company Disclosure Letter lists all mortgages affecting
the Company Owned Real Properties, indicates whether the transaction hereunder
would be an event of default or result in any acceleration of indebtedness
thereunder, and sets forth any uncured events of default thereunder or events or
conditions which may become events of default thereunder with the giving of
notice, lapse of time or both.
(ii) Except for such exceptions as would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect:
(A) the Company or a Company Subsidiary is the owner of,
and no other person, firm or corporation has any interest as owner
in or to, or any right to occupancy in, any Company Owned Real
Property;
(B) the Company or a Company Subsidiary is the tenant or
lessee with respect to, and no other person, firm or corporation has
any interest as tenant or lessee in or to, or any right to occupancy
in, any Company Leased Real Property;
(C) there are no Persons currently in possession of the
Company Real Properties other than Company and its Subsidiaries, nor
are there any leases, subleases, licenses, concessions or other
agreements permitting anyone other than Company and its
Subsidiaries, to use, manage, occupy or possess any Company Real
Property or any part thereof other than as disclosed in Section
5.1(u)(ii) which lists all the leases affecting the Company Owned
Real Properties, and (I) all rent and additional rent payable
thereunder, (II) all security deposits held by the Company or any of
its Subsidiaries thereunder, and (III) any notices of default given
or received by the landlord thereunder which remain uncured;
-33-
(D) (I) neither Company nor any of its Subsidiaries has
received any written notices or notices of violation of law or local
or municipal ordinances or orders, or regulations, presently noted
in or issued by federal, state, local or municipal departments
having jurisdiction against or affecting any of the Company Real
Properties that remain uncured and (II) to the knowledge of the
executive officers of the Company the current maintenance,
operation, use and occupancy of the Company Real Properties does not
violate any building, zoning, health, environmental, fire or similar
law, ordinance, order or regulation (including the Americans with
Disabilities Act of 1990, 42 U.S.C. (S)12183, as amended (the "ADA")
and comparable state and municipal legislation), or the terms and
conditions of any of the applicable leases;
(E) (I) neither Company nor any of its Subsidiaries has
received written notice of its failure to obtain any necessary
certificate of occupancy (or similar permit) for use of each of the
theaters located on the Company Real Properties as a motion picture
theater, (II) to the knowledge of the executive officers of the
Company, either Company or one of its Subsidiaries possesses the
certificate of occupancy and all other certificates, approvals,
permits and licenses from any Governmental Entity having
jurisdiction over such theaters that are necessary to permit the
lawful use and operation of such theaters as motion picture theaters
(the "COMPANY Permits"), and all of the same are valid and in full
force and effect, and (III) to the knowledge of executive officers
of the Company, there exists no threatened revocation of any
certificate of occupancy or any of the Company Permits;
(F) neither Company nor any of its Subsidiaries has
received any written notice that it has failed to obtain any
necessary sign permits, illuminated sign permits, and marquee
permits from the appropriate Governmental Entity having jurisdiction
over existing signs and marquees at the Company Real Properties,
and, to the knowledge of the executive officers of the Company, such
permits are valid and in full force and effect and there exists no
threatened revocation of any such permits;
(G) to the knowledge of the executive officers of the
Company there are no actions pending or threatened to change the
zoning or building ordinances affecting any of the Company Real
Properties, or of any pending or threatened condemnation of any of
the Company Real Properties nor has there been any material casualty
damage to any of the Company Real Properties which remains
unrestored;
-34-
(H) neither the Company nor any of its Subsidiaries has
received any written notice from any insurance carrier of any work
required to be performed at any theater located on the Company Real
Properties or the Company Leased Properties (each, a "COMPANY
THEATER") that has not been performed as of the date hereof or of
any defects or inadequacies in any such theater that have not been
corrected as of the date hereof and which if not corrected could
result in termination of insurance coverage or a material increase
in the cost thereof;
(I) with respect to all Company Theaters, all water, sewer,
gas, electricity, telephone and other utilities required for the
operation of each such theater are installed and operating and all
installations and connection charges charged to Company or any of
its Subsidiaries pursuant to applicable invoices that are not the
subject of a good faith dispute have been paid in full and any
installation and connection charges that are properly charges to
Company or its Subsidiaries after the date hereof and prior to the
Closing Date shall be paid in full, except, in each case, for
payments that are current and will be paid in the ordinary course of
business;
(J) Section 5.1(u)(iii) of the Company Disclosure Letter
lists all radius restrictions or other non-competition agreements to
which the Company or any of its Subsidiaries is subject.
(v) OPERATING ASSETS. Except for such exceptions as would not have a
Company Material Adverse Effect, (i) Company has good and marketable title or
leasehold title or a valid license to all of the personal property used, or held
for use, in connection with the theaters operated on the Company Real Properties
(other than gaming and vending machines used in the ordinary course of
business), subject to no encumbrance other than the Company Permitted
Encumbrances; (ii) no financing statement under the Uniform Commercial Code or
under the personal property securities laws and regulations of any province or
territory of Canada or any similar applicable statute has been filed in any
jurisdiction, and neither Company nor any of its Subsidiaries has signed any
such financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except in connection with the
Company Permitted Encumbrances; (iii) each theater located on a Company Real
Property and each of the items of personal property used or held for use in, or
in connection with, each such theater, including without limitation, seating,
projection equipment and screens, are in good operating condition, subject to
normal wear and tear, and are fit for the use for which they are intended and to
which they are presently devoted; (iv) each theater located on a Company Real
Property, together with the related items of personal property located therein,
constitutes a fully operable motion picture
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theater and is sufficient to permit Company to operate the business as currently
being conducted therein; and (v) except as contemplated by this Agreement, since
the Audit Date, neither the Company nor any of its Subsidiaries has sold,
removed or transferred any equipment or property from any theater located on a
Company Real Property, except in the ordinary course of business and so long as
such equipment or property has been replaced prior to the date hereof.
V.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Except
as set forth in the corresponding sections or subsections of the disclosure
letter delivered to the Company by Parent on or prior to entering into this
Agreement (the "PARENT DISCLOSURE LETTER"), Parent and Merger Sub each hereby
represent and warrant to the Company that:
(a) CAPITALIZATION OF MERGER SUB. The authorized capital stock of
Merger Sub consists of 1000 shares of Common Stock, par value $.01 per share,
all of which are outstanding and are validly issued, fully paid and
unassessable. All of the issued and outstanding capital stock of Merger Sub is,
and at the Effective Time will be, owned by Parent, and there are (i) no other
shares of capital stock or voting securities of Merger Sub, (ii) no securities
of Merger Sub convertible into or exchangeable for shares of capital stock or
voting securities of Merger Sub and (iii) no options, warrants or other rights
to acquire from Merger Sub, and no obligations of Merger Sub to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Merger Sub. Merger Sub has not
conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to this Agreement and
the Merger and the other transactions contemplated by this Agreement.
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Parent
and its "SIGNIFICANT SUBSIDIARIES" (as defined in Rule 1.02(w) of Regulation S-X
promulgated pursuant to the Exchange Act) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization and has all requisite corporate or similar power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership or
operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in such good
standing, when taken together with all other such failures, is not reasonably
likely to have a Parent Material Adverse Effect (as defined below).
As used in this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT"
means a material adverse effect on the financial condition, properties, business
or results of operations of the Parent and its Subsidiaries taken as a whole
provided, however, that a
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Parent Material Adverse Effect shall not include any effect upon the financial
condition, properties, business or results of operations of the Company, or any
of its Subsidiaries resulting from national economic or business conditions,
generally or the public announcement of the execution of the Merger Agreement
and the transactions contemplated thereby.
(c) CAPITAL STRUCTURE. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock, of which 53,694,331
shares were outstanding as of the close of business on August 10, 1998,
80,000,000 shares of Class B Common Stock , par value $.01 per share (the
"PARENT CLASS B COMMON STOCK") of which 21,613,418 shares were outstanding as of
the close of business on August 10,1998, and 10,000,000 shares of Preferred
Stock par value $.01 per share (the "PARENT PREFERRED SHARES", and collectively
with the Parent Common Stock, the Parent Class B Common Stock, the "PARENT
SECURITIES"), none of which were outstanding as of the close of business on
August 10,1998. All of the outstanding Parent Securities have been duly
authorized and are validly issued, fully paid and nonassessable. Parent has no
Parent Securities reserved for issuance, except that, as of August 10, 1998,
there were 6,045,940 shares of Parent Common Stock reserved for issuance
pursuant to the CSC 1998 Employee Stock Plan, 453,150 shares of Parent Common
Stock reserved for issuance pursuant to the CSC Amended and Restated Employee
Stock Plan and 120,000 shares of Parent Common Stock reserved for issuance
pursuant to the CSC 1996 Non-Employee Director Stock Option Plan (collectively,
the "PARENT STOCK PLANS"), the 21,613,418 shares of Parent Common Stock subject
to issuance upon conversion of the outstanding shares of Parent Class B Common
Stock, 10,231,320 shares of Parent Common Stock subject to issuance upon
conversion of the 8 1/2% Series I Cumulative Convertible Exchangeable Preferred
Stock of CSC Holdings, Inc., a wholly owned subsidiary of Parent. In addition,
in connection with a pending two-for-one stock split of Parent Common Stock and
Parent Class B Common Stock, payable on August 21, 1998 to holders of record as
of August 10,1998, Parent has, as of the date hereof, reserved for issuance an
additional 92,158,160 shares of Parent Common Stock and 21,613,418 shares of
Parent Class B Common Stock. Parent does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of Parent on any matter ("PARENT VOTING DEBT").
(d) CORPORATE AUTHORITY.
(i) No vote of holders of capital stock of Parent is necessary to
approve this Agreement and the Merger and the other transactions
contemplated hereby. Each of the Parent and Merger Sub has all requisite
corporate power and authority and has taken all corporate action necessary
in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Merger.
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This Agreement is a valid and binding agreement of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to the Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent
Common Stock required to be issued pursuant to Article IV. The Parent
Common Stock, when issued, will be validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive right
of subscription or purchase in respect thereof. The Parent Common Stock,
when issued, will be registered under the Securities Act and Exchange Act
and registered or exempt from registration under any applicable state
securities or "blue sky" laws.
(e) GOVERNMENTAL FILINGS; NO VIOLATIONS. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws, and (D) required to be made with the ASE, no notices, reports
or other filings are required to be made by Parent or Merger Sub with, nor are
any consents, registrations, approvals, permits or authorizations required to be
obtained by Parent or Merger Sub from, any Governmental Entity, in connection
with the execution and delivery of this Agreement by Parent and Merger Sub and
the consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent Parent or Merger Sub from consummating
the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under,
the certificate or by-laws of Parent or Merger Sub or the comparable
governing instruments of any of its Significant Subsidiaries, (B) a breach
or violation of, or a default under, or the acceleration of any
obligations or the creation of a Lien on the assets of Parent or any of
its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any Contracts binding upon Parent or any of its Subsidiaries or any
Law or governmental or non-governmental permit or license to which Parent
or any of its Significant Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for breach, violation, default,
acceleration, creation or change that, individually or in the aggregate,
is not reasonably likely to have a Parent Material Adverse Effect or
prevent Parent or Merger Sub from consummating the transactions
contemplated by this Agreement.
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(f) PARENT REPORTS; FINANCIAL STATEMENTS. Parent has made available
to the Company each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1997 (the "PARENT AUDIT
DATE"), including (i) Parent's Annual Report on Form 10-K for the year ended
December 31, 1997 and (ii) Parent's Quarterly Report on Form 10-Q for the period
ended March 31, 1998, each in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC (collectively, including any such reports
filed subsequent to the date hereof, the "PARENT REPORTS"). As of their
respective dates, (or, if amended, as of the date of the latest such amendments)
the Parent Reports did not, and any Parent Reports filed with the SEC subsequent
to the date hereof will not, 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 made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income and of changes in financial position included
in or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents, or will fairly present, the results of
operations, retained earnings and changes in financial position, as the case may
be, of Parent and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Parent
Reports filed prior to the date hereof, since the Parent Audit Date Parent and
its Subsidiaries have conducted their respective businesses only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such businesses and there has not been (i) any change in the
financial condition, properties, business or results of operations of Parent and
its Subsidiaries taken as a whole or any development or combination of
developments, individually or in the aggregate, has had or is reasonably likely
to result in a Parent Material Adverse Effect; (ii) any damage, destruction or
other casualty loss with respect to any asset or property owned, leased or
otherwise used by Parent or any of its Subsidiaries, whether or not covered by
insurance other than any such damage, destruction or casualty loss that,
individually or in the aggregate has not had or is not reasonably likely to have
a Parent Material Adverse Effect; or (iii) any change by Parent in accounting
principles, practices or methods. Since the Parent Audit Date, except as
provided for herein or as disclosed in the Parent Reports filed prior to the
date hereof, there has not been any increase in the compensation payable or that
could become payable by the Parent or any of its Subsidiaries to officers or key
employees or any amendment of any of the Parent Compensation and Benefit Plans
other
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than increases or amendments in the ordinary course.
(h) LITIGATION AND LIABILITIES. Except as disclosed in the Parent
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of Parent, threatened
against Parent or any of its Affiliates or (ii) liabilities, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to environmental and occupational safety and health
matters, or any other facts or circumstances of which the executive officers of
Parent has knowledge that could result in any claims against, or obligations or
liabilities of, Parent or any of its Affiliates, except for those that, if
adversely determined, would not be reasonably likely to have a Parent Material
Adverse Effect or prevent Parent or Merger Sub from consummating the
transactions contemplated by this Agreement.
(i) COMPLIANCE WITH LAWS. Except as set forth in the Parent Reports
filed prior to the date hereof, the businesses of each of Parent and its
Subsidiaries have not been, and are not being, conducted in violation of any
Laws, except for violations that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect or prevent Parent or
Merger Sub from consummating the transactions contemplated by this Agreement.
Except as set forth in the Parent Reports filed prior to the date hereof, no
investigation or review by any Governmental Entity with respect to Parent or any
of its Subsidiaries is pending or, to the knowledge of the executive officers of
Parent, threatened, except for those the outcome of which are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent Parent or Merger Sub from consummating the transactions contemplated
by this Agreement.
(j) OWNERSHIP OF SHARES. Except as to Company Securities deemed
beneficially owned by Parent pursuant to the Stockholders Agreement, neither
Parent nor any of its Subsidiaries beneficially owns (within the meaning of such
term under Rule 13d-3 of the Exchange Act) any Company Securities.
(k) BROKERS AND FINDERS. Neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
the Merger or the other transactions contemplated by this Agreement, except that
Parent has engaged Gemini Associates Inc. ("GEMINI") as its financial advisor.
(l) AVAILABLE FUNDS. Parent has or will have available to it all
funds necessary to satisfy all of its obligations hereunder and in connection
with the Merger and the other transactions contemplated by this Agreement.
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ARTICLE VI
Covenants
VI.1. INTERIM OPERATIONS. The Company covenants and agrees as to
itself and its Subsidiaries that, after the date hereof and prior to the earlier
of the termination of this Agreement in accordance with its terms and the
Effective Time (unless Parent shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Agreement):
(a) the business of it and its Subsidiaries shall be conducted in
the ordinary and usual course and, to the extent consistent therewith, it and
its Subsidiaries shall use their respective best efforts to preserve its
business organization intact and maintain its existing relations and goodwill
with customers, suppliers, distributors, creditors, lessors, employees and
business associates;
(b) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its certificate
of incorporation or by-laws; (iii) split, combine or reclassify its outstanding
shares of capital stock; (iv) declare, set aside or pay any dividend payable in
cash, stock or property in respect of any capital stock other than dividends
from its direct or indirect wholly-owned Subsidiaries; or (v) except for the
repurchase of the Class A Warrant contemplated by the Warrantholder Agreement
and the repurchase of outstanding Class B Preferred Shares, repurchase, redeem
or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock;
(c) except as set forth in Section 6.1(c) of the Company Disclosure
Letter, neither it nor any of its Subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than Shares issuable pursuant to options
outstanding on the date hereof under the Stock Plan or upon conversion of the
Class A Preferred Shares and Class C Preferred Shares); (ii) transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any material
property or assets (including capital stock of any of its Subsidiaries) or incur
or modify any material indebtedness or other liability; or (iii) except as set
forth in Section 6.1(c)(iii) of the Company Disclosure Letter, make or authorize
or commit for any capital expenditures other than in amounts less than $25,000
individually and $100,000 in the aggregate or, by any means, make any
acquisition of, or investment in, assets or stock of any other Person or entity
in excess of $25,000;
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(d) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Compensation and Benefit Plans or increase the salary,
wage, bonus or other compensation of any employees except increases for
non-executive employees occurring in the ordinary and usual course of business
(which shall include normal periodic performance reviews and related
compensation and benefit increases);
(e) neither it nor any of its Subsidiaries shall settle or
compromise any material claims or litigation or, except in the ordinary and
usual course of business, modify, amend or terminate any of its material
Contracts or waive, release or assign any material rights or claims;
(f) neither it nor any of its Subsidiaries shall make any Tax
election or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be cancelled or terminated except in the ordinary and
usual course of business; and
(g) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do any of the foregoing.
VI.2. ACQUISITION PROPOSALS. The Company agrees that after the date
hereof and prior to the earlier of the termination of this Agreement in
accordance with its terms and the Effective Time, neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, initiate or solicit, encourage or otherwise
knowingly facilitate any inquiries or the making of any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation or similar
transaction involving, or any purchase of all or 15% or more of the assets or
any equity securities of, it or any of its Subsidiaries (any such proposal or
offer being hereinafter referred to as an "ACQUISITION PROPOSAL"). The Company
further agrees that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, and that it shall direct
and use its best efforts to cause its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person other than Parent or Merger
Sub relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; PROVIDED, however, that
nothing contained in this Agreement shall prevent the Company or its Board of
Directors from (A) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal; (B) providing information in response to
a request therefor by a
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Person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the Person so requesting such information an
executed a customary form of confidentiality agreement; (C) engaging in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (D) withdrawing, modifying or changing, in
a manner adverse to Parent, its recommendation to the stockholders of the
Company with respect to this Agreement or the Merger, if and only to the extent
that, (i) in each such case referred to in clause (B), (C) or (D) above, the
Board of Directors of the Company determines in good faith by a majority vote
after consultation with outside legal counsel that failing to take such action
would be reasonably likely to result in a breach of their fiduciary duties under
applicable law and (ii) in each case referred to in clause (C) or (D) above, the
Board of Directors of the Company determines in good faith (after consultation
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Acquisition Proposal being referred to
in this Agreement as a "SUPERIOR PROPOSAL"). The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties other than Parent or Merger Sub
conducted heretofore with respect to any Acquisitions Proposal. The Company
agrees that it will take the necessary steps to promptly inform any individuals
or entities referred to in the preceding sentence hereof of the obligations
undertaken in this Section 6.2. The Company agrees that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Parent
informed, on a current basis, on the status and terms of any such proposals or
offers and the status of any such discussions or negotiations. The Company also
agrees that it will promptly request any Person that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring it
or any of its Subsidiaries to return all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries.
VI.3. INFORMATION SUPPLIED. The Company and Parent each agrees, as
to itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(including the proxy statement and prospectus (the "PROSPECTUS/PROXY STATEMENT")
constituting a part thereof) (the "S-4 REGISTRATION STATEMENT") will, at the
time the S-4 Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit
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to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) the Prospectus/Proxy Statement and any amendment
or supplement thereto will, at the date of mailing to stockholders and at the
times of the meetings of stockholders of the Company to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
VI.4. STOCKHOLDERS MEETING. Subject to their fiduciary obligations
under applicable law, the Company's Board of Directors shall recommend the
adoption of the Merger Agreement by holders of Shares and Class A Preferred
Shares at the meeting of such stockholders called to consider and vote upon
adoption of the Merger Agreement (the "Stockholders Meeting") and shall take all
lawful action to solicit such adoption. Whether or not the Board of Directors of
the Company determines at any time after the date hereof that this Agreement is
no longer advisable and recommends that the holders of Shares and Class A
Preferred Shares reject it, the Company is required to, and will take, in
accordance with applicable law and its certificate and by-laws, all action
necessary to convene the Stockholders Meeting as promptly as practicable after
the S-4 Registration Statement is declared effective to consider and vote upon
the adoption of this Agreement.
VI.5. FILINGS; OTHER ACTIONS; NOTIFICATION. (a) The Company shall
promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. Parent and the Company each shall use all reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the stockholders of the
Company. Parent shall also use all reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state securities
law or "blue sky" permits and approvals required in connection with the Merger
and to consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) all reasonable efforts to
take or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under this Agreement and applicable
Laws to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing and
filing as promptly as practicable all documentation to effect all necessary
notices, reports and other filings and to obtain as promptly as practicable all
consents, registrations, approvals, permits and authorizations necessary or
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advisable to be obtained from any third party and/or any Governmental Entity in
order to consummate the Merger or any of the other transactions contemplated by
this Agreement; PROVIDED, HOWEVER, that nothing in this Section 6.5 shall
require, or be construed to require, Parent to proffer to, or agree to, sell or
hold separate and agree to sell, before or after the Effective Time, any assets,
businesses, or interest in any assets or businesses of Parent, the Company or
any of their respective Affiliates (or to consent to any sale, or agreement to
sell, by the Company of any of its assets or businesses) or to agree to any
material changes or restriction in the operations of any such assets or
businesses. Subject to applicable laws relating to the exchange of information,
Parent and the Company shall have the right to review in advance, and to the
extent practicable each will consult the other on, all the information relating
to Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement. In
exercising the foregoing right, each of the Company and Parent shall act
reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this Agreement.
VI.6. TAXATION. Subject to Section 6.2, neither Parent nor the
Company shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code if the Average Parent Share Price is
greater than or equal to the Floor Price.
VI.7. ACCESS. Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford the Parent's officers, employees, counsel, accountants and other
authorized representatives ("REPRESENTATIVES") reasonable access, during normal
business hours throughout the period prior to the earlier of termination of this
Agreement in accordance
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with its terms and the Effective Time, to its properties, books, contracts and
records and, during such period, each shall (and shall cause its Subsidiaries
to) furnish promptly to the other all information concerning its business,
properties and personnel as may reasonably be requested, PROVIDED that no
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty made by the Company, and PROVIDED, FURTHER, that the
foregoing shall not require the Company to permit any inspection, or to disclose
any information, that would result in the disclosure of any trade secrets of
third parties or violate any of its obligations with respect to confidentiality
if the Company shall have used its reasonable efforts to obtain the consent of
such third party to such inspection or disclosure. All requests for information
made pursuant to this Section shall be directed to an executive officer of the
Company, or such Person as may be designated by its executive officers. All such
information shall be governed by the terms of the Confidentiality Agreement.
VI.8. AFFILIATES. At least 30 days prior to the Stockholders
Meeting, the Company shall deliver to Parent a list of names and addresses of
those Persons who will be, in the opinion of the Company, as of the time of the
Stockholders Meeting, "affiliates" of the Company within the meaning of Rule 145
under the Securities Act. There shall be added to such list the names and
addresses of any other Person subsequently identified by either Parent or the
Company as a Person who may be deemed to be such an affiliate of the Company at
such time; PROVIDED, HOWEVER, that no such Person identified by Parent shall be
added to the list of affiliates of the Company if Parent shall receive from the
Company, on or before the date of the Stockholders Meeting, an opinion of
counsel reasonably satisfactory to Parent to the effect that such Person is not
such an affiliate. The Company shall exercise its best efforts to deliver or
cause to be delivered to Parent, prior to the date of the Stockholders Meeting,
from each affiliate of the Company who makes a Stock Election identified in the
foregoing list (as the same may be supplemented as aforesaid), a letter dated as
of the Closing Date substantially in the form attached as Exhibit A-1 (the
"AFFILIATES LETTER"). Parent shall not be required to maintain the effectiveness
of the S-4 Registration Statement or any other registration statement under the
Securities Act for the purposes of resale of Parent Common Stock by such
affiliates received in the Merger and the certificates representing Parent
Common Stock received by such affiliates shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Section.
VI.9. STOCK EXCHANGE LISTING AND DE-LISTING. Parent shall use its
best efforts to cause the shares of Parent Common Stock to be issued in the
Merger to be approved for listing on the ASE subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause the Shares to be de-listed from the ASE and de-registered
under the Exchange Act as soon as practicable following the Effective Time.
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VI.10. PUBLICITY. The initial press release shall be a joint press
release and thereafter the Company and Parent each shall consult with each other
prior to issuing any press releases or otherwise making public announcements
with respect to the Merger and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange) with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities exchange.
VI.11. Benefits.
(a) STOCK OPTIONS. At the Effective Time, each then outstanding
option to purchase Shares ("OPTION") under the Stock Plan, whether vested or
unvested, shall be cancelled and the holder thereof shall be entitled to receive
an amount of cash equal to the product of (x) the amount, if any, by which the
Share Cash Merger Consideration exceeds the exercise price per Share under such
Option and (y) the number of Shares issuable pursuant to the unexercised portion
of such Option, less any required withholding of taxes (such amount being
hereinafter referred to as the "OPTION CONSIDERATION"). The Option Consideration
shall be paid as soon as practicable following the Effective Time. Prior to the
Effective Time, the Company shall take such actions as may be necessary to
effectuate the foregoing, including without limitation obtaining all applicable
consents. The cancellation of an Option in exchange for the Option Consideration
shall be deemed a release of any and all rights the holder had or may have had
in respect of such Option, and any required consents received from Option
holders shall so provide.
(b) EMPLOYEE BENEFITS.
(i) Each of Parent and Merger Sub agrees that, during the period
commencing at the Effective Time and ending on the first anniversary
thereof, the employees of the Surviving Corporation and its Subsidiaries
will continue to be provided with benefits under employee benefit plans
(other than plans involving the issuance of Shares) that are substantially
similar in the aggregate to those currently provided by the Company and
its Subsidiaries to such employees. Parent shall, and shall cause the
Surviving Corporation to, honor all employee benefit obligations to
current and former employees under the Compensation and Benefit Plans and
all employee severance plans (or policies) in existence on the date hereof
and all employment or severance agreements entered into by the Company or
adopted by the board of directors of the Company prior to the date hereof.
Parent agrees to offer or cause Merger Sub to offer employment contracts
with the persons and on the terms set forth on Schedule I to this
Agreement immediately prior to the Effective Time. Nothing herein shall
prevent Parent from terminating any Compensation and Benefit Plan.
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(ii) Each of Parent and Merger Sub agrees that the employees of the
Surviving Corporation shall receive full credit for purposes of
eligibility and vesting under the employee benefit plans or arrangements
maintained by the Surviving Corporation for such employees' service with
the Company or any of its Subsidiaries to the same extent recognized by
the Company immediately prior to the Effective Time.
VI.12. EXPENSES. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV, and Parent shall reimburse the
Surviving Corporation for such charges and expenses. Except as otherwise
provided in Section 8.5(b), whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the Merger and the
other transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except that expenses incurred in connection with the
filing fee for the S-4 Registration Statement and printing and mailing the
Prospectus/Proxy Statement and the S-4 Registration Statement shall be shared
equally by Parent and the Company.
VI.13. INDEMNIFICATION; DIRECTORS' AND OFFICERS' Insurance. (a) From
and after the Effective Time, Parent and the Surviving Corporation shall
indemnify and hold harmless each present and former director and officer of the
Company, (when acting in such capacity or when serving at the request of the
Company as a director or officer of a Subsidiary or a fiduciary of a
Compensation and Benefits Plan) determined as of the Effective Time (the
"INDEMNIFIED PARTIES"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "COSTS") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, resulting from matters existing or occurring at or prior to the
Effective Time (including, without limitation, any claim, action, suit,
proceeding or investigation resulting from the transactions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company would have been permitted under
Delaware law and its certificate of incorporation or by-laws in effect on the
date hereof to indemnify such Person (and Parent or the Surviving Corporation
shall also advance expenses as incurred to the fullest extent permitted under
applicable law, PROVIDED, the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification), and PROVIDED, FURTHER, that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under Delaware law and
the Company's certificate of incorporation and by-laws shall be made by
independent counsel selected by the Surviving Corporation.
(b) Any Indemnified Party wishing to claim indemnification under
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paragraph (a) of this Section 6.13, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent and the
Surviving Corporation thereof, but the failure to so notify shall not relieve
Parent or the Surviving Corporation of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the indemnifying
party. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Parent or the
Surviving Corporation shall have the right to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, (ii) Parent, the Surviving
Corporation and the Indemnified Parties will cooperate in the defense of any
such matter and (iii) Parent and the Surviving Corporation shall not be liable
for any settlement effected without its prior written consent (which consent
will not be unreasonably withheld); and PROVIDED, FURTHER, that Parent and the
Surviving Corporation shall not have any obligation hereunder to any Indemnified
Party if and when a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) Parent shall and shall cause the Surviving Corporation to
maintain the Company's existing officers' and directors' liability insurance
("D&O INSURANCE") for a period of six years after the Effective Time so long as
the annual premium therefor is not in excess of 200% of the last annual premium
paid prior to the date hereof (the "CURRENT PREMIUM"); PROVIDED, HOWEVER, that
if the existing D&O Insurance expires, is terminated or cancelled during such
six-year period, Parent shall and shall cause the Surviving Corporation to use
all reasonable efforts to obtain as much D&O Insurance as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium. The Company will use all reasonable
efforts to obtain officers and directors liability insurance to become effective
at the Effective Time with coverage amounts and a term reasonably satisfactory
to Parent.
(d) If Parent or the Surviving Corporation or any of their
respective successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) shall transfer all
or substantially all of its properties and assets to any individual, corporation
or other entity, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume all of the obligations set forth in this Section.
(e) The provisions of this Section 6.13 shall survive the closing of
the transactions contemplated hereby, and are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
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VI.14. OTHER ACTIONS BY THE COMPANY; TAKEOVER STATUTES; CHANGE OF
CONTROL OFFER. The Company shall repurchase the outstanding Class A Warrant
immediately prior to the Effective Time for $1.00. The Company shall use all
reasonable efforts to obtain such waivers, consents and estoppel certificates as
Parent shall reasonably request, upon terms and conditions and in a form
reasonably satisfactory to Parent with respect to any material Contracts of the
Company or its Subsidiaries, it being understood and agreed that the Company
shall not amend or agree to amend such Contracts or make any additional payments
or incur any additional obligations or grant any additional rights in order to
obtain such waivers, consents and certificates without Parent's prior written
consent. If any Takeover Statute is or may become applicable to the Merger or
the other transactions contemplated by this Agreement or the Stockholders
Agreements, the Company and its Board of Directors shall grant such approvals
and take such actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Stockholders Agreements or by the Merger and otherwise act to
eliminate or minimize the effects of such statute or regulation on such
transactions. The Company agrees that it will mail a notice with respect to a
Change of Control Offer (as defined in the Indenture, dated as of June 12, 1998
(the "INDENTURE"), between the Company and The Bank of New York, as Trustee,
relating to the Company's outstanding 10 7/8% Senior Notes due June 12, 2008
(the "NOTES")) pursuant to Section 4.19 of the Indenture, within five business
days of the date hereof and shall provide that the Change of Control Payment
Date (as defined in the Indenture) with respect to such Change of Control Offer
shall not, without Parent's written consent, be more than thirty days from the
date such notice is mailed. If the Company complies with preceding sentence and,
prior to the Change of Control Payment Date, there has been no public disclosure
of any events, conditions, circumstances or other matters relating to the
Company or its Subsidiaries the subject matter of which represents, individually
or in the aggregate (and without giving effect to any qualifications as to
"Company Material Adverse Effect," "material" or other similar qualifications),
a breach of the representations and warranties of the Company contained in this
Agreement as of the date hereof, which breaches have had or are reasonably
likely to have, a Company Material Adverse Effect or are reasonably likely to
prevent the Company from consummating the transactions contemplated by this
Agreement, on the Change of Control Payment Date, Parent will purchase any Notes
required to be purchased by the Company pursuant to such Change of Control
Offer.
6.15. PARENT VOTE. Parent shall vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any Company
Securities entitled to vote and any shares of common stock of Merger Sub
beneficially owned by it or any of its Affiliates or with respect to which it or
any of its Affiliates has the power (by agreement, proxy or otherwise) to cause
to be voted (or to provide a consent), in favor of the adoption and approval of
this Agreement at any meeting of stockholders of the Company or Merger Sub,
respectively, at which this Agreement shall be submitted for
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adoption and approval and at all adjournments or postponements thereof (or, if
applicable, by any action of stockholders of either the Company or Merger Sub by
consent in lieu of a meeting), and shall cause a meeting of stockholders of
Merger Sub to be called for such purpose unless such action is taken by consent
in lieu thereof.
ARTICLE VII
Conditions
VII.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been duly
adopted by holders of Company Securities constituting the Company Requisite Vote
and shall have been duly adopted by the sole stockholder of Merger Sub in
accordance with applicable law and the certificate and by-laws of each such
corporation.
(b) ASE LISTING. The shares of Parent Common Stock issuable to the
Company stockholders pursuant to this Agreement shall have been authorized for
listing on the ASE upon official notice of issuance.
(c) REGULATORY CONSENTS. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"GOVERNMENTAL CONSENTS") in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company, Parent and Merger Sub shall have been made
or obtained (as the case may be).
(d) LITIGATION. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (collectively, an "ORDER"),
and no Governmental Entity shall have instituted any proceeding or threatened to
institute any proceeding seeking any such Order.
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(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened, by the SEC.
VII.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date), and Parent shall have received
a certificate signed on behalf of the Company by the Chief Executive Officer of
the Company to such effect; PROVIDED, HOWEVER, that notwithstanding anything
herein to the contrary, this Section 7.2(a) shall be deemed to have been
satisfied even if such representations or warranties (without giving effect to
any qualifications as to "Company Material Adverse Effect," "material" or
similar qualifications) are not so true and correct unless the failure of such
representations or warranties (without giving effect to any qualifications as to
"Company Material Adverse Effect," "material" or similar qualifications) to be
so true and correct, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect or is reasonably likely to
prevent the Company from consummating the transactions contemplated by this
Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive of the Company to such effect.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be required
under the Contracts listed in Section 7.2(c) of the Parent Disclosure Letter and
all other consents or approvals from each Person whose consent or approval is
required under any Contract except for such consents or approvals the failure to
obtain would not, individually or in the aggregate, be reasonably likely to have
a Company Material Adverse Effect or be reasonably likely to prevent the Company
from consummating the transactions contemplated by this Agreement.
(d) TAX OPINION. If, and only if, the Average Parent Share Price is
greater
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than or equal to the Floor Price (and treated as being greater than or equal to
the Floor Price after giving effect to Section 4.2(a)(iv)), Parent shall have
received the opinion of Sullivan & Cromwell, counsel to Parent, dated the
Closing Date, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that each of Parent, Merger Sub and the Company will be a party to
that reorganization within the meaning of Section 368(b) of the Code.
(e) RESIGNATIONS. Parent shall have received the resignations of
each director of the Company.
(f) EMPLOYMENT AGREEMENTS. Parent and/or Merger Sub shall have
entered into an Employment Agreement with A. Dale Mayo, in the form attached
hereto as Schedule II.
(g) AFFILIATES LETTERS. Parent shall have received an Affiliates
Letter from each Person identified as an affiliate of the Company pursuant to
Section 6.8.
VII.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date (except
that the representations and warranties of Parent and Merger Sub contained in
Sections 5.2(c), (g), (h) and (i) shall not be required to be so true and
correct as of such dates if the Average Parent Price is less than the Floor
Price, and in which event neither Parent nor Merger Sub shall have any
obligation or liability (and the Company shall have no rights) in respect of a
breach of such representations and warranties) as though made on and as of the
Closing Date, (except to the extent any such representation and warranty
expressly speaks as of an earlier date) and the Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent and an
executive officer of Merger Sub to such effect; PROVIDED, HOWEVER, that
notwithstanding anything herein to the contrary, this Section 7.3(a) shall be
deemed to have been satisfied even if such representations or warranties
(without giving effect to any qualifications as to "Parent Material Adverse
Effect," "material" or similar qualifications) are not so true and correct
unless the failure of such representations or warranties (without giving effect
to any qualifications as to "Parent Material Adverse Effect," "material" or
similar qualifications) to be so true and correct, individually or in the
aggregate, has had, or is reasonably likely to have, a Parent Material Adverse
Effect or is reasonably likely to prevent Parent from consummating the
transactions contemplated by this Agreement.
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(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by an executive officer of Parent and an
executive officer of Merger Sub to such effect.
(c) TAX OPINION. If, and only if, the Average Parent Share Price is
greater than or equal to Floor Price (and treated as being greater than or equal
to the Floor Price after giving effect to Section 4.2(a)(iv)), the Company shall
have received the opinion of Kirkpatrick & Lockhart, counsel to the Company,
dated the Closing Date, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of Parent, Merger Sub and the Company will be
a party to that reorganization within the meaning of Section 368(b) of the Code.
ARTICLE VIII
Termination
VIII.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval by stockholders of the Company and
Parent referred to in Section 7.1(a), by mutual written consent of the Company
and Parent by action of their respective Boards of Directors.
VIII.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of either Parent or the
Company if (i) the Merger shall not have been consummated by February 28, 1999,
whether such date is before or after the date of approval by the stockholders of
the Company; PROVIDED, HOWEVER, that if Parent determines that additional time
is necessary in order to forestall any action to restrain, enjoin or prohibit
the Merger by any Government Entity, the Termination Date may be extended by
Parent to a date not beyond April 30, 1999 (the "TERMINATION DATE"), (ii) the
adoption of this Agreement by Company's stockholders required by Section 7.1(a)
shall not have been obtained at a meeting duly convened therefor or at any
adjournment or postponement thereof, or (iii) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall become final
and non-appealable (whether before or after the approval by the stockholders of
the Company; PROVIDED, that the right to terminate this Agreement pursuant to
clause (i) above shall not be available to any party that has breached in any
material respect its
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obligations under this Agreement in any manner that shall have proximately
caused the event that would otherwise give rise to a right to terminate this
Agreement.
VIII.3. TERMINATION BY THE COMPANY. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company if there has
been a material breach by Parent or Merger Sub of any representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Company to the party committing such breach.
VIII.4. TERMINATION BY PARENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Board of Directors of Parent if (i) the Board of Directors of the Company
shall have withdrawn or adversely modified its approval or recommendation of
this Agreement or approved or recommended a Superior Proposal or (ii) there has
been a material breach by the Company of any representation, warranty, covenant
or agreement contained in this Agreement that is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by Parent
to the party committing such breach.
VIII.5. EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors or other representatives); PROVIDED, HOWEVER, except as otherwise
provided herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement.
(b) In the event that (i) an Acquisition Proposal shall have been
made to the Company or any of its Subsidiaries or any of its stockholders or any
Person shall have publicly announced an intention (whether or not conditional)
to make an Acquisition Proposal with respect to the Company or any of its
Subsidiaries and thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 8.2(ii)or (ii) this Agreement is terminated by
Parent pursuant to Section 8.4(i), then the Company shall promptly, but in no
event later than two days after the date of such termination, pay Parent a
termination fee of $1,600,000 and shall promptly, but in no event later than two
days after being notified of such by Parent, pay all of the charges and
expenses, including those of the Exchange Agent, incurred by Parent or Merger
Sub in connection with this Agreement and the transactions contemplated by this
Agreement up to a maximum amount of $400,000, in each case payable by wire
transfer of same day funds. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an
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integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent or
Merger Sub commences a suit which results in a judgment against the Company for
the fee set forth in this paragraph (b), the Company shall pay to Parent or
Merger Sub its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
The Chase Manhattan Bank, N.A. in effect on the date such payment was required
to be made.
ARTICLE IX
Miscellaneous and General
IX.1. SURVIVAL. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Sections 6.6 (Taxation), 6.9 (Stock Exchange
Listing and De-listing), 6.11 (Benefits), 6.12 (Expenses) and 6.13
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Sub contained in Section 6.12 (Expenses), Section 8.5 (Effect
of Termination and Abandonment) shall survive the termination of this Agreement.
All other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination of
this Agreement.
IX.2. MODIFICATION OR AMENDMENT. Subject to the provisions of
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
IX.3. WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
IX.4. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together
constitute the same agreement.
IX.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (A) THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED
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AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably
submit to the jurisdiction of the courts of the State of Delaware and the
Federal courts of the United States of America located in the State of Delaware
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated hereby, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a Delaware State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.6 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
IX.6. NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
IF TO PARENT OR MERGER SUB:
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Cablevision Systems Corporation,
One Media Crossways,
Woodbury, New York 11797.
Attention: General Counsel
fax: (516) 364-8501.
(with copies to:
John P. Mead, Esq.
Duncan C. McCurrach, Esq.
Sullivan & Cromwell,
125 Broad Street,
New York, New York 10004
fax: (212) 558-3588.)
IF TO THE COMPANY:
Clearview Cinema Group, Inc.
97 Main Street,
Chatham, New Jersey 07928.
Attention: Chief Executive Officer
fax: (973) 377-4303
(with a copies to:
Warren Colodner, Esq.,
Janice C. Hartman, Esq.
Kirkpatrick & Lockhart,
1251 Sixth Avenue, 45th Floor,
New York, New York 10022
fax: (212) 536-3901.)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
IX.7. ENTIRE. This Agreement (including any exhibits hereto), the
Company Disclosure Letter, the Parent Disclosure Letter constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
IX.8. NO THIRD PARTY BENEFICIARIES. Except as provided in Sections
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6.13 (Indemnification; Directors' and Officers' Insurance), this Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.
IX.9. OBLIGATIONS OF PARENT AND OF THE COMPANY. Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of
the Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
IX.10. TRANSFER TAXES. Any liability arising out of the New York
City Real Property Gains Tax, if applicable and due with respect to the Merger,
shall be borne by the Company, as well as real property transfer taxes, if any,
payable in any other jurisdiction where any of the Company Real Properties is
situated. The parties shall cooperate in the allocation of the purchase price in
a fair and reasonable manner so as to determine what, if any value is being paid
for each of the Company Real Properties which may be subject to such a real
estate transfer tax, and the parties shall complete and file all required real
property transfer tax forms. All other transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including penalties and interest)
incurred in connection with the Merger shall be paid by Parent and Merger Sub
when due, and Parent and Merger Sub will indemnify the Company against liability
for any such taxes.
IX.11. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
IX.12. INTERPRETATION. The table of contents and headings herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
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IX.13. ASSIGNMENT. This Agreement shall not be assignable by
operation of law or otherwise; PROVIDED, HOWEVER, that Parent may designate, by
written notice to the Company, another wholly-owned direct or indirect
subsidiary to be a Constituent Corporation in lieu of Merger Sub, in which event
all references herein to Merger Sub shall be deemed references to such other
subsidiary, except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
CABLEVISION SYSTEMS CORPORATION
By: /s/ ANDREW B. ROSENGARD
-----------------------
Name: Andrew B. Rosengard
Title: Executive Vice President
CCG HOLDINGS INC.
By: /s/ ANDREW B. ROSENGARD
-----------------------
Name: Andrew B. Rosengard
Title: Executive Vice President
CLEARVIEW CINEMA GROUP, INC.
By: /s/ A. DALE MAYO
-----------------
Name: A. Dale Mayo
Title: President
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