AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 14, 2000
BY AND AMONG
WORLDWIDE SPORTS AND RECREATION, INC.,
SUNSHINE ACQUISITION, INC.
AND
SERENGETI EYEWEAR, INC.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 14, 2000, is by and
among Worldwide Sports and Recreation, Inc., a Delaware corporation
("PURCHASER"), Sunshine Acquisition, Inc., a newly formed New York corporation
and a wholly owned Subsidiary of Purchaser ("ACQUISITION SUB"), and Serengeti
Eyewear, Inc., a New York corporation (the "COMPANY").
WHEREAS, the Board of Directors of each of Purchaser, Acquisition Sub
and the Company has approved, and deems it advisable and in the best interests
of its respective stockholders to consummate, the acquisition of the Company by
Purchaser, upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition Sub
make a cash tender offer (the "OFFER") to acquire all of the issued and
outstanding shares of common stock, par value $0.001 per share (the "COMPANY
COMMON STOCK"), of the Company (the "SHARES") for $3.95 per Share, net to the
seller in cash, without interest thereon (such price, as it may be modified as
provided herein from time to time being referred to herein as the "PER SHARE
AMOUNT"), upon the terms and subject to the conditions of this Agreement and the
Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Purchaser, Acquisition Sub and the Company has approved the
merger of Acquisition Sub with and into the Company (the "MERGER") following the
consummation of the Offer in accordance with the New York Business Corporation
Law (the "NYBCL") and upon the terms and subject to the conditions set forth
herein; and
WHEREAS, also in furtherance of such acquisition, concurrently with the
execution of this Agreement and as an inducement for Purchaser and Acquisition
Sub to enter into this Agreement, Purchaser, Acquisition Sub and each of the
stockholders of the Company listed on EXHIBIT A attached hereto (the "TENDERING
STOCKHOLDERS") are entering into a Tender and Voting Agreement of even date
herewith (the "TENDER AND VOTING AGREEMENTS"), pursuant to which each of the
Tendering Stockholders has agreed, upon the terms and subject to the conditions
set forth therein, to tender all of the Shares owned by each such Tendering
Stockholder to Acquisition Sub pursuant to the Offer, to approve this Agreement,
the Offer, the Merger and each of the transactions contemplated hereby
(collectively, the "TRANSACTIONS") and to refrain from exercising any Options
(as defined in Section 2.8 hereof) held thereby until after the Effective Time;
and
WHEREAS, the Board of Directors of the Company (the "BOARD") has, in
light of and subject to the terms and conditions set forth herein, (i)
determined that the consideration to be paid for each Share in the Offer and the
Merger is fair to the holders of such Shares and in the best interests of such
stockholders, (ii) approved and adopted this Agreement and the transactions
contemplated hereby, and (iii) resolved to recommend that the holders of such
Shares accept the Offer and approve this Agreement, the Merger and each of the
transactions contemplated hereby, upon the terms and subject to the conditions
set forth herein; and
WHEREAS, Purchaser, Acquisition Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Purchaser, Acquisition Sub and the Company
hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with SECTION 8.1 and subject to the other provisions
of this Agreement, as promptly as practicable but in no event later than five
(5) Business Days (as defined below) after the date of this Agreement,
Acquisition Sub shall, and Purchaser shall cause Acquisition Sub to, commence
the Offer. The initial scheduled expiration date for the Offer shall be
twenty (20) Business Days following the commencement of the Offer. The
obligation of Acquisition Sub to, and of Purchaser to cause Acquisition Sub
to, accept for payment, and pay for, Shares of Company Common Stock properly
tendered pursuant to the Offer shall be subject only to the conditions set
forth in ANNEX A attached hereto (the "OFFER CONDITIONS"), any of which may
be waived, in whole or in part, by Acquisition Sub, in its sole discretion
except as set forth below. Acquisition Sub expressly reserves the right to
modify the terms of the Offer in a manner not inconsistent with this
Agreement, except that, without the prior written consent of the Company,
Acquisition Sub shall not (i) waive or otherwise modify the Minimum Condition
(as defined in ANNEX A attached hereto) so as to reduce the minimum number of
Shares that Acquisition Sub will accept in the Offer to an amount
constituting less than sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding Shares, (ii) reduce the Per Share Amount, (iii) impose
any conditions to the Offer in addition to the Offer Conditions or modify the
Offer Conditions (other than to waive any Offer Conditions to the extent
permitted by this Agreement), (iv) except as provided in the next sentence,
extend the Offer, (v) change the form of consideration payable in the Offer,
(vi) reduce the maximum number of Shares to be purchased, or (vii) amend, add
to or waive (except to the extent expressly permitted by this Agreement) any
other term of the Offer in a manner adverse to the holders of Shares of
Company Common Stock. Notwithstanding the foregoing, Acquisition Sub may,
without the consent of the Company, (i) extend the Offer if, at the scheduled
or extended expiration date of the Offer, any of the Offer Conditions shall
not have been satisfied or waived, until such time as such conditions are
satisfied or waived but, in any event, Acquisition Sub shall not, without the
prior written consent of the Company, extend the Offer beyond the Cut-Off
Date (as defined in SECTION 8.1(b) hereof) or (ii) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to the
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Offer but, in any event, Acquisition Sub shall not, without the prior written
consent of the Company, extend the Offer beyond the Cut-Off Date. Purchaser and
Acquisition Sub each agree that Acquisition Sub will not terminate the Offer
between scheduled expiration dates (except in the event that this Agreement is
terminated) and that, in the event that Acquisition Sub will otherwise be
entitled to terminate the Offer at any scheduled expiration date thereof due to
the failure of one or more of the Offer Conditions, unless this Agreement shall
have been terminated, Acquisition Sub shall, and Purchaser shall cause
Acquisition Sub to, extend the Offer until such date as the Offer Conditions
have been satisfied or such later date as required by applicable federal
securities law; provided however, that nothing herein shall require Acquisition
Sub to extend the Offer beyond the Cut-Off Date (as defined in SECTION 8.1(b)
hereof). Subject to the terms and conditions of the Offer in this Agreement,
Acquisition Sub shall, and Purchaser shall cause Acquisition Sub to, accept for
payment all Shares validly tendered and not withdrawn pursuant to the Offer as
soon as reasonably possible after Acquisition Sub is permitted to accept such
Shares for payment pursuant to the Offer, and then pay for such Shares promptly
as required by SEC Rule 14(e)-1(c). The Per Share Amount shall, subject to all
applicable withholding of taxes, be paid net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of the Offer and
this Agreement. If this Agreement is terminated by either Purchaser or
Acquisition Sub or by the Company, Acquisition Sub shall, and Purchaser shall
cause Acquisition Sub to, promptly terminate the Offer. The Company agrees that
no Shares held by the Company or any of its Subsidiaries will be tendered in the
Offer. As used herein, "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required to close under the laws of the State of New York or the
laws of the United States.
(b) As promptly as reasonably practicable on the date of
commencement of the Offer, Purchaser and Acquisition Sub shall file with the
Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 (together with any supplements or amendments thereto, the
"SCHEDULE 14D-1") with respect to the Offer, which shall contain an offer to
purchase (the "OFFER TO PURCHASE") and a related letter of transmittal, summary
advertisement and related documents (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer would be made, together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"), and Purchaser and
Acquisition Sub shall cause the Offer Documents to be disseminated to holders of
Shares as and to the extent required by SEC Rule 14d-5 and other applicable
federal and state securities laws and the rules of any stock exchange or stock
market in which the Shares are then traded. Purchaser, Acquisition Sub, and the
Company each agree promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Purchaser and Acquisition Sub
further agree to take all steps necessary to cause the Schedule 14D-1 as so
corrected to be promptly filed with the SEC and the other Offer Documents as so
corrected to be promptly disseminated to holders of the Shares, in each case as
and to the extent required by applicable federal and state securities laws and
the rules of any stock exchange or stock market in which the Shares are then
traded. The Company and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the SEC
or dissemination to the stockholders of the Company. Purchaser and Acquisition
Sub agree to provide the Company and its counsel any comments Purchaser,
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Acquisition Sub or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
1.2 COMPANY ACTIONS.
(a) Subject to the terms and conditions set forth herein
(including, but not limited to, the Offer Conditions), the Company hereby
approves of and consents to the Offer and represents and warrants that the
Board, at a meeting duly called and held, in which a quorum of directors were
present, duly adopted resolutions which approve this Agreement, the Offer and
the Merger, determine that, in the opinion of the Board, the Offer, the Merger
and the Transactions contemplated herein are in the best interests of the
Company and its stockholders and are fair to the stockholders and recommend that
the holders of the Shares accept the Offer and, if required by applicable law,
approve the Merger. Subject to the fiduciary duties of the Board under
applicable law as determined by the Board in good faith after receiving advice
of independent counsel, the Company hereby consents to the inclusion in the
Offer Documents and in the Schedule 14D-9 referred to below of the
recommendation of the Company's Board of Directors described in this
SECTION 1.2.
(b) As soon as reasonably practicable after the Offer
Documents are filed with the SEC and as otherwise required by applicable law,
the Company shall, pursuant to SEC Rule 14d-9, file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended or supplemented from time to time, the
"SCHEDULE 14D-9") containing the recommendation of the Board described in
SECTION 1.2(a) and shall disseminate a copy of Schedule 14D-9 to the
stockholders of the Company to the extent required by SEC Rule 14d-9 and any
other applicable securities laws. The Company shall cooperate with Purchaser in
mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. Each of the Company, Purchaser and
Acquisition Sub agrees promptly to correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information shall
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be promptly filed
with the SEC and promptly disseminated to the Company's stockholders, in each
case as and to the extent required by applicable federal and state securities
laws and the rules of any stock exchange or stock market in which the Shares are
then traded. Purchaser and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to the Company's stockholders. The Company agrees to provide
Purchaser and its counsel any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Acquisition Sub promptly with mailing labels
containing the names and addresses of the recordholders of Shares as of a recent
date and of those Persons becoming recordholders subsequent to such date,
together with copies of all lists indicating current stockholders, security
position listings and related computer files, if available, and all information
in the Company's
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possession or control regarding the names, addresses and holdings of beneficial
owners of Shares, and shall furnish to Acquisition Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Purchaser or Acquisition Sub may reasonably request in
communicating the Offer to the Company's stockholders. The Company represents
that the information provided to Purchaser or Acquisition Sub pursuant to this
SECTION 1.2(c) shall be true and correct as of its respective dates. Subject to
the requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer and the Merger, Purchaser and Acquisition Sub and their officers,
agents, employees and advisors shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will promptly, upon request, deliver to the Company or destroy, and
will use their commercially reasonable efforts to cause their officers, agents,
employees, advisors, associates and agents to deliver or destroy, all copies of
such information then in their possession or control.
1.3 DIRECTORS. (a) Effective upon the acceptance for payment by
Acquisition Sub of, and payment by Acquisition Sub for, Shares constituting
sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding Shares
pursuant to the Offer, Purchaser shall be entitled to designate the number of
directors, rounded up to the next whole number, on the Board that equals the
product of (i) the total number of directors on the Board (after giving effect
to the election of any additional directors pursuant to this SECTION 1.3) and
(ii) the percentage that the number of Shares owned by Purchaser or Acquisition
Sub (including Shares accepted for payment) bears to the total number of shares
of Company Common Stock outstanding, and the Company shall take all action
necessary to cause the Company's designees to be elected or appointed to the
Board, including, without limitation, increasing the number of directors, or
seeking and accepting resignations of incumbent directors, or both. At such
times, the Company will use its best efforts to cause individuals designated by
Purchaser to constitute the same percentage as such individuals represent on the
Board of (x) each committee of the Board, (y) each board of directors of each
Subsidiary of the Company and (z) each committee of each such board.
(b) The Company's obligations to appoint designees to the
Board shall be subject to Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions required pursuant to Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill its obligations under this SECTION 1.3. Purchaser will promptly supply
to the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1 and the Company's obligations under this
SECTION 1.3(b) are conditioned on the Purchaser's timely provision of such
required information to the Company.
(c) Following the election of designees of Purchaser to the Board
pursuant to this SECTION 1.3, prior to the Effective Time, any amendment of this
Agreement, any amendment of the Certificate of Incorporation or By-laws of the
Company which is not expressly contemplated
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hereby, any termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Purchaser or Acquisition Sub or waiver of any of the Company's rights
hereunder shall require the concurrence of a majority of the directors of the
Company then in office who are not designees of Purchaser.
1.4 CONSUMMATION OF MERGER. From the date of acceptance for payment by
Acquisition Sub of Shares pursuant to the Offer, the Company shall take all
actions necessary to consummate the Merger as soon thereafter as reasonably
practicable.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), the Company and
Acquisition Sub shall consummate the Merger in accordance with the NYBCL
pursuant to which (i) Acquisition Sub shall merge with and into the Company and
the separate corporate existence of Acquisition Sub shall thereupon cease, (ii)
the Company shall be the successor or the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION"), shall
continue to be governed by the laws of the State of New York and shall be a
wholly-owned Subsidiary of Purchaser, and (iii) the corporate existence of the
Company with all of its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. Purchaser may, upon notice to the
Company, modify the structure of the Merger if Purchaser determines it advisable
to do so because of tax or other considerations, and the Company shall promptly
enter into any amendments to this Agreement necessary or desirable to accomplish
such structure modification, provided that no such amendments shall reduce the
Merger Consideration (as hereinafter defined).
SECTION 2.2 EFFECTIVE TIME. As soon as practicable after the
satisfaction or waiver of the conditions set forth in ARTICLE VII, the parties
hereto shall cause (i) a Certificate of Merger to be executed and filed on the
Merger Closing Date (as hereinafter defined) (or on such other date as Purchaser
and the Company may agree) with the Secretary of State of the State of New York
in such form as required by, and executed in accordance with the relevant
provisions of the NYBCL, and (ii) all other filings or recordings required by
the NYBCL in connection with the Merger. Prior to the filing referred to in this
SECTION 2.2, a closing (the "MERGER CLOSING") will be held at the offices of
Katten Muchin Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661, at 9:00 a.m. Chicago time (or such other place as the parties may agree).
The date on which the Merger Closing occurs is referred to herein as the "MERGER
CLOSING DATE"). The Merger shall become effective at such time as such
Certificate of Merger is duly filed with the Secretary of State of the State of
New York, or at such later time specified in such Certificate of Merger (the
time the Merger becomes effective being referred to herein as the "EFFECTIVE
TIME").
SECTION 2.3 EFFECTS OF THE MERGER. At the Effective Time, the Merger
shall have the effects as set forth in the applicable provisions of the NYBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges,
6
powers and franchises of the Company and Acquisition Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Acquisition Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.4 CERTIFICATE OF INCORPORATION; CERTIFICATE OF DESIGNATION
AND BY-LAWS.
(a) The Certificate of Incorporation of Acquisition Sub in
effect at the Effective Time shall be amended as of the Effective Time in order
to change the name of Acquisition Sub to "Serengeti Eyewear, Inc." and such
Certificate of Incorporation, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law and such Certificate of Incorporation.
(b) The By-laws of Acquisition Sub in effect at the Effective
Time shall be the By-laws of the Surviving Corporation until amended in
accordance with applicable law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.5 DIRECTORS. The directors of Acquisition Sub at the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-laws
of the Surviving Corporation until such director's successor is duly elected or
appointed and qualified. The Company shall cause each director of the Company's
Subsidiaries which are corporations to tender his or her resignation prior to
the Effective Time, with each such resignation to be effective as of the
Effective Time.
SECTION 2.6 OFFICERS. The officers of Acquisition Sub at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 2.7 SUBSEQUENT ACTIONS. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Acquisition Sub acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with
the Merger or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Acquisition Sub, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
rights, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
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SECTION 2.8 CONVERSION OF SHARES. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder of Shares or any
shares of common stock of Acquisition Sub:
(a) Each issued and outstanding share of common stock of
Acquisition Sub shall be converted into and become one validly issued, fully
paid and non-assessable share of Common
Stock of the Surviving Corporation.
(b) Subject to SECTIONS 2.8(d) AND 3.1, each issued and
outstanding Share (other than Shares to be canceled in accordance with SECTION
2.8(c)) shall be canceled and become the right to receive in cash, without
interest, the Per Share Amount set forth in the Offer (the "MERGER
CONSIDERATION"). As of the Effective Time, all such Shares shall be canceled in
accordance with this SECTION 2.8(b), and when so canceled, shall no longer be
outstanding and shall automatically be retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(c) Each share of Company Common Stock (including, without
limitation, the Shares purchased pursuant to the Offer) owned by the Company,
any Company Subsidiary, Purchaser, or Acquisition Sub shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(d) Each option granted to an employee, consultant or director
of the Company or its Subsidiaries to acquire Shares ("OPTION") that is
outstanding as of the Effective Time, whether or not then vested or exercisable,
shall be terminated and canceled. At the Effective Time, all holders of canceled
Options, whether or not then vested or exercisable, having an exercise price per
share that is less than the Per Share Price, shall receive in exchange for such
canceled Options, the right to receive in cash, without interest, a single lump
payment equal to the product of (1) the number of Shares subject to such Option
and (2) the excess of the Per Share Price over the exercise price per share of
such Option, and all holders of canceled Options, whether or not then vested or
exercisable, having an exercise price per share that is greater than the Per
Share Price shall receive no consideration in exchange for such canceled
Options.
(e) Each Company Warrant (as hereinafter defined) that is
outstanding as of the Effective Time, whether or not then exercisable, shall
automatically be terminated and canceled. At the Effective Time, all holders of
canceled Company Warrants, whether or not then exercisable, having an exercise
price per share that is less than the Per Share Price, shall receive in exchange
for such terminated and canceled Company Warrants the right to receive in cash,
without interest, a single lump sum cash payment equal to the product of (1) the
number of Shares subject to such Company Warrant, and (2) the excess of the Per
Share Price over the exercise price per share of such Company Warrant, and all
holders of terminated and canceled Company Warrants, whether or not then
exercisable, having an exercise price per share that is greater than the Per
Share Price shall receive no consideration in exchange for such terminated and
canceled Company Warrants.
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SECTION 2.9 STOCKHOLDERS' MEETINGS.
(a) In order to consummate the Merger, the Company, acting
through the Board, shall, in accordance with applicable legal, regulatory and
stock exchange or stock market requirements, and subject to their fiduciary
duties and obligations:
(i) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders (the "STOCKHOLDERS'
MEETING") to be held as soon as practicable following the acceptance
for payment and purchase of Shares pursuant to the Offer for the
purpose of considering and taking action upon the approval of the
Merger;
(ii) include in the Merger Proxy Statement (as
hereinafter defined) the recommendation of the Board that the
stockholders of the Company vote in favor of the approval of the
Merger;
(iii) prepare and file with the SEC a preliminary
proxy or information statement relating to this Agreement and the
Merger and use its reasonable best efforts (A) to obtain and furnish
the information required to be included by it in the Merger Proxy
Statement and, after consultation with Purchaser, respond promptly to
any comments made by the SEC with respect to the preliminary proxy or
information statement, and cause a definitive proxy or information
statement, including any amendments or supplements thereto (the "MERGER
PROXY STATEMENT"), to be mailed to its stockholders at the earliest
practicable time following the expiration or termination of the Offer;
PROVIDED, HOWEVER, that no amendment or supplement to the Merger Proxy
Statement will be made by the Company without consultation with
Purchaser and its counsel, and (B) subject to its fiduciary duties as
unanimously determined in good faith by the Board, based as to legal
matters on the written advice of legal counsel, to obtain the necessary
approvals by its stockholders of this Agreement, the Merger and the
Transactions. At such meeting, Purchaser and its affiliates shall vote,
or cause to be voted, all Shares owned by them in favor of approval and
adoption of the Merger; and
(b) Purchaser will provide the Company with the information
concerning Purchaser required to be included in the Merger Proxy Statement.
(c) Notwithstanding anything herein to the contrary,
Purchaser, the Company and Acquisition Sub agree that, in lieu of holding the
Stockholders' Meeting, the Company may obtain the approval and adoption of this
Agreement, the Merger and the other Transactions by the holders of sixty-six and
two-thirds percent (66 2/3%) of the outstanding Shares, by written consent
pursuant to SECTION 615 of the NYBCL ("APPROVAL BY CONSENT"). In addition, the
Company agrees with and covenants to Purchaser and Acquisition Sub that the
Company shall use all reasonable efforts to permit the Company's stockholders to
effect Approvals by Consent to adopt and approve, for purposes of SECTION 903 of
the NYBCL, this Agreement, the Merger and the other Transactions and to comply
with and satisfy as promptly as practicable any applicable legal, regulatory or
stock exchange or stock market requirements that apply to approving this
Agreement, the Merger and the other Transactions by way of Approval by Consent.
If Company
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stockholder approval and adoption is obtained by Approval by Consent, the
Company shall not be required to call the Stockholders' Meeting.
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary
(except for the provisions of SECTION 3.1(b)), any Shares held by a holder who
has demanded and perfected his demand for appraisal of his, her or its Shares in
accordance with the NYBCL (including, but not limited to, SECTIONS 623 AND 910
thereof) and as of the Effective Time has neither withdrawn nor lost his, her or
its right to such appraisal ("DISSENTING SHARES") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to SECTION 2.8,
but the holder thereof shall be entitled to only such rights as are granted by
the NYBCL.
(b) Notwithstanding the provisions of SECTION 3.1(a), if any
holder of Shares who demands appraisal of his Shares under the NYBCL effectively
withdraws or loses (through failure to perfect or otherwise) his, her or its
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares shall automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in SECTION 3.1(a), without interest thereon, upon surrender of the
certificate or certificates representing such Shares pursuant to SECTION 3.2
hereof.
(c) If applicable, the Company shall give Purchaser (i) prompt
notice of any demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to the
NYBCL received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
NYBCL. The Company shall not voluntarily make any payment with respect to any
demands for appraisal and shall not, except with the prior written consent of
Purchaser, settle or offer to settle any such demands.
SECTION 3.2 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Purchaser shall designate a
bank or trust company who shall be reasonably satisfactory to the Company to act
as paying agent in the Merger (the "EXCHANGE AGENT"), and on or prior to the
Effective Time, Purchaser shall make available, or cause the Surviving
Corporation to make available, to the Exchange Agent, cash in an amount
necessary for the payment of the Merger Consideration as provided in SECTION 2.8
upon surrender of certificates representing Shares (the "CERTIFICATES") as part
of the Merger. Funds made available to the Exchange Agent shall be invested by
the Exchange Agent as directed by Acquisition Sub or, after the Effective Time,
the Surviving Corporation, provided that such investments shall only be in
obligations of or guaranteed by the United States of America, in
10
commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates
of deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $1 billion (it being understood that any and all
interest or income earned on funds made available to the Exchange Agent pursuant
to this Agreement shall be turned over to Purchaser).
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual and proper
delivery of the Certificates to the Exchange Agent, shall contain instructions
for use in effecting the surrender of the Certificates in exchange for payment
of the Merger Consideration and shall be in such form and contain such other
provisions as Purchaser and the Company may reasonably specify (together, the
"TRANSMITTAL DOCUMENTS")). Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with duly executed Transmittal Documents, the
holder of such Certificate shall be entitled to receive in exchange therefor (as
promptly as practicable) the Merger Consideration in respect of all Shares
formerly represented by such Certificate which such holder has the right to
receive, as set forth in SECTION 2.8. The Certificate(s) so surrendered shall
forthwith be canceled. All cash paid upon the surrender of Certificates in
accordance with the terms of this ARTICLE III shall be deemed to have been paid
in full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates. Until surrendered in accordance with the
provisions of and as contemplated by this SECTION 3.2, any Certificate (other
than Certificates representing Shares subject to SECTIONS 2.8(c) and other than
Dissenting Shares, if applicable) shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration.
(c) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of any shares of capital stock thereafter on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or its transfer agent, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this ARTICLE III. No interest shall accrue or be paid
on or with respect to any cash payable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares.
(d) From and after the Effective Time, the holders of
Certificates evidencing ownership of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided herein or by applicable
law.
(e) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation
shall pay or cause to be paid in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, in accordance with SECTION 2.8, for Shares
represented thereby. When authorizing such payment of any portion of the Merger
Consideration in exchange therefor, the Board of Directors of the Surviving
Corporation may, in its discretion and as a condition precedent to the payment
thereof, require the owner of such lost, stolen or
11
destroyed Certificate to execute and deliver to the Surviving Corporation an
indemnity agreement, in form acceptable to the Surviving Corporation, pursuant
to which such owner agrees to indemnify the Surviving Corporation against any
claim that may be made against the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(f) Promptly following the date which is six months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the Transactions, which had been made available to the Exchange Agent and which
have not been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or similar laws) only as general creditors thereof with
respect to any portion of the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon.
(g) Subject to ARTICLE II, the Merger Consideration paid in
the Merger, if any, shall be net to the holder of Shares in cash, subject to
reduction only for any applicable federal withholding taxes or stock transfer
taxes payable by such holder.
(h) Notwithstanding anything to the contrary in this SECTION
3.2, none of the Exchange Agent, Purchaser or the Surviving Corporation shall be
liable to any holder of a Certificate formerly representing Shares for any
amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If Certificates are not surrendered
prior to two years after the Effective Time, unclaimed funds payable with
respect to such Certificates shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any Person previously entitled thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in that certain Company Disclosure Schedule dated
the date hereof and delivered to Purchaser prior to the execution hereof (the
"SCHEDULE"), the Company represents and warrants the following to Purchaser and
Acquisition Sub. Any information disclosed in any Section of the Schedule, if
reasonably related to any other Section or Sections of the Schedule and
described in reasonable detail so as to allow a reasonable person to make the
applicable cross-reference or connection, shall be deemed disclosed in reference
to all applicable Sections of the Schedule.
SECTION 4.1 ORGANIZATION, GOOD STANDING, ETC. The Company and each of
its Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the respective states of their incorporation, have
all requisite power to own their properties and to carry on their businesses as
now being conducted and are duly qualified to do business and are in good
standing in all other jurisdictions in which qualification as a foreign
corporation is required, except for such failure to be qualified and in good
standing, if any, which when taken
12
together with all other such failures of the Company and its Subsidiaries would
not in the aggregate have a Company Material Adverse Effect, as defined below.
Each such corporation, state of incorporation and jurisdiction is set forth in
SECTION 4.1 of the Schedule. As used herein, the term "SUBSIDIARY" shall mean,
with respect to any party, any corporation or other organization, whether
incorporated or unincorporated or domestic or foreign to the United States of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding such partnerships where such party or any Subsidiary of such party do
not have a majority of the voting interest in such partnership) or (ii) at least
a majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used
herein, "COMPANY MATERIAL ADVERSE EFFECT" means any event, change or effect that
is materially adverse to the business, assets, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole; provided, however, that "Company Material Adverse Effect" shall not
include (A) any event, change or effect arising out of or attributable to (i)
any decrease in the market price of the shares of Common Stock (but not any
event, change or effect underlying such decrease to the extent that it would
otherwise constitute a Company Material Adverse Effect), (ii) general economic
conditions or events, changes or effects affecting the securities markets
generally, (iii) events, changes or effects that generally affect the industry
in which the Company and its Subsidiaries operate (including legal and
regulatory changes), or (iv) changes arising primarily from the consummation of
the transactions contemplated by this Agreement or the announcement of the
execution of this Agreement; or (B) any consideration of the Company's EBITDA
(as defined below), solely in and of itself, for June, July or August, 2000,
unless the Company's actual reported EBITDA (without regard to adjustments) for
June, 2000 is less than $500,000, for July, 2000 is less than 0, or for August,
2000 is less than negative $200,000. For purposes of this Agreement, the
Company's EBITDA shall mean, for the calendar months of June, July and August,
2000, the excess of total revenues over total expenses of the Company and its
Subsidiaries for each such calendar month, before provision for income taxes and
excluding any extraordinary items, plus the aggregate amounts deducted in
determining such expenses in respect of interest expense, depreciation and
amortization for such calendar month, in each case as determined in accordance
with GAAP and consistent with past practices.
SECTION 4.2 AUTHORIZED SHARES, ABSENCE OF OPTIONS, WARRANTS, ETC. The
authorized capital stock of the Company consists of 10,000,000 Shares, and
1,000,000 shares of Preferred Stock of which 15,000 shares are designated as
Series A Preferred Stock of the Company ("COMPANY SERIES A STOCK"), 15,000
shares are designated as Series B Preferred Stock of the Company ("COMPANY
SERIES B STOCK"), and 15,000 shares are designated as Series C Preferred Stock
("COMPANY SERIES C STOCK"). As of the date hereof, (i) 2,384,000 Shares are
issued and outstanding, (ii) 8,513 shares of Company Series A Stock are issued
and outstanding, (iii) 8,435 shares of Company Series B Stock are issued and
outstanding, (iv) 8,435 shares of Company Series C Stock are issued and
outstanding, and (v) no shares of capital stock are held in the Company's
treasury. There are no other outstanding shares of capital stock or voting
securities of the Company and no outstanding commitments to issue any shares of
capital stock or voting securities of the Company after the date of this
Agreement other than pursuant to the exercise of
13
options outstanding as of the date of this Agreement under any Company Plan (as
defined in SECTION 4.17 below) which are set forth on SECTION 4.2 of the
Schedule, or warrants outstanding as of the date of this Agreement which are set
forth on SECTION 4.2 of the Schedule (the "COMPANY WARRANTS"). A true, accurate
and complete list of all material terms (including the exercise prices and the
dates of grant or issuance) of such options and the Company Warrants is included
in SECTION 4.2 of the Schedule. All of the outstanding Shares are, and all
Shares issuable upon due exercise of the securities listed below will be, when
issued in accordance with the terms of such securities, duly authorized, validly
issued, fully paid and nonassessable by the Company. Other than the Tender and
Voting Agreements, to the Company's Knowledge, there are no voting trusts or
other agreements or understandings with respect to the voting of any such
Shares. There are no outstanding preemptive rights, calls, rights of conversion
or exchange or other rights, commitments or agreements of any character relating
to the authorized or issued Shares known to the Company. The Company is the
owner of all outstanding equity securities of each of its Subsidiaries, free and
clear of any Liens other than Permitted Liens (as defined in SECTION 4.10
below); no equity securities of any of such Subsidiaries are held in the
treasury of any of such Subsidiaries; there are no other equity securities of
any class of any of such Subsidiaries reserved for issuance as of the date of
this Agreement; there are no voting trusts or other agreements or understandings
with respect to the voting of any of the equity securities of such Subsidiaries;
and there are no outstanding options, warrants, preemptive rights, calls, rights
of conversion or exchange or other rights, commitments or agreements of any
character relating to equity securities of any of such Subsidiaries. SECTION 4.2
of the Schedule lists all stocks, bonds, debentures and other interests in or
securities of such Subsidiaries and of other business enterprises owned by the
Company or any of its Subsidiaries. For purposes of this Agreement, "LIEN"
means, with respect to any asset (including, without limitation, any security,
any option, claim, mortgage, lien, pledge, charge, security interest or
encumbrance or restrictions of any kind in respect of such asset.
SECTION 4.3 EFFECT OF AGREEMENT. The execution and delivery of this
Agreement by the Company and the consummation of the Merger have been duly
authorized by the Board, do not require the consent, approval or authorization
of or filing with any Person or any Federal, state or local government or any
court, administrative agency or commission or other governmental entity or
agency or foreign government, court, administrative agency or commission or
other governmental authority or agency (a "GOVERNMENTAL ENTITY") (i) except in
connection with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (ii) pursuant to the
applicable requirements of the Exchange Act and the SEC's rules and regulations
promulgated thereunder, (iii) the filing and, if applicable, recordation of the
Certificate of Merger pursuant to the NYBCL and (iv) and the consents, waivers
or approvals from Persons to specified contracts listed in SECTION 4.3 of the
Schedule and will not, subject to obtaining the aforesaid consents, waivers or
approvals and making the aforesaid filings, violate any material law, statute,
regulation, injunction, order or decree of any Governmental Entity, or conflict
with or result in a material breach of or constitute a material default under
any of the terms or provisions of, or give any Person the right to terminate,
any mortgage, note, bond or indenture or material obligation to which the
Company or any of its Subsidiaries is a party or by which it or any of its or
their properties may be bound. Subject to securing the consents, waivers and
approvals set forth in SECTION 4.3 of the Schedule, the
14
execution and delivery of this Agreement by the Company and the consummation of
the Merger will not give to others any interests or rights, including rights of
termination or cancellation, in or with respect to any material property, asset,
contract, agreement, license or other commitment or instrument of the Company or
any of its Subsidiaries.
SECTION 4.4 CONTRACTS AND COMMITMENTS. Neither the Company nor any of
its Subsidiaries is in material breach or violation of or in material default
(i) under any of the terms or provisions of any mortgages, leases, notes, bonds,
indentures, commitments, contracts, agreements, licenses or other instruments to
which such corporation is a party or by which it or any of its properties is
bound and which singularly is or in the aggregate are material to the business,
properties, financial condition or operations of such corporation, (ii) under
any material law, judgment or decree, or any order, rule or regulation
applicable to such corporation or to any of its properties or (iii) in the
payment of any of its material obligations for borrowed funds, and there exists
no known condition or known event which, after notice or lapse of time or both,
would constitute a default in connection with any of the foregoing. SECTION 4.4
of the Schedule contains a correct and complete list of every material contract,
agreement, lease or commitment, written or oral, to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of its or their assets or properties are bound, including all amendments
and other modifications thereto (collectively, the "MATERIAL CONTRACTS"). The
Company has made available to Purchaser a true and complete copy of all Material
Contracts. Each Material Contract is a valid and binding obligation of the
Company or its Subsidiaries, as applicable, enforceable in accordance with its
terms, and is in full force and effect, subject to bankruptcy, reorganization,
receivership and other laws affecting creditors' rights generally. To the
Company's Knowledge, no other party to any Material Contract, is (with or
without the lapse of time or the giving of notice, or both) in material breach
or default in any material respect thereunder and to the Company's Knowledge
there exists no condition which would constitute a material breach or default by
any other party thereunder. To the Company's Knowledge, none of the Company or
any of its Subsidiaries has been notified that any other party to any Material
Contract intends to cancel, terminate, not renew or exercise an option under any
Material Contract, whether in connection with the transactions contemplated
hereby or otherwise. As used herein, "COMPANY'S KNOWLEDGE" means the actual
knowledge of Stephen Nevitt and William McMahon after reasonable inquiry of
Lucia Almquist, John Sanchez, Douglas Hinton, Jeffrey Rubin and Alison
MacDonald.
SECTION 4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has made
available to Purchaser a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended (the "SECURITIES ACT")),
definitive proxy statement and other filings filed with the SEC by the Company
since January 1, 1997, and, prior to the Effective Time, the Company will have
made available to Purchaser true and complete copies of any additional documents
filed with the SEC by the Company after the date hereof but prior to the
Effective Time (collectively, the "COMPANY SEC DOCUMENTS"). In addition, the
Company has made available to Purchaser all exhibits (including those exhibits
incorporated by reference) to the Company SEC Documents filed prior to the date
hereof, and will promptly make available to Purchaser all exhibits to any
additional Company SEC Documents filed prior to the Effective Time. The Company
has filed with the SEC
15
all reports and registration statements and other filings required to be filed
with the SEC under the rules and regulations of the SEC. All material documents
required to be filed as exhibits to the Company SEC Documents have been so
filed. As of their respective filings dates, the Company SEC Documents complied
in all material respects with the requirements of the Exchange Act and the
Securities Act, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made and at the time, not misleading, except
to the extent corrected by a subsequently filed the Company SEC Document. The
financial statements of the Company (including, but not limited to, the
financial statements of the Company through the periods ended December 31, 1999
(the "DECEMBER 1999 BALANCE SHEET") and March 31, 2000 (the "MARCH 2000 BALANCE
SHEET", respectively), including any amendments or restatements thereof prior to
the date hereof and the notes thereto, included in the Company SEC Documents
filed prior to the date hereof (the "COMPANY FINANCIAL STATEMENTS"), copies of
which have been made available to the Purchaser by the Company prior to the date
of this Agreement, complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and were prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
("GAAP") (except as may be indicated in the notes thereto or, in the case of
unaudited statements included in Quarterly Reports on Form 10-Q, as permitted by
Form 10-Q of the SEC). The Company Financial Statements fairly present the
consolidated financial condition, operating results, and cash flows of the
Company and its Subsidiaries at the dates and during the periods indicated
therein (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments which are not material). There has been no change in the
Company's accounting policies except as described in the notes to the Company
Financial Statements. The Company has not received from its independent
auditors, at any time since January 1, 1997, a letter or any other written
notice stating that the auditors' review of the Company's system of internal
accounting controls or any of its Subsidiaries' systems of internal accounting
controls, to the extent the auditors deemed such a review necessary in
establishing the scope of their examinations of the Company's consolidated
financial statements since such date, disclosed any weakness in internal
controls that the auditors considered a material weakness.
SECTION 4.6 ABSENCE OF LIABILITIES; INDEBTEDNESS. (a) Neither the
Company nor any of its Subsidiaries has any material liabilities or obligations,
either accrued, absolute, contingent or otherwise, which have not been (i)
reflected in the December 1999 Balance Sheet, none of which have had or could
reasonably be expected to have a Company Material Adverse Effect, (ii)
specifically described in SECTION 4.6(a) of the Schedule, (iii) incurred in the
ordinary course of the Company's business since December 31, 1999, none of which
have had or could reasonably be expected to have a Company Material Adverse
Effect or (iv) incurred under or in connection with this Agreement.
(b) Section 4.6(b) of the Schedule sets forth a true, accurate and
complete list of (i) all Indebtedness of the Company or its Subsidiaries,
including, but not limited to, Indebtedness owed to affiliates of the Company
and its Subsidiaries and (ii) all Indebtedness owed to the Company and its
Subsidiaries by affiliates of the company or its Subsidiaries.
16
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, except as set forth in SECTION 4.7 of the Schedule, the Company and its
Subsidiaries have conducted their business in the ordinary course, consistent
with past practice. Without limiting the generality of the foregoing, since
December 31, 1999, except as disclosed in SECTION 4.7 of the Schedule, (i)
neither the Company nor any of its Subsidiaries has sustained any material
damage, destruction or loss by reason of fire, flood, accident or other calamity
(whether or not covered by insurance); (ii) there have been no material adverse
changes in the condition (financial or otherwise), business, net worth, assets,
properties, obligations or liabilities (fixed or otherwise) of the Company or
any of its Subsidiaries; (iii) neither the Company nor any of its Subsidiaries
has incurred any material liability or obligation for the payment of money
extending more than one year (including, but not limited to, liabilities or
obligations under or pursuant to capital leases), except for operating leases
entered into in the ordinary course of business; (iv) neither the Company nor
any of its Subsidiaries has paid any obligation or liability (fixed or
contingent) except current liabilities included in the December 1999 Balance
Sheet and current liabilities incurred since December 31, 1999 in the ordinary
course of business or pursuant to the terms of this Agreement; (v) the Company
has not declared any other dividend or other distribution on or with respect to
any Shares or other securities of the Company; (vi) the Company has not
purchased, redeemed or otherwise acquired for consideration, directly or
indirectly, any Shares or other securities of the Company; (vii) neither the
Company nor any of its Subsidiaries has disposed of, or agreed to dispose of,
any material property or asset, other than in the ordinary course of business
and for a consideration at least equal to the fair market value of such property
or asset; (viii) neither the Company nor any of its Subsidiaries has made any
expenditures or commitments for the purchase, acquisition, construction or
improvement of a capital asset except in the ordinary course of business and in
an aggregate amount not exceeding $100,000; (ix) neither the Company nor any of
its Subsidiaries has repaid Indebtedness (as hereinafter defined) of the Company
or any of its Subsidiaries to any affiliates of the Company or any of its
Subsidiaries; (x) neither the Company nor any of its Subsidiaries has incurred
any Indebtedness, other than Indebtedness incurred in the ordinary course of
business; (xi) neither the Company nor any of its Subsidiaries has amended its
Certificate of Incorporation or By-Laws; and (xii) except as set forth above,
neither the Company nor any of its Subsidiaries has entered into any other
transaction or contract other than in the ordinary course of business. Except as
set forth in SECTION 4.7 of the Schedule, there are no scheduled, and the
Company does not expect to make any, dividends on other distributions (whether
cash, stock or otherwise) on or respect to any Shares or other securities of the
Company between the date of the Agreement and the Cut-Off Date. For purposes of
this Agreement, "INDEBTEDNESS" means any liability, whether or not contingent,
(i) in respect of borrowed money or evidenced by bonds, notes, debentures, or
similar instruments, (ii) representing the balance deferred and unpaid of the
purchase price of any property (including pursuant to capital leases) but
excluding trade payables, if and to the extent any of the foregoing indebtedness
would appear as a liability upon a balance sheet prepared on a consolidated
basis in accordance with GAAP, (iii) guaranties, direct or indirect, in any
manner, of all or any part of any Indebtedness of any Person and (iv) any
penalties, fees and expenses relating to prepayment or otherwise with respect to
any of the foregoing.
SECTION 4.8 TAX AND OTHER RETURNS. Except as set forth in SECTION 4.8
of the Schedule (i) all federal tax returns and tax reports required to be filed
by the Company and its Subsidiaries
17
have been timely filed with (taking into account any extension of time granted
to, or obtained by or on behalf of, the Company or its Subsidiaries) the
appropriate Governmental Entities where such returns and reports are required to
be filed and all such tax returns were true, accurate and complete in all
material respects; (ii) all material foreign, state and local tax returns and
tax reports required to be filed by the Company or any of its Subsidiaries in
those jurisdictions where either the Company or any of its Subsidiaries have
qualified to do business, and which relate to income, profits, franchise or
property taxes, have been filed with the appropriate Governmental Entity in such
jurisdiction, and all such tax returns were true, accurate and complete in all
material respects; (iii) all federal, state, local and foreign income, profits
and franchise taxes (including interest and penalties) shown due on the tax
returns and tax reports referred to in (i) and (ii) of this SECTION 4.8 have
been fully paid; (iv) the Company and its Subsidiaries have provided in its
Company Financial Statements, and at the Effective Time will have provided in
its financial statements for periods through the Effective Time, adequate
accruals in accordance with GAAP for all taxes that have been, or will have
been, incurred but have not been paid, whether or not shown as being due on any
tax returns, for all periods through the Effective Time; (v) no waivers of
statutes of limitation have been given or requested; (vi) there is no dispute or
claim concerning any additional tax liability of the Company or any of its
Subsidiaries made by any taxing authority with respect to the returns and
reports filed by the Company or its Subsidiaries and referred to in (i) and (ii)
of this SECTION 4.8 and (vii) to the Company's Knowledge, no taxing authority
has given the Company notice that it will assess any additional tax liability
for any tax return or report filed by the Company or its Subsidiaries referred
to in (i) and (ii) of this SECTION 4.8 and none of the Company's or its
Subsidiaries' advisors have advised the Company or its Subsidiaries that there
is a substantial likelihood that such additional taxes may be assessed. No power
of attorney has been executed or filed by or on behalf of the Company or its
Subsidiaries with respect to taxes.
SECTION 4.9 EMPLOYMENT ARRANGEMENTS. Except as disclosed in SECTION 4.9
of the Schedule, neither the Company nor any of its Subsidiaries is a party to
any employment, agency, commission or consultant contract, written or oral, with
any present or former officer, director or employee, consultant or agent, or any
collective bargaining agreement. Except as disclosed in SECTION 4.9 of the
Schedule, since December 31, 1999, there has been no change in any such plan or
arrangement or in compensation to any director or officer, or any change, either
material in amount or other than in the ordinary course of business, in
compensation to any other employee of the Company or any of its Subsidiaries.
Except as disclosed in SECTION 4.9 of the Schedule, since December 31, 1999,
there have been no bonus, profit sharing, incentive, pension or similar payments
made to any employee, consultant or agent by the Company or any of its
Subsidiaries, nor has the Company or any of its Subsidiaries committed to make
any such payments. Except as set forth in SECTION 4.9 of the Schedule, no
director, officer, employee or agent of the Company or any of its Subsidiaries
is entitled to receive, or has any claim with respect to, a bonus, "success
fee", severance or separation payment or other payment as a result of the
consummation of the Transactions contemplated by this Agreement or the
termination of his, her or its employment with or by the Company in connection
therewith or otherwise. No present or former officer, director, employee,
consultant or agent of the Company has any claims to recapture unearned
incentive compensation.
18
SECTION 4.10 PROPERTY. The Company and each of its Subsidiaries have
good and marketable title in fee simple to all of the real property respectively
owned by them, and good title to all of the other tangible properties and assets
respectively owned by them, free and clear of all Liens except (i) Liens for
taxes not yet delinquent; (ii) Liens being contested in good faith by
appropriate proceedings (which Liens are described in SECTION 4.10 of the
Schedule); (iii) such imperfections of title and encumbrances, if any, as do not
materially interfere with the present use of such property; and (iv) for those
listed in SECTION 4.10 of the Schedule ("PERMITTED LIENS"). Neither the Company
nor any of its Subsidiaries has received written notice of material violation of
any material zoning regulation, ordinance or other law, order, regulation or
requirement relating to real property owned or leased by it. The tangible
personal property of the Company and its Subsidiaries that is material to the
operation of the business of the Company and its Subsidiaries is fit for the use
which is intended, free from any material defects and is in good operating
condition and repair (ordinary wear and tear excepted). None of the Company or
any of its Subsidiaries owns any material amounts of personal property that are
obsolete or of below standard quality. Since December 31, 1999, the Company has
maintained its inventory at levels maintained in the ordinary course, consistent
with past practice and taking into account the seasonality of its business. None
of the material tangible personal property is located other than at the
locations of the Company or any of its Subsidiaries or vendors set forth on
SECTION 4.10 of the Schedule. No portion of the real property owned or leased by
the Company or any of its Subsidiaries is subject to any pending condemnation
proceeding or proceeding by any Governmental Entity materially adverse to such
property, and, to the Company's Knowledge, none of the Company or any of its
Subsidiaries knows of any threatened condemnation proceeding with respect to
such property. The buildings, plants, improvements, structures and fixtures on
the real property owned or leased by the Company or any of its Subsidiaries,
including, without limitation, heating, ventilation, mechanical, electrical,
sewer, sprinkler and air conditioning systems, roof, foundation and floors, (i)
are in good operating condition in all material respects, ordinary wear and tear
excepted, and (ii) are in accordance in all material respects with all
applicable laws, ordinances, rules and regulations applicable to the Company or
any of its Subsidiaries or such property, including those relating to building,
zoning, fire or health codes, and, to the Company's Knowledge, neither the
Company nor any of its Subsidiaries has received any notice alleging any such
violation or requiring or calling attention to the need for any work, repairs,
construction, alteration or installation on or in connection with such real
property which has not been heretofore been complied with in all material
respects by the Company or its Subsidiaries.
SECTION 4.11 PATENTS, TRADEMARKS, ETC. (a) SECTION 4.11 of the Schedule
correctly lists all domestic and foreign letters patent, patent applications,
patent, technology and know-how licenses and royalty agreements, trade names,
trademark (including service mark) registrations and applications, common law
trademarks, trademark licenses and royalty agreements, copyrights and copyright
registrations and applications and copyright licenses and royalty agreements
("INTELLECTUAL PROPERTY") used or held by the Company or any of its
Subsidiaries. Unless otherwise indicated in SECTION 4.11 of the Schedule, the
Company or such Subsidiary either owns or has the right to use (in the manner
presently being used by the Company or such Subsidiary) by license, sublicense,
agreement, or permission all of the Intellectual Property set forth on SECTION
4.11 of the Schedule. Except as otherwise set forth in SECTION 4.11 of the
Schedule, the
19
Company has not granted a license, nor entered into a written agreement,
relating in whole or in part, to any of the Intellectual Property of the Company
used in connection with the conduct of its business, and there has been no
assertion thereof by any Person. To the Company's Knowledge, there is no
infringement or other adverse claim against the rights of the Company with
respect to any of the Intellectual Property used or owned by the Company in
connection with the conduct of its business. None of the Intellectual Property
is subject to any pending or, to the Company's Knowledge, threatened litigation
or other adverse claims except as set forth in SECTION 4.11 of the Schedule.
Neither the Company nor any of its Subsidiaries has received written notice or,
to the Company's Knowledge, oral notice that the use by it of such Intellectual
Property may infringe upon or conflict with any intellectual property rights of
any Person. Subject to securing the consents, waivers and approvals set forth in
SECTION 4.11 of the Schedule, the execution and delivery of this Agreement by
the Company and the consummation of the Merger will not give to any Person any
interests or rights, including rights of termination or cancellation, in or with
respect to any of the Intellectual Property owned, used or held by the Company
or any of its Subsidiaries.
SECTION 4.12 ABSENCE OF DEFAULTS BY OTHERS. To the Company's Knowledge,
no party with whom the Company or any of its Subsidiaries has an agreement which
is material to the business, properties, financial condition or operations of
the Company or any of its Subsidiaries is in material default thereunder.
SECTION 4.13 LITIGATION. Except as disclosed in SECTION 4.13 of the
Schedule, neither the Company nor any of its Subsidiaries is a party to, or, to
the Company's Knowledge, threatened with, any litigation, governmental or other
proceeding, investigation, strike or other labor dispute or other controversy
which might materially and adversely affect the validity of this Agreement or
which, individually or in the aggregate, through settlement or judgement, might
reasonably be expected to result in damages and expenses to the Company in
excess of $100,000, and there is no outstanding order, writ, injunction or
decree of any Governmental Entity against or affecting in any material respect
the Company or any of its Subsidiaries or a material portion of their respective
businesses, properties, assets or goodwill.
SECTION 4.14 DISCLOSURE DOCUMENTS. Each document required to be filed
by the Company with the SEC in connection with the transactions contemplated by
this Agreement will, when filed, comply as to form in all material respects with
the applicable requirements of the Exchange Act, and none of the information
supplied or to be supplied by the Company for inclusion in (i) the Schedule
14D-1 and the Schedule 14D-9 and (ii) insofar as it relates to the Company, the
Offer, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein, in light of the circumstances under
which they were made, not misleading.
SECTION 4.15 BROKERS' AND FINDERS' FEES. Except as disclosed in SECTION
4.15 of the Schedule, no agent, broker, Person or firm acting on behalf of the
Company or under its authority has claimed or is or will be entitled to any
commission or broker's or finder's fee from the Company in connection with the
transactions contemplated by this Agreement.
20
SECTION 4.16 INSURANCE. SECTION 4.16 of the Schedule correctly lists
and briefly describes all policies of fire, liability, workmen's compensation,
life, business interruption and other types of insurance held by the Company or
any of its Subsidiaries and indicates for each such policy the carrier, risks
insured, amounts of coverage, amount the deductible and expiration date. All
such insurance policies are in full force and effect. The consummation of the
transactions contemplated by this Agreement (including, but not limited to, the
Offer and the Merger) does not constitute a breach of, or give the insurer
thereunder or other party thereto a right of termination with respect to, such
policies or bonds.
SECTION 4.17 PENSION, RETIREMENT AND PROFIT SHARING PLANS. SECTION 4.17
of the Schedule lists each pension, profit sharing, stock-bonus, thrift or other
retirement plan, employee stock ownership plan, deferred compensation, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health or welfare plan or other similar plan, agreement, arrangement or
understanding, whether or not reduced to writing, whether or not terminated and
whether or not such plan is or is intended to be qualified under Section 401(a)
of the Internal Revenue Code or any similar provision of applicable foreign
laws, including, without limitation, any employee welfare benefit plan or
employee pension benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any similar plans under
applicable foreign laws ("COMPANY PLAN"), maintained or sponsored by, or with
respect to which there may be any liability (contingent or otherwise) to, the
Company or any of its current or former Plan Affiliates (as hereinafter
defined). Each Company Plan is in full force and effect and has been
administered in all material respects in accordance with its terms and is and
has been, and each plan administrator and fiduciary of a Company Plan is and has
been, in compliance in all material respects with all applicable requirements of
ERISA (including the funding, reporting and disclosure and prohibited
transaction provisions thereof) and other applicable laws, regulations and
rulings. Each Company Plan intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "CODE") has received a
determination letter from the IRS to the effect that such Company Plan is
qualified under Section 401(a) of the Code as to form, and no event has
occurred, and, to the Company's Knowledge, no condition exists, which has
resulted or could reasonably be expected to result in the revocation of such
determination. No Company Plan is a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA) or a "defined benefit plan" or is subject to the
provisions of Title IV of ERISA. The Company or one of its Subsidiaries has
made, accrued or provided for all contributions required under each Company
Plan. No Company Plan provides for post-retirement "welfare-type" benefits
except as may be required under COBRA. For purposes of the foregoing, the term
"PLAN AFFILIATE" means any other Person or entity with whom the Company or any
of its Subsidiaries or their respective predecessors and successors constitute
or have constituted all or part of a controlled group, or which would be treated
or have been treated with the Company or any of its Subsidiaries or their
respective predecessors and successors as under common control or whose
employees would be treated or have been treated as employed by the Company or
any of its Subsidiaries or their respective predecessors and successors, under
Section 414 of the Code or Section 4001(b) of ERISA and any regulations,
administrative rulings and case law interpreting the foregoing. For purposes of
the foregoing representation, information about Company Plans of Plan Affiliates
shall be limited to Company Plans for which the Company or any of its
Subsidiaries may have any
21
potential liability, including contingent liability, arising under law, pursuant
to any indemnification agreement or otherwise.
SECTION 4.18 ENVIRONMENTAL.
(a) Except as disclosed in SECTION 4.18.1 of the Schedule or
in the environmental reports listed in SECTION 4.18.1 of the Schedule, the
Company and its Subsidiaries have complied in all material respects, and the
Company and its Subsidiaries and all properties owned or leased by the Company
and its Subsidiaries, either currently or in the past (collectively, "REAL
ESTATE") are in material compliance, with all applicable environmental and
health and safety laws and all material federal, foreign, state and local laws,
ordinances, orders, rules, and regulations relating to the operation and
occupancy of the Company's and its Subsidiaries' business and the Real Estate.
(b) Except as disclosed in SECTION 4.18.2 of the Schedule or
in the environmental reports listed in SECTION 4.18.2 of the Schedule, to the
Company's Knowledge, none of the Company or any of its Subsidiaries has any
material liability, responsibility or obligation, whether fixed, unliquidated,
absolute, contingent or otherwise, under any federal, foreign, state or local
environmental laws or regulations, including any liability, responsibility, or
obligation for fines or penalties, or for investigation, expense, removal, or
response action to effect compliance with or discharge any duty, obligation, or
claim under any such laws or regulations, and, to the Company's Knowledge, no
actions, suits, proceedings, or investigations under such laws or regulations
exist or to the Company's Knowledge are threatened.
(c) Except as disclosed in SECTION 4.18.3 of the Schedule or
in the environmental reports listed in SECTION 4.18.3 of the Schedule, to the
Company's Knowledge, there is no past or continuing release or threat of release
of any hazardous or toxic substance, including, but not limited to, a "hazardous
substance" as defined in 42 U.S.C. Sections 9601(14) and oil, gasoline and other
petroleum-based substances (each, a "HAZARDOUS SUBSTANCE"), into the environment
at, on or from the Real Estate.
(d) Except as disclosed in SECTION 4.18.4 of the Schedule or
in the environmental reports listed in SECTION 4.18.4 of the Schedule, to the
Company's Knowledge, there have been no Hazardous Substances used or generated
by the Company or any of its Subsidiaries that have been disposed of or come to
rest at any site that has been included in any published federal, state or local
"Superfund" site list or any other list of hazardous or toxic waste sites.
(e) Except as disclosed in SECTION 4.18.5 of the Schedule or
in the environmental reports listed in SECTION 4.18.5 of the Schedule, to the
Company's Knowledge, there never have been any and there are no underground or
above-ground storage tanks located on, no polychlorinated biphenyls ("PCBS") or
PCB-containing equipment used or stored on, and no hazardous waste, as defined
by the RCRA or comparable state or local laws, treated, stored, or disposed on,
the Real Estate or other real property previously owned, leased or used by the
Company or any of its Subsidiaries.
22
SECTION 4.19 PROXY STATEMENT; SCHEDULE 14D-9. The Proxy Statement to be
sent to the stockholders of the Company in connection with the Stockholders'
Meeting, as of the date first mailed to the stockholders of the Company and at
the time of the Stockholders' Meeting, and the Schedule 14D-9 at the time filed
with the SEC will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement and the Schedule 14D-9 will, when
filed by the Company with the SEC, comply as to form in all material respects
with the applicable provisions of the Exchange Act and the SEC rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to information supplied by or
on behalf of Purchaser or any of its affiliates which is contained in any of the
foregoing documents.
SECTION 4.20 CERTAIN BUSINESS PRACTICES. Neither the Company nor any of
its Subsidiaries nor any of their respective directors, officers, agents,
representatives or employees (in their capacity as directors, officers, agents,
representatives or employees) has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) directly or indirectly, paid or delivered any fee,
commission or other sum of money or item of property, however characterized, to
any finder, agent, or other party acting on behalf of or under the auspices of a
governmental official or party acting on behalf of or under the auspices of a
governmental official or Governmental Entity, in the United States or any other
country, which is in any manner related to the business or operations of the
Company or any of its Subsidiaries, that was illegal under any federal, state or
local laws of the United States or any other country having jurisdiction; or (c)
made any payment to any customer or supplier of the Company or any of its
Subsidiaries or any officer, director, partner, employee or agent of any such
customer or supplier for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee or agent for the
unlawful rebating of charges, or engaged in any other unlawful reciprocal
practice, or made any other unlawful payment or given any other unlawful
consideration to any such customer or supplier or any such officer, director,
partner, employee or agent, in respect of the business of the Company and its
Subsidiaries.
SECTION 4.21 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 4.21 of the Schedule, the Company and its Subsidiaries hold all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "COMPANY PERMITS"). Except as set forth in SECTION 4.21 of the
Schedule, the Company and its Subsidiaries are in compliance in all material
respects with the terms of the Company Permits. Except as set forth in SECTION
4.21 of the Schedule, the businesses of the Company and its Subsidiaries are not
being, and have not been, conducted in violation of any material law, ordinance
or regulation of any Governmental Entity. Except as set forth in SECTION 4.21 of
the Schedule, no investigation or review by any Governmental Entity with respect
to the Company or any of its Subsidiaries is pending or, to the Company's
Knowledge, threatened, nor, to the Company's Knowledge, has any Governmental
Entity given notice to the Company an intention to conduct the same.
23
SECTION 4.22 AFFILIATE AGREEMENTS. Except as set forth on SECTION 4.22
of the Schedule, there are no material written or oral contracts, agreements,
arrangements or understandings between the Company or its Subsidiaries and/or
their affiliates in connection with its business, including, without limitation,
any such contracts, agreements, arrangements or understandings relating to the
provision of any products or services by the Company or its Subsidiaries to any
such affiliate, or by any such affiliate to the Company or its Subsidiaries.
SECTION 4.23 LABOR RELATIONS. Except as set forth on SECTION 4.23 of
the Schedule, there are no controversies or unfair labor practice proceedings
pending or, to the Company's Knowledge, threatened against the Company or its
Subsidiaries by any of their current or former employees or any labor or other
collective bargaining unit representing any current or former employees of the
Company or its Subsidiaries that would likely result in a labor strike or work
stoppage, have a Company Material Adverse Effect or result in a material
liability (contingent or otherwise) of the Company or any of its Subsidiaries.
Except as set forth on SECTION 4.23 of the Schedule, to the Company's Knowledge,
no organizational effort is presently being made or threatened by or on behalf
of any labor union with respect to employees of the Company or its Subsidiaries
which, if successful, would likely have a Company Material Adverse Effect. As of
the date of this Agreement, to the Company's Knowledge, no officer or employee
of the Company or any of its Subsidiaries has any announced plan to terminate
employment with the Company or any of its Subsidiaries.
SECTION 4.24 TRANSACTION AND LEGAL FEES. Section 4.24(a) of the
Schedule sets forth all fees and expenses (other than legal) incurred but unpaid
as of the date hereof by the Company or any of its Subsidiaries, and the
Company's good faith estimate of any additional fees and expenses (other than
legal) which the Company or its Subsidiaries expect to incur as a result of or
in connection with the Offer, including accounting and investment banking fees
and expenses. Section 4.24(b) of the Schedule sets forth all legal fees and
expenses incurred but unpaid by the Company or any of its Subsidiaries as of the
date hereof by the Company and its Subsidiaries, and the Company's good faith
estimate of any additional legal fees and expenses which the Company or its
Subsidiaries expect to incur as a result of or in connection with the
consummation of the Offer. The Company and its Subsidiaries have properly
accrued, in accordance with GAAP, in the Company Financial Statements for any
and all billed and unbilled, but unpaid, legal fees and expenses of the Company
and its Subsidiaries.
SECTION 4.25 MINUTE BOOKS. The minute books of the Company and its
Subsidiaries have been made available to Purchaser and contain all minutes of
meetings of directors and stockholders or actions by written consent since the
date of incorporation of the Company and the respective Subsidiaries through the
date of this Agreement.
SECTION 4.26 COMPLETE COPIES OF MATERIALS. The Company has made
available true, accurate and complete copies of each document described or
identified in the Schedule and each other document in the possession or control
of or otherwise reasonably accessible to the Company that has been requested in
writing by the Purchaser or its counsel in connection with their legal and
accounting review of the Company and its Subsidiaries.
24
SECTION 4.27 CUSTOMERS AND SUPPLIERS. As of the date hereof, no
customer which individually accounted for more than 5% of the gross revenues of
the Company or its Subsidiaries during the 12-month period preceding the date
hereof has given notice to the Company or its Subsidiaries that it will stop, or
decrease the rate of, buying services or products from the Company or its
Subsidiaries. As of the date hereof, no material supplier of the Company or its
Subsidiaries has given notice to the Company or its Subsidiaries that it will
stop, or decrease the rate of, supplying materials, products or services to the
Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries has
knowingly breached any agreement with, or engaged in any fraudulent conduct with
respect to, any supplier of the Company or its Subsidiaries.
SECTION 4.28 FULL DISCLOSURE. No representation or warranty by the
Company in this Agreement(including the Schedules and Exhibits hereto) contains
as of the date hereof or will contain as of the date given or delivered any
untrue statements of a material fact.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as follows:
SECTION 5.1 ORGANIZATION, GOOD STANDING, ETC. Each of Purchaser and
Acquisition Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted thereby.
SECTION 5.2 AUTHORIZATION OF AGREEMENT. The execution and delivery of
this Agreement by Purchaser and Acquisition and the Transactions contemplated
hereby have been duly authorized by the Board of Directors of each of Purchaser
and Acquisition Sub and do not require the consent, approval or authorization of
or filing with any Person or public authority other than the filings under and
pursuant to the HSR Act contemplated by SECTION 4.3 and will not violate any
law, statute, regulation, injunction, order or decree of any Governmental Entity
or conflict with or result in a breach of or constitute a default under any of
the terms or provisions of any material mortgage, note, bond or indenture or
obligation to which Purchaser is a party or by which it or any of its properties
may be bound.
SECTION 5.3 DISCLOSURE DOCUMENTS. Each document required to be filed by
the Purchaser with the SEC in connection with the transactions contemplated by
this Agreement will, when filed, comply as to form in all material respects with
the applicable requirements of the Exchange Act, and none of the information
supplied or to be supplied by the Purchaser for inclusion in (i) the Offer and
(ii) insofar as it relates to the Purchaser, the Schedule 14D-1 or the Schedule
14D-9 will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
25
SECTION 5.4 BROKERS AND FINDERS. Except as disclosed to the Company in
writing, no agent, broker, Person or firm acting on behalf of Purchaser or
Acquisition Sub or under its authority has claimed or is or will be entitled to
any commission or broker's or finder's fee from Purchaser or Acquisition Sub in
connection with the transactions contemplated by this Agreement.
SECTION 5.5 COMMITMENT LETTERS. Purchaser has obtained and accepted (i)
the commitment of Antares Capital Corporation ("Antares") to provide certain
financing in connection with the transactions contemplated hereby, a true,
correct and complete copy of which is attached hereto as EXHIBIT B (the "Antares
Commitment"), (ii) the commitment of The Northwestern Mutual Life Insurance
Company ("NML") to provide certain financing in connection with the transactions
contemplated hereby, a true, correct and complete copy of which is attached
hereto as EXHIBIT C (the "NML Commitment"), (iii) the commitment of Metropolitan
Life Insurance Company ("MLI") to provide certain financing in connection with
the transactions contemplated hereby, a true, correct and complete copy of which
is attached hereto as EXHIBIT D (the "MLI Commitment"), and (iv) the commitment
of Windpoint Partners ("WPP") to provide certain financing in connection with
the transactions contemplated hereby, a true, correct and complete copy of which
is attached hereto as EXHIBIT E (the "WPP Commitment"). Antares, NML, MLI and
WPP are collectively referred to herein as the "Financing Sources" and Exhibits
B, C, D and E are collectively referred to herein as the "Commitment Letters".
Purchaser believes, in good faith, that Purchaser will be able to obtain
financing pursuant to and in accordance with the Commitment Letters. To the
Purchaser's Knowledge, there are no facts or circumstances that would prevent
the terms and conditions set forth in the Commitment Letters from being
satisfied as contemplated by and required pursuant to the terms of the
Commitment Letters. For purpose of this Agreement, the term "Purchaser's
Knowledge" means the actual knowledge of Richard Kracum, B. Joseph Messner,
Salam Chaudhary, L. Nick Minden and William Yager after reasonable inquiry.
ARTICLE VI
COVENANTS
SECTION 6.1 CONDUCT OF BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES.
(a) Except as expressly contemplated by this Agreement, during
the period from the date hereof until such time as Purchaser's designees shall
constitute a majority of the Board, the Company shall, and the Company shall
cause each of its Subsidiaries to: (i) conduct its business only in the ordinary
course consistent with past practice in all material respects; (ii) use
commercially reasonable efforts to preserve, maintain, and protect its assets
and the business of the Company and each of its Subsidiaries; (iii) use
commercially reasonable efforts to preserve intact the business organization of
the business of the Company and each of its Subsidiaries, to keep available the
services of the employees of its business, and to maintain existing
relationships with licensors, licensees, suppliers, contractors, distributors,
customers, and others having business relationships with its business; and (iv)
comply in all material respects with all applicable laws, including all
applicable federal and state securities laws, rules and regulations and
including,
26
without limitation, the timely filing of all periodic reports with the SEC
required to be filed pursuant to the Exchange Act.
(b) Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the time
Persons designated or elected by Purchaser or any of its affiliates shall
constitute a majority of the Board, the Board will not, without the prior
written consent of Purchaser, permit the Company or any of its Subsidiaries to:
(i) amend or propose to amend its certificate of
incorporation or by-laws;
(ii) authorize for issuance, issue, sell, deliver, or
agree or commit to issue, sell or deliver, dispose of, encumber or
pledge any stock of any class, options, warrants, commitments,
subscriptions, rights to purchase, stock appreciation rights,
restricted stock, performance units, stock equivalents or other
securities, except as required by agreements with the employees of the
Company or its Subsidiaries or under benefit plans, in either case in
effect as of the date of this Agreement and disclosed in Section 4.2 of
the Schedule, or amend any of the terms of any such securities or
agreements outstanding, or benefit plans in effect, as of the date of
this Agreement;
(iii) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or otherwise
acquire any of its securities or any securities of its Subsidiaries;
(iv) (A) incur or assume any long-term or short-term
Indebtedness or issue any debt securities except for borrowings under
existing lines of credit in the ordinary course of business (B) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person except in the ordinary course of business; consistent with past
practice, and except for obligations of wholly owned Subsidiaries of
the Company to the Company or to other wholly owned Subsidiaries of the
Company; (C) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned
Subsidiaries of the Company or customary loans or advances to employees
in the ordinary course of business consistent with past practice and in
amounts not material to the maker of such loan or advance) or make any
change in its existing borrowing or lending arrangements for or on
behalf of any such Person, whether pursuant to an employee benefit plan
or otherwise; (D) pledge or otherwise encumber shares of capital stock
of the Company or any of its Subsidiaries; or (E) mortgage or pledge
any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien thereupon, other than Permitted Liens;
(v) adopt a plan of complete or partial liquidation
or adopt resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or recapitalization
of the Company or any of its Subsidiaries;
27
(vi) (A) except as may be required by law, as
contemplated by this Agreement, or as required under a Company Plan or
an agreement in effect on the date hereof, enter into, adopt or pay,
agree to pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to, or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance, welfare, insurance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any director, officer or employee in any
manner; or (B) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to
the Company or its Subsidiaries, and as required under existing
agreements or in the ordinary course of business consistent with past
practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights or
performance units);
(vii) acquire, sell, transfer, lease, encumber or
dispose of any assets other than in the ordinary course of business or
enter into any commitment or transaction other than in the ordinary
course of business consistent with past practice which would be
material to the Company and its Subsidiaries, taken as a whole;
(viii) except as may be required as a result of a
change in law or in GAAP, change any of the accounting principles or
practices used by it;
(ix) revalue in any material respect any of its
assets, including, without limitation, writing down the value of
inventory or writing-off notes or accounts receivable
other than in the ordinary course of business;
(x) (A) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof or any equity interest
therein; (B) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which would
be material to the Company and its Subsidiaries, taken as a whole; (C)
authorize any new capital expenditure or expenditures which,
individually, is in excess of $25,000 or, in the aggregate, are in
excess of $100,000; or (D) enter into or amend any contract, agreement,
commitment or arrangement (including any Material Contract) providing
for the taking of any action that would be prohibited hereunder;
(xi) make any tax election (unless required by law)
or settle or compromise any income tax liability of the Company or any
of its Subsidiaries, except if such action is taken in the ordinary
course of business, and, in any event, the Company shall consult with
Purchaser before executing or causing to be executed any agreement or
waiver extending the period for assessment or collection of any taxes
of the Company or its Subsidiaries;
28
(xii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its
Subsidiaries or incurred in the ordinary course of business consistent
with past practice;
(xiii) permit any insurance policy naming the Company
or any of its Subsidiaries as a beneficiary or a loss payable payee to
be canceled or terminated without notice to Purchaser except in the
ordinary course of business and consistent with past practice unless
the Company or such Subsidiary shall have obtained a comparable
replacement policy;
(xiv) settle or compromise any pending or threatened
suit, action or claim relating to the Transactions;
(xv) amend, modify, or change in any material respect
any existing Material Contract relating to the business of the Company
or its Subsidiaries, other than in the ordinary course of business
consistent with past practice;
(xvi) waive, release, grant, or transfer any rights
of material value relating to the business of the Company or its
Subsidiaries, other than in the ordinary course of business consistent
with past practice; or
(xvii) take, or agree in writing or otherwise to
take, any of the actions described in SECTIONS 6.1(b)(i) through
6.1(b)(xvi) or any action which would make any of the representations
or warranties of the Company contained in this Agreement untrue or
incorrect as of the date when made or would result in any of the Offer
Conditions set forth in ANNEX A not being satisfied.
(c) Until Purchaser's designees constitute a majority of
the Board, the Company will deliver to Purchaser accurate and complete copies
of all documents filed with the SEC or any exchange on which the Shares are
listed for trading.
SECTION 6.2 ACQUISITION PROPOSALS. (a) The Company and each of its
Subsidiaries shall, and shall direct and use its commercially reasonable efforts
to cause its officers, directors, employees, agents and other representatives
to, immediately cease any discussions, negotiations or contacts with any Persons
that may be ongoing with respect to an Acquisition Proposal (as hereinafter
defined). With respect to any Person or Persons with whom the Company or any of
its Subsidiaries has been discussing any Acquisition Proposal prior to the date
hereof, the Company and its Subsidiaries shall promptly following the execution
of this Agreement request each such Person who has heretofore entered into a
confidentiality agreement with the Company or any of its Subsidiaries regarding
an Acquisition Proposal to return to the Company all confidential information
heretofore furnished to such Person or Persons by or on behalf of the Company or
its Subsidiaries. Neither the Company nor any of its Subsidiaries shall,
directly or
29
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
Person (as hereinafter defined) relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any portion of the assets of,
or any equity interest in, the Company or any of its Subsidiaries or any
recapitalization, business combination or similar transaction with the Company
or any of its Subsidiaries (any communication with respect to the foregoing
being an "ACQUISITION PROPOSAL") or participate in any negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other Person to do or seek any of the foregoing;
PROVIDED, HOWEVER, that, at any time prior to the purchase of Shares by
Acquisition Sub pursuant to the Offer, the Company may furnish information to,
and negotiate or otherwise engage in discussions with, any party who delivers a
written Acquisition Proposal which was not solicited or encouraged after the
date of this Agreement if the Board by majority vote determines in good faith
(i) after consultation with and receipt of advice from its outside legal
counsel, that failing to take such action may reasonably be determined to
constitute a breach of the fiduciary duties of the Board under applicable law,
(ii) that commitments (financing and other) of substantially the same
sufficiency and firmness as those then obtained by Purchaser have been obtained
with respect to such Acquisition Proposal that the Board reasonably expects a
transaction pursuant to such Acquisition Proposal could be consummated and (iii)
that such Acquisition Proposal is not subject to any regulatory approvals that
could reasonably be expected to prevent consummation. In connection with the
Acquisition Proposal of a party that satisfies the criteria set forth in the
proviso to the preceding sentence, the Company will enter into a confidentiality
agreement with such party, which confidentiality agreement shall have terms and
conditions that will be no less favorable to the Company than the terms and
provisions relating to confidentiality contained in that certain Letter
Agreement dated April 25, 2000 by and between the Company and Purchaser.
(b) From and after the execution of this Agreement, the
Company shall promptly give Purchaser written notice of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals relating
to an Acquisition Proposal (including the material terms thereof and the
identity of the other party or parties involved) and furnish to Purchaser as
soon as reasonably practicable and in any event no later than 48 hours after
such receipt an accurate description of all material terms (including any
changes or adjustments to such terms as a result of negotiations or otherwise)
of any such written proposal. The Company shall promptly provide to Purchaser
any non-public information regarding the Company provided to any other party,
which information was not previously provided to Purchaser. In addition, the
Company shall promptly advise Purchaser, in writing, if the Board shall make any
determination as to any Acquisition Proposal as contemplated by the proviso to
the first sentence of this SECTION 6.2. The Company agrees that it shall keep
Purchaser informed, on a current basis, of the status of any Acquisition
Proposal. Notwithstanding the foregoing, the Company shall be permitted to take
such actions as may be required to comply with Rule 14e-2 of the Exchange Act.
It is understood and agreed that any violation of this SECTION 6.2 by any
officer, director, employee, agent or other representative of the Company,
whether or not such Person is purporting to act on behalf of the Company, shall
be deemed a breach of this SECTION 6.2 by the Company. For purposes of this
Agreement, "PERSON" means a natural person, partnership, corporation, limited
liability company,
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business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Entity or other entity or organization.
(c) Except as set forth in this SECTION 6.2, neither the Board
nor any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Purchaser, the approval or
recommendation by such Board or such committee of the Offer, the Merger or this
Agreement; provided, however, that the Board may (A) in respect to any takeover
or Acquisition Proposal, suspend such recommendation for a period of up to five
days pending its analysis of such Acquisition Proposal, or (B) at any time prior
to consummation of the Offer, modify or withdraw such recommendation if the
Board determines in good faith, after consultation with and the advice of
outside counsel, that it would be consistent with its fiduciary responsibilities
to so modify or withdraw such recommendation; provided, further that, unless
this Agreement shall have been terminated, any such suspension, modification or
withdrawal shall not prevent Purchaser and Acquisition Sub, in its or their
discretion, from consummating the Offer and shall not affect any of the actions
taken by the Company pursuant to this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition or other similar agreement (each, an "ACQUISITION AGREEMENT")
related to any Acquisition Proposal. Notwithstanding the foregoing, in the event
that prior to the acceptance for payment of Shares pursuant to the Offer, the
Board determines in good faith, after consultation with and the advice of
outside counsel, that it would be consistent with its fiduciary responsibilities
to the Company's shareholders under applicable law, the Board may (subject to
this and the following provisions of this SECTION 6.2) (w) withdraw or modify
its approval or recommendation of the Offer, the Merger and this Agreement, (x)
approve or recommend a Superior Proposal (as defined below), (y) cause the
Company to enter into an Acquisition Agreement related to any Superior Proposal
or (z) terminate this Agreement, but in each case, only at a time that is after
the second Business Day following Purchaser's receipt of written notice (or such
earlier time as is necessary for the Board to comply with its fiduciary duties)
(a "NOTICE OF SUPERIOR PROPOSAL"), which obligation shall be satisfied by
delivery by facsimile transmission and by overnight delivery by Federal Express
or other nationally recognized overnight carrier as well as by delivery of the
notice required by SECTION 6.2(b) advising Purchaser that the Board has received
an Acquisition Proposal that may constitute a Superior Proposal, subject to the
fiduciary duties of the Board, specifying the material terms and conditions of
such Superior Proposal and identifying the Person making such Superior Proposal.
For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any Acquisition
Proposal determined by the Board in good faith, after consultation with and
advice from outside counsel, to be a bona fide proposal and made by a third
party for consideration consisting of cash, property and/or securities, for more
than a substantial minority (on an as-converted basis or otherwise) of the
combined voting power of the shares of Company Common Stock then outstanding or
all or substantially all of the assets of the Company or its Subsidiaries and
otherwise on terms which the Board determines in its good faith judgment, after
consultation with outside counsel, to be more favorable to the Company's
stockholders than the Offer and the Merger.
(d) During the period from the date of this Agreement until
such time as Purchaser's designees shall constitute a majority of the Board, the
Company shall not terminate,
31
amend, modify or waive any provision of any confidentiality or standstill
agreement to which the Company or any of its Subsidiaries is a party (other than
any involving PURCHASER)("STANDSTILL AGREEMENTS"), unless the Board shall have
determined in good faith, in reliance upon advice from its outside counsel, that
failing to release any third party or to amend, modify or waive such provisions
would not be consistent with the Board's fiduciary responsibilities under
applicable law.
SECTION 6.3 ACCESS TO INFORMATION.
(a) Between the date hereof and the consummation of the Offer
and/or the Effective Time, as the case may be, the Company will give Purchaser
and its authorized representatives and Persons providing or committed to provide
Purchaser with financing for the Transactions and their representatives,
reasonable access to all employees, plants, offices, warehouses and other
facilities and properties and to all books and records of the Company and its
Subsidiaries, will permit Purchaser to make such inspections (including
environmental audits and assessments of the facilities of the Company and its
Subsidiaries) any physical inspections or soil or groundwater investigations) as
they may reasonably request and will cause the Company's officers and those of
its Subsidiaries to furnish Purchaser with such financial and operating data and
other information with respect to the business and properties of the Company and
any of its Subsidiaries as Purchaser may from time to time reasonably request;
provided, however, that no investigation pursuant to this SECTION 6.3 shall
affect any representation or warranty of any party contained in this Agreement
or in any agreement, instrument, or document delivered pursuant hereto or in
connection herewith; and provided further that the Company shall have the right
to have a representative present at all times.
(b) Purchaser will hold and will cause its consultants and
advisors to hold in confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its or their legal counsel, by
other requirements of law, all documents and information concerning the Company
and its Subsidiaries furnished to Purchaser in connection with the Transactions
(except to the extent that such information can be shown to have been (i)
previously known by Purchaser from sources other than the Company, or its
directors, officers, representatives or affiliates, (ii) in the public domain
through no fault of Purchaser or (iii) later lawfully acquired by Purchaser on a
non- confidential basis from other sources who are not known by Purchaser to be
bound by a confidentiality agreement or otherwise prohibited from transmitting
the information to Purchaser by a contractual, legal or fiduciary obligation)
and will not release or disclose such information to any other Person, except
its auditors, attorneys, financial advisors and other consultants and advisors
(including financing sources) in connection with this Agreement who need to know
such information. If the Transactions are not consummated, such confidence shall
be maintained and, if requested by or on behalf of the Company, Purchaser will,
and will use all reasonable efforts to cause their auditors, attorneys,
financial advisors and other consultants, agents and representatives to, return
to the Company or destroy all copies of written information furnished by the
Company to Purchaser or its agents, representatives or advisors.
(c) If Purchaser requests, the Company and each of its
Subsidiaries will cooperate, and will cause its accountants to cooperate, in all
material respects with the financing
32
arrangements of Purchaser or its affiliates. If Purchaser requests, the
Company (a) shall furnish to Purchaser's independent accountants such
customary management representation letters as Purchaser's accountants may
reasonably require of Purchaser, the Company or their Subsidiaries as a
condition to its execution of any required accountants' consents necessary in
connection with the delivery of any customary "comfort" letters reasonably
requested by financing sources of Purchaser or its affiliates, and (b) shall
furnish to Purchaser all financial statements (audited and unaudited) and
other information in the possession of the Company or its Subsidiaries or
their representatives or agents as Purchaser shall reasonably determine as
necessary or appropriate in connection with such financing. Without limiting
the generality of the foregoing, the Company and each of its Subsidiaries
agrees to cooperate with Purchaser's and Acquisition Sub's financing sources,
such cooperation to include providing such information to Purchaser's and
Acquisition Sub's financing sources as Purchaser or Acquisition Sub may
reasonably request and making available to such financing sources senior
officers and such other employees of the Company or its Subsidiaries as
Purchaser and Acquisition Sub may reasonably request to assist in the
preparation of financing documents and otherwise cooperate with Purchaser's
and Acquisition Sub's financing sources as Purchaser and Acquisition Sub may
reasonably request upon reasonable notice and consistent with such officers'
and employees' other business responsibilities to the Company or its
Subsidiaries.
SECTION 6.4 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS.
(a) Prior to the consummation of the last to occur of any of
the Offer and the Merger, upon the terms and subject to the conditions of this
Agreement, each of Purchaser and the Company agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under any applicable laws to
consummate and make effective the Transactions as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Transactions
and the taking of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental Entity, (ii) the preparation of any financing documents requested
by Purchaser, (iii) the satisfaction of the other parties' conditions to the
consummation of the Offer and the Merger and (iv) the cure of any breaches
(whether material or immaterial) of such party's representations, warranties,
covenants or agreements in this Agreement of which such party receives notice.
In addition, no party hereto shall take any action after the date hereof that
would reasonably be expected to materially delay the obtaining of, or result in
not obtaining, any permission, approval or consent from any Governmental Entity
necessary to be obtained prior to the consummation of the Offer and the Merger.
(b) Prior to the consummation of the Offer, each party shall
promptly consult with the other parties hereto with respect to, provide any
necessary information with respect to and provide the other (or its counsel)
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement and the Transactions. Each party hereto shall promptly
inform the other of any communication from any Governmental Entity regarding any
of the Transactions. If any party hereto or affiliate thereof receives a request
for additional information or documentary
33
material from any such Governmental Entity with respect to the Transactions,
then such party will endeavor in good faith to make, or cause to be made, as
soon as reasonably practicable and after consultation with the other party,
an appropriate response in compliance with such request. To the extent that
transfers of Company Permits are required as a result of execution of this
Agreement or consummation of the Transactions, the Company shall use its best
efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require Purchaser to (i) enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring
Purchaser to hold separate or divest, or to restrict the dominion or control of
Purchaser or any of its affiliates over, any of the assets, properties of
businesses of Purchaser, its affiliates or the Company, in each case as in
existence on the date hereof, or (ii) defend against any litigation brought by
any Governmental Entity seeking to prevent the consummation of the Transactions.
SECTION 6.5 CONSENTS. Purchaser and the Company each will use all
reasonable efforts to obtain consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the
Transactions.
SECTION 6.6 PUBLIC ANNOUNCEMENTS. Purchaser and the Company will
consult with each other before issuing any press releases or otherwise making
any public statements with respect to this Agreement, the Offer and the Merger,
and shall not issue any such press release or make any such public statement
without the prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed) except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or as may be advised by counsel, in writing, to be necessary. Purchaser
and the Company anticipate issuing a joint press release regarding this
Agreement and the Offer and the Merger promptly following execution of this
Agreement.
SECTION 6.7 COMPANY ACTIONS REGARDING CERTAIN EMPLOYEE RELEASES. Prior
to the consummation of the Offer, the Company shall use its reasonable best
efforts to obtain from each of William McMahon, Lucia Almquist, Jeffrey Rubin
and Alison MacDonald releases, in a form reasonably acceptable to the Purchaser,
of any and all claims that each such person may have with respect to certain
stock options to purchase Company Common Stock which were previously offered to
such employees but were never granted, vested or received.
SECTION 6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Purchaser of (i) the occurrence or nonoccurrence of any event,
the occurrence or nonoccurrence of which would be likely to cause (a) any
representation or warranty of the Company contained in ARTICLE IV of this
Agreement that is not qualified by materiality to be untrue or inaccurate in any
material respect at or prior to the consummation of the Offer or (b) any
representation or warranty of the Company contained in ARTICLE IV of this
Agreement that is qualified by materiality to be untrue or inaccurate in any
respect at or prior to the consummation of the Offer, and (ii) any failure of
the Company to comply with or satisfy in any material respect any covenant,
condition, or agreement to be complied with or satisfied by the Company
hereunder.
34
The Company shall give prompt notice to Purchaser if there occurs any event
which has resulted in or is reasonably likely to result in a Company Material
Adverse Effect or, subject to the fiduciary duties of the Board, will prevent or
result in a third party materially delaying the consummation of the Offer or the
Merger. Purchaser shall give prompt notice to the Company of (i) the occurrence
or nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause (a) any representation or warranty of Purchaser or Acquisition
Sub contained in ARTICLE V of this Agreement that is not qualified by
materiality to be untrue or inaccurate in any material respect at or prior to
the consummation of the Offer or (b) any representation or warranty of the
Purchaser or Acquisition Sub contained in ARTICLE V of this Agreement that is
qualified by materiality to be untrue or inaccurate in any respect at or prior
to the consummation of the Offer and (ii) any failure of Purchaser to comply
with or satisfy any covenant, condition, or agreement to be complied with or
satisfied by Purchaser hereunder. The delivery of any notice pursuant to this
Section shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in ARTICLE VII, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.9 HART-SCOTT-RODINO. As promptly as practicable, and in any
event within five (5) Business Days following the execution and delivery of this
Agreement by the parties, to the extent required by the HSR Act, the Company and
Purchaser shall each prepare and file, or shall cause its "ultimate parents" (as
defined in the HSR Act) to prepare and file, any required notification and
report form under the HSR Act, in connection with the transactions contemplated
hereby, the filing fees for which shall be paid by the Purchaser; the Company
and Purchaser shall cause their ultimate parents to request early termination of
the waiting period thereunder; and the Company and Purchaser shall cause their
ultimate parents to respond with reasonable diligence to any request for
additional information made in response to such filings. As promptly as
practicable, and in any event within ten (10) Business Days following the
execution and delivery of this Agreement by the parties, the Company and
Purchaser shall prepare and file any other application, report, or other filing
required to be submitted to any other Governmental Entity in connection with the
transactions contemplated hereby.
SECTION 6.10 INDEMNIFICATION.
(a) Purchaser agrees that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries (the "INDEMNIFIED PARTIES") as
provided in their respective charters or by-laws or otherwise in effect as of
the date hereof with respect to matters occurring prior to the Effective Time
shall survive such Effective Time and shall continue in full force and effect
for four (4) years after the Effective Time; provided that such indemnification
shall be subject to any limitations imposed from time to time under applicable
law. Notwithstanding anything in this SECTION 6.10 to the contrary, neither
Purchaser nor Surviving Corporation shall have any obligation under this SECTION
6.10 with respect to or in connection with fraudulent or bad faith actions or
omissions by any Indemnified Party.
35
(b) Purchaser shall cause the Company or the Surviving
Corporation, as the case may be, to maintain in effect for not less than four
(4) years after the Effective Time, the policies of the directors' and officers'
liability and fiduciary insurance most recently maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous to the beneficiaries thereof so long as such substitution does not
result in gaps or lapses in coverage) with respect to matters occurring prior to
the consummation of the Merger to the extent available, provided that in no
event shall the Company or the Surviving Corporation, as the case may be, be
required to expend more than an amount per year equal to 200% of the current
annual premiums paid by the Company (the "PREMIUM AMOUNT") to maintain or
procure insurance coverage pursuant hereto and further provided that if the
Surviving Corporation is unable to obtain the insurance called for by this
SECTION 6.10(b), the Surviving Corporation will obtain as much comparable
insurance as is available for the Premium Amount per year.
SECTION 6.11 FINANCIAL STATEMENTS. The Company shall promptly prepare
at the end of each month and promptly deliver to Purchaser upon completion the
balance sheet, income statement and statement of cash flows prepared in
accordance with GAAP of the Company and its Subsidiaries for each month ended
between the date of this Agreement and the consummation of the Offer. The
Company shall promptly prepare all reasonably requested financial statements
required to be included in Purchaser's financing documents. The Company shall
prepare in accordance with GAAP and deliver to Purchaser at least five (5) days
prior to the consummation of the Offer all financial statements reasonably
requested by Purchaser in order for Purchaser to calculate the Closing Working
Capital and to monitor the Company's EBITDA.
SECTION 6.12 401(K) PLAN. If requested by the Purchaser, the Company
shall terminate its 401(K) Plan effective immediately prior to the consummation
of the Offer.
SECTION 6.13 CONSULTING AND NON-COMPETITION AGREEMENT. Prior to or as
of the date hereof, the Company and Steven Nevitt shall enter into a Consulting
and Non-Competition Agreement, dated and effective as of the date of the
consummation of the Offer, in the form of EXHIBIT F hereto (the "NEVITT
AGREEMENT").
SECTION 6.14 PREFERRED STOCK AND ESCROW AGREEMENT. Prior to or as of
the date hereof, each holder of Preferred Stock of the Company shall have
entered into the Preferred Stock and Escrow Agreement, in the form of EXHIBIT G
hereto (the "ESCROW AGREEMENT").
SECTION 6.15 PURCHASER FINANCING COVENANTS. The Purchaser covenants and
agrees that it shall use its reasonable best efforts to cause all of the terms
and conditions set forth in the Commitment Letters (other than terms and
conditions relating to a material adverse change involving the Company and its
Subsidiaries, the Minimum Condition and clause (d) under "Other Terms and
Conditions" in the Antares Commitment with respect to the Company or its
Subsidiaries) to be satisfied.
36
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 CONDITIONS TO THE MERGER. The obligation of the Company,
Purchaser and Acquisition Sub to effect the Merger is subject to the
satisfaction (or waiver) at or prior to the Merger Closing Date of each of the
following conditions:
(i) STOCKHOLDER APPROVAL; PURCHASE OF SHARES.
(A) This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the
stockholders of the Company by the requisite vote or by the
Approval by Consent; provided, however, that Purchaser and
Acquisition Sub shall vote all of their shares of Company
Common Stock entitled to vote thereon in favor of the Merger;
and
(B) Acquisition Sub shall have previously
accepted for payment and paid for Shares pursuant to the
Offer.
(ii) LEGAL PROCEEDINGS. There shall not be any
statute, rule or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited and no Governmental
Entity shall have issued an order, decree, or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order,
decree, ruling, or other action shall have become final and
nonappealable.
(iii) HSR ACT. All applicable waiting periods (and
any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated without objection from any of the relevant
federal authorities.
ARTICLE VIII
TERMINATION; APPROVALS; WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time
notwithstanding any requisite approval and adoption of this Agreement and the
Transactions by the stockholders of the Company:
(a) by mutual written consent of the Company and Purchaser; or
(b) either by the Company or by Purchaser, if the Offer shall
not have been consummated on or before August 18, 2000 (the "CUT-OFF DATE")
unless such failure to consummate the Offer shall be due to a breach of this
Agreement by the party or parties seeking to terminate this Agreement pursuant
to this SECTION 8.1(b); or
37
(c) either by the Company or by Purchaser, if there shall be
any statute, rule, or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited; a Governmental Entity shall
have issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and nonappealable; or the waiting period under
the HSR Act has not expired or been terminated prior to the Cut-Off Date; or
(d) either by Purchaser or by Acquisition Sub if as a result
of the failure of any of the Offer Conditions set forth in ANNEX A (other than
the Financing Condition), the Offer shall have been terminated or expired in
accordance with its terms without Acquisition Sub having accepted for payment of
any Shares pursuant to the Offer consistent with Acquisition Sub's obligations
under SECTION 1.1 of this Agreement; provided, however, that the right to
terminate this Agreement pursuant to this SECTION 8.1(d) shall not be available
to any party whose failure to perform any of its obligations under this
Agreement results in the failure of any such Offer Condition; or
(e) either by Purchaser or by Acquisition Sub prior to the
purchase of Shares pursuant to the Offer in the event Purchaser has failed to
satisfy the Financing Condition on or prior to the Financing Condition
Termination Date but only if Purchaser terminates this Agreement as a result
thereof within one (1) Business Day after such date;
(f) by the Company in accordance with SECTION 6.2(c)(z);
provided, however, that the Company has complied with all provisions thereof,
including the notice provisions therein, and that the Company complies with the
requirements of SECTION 8.3 relating to the payment (including the timing of any
payment) of the Termination Fee; or
(g) by the Company, if (i) any of the representations or
warranties of Purchaser or Acquisition Sub set forth in this Agreement that are
qualified as to materiality shall not be true and correct in any respect or any
such representations or warranties that are not so qualified shall not be true
and correct in any material respect, or (ii) Purchaser or Acquisition Sub shall
have failed to perform in any material respect any material obligation or to
comply in any material respect with any material agreement or covenant of
Purchaser or Acquisition Sub to be performed or complied with by it under this
Agreement;
(h) by the Company, prior to the commencement of the Offer if
Acquisition Sub for any reason shall have failed to commence the Offer in
accordance with Section 1.1 within five (5) Business Days after the date of this
Agreement; or
(i) by the Company if the Purchaser shall have failed to
satisfy the Financing Condition on or prior to the Cut-Off Date, other than (i)
as a result of a Company Material Adverse Effect, (ii) as a result of the
failure to satisfy the Minimum Condition or (iii) under or pursuant to clause
(d) under "Other Terms and Conditions" in the Antares Commitment, but only if
the failure to satisfy the Financing Condition under such clause (d) resulted
from additional due diligence relating to the Company and its Subsidiaries and
not the Purchaser or its Affiliates.
38
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to SECTION 8.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provisions of SECTION 6.2, this SECTION 8.2 and SECTION 8.3 hereof,
provided that nothing contained in this SECTION 8.2 shall relieve any party from
liability for any breach of this Agreement.
SECTION 8.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement, Purchaser,
Acquisition Sub and Company shall each be responsible for their own fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, whether the Offer or Merger is consummated.
(b) The Company shall pay, or cause to be paid to Purchaser,
in immediately available funds, $1,500,000 (the "TERMINATION FEE") under the
circumstances and at the times set forth as follows:
(i) Upon demand, if Purchaser or Acquisition Sub
terminates this Agreement under Section 8.1(d) in connection with, or
as a result of, the failure to satisfy the Board Approval Condition; or
(ii) Upon demand, if the Company terminates this
Agreement under SECTION 8.1(f) in accordance with SECTION 6.2(c)(z); or
(iii) If Purchaser terminates this Agreement under
Section 8.1(d) in connection with, or as a result of, the failure to
satisfy the Pay-Off Letter Condition, the Representation and Warranty
Condition, the Covenant Condition, the Indebtedness Condition or the
Working Capital Condition (collectively, the "Termination Fee Offer
Conditions") and prior to such termination or within six (6) months
thereafter, an Acquisition Proposal shall have been made and accepted
by the Company with respect to a Superior Proposal or a Superior
Proposal is consummated, then the Company shall pay to Purchaser the
Termination Fee (net of any Purchaser Expense Reimbursement previously
paid to Purchaser under Section 8.3(c)) upon consummation of such
Superior Proposal; provided, however, for purposes of this Section 8.3,
if a dispute exists between the Company and Purchaser concerning
whether such transaction constitutes a Superior Proposal, an
independent investment banking firm mutually acceptable to the Company
and Purchaser shall determine whether the proposal is more favorable to
the Company's stockholders than the Offer and the Merger.
(c) If Purchaser terminates this Agreement under SECTION
8.1(d) in connection with, or as a result of, (A) the failure to satisfy the
Termination Fee Offer Conditions or (B) the occurrence of a Company Material
Adverse Effect, then and in any of such events, the Company
39
shall pay, or cause to be paid, to Purchaser, on demand, in immediately
available funds, an amount equal to the actual out-of-pocket expenses actually
incurred by Purchaser and Acquisition Sub in connection with the transactions
contemplated hereby, exclusive of any commitment or similar fees incurred by the
Purchaser with respect to financing the Offer (the "PURCHASER EXPENSE
REIMBURSEMENT"). Notwithstanding the foregoing, Purchaser and Acquisition Sub
shall not be required to terminate this Agreement or accept the Purchaser
Expense Reimbursement if any of the foregoing conditions exist as a result of
the following with respect to the Company: (i) an intentional or willful breach
of a representation or warranty, (ii) intentional or willful failure to perform
a covenant or (iii) fraud.
(d) If (i) the Company terminates this Agreement under Section
8.1(i) hereof or (ii) the Purchaser terminates this Agreement under Section
8.1(e) hereof because of a failure to satisfy the Financing Condition for any
reason other than (A) as a result of a Company Material Adverse Effect or (B) as
a result of the failure to satisfy the Minimum Condition, the Purchaser shall
pay, or cause to be paid, to the Company, on demand, in immediately available
funds, an amount equal to the sum of (x) $1,000,000, plus (y) the actual
out-of-pocket expenses actually incurred by the Company in connection with the
transactions contemplated hereby. If the Purchaser terminates this Agreement
under Section 8.1(e) hereof because of a failure to satisfy the Financing
Condition solely as a result of the failure to satisfy clause (d) under "Other
Terms and Conditions" in the Antares Commitment due to additional due diligence
relating to the Company and its Subsidiaries, the Purchaser shall only be
required to pay to the Company the expenses referred to in clause (y) above and
shall not be required to pay to the Company the amount referred to in clause (x)
above. The parties hereto hereby agree that the amounts payable under this
Section 8.3(d) shall constitute liquidated damages for any and all costs,
expenses and damages incurred by the Company or its Subsidiaries (including, but
not limited to, legal and accounting fees and disbursements) under or in
connection with this Agreement, the transactions contemplated hereby, the
termination hereof, the Purchaser's breach of this Agreement or the Purchaser's
failure to satisfy the Financing Condition.
SECTION 8.4 AMENDMENTS. Subject to applicable law, this Agreement may
be amended by action taken by the Company and Purchaser at any time before or
after approval of the Merger by the stockholders of the Company (if required by
applicable law) but, after any such approval, no amendments shall be made which
require the approval of such stockholders under applicable law. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto.
SECTION 8.5 WAIVER. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
40
ARTICLE IX
FINANCING CONDITION
SECTION 9.1 FINANCING CONDITION. The Company acknowledges and agrees
that the obligation of Purchaser and Acquisition Sub to consummate the Offer is
subject to, in addition to the other Offer Conditions set forth in ANNEX A,
Purchaser obtaining, on or prior to the Cut-Off Date (the "FINANCING CONDITION
TERMINATION DATE"), financing under and in accordance with each of the
Commitment Letters (the "FINANCING CONDITION"). If Purchaser fails to satisfy
the Financing Condition on or prior to the Financing Condition Termination Date
but fails to terminate this Agreement under and pursuant to SECTION 8.1(e)
within one (1) Business Day after the Financing Condition Termination Date, the
Financing Condition shall thereafter cease to be an Offer Condition.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
consummation of the Offer.
SECTION 10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (b) shall not be assigned by operation of law or
otherwise; PROVIDED, HOWEVER, that Purchaser may assign any or all of its rights
and obligations under this Agreement to any Subsidiary or affiliate of
Purchaser, but no such assignment shall relieve Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 10.3 VALIDITY. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other Persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by Federal Express,
United Parcel Service or other nationally recognized overnight commercial
delivery service, or by facsimile notice, confirmation of receipt received,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
41
(a) If to Purchaser:
Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners
675 North Michigan Avenue
Suite 3300
Chicago, Illinois 60611
Attention: Richard Kracum
Facsimile Number: 312-255-4820
and
Worldwide Sports and Recreation, Inc.
c/o Wind Point Partners
One Towne Square
Suite 780
Southfield, Michigan 48076
Attention: Salam Chaudhary
Facsimile Number: 248-945-7220
With a copy, which will not constitute notice, to:
Katten Muchin Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Steven V. Napolitano, Esq.
Facsimile Number: 312-902-1061
(b) If to the Company:
Serengeti Eyewear, Inc.
8125 25th Court East
Sarasota, Florida 34243
Attention: Stephen Nevitt
Facsimile Number: 941-358-1803
With a copy, which will not constitute notice, to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert L. Winikoff
Facsimile Number: 212-755-2839
42
SECTION 10.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law thereof.
SECTION 10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 10.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in SECTION 10.2, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 10.8 EQUITABLE REMEDIES. The parties agree that the assets and
business of the Company and its Subsidiaries as a going concern constitute a
unique property and, accordingly, Purchaser shall be entitled, at its option and
in addition to any other remedies available as herein provided, to the remedy of
specific performance, to effect the transactions described in this Agreement.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
43
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
SERENGETI EYEWEAR, INC.
By:
-------------------------------------
Name:
--------------------------
Title:
-------------------------
WORLDWIDE SPORTS AND RECREATION, INC.
By:
-------------------------------------
Name:
--------------------------
Title:
-------------------------
SUNSHINE ACQUISITION, INC.
By:
-------------------------------------
Name:
--------------------------
Title:
-------------------------
44
ANNEX A
OFFER CONDITIONS
Notwithstanding any other term of the Offer, but subject, in all
cases to Purchaser's and Acquisition Sub's obligations set forth under the
Agreement, including, without limitation, under SECTION 1.1, Acquisition Sub
shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the 1934 Act
(relating to Acquisition Sub's obligation to promptly pay for or return
tendered Shares after the termination or withdrawal of the Offer), to pay for
any Shares tendered pursuant to the Offer unless (i) there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares that would, when combined with any Shares held by the
Purchaser, Acquisition Sub or any of their affiliates, constitute ninety
percent (90%) of the aggregate outstanding Shares (the "MINIMUM CONDITION"),
(ii) any waiting period under the HSR Act applicable to the Offer shall have
expired or been terminated prior to the expiration of the Offer, (iii) the
Financing Condition shall have been satisfied, and (iv) the Company shall
have delivered pay-off letters, in form annexed hereto from (x) SunTrust
Bank, Central Florida, N.A. and Bank Austria Creditanstalt Corporate Finance,
Inc. and (y) the CIT Group/Business Credit, Inc., with respect to the
Company's Indebtedness (the "PAY-OFF LETTER CONDITION"). Furthermore,
notwithstanding any other term of the Offer, but subject, in all cases, to
Purchaser's and Acquisition Sub's obligations set forth in the Agreement,
including, without limitation, under SECTION 1.1, Acquisition Sub shall not
be required to accept for payment or, to pay for any Shares not theretofore
accepted for payment or paid for, and may terminate the Offer at any time if,
at any time on or after the date of the Agreement and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exists (other than as a result of any action or inaction of
Purchaser or any of its Subsidiaries that constitutes a breach of this
Agreement):
(a) there shall be instituted or pending by any Governmental
Entity, any suit, action, Proceeding, application or counterclaim which would
reasonably be expected to (i) restrain or prohibit the acquisition by Purchaser
or Acquisition Sub of the Shares pursuant to the Offer, the consummation of the
Offer or the Merger, or require the Company, Purchaser or Acquisition Sub to pay
any damages that are material in relation to the Company and its Subsidiaries,
or Purchaser and its Subsidiaries, taken as a whole, (ii) prohibit or limit in
any material respect the ownership or operation of any business or assets of the
Company or its Subsidiaries or Purchaser or its Subsidiaries, as they are
presently being operated, or compel the Company or Purchaser to dispose of or
hold separate any material business or assets of the Company and its
Subsidiaries or Purchaser and its Subsidiaries, as a result of the Offer or the
Merger, (iii) impose material limitations on the ability of Purchaser or
Acquisition Sub to acquire or hold, to exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Shares on all matters properly presented to
the shareholders of the Company, (iv) prohibit Purchaser or any of its
Subsidiaries from effectively controlling any material business or operations of
the Company or its Subsidiaries, or (v) which otherwise is reasonably likely to
have a Company Material Adverse Effect.
(b) there shall be enacted, entered, enforced, promulgated or
deemed applicable to the Offer or the Merger by any Governmental Entity, any
statute, rule, regulation, judgment, order of injunction, other than the
application to the Offer or the Merger of applicable waiting periods under the
HSR Act, that would reasonably be expected to result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above (other than any
state law, statute, rule or regulation whose applicability can be avoided by not
extending the Offer to residents of such state provided that in the aggregate
not more than 5% of the outstanding Shares as of the consummation of the Offer
shall be owned of record by residents of all such states);
(c) (i) the Board or any committee thereof shall have
suspended and be continuing to have suspended ((a) for a period in excess of
five consecutive days or (b) on or as of the date of the expiration of the Offer
as such date may be extended pursuant to SECTION 1.1 of this Agreement),
withdrawn or modified in a manner adverse to Purchaser or Acquisition Sub its
approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Acquisition Proposal, or shall have resolved to take
any of the foregoing actions or (ii) the Company enters into an agreement
regarding an Acquisition Proposal (collectively, the "BOARD APPROVAL
CONDITION");
(d) there shall have occurred and be continuing a breach of
one or more of the representations and warranties of the Company set forth in
the Agreement which for purposes of this paragraph (d) shall be read without
giving any effect to any Company Material Adverse Effect or other materiality
qualifiers contained in any such representation and warranty and which, either
individually or in the aggregate, have resulted or could reasonably be expected
to result in a Company Material Adverse Effect, or the Company shall have failed
to execute and deliver to Purchaser and Acquisition Sub at the consummation of
the Offer a certificate, dated the date of consummation of the Offer, executed
by an appropriate officer of the Company that no such breach has occurred (the
"REPRESENTATION AND WARRANTY CONDITION");
(e) the Company shall have and be continuing to have failed to
perform or to comply with (i) SECTION 6.2 hereof in any respect in connection
with the non-solicitation agreements and covenants contained in SECTION 6.2 and
in any material respect in connection with any of the other agreements and
covenants contained in SECTION 6.2 or (ii) one or more material obligations,
covenants or agreements set forth in this Agreement to be performed or complied
with by it under the Agreement in any material respect, or the Company shall
have failed to execute and deliver to Purchaser and Acquisition Sub at the
consummation of the Offer a certificate, dated the date of consummation of the
Offer, executed by an appropriate officer of the Company that no such failure
has occurred (the "COVENANT CONDITION");
(f) there shall have occurred and be continuing (i) any
general suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any coordinated
trading halt triggered solely as a result of a specified increase or decrease in
a market index or similar "circuit breaker" process), (ii) a declaration of a
banking moratorium or any general suspension of payments in respect of or
operations by banks in the United States, (iii) any material limitation (whether
or not mandatory) by any Governmental Entity on, or other similar event that
materially adversely affects, the extension of credit in the United
A-2
States by banks or other lending institutions, or (iv) a commencement of a war
or armed hostilities or other national or international calamity directly or
indirectly involving the United States which materially adversely affects the
extension of credit in the United States by banks or other lending institutions;
(g) there shall have occurred and be continuing a Company
Material Adverse Effect.
(h) the aggregate outstanding Indebtedness of the Company and
its Subsidiaries shall exceed $11,000,000 (the "INDEBTEDNESS CONDITION");
(i) the Closing Working Capital (as hereinafter defined) of
the Company and its Subsidiaries shall not equal or exceed $10,000,000 (the
"WORKING CAPITAL CONDITION"), and the Company shall have either executed and
delivered to Purchaser and Acquisition Sub a certificate, dated the date of
consummation of the Offer, executed by the Company's Secretary to such effect
and accompanied by the appropriate supporting information and data or the
Company shall have failed to execute and deliver to Purchaser and Acquisition
Sub such certificate or supporting materials. For purposes of this Agreement,
"CLOSING WORKING CAPITAL" shall mean an amount equal to the current assets
(excluding capitalized debt issuance costs) of the Company and its Subsidiaries
as of the date of consummation of the Offer, minus the current liabilities
(excluding up to $202,500 in the aggregate in bonuses payable to William
McMahon, Lucia Almquist and the other executives listed on Section 4.9 of the
Schedule, accrued dividends on the Preferred Stock, bank notes payable, any
current portion of long-term debt, any bank overdrafts and any other amounts
borrowed under any of the Company's credit facilities) of the Company and its
Subsidiaries as of such date, in each case as calculated in accordance with past
practice and applied on a basis consistent with the December 1999 Balance Sheet;
or
(j) the aggregate Transaction Fees (as hereinafter defined)
shall exceed $150,000 (the "Transaction Fee Condition"). For purposes of this
Agreement, "Transaction Fees" shall mean all fees and expenses paid or incurred
by the Company or any of its Subsidiaries from and after July 1, 2000 through
the date of consummation of the Offer as a result of or in connection with the
Offer (including legal, accounting and investment banking fees and expenses) and
excluding amounts payable to the Company's lenders and printing costs and
expenses;
;provided that, with respect to paragraphs (a), (b), (d) and (e) above,
Purchaser shall give the Company advance written notice of any intention by
Purchaser to assert the nonsatisfaction of any of the conditions set forth in
such paragraphs (a), (b), (d) and (e), which notice shall describe in reasonable
detail the basis for the belief that any such condition has not been satisfied;
and, provided further that if any breach or failure to perform contemplated by
any of such paragraphs (d) and (e) is reasonably capable of being cured through
the exercise by the Company of its reasonable best efforts and for so long as
the Company continues to use such reasonable best efforts to cure such breach or
failure to perform, the Purchaser shall not terminate the Offer under such
paragraphs (d) or (e) until the 10th day after such notice has been delivered to
the Company, provided that nothing in the foregoing clause shall require the
Purchaser to extend the Offer beyond the Cut-off Date or otherwise or limit any
rights of the Purchaser to terminate this
A-3
Agreement in accordance with its terms.
If the Agreement is terminated by Purchaser or Acquisition Sub or by
the Company in accordance with its terms, Acquisition Sub shall, and Purchaser
shall cause Acquisition Sub to, terminate promptly the Offer.
The foregoing conditions are for the benefit of Purchaser and
Acquisition Sub and may, subject to the terms and conditions of the Agreement,
be waived by Purchaser and Acquisition Sub in whole or in part at any time and
from time to time in their sole discretion. The failure by Purchaser or
Acquisition Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time. Notwithstanding
the fact that Acquisition Sub reserves the right to assert the occurrence or
non-occurrence of an Offer Condition following acceptance for payment but prior
to payment in order to delay or cancel its obligation to pay for properly
tendered Shares, Acquisition Sub shall either promptly pay for such Shares or
promptly return such Shares.
Each term which is defined in the Agreement has the same meaning
wherever it is used in this ANNEX A as the meaning given such term in the
Agreement.
A-4
EXHIBIT A
Milton Nevitt
Joseph Feldman
Stephen Nevitt
Michael Guccione
Nevitt Funding Trust
A-1
EXHIBIT B
Attached hereto.
B-1
EXHIBIT C
Attached hereto.
C-1
EXHIBIT D
Attached hereto.
D-1
EXHIBIT E
Attached hereto.
E-1
EXHIBIT F
Attached hereto.
F-1
EXHIBIT G
Attached hereto.
G-1
FORM OF PAY-OFF LETTER
Attached hereto.