Exhibit 3.5
North Carolina
Department of the Secretary of State
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CERTIFICATE OF EXISTENCE
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify that
PCA INTERNATIONAL, INC.
is a corporation duly incorporated under the laws of the State of North
Carolina, having been incorporated on the 12th day of May, 1967, with its period
of duration being Perpetual.
I FURTHER certify that, as of the date set forth hereunder, the said
corporation's articles of incorporation are not suspended for failure to comply
with the Revenue Act of the State of North Carolina; that the said corporation
is not administratively dissolved for failure to comply with the provisions of
the North Carolina Business Corporation Act; that its most recent annual report
required by N.C.G.S. 55-16-22 has been delivered to the Secretary of State; and
that the said corporation has not filed articles of dissolution as of the date
of this certificate.
IN WITNESS WHEREOF, I have
hereunto set my hand and
affixed my official seal at
the City of Raleigh, this
19th day of April, 2002.
/s/ Elaine F. Marshall
------------------------------
Secretary of State
North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF RESTATEMENT
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have
hereunto set my hand and
affixed my official seal at
the City of Raleigh, this
19th day of April, 2002.
/s/ Elaine F. Marshall
---------------------------
Secretary of State
RESTATED CHARTER
OF
PCA INTERNATIONAL, INC.
The undersigned corporation, pursuant to action by its shareholders, hereby
executes the Restated Charter for the purpose integrating into one document its
original Articles of Incorporation and all Amendments thereto:
1. The name of the corporation is PCA International, Inc.
2. The period of duration of the corporation is perpetual.
3. The purposes for which the corporation is organized are: to engage for
profit in the business of commercial and portrait photography including without
limitation photography and finishing, amateur photofinishing, school photography
and promotional photography; to engage for profit in the business of printing,
photography and all related operations in the field of graphic art; and to
engage in any other lawful business for profit.
4. The total authorized capital of the corporation is TWENTY-FOUR MILLION
FIVE HUNDRED FIFTY-EIGHT THOUSAND THREE HUNDRED TWENTY AND NO/100
($24,558,320.00) DOLLARS divided into twenty million (20,000,000) shares of
common stock having a par value of Twenty ($ .20) Cents per share, sixty-nine
thousand seven hundred ninety (69,790) shares of preferred stock of a par value
of Eight and No/100 ($8.00) Dollars per share, and two million (2,000,000)
shares of preferred stock of a par value of Ten and No/100 ($10.00) Dollars per
share.
The description of the said stock and the designations, preferences and
voting rights of the classes of such stock of the corporation and the
restrictions and qualifications thereof are as follows:
A.
Preferred Stock (par value $8.00)
(1) Issue. All or any part of the preferred stock may be issued by the
corporation from time to time, as may be determined by the Board of Directors as
provided by law.
(2) Dividends. Before any dividends on the common stock of the corporation
shall be paid, or declared or set apart for payment, the holders of preferred
stock shall be entitled to receive cumulative dividends, when and as declared by
the Board of Directors, at the rate of 8% per share per annum, and no more,
payable quarterly on the first day of each of the months of January, April, July
and October of each year. Such dividends shall commence to accrue and be
cumulative from and after the date upon which such shares are issued.
(3) Redemptions. The corporation may at any time, at the option of the
Board of Directors, redeem the whole or any part of the preferred stock at the
time outstanding, upon notice duly mailed as hereinafter provided, by paying or
providing for the payment in cash of the redemption price for such shares plus
an amount equal to dividends accrued and unpaid to the date of redemption;
provided, however that any such redemption shall be approved by a majority of
the disinterested directors. For purposes of the preceding sentence,
disinterested directors are those directors who do not own, directly or
indirectly, any Interest In the preferred stock. The redemption price shall be
Eight Dollars ($8.00) per share. Not less than thirty days previous notice of
every such redemption of the preferred stock shall be mailed to the holders of
record of the shares to be redeemed at their last known address as shown on the
records of the corporation.
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In case of the redemption of a part only of any shares of the preferred
stock at the time outstanding, the shares to be redeemed shall be selected pro
rata or by lot or not pro rata or not by lot or in such other manner as the
Board of Directors of the corporation from time to time may determine. The Board
of Directors of the corporation shall have full power and authority to effect
the redemption of, to prescribe the manner in which, and, subject to the
provisions and limitations herein contained, the terms and conditions upon which
such stock shall be redeemed from time to time.
If, after notice of redemption of any such preferred stock shall have been
duly mailed as hereinabove provided or irrevocable authorization and direction
for such mailing shall have been given to the bank or trust company hereinafter
mentioned, and if on or before the redemption date designated in such notice the
corporation shall deposit in trust with any bank or trust company named in such
notice, to be applied to the redemption of the preferred stock so called for
redemption, funds sufficient to redeem such stock upon the date specified in the
notice of redemption, then from and after the time of such deposit all shares of
such preferred stock for the redemption of which such deposit shall have been
made shall, whether or not the certificates therefor have been surrendered for
cancellation, be deemed no longer to be outstanding for any purpose and all
rights with respect to such shares shall thereupon cease and terminate, except
the right to receive the redemption price so deposited (without interest) which
price shall include dividends accrued and unpaid to the date of such deposit.
Any funds deposited and unclaimed at the end of five years from the date fixed
for redemption shall be repaid to the corporation free of trust, and such
holders of such preferred stock so called for redemption as shall not have
received the redemption price prior to the expiration of such
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five years shall be deemed to be unsecured creditors of the corporation for the
redemption price of their shares and shall look only to the corporation for
payment thereof without interest. Shares redeemed pursuant to this paragraph of
Article 4 shall be retired and not reissued.
Whenever used herein with reference to the shares of the preferred stock
the term "redemption price" shall mean the sum of the par value and all
dividends accrued and unpaid thereon to the date of redemption; and the term
"dividends accrued" shall mean an amount computed at the annual dividend rate
from the date or dates on which dividends on such shares, less the aggregate of
the dividends theretofore or on such date paid thereon.
(4) Dividend Restrictions; Shareholders' Consent. So long as any preferred
stock shall be outstanding the corporation shall not (a) pay or declare any
dividend whatsoever, whether in cash, stock or otherwise, or make any
distribution in respect of the common stock of the corporation, or purchase,
redeem or otherwise acquire any common stock, or set any funds apart for such
purposes, unless all dividends accrued and unpaid with respect to the preferred
stock shall have been paid or funds for the payment thereof irrevocably set
aside in trust; or (b) without the affirmative vote of the holders of at least:
a majority in interest of the preferred stock then outstanding, amend, alter, or
repeal any of the provisions of the preferred stock so as to affect adversely
the preferences, rights, or powers of preferred stock.
(5) Voting. At all times each holder of shares of the preferred stock of
the corporation shall be entitled to one vote for each such share standing in
the name of such holder on the books of the corporation.
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(6) Conversion. Each share of preferred stock shall be convertible, at the
option of the holder thereof, at any time after the last day of the sixtieth
month next; succeeding the date of issue of such share upon surrender to the
corporation of the certificates for the shares to be converted, into fully paid
and nonassessable common stock of the corporation, at the rate of one share for
each share of preferred stock; provided that, in the case of the call for
redemption of any shares of preferred stock, such right of conversion shall
terminate as to the shares called for redemption at the close of business on the
date fixed for redemption. The conversion rate shall be subject to adjustment
from time to time, so as to preserve to the holders of the preferred stock their
conversion rights substantially without diminution, by taking into account any
and all increases or decreases in the number of outstanding shares of common
stock which may occur after the date of issue of any share of preferred stock
resulting from a combination of stock, a stock split, stock dividend or any
other issue of common stock without consideration. The corporation shall at all
times reserve and keep available out of its authorized but unissued common stock
the full number of shares of common stock deliverable upon the conversion of all
preferred stock from time to time outstanding.
(7) Assets. In the event of any involuntary or voluntary liquidation,
dissolution or winding up of the affairs of the corporation the holders of the
preferred stock shall be entitled to receive Eight Dollars ($8.00) per share
plus the amount of any accrued and unpaid dividends. In the event of either an
involuntary or voluntary liquidation, dissolution or winding up of the affairs
of the corporation, the amounts payable to the holders of the preferred stock
under the foregoing provisions shall be paid
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in full before any payment or any distribution of assets whatsoever is made to
or set aside for the holders of common stock of the corporation.
(8) Preemptive Right. No holder of shares of preferred stock, as such,
shall have any preemptive right to subscribe for shares, obligations, warrants,
or other securities of the corporation of any class, whether now or hereafter
authorized.
B.
Preferred Stock (par value $10.00)
(1) Issuance in Series. The preferred stock may be issued from time to time
by the Board of Directors as shares of one or more series of preferred stock,
with such distinctive serial designations as shall be stated and expressed
herein or in the resolution or resolutions of the Board of Directors providing
for the issue of such stock. In the resolution or resolutions providing for the
issue of shares of each particular series, the Board of Directors is expressly
authorized to fix:
(a) The annual dividend rate for such series, the dividend payment date and
the date from which dividends shall be cumulative on all shares of such series
issued prior to the record date for the first dividend;
(b) The redemption price or prices for such series
(c) (1) the obligation, if any, of the corporation to purchase and retire
or redeem shares of such series from a sinking fund; (2) the provisions of such
sinking fund; and (3) the redemption price or prices for shares of such series
redeemed pursuant to sinking fund provisions, if shares so redeemed are to be
redeemable at a price or prices other than the redemption price or prices for
shares not so redeemed;
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(d) The rights, if any, of the holders of shares of such series to convert
such shares into other classes of stock of the corporation and the terms and
conditions of such conversions;
(e) The rights and preferences of such series with respect to the voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
corporation;
(f) The voting rights, if any, of such series;
(g) The maximum number of shares of such series issuable; and
(h) Any other preferences, limitations and relative rights which are not
inconsistent with this Article IV.
In fixing the relative rights and preferences of each series of preferred
stock, the Board of Directors shall insure that all shares of this class will be
identical except as to the following relative rights and preferences, as to
which there may be variations between different series within this class:
1. The rate of dividend.
2. The price at and the terms and conditions on which shares may be
redeemed.
3. The amount payable upon shares in the event of involuntary or voluntary
liquidation.
4. Sinking fund provisions for the redemption or purchase of shares.
5. The terms and conditions on which shares may be converted, if the shares
of any series are issued with the privilege of conversion.
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(2) Preemptive Rights. No holder of shares of preferred stock as such shall
have any preemptive rights to subscribe to shares, obligations, warrants, or
other securities of the corporation of any class, whether now or hereafter
authorized.
(3) Statement of Classification of Shares. If and whenever, from time to
time, the Board of Directors shall determine to issue cumulative preferred stock
of any series not then established, it shall, prior to the issue of any shares
of such new series, cause provisions respecting such series to be set out in a
Statement of Classification of Shares filed with the Secretary of State of the
State of North Carolina. The Board of Directors, in any such Statement of
Classification of Shares, may reclassify any of the authorized but unissued
shares of any particular series as shares, or additional shares, of any other
series or, unless otherwise provided in the Statement of Classification of
Shares establishing any particular series, increase the maximum number of shares
theretofore established for the particular series to any greater number than
authorized by the Statement of Classification of Shares for that particular
series.
(4) Shareholders' Consent. So long as any preferred stock shall be
outstanding, the corporation shall not (a) pay or declare any dividend
whatsoever, whether in cash, stock or otherwise, or make any distribution in
respect of the common stock of the corporation, or purchase, redeem or otherwise
acquire any common stock, or set any funds apart for such purposes, unless all
dividends accrued and unpaid with respect to the preferred stock shall have been
paid or funds for the payment thereof irrevocably set aside in trust; or (b)
without the affirmative vote of the holders of at least a majority in interest
of the preferred stock then outstanding, amend, alter, or repeal any
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of the provisions of the preferred stock so as to affect adversely the
preferences, rights, or powers of the preferred stock.
(5) So long as any part of the preferred stock, par value $8.00, described
in Article IV A hereinabove, is outstanding, such stock shall be superior to,
and have priority over the preferred stock, par value $10.00, with respect to
relative rights, preferences and privileges.
C.
Common Stock
(1) Voting. At all times each holder of shares of common stock of the
corporation shall be entitled to one vote for each such share standing in the
name of such holder on the books of the corporation.
(2) Dividends and Assets. In the matter of dividends and assets, the rights
of the common stock shall be junior to the rights of the classes of preferred
stock as hereinabove provided.
(3) General Rights. In addition to the foregoing rights regarding voting
and dividends and assets the holders of the common stock of the corporation
shall have all rights and privileges of the shareholders of the corporation
except such rights, preferences and privileges as are expressly granted to the
holders of the preferred stock of the corporation in accordance with the
foregoing provisions and such rights as are accorded to the holders of the
preferred stock by law which cannot by the terms hereof be waived.
(4) Preemptive Rights. No holder of shares of common stock as such shall
have any preemptive rights to subscribe to shares, obligations, warrants or
other securities of the corporation of any class, whether now or hereafter
authorized.
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5. The stated capital of the corporation is SEVEN HUNDRED EIGHTEEN THOUSAND
THREE HUNDRED FORTY AND 20/100 ($718, 340.20) DOLLARS.
6. The address of the registered agent of the corporation in the State of
North Carolina is 111 Corcoran Street, Durham, Durham County, North Carolina,
27702; and the name of the registered agent of the corporation at such address
is C T Corporation."
7. This Restated Charter was adopted by the shareholders of the corporation
on the 22nd day of June, 1976, in the manner prescribed by law for adopting a
charter amendment; and it supercedes the original Articles of Incorporation and
all Amendments thereto.
8. The number of shares of the corporation outstanding at the time of such
adoption was 865,327; and the number of shares entitled to vote thereon was
865,327.
9. The number of shares voted for such statement was 856,908 and the number
of shares voted against such statement was 0.
10. Such adoption does not give rise to dissenter's rights for the reason
that the only effect of this Restated Charter is to set forth without change the
corresponding provisions of the Articles of Incorporation as heretofore amended.
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IN TESTIMONY WHEREOF, this Restatement has been executed by the President
and Secretary of the corporation this 23 day of June, 1976.
PCA INTERNATIONAL, INC.
By: /s/ Stuart C. Davis
---------------------------------
President
ATTEST:
/s/ Clinton L. Byrnes
- ------------------------------
Secretary
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STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
STUART C. DAVIS and CLINTON L. BYRNES, being first duly sworn, depose and
say that they signed the foregoing Restated Charter as President and Secretary,
respectively, of the corporation; that the statements contained therein are
true, and that they are authorized so to sign.
/s/ Stuart C. Davis
-------------------------------------------
Stuart C. Davis
/s/ Clinton L. Byrnes
-------------------------------------------
Clinton L. Byrnes
SWORN TO AND SUBSCRIBED BEFORE ME, this 23 day of June, 1976.
Illegible Signature
-------------------------------------------
Notary Public
My commission expires:
My Commission Expires June 25, 1980
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North Carolina
Department of the Secretary of State
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To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have
hereunto set my hand and
affixed my official seal at
the City of Raleigh, this
19th day of April, 2002.
/s/ Elaine F. Marshall
--------------------------------------
Secretary of State
ARTICLES OF AMENDMENT
TO THE RESTATED CHARTER OF
PCA INTERNATIONAL, INC.
The undersigned corporation hereby executes these Articles of Amendment for
the purpose of amending its restated charter:
1. The name of the corporation is: PCA INTERNATIONAL, INC.
2. The following amendment to the charter of the corporation was adopted by
its shareholders on the sixth day of December, 1982, in the manner prescribed by
law:
RESOLVED, that Article 4(D) shall be added to the Restated Charter of the
corporation and shall hereafter read as follows:
D.
VOTING REQUIREMENTS
IN CERTAIN CIRCUMSTANCES
(1) The affirmative vote of not less than 85% of the outstanding
shares of the corporation then entitled to vote shall be required, except
as expressly provided in paragraph (2) of this Article 4(D), in order for
any of the following actions or transactions to be effected by the
corporation, or approved by the corporation as a stockholder of any
subsidiary of the corporation, if, as of the record date for the
determination of the stockholders to vote thereon or consent thereto, any
Prior Holder (as hereinafter defined) owns or controls, directly or
indirectly, 20% or more of the outstanding shares of the corporation
entitled to vote:
(a) any merger or consolidation of the corporation or any of its
subsidiaries with or into such Prior Holder or any of its affiliates,
subsidiaries or associates, or any merger or consolidation of the
corporation with or into any subsidiary of the corporation;
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(b) any sale, lease, exchange or other disposition of all or
substantially all of the assets of the corporation or any of its
subsidiaries to or with such Prior Holder or any of its affiliates,
subsidiaries or associates;
(c) any issuance or delivery of any voting securities of the
corporation or any of its subsidiaries to such Prior Holder or any of
its affiliates, subsidiaries or associates in exchange for cash, other
assets or securities, or a combination thereof; or
(d) any dissolution of the corporation.
(2) The vote of stockholders specified in paragraph (1) of this
Article 4(D) shall not apply to any action or transaction described in such
paragraph, if
(a) the Board of Directors of the corporation shall have approved
the action or transaction before direct or indirect ownership or
control of 20% or more of the outstanding shares of stock of the
corporation entitled to vote is acquired by the Prior Holder; or
(b) the cash, or fair market value of other consideration, to be
received by the common stockholders in any such action or transaction
described in paragraph (1) of this Article 4(D) shall
(i) bear the same or greater percentage relationship to the
market price of the corporation's common stock immediately prior
to the announcement of any such action or transaction as the
highest price per share (including brokerage commissions and/or
soliciting dealers' fees and transfer taxes) which the Prior
Holder has paid for any of the shares of the corporation's common
stock already owned by it bears to the market price of the common
stock of the corporation immediately preceding the initial
acquisition of the corporation's common stock by the Prior
Holder; and
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(ii) be not less than the highest per share price (including
brokerage commissions and/or soliciting dealers' fees and
transfer taxes) paid by such other entity in acquiring any of its
holdings of the corporation's common stock; and
(iii) be not less than the earnings per share of common
stock for the four full consecutive fiscal quarters, or the last
fiscal year reported, whichever is higher, immediately preceding
the record date for solicitation of votes on such action or
transaction, multiplied by the then price/ earnings multiple (if
any) of the Prior Holder as customarily computed and reported in
the financial community.
(3) For the purpose of this Article 4(D) and for guidance to the Board
of Directors for purposes of paragraph (4) hereof,
(a) "Prior Holder" shall mean any corporation, person or entity
other than PCA International, Inc. or any of its subsidiaries;
(b) A Prior Holder shall be deemed to own or control, directly or
indirectly, any outstanding shares of common stock of the corporation
which it, or any of its affiliates, subsidiaries or associates, own or
have the right to acquire pursuant to any agreement, arrangement or
understanding or upon exercise of conversion rights, warrants or
options, or otherwise;
(c) "outstanding shares entitled to vote" and "voting securities"
shall mean such shares as are entitled to vote on a proposed plan of
merger or consolidation, considered as one class; and
(d) "Affiliate," "subsidiary" and "associate" shall have the same
meanings as set forth in Rule 12b-2 under the securities Exchange Act
of 1934 as in effect on the date of the adoption of this Article.
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(4) The Board of Directors of the corporation shall have the power and
duty to determine for the purposes of this Article 4(D), on the basis of
the information known to the Board of Directors, who shall constitute a
Prior Holder, whether any Prior Holder owns or controls, directly or
indirectly, 20% or more of the outstanding shares of the corporation
entitled to vote, and what entities are subsidiaries, affiliates or
associates of the Prior Holder. Any such determination by the Board shall
be conclusive and binding for all purposes.
3. The number of shares of the corporation outstanding was 3,523,586; and
the number of shares entitled to vote thereon was 3,523,586.
4. The number of shares voted for such amendment was 1,905,980; and the
number of shares voted against such amendment was 545,774.
5. The amendment herein effected does not give rise to dissenter's rights
under N.C.G.S.ss.55-101(b) as it does not affect any of the rights described in
said section of an existing class of shareholders.
IN WITNESS WHEREOF, these Articles are signed by the ____________ President
and ___________ secretary of the corporation this 6th day of December, 1982.
PCA INTERNATIONAL, INC.
By: /s/ William B. Mewborne, Jr.
------------------------------------------
President
By: /s/ A Allen Henderson
-------------------------------------------
Secretary
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STATE OF NORTH CAROLINA
COUNTY OF UNION
I, Elsie Millwood, a Notary Public, hereby certify that on this 6th day of
December, 1982, personally appeared before me William B. Mewborne, Jr. and A.
Allen Henderson, each of whom being by me first sworn, declared that he signed
the foregoing document in the capacity indicated, that he was authorized so to
sign, and that the statements therein contained are true.
/s/ Elsie Millwood
-----------------------------------------
Notary Public
My Commission Expires: May 15, 1985
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North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed my official seal at
the City of Raleigh, this 19th day of April,
2002.
/s/ Elaine F. Marshall
-----------------------------------------------
Secretary of State
ARTICLES OF AMENDMENT TO THE RESTATED
CHARTER OF
PCA INTERNATIONAL, INC.
The undersigned corporation hereby executes these Articles of Amendment for
the purpose of amending its Restated Charter:
1. The name of the corporation is PCA International, Inc.
2. The following amendment to the Restated Charter of the corporation was
adopted by its shareholders on the 22nd day of May, 1990, in the
manner prescribed by law:
RESOLVED, that the Restated Charter of the corporation be amended by
deleting Article 4(D) thereof.
3. The number of shares of the corporation outstanding at the time of
such adoption was 7,620,828; and the number of shares entitled to vote
thereon was 7,620,828. There were no shares entitled to vote as a
class inasmuch as there is one class of common stock outstanding.
4. The designation and number of outstanding shares entitled to vote on
such amendment were as follows:
Class Number of Shares
----- ----------------
Common 7,620,828
5. The number of shares voted for such amendment was 6,543,744; and the
number of shares voted against such amendment was 9,012.
6. The amendment herein effected will not change the stated capital of
the corporation.
7. The amendment herein effected does not give rise to dissenter's rights
under N.C.G.S.ss.55-101(b) as it does not effect any of the rights
described in said section of an existing class of shareholders.
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IN WITNESS WHEREOF, these Articles of Amendment are signed by the President
and Secretary of the corporation this 23rd day of May, 1990.
PCA International, Inc.
By: /s/ John Grosso
-----------------------------------------------
John Grosso, President
Attest:
By: /s/ Robert J. Consoli
---------------------------------
Robert J. Consoli, Secretary
[CORPORATE SEAL]
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, Joanna S. Corhian, a Notary Public, hereby certify that on this 23rd day
of May, 1990, personally appeared before me John Grosso and Robert J. Consoli,
each of whom being by me first sworn, declared that he signed the foregoing
document in the capacity indicated, that he was authorized so to sign, and that
the statements therein contained are true.
/s/ Joanna S. Corhian
-----------------------------------------------
Notary Public
My commission expires: 3-5-95
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North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed my official seal at
the City of Raleigh, this 19th day of April,
2002.
/s/ Elaine F. Marshall
--------------------------------------------
Secretary of State
ARTICLES OF AMENDMENT TO THE RESTATED
CHARTER OF
PCA INTERNATIONAL, INC.
The undersigned corporation hereby submits these Amendment for the purpose
of amending its Restated Charter:
1. The name of the corporation is PCA International, Inc.
2. The following amendment to the restated charter of the corporation was
adopted by its shareholders on the 24th day of May, 1995, in the manner
prescribed by law:
The corporation's restated charter shall be amended by adding Article 11,
which shall provide:
11. No person who is serving or who has served as a director of the
Corporation shall be personally liable to the Corporation or any of its
shareholders for monetary damages for breach of duty as a director, except
for liability with respect to (i) acts or omissions that the director at
the time of such breach knew or believed were clearly in conflict with the
best interests of the Corporation, (ii) any transaction from which the
director derived an improper personal benefit, (iii) acts or omissions
occurring prior to the effective date of this article or (iv) acts or
omissions with respect to which the North Carolina Business Corporation Act
does not permit the limitation of liability. As used herein, the term
"improper personal benefit" does not include a director's reasonable
compensation or other reasonable incidental benefit for or on account of
his service as a director, officer, employee, independent contractor,
attorney or consultant of the Corporation. No amendment or repeal of this
article, nor the adoption of any provision to these Articles of
Incorporation inconsistent with this article, shall eliminate or reduce
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the protection granted herein with respect to any matter that occurred
prior to such amendment, repeal or adoption.
This the 1st day of June, 1995.
PCA INTERNATIONAL, INC.
By: /s/ John Grosso
------------------------------------------
John Grosso
President
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North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF MERGER
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have
hereunto set my hand and
affixed my official seal at
the City of Raleigh, this
19th day of April, 2002.
/s/ Elaine F. Marshall
---------------------------
Secretary of State
ARTICLES OF MERGER
OF
JUPITER ACQUISITION CORP.
WITH AND INTO
PCA INTERNATIONAL, INC.
PCA International, Inc., a North Carolina corporation (the "Surviving
Corporation"), hereby submits these Articles of Merger for the purpose of
merging Jupiter Acquisition Corp., a North Carolina corporation ("the Merging
Corporation"), with and into the Surviving Corporation (the "Merger"):
1. The Agreement and Plan of Merger pursuant to which the Merger shall be
effected is attached as Annex A hereto.
2. The Merger was duly approved in the manner prescribed by Chapter 55 of
the General Statutes of North Carolina by the board of directors and
shareholders of the Surviving Corporation and the Merging Corporation.
3. These Articles of Merger and the Merger will be effective upon filing.
This the 25th day of August, 1998.
PCA INTERNATIONAL, INC.
By: /s/ John Grosso
-------------------
John Grosso
President
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AGREEMENT AND PLAN OF MERGER, AS AMENDED
by and between
PCA INTERNATIONAL, INC.
AND
JUPITER ACQUISITION CORP.
dated as of
April 20, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 20, 1998,
by and between PCA International, Inc., a North Carolina corporation (the
"Company"), and Jupiter Acquisition Corp., a North Carolina corporation
("Mergerco").
RECITALS
The respective boards of directors of the Company and Mergerco deem it
advisable for the mutual benefit of the Company and Mergerco, and their
respective shareholders, that Mergerco be merged with and into the Company (the
"Merger") upon the terms and subject to the conditions set forth herein and in
accordance with the Business Corporation Act of the State of North Carolina (the
"NCBCA"). The Board of Directors and sole shareholder of Mergerco have approved
and adopted this Agreement. The Board of Directors of the Company has approved
this Agreement and has resolved to recommend to the shareholders of the Company
to vote to approve the principal terms of this Agreement in conjunction with
their approval of the principal terms of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), the Company
and Mergerco shall consummate the Merger pursuant to which (a) Mergerco shall be
merged with and into the Company and the separate corporate existence of
Mergerco shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of North Carolina, and (c) the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in this Section 1.1.
Pursuant to the Merger, (x) the Articles of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation, and (y) the Bylaws of Mergerco, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, such Articles
of Incorporation and such Bylaws. The Merger shall have the effects specified in
the NCBCA.
Section 1.2 Effective Time. Mergerco and the Company will cause Articles of
Merger to be executed and filed on the date of the Closing (as defined in
Section 1.3) (of on such other date as Mergerco and the Company may agree) with
the
Secretary of State of North Carolina (the "Secretary of State") as provided in
the NCBCA. The Merger shall become effective on the date on which the Articles
of Merger have been duly filed with the Secretary of State or such time as is
agreed upon by the parties and specified in the Articles of Merger, and such
time is hereinafter referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the third business day after satisfaction or waiver of all of the
conditions set forth in Article VI hereof (the "Closing Date"), at the offices
of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New
York, New York, unless another date or place is agreed to in writing by the
parties hereto.
Section 1.4 Directors and Officers of the Surviving Corporation. The
directors of Mergerco at the Effective Time shall, from and after the Effective
Time, be the directors of the Surviving Corporation until their successors shall
have been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and Bylaws. Mergerco agrees that prior to the Effective Time,
it shall offer the following directors of the Company the opportunity to remain
as directors of the Company following the Effective Time until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal Donald P. Greenberg, Bridgette P. Heller and
Joseph H. Reich. The officers of the Company at the Effective Time shall, from
and after the Effective Time, remain as the officers of the Surviving
Corporation until their successors shall have been duly elected or appointed or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Bylaws.
Section 1.5 Shareholders' Meeting.
(a) The Company, acting through its Board of Directors, shall, -in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting
(or the annual meeting) of its shareholders (the "Special Meeting") as promptly
at practicable for the purpose of considering and taking action upon the
approval of this Agreement and the Merger;
(ii) prepare and, after consultation with Mergerco, file with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a preliminary proxy statement relating
to the Merger and this Agreement and use its best efforts (x) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Mergerco, to
respond promptly to any comments made by the SEC with respect to the preliminary
proxy statement and cause a definitive proxy statement, including any amendment
or supplement thereto (the "Proxy Statement"), to be mailed to its
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shareholders, provided that no amendment or supplement to the Proxy Statement
will be made by the Company without consultation with Mergerco and its counsel
and (y) to obtain the necessary approvals of the Merger and this Agreement by
its shareholders;
(iii) promptly notify Mergerco of the receipt of the comments of the
SEC and of any request from the SEC for amendments or supplements to the
preliminary proxy statement or the definitive Proxy Statement or for additional
information, and will promptly supply Mergerco with copies of all correspondence
between the Company or its representatives, on the one hand, and the SEC or
members of its staff, on the other hand, with respect to the preliminary proxy
statement, the definitive Proxy Statement or the Merger;
(iv) promptly Inform Mergerco if at any time prior to the Special
Meeting any event should occur which is required by applicable law to be set
forth in an amendment of, or a supplement to, the Proxy Statement, in which
case, the Company, with the cooperation of Mergerco, will, upon learning of such
event, promptly prepare and mail such amendment or supplement; provided, that
prior to such mailing, the Company shall consult with Mergerco with respect to
such amendment or supplement and shall afford Mergerco reasonable opportunity to
comment thereon;
(v) notify Mergerco at least 24 hours prior to the mailing of the Proxy
Statement, or any amendment or supplement thereto, to the shareholders of the
Company; and
(vi) subject to the fiduciary obligations of the Board of Directors
under applicable law as advised by independent counsel, include in the Proxy
Statement the recommendation of the Board of Directors that shareholders of the
Company vote in favor of the approval of this Agreement and the Merger.
(b) The Company, if required, and Mergerco, if required, shall prepare and
file concurrently with the filing of the preliminary proxy statement a Statement
on Schedule 13E-3 ("Schedule 13E-3") with the SEC. If at any time prior to the
Special Meeting any event should occur which is required by applicable law to be
set forth in an amendment of, or supplement to, the Schedule 13E-3, the Company
or Mergerco, as the case may be, shall file such amendments or supplements.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of common stock, par value $.20 per share, of the Company ("Common Stock"
or "Shares" and individually as "Share") or holders of any shares of common
stock, par value $.01 per share, of Mergerco (the "Mergerco Common Stock"):
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(a) Mergerco Common Stock. Each issued and outstanding share of Mergerco
Common Stock shall be converted into and become one (1) fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All Shares that
are owned by the Company as treasury stock and any Shares owned by Mergerco or
any wholly owned Subsidiary (as defined in Section 3.1 hereof) of Mergerco
immediately prior to the Effective Time shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other than
Shares to be cancelled in accordance with Section 2.1(b), Shares to remain
outstanding pleasant to Section 2.1(d), and any Shares which are held by
shareholders exercising appraisal rights pursuant to Chapter 55-13 of the NCBCA
("Dissenting Shareholders")) shall, subject to Section 2.1(d) herein, be
converted into the right to receive $26.50 in cash without interest (the "Cash
Merger Consideration"), payable to the holder thereof. Such Cash Merger
Consideration shall be paid upon surrender of the certificate formerly
representing such Share in the manner provided in Section 2.2. The Shares
converted into the right to receive the Cash Merger Consideration are
hereinafter referred to as the "Cash Merger Shares." All such Cash Merger
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any Cash Merger Shares shall cease to have any
rights with respect thereto, except the right to receive the Cash Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest.
(d) Continuing Shares. Notwithstanding the provisions of Section 2.1(c), in
connection with the Merger, each holder of Shares of Common Stock shall have the
right to elect to have any or all Shares held by such holder to remain
outstanding (any Shares Which so; remain outstanding are herein referred to as
"Continuing Shares") and not be converted into the right to receive the Cash
Merger Consideration (subject to the upward or downward adjustment referred to
below in this Section 2.1(d)). Such election may be exercised by a holder of
Shares completing and returning to the Company by 5:00 P.M., New York City time,
on the last business day preceding the date of the Special Meeting, a form of
Continuing Share Election (the "Continuing Share Election') which shall be
mailed to holders together with the Proxy statement and proxy. Each holder of
shares (other than holders of Shares to be canceled as set forth in Section
2.1(b) and Dissenting Shareholders) shall have the right to specify in the
Continuing Share Election (i) the number os Shares owned by such holder that
such holder desires to have converted into the right to receive the Cash Merger
Consideration and (ii) the number of Shares owned by such holder that such
holder desires to remain outstanding as continuing Shares and not be converted
into the right to receive the Cash Merger Consideration. If holders of Shares
elect in the aggregate to retain Continuing Shares in excess of the Maximum
Continuing Number (as hereinafter defined), then the number of Continuing Shares
to be owned by all such electing holders will be prorated based on the number of
Continuing Shares each shareholder that made a Continuing Share Election elected
to retain (with fractional Shares rounded down to the
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next whole number) so that only the Maximum Continuing Number of Shares shall
remain as Continuing Shares. With respect to Shares as to which Continuing Share
Elections are made but with respect to which no Continuing Shares will be issued
by reason of the preceding sentence, such Continuing Share Elections shall be
deemed revoked and relinquished and such Shares shall be converted into the
right to receive the Cash Merger Consideration. If holders of Shares elect in
the aggregate to retain less than the minimum Continuing Number (as hereinafter
defined) of Shares, then (i) each shareholder that made a Continuing Share
Election shall retain the number of Continuing Shares set forth in such election
and (ii) each shareholder (whether or not such shareholder made a Continuing
Share Election) shall receive a prorated (based on the total number of Shares
owned by such Shareholder as to which a Continuing Share Election has not been
made) number of Continuing Shares (with fractional Shares rounded up to the next
whole number) so that the minimum Continuing Number of Share shall remain
outstanding as Continuing Shares. With respect to Shares as to which no
Continuing Share Election was made but which will remain outstanding as
Continuing Shares by reason of the Preceding sentence, such a Continuing Share
Election shall be deemed to have been made. The Continuing Shares shall not be
converted or canceled as provided in Section 2.1(c), but the certificates
representing such Shares shall be exchanged as provided in Section 2.4(b). For
the purposes of this Agreement, "Maximum Continuing Number" shall mean 358,490
Shares (plus the number of Continuing Shares "beneficially owned" (as defined in
the Exchange Act) by the persons listed in Section 2.1(d) to the Disclosure
Schedule heretofore delivered to Mergerco (the "Disclosure Schedule")), and
"Minimum Continuing Number" shall mean 271,698 Shares (plus the number of
Continuing Shares "beneficially owned" by the persons listed in Section 2.1(d)
to the Disclosure Schedule).
(e) Adjustments. If, between the date of this Agreement and the Effective
Time, the number of outstanding Shares or the number of shares of the Common
Stock of the Company shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination, exchange of shares or
the like, the amount of the Cash Merger Consideration shall be correspondingly
adjusted.
Section 2.2 Payment of Cash Merger Consideration.
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(a) Payment Agent. Mergerco shall designate a bank or trust company to au
as agent for the holders of the Cash Merger Shares in connection with the Merger
(the "Paying Agent") to receive the funds to which holders of the Cash Merger
Shares shall become entitled pursuant to Section 2.1(c). Such funds shall be
invested by the Paying Agent as directed by Mergerco or the Surviving
Corporation in direct obligations of the United States, obligations for which
the full faith and credit of the United States is pledged to provide for the
payments of principal and interest, commercial paper rated of the highest
quality by Moody's Investor Services or Standard & Poors Rating Group or
certificates of deposit, issued by commercial banks having at least $1 billion
in assets.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Cash Merger Shares (the "Certificates"), whose Shares
were converted pursuant to Section 2.1 into the right to receive the Cash Merger
Consideration (i) 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 delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Mergerco and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Cash Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Mergerco, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Cash Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so surrendered
shall forthwith be canceled. If payment of the Cash Merger Consideration is to
be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the Cash
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Cash Merger Consideration in cash as contemplated by this Section
2.2.
(c) No Further Ownership Rights in the Shares. At the Effective Time, there
shall be no further registration of transfers of the Cash Merger Shares on the
records of the Company. From and after the effective Time, the holders of
Certificates evidencing ownership of the Cash Merger Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
law. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(d) Termination of Fund; No Liability. At any time following one year after
the Effective Time, the Surviving corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) which had been made available to the Paying 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 other similar laws) with respect to the Cash Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Certificate
for Cash Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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Section 2.3 Dissenters' Rights. Any Dissenting Shareholder which perfects
its dissenter's rights pursuant to Chapter 55-13 of the NCGCA shall have the
rights to receive payment as provided in such Chapter for its Shares. If any
dissenting Shareholder shall fail to perfect or shall have effectively withdrawn
or lost the right to dissent, the Shares held by such Dissenting Stockholder
shall thereupon be treated as thought such Shares had been converted into the
Cash Merger Consideration pursuant to Section 2.1.
Section 2.4 Exchange of Stock Certificates. (a) Immediately after the
Effective time, the Surviving Corporation shall deliver to the record holders of
the certificates which immediately prior to the Effective time represented all
the outstanding shares of Mergerco Common Stock that were converted into the
right to receive Shares in accordance with Section 2.1(a), in exchange for such
certificates, duly endorsed in blank, Share certificates, registered in the name
of such record holes, representing the number of Shares to which such record
holders are so entitled by virtue of Section 2.1(a).
(a) As soon as reasonably practicable after the Effective Time, the Paying
Agent shall mail to each holder of record of Continuing Shares a letter of
instructions (which shall be in such form and have such other provisions as
Mergerco and the Company may reasonably specify) instructing such holders to
transmit their certificates representing Continuing Shares to the Paying Agent
in exchange for new certificates representing such Continuing Shares. Although
certificates representing Continuing Shares which are not so exchanged will be
deemed for all purposes to represent validly issued and outstanding Continuing
Shares, such certificats will not be transferable on the books of the Company
except for such new certificates. Any holder of a certificate which represents
some Shares entitled to receive the Cash Merger Consideration and some
Continuing Shares shall receive in exchange therefor the Cash Merger
Consideration for the Cash Merger Shares pursuant to Section 2.2(b) and a new
certificate for the Continuing Shares pursuant to this Section 2.4(b)
Section 2.5 Stock Options. With respect to the Company's amended and
Restated 1996 Omnibus Long-Term Compensation Plan, the 1990 Non-Qualified Stock
Option Plan and the 1992 Non-Qualified Stock Option Plan (collectively, the
"Stock Option Plan"), the Company shall take such action as shall be required to
effectuate the cancellation of all options under the Stock Option Plans (the
"Options') (whether or not then exercisable and without regard to the exercise
price of such Options), to take effective immediately prior to the Effective
Time. Each holder of an Option shall receive from the Company, in respect of
each Option so canceled, as soon as practicable following the Effective Time, an
amount equal to the excess, if any, of the Cash Merger Consideration over the
exercise price of such Option, multiplied by the number of Shares subject to
such Option, without any interest thereon and after deducting taxes required to
be withheld (the "Option Consideration"). Notwithstanding the foregoing, payment
may be withheld in respect of any Option until any required consent of the
holder thereof to its cancellation as contemplated hereby is obtained. The
surrender of an Option to the Company shall be deemed a release of any and all
rights the holder had or any have had in such Option, other than the right to
receive the Option Consideration in respect thereof. Notwithstanding the
foregoing, Mergerco may, by
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separate agreements with holders of any Options, agree with such holders on
alternate treatment of such Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Mergerco as follows:
Section 3.1 Organization. Except as set forth in Section 3.1 of the
Company's disclosure schedule heretofore delivered to Mergerco (the "Disclosure
Schedule"), each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole. As used in this Agreement, the term "Subsidiary" shall mean all
corporations or other entities in which the Company or Mergerco, as the case may
be, owns a majority of the issued and outstanding capital stock or similar
interests. As used in this Agreement, any reference to any event, change or
effect being material or having a material adverse effect on or with respect to
any entity (or group or entities taken as a whole) means such event, change or
effect is materially adverse to the condition (financial or other), business,
assets or results of operations of such entity (or, if used with respect
thereto, of such group of entities taken as a whole). The Company and each of
its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction which the property owned, leased or operated by it
or the nature of the business conducted by it make such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. The Company does
not own any equity interest in any corporation or other entity other than the
Subsidiaries. Section 3.1 of the Company's Disclosure Schedule sets forth a
complete list of the Company's Subsidiaries.
Section 3.2 Capitalization. (a) The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock (the "Company Shares"), 2,000,000
shares of preferred stock, par value $10.00 per share (the "$10.00 Preferred')
and 69,790 shares of preferred stock, par value $8.00 per share (the "$8.00
Preferred", and together with the $10.00 Preferred, the `Preferred Stock"). As
of the date hereof, (i) 7,941,379 Shares are issued and outstanding, (ii) no
Shares are issued and held in the treasury of the Company, (iii) no shares of
Preferred Stock are issued or outstanding, (iv) 1,511,000 Shares are reserved
for issuance upon exercise of outstanding Options granted unde the Stock Option
Plans and (v) 150,000 Shares are reserved for issuance upon exercise of
outstanding warrants. Section 3.2 of the Company's Disclosure Schedule sets
forth the exercise price, grant date and expiration date for all outstanding
Options. All the outstanding Shares of the Company's capital stock are, and all
Shares
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which may be issued pursuant to the exercise of outstanding options will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in Section
3.2 of the Disclosure Schedule there are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) ("Voting Debt") of the Company or any of its Subsidiaries issued
and outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement, as of the date hereof, (i) there are no shares
of capital stock of the Company or any of its Subsidiaries authorized, issued or
outstanding, (ii) there are no existing options, warrants, calls, preemptive
rights, subscriptions or other rights, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of the
Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of its subsidiaries or securities convertible into or
exchangeable for such shares or equity interest, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment, and
(iii) there are no outstanding contractual obligations of the Company or any or
its Subsidiaries to repurchase, redeem or otherwise acquire any Shares, or any
capital stock of the Company, or any Subsidiary or affiliate of the Company or
to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
(a) All of the outstanding shares of capital stock of each of the
Subsidiaries of the Company are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, claims or encumbrances.
(b) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of its
Subsidiaries.
(c) None of the Company or its Subsidiaries is required to redeem
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement.
Section 3.3 Authorization; Validity of Agreement; Company Action. The
Company has full corporate power and authority to execute and deliver this
Agreement and, subject to shareholder approval, to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement, and the consummation by it of the transactions contemplated
hereby, have been duly authorized by its Board of Directors and, except for
obtaining the approval of its shareholders as contemplated by Section 1.5
hereof, no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and, assuming
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due and valid authorization, execution and delivery hereof by Mergerco, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except for the filing,
permits, authorizations, consents and approvals as may be required as set forth
in Section 3.4 of the Company's Disclosure Schedule, and other applicable
requirements of the Exchange Act, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), state securities or blue sky laws, and
the NCBCA, neither the execution, delivery or performance of this Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby nor compliance by the Company with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the Article of
Incorporation or the Bylaws of the Company or of any of its subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
payment, termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound (the "Agreements") or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its Subsidiaries or any of their properties or assets, excluding
from the foregoing clause (iii) such violations, breaches or defaults which
would not, individually or in the aggregate, have a material adverse effect on
the Company and its Subsidiaries, taken as a whole and which will not materially
impair the ability of the Company to consummate the transactions contemplated
hereby. Except as set forth in Section 3.4 of the Company's Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to or otherwise bound
by any contract or agreement (whether written or oral) providing for any
severance or other payment upon or following a change of control of the Company.
Section 3.4 of the Company's Disclosure Schedule describes in reasonable detail
the nature and amount of any such severance or other payments.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Mergerco true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1995 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder.
-10-
None of the Subsidiaries is required to file any forms, reports or other
documents with the SEC. The financial statements of the Company (the "1998
Financial Statements") included in the Company's annual Report on Form 10K for
the fiscal year ended February 1, 1998 (the "1998 10-K") have been prepared
from, and are in accordance with, the books and records of the Company and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position and the consolidated
results of operations and cash flows of the Company and its consolidated
Subsidiaries at the dates and for the periods covered thereby. The historical
financial information contained in the financial information attached as Section
3.5 of the Disclosure Schedule is, to the best of the knowledge of the Company,
true and correct in all material respects.
Section 3.6 Absence of Certain Changes. Except as disclosed in Section 3.6
of the Company's Disclosure Schedule, since February 1, 1998, the Company and
its Subsidiaries have conducted their respective businesses only in ordinary and
usual course and there has not occurred (i) any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries; or (iii) any change by the Company or any
of its Subsidiaries in accounting principles or methods, except insofar as may
be required by a change in GAAP.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Company SEC Documents and (b) for liabilities and obligations as set forth in
Section 3.7 of the Company Disclosure Schedule, since February 1, 1998, neither
the Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reasonably likely to have, a material adverse effect on the
Company and its Subsidiaries, taken as a whole or, subject to the foregoing
exceptions or for liabilities or obligations incurred in the ordinary course of
business and consistent with past practice, would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and its Subsidiaries
(including the notes thereto).
Section 3.8 Litigation. Except as set forth in Section 3.8 of the Company's
Disclosure Schedule, none of the Company, any of its Subsidiaries and any of
their respective properties, assets, businesses, franchises, or governmental
approvals, is subject to any pending, or, to the knowledge of the Company,
threatened, legal action, suit, arbitration or other legal or administrative
proceeding or outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen after due inquiry, in the future would have,
individually or in the aggregate, a material adverse effect on the Company and
its Subsidiaries, taken as a whole, or a material adverse effect on the ability
of the Company to consummate the transactions contemplated hereby.
-11-
Section 3.9 Employee Benefit Plans; ERISA.
(a) Section 3.9 of the Company's Disclosure Schedule sets forth a list
of all material employee benefit plans, arrangements, contracts or agreements
(including, but not limited to, employment agreements, severance agreements,
executive compensation arrangements, equity arrangements, incentive plans, bonus
plans, deferred compensation agreements, health, accident, vacation or other
fringe benefit plans) of any type (including but not limited to plans described
in section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained by the Company, any of its Subsidiaries or any
trade or business, whether or not incorporated (an "ERISA Affiliate"), which
together with the Company would be under "common control" within the meaning of
section 4001(a)(14) of ERISA ("Benefit Plans"). Neither the Company nor any
ERISA Affiliate has any formal plan or commitment, whether legally binding or
not, to create any additional Benefit Plan or modify or change any existing
Benefit Plan that would affect any employee or terminated employee of the
Company or any Subsidiary.
(b) With respect to each Benefit Plan: (i) if intended to qualify under
section 401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"), the
United States Internal Revenue Service (the "Service") has issued a favorable
letter of determination on such qualified status and on the exempt status under
section 501(a) of the Code and since such letter of determination no event has
occurred that would disqualify such plan; (ii) such plan has been administered
in all material respects in accordance with its terms and applicable law; (iii)
no breaches of fiduciary duty have occurred which might reasonably be expected
to give rise to material liability on the part of the Company; (iv) no disputes
are pending, or, to the knowledge of the Company, threatened that might
reasonably be expected to give rise to material liability on the part of the
Company; (v) no prohibited transaction (within the meaning of Section 406 of
ERISA) has occurred that might reasonably be expected to give rise to material
liability on the part of the Company; (vi) all contributions and premiums due as
of the date hereof (taking into account any extensions for such contributions
and premiums) have been made in full; and (vii) all reports required to be filed
with respect to such Benefit Plan have been properly, accurately and timely
filed.
(c) Neither the Company nor any ERISA Affiliate (a) has incurred, or
reasonably expects to incur, an accumulated funding deficiency, as defined in
the Code and ERISA or (b) has any material liability under Title IV of ERISA
with respect to any Benefit Plan that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan" (as
defined in section 3(l) of ERISA), no such plan provides medical or death
benefits with respect to current or former employees of the Company or any of
its Subsidiaries beyond their termination of employment, other than on an
employee-pay-all basis.
(e) Except as contemplated by Section 2.5, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any individual
to
-12-
severance pay or accelerate the time of payment or vesting, or increase the
amount, of compensation or benefits due to any individual, (ii) constitute or
result in a prohibited transaction under section 4975 of the Code or section 406
or 407 of ERISA or (iii) subject the Company, any of its Subsidiaries, any ERISA
Affiliate, any of the Benefit Plans, any related trust, any trustee or
administrator of any thereof, or any party dealing with the Benefit Plans or any
such trust to either a civil penalty assessed pursuant to section 409 or 502(i)
of ERISA or a tax imposed pursuant to section 4976 or 4980B of the Code.
(f) There is no arrangement under any Benefit Plan that would
result in the payment of any amount that by operation of section 280G or 162(m)
of the Code would not be deductible by the Company or any of the Subsidiaries.
(g) There are no unfunded obligations under any Benefit Plan except
to the extent of reserves therefor shown in the Company SEC Documents.
(h) No employees of the Company or any of its Subsidiaries who earn
annual compensation in 1998 in excess of $50,000 have threatened to terminate or
are reasonably expected to terminate, their employment prior to or after the
Effective Time.
(i) Neither the Company nor any ERISA Affiliate has at any time
within the preceding six years been obligated to contribute to any Benefit Plan
that is a "multiemployer plan," as such term is defined in section 3(37) of
ERISA.
(j) With respect to each Benefit Plan the Company has made
available to Mergerco or its representatives accurate and complete copies of all
plan texts, summary plan descriptions, summary of material modifications, trust
agreements and other related agreements including all amendments to the
foregoing; the most recent annual report, the most recent annual and periodic
accounting of plan assets; the most recent determination letter received from
the Service; and the most recent actuarial valuation, to the extent any of the
foregoing may be applicable to a particular Benefit Plan.
Section 3.10 Information in Proxy Statement. The information contained in
the Proxy Statement and the Schedule 13E-3, any amendment or supplement thereto
or any other documents filed with the SEC by the Company in connection with the
Merger, when filed with the SEC and, in case of the Proxy Statement, when mailed
to Company shareholders and at the time of the Special Meeting (except for
information supplied by Mergerco specifically for inclusion or incorporation by
reference therein, as to which no representation by the Company is made), will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 3.11 No Default; Compliance with Applicable Laws. The business of the
Company and each of its Subsidiaries is not being conducted in default or
-13-
violation of any term, condition or provision of (i) its respective Articles of
Incorporation or Bylaws, or (ii) any federal, state, local or foreign statute,
law, ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company or any of its Subsidiaries, excluding from the
foregoing clause (ii), defaults or violations which would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole. Except as disclosed in Section 3.11 of the
Company's Disclosure Schedule, as of the date of this Agreement, no claim or, to
the best knowledge of the Company, investigation or review by any Governmental
Entity or other entity with respect to the Company or any of its Subsidiaries is
pending or, to the best knowledge of the Company, threatened nor to the best
knowledge of the Company has any Governmental Entity or other entity indicated
an intention to assert or conduct the same, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen after due inquiry, in the
future will not, individually or in the aggregate have a material adverse effect
on the Company and its Subsidiaries, taken as a whole.
Section 3.12 License; Intellectual Property. Section 3.12 of the Company's
Disclosure Schedule sets forth a list of all registered and material
unregistered Intellectual Property (as defined below) owned by the Company and
used in the conduct of its business and all agreements granting any right to use
or practice any right relating to the Intellectual Property (as defined below)
currently used in the conduct of the Company's business (the "Licenses"). Except
as set forth in Section 3.12 of the Company's Disclosure Schedule, (i) the
Company or its Subsidiaries is the sold owner of all of Its rights under the
Licenses free and clear of any liens, claims, encumbrances or interests; (ii)
the Company or its Subsidiaries is the sole owner of, or has a valid right to
use pursuant to a License, all patents and patent applications; registered and
unregistered trademarks, service marks, trade names, trade dress, logos, company
names and other source or business identifiers, including all goodwill
associated therewith; the names, likenesses and other attributes of individuals;
registered and unregistered copyrights, computer programs and databases; trade
secrets, inventions, discoveries, proprietary technology, know-how, industrial
designs, customer lists and other confidential information ("Trade Secrets");
any pending applications for any of the foregoing (collectively, the
"Intellectual Property") currently used in the conduct of the Company's
business, free and clear of any liens, claims, encumbrances or interests; (iii)
to the Company's best knowledge the present or past operations of the Company or
the Subsidiaries does not infringe upon, violate, interfere or conflict with the
rights of others with respect to any Intellectual Property and no claim is
pending or, to the Company's best knowledge, threatened, to this effect; (iv)
none of the Intellectual Property currently used is invalid or unenforceable, or
has not been used or enforced or has failed to be used or enforced in a manner
that would result in the abandonment, cancellation or unenforceability of any of
the Intellectual Property and no claim is pending or, to the Company's best
knowledge, threatened, to this effect; (v) no License provision or any other
contract, agreement or understanding to which the Company or any Subsidiary is a
party would prevent the continued use by the Company or the Subsidiaries (as
currently used by the Company or its Subsidiaries) of any Intellectual Property
following the consummation of the transactions contemplated hereby; (vi) to the
Company's best knowledge, no person is infringing upon or otherwise violating
any Intellectual Property
-14-
or License; (vii) there are no claims pleading or, to the Company's best
knowledge, threatened in connection with any License; and (viii) to the
Company's best knowledge, no Trade Secret has been disclosed by the Company or
its Subsidiaries to any third party except subject to an appropriate
confidentiality agreement or as required by a governmental authority.
Section 3.13 Taxes. (a) Except as set forth in Section 3.13 of the
Company's Disclosure Schedule:
(i) the Company and its Subsidiaries have (w) duly filed (or there
have been filed on their behalf) with the Service all United States federal
income Tax Returns (as hereinafter defined) required to be filed by them on or
prior to the date hereof, such Tax Returns are true, correct and complete in all
material respects (or the financial statements contain an adequate charge,
accrual or restive for taxes in respect of such tax returns), and all Taxes (as
hereinafter defined) shown on such Tax Returns have been duly paid, (x) duly
filed (or there have been filed on their behalf) with the appropriate
governmental authorities all other Tax Returns required to be filed by them on
or prior to the date hereof, other than any filings which the failure to make in
a timely manner would not whether singly or in the aggregate, have a material
adverse effect on the Company and its Subsidiaries taken as a whole, such Tax
Returns are true, correct and complete in all material respects (or the
financial statements contain an adequate charge, accrual or reserve for taxes in
respect of such tax returns), and all Taxes shown on such Tax Returns and all
other Taxes due or claimed to be due, whether by proposed assessment or
otherwise, by any governmental authority have been duly paid, except for such
Taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided in accordance with GAAP and (y) duly made provision
in accordance with GAAP for all Taxes for all periods for which Tax Returns have
not yet been filed or with respect to which Taxes are not yet due;
(ii) there are no liens for Taxes upon any property or assets of
the Company or any Subsidiary thereof, except for liens for Taxes not yet due;
(iii) neither the Company nor any of its Subsidiaries has made any
change in accounting methods, there is no application pending with any taxing
authority requesting permission for any change in any accounting method of any
of the Company or its Subsidiaries and no taxing authority has proposed any
adjustment or change in accounting method, and neither the Company nor any of
its Subsidiaries has received a ruling from any taxing authority or signed an
agreement likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole;
(iv) the Company and its Subsidiaries have complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
-15-
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and the manner prescribed by law,
withheld from employee wages and other compensation and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws;
(v) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries and
neither the Company nor its Subsidiaries has received notice that such an audit
or proceedings may be commenced;
(vi) the Federal Income Tax Returns of or with respect to each of
the Company and its Subsidiaries have been examined by the Service (or the
applicable statutes of limitation for the assessment of Taxes for such periods
have expired) for all periods through and including January 31, 1994 (except for
the returns of American Studios, Inc., which have been examined through December
31, 1991), and no deficiencies were asserted as a result of such examinations
which have not been resolved and fully paid;
(vii) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment or collection of any Taxes or deficiencies against the Company or any
of its Subsidiaries, and no power of attorney granted by either the Company or
any of its Subsidiaries with respect to any Taxes is currently in force;
(viii) neither the Company nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any agreement providing for the
allocation or sharing of Taxes and neither the Company nor any of its
Subsidiaries has any liability for Taxes of any person or entity other than the
Company and its Subsidiaries;
(ix) neither the Company nor its Subsidiaries is a party to any
agreement, contract or agreement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code, and none of the actions contemplated or permitted
by this Agreement will result in any such payments;
(x) neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the applicable of Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code);
(xi) the deductibility of compensation by the Company and/or its
Subsidiaries will not be limited by Section 162(m) of the Code;
-16-
(xii) all transactions that could give rise to an understatement of
the federal income tax liability of the Company or any of its Subsidiaries
within the meaning of Section 6662(d) of the Code are adequately disclosed on
Tax Returns in accordance with Section 6662(d)(2)(B) of the Code if there is or
was no substantial authority for the treatment giving rise to such
understatement;
(xiii) no closing agreement that could affect the Taxes of the
Company or any of its Subsidiaries for periods ending after the Closing Date
pursuant to Section 7121 of the Code or any similar provision of any state,
local or foreign law has been entered into by or with respect to any of the
Company or its Subsidiaries;
(xiv) no currently effective Federal Income Tax elections have been
made or filed by or with respect to the Company or any of its Subsidiaries;
(xv) none of the assets of the Company or any of its Subsidiaries
are assets or property that are or will be required to be treated as being: (a)
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954 (as in effect immediately before the enactment of
the Tax Reform Act of 1986); (b) "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code; (c) property used predominantly outside the
United States within the meaning of Proposed Treasury Regulation Section
1.168-2(g)(5) or (d) "tax-exempt bond financed property" within the meaning of
Section 168(g)(5) of the Code; and
(xvi) all adjustments to Federal taxable income required to have
been reported to any state or local taxing authority have been so reported.
(b) The net operating loss and credit carryovers available to the
Company and its Subsidiaries are set forth in Section 3.13 of the Company's
Disclosure Schedule. Except as set forth in Section 3.13 of the Company's
Disclosure Schedule, as of the date of this Agreement, the net loss and credit
carryovers are not subject to limitations imposed by Sections 382, 383 or 384 of
the Code (or any predecessor thereto), the consolidated return regulations or
otherwise.
(c) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
estimated, excise, real or personal property, sales, withholding, social
security, occupation, use, service, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the Service or any
taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
-17-
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or Jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
Section 3.14 Insurance. As of the date hereof, the Company and each of
its Subsidiaries are insured by insurers of recognized financial responsibility
and solvency, against such losses and risks and in such amounts as are customary
in the businesses in which they are engaged. All material policies of insurance
and fidelity or surety bonds insuring the Company or any of its Subsidiaries or
their respective businesses, assets, employees, officers and directors have
previously been made available for inspection by Mergerco and are in full force
and effect. Section 3.14 of the Company's Disclosure Schedule describes all
self-insurance arrangements affecting the Company or any Subsidiary and the
aggregate amount of all claims made under such arrangements since January 1,
1994. As of the date hereof, there are no material claims by the Company or any
Subsidiary under any such policy or instrument as to which any insurance company
is denying liability or defending under a reservation of rights clause. To the
Company's best knowledge, all necessary notifications of claims have been made
to insurance carriers other than those which will not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
Section 3.15 Contracts. Each Agreement (as defined in Section 3.4) is
legally valid and binding against the Company or its Subsidiaries and, to the
Company's best knowledge, each other party thereto and in full force and effect,
except where failure to be legally valid and binding and in full force and
effect would not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and thee are no
material defaults thereunder by the Company or its Subsidiaries and, to the
Company's best knowledge, any other party thereto, except those defaults that
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole. The Company has previously made available for inspection by
Mergerco or its representatives all material Agreements. Each of the Agreements
set forth on section 3.15 of the Company's Disclosure Schedule (the "Material
Agreements") is legally valid and binding against the Company or its
Subsidiaries and, to the Company's best knowledge, each other party thereto and
in full force and effect, and there are no material defaults thereunder by the
Company or its Subsidiaries and, to the Company's best knowledge, any other
party thereto. The Company has delivered to Mergerco true and complete copies of
all Material Agreements. (a) No party to any of the Material Agreements within
the last twelve months has threatened to modify, cancel or otherwise terminate,
or to the Company's best knowledge, intends to modify, cancel or otherwise
terminate, any of the Material Agreements or the relationship evidence thereby
and (b) no such party has during the last twelve months materially limited or,
to the Company's best knowledge, intends to materially limit the services or
supplies provided by it to the Company or any of its Subsidiaries, or by the
Company or any of its Subsidiaries to it.
-18-
Section 3.16 Related Party Transactions. Except as set forth in Section
3.16 of the Company's Disclosure Schedule or in the Company SEC Reports, no
director, officer, partner, employee, "affiliate" or "associate" (as such terms
are defined in Rule 12b-2 under the Exchange Act) of the Company or any of its
Subsidiaries (i) has borrowed money from or has outstanding any indebtedness or
other similar obligations to the Company or any of its Subsidiaries; (ii) to the
best knowledge of the Company, owns any direct or indirect interest of any kind
in, or is a director, officer, employee, affiliate or associate of, or
consultant or lender to, or borrower from, or has the right to participate in
the management, operations or profits of, any person or entity which is (x) a
competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor
of the Company or any of its Subsidiaries, (y) engaged in a business related to
the business of the Company or any of its Subsidiaries or (z) participating in
any transaction to which the Company or any of its Subsidiaries is a party or
(iii) is otherwise a party to any contract, arrangement or understanding with
the Company or any of its Subsidiaries.
Section 3.17 Real Property.
(a) The Company is the owner of good, marketable and insurable fee
title to the parcels of land described in Section 3.17 of the Company's
Disclosure Schedule and to all of the buildings and other improvements located
thereon (collectively, the "Owned Real Property") free and clear of all Title
Defects (as hereinafter defined) except for the matters listed in Section 3.17
of the Company's Disclosure Schedule or encumbrances that do not, individually
or in the aggregate (i) interfere in any material respect with the use and
occupancy of the Owned Real Property as currently used and occupied or (ii)
materially reduce the fair market value of the Owned Real Property below the
fair market value the Owned Real Property would have had but for such
encumbrances. The Owned Real Property constitutes all of the real property owned
by the Company on the date hereof. As used in this Agreement, "Title Defects"
shall mean and include any mortgage, deed of trust, lien, pledge, security
interest, claim, lease, option, right of first refusal, easement, restrictive
covenant, encroachment or other survey defect, encumbrance or other restriction
or limitation whatsoever.
(b) The Company does not own or hold, and is not obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell or dispose of the Owned Real Property of any portion
thereof or any other real property, or interest therein.
(c) The Owned Real Property is in full compliance with all applicable
building, zoning, subdivision, environmental and other land use and similar
laws, codes, regulations and orders of governmental authorities, except where
the failure to be in such compliance will not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole.
(d) The Company has not received notice and has no knowledge of any
pending, threatened or contemplated condemnation proceeding
-19-
affecting the Owned Real Property or any part thereof or of any sale or other
disposition of the Owned Real Property or any part thereof in lieu of
condemnation.
Section 3.18 Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve the Merger, this
Agreement and the transactions contemplated thereby and hereby.
Section 3.19 Environmental Matters. Except as set forth on Section 3.19 of
the Company's Disclosure Schedule, the Company (a) is and has been for the past
five years in compliance in all material respects with all applicable Safety and
Environmental Laws; (b) there is no Environmental Claim pending, or, to the
knowledge of the Company, threatened, against the Company, and there is no
civil, criminal or administrative judgment, order or notice of violation extant
against the Company pursuant to Safety and Environmental Laws or principles of
common law relating to pollution, protection of the Environment or health and
safety; and (c) there are no past or present events, conditions, circumstances,
activities, practices, incidents, agreements, actions or plans which may prevent
material compliance by the Company with Environmental Laws, or which have given
rise to, or which are reasonably likely to give rise to, an Environmental Claim
or to Environmental Compliance Costs in which the liability to the Company is
reasonably likely to exceed $100,000. For purposes of this Section 3.19:
(a) "Environment" means navigable waters, waters of the contiguous
zone, ocean waters, natural resources, surface waters, ground water, drinking
water supply, land surface, subsurface strata, ambient air, both inside and
outside of buildings and structures, man-made buildings and structures, and
plant and animal life on earth;
(b) "Environment Claims" means any notification, whether direct or
indirect, formal or informal, written or oral, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or health and safety, that any of the current or past
operations of the Company or any of its Subsidiaries, or any by-product thereof,
or any of the property currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries, or the operations or property of any
predecessor of the Company or any of its Subsidiaries is or may be implicated in
or subject to any claim, order, demand, hearing, notice, lawsuit, agreement or
evaluation by any Governmental Entity or any other person;
(c) "Environmental Complaint Costs" means any expenditures, costs,
assessments or expenses (including any expenditures, costs, assessments or
expenses in connection with the conduct of any Remedial Action, as well as
reasonable fees, disbursements and expenses of attorneys, experts, personnel and
consultants), whether direct or indirect, necessary to cause the operations,
real property, assets, equipment or facilities owned, leased, operated or used
by the Company or any of its Subsidiaries to be in compliance with any and all
requirements, as in effect at the
-20-
Closing Date, of Safety and Environmental Laws, principles of common law
concerning pollution, protection of the Environment or health and safety, or
permits issued pursuant to Safety and Environmental Laws; provided, however,
that Environmental Compliance Costs do not include expenditures, costs,
assessments or expenses necessary in connection with normal maintenance of such
real property, assets, equipment or facilities or the replacement of equipment
in the normal course of events due to ordinary wear and tear;
(d) "Hazardous Substance" means any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or waste, industrial or petroleum-derived substance
or waste, radioactive substance or waste, or any constituent of any such
substance or waste, or any other substance regulated under or defined by any
Safety and Environmental Law;
(e) "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, discharge, dispersal, leaching or migration into or through
the indoor or outdoor Environment or into, through or out of any property,
including the movement of Hazardous Substances through or in the air, soil,
surface water, ground water or property;
(f) "Remedial Action" means all actions, whether voluntary or
involuntary, reasonably necessary to comply with, or discharge any obligation
under, Safety and Environmental Laws to (i) clean up, remove, treat, cover or in
any other way adjust Hazardous Substances in the indoor or outdoor Environment;
(ii) prevent or control the Release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or the
Environment; or (iii) perform remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring on, about or in any real
property;
(g) "Safety and Environmental Claim" means any claims based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of the Sellers contained in this Agreement or in any
Document delivered pursuant to this Agreement related to Safety and
Environmental Laws; and
(h) "Safety and Environmental Law" means all laws, statutes, codes,
ordinances, regulations or other requirements and orders, judgments, awards,
decrees or writs relating to pollution, protection of the Environment, public or
Worker health and safety, or the emission, discharge, release or threatened
release of Hazardous Substances into the Environment or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
Section 3.20 Year 2000. The Company has developed and implemented a program
to address, on a timely basis, the "Year 2000 Problem" (that is, the risk that
computer applications used by the Company may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999) and reasonably anticipates that it will, on a timely
basis, successfully
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resolve the Year 2000 Problem for all material computer applications used by the
Company.
Section 3.21 Fairness Opinion. The Company has received a fairness opinion
from Needham & Company in the form attached as Section 3.21 to the Disclosure
Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO
Mergerco represents and warrants to the Company as follows:
Section 4.1 Organization. Mergerco is a corporation duly organized, validly
existing and in good standing under the laws of North Carolina and has all
requisite corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority, and governmental
approvals would not have a material adverse effect on Mergerco. Mergerco is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing would
not, in the aggregate, have a material adverse effect on Mergerco.
Section 4.2 Capitalization. The authorized capital stock of Mergerco will,
immediately prior to the Effective Time, consist of (i) 10,000,000 shares of
Mergerco Common Stock, of which there will be 1,905,661 shares outstanding. All
outstanding shares of capital stock of Mergerco will at such time be duly
authorized and validly issued and fully paid and nonassessable. As soon as
practicable after the Effective Time, the Company shall issue to Jupiter
Partners II L.P. ("Jupiter"), and Jupiter shall purchase from the Company, for
cash consideration of $26.50 per share, a number of Shares of the Company equal
to (i) the amount, if any, of equity provided by Jupiter to Mergerco or the
Company pursuant to Section 4.7(a) in excess of $50,500,000, divided by (ii)
$26.50.
Section 4.3 Authorization; Validity of Agreement; Necessary Action.
Mergerco has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Mergerco, of this Agreement, and the consummation of
the Merger and of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Mergerco and by the sole stockholder of Mergerco
and no other corporate action on the part of Mergerco is necessary to authorize
the execution and delivery by Mergerco of this Agreement and the consummation of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Mergerco, as the case may be, and, assuming due and valid
authorization, execution and delivery hereof by the
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Company, is a valid and binding obligation of Mergerco, as the case may be,
enforceable against it in accordance with its terms.
Section 4.4 Consents and Approvals; No Violation. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, state
securities or blue sky laws and the NCBCA, neither the execution, delivery or
performance of this Agreement by Mergerco not the consummation by Mergerco of
the transactions contemplated hereby nor compliance by Mergerco with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the articles of corporation or by-laws of Mergerco, (ii) require
any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Mergerco is a
party or by which it or any of its properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Mergerco or any of its properties or assets, excluding from the
foregoing clause (iii) such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on Mergerco and
will not materially impair the ability of Mergerco to consummate the
transactions contemplated hereby.
Section 4.5 Information in Proxy Statement. None of the information
supplied by Mergerco specifically for inclusion or incorporation by reference in
the Proxy Statement will, at the date mailed to shareholders and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
Section 4.6 Litigation. Mergerco is not subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen after
due inquiry, would have a material adverse effect on the ability of Mergerco to
consummate the transactions contemplated hereby.
Section 4.7 Financing Commitment. (a) Jupiter will provide to Mergerco not
less than $50.5 million and not more than $54.3 million (including the amount to
purchase additional Shares pursuant to Section 4.2 herein) in equity to
consummate the Merger, pay the Cash Merger Consideration and pay the related
transaction expenses.
(b) Jupiter has entered into commitment letters (the "Commitment
Letters") for $127 million in senior debt financing and for $100 million of
senior subordinated debt financing (collectively, the "Financing"). Such
Financing, together with the amount referred to in paragraph (a) above, is
adequate to pay in full in cash at closing the Cash Merger Consideration,
together with all fees and expenses of Mergerco associated with the transactions
contemplated hereby, and to make any other
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payments necessary to consummate the transactions contemplated hereby, including
refinancing any debt required to be refinanced. True and correct copies of the
Commitment Letters have been furnished to the Company. Neither Mergerco, Jupiter
nor their affiliates will terminate, amend or modify in any respect the
Commitment Letters or in a manner which will adversely affect the probability
that such financing will be actually funded, or the timing thereof, without the
prior written consent of the Company. Jupiter has fully paid any and all
commitment fees or other fees required by such Commitment Letters to be paid as
of the date hereof (and will duly pay any such fees due after the date hereof).
The Commitment Letters are valid and in full force and effect and no event has
occurred which (with or without notice, lapse of time or both) would constitute
a default on the part of Jupiter or Mergerco thereunder.
Section 4.8 Fraudulent Conveyance. Assuming the accuracy of the
representations and warranties of the Company in this Agreement, Mergerco has no
reason to believe that the financing to be provided to effect the Merger will
cause (i) the fair salable value of the Surviving Corporation's assets to be
less than the total amount of its existing liabilities, (ii) the fair salable
value of the assets of the Surviving Corporation to be less than the amount that
will be required to pay its probable liabilities on its existing debts as they
mature, (iii) the Surviving Corporation not to be able to pay its existing debts
as they mature or (iv) the Surviving Corporation to have an unreasonably small
capital with which to engage in its business.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement, (ii) as get
forth in Section 5.1 of the Company's Disclosure Schedule or (iii) as agreed in
writing by Mergerco, aft6r the date hereof, and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its Subsidiaries shall use its commercially reasonable
best efforts to preserve its business organization intact and maintain its
existing relations with material customers and suppliers, key employees,
material creditors and business partners (including, without limitation, those
party to the Material Agreements);
(b) the Company will not, directly or indirectly, (i) sell, transfer or
pledge or agree to sell, transfer or pledge any of the Shares, Preferred Stock,
or capital stock of it or of any of its Subsidiaries beneficially owned by it;
(ii) amend its Articles of Incorporation or Bylaws or similar organizational
documents; or (iii) split, combine or reclassify the outstanding Shares or
Preferred Stock, or any outstanding capital stock of any of the Subsidiaries of
the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) declare,
set aside or pay any dividend or other distribution payable in cash, stock or
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property with respect to its capital stock; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire any shares of, capital stock of any class of the Company or its
Subsidiaries, other than shares reserved for issuance or the date hereof
pursuant to the exercise of Options outstanding on the date hereof, (iii)
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any
material assets other than in the ordinary and usual course of business and
consistent with past practice, or incur or modify any material indebtedness or
other liability; or (iv) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the Company or
any of its Subsidiaries to any of its executive officers or key employees; (ii)
(A) adopt any new, or (B) amend or otherwise increase, or accelerate the payment
or vesting of the amounts payable or to become payable under any existing,
bonus, incentive compensation, deferred compensation, severance, profit sharing,
stock option, stock purchase, insurance, pension, retirement or other employee
benefit plan agreement or arrangement or (iii) enter into any employment or
severance agreement with or, except in accordance with the existing written
policies of the Company, grant any severance or termination. pay to, any
officer, director or employee of the Company or any its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall modify, amend
or terminate any of its material Agreements or waive, release or assign any
material rights or cairns thereunder;
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be canceled or terminated without notice to Mergerco, and the Company shall use
its reasonable commercial best efforts to maintain all such policies;
(g) neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any long-term debt or any short-term indebtedness other than normal
borrowings under the Company's existing revolving credit facility; (ii) 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 and consistent with past practice; (iii) 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
expense advances to employees in accordance with past practice); or (iv) enter
into any material commitment or transaction (including, but not limited to, any
material borrowing, capital expenditure or purchase, sale or lease of assets or
real estate);
(h) neither the Company nor any of its Subsidiaries shall change any of
the accounting methods used by it unless required by GAAP;
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(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company and its consolidated
Subsidiaries or those incurred in the ordinary course of business subsequent to
the date of such financial statements;
(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or agree
to commit to take, any action that would make any representation or warranty of
the Company contained herein, in the case of any representation or warranty not
qualified by materiality, materially inaccurate or; in the case of any other
representation or warranty, inaccurate in any respect at, or as of any time
prior to, the Effective Time in each case without regard to any knowledge
qualification; and
(l) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access; Confidentiality. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Mergerco, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Mergerco (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws, (b)
all interim management reports, financial statements or similar documents or
information prepared by the Company, and (c) all other information concerning
its business, properties and personnel as Mergerco may reasonably request.
Unless otherwise required by law and until the Effective Time, Mergerco will
hold and will cause any Representative, as defined in the Confidentiality
Agreement, dated April 18, 1997 between the Company and Mergerco to hold any
such information which is nonpublic in confidence pursuant to the terms of such
Confidentiality Agreement.
Section 5.3 Consents and Approvals. (a) Each of the Company and Mergerco
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information (except that Mergerco shall
have no obligation to share any
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information filed by it under the HSR Act with the Company other than
information relating to its businesses in industries within the same SIC codes
as the Company) to each other in connection with any such requirements imposed
upon any of them or any of their Subsidiaries in connection with this Agreement
and the transactions contemplated hereby. Each of the Company and Mergerco will,
and will cause its Subsidiaries to, take all reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Mergerco, the Company or any of their Subsidiaries in connection with the Merger
or the taking of any action contemplated thereby or by this Agreement.
(b) The Company and Mergerco shall take all reasonable actions
necessary to file a soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission Antitrust Division of the Department of Justice for additional
information or documentation and to respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
Governmental Entity in connection with antitrust matters.
Section 5.4 No Solicitation. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents, including,
but not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Mergerco,
any of its affiliates or representatives) concerning any merger, tender offer,
exchange offer, sale of assets, sale of shares of capital stock or debt
securities or similar transactions involving the Company or any Subsidiary,
division or operating or principal business unit of the Company (an "Acquisition
Proposal"). The Company will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Notwithstanding the foregoing, the Company may furnish
information concerning its business, properties or assets to any corporation,
partnership, person or other entity or group pursuant to appropriate
confidentiality agreements, and may negotiate and participate in discussions and
negotiations with such entity or group concerning an Acquisition Proposal (x) if
such entity or group has on an unsolicited basis submitted a bona fide written
proposal to the Board of Directors of the Company relating to any such
transaction which the Board of Directors determines (based upon the advice of
independent investment bankers for the Company) represents a superior
transaction to the Merger for the shareholders of the Company, and (y) if the
Board of Directors of the Company determines, only after receipt of advice from
independent legal counsel to the Company and firm, that the failure to provide
such information or access or to engage in such discussions or negotiations
would cause the Board of Directors to violate its fiduciary duties to the
Company's shareholders under applicable law. The Company shall immediately (in
any event within 24 hours) communicate to Mergerco the terms of any proposal,
discussion, negotiation or inquiry (and will disclose any written materials
received by the Company in connection
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with such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
Section 5.5 Brokers or Finders. The Company represents, as to itself, its
Subsidiaries and its affiliates, that, except as set forth in Section 5.5 of the
Company's Disclosure Schedule, no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement and the Company agrees to
indemnify and hold Mergerco harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged to
have been made by the Company or its affiliates. The expenses of the Company in
connection with the transactions contemplated by this Agreement, including the
fees and expenses of attorneys, accountants, investment bankers, financial
advisors or similar agents or reasonable estimates thereof, are set forth in
Section 5.5 of the Company's Disclosure Schedule.
Section 5.6 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement the
proper officers and directors of Mergerco shall use all reasonable efforts to
take, or cause to be taken, all such necessary actions.
Section 5.7 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to
Mergerco and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Mergerco nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange or trading
market.
Section 5.8 Notification of Certain Matters. The Company shall give prompt
notice to Mergerco and Mergerco shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Company, or Mergerco, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.8 shall not otherwise affect the
remedies available hereunder to the party receiving such notice.
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Section 5.9 Directors' and Officers' Insurance and Indemnification. (a)
After the Effective Time the Surviving Corporation (or any successor to the
Surviving Corporation) shall indemnify, defend and hold harmless the present and
former officers and directors' of the Company and its Subsidiaries (each an
"Indemnified Party") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel and judgments,
fines, losses, claims, liabilities and amounts paid in settlement (provided that
any such settlement is effected with the written consent of the Surviving
Corporation, such consent not to be unreasonably withheld)) arising out of
actions or omissions occurring at or prior to the Effective Time to the full
extent permitted under North Carolina law, such right to include advancement of
expenses incurred in the defense of any action or suit; provided that any
determination required to be made with respect to whether such Indemnified Party
is entitled to indemnity hereunder (including without limitation whether, with
respect to the indemnification of such Indemnified Party by the Surviving
Corporation, an Indemnified Party's conduct complies with the standards set
forth under the NCBCA), shall be made at the Surviving Corporation's expense by
independent counsel mutually acceptable to the Surviving Corporation and the
Indemnified Party; provided further, that nothing herein shall impair any rights
or obligations of any present or former directors or officers of the Company.
(b) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance covering claims arising from facts
or events which occurred before the Effective Time ("D&O Insurance"), for a
period of not less than six years after the Effective Date; provided, that the
Surviving Corporation may substitute therefor policies of substantially similar
coverage and amounts containing terms no less favorable to such former directors
or officers; provided, further, if the existing D&O Insurance expires, is
terminated or canceled during such period, the Surviving Corporation will obtain
substantially similar D&O Insurance; provided further, however, that in no event
shall the Surviving Corporation be required to pay aggregate annual premiums for
insurance under this Section in excess of 150% of the aggregate annual premiums
paid by the Company in 1998 on an annualized basis for such purpose and, in the
event that the annual premium for insurance required to be obtained hereunder
shall exceed such amount, the Surviving Corporation shall maintain as much of
such insurance as may be maintained for such amount.
(c) To the extent permitted by applicable law, the articles of
incorporation and the bylaws of the Surviving Corporation for so long as it
continues to exist shall contain the provisions with respect to advancement of
expenses, indemnification and exculpation from liability set forth in the
Articles of Incorporation and Bylaws of the Company on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to the
Effective Time were directors or officers of the Company, unless such
modification is required by law.
(d) In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity in such
consolidation or
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merger or (ii) transfers all or substantially all its properties and assets to
any person, then, and in each case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation honor the indemnification
obligations set forth in this Section 5.9. The Surviving Corporation shall honor
the indemnification provisions of Section 5.9 of the Agreement and Plan of
Merger dated December 17, 1996, as amended, by and among the Company, ASI
Acquisition Corp. and American Studios, Inc.
(e) The obligations of the Surviving Corporation under this Section
5.9 shall not be terminated, modified or assigned in such a manner as to
adversely affect any director or officer to whom this Section 5.9 applies
without the consent of such affected director or officer (it being expressly
agreed that the directors and officers to whom this Section 5.9 applies shall be
third-party beneficiaries of this Section 5.9).
Section 5.10 Tax Return Filing and Tax Election. The Company shall, and the
Company shall cause each Subsidiary to, prepare, in a manner consistent with
past practices, and timely file all Tax Returns required to be filed by the
Company and each Subsidiary the due date of which occurs on or before the
Closing Date and pay all Taxes due with respect to any such Tax Returns. The
Company shall, and the Company shall cause each Subsidiary to, deliver drafts of
such Tax Returns to Mergerco for its review no later than 10 business days prior
to the date, including extensions, on which such Tax Returns are required to be
filed and neither the Company nor any Subsidiary shall unreasonably fail to make
any changes to such Tax Returns as Mergerco may request sufficiently in advance
of the due date of such Tax Return to permit the making of such change. Except
upon the prior written consent of Mergerco, the Company shall not, and the
Company shall not permit any Subsidiary to, make any Tax elections on or prior
to the Closing Date.
Section 5.11 Cooperation. After the date hereof and prior to the effective
Time, the Company shall, and shall cause its management to, cooperate with
Jupiter in connection with Jupiter's arranging the financing for the Merger,
including (a) providing to Jupiter's financing sources all information
reasonably requested by them to complete syndications of their loans, (b)
assisting such financing sources upon their reasonable request in the
preparation of information memoranda to be used in connection with such
syndications and (c) otherwise assisting such financing sources in their
syndication efforts, including by making reasonably available officers of the
Company and its subsidiaries, as appropriate, at meetings of prospective lenders
in various locations. In the event that the Merger is not consummated and
Mergerco is not entitled to reimbursement pursuant to Section 8.1 for its Fees
and Expenses, Mergerco shall bear the out-of-pocket costs the Company incurred
as a result of the cooperation required under this Section 5.11.
Section 5.12 Financing. Mergerco shall use commercially reasonable efforts
to consummate the Financing or alternative financing on terms similar to the
Financing and no more onerous than the terms of the Financing ("Alternative
Financing").
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Section 5.13 NASDAQ Listing. Mergerco will not take any action, for at
least three years after the Effective Time of the Merger, to cause the Common
Stock to be de-listed from the NASDAQ; provided, however, that Mergerco may
cause or permit the Common Stock to be de-listed in connection with any
transaction (including the Merger) which results in the termination of
registration of such securities under Section 12 of the Exchange Act, and
provided, further, that nothing in this Section 5.13 shall require the Company
to take any affirmative action to prevent the Common Stock from being de-listed
by NASDAQ if the Common Stock ceases to meet the applicable listing standards.
Section 5.14 Fees. The Company shall take reasonable actions to insure that
all legal, investment banking, accounting, advisory, consulting, and other third
party professional, printing and SEC fees and expenses incurred, paid or accrued
by the Company and its Subsidiaries in connection with the negotiation,
execution and delivery of this Agreement and the other documents contemplated
hereby and the special Meeting shall be reasonable and customary for such a
Merger and the contemplated transactions under this Agreement.
Section 5.15 Consummation of the Merger. The Company shall use its
commercially reasonable efforts to consummate the Merger and the other
transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger
Transaction. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, or Mergerco, as the case may be, to the extent permitted by
applicable law:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the holders of the Shares.
(b) Statutes; Consents. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any government or any governmental
agency or authority of competent jurisdiction which prohibits the consummation
of the Merger and all governmental consents, orders and approvals required for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a court or
other governmental authority of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger; and
(d) HSR Approval. The applicable waiting period under the HSR Act shall
have expired or been terminated.
-31-
Section 6.2 Conditions to Mergerco's Obligation to Effect the Merger. The
obligation of Mergerco to effect the Merger shall be subject to the satisfaction
on or prior to the Closing Date of each of the following conditions, any and all
of which may be waived in whole or in part by Mergerco to the extent permitted
by applicable law:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement (other than in Section 3.2 and
considered without regard to any materiality or material adverse effect
qualification) shall be true and correct in all respects in each case when made
and on the Closing Date as though made on and as of the Closing Date except at
either time to the extent that the failure of such representations and
warranties to be true and correct would not have or be reasonably likely to have
a material adverse effect on the Company and its Subsidiaries taken as a whole
or on the consummation of the transactions contemplated hereby or the Company's
ability to perform its obligations hereunder in a timely manner. The
representations and warranties of the Company set forth in Section 3.2 shall be
true and correct in all material respects on and as of the date made and as of
the Closing Date. The Company shall have delivered to Mergerco a certificate,
dated the Closing Date and signed by the Chief Executive Officer or Chief
Operating Officer of the Company, to the foregoing effects.
(b) Covenants. The Company shall have performed or complied in all
material respects with all obligations, agreements or covenants required by this
Agreement to be performed or complied with by it. The Company shall have
delivered to Mergerco a certificate, dated the Closing Date and signed by the
Chief Executive Officer or Chief Operating Officer of the Company. to the
foregoing effect.
(c) No Material Adverse Change. Since the date of this Agreement, there
shall have been no material adverse change in the business, assets, operations
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole. The Company shall have delivered to Mergerco a certificate, dated
the Closing Date and signed by the Chief Executive Officer or Chief Financial
Officer of the Company, to the foregoing effect.
(d) Litigation. There shall have been no action taken, or statute,
rule, regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Merger by any Governmental Entity
which directly or indirectly (i) prohibits; or imposes any material limitations
on, the Company's ownership or operation (or that of its Subsidiaries or
affiliates) of all or a material portion of their businesses or Assets, or
compels the Company to dispose of or hold separate any material portion of the
business or assets of the Company and its Subsidiaries, in each case taken as a
whole, (ii) prohibits or makes illegal the consummation of the Merger or the
other transactions contemplated by this Agreement, or (iii) otherwise materially
adversely affects the business, assets, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole; provided that
Mergerco shall have used all reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted.
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(e) Financing. All conditions to the availability of the Financing
contemplated by the Commitment Letters shall have been met and such Financing
shall be available or Alternative Financing shall be available.
(f) Consent. All consents and waivers from third parties necessary in
connection with the consummation of the Merger shall have been obtained, except
to the extent that the failure to obtain such consents and waivers would not,
individually or in the aggregate, have a materially adverse effect to the
Company as a whole or a material adverse effect on the consummation of the
transactions contemplated hereby.
(g) Code Section 1445 Statement. The Company shall have furnished
Mergerco with a statement meeting the requirements of Treasury Regulation
Section 1.1445-2(c)(3).
(h) Option Consents. The Company shall have caused the cancellation of
all Options as contemplated by Section 2.5 hereof other than Options which
Mergerco and the holders thereof agree will remain outstanding and other than
Options covering not mote than 10,000 Shares.
(i) Dissenting Shares. The number of Dissenting Shares shall constitute
no greater than 10% of the total number of Shares outstanding immediately prior
to the Effective Time.
Section 6.3 Conditions to the Company's Obligation to Effect the Merger.
The obligation of the company to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, to the extent permitted by applicable law:
(a) Representations and Warranties. The representations and warranties
of Mergerco set forth in this Agreement that are qualified as to materiality
shall be true, and the representations and warranties of Mergerco set forth in
this Agreement that are not so qualified shall be true in all material respects,
in either case when made and immediately prior to the Closing Date as though
made on or as of the Closing Date, and in each case without giving effect to any
knowledge qualifiers contained therein. Mergerco shall have delivered to the
Company a certificate, dated the Closing Date and signed by the Chief Executive
Officer or Chief Operating Officer of Mergerco, to the foregoing effect.
(b) Covenants. Mergerco shall have performed or complied with all
obligations, agreements or covenant required by this Agreement to be performed
or complied with by it. Mergerco shall have delivered to the Company a
certificate, dated the Closing Date and signed by the Chief Executive Officer or
Chief Financial Officer of Mergerco, to the foregoing effect.
(c) Litigation. There shall have been no action taken, or statute,
rule, regulation, judgment, order or injunction promulgated, entered, enforced,
- 33 -
enacted, issued or deemed applicable to the Merger by any Governmental Entity
which directly or indirectly prohibits or makes illegal the consummation of the
Merger or the other transactions contemplated by this Agreement; provided that
the Company shall have used all reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of Mergerco and the
Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Mergerco:
(i) if the Merger shall not have been consummated before October 31,
1998 (the "Termination Date"); provided, that a party that has willfully
and materially breached a representation, warranty or covenant set forth in
this Agreement shall not be entitled to exercise its right to terminate
under this Section 7.1(b)(i);
(ii) if, upon a vote at a duly held meeting of the shareholders of the
Company or any adjournment thereof, the shareholders of the Company shall
not approve the Merger or this Agreement; or
(iii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the Effective Time, the Board of Directors of the
Company shall have (A) withdrawn, or modified or changed in a manner
adverse to Mergerco its approval or recommendation of this Agreement or the
Merger in order to permit the Company to execute an agreement in principle
or a definitive agreement providing for the acquisition of the Company by
merger, consolidation or otherwise, on terms (including the per share
consideration) determined by the Board of Directors of the Company (based
upon the advice of independent investment bankers for the Company), to be
superior for the shareholders of the Company as compared to the terms of
the acquisition
- 34 -
of the Company contemplated by this Agreement, and (B) determined, only
after receipt of advice from independent legal counsel to the Company, that
the failure to take such action as set forth in the preceding clause (A)
could cause the Board of Directors to violate its fiduciary duties to the
Company's shareholders under applicable law; or
(ii) if, prior to the Effective Time, Mergerco breaches or fails in
any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its representations
and warranties in any material respect, or if any representation or
warranty of Mergerco set forth in this Agreement shall have become untrue
such that any of the conditions set forth in Section 6.1 or Section 6.3 is
reasonably likely to be incapable of being satisfied by the Termination
Date (as such date may otherwise be extended by agreement of the parties);
provided, however, that the Board of Directors of the Company may terminate
this Agreement under this Section 7.1(c)(ii) only if such breach, failure
of compliance or untruth, if it is capable of being cured, continues
uncured for a period of ten (10) days after receipt by Mergerco of notice
thereof from the Company.
(d) By the Board of Directors of Mergerco:
(i) if prior to the Effective Time, the Board of Directors of the
Company shall have withdrawn, failed to reaffirm or modified or changed in
a manner adverse to Mergerco its approval or recommendation of this
Agreement or the Merger or shall have recommended an Acquisition Proposal
or offer, or shall have executed an agreement in principle (or similar
agreement) or definitive agreement providing for a tender offer or exchange
offer for any shares of capital stock of the Company, or a merger,
consolidation or other business combination with a person or entity other
than Mergerco or its affiliates (or the Board of Directors of the Company
resolves to do any of the foregoing); or
(ii) if, prior to the Effective Time, the Company breaches or fails to
perform or comply with any of its covenants and agreements contained herein
or breaches any of its representations or warranties contained herein, or
if any representation or warranty of the Company shall have become untrue
such that any of the conditions set forth in Section 6.1 and Section 6.2 is
reasonably likely to be incapable of being satisfied by the Termination
Date (as such date may otherwise be extended by the agreement of the
parties); provided, however, that the Board of Directors of Mergerco, may
terminate this Agreement under this Section 7.1(d)(ii) only if the breach,
failure of compliance or untruth referred to herein would have or would be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries taken as a whole or on the consummation of the transactions
contemplated hereby or the Company's ability to perform its obligations
hereunder in a timely manner and, if such breach, failure of compliance or
untruth is capable of being cured, the same continues uncured for a period
of ten (10) days after receipt by the Company of notice thereof from
Mergerco.
- 35 -
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given to the other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement, except for the last sentence of Section
5.2 hereof shall forthwith become null and void, and there shall be no liability
on the part of Mergerco or the Company except (A) for fraud and (B) as set forth
in this Section 7.2 and Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as otherwise contemplated by this
Agreement, including Section 8.1(b) hereof, all costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) If (v) the Board of Directors of the Company shall terminate this
Agreement pursuant to Section 7.1(c)(i) hereof, (w) the Board of Directors of
Mergerco shall terminate this Agreement pursuant to Section 7.1(d)(i) hereof,
(x) the Board of Directors of Mergerco shall terminate this Agreement pursuant
to Section 7.1(b)(i) hereof and the Company has breached the covenant set forth
in Section 5.15, or (y) this Agreement shall be terminated pursuant to Section
7.1(b)(i) or Section 7.l(b)(ii) hereof and, in the case of this subclause (y)
only, at the time of such termination an Acquisition Proposal or an intention to
make an Acquisition Proposal (whether or not such Acquisition Proposal has been
made subject to certain contingencies) shall have been made to the Company
(whether or not it is pending at the time of such termination) or shall have
been publicly announced by any person and, if, in the case of this subclause (y)
only, within one year of such termination, the Company or any of its
Subsidiaries enters into an agreement relating to an Acquisition Proposal, the
Company shall pay to or at the direction of Mergerco (not later than two
business days after termination of this Agreement or the execution of the
agreement referred to in subclause (y) in the case of subclause (y) above) an
amount equal to $6,000,000 and shall promptly assume and pay, or reimburse
Mergerco for, all reasonable out-of-pocket fees and expenses (collectively "Fees
and Expenses") incurred, or to be incurred, by Mergerco and its affiliates
(including the fees and expenses of legal counsel, accountants, financial
advisors, other consultants, financial printers and financing sources) in
connection with the Merger and the consummation of the transactions contemplated
by this Agreement. In the event of any breach or failure set forth in subclause
(x) above, such $6,000,000 amount shall be paid by the Company to Mergerco as
liquidated damages and not as a penalty. In any such event recovery of such
liquidated damages shall be the sole right of Mergerco and payment of such
amount shall be the sole liability of the Company. Such amount is being fixed as
liquidated damages in any such event by reason of the fact that the actual
damages to be suffered by Mergerco are by their nature uncertain and
unascertainable with exactness. In any such event, Mergerco shall not seek any
money or other judgment against the Company, or any officer, director or
shareholder of the Company or against the assets of the Company, and the sole
recourse of Mergerco shall be to recover liquidated damages in the foregoing
amount.
- 36 -
(c) If this Agreement is terminated pursuant to Section 7.1(d)(ii) or
terminated by the Company at a time after Mergerco has given notice to the
Company that Mergerco is (or with notice or lapse of time or both, would be)
entitled to terminate this Agreement under Section 7.1(d)(ii), the Company shall
promptly assume and pay, or reimburse Mergerco for, all Fees and Expenses.
(d) If this Agreement is terminated pursuant to Section 7.1(b)(i) or
Section 7.1(b)(ii) and, at the time of such termination, any person or group of
persons (the "Acquiror") has acquired beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of more than 20% (other than for investment
purposes only) (or, in the case of Centennial Partners L.P., 35 %) in the
aggregate of the outstanding Common Stock of the Company and if, within one year
of such termination, the Company or any of its Subsidiaries enters into an
agreement relating to an Acquisition Proposal, then the Company shall pay to or
at the direction of Mergerco (not later than two business days after the
execution of such agreement), an amount equal to $6,000,000.
Section 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective boards of directors at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this Agreement by the shareholders of the Company, no such
amendment, modification or supplement shall reduce the amount or change the form
of the Merger consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pur to this Agreement shall survive the Effective
Time unless otherwise specified therein.
Section 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as Federal
Express, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Mergerco or Jupiter, to:
Jupiter Partners II L.P.
30 Rockefeller Plaza, Suite 4525
New York, New York 10112
Attention: Mr. John A. Sprague
Telephone No.; (212) 332-2800
Fax No.: (212) 332-2828
and
- 37 -
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Richard S. Borisoff, Esq.
Telephone No.: (212) 373-3000
Fax No.: (212) 757-3990
(b) if to the Company, to:
PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, NC 28105
Attention: John Grosso
Telephone No.: (704) 847-8011
Fax No.: (704) 847-1548
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Telephone No.: (212) 756-2000
Fax No.: (212) 593-5955
Section 8.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "affiliate(s)" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as provided in Section 5.9 is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.8 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be
- 38 -
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
Section 8.9 Governing Law. Except to the extent that the laws of the State
of North Carolina are mandatorily applicable, this Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Mergerco may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
of its affiliates. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
- 39 -
IN WITNESS WHEREOF, Mergerco and the Company have caused this Agreement to
be signed by their respective officers thereunto duty authorized as of the date
first written above.
JUPITER ACQUISITION CORP.
By: /s/ John A. Sprague
-----------------------------------------------
Name: John A. Sprague
Title: President
PCA INTERNATIONAL, INC.
By: /s/ Joseph H. Reich
-----------------------------------------------
Name: Joseph H. Reich
Title: Chairman of the Board
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North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
PCA INTERNATIONAL, INC.
the original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal at the City of Raleigh, this
19th day of April, 2002.
/s/ Elaine F. Marshall
-----------------------------------------------------
Secretary of State
ARTICLES OF AMENDMENT
OF
PCA INTERNATIONAL, INC.
The undersigned corporation hereby submits these Articles of Amendment for
the purpose of amending its articles of incorporation to fix the preferences,
limitations, and relative rights of a series of its shares:
1. The name of the corporation is PCA International, Inc.
2. The following amendment to the articles of incorporation of the corporation
was duly adopted by the board of directors of the corporation on the 30th day of
April, 1999, without shareholder approval, which was not required because the
Articles of Incorporation authorized the Board of Directors to adopt this
amendment:
Two Articles of Incorporation are hereby amended by adding to the end of
Article IV, Section B thereof, the following paragraphs:
1. Designation and Number of Shares. There shall be hereby established a
series of Preferred Stock, par value $10 per share, designated as "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock"). The authorized
number of shares of Series A Preferred Stock shall be 15,000.
2. Rank. The Series A Preferred Stock shall, with respect to distributions
of assets and rights upon the occurrence of an Extraordinary Event (as
hereinafter defined) rank senior to (a) all classes of common stock of the
Corporation (including, without limitation, the common stock, par value $.20 per
share, of the Corporation) (the "Common Stock") and (b) each other class or
series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series A Preferred Stock (the
"Junior Stock").
3. Dividends. Beginning on the date of issuance of the Series A Preferred
Stock, if the Board of Directors of the Corporation shall declare a dividend or
make any other distribution (including, without limitation, in cash or other
property or assets), to holders of shares of Common Stock, then the holders of
each share of Series A Preferred Stock shall be entitled to receive, out of
funds legally available therefor, a dividend or distribution in an amount equal
to the amount of such dividend or distribution received by a holder of the
number of shares of Common Stock for which such share of Series A Preferred
Stock is convertible on the record date for such dividend or distribution. Any
such amount shall be paid to the holders of shares of Series A Preferred Stock
at the same time such dividend or distribution is paid to holders of Comon
Stock.
4. Liquidation Preference.
(a) For the purposes of this Section 4, an Extraordinary Event shall mean
(i) the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation (a "Liquidation"), (ii) the voluntary sale, conveyance, exchange or
transfer to
another Person of all or substantially all of the assets of the Corporation (a
"Sale of Assets"), and (iii)(x) the merger or consolidation of the Corporation
with one or more other Persons or (y) the merger or consolidation of one or more
Persons into or with the Corporation, if, in the case of (x) or (y), the
stockholders of the Corporation prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person (a
"Merger").
(b) In the event of any Extraordinary Event, the holders of shares of
Series A Preferred Stock then outstanding shall be entitled to be paid for each
share of Series A Preferred Stock held thereby, out of the assets of the
Corporation available for distribution to its stockholders, before any payment
shall be made or any assets distributed to the holders of any shares of Junior
Stock, an amount (the "Liquidation Amount") that shall be the sum of (i) the
greater of (x) $1,000.00 per share or (y) the fair market value of the Common
Stock for which such share is convertible on the date fixed for the
Extraordinary Event (the "Liquidation Preference") and (ii) all declared and
unpaid dividends thereon to the date fixed for the Extraordinary Event. If the
assets of the Corporation are not sufficient to pay in full the foregoing
Liquidation Amount to the holders of outstanding shares of the Series A
Preferred Stock, then the holders of all shares of Series A Preferred Stock
shall share ratably in such distribution of assets in accordance with the amount
that would be payable on such distribution if the amounts to which the holders
of outstanding shares of Series A Preferred Stock are entitled were paid in
full.
(c) The Liquidation Amount payable to the holders of shares of Series A
Preferred Stock in accordance with Section 4(b) shall be payable in cash,
provided, however, that in the event of a Merger, such Liquidation Amount shall
be payable, at the option of the Corporation, in securities of the surviving
Person.
(d) Written notice of an Extraordinary Event shall be delivered in person,
mailed by certified mail, return receipt requested, mailed by overnight mail or
sent by telecopier, not less than ten (10) days prior to the date of such
Extraordinary Event, to the holders of record of the Series A Preferred Stock,
such notice to be addressed to each such holder at its address as shown by the
records of the Corporation.
5. Redemption.
(a) On April 30, 2011, the Corporation shall redeem, to the extent it has
legally available funds therefor, all of the shares of the Series A Preferred
Stock at a redemption price that shall be the sum of (i) the greater of (x)
$1,000.00 per share or (y) the fair market value of the Common Stock into which
such share is convertible on the date fixed for redemption and (ii) all declared
and unpaid dividends thereon to the date fixed for redemption (the "Redemption
Price"). In the event that the Corporation does not have sufficient legally
available funds on such date to redeem all outstanding shares of the Series A
Preferred Stock, then the Corporation shall redeem on such date the number of
shares of the Series A Preferred Stock which it has legally available funds to
redeem, and the shares of the Series A Preferred Stock not so redeemed
- 2 -
in whole or from time to time in part on the first date on which the Corporation
shall have legally available funds for a redemption of such shares, subject to
Section 5(d) hereof.
(b) To the extent the Corporation shall have funds legally available for
such payment, the Corporation may redeem at its option shares of Series A
Preferred Stock, at any time in whole or from time to time in part, at the
Redemption Price without premium or interest.
(c) In the event that less than all the outstanding shares of the Series A
Preferred Stock are to be redeemed, the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be redeemed shall be
determined pro rata or by lot as may be determined by the Board of Directors, in
its sole discretion, to be equitable.
(d) In the event that the Corporation shall redeem shares of the Series A
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to the
date of such redemption, to each holder of record of the shares to be redeemed
at such holder's address as the same appears on the books of the Corporation.
Each such notice shall state (i) the date of redemption; (ii) the aggregate
number of shares of the Series A Preferred Stock to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of shares
to be redeemed from such holder; (iii) the Redemption Price; (iv) the place or
places where certificates for such shares may be surrendered for payment of the
Redemption Price; and (v) that dividends on the shares to be redeemed will cease
to accrue on the date of such redemption.
(e) Any shares of the Series A Preferred Stock that shall at any time have
been redeemed or repurchased by the Corporation, or surrendered to the
Corporation for exchange, in accordance herewith or otherwise, or otherwise
acquired by the Corporation shall, upon such redemption, repurchase, surrender
or other acquisition, be canceled, and thereafter such shares shall have the
status of authorized but unissued shares of Preferred Stock, without designation
as to rights, preferences, limitations or series until such shares are once more
designated as part of a particular series with particular rights, preferences or
limitations by the Board of Directors or a duly authorized committee thereof;
provided, that no such issued and reacquired shares of Series A Preferred Stock
shall be reissued or sold as Series A Preferred Stock.
(f) On or after any date of redemption, unless the Corporation defaults in
the payment of the Redemption Price, dividends will cease to accrue on the
outstanding shares of Series A Preferred Stock called for redemption and all
rights of the holders of such shares (except the right to receive the applicable
Redemption Price upon surrender of their certificates) will terminate.
6. Voting Rights; Election of Director.
(a) The holders of Series A Preferred Stock, except as otherwise required
under North Carolina law or as set forth in Section (b) and (c) below,
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shall not be entitled or permitted to vote on any matter required or permitted
to be voted upon by the stockholders of the Corporation.
(b) So long as the Series A Preferred Stock is outstanding, each share of
Series A Preferred Stock shall entitled the holder thereof to vote, in person or
by proxy, at a special or annual meeting of stockholders, on all matters
entitled to be voted on by holders of Common Stock voting together as a single
class with other shares entitled to vote thereon. With respect to any such vote,
each share of Series A Preferred Stock shall entitle the holder thereof to cast
the number of votes per share as is equal to the number of votes that such
holder would be entitled to cast had such holder converted its shares of Series
A Preferred Stock into shares of Common Stock on the record date for determining
the stockholders of the Corporation eligible to vote on any such matters.
(c) The holders of the Series A Preferred Stock, voting as a separate
series, shall be entitled to elect one director of the Corporation. The Series A
Preferred Stock shall vote together with all other classes and series of stock
of the Corporation as a single class with respect to the election of all of the
other directors of the Corporation. At any meeting (or in a written consent in
lieu thereon) held for the purpose of electing directors, the presence in person
or by proxy (or the written consent) of the holders of a majority of the shares
of Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election of the director to be elected solely
by the holders of the Series A Preferred Stock. A vacancy in the directorship
elected the by holders of the Series A Preferred Stock pursuant to this Section
6(c) shall be filled only by vote or written consent of the holders of a
majority of the Series A Preferred Stock.
7. Conversions.
(a) Any holder of Series A Preferred Stock shall have the right, at its
option, at any time and from time to time, to convert, subject to the terms and
provisions of this Section 7, any or all of such holder's shares of Series A
Preferred Stock into such number of fully paid and non-assessable shares of
Common Stock as is equal, subject to Section 7(g), to a fraction, the numerator
of which shall be the product of (i) the number of shares of Series A Preferred
Stock being so converted and (ii) the Liquidation Preference and the denominator
of which shall be the Conversion Price (as defined below) then in effect, except
that with respect to any share which shall be called for redemption, such right
shall terminate at the close of business on the Business Day immediately prior
to the date of redemption for such share, unless in any such case the
Corporation shall default in performance or payment due upon redemption thereof.
The "Conversion Price" shall be $8.00 per share, subject to adjustment as set
forth in Section 7(d). Such conversion right shall be exercised by the surrender
of the shares of Series A Preferred Stock to be converted (the "Shares") to the
Corporation at any time during usual business hours at its principal place of
business to be maintained by it, accompanied by written notice that the holder
elects to convert such Shares and specifying the name or names (with address) in
which a certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Corporation) by a
- 4 -
written instrument or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 7(k). All Shares surrendered for conversion shall be delivered to the
Corporation for cancellation and canceled by it and no Shares shall be issued in
lieu thereof.
(b) As promptly as practicable after the surrender, as herein provided, of
any Shares for conversion pursuant to Section 7(a), the Corporation shall
deliver to or upon the written order of the holder of the Shares so surrendered
a certificate or certificates representing a number of fully paid and
non-assessable shares of Common Stock into which such Shares may be or have been
converted in accordance with the provisions of this Section 7. Subject to the
following provisions of this Section 7, such conversion shall be deemed to have
been made immediately prior to the close of business on the date that such
Shares shall have been surrendered in satisfactory form for conversion, and the
Person or Persons entitled to receive the Comon Stock deliverable upon
conversion of such Shares shall be treated for all purposes as having become the
record holder or holders of such Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the Corporation shall be closed (but not for any period in excess of five
days), but such surrender shall be effective to constitute the Person or Persons
entitled to receive such Common Stock as the record holder or holders thereof
for all purposes immediately prior to the close of business on the next
preceding day on which such transfer books are open, and such conversion shall
be deemed to have been made at, and shall be made at the Conversion Price in
effect at, such time on such next preceding day. In case of the redemption of
any shares of Series A Preferred Stock pursuant to Section 5(a), the right of
conversion shall cease and terminate, as to the shares to be redeemed, at the
close of business on the Business Day immediately prior to the date fixed for
redemption, unless the Corporation shall default (I) in the payment of the
applicable redemption price for the shares to be redeemed or the amounts, if
any, payable pursuant to Section 7(c) or (II) in the performance of its
obligation to issue Common Stock in exchange therefor, as the case may be.
If the last day for the exercise of the conversion right shall not be a
Business Day, then such conversion right may be exercised on the next succeeding
Business Day.
(c) To the extent permitted by law, when shares of Series A Preferred Stock
are converted, all dividends accrued and unpaid (whether or not declared or
currently payable) on the Series A Preferred Stock so converted to the date of
conversion shall be immediately due and payable and must accompany the shares of
Common Stock issued upon such conversion.
(d) The Conversion Price shall be subject to adjustment as follows:
- 5 -
(i) In case the Corporation shall at any time or from time to time (A) pay
a dividend or make a distribution (other than a dividend or distribution paid or
made to holders of shares of Series A Preferred Stock in the manner provided in
Section 3) on the outstanding shares of any of the Common Stock in Capital Stock
(which, for purpose of this Section 7(d) shall include, without limitation, any
dividends or distributions in the form of options, warrants or other rights to
acquire Capital Stock) of the Corporation or any Subsidiary or Affiliate
thereof, (B) subdivide the outstanding shares of any of the Common Stock into a
larger number of shares, (C) combine the outstanding shares of any of the Common
Stock into a smaller number of shares, (D) issue any shares of its capital stock
in a reclassification of any of the Common Stock or (E) pay a dividend or make
distribution (other than a dividend or distribution paid or made to holders of
shares of Series A Preferred Stock in the manner provided in Section 3) on the
outstanding shares of any of the Common Stock in shares of its Capital Stock
pursuant to a shareholder rights plan, "poison pill" or similar arrangement,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Series A Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Comon Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series A Preferred Stock been
converted immediately prior the occurrence of such event. An adjustment made
pursuant to this Section 7(d)(i) shall become effective retroactively (A) in the
case of any such dividend or distribution, to a date immediately following the
close of business on the record date for the determination of holders of any of
Common Stock entitled to receive such dividend or distribution or (B) in the
case of any such subdivision, combination or reclassification, to the close of
business on the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to time issue
or sell shares of any of its Common Stock (or securities convertible into or
exchangeable for shares of its Common Stock, or any options, warrants or other
rights to acquire shares of its Common Stock) (A) if there is no Active Public
Market at such time for the Common Stock, at a price per share that is less than
the higher of the then Conversion Price and the Current Market Price per share
of such Common Stock then in effect as of the record date or Issue Date referred
to in the following sentence, as the case may be (the "Relevant Date"), or (B)
if there is an Active Public Market at such time for the Common Stock, at a
price per share that is less than the Current Market Price per share of such
Common Stock then in effect at the Relevant Date (treating the price per share
of Common Stock, in the case of the issuance of any security convertible or
exchangeable or exercisable into Common Stock, as equal to (m) the sum of the
price for such security convertible, exchangeable or exercisable into Common
Stock plus any additional consideration payable (without regard to any
anti-dilution adjustments) upon the conversion, exchange or exercise of such
security into Common Stock divided by (n) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable security),
other than (I) issuances or sales for which an adjustment is made pursuant to
another Section of this Section 7(d) and (II) issuances
- 6 -
which are made to holders of shares of Series A Preferred Stock pursuant to
Section 3, then, and in each case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effet on the day immediately prior
to such Relevant Date by a fraction (x) the numerator of which shall be the sum
of the number of shares of Common Stock outstanding on the Relevant Date plus
the number of additional shares of Common Stock issued or to be issued (or the
maximum number into which such convertible or exchangeable securities initially
may convert or exchange or for which such options, warrants or other rights
initially may be exercised) and (y) the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on the Relevant Date plus the
number of shares of Common Stock which the aggregate consideration for the total
number of such additional shares of Common Stock so issued (or into which such
convertible or exchangeable securities may convert or exchange or for which such
options, warrants or other rights may be exercised plus the aggregate amount of
any additional consideration initially payable upon conversion, exchange or
exercise of such security) would purchase at the Current Market Price per share
of Common Stock on the Relevant Date. Such adjustment shall be made whenever
such shares, securities, options, warrants or other rights are issued, and shall
become effectively retroactively to a date immediately following the close of
business (i) in the case of an issuance to the stockholders of the Corporation,
as such, on the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and (ii) in
all other cases, on the date of such issuance (the "Issue Date"); provided,
however, that the determination as to whether an adjustment is required to be
made pursuant to this Section 7(d)(ii) shall only be made upon the issuance of
such shares or such convertible or exchangeable securities, options, warrants or
other rights, and not upon the issuance of the security into which such
convertible or exchangeable security converts or exchanges, or the security
underlying such option, warrants or other right; provided, further, that if any
convertible or exchangeable securities, options, warrants or other rights (or
any portions thereof) which shall have given rise to an adjustment pursuant to
this Section 7(d)(ii) shall have expired or terminated without the exercise
thereof and/or if by reason of the terms of such convertible or exchangeable
securities, options, warrants or other rights there shall have been an increase
or increases, with the passage of time or otherwise, in the price payable upon
the exercise or conversion thereof, then the Conversion Price hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating form the computation any additional shares of Common Stock
corresponding to such convertible or exchangeable securities, options, warrants
or other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights which remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from time to time
distribute to all holders of shares of its Common Stock (including any such
- 7 -
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged) cash, evidences of indebtedness of the Corporation or
another issuer, securities of the Corporation or another issuer or other assets
(excluding (A) dividends or distributions paid or made to holders of shares of
Series A Preferred Stock in the manner provided in Section 3 and (B) dividends
payable in shares of Common Stock for which adjustment is made under Section
7(d)(i)) or rights or warrants to subscribe for or purchase securities of the
Corporation (excluding those in respect of which adjustments in the Conversion
Price is made pursuant to Section 7(d)(i) or 7(d)(ii)), then, and in each such
case, the Conversion Price then in effect shall be adjusted by dividing the
Conversion Price in effect immediately prior to the date of such distribution by
a fraction (x) the numerator of which shall be the Current Market Price of the
Common Stock on the record date referred to below and (y) the denominator of
which shall be such Current Market Price of the Common Stock less the then fair
market value (as determined in good faith by the Board of Directors of the
Corporation, a certified resolution with respect to which shall be mailed to the
holders of the Series A Preferred Stock) of the portion of the cash, evidence of
indebtedness, securities or other assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock (but such denominator
not to be less than one); provided, however, that no adjustment shall be made
with respect to any distribution of rights to purchase securities of the
Corporation if the holder of shares of Series A Preferred Stock would otherwise
be entitled to receive such rights upon conversion at any time of shares of
Series A Preferred Stock into Common Stock unless such rights are subsequently
redeemed by the Corporation, in which case such redemption shall be treated for
purposes of this Section 7(d)(iii) as a dividend on the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective retroactively to a date immediately following the close of business on
the record date for the determination of stockholders entitled to receive such
distribution.
(iv) In case the Corporation at any time or from time to time shall take
any action affecting its Common Stock other than an action described in any of
Section 4 or Section 7(d)(i) through 7(d)(iii), inclusive, then, the Conversion
Price shall be adjusted in such manner and at such time as the Board of
Directors of the Corporation in good faith determines to be equitable in the
circumstances (such determination to be evidenced in a resolution, a certified
copy of which shall be mailed to the holders of the Series A Preferred Stock).
(v) Notwithstanding anything herein to the contrary, no adjustment under
this Section 7(d) need be made to the Conversion Price unless such adjustment
would require an increase or decrease of at least 1% of the Conversion Price
then in effect. Any lesser adjustment shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment, which, together
with any adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least 1% of such Conversion Price. Any adjustment to
the Conversion Price carried forward and not theretofore made shall be made
immediately prior to the conversion of any shares of Series A Preferred Stock
pursuant hereto.
- 8 -
(e) If the Corporation shall take a record of the holders of any of the
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and in
such case, the Corporation promptly shall deliver to each registered holder of
Series A Preferred Stock at least 10 Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of any shares of Series A Preferred Stock pursuant to
this Section 7. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of the shares of Series A Preferred Stock so
surrendered. If the conversion of any share or shares of Series A Preferred
Stock pursuant to this Section 7 results in a fraction, an amount equal to such
fraction multiplied by the Current Market Price of the Common Stock on the
Business Day preceding the day of conversion shall be paid to such holder in
cash by the Corporation.
(h) In case any capital reorganization or reclassification or other change
of outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value) (collectively, a
"Reclassification"), the Corporation shall execute and deliver to each holder of
Series A Preferred Stock at least 10 Business Days prior to effecting a
Reclassification a certificate that the holder of each share of Series A
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Series A Preferred Stock into the kind and amount of shares of stock or
other securities receivable upon such Reclassification by a holder of the number
of shares of Common Stock into which such share of Series A Preferred Stock
could have been converted immediately prior to such Reclassification. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 7. The
provisions of this Section 7(h) and any equivalent thereof in any such
certificate similarly shall apply to successive Reclassifications.
(i) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock;
- 9 -
(B) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common Stock, or any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
other disposition of all or substantially all of the assets of the Corporation;
or
(D) of the voluntary or involuntary dissolution, liquidation or winding
up of the Corporation;
then the Corporation shall mail to each holder of shares of Series A Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least ten Business Days
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; provided that in the
case of any event to which Section 4 applies, the Corporation shall give at
least 10 Business Days' prior written notice as aforesaid. Such notice also
shall specify the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for shares of stock
or other securities or property or cash deliverable upon such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding up.
(j) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series A Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series A Preferred Stock.
(k) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Series A Preferred Stock pursuant to this Section 7
shall be made without charge to the converting holder of shares of Series A
Preferred Stock for such certificates or for any tax in respect of the issuance
or delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock converted; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the shares of Series A Preferred Stock converted, and the Corporation
shall not be required to
- 10 -
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
8. Business Day. If any payment shall be required by the terms hereof to be
made on a day that is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
9. Restricted Actions. Notwithstanding any provision to the contrary
contained in this Certificate, the Corporation shall not be required to make any
payments to its stockholders, including without limitation any Liquidation
Preference, redeem any capital stock, including without limitation any shares of
the Series A Preferred Stock, or take any other action in connection with its
stockholders, as set forth in this Certificate or otherwise, to the extent that
at such time the terms of any financing or working capital agreement of the
Corporation or by which the Corporation is bound, would prohibit such payment,
redemption or other action, or if such payment, redemption or other action would
constitute a breach thereof or a default thereunder or if such payment,
redemption or other action would, upon the giving of notice or passage of time
or both, constitute such breach or default.
10. Definitions. As used in this Certificate of Designations, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Active Public Market" shall be deemed to exist if, at the time of
determination, (i) the Common Stock is listed on one or more national securities
exchanges in the United States or (ii) the Common Stock is quoted on NASDAQ and
has an average daily volume of at least .4% of the outstanding shares for the
preceding six months prior to such date.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other day on
which commercial banks in the State of North Carolina are authorized or required
by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
- 11 -
"Common Stock" shall have the meaning ascribed to it in Section 2 hereof.
"Corporation" shall have the meaning ascribed to it in the first Section of
this Resolution.
"Current Market Price" per share shall mean, on any date specified herein
for the determination thereof, (a) the average daily Market Price of the Common
Stock for those days during the period of 30 days, ending on such date, on which
the national securities exchanges were open for trading, and (b) if the Common
Stock is not then listed or admitted to trading on any national securities
exchange or quoted in the over- counter market, the Market Price on such date.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder.
"Extraordinary Event" shall have the meaning ascribed to it in Section 4(a)
hereof.
"Junior Stock" shall have the meaning ascribed to it in Section 2 hereof.
"Liquidation" shall have the meaning ascribed to it in Section 4(a) hereof.
"Liquidation Amount" shall have the meaning ascribed to it in Section 4(b)
hereof.
"Liquidation Preference" shall have the meaning ascribed to it in Section
4(b) hereof.
"Market Price" shall mean, per share of Common Stock, on any date specified
herein: (a) the closing price per share of the Common Stock on such date
published in The Wall Street Journal or, if no such closing price on such date
is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last trading price of the Common Stock on such date;
or (c) if there shall have been no trading on such date or if the Common Stock
is not so designated, the average of the reported closing bid and asked prices
of the Common Stock, on such date as shown by NASDAQ and reported by any member
firm of the New York Stock Exchange selected by the Corporation; or (d) if none
of (a), (b) or (c) is applicable, a market price per share determined at the
Corporation's expense by an appraiser chosen by the holders of a majority of the
shares of Series A Preferred Stock or, if no such appraiser is so chosen more
than 20 business days after notice of the necessity of such calculation shall
have been delivered by the Corporation to the holders of Series A Preferred
Stock, then by an appraiser chosen by the Corporation.
- 12 -
"Merger" shall have the meaning ascribed to it in Section 4(a) hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotation System.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Preferred Stock" shall have the meaning ascribed to it in Section
1 hereof.
This the 30th day of April, 1999.
PCA INTERNATIONAL, INC.
By: /s/ John Grosso
---------------------------------------
Name: John Grosso
Title: President
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North Carolina
Department of the Secretary of State
- --------------------------------------------------------------------------------
To all whom these presents shall come, Greetings:
I, ELAINE F. MARSHALL, Secretary of State of the State of North Carolina,
do hereby certify the following and hereto attached to be a true copy of
ARTICLES OF MERGER
OF
PCA INTERNATIONAL, INC.
The original of which is now on file and a matter of record in this office.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed my official seal at
the City of Raleigh, this 19th day of April,
2002.
/s/ Elaine F. Marshall
--------------------------------------------
Secretary of State
SEAL
ARTICLES OF MERGER
OF
PHOTO CORPORATION OF AMERICA
WITH AND INTO
PCA INTERNATIONAL, INC.
Pursuant to Section 55-11-04 of Article 11 of the North Carolina Business
Corporation Act, the undersigned corporation, being the surviving corporation in
a merger, hereby submits the following Articles of Merger and certifies.
FIRST: That the name and jurisdiction or organization of each of the
constituent entities of the merger is as follows:
Name Jurisdiction of Organization
---- ----------------------------
PCA International, Inc. North Carolina
Photo Corporation of America North Carolina
SECOND: That a written agreement and plan of merger among the parties to
the merger (the "Plan") has been approved, adopted, certified, executed and
acknowledged by the directors of PCA International, Inc. in accordance with the
requirements of Section 55-11-04 and Article 11 of the North Carolina Business
Corporation Act.
THIRD: That the name of the surviving corporation of the merger is PCA
International, Inc. ( the "Surviving Business Entity"). The address of the
principal place of business of the Surviving Business entity is 815 Matthews
Mint Hill Road, City of Matthews, County of Mecklenburg, North Carolina 28105.
FOURTH: That shareholder approval of the Plan was not required because the
Surviving Business Entity was the owner of at least ninety percent (90%) of the
outstanding shares of each class of the merging corporation and the Plan does
not provide for any changes in the articles of incorporation of the Surviving
Business Entity that require shareholder action.
FIFTH: That the effective date of the merger shall be the date of filing of
these Articles in the office of the Secretary of State of North Carolina.
SIXTH: that the executed written agreement and plan of merger is on file at
the principal place of business of the Surviving Business Entity.
SEVENTH: That a copy of the written agreement and plan of merger, attached
hereto, will be furnished by the Surviving Business Entity, on request and
without cost to any member or stockholder or any other person holding any
interest in any constituent entity.
- 2 -
WRITTEN AGREEMENT AND PLAN
OF
MERGER
OF
PHOTO CORPORATION OF AMERICA
WITH AND INTO
PCA INTERNATIONAL, INC.
This Written Agreement and Plan of Merger (the "Agreement") sis made and
entered into this 31st day of May 2000 by and between Photo Corporation of
America, a North Carolina corporation (the "Disappearing Subsidiary") and PCA
International, Inc., a North Carolina corporation (the "Parent Corp") (the
Disappearing Subsidiary and the Parent Corp being hereinafter collectively
referred to as the "Constituent Business Entities").
W I T N E S S E T H
WHEREAS, immediately prior to the date hereof all of the issued and
outstanding shares of all classes of capital stock of the Disappearing
Subsidiary were held directly by PCA International, Inc.; and
WHEREAS, in accordance with Section 55-11-04 of the North Carolina Business
Corporation Act (the "NCBCA") all of the directors of the Parent Corp have
authorized the merger of the Disappearing Subsidiary with and into the Parent
Corp.
NOW THEREFORE, for and in consideration of the premises and of the mutual
agreements, promises and covenants contained herein, it is agreed by and between
the parties hereto, subject to the conditions hereinafter set forth and in
accordance with the NCBCA that the Disappearing Subsidiary shall be merged with
and into the Parent Corp as the surviving Constituent Business Entity (the
Parent Corp, subsequent to such merger, sometimes being hereinafter referred to
as the "Surviving Business Entity"), with the legal existence of the Surviving
Business Entity to be continued under the name "PCA International, Inc." and
that the terms and conditions of the merger hereby agreed upon, and the mode of
carrying the same into effect shall be as follows:
SECTION I
MERGER
1.1 Constituent Parties and States of Domicile. The parties to the merger
include Photo Corporation of America, a North Carolina corporation and PCA
International, Inc., a North Carolina corporation.
1.2 Surviving Business Entity. Effective upon the date of filing of the
Articles of Merger in the Office of the Secretary of State of North Carolina in
accordance with the NCBCA (the "Effective Date"), the Disappearing Subsidiary
shall be merged with and into the Parent Corp, and PCA International, Inc. shall
continue in existence as the Surviving Business Entity, and the merger shall in
all respects have the effects provided
- 3 -
for in the NCBCA. The address of the principal place of business of the
Surviving Business Entity is 815 Matthews Mint Hill Road, City of Matthews,
County of Mecklenburg, North Carolina 28105.
1.3 Effects of Merger. Without limiting the foregoing, on and after the
Effective Date, the separate existence of the Disappearing Subsidiary shall
terminate and cease. In accordance with the terms of this Agreement and pursuant
to the provisions of the NCBCA, all rights, title and interest in and to all
tangible and intangible property (real, personal, and mixed), leases, and all
and any other interests or property owned or held by or in the name of the
Disappearing Subsidiary shall be vested in the Parent Corp without reversion or
impairment; the Parent Corp shall assume all debts, liabilities, restrictions,
disabilities, duties, and other obligations of the Disappearing Subsidiary such
that the same may be enforced against the Parent Corp to the same extent as if
the same had been incurred or contracted by the Parent Corp; all rights of
creditors and all liens upon any property of the Disappearing Subsidiary shall
be preserved unimpaired; any action or proceeding, whether civil, criminal or
administrative, pending by or against the Disappearing Subsidiary shall be
prosecuted and may be continued as if the merger did not occur or the Parent
Corp may be substituted as a party in such action or proceeding in place of the
Disappearing Subsidiary; and all the rights, privileges, immunities, powers,
franchises and purposes of the Disappearing Subsidiary shall vest in the Parent
Corp.
1.4 Other Actions. Prior to, and from and after, the Effective Date, the
Constituent Business Entities shaft take all such action as shall be necessary
or appropriate in order to effectuate the merger. If at any time the Parent Corp
shall consider or be advised that any further assignments or assurances in law
or any other actions are necessary, appropriate or desirable to vest in the
Parent Corp, according to the terms hereof, the title to any property or rights
of the Disappearing Subsidiary, the last acting members of the Disappearing
Subsidiary, or the corresponding authorized persons of the Parent Corp, shall
and will execute and make all such proper assignments and assurances and take
all action necessary and proper to vest title in such property or rights in the
Parent Corp and otherwise to carry out the purposes of this Agreement.
SECTION 2
TERMS AND CONDITIONS OF MERGER
2.1 Cancellation of Shares in Disappearing Subsidiary. Upon the Effective
Date, each outstanding share of the Disappearing Subsidiary shall be canceled
and no consideration shall be paid in respect thereto.
2.2 Continuation of Shares in Parent Corp. Upon the Effective Date, all
shares in the Parent Corp issued and outstanding immediately prior to the
Effective Date shall continue to exist and shall not be converted exchanged, or
altered in any manner as a result of the Merger and shall remain as outstanding
shares of the Parent Corp.
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SECTION 3
ARTICLES OF INCORPORATION
OF
PCA INTERNATIONAL, INC.
From and after the Effective Date, the Articles of Incorporation of the
Parent Corp, as in effect at such date, shall constitute the Articles of
Incorporation of the Surviving Business Entity and shall continue in effect
until the same shall be altered, amended or repealed as therein provided or as
provided by law.
SECTION 4
APPROVAL AND
EFFECTIVENESS OF MERGER
4.1 Filing of Documents Upon Approval. Upon approval and adoption of the
merger and this Agreement pursuant to the provisions of the NCBCA, if this
Agreement is not terminated and abandoned pursuant to the provisions of Section
5 hereof, Articles of Merger incorporating the terms of this Agreement and any
other documents required to effect the merger herein provided for shall be filed
in accordance with the provisions of the NCBCA as soon as practicable after such
approval. The officers of the Constituent Business Entities are authorized,
empowered and directed to do any and all acts and things, and to make, execute,
deliver, file, and record any and all instruments, papers, and documents which
shall be or become necessary, proper, or convenient to carry out or put into
effect any of the provisions of this Agreement or of the mergers herein provided
for.
4.2 Effective Date. The merger shall become effective as of the Effective
Date.
SECTION 5
TERMINATION
At any time prior to the filing of the Articles of Merger with the Office
of the Secretary of State of North Carolina the officers of either of the
Constituent Business Entities may terminate and abandon this Agreement,
notwithstanding favorable action on the merger by the directors and shareholders
of either or both of the Disappearing Subsidiary and the Parent Corp.
SECTION 6
MISCELLANEOUS
This Agreement may be executed (whether via facsimile or in original) in
counterparts, each of which when so executed shall be deemed to be an original
and all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Constituent Business Entities each have caused
this Agreement to be executed, as of the date hereinabove first written.
SURVIVING BUSINESS ENTITY:
- --------------------------
PCA INTERNATIONAL, INC.,
a North Carolina Corporation
By: /s/ Barry J. Feld
--------------------------------------
Name: Barry J. Feld
Title: President
Date: May 3l, 2000
ATTEST:
By: /s/ James Robert Wren, Jr.
------------------------------
Name: James Robert Wren, Jr.
Title: Secretary
Date: May 31, 2000
MERGING BUSINESS ENTITY:
- ------------------------
PHOTO CORPORATION OF AMERICA,
a North Carolina Corporation
By: /s/ Barry J. Feld
---------------------------------------
Name: Barry J. Feld
Title: President
Date: May 3l, 2000
ATTEST:
By: /s/ James Robert Wren, Jr.
------------------------------
Name: James Robert Wren, Jr.
Title: Secretary
Date: May 31, 2000
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