EXHIBIT 2.1
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Execution Copy
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AGREEMENT AND PLAN OF MERGER
Among
Sealy Corporation,
Sandman Merger Corporation
and
Zell/Chilmark Fund, L.P.
October 30, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS........................................................................... 1
ARTICLE II THE MERGER........................................................................... 7
Section 2.01. The Merger................................................................... 7
Section 2.02. Effect of Merger.............................................................. 7
Section 2.03. Additional Actions............................................................ 7
Section 2.04. Certificate of Incorporation, By-laws, Directors and Officers
of the Surviving Corporation............................................ 8
ARTICLE III CONVERSION OF COMPANY STOCK......................................................... 8
Section 3.01. Conversion of Shares.......................................................... 8
Section 3.02. Surrender of Company Share Certificates; Payment of Cash
Consideration...........................................................10
Section 3.03. Stock Transfer Books..........................................................11
Section 3.04. Shares of Dissenting Stockholders.............................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................12
Section 4.01. Organization..................................................................12
Section 4.02. Subsidiaries..................................................................12
Section 4.03. Capitalization................................................................12
Section 4.04. Authorization.................................................................13
Section 4.05. No Violation..................................................................13
Section 4.06. Approvals.....................................................................13
Section 4.07. Periodic SEC Filings; Financial Statements....................................14
Section 4.08. Absence of Certain Transactions...............................................15
Section 4.09. Taxes.........................................................................17
Section 4.10. Litigation....................................................................19
Section 4.11. Environmental Matters.........................................................20
Section 4.12. Real Property.................................................................21
Section 4.13. Personal Property.............................................................22
Section 4.14. Contracts.....................................................................22
Section 4.15. Employee and Labor Matters and Plans..........................................23
Section 4.16. Insurance Policies............................................................24
Section 4.17. Intellectual Properties.......................................................25
Section 4.18. Permits.......................................................................26
Section 4.19. Compliance with Laws..........................................................26
Section 4.20. Brokerage Fees................................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.....................................27
Section 5.01. Authorization.................................................................27
Section 5.02. No Violation..................................................................27
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Section 5.03. Approvals.....................................................................27
Section 5.04. Ownership of Owned Shares.....................................................27
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................28
Section 6.01. Organization..................................................................28
Section 6.02. Authorization.................................................................28
Section 6.03. No Violation..................................................................28
Section 6.04. Approvals.....................................................................29
Section 6.05. Litigation....................................................................29
Section 6.06. Financing.....................................................................29
Section 6.07. Brokerage Fees................................................................30
Section 6.08. Purchaser Activities..........................................................30
Section 6.09. Capitalization................................................................30
ARTICLE VII COVENANTS...........................................................................30
Section 7.01. Interim Operations of the Company.............................................30
Section 7.02. Access to Information; Assistance with Financing..............................32
Section 7.03. Acquisition Proposals.........................................................33
Section 7.04. Consents and Approvals........................................................33
Section 7.05. Employment Matters............................................................33
Section 7.06. Publicity.....................................................................34
Section 7.07. Notification of Certain Matters...............................................34
Section 7.08. Directors' and Officers' Indemnification......................................34
Section 7.09. Stockholder Approval..........................................................35
Section 7.10. Consent by Shareholder........................................................35
Section 7.11. Further Assurances............................................................35
Section 7.12. Noncompetition; Nonsolicitation...............................................35
Section 7.13. Warrants......................................................................36
Section 7.14. Information Statement.........................................................37
Section 7.15. Preferred Stock of Purchaser..................................................37
Section 7.16. Assistance with Financing.....................................................37
ARTICLE VIII CONDITIONS.........................................................................38
Section 8.01. Conditions to the Obligations of Each Party...................................38
Section 8.02. Conditions to the Obligations of Purchaser....................................38
Section 8.03. Conditions to the Obligations of the Company and the
Shareholder.............................................................41
ARTICLE IX CLOSING; TERMINATION.................................................................41
Section 9.01. Closing.......................................................................41
Section 9.02. Termination...................................................................42
Section 9.03. Effect of Termination.........................................................42
ARTICLE X GENERAL PROVISIONS....................................................................42
Section 10.01. Non-Survival.................................................................42
Section 10.02. Costs and Expenses...........................................................43
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Section 10.03. Notices......................................................................43
Section 10.04. Counterparts.................................................................44
Section 10.05. Entire Agreement.............................................................44
Section 10.06. Independent Investigation....................................................45
Section 10.07. Governing Law................................................................45
Section 10.08. Third Party Rights; Assignment...............................................45
Section 10.09. Waivers and Amendments.......................................................45
Section 10.10. Schedules....................................................................45
Exhibit A Term Sheet - Junior Subordinated Notes
Exhibit B Term Sheet - Stockholders' Agreement
Exhibit C Form of Legal Opinion - Company and Shareholder's Counsel
Exhibit D Form of Legal Opinion - Purchaser's Counsel
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated October 30,
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1997, among Sealy Corporation, a Delaware corporation (the "Company"), Sandman
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Merger Corporation, a transitory Delaware merger corporation ("Purchaser"), and
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Zell/Chilmark Fund, L.P., a Delaware limited partnership (the "Shareholder").
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WHEREAS, the Board of Directors of each of Purchaser and the Company
have approved the acquisition of the Company by Purchaser;
WHEREAS, Purchaser is a new corporation formed by Bain Capital, Inc.
("Bain"), its Affiliates and/or other investors (collectively, the "Investors");
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WHEREAS, in furtherance of such acquisition, the Boards of Directors
of each of Purchaser and the Company have approved a merger (the "Merger") of
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Purchaser with and into the Company upon the terms and subject to the conditions
set forth in this Agreement, with the Company surviving the Merger;
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes; and
WHEREAS, as a condition to its willingness to enter into this
Agreement, Purchaser has required that the Shareholder agree, and the
Shareholder is willing to agree, to the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties hereto contained herein, and other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, and subject to the satisfaction or waiver of the conditions
hereof, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Definitions. Certain terms used in this
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Agreement and the Schedules are defined as follows:
"Adjusted Equity Value" means US$418.7 million ($418,700,000).
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"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
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regulations promulgated pursuant to the Exchange Act.
"Class A Common Stock" shall mean the Class A Common Stock, $0.01 par
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value per share, of the Company.
"Class B Common Stock" shall mean the Class B Common Stock, $0.01 par
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value per share, of the Company.
"Closing Date" shall mean the date on which the Closing occurs.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Common Stock Purchase Price" means the difference of (a) the Adjusted
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Equity Value minus (b) the Equity Adjustment Amount.
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"Common Stock Per Share Amount" means (a) the Common Stock Purchase
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Price divided by (b) the number of shares of Company Common Stock which would be
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converted into the right to receive cash as of the Effective Time pursuant to
Section 3.01(a) hereof assuming there are no Dissenting Shares.
"Company Common Stock" shall mean the Class A Common Stock and the
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Class B Common Stock.
"Company Expenses" means the sum of the following: (a) all fees and
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expenses (including, without limitation, all legal, accounting and investment
banking fees and expenses) paid or payable by, or incurred by the Company or any
of the Company Subsidiaries in connection with the auction of the Company, the
negotiation, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby except those fees and expenses paid,
payable or incurred in connection with the tender for the Senior Sub Notes, (b)
all fees and expenses (including, without limitation, all legal, accounting and
investment banking fees and expenses) paid or payable by, or incurred by the
Company or any of the Company Subsidiaries on behalf of the Shareholder in
connection with the auction of the Company, the negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, (c) all one time bonus payments and change-in-control payments
(excluding any severance payments) paid or payable by, or incurred by the
Company or any of the Company Subsidiaries in connection with the execution of
this Agreement or the consummation of the transactions contemplated hereby
including those identified on Schedule 1.01 along with all Taxes and expenses in
connection with such payments, and (d) the cost of obtaining the opinion
referred to in Section 8.03(e)(ii), if such opinion is required; provided that
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Company Expenses shall not include any fees and expenses paid or payable by, or
incurred by the Company or any of the Company Subsidiaries in connection with
Section 7.02(b) or any amount included in the Warrant and Option Charges. As
contemplated by Section 10.02 hereof, the parties hereto shall agree to the
amount, and timing of payment, of the Company Expenses prior to the Effective
Date. The Company and Purchaser shall cooperate to obtain reasonable detail
from the Company's service providers as to the nature of services performed.
"Company Stock" shall mean all shares of the Company's capital stock
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authorized, issued or outstanding prior to the Effective Time, of whatever class
or series, including , without limitation, all of the Class A Common Stock,
Class B Common Stock and Preference Stock of the Company.
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"Company Subsidiary" shall mean any Subsidiary of the Company.
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"Effective Time" shall mean the time the Certificate of Merger is
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filed with the Secretary of State.
"Environmental Law" shall mean any Law of any Governmental Entity as
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in effect on or prior to the date hereof, including all common law, relating to
pollution, protection of the environment, waste generation, handling, treatment,
storage, disposal or transportation, and exposure to hazardous or toxic
substances, and includes without limitation, the terms and conditions of any
Environmental Permit, and judicial, administrative, or other regulatory decrees,
judgments, orders, and decisions of any Governmental Entity. The term
"Environmental Law" shall include, but not be limited to the following statutes
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and the regulations promulgated thereunder: the Clean Air Act, 42 U.S.C.
(S)7401 et seq., the Clean Water Act, 33 U.S.C. (S)1251 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S)6901 et seq., the Superfund
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Amendments and Reauthorization Act, 42 U.S.C. (S)11011 et seq., the Toxic
Substances Control Act, 15 U.S.C. (S)2601 et seq., the Safe Drinking Water Act,
42 U.S.C. (S)300 et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. (S)9601 et seq., and the
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Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S)11001 et seq.
"Environmental Permit" shall mean any license, permit, registration,
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consent, identification number, authorization or other approval required by any
Environmental Law for the operation of the business of the Company or any
Company Subsidiary.
"Equity Adjustment Amount" means (a) the Company Expenses, plus (b)
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the Warrant and Option Charges, minus (c) the aggregate exercise price received
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by the Company on all options and warrants of the Company actually exercised
during the period from the date hereof through the Effective Time.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean United States generally accepted accounting
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principles.
"Governmental Entity" shall mean any federal, state, local or foreign
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court, administrative agency or commission or other governmental authority or
instrumentality or subdivision thereof.
"Hazardous Materials" shall mean any chemical, waste, pollutant, or
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contaminant that is regulated under any Environmental Law and includes but is
not limited to: (i) petroleum and petroleum substances, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) any substance designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act,
33 U.S.C. (S)1251 et seq. (33 U.S.C. (S)1321) or listed pursuant to (S)307 of
the Federal Water Pollution Control Act (33 U.S.C. (S)1317), (v) any substance
defined as a "hazardous
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substance" pursuant to Section 101 of CERCLA, and the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. (S)11001 et seq., and (vi) any substance
defined as a "solid waste" or a "hazardous waste" pursuant to Section 1004 of
RCRA.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
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of 1976, as amended.
"IRS" shall mean the United States Internal Revenue Service, or any
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successor agency thereto.
"Judgment" shall mean any and all judgments, orders, writs,
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directives, rulings, decisions, injunctions (temporary, preliminary or
permanent), decrees or awards of any Governmental Entity.
"Law" shall mean all laws (whether statutory or otherwise),
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ordinances, rules, regulations and Judgments of all Governmental Entities.
"Liabilities" shall mean any known liabilities or obligations of any
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nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due and whether or not required to be disclosed in the SEC Filings.
"Lien" shall mean, with respect to any property or asset, any
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mortgage, pledge, security interest, lien (statutory or other), charge,
encumbrance or other similar restrictions or limitations of any kind or nature
whatsoever on or with respect to such property or asset (but specifically
excluding any such restrictions or limitations created pursuant to the Company's
$275,000,000 Second Restated Secured Credit Agreement dated as of February 25,
1997).
"Merger Warrants" shall mean those warrants to purchase Class B Common
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Stock outstanding pursuant to that certain Warrant Agreement dated as of August
1, 1989 between The Ohio Mattress Holding Company and First Chicago Trust
Company of New York.
"Owned Shares" shall mean the 26,143,506 shares of Company Common
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Stock owned beneficially and of record by the Shareholder as of the date hereof
(as such number may be reduced as a result of the conversion of shares into
Preference Stock as contemplated by this Agreement).
"Permits" shall mean all franchises, licenses, authorizations,
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approvals, permits (excluding Environmental Permits), consents or other rights
granted by any Governmental Entity and all certificates of convenience or
necessity, immunities, privileges, licenses, concessions, consents, grants,
ordinances and other rights, of every character whatsoever required for the
conduct of business and the use of properties by the Company and the Company
Subsidiaries as currently conducted or used.
"Person" shall mean any individual, corporation, partnership, limited
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liability company, joint venture, trust, unincorporated organization or other
entity or Governmental Entity.
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"Preference Stock" shall mean the Preferred Stock, $.01 par value, of
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the Company.
"Proceeding" shall mean any action, claim, suit, or legal,
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administrative, arbitration or other alternative dispute resolution proceeding
or investigation.
"Requisite Approvals" shall mean all permits, approvals, filings and
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consents required to be obtained or made, and all waiting periods required or
contemplated to expire, prior to the consummation of the Merger under applicable
Laws, including without limitation notifications, approvals and filings pursuant
to the HSR Act and filings under "transaction-triggered" and "responsible
property transfer" Environmental Laws.
"Restructure Warrants" shall mean those Series A Warrants and Series B
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Warrants outstanding pursuant to that certain Warrant Agreement dated as of
November 6, 1991, between Sealy Corporation and Sealy, Inc.
"Rollover Options" means the options to purchase Company Common Stock
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to be rolled-over into stock options of the Surviving Corporation owned by the
individuals identified on a list to be provided to Purchaser by the Company
(which list must be reasonably acceptable to Purchaser) no later than thirty
days before the Closing (which list shall identify the number of such options
owned by each such Person).
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended,
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and the rules and regulations promulgated thereunder.
"Senior Sub Notes" means the Company's 10- 1/4% Senior Subordinated
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Notes due 2003.
"Stockholder Approval" shall mean the affirmative vote of or the
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written consent by the holders of the numbers of outstanding shares of capital
stock of the Company or Purchaser, as the case may be, required under the DGCL
and the applicable certificate of incorporation to approve this Agreement, the
Merger and the transactions contemplated hereby.
"Subsidiary" shall mean, in respect of any specified Person, any
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company or other entity of which 50% or more of the outstanding share capital or
other equity interest is owned, directly or indirectly, by such specified
Person.
"Surviving Corporation Common Stock" shall mean the Common Stock and
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Class L Common Stock of the Surviving Corporation, as provided in Section
3.01(c).
"Warrant and Option Charges" means the sum of (a) the aggregate amount
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paid or payable by, or incurred by the Company or any of the Company
Subsidiaries in connection with the extinguishment of outstanding warrants and
options of the Company, plus (b) the aggregate spread on the Merger Warrants
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that remain outstanding as of the Effective Time, which spread shall be valued
as the difference between the cash which a holder of the Merger Warrants would
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have been entitled to receive in the Merger had such Merger Warrants been
exercised immediately prior to the Effective Time minus the exercise price of
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such Merger Warrants, plus (c) the aggregate spread on the Rollover Options,
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which spread shall be valued based on the difference between the cash which a
holder of the Rollover Option would have been entitled to receive in the Merger
had such Rollover Option been exercised immediately prior to the Effective Time
minus the exercise price of such Rollover Option, including, in each case,
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without limitation, all redemption payments, premiums, penalties, fees and
expenses.
Section 1.02. Additional Definitions. The following terms shall
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have the respective meanings specified in the indicated Sections of this
Agreement:
Defined Term Section Defined in
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Affiliated Group 4.09
Agreement Preamble
Bain Recitals
Certificate of Merger 2.01
Closing 9.01
Commitment Letters 6.06
Company Preamble
Company Share Certificate 3.02(b)(i)
Company Stockholders 4.04
Contracts 4.14
Covered Party 7.08
Debt Financing 6.06
DGCL 2.02
Dissenting Shares 3.05(a)
Employee Plan 4.15
Equity Financing 6.06
First Tier Subsidiary 7.16
Indebtedness 8.02
Information Statement 7.14
Intellectual Property 4.17
Investors Recitals
Leases 4.12
Leased Premises 4.12(a)
Merger Recitals
Multiemployer Plan 4.15(b)
Owned Property 4.12(a)
Paying Agent 3.02(a)
Purchaser Preamble
Real Property 4.12
SEC Filings 4.07
Secretary of State 2.01
Shareholder Preamble
Surviving Corporation 2.01
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Tax 4.09
Tax Returns 4.09
Trademarks 4.17
Warrant Losses 7.13
ARTICLE II
THE MERGER
Section 2.01. The Merger. At the Effective Time, subject to the
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terms and conditions of this Agreement, Purchaser shall be merged with and into
the Company in accordance with the laws of the State of Delaware, with the
Company being the surviving corporation (following the Merger, the "Surviving
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Corporation"). The Merger shall be effective when a properly executed
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Certificate of Merger, together with any other documents required by the laws of
the State of Delaware to effectuate the Merger (collectively, the "Certificate
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of Merger"), shall be filed with the Secretary of State of the State of Delaware
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(the "Secretary of State"), which filing shall be made as soon as possible after
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the Closing, as provided for in Section 9.01 hereof.
Section 2.02. Effect of Merger. By virtue of the Merger, as of the
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Effective Time, all rights, privileges, immunities, powers and purposes of the
Company and Purchaser, and all the property, real and personal, including,
without limitation, causes of action, and every other asset of the Company and
Purchaser, shall vest in the Surviving Corporation, without any further act or
deed, and the separate existence of Purchaser shall cease and the corporate
existence of the Company as the Surviving Corporation and a corporation
organized under the General Corporation Law of the State of Delaware (the
"DGCL") shall continue unaffected and unimpaired by the Merger. The Surviving
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Corporation shall assume and be liable for all the liabilities, obligations and
penalties of the Company and Purchaser; no liability or obligation due or to
become due, and no claim or demand for any cause of action existing against
either the Company or Purchaser, or any stockholder, officer or director
thereof, shall be released or impaired by the Merger; and no Proceeding, whether
civil or criminal, then pending by or against either the Company or Purchaser or
any stockholder, officer or director thereof, shall abate or be discontinued as
a result of or by the Merger, but may be enforced, prosecuted, settled or
compromised as if the Merger had not occurred, or the Surviving Corporation may
be substituted in such Proceeding in place of either the Company or Purchaser.
Section 2.03. Additional Actions. If, at any time after the
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Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation, its right, title or interest in, to or under, any
of the rights, properties or assets of the Company or Purchaser acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or (ii) otherwise carry out the purposes of this Agreement, the
Company and its officers and directors and Purchaser and its officers and
directors shall be deemed to have granted the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such deeds, bills of
sale, assignments and assurances and to take and do all such other actions and
things as may be necessary or desirable to vest,
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perfect or confirm any and all rights, title, properties or assets in the
Surviving Corporation or to otherwise carry out the purposes of this Agreement;
and the officers and directors of the Surviving Corporation are fully authorized
in the name of the Company and of Purchaser or otherwise to take any and all
such actions.
Section 2.04. Certificate of Incorporation, By-laws, Directors and
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Officers of the Surviving Corporation. (a) From and after the Effective Time,
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the Certificate of Incorporation of Purchaser in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until altered, amended or repealed in accordance with applicable Law
and this Agreement, except that, as of the Effective Time, Article I of such
Certificate of Incorporation shall be amended to read as follows: "The name of
the Corporation is Sealy Corporation."
(b) From and after the Effective Time, the By-laws of Purchaser in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation until altered, amended or repealed in accordance with
applicable Law and this Agreement.
(c) From and after the Effective Time, the directors of Purchaser
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation to serve until such time as their successors have been elected and
qualified in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation, applicable Law and this Agreement.
(d) From and after the Effective Time, the officers of the Company
shall be the officers of the Surviving Corporation to serve until such time as
their successors have been elected and qualified in accordance with the
Certificate of Incorporation and By-laws of the Surviving Corporation,
applicable Law and this Agreement.
ARTICLE III
CONVERSION OF COMPANY STOCK
Section 3.01. Conversion of Shares. (a) Each share of Company
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Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock to be canceled pursuant to Section
3.01(d) hereof and Dissenting Shares (as defined below)) shall, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into (as provided in and subject to the limitations set
forth in this Article III) the right to receive cash in an amount equal to the
Common Stock Per Share Amount payable to the holder thereof, without interest
thereon, upon the surrender of the certificate previously representing such
share of Company Common Stock.
(b) The aggregate Preference Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Preference Stock to be
canceled pursuant to Section 3.01(d) hereof) shall, at the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into (as provided in and subject to the limitations set forth
in this Article III) the right to receive (i) that number of fully paid and
nonassessable shares of
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Surviving Corporation Common Stock such that immediately following the Effective
Time such holder will own ten percent (10%) of each class of the issued and
outstanding Surviving Corporation Common Stock which is intended to represent a
number of shares of the Surviving Corporation Common Stock valued at $15 million
based on the purchase price of the Surviving Corporation Common Stock to be
purchased by the Investors at the Closing (such percentage shall be adequately
increased as a result of Rollover Options to the extent necessary to preserve
such valuation) and (ii) $25 million principal amount of junior subordinated
notes of the Surviving Corporation in form and substance reasonably satisfactory
to the Shareholder, containing the terms set forth in the term sheet in Exhibit
A hereto, upon the surrender of the certificate previously representing such
shares of Preference Stock.
(c) Each share of the Common Stock, $0.01 par value per share, of
Purchaser, issued and outstanding immediately prior to the Effective Time,
shall, at the Effective Time, by virtue of the Merger and without any action on
the part of the Investors or any other Person, be converted into one fully paid
and nonassessable share of Common Stock, $0.01 par value per share, of the
Surviving Corporation. Each share of Class L Common Stock, $0.01 par value per
share, of Purchaser, issued and outstanding immediately prior to the Effective
Time, shall, at the Effective Time, by virtue of the Merger and without any
action on the part of the Investors or any other Person, be converted into one
fully paid and nonassessable share of Class L Common Stock, $0.01 par value per
share, of the Surviving Corporation.
(d) All shares of Company Common Stock and Preference Stock that are
owned by the Company as treasury stock shall, at the Effective Time, be canceled
and retired and shall cease to exist without any consideration payable therefor.
(e) All shares of Company Common Stock deemed "restricted" under any
of the Company's incentive plans shall be deemed issued and outstanding for
purposes of this Agreement, and the holders of such shares immediately prior to
the Effective Time (as set forth in the Company's stock register) shall be
entitled to the consideration set forth in Section 3.01(a) hereof in respect of
such shares.
(f) At and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock shall cease to have any rights as stockholders of the
Company, except the right to receive the cash into which their shares of Company
Common Stock have been converted by the Merger as provided in Section 3.01(a).
(g) Notwithstanding any provision to the contrary, the parties agree
to amend this Agreement prior to Closing to permit shares of Company Common
Stock owned by certain employees of the Company (whether or not such shares are
deemed "restricted" under any of the Company's incentive plans) to be rolled
over into shares of Surviving Corporation Common Stock with corresponding
adjustments to be made to this Section 3.01 and the related definitions.
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Section 3.02. Surrender of Company Share Certificates; Payment of
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Cash Consideration.
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(a) Prior to the Effective Time, the Company shall select a bank or
other financial institution acceptable to Purchaser to serve as the paying agent
(the "Paying Agent").
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(b) At the Closing, Purchaser shall deliver:
(i) to each Person identified on a list to be provided to
Purchaser by the Company no later than five days before the Closing who
shall have surrendered to the Company and Purchaser at the Closing one or
more certificates which, immediately prior to the Effective Time,
represented shares of Company Common Stock (such certificates, "Company
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Share Certificates"), the amount of cash into which the shares of Company
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Common Stock represented by the Company Share Certificate so surrendered
have been converted pursuant to the provisions of this Article III;
(ii) to the Shareholder who shall have surrendered to Purchaser
at the Closing the certificate which, immediately prior to the Effective
Time, represented all of the shares of outstanding Preference Stock, the
securities of the Surviving Corporation into which the shares of Preference
Stock represented by such certificate have been converted pursuant to the
provisions of this Article III; and
(iii) to the Paying Agent, for the benefit of holders of Company
Common Stock not so listed, funds in the aggregate amount into which such
shares of Company Common Stock shall have been converted pursuant to the
provisions of this Article III.
(c) As soon as practicable after the Effective Time, the Surviving
Corporation shall mail to each holder of record (other than the Investors) of
Company Common Stock not surrendered pursuant to subsection (b) above (i) a form
of letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Company Common Stock shall pass, only upon
delivery of the Company Share Certificates to the address specified therein) and
(ii) instructions for use in effecting the surrender of Company Share
Certificates for payment therefor. Upon surrender of a Company Share
Certificate for cancellation to the Paying Agent, together with such letter of
transmittal, duly executed, the holder of such Company Share Certificate shall
be entitled to receive in payment therefor from the Paying Agent the amount of
cash into which the shares of Company Common Stock theretofore represented by
the Company Share Certificate so surrendered shall have been converted pursuant
to the provisions of this Article III, and the Company Share Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of the Company Share Certificate.
(d) In the event that any Company Share Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Share Certificate to be lost, stolen or destroyed,
the Surviving Corporation will pay in exchange for such lost, stolen or
destroyed Company Share Certificate, the cash payable in respect thereof as
determined in accordance with this Article III, except that when authorizing
such payment, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition to such
10
payment, require the owner of such Company Share Certificate to give the
Surviving Corporation a bond in such amount as it may direct as indemnity
against any claim that may be made against the Surviving Corporation with
respect to such Company Share Certificate.
(e) One year after the Closing Date, all unclaimed cash held by the
Paying Agent shall be returned by it to the Surviving Corporation, and
thereafter any Company Share Certificates that must be surrendered shall be
surrendered to, and payment therefor delivered by, the Surviving Corporation.
With respect to any Company Share Certificates which shall not have been
surrendered prior to five years after the Closing Date, the unclaimed cash
payable in exchange for such Company Share Certificates shall, to the extent
permitted by applicable escheat or other Laws, become the property of the
Surviving Corporation, free and clear of all claims or interest of any Person
previously entitled thereto.
Section 3.03. Stock Transfer Books. At the Effective Time, the
--------------------
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of shares of Company Common Stock on the
records of the Company. If, after the Effective Time, certificates previously
representing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash pursuant to the
provisions of this Article III.
Section 3.04. Shares of Dissenting Stockholders. (a)
---------------------------------
Notwithstanding anything in this Agreement to the contrary, any shares of
Company Common Stock that are issued and outstanding as of the Effective Time
and that are held by a holder who has properly exercised his or her appraisal
rights (the "Dissenting Shares") under the DGCL shall not be converted into the
-----------------
right to receive the consideration provided for in this Article III, unless and
until such holder shall have failed to perfect, or shall have effectively
withdrawn or lost, his or her right to dissent from the Merger under the DGCL
and to receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to and subject to the requirements of the DGCL.
If any such holder shall have so failed to perfect or have effectively withdrawn
or lost such right, each share of such holder's Company Common Stock shall
thereupon be deemed to have been converted into and to have become, as of the
Effective Time, the right to receive, without any interest thereon, the
consideration provided for in this Article III.
(b) The Company shall give Purchaser (i) prompt notice of any notice
or demands for appraisal or payment for shares of Company Common Stock received
by the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands or notices. The
Company shall not, without the prior written consent of Purchaser, make any
payment with respect to, or settle, offer to settle or otherwise negotiate, with
respect to any such demands.
(c) Dissenting Shares, if any, after payments of fair value in
respect thereto have been made to the holders thereof pursuant to the DGCL,
shall be canceled.
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 4.01. Organization. Each of the Company and each Company
------------
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to conduct its business as it is now being
conducted and to own, operate or lease the properties and assets it currently
owns, operates or holds under lease. Each of the Company and each Company
Subsidiary is duly qualified or licensed to do business and is in good standing
as a foreign corporation in each jurisdiction where such qualification or
licensing is necessary, except where the failure to so qualify or be licensed
would not have a material adverse effect on the financial condition of the
Company and the Company Subsidiaries, taken as a whole.
Section 4.02. Subsidiaries. Schedule 4.02 sets forth a list as of
------------ -------------
the date hereof of all corporations and other legal entities of which the
Company owns, directly or indirectly, any shares of capital stock or other
equity ownership interests. Except as set forth in Schedule 4.02, all
-------------
outstanding shares of stock of each Company Subsidiary have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned,
directly or indirectly, by the Company free and clear of any Liens, and there
are no outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights or agreements or instruments or understandings of
any character, obligating any Company Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, contingently or otherwise, additional
shares of such Company Subsidiary or any securities or obligations convertible
or exchangeable for such shares or to grant, extend or enter into any such
option, warrants, convertible security, call, right, commitment, preemptive
right or agreement.
Section 4.03. Capitalization. The authorized capital stock of the
--------------
Company consists of (a) 49,500,000 shares of Class A Common Stock, of which
29,925,287 shares were issued and outstanding as of October 13, 1997, (b)
500,000 shares of Class B Common Stock, of which 11,282 were issued and
outstanding as of October 13, 1997, and (c) 10,000,000 shares of Preference
Stock, of which no shares are issued and outstanding on the date of this
Agreement. All outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. Except as
set forth in Schedule 4.03 and as provided in this Agreement, there are no
-------------
authorized or outstanding options, warrants, convertible securities, calls,
rights, commitments, preemptive rights or agreements or instruments or
understandings of any character, to which the Company is a party or by which the
Company is bound, obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, contingently or otherwise, additional shares of
capital stock of the Company or any securities or obligations convertible into
or exchangeable for such shares or to grant, extend or enter into any such
option, warrant, convertible security, call, right, commitment, preemptive right
or agreement. With respect to each type of option or warrant listed on Schedule
--------
4.03, Schedule 4.03 further lists, as of the date of this Agreement, the
- ---- -------------
exercise price and the aggregate number of shares of Company Common Stock
issuable upon exercise of such type of option or warrant (after giving effect to
all
12
applicable anti-dilution provisions). Except as set forth on Schedule 4.03 and
-------------
as provided in this Agreement, to the Company's knowledge, there are no
shareholders agreements or similar agreements regarding the ownership of equity
securities of the Company among any of the holders of any equity securities of
the Company.
Section 4.04. Authorization. The Company has all requisite
-------------
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The affirmative vote of or written consent by the
holders of a majority of the votes entitled to be cast by holders of the Company
Stock is the only vote of any holders of Company Stock ("Company Stockholders")
--------------------
under the DGCL that is necessary for Stockholder Approval of the Merger, this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly approved by the Board of Directors of the Company and the
requisite Company Stockholders and no other corporate proceedings on the part of
the Company are necessary to authorize the Merger, this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and (assuming due authorization, execution and delivery
by Purchaser), constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to creditors'
rights generally and (ii) general principles of equity (whether applied in a
proceeding at law or in equity).
Section 4.05. No Violation. The execution and delivery of this
------------
Agreement by the Company does not, and the consummation by the Company of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation of or default or loss of any benefit under, any
provision of the Company's or any Company Subsidiary's Certificate of
Incorporation or By-laws; (ii) except as otherwise set forth in Schedule 4.05
-------------
hereto and subject to the matters described in Section 4.06 hereof, conflict
with or result in any violation of or default or loss of any benefit under, any
Law or Judgment of any Governmental Entity to which the Company or any Company
Subsidiary is a party or to which any of its property is subject; or (iii)
except as otherwise set forth in Schedule 4.05, conflict with, or result in a
-------------
breach or violation of or default or loss of any benefit under, or accelerate
the performance required by, the terms of any agreement, contract, indenture or
other instrument to which the Company or any Company Subsidiary is a party or to
which any of its property is subject, or constitute a default or loss of any
right thereunder or any event which, with the lapse of time or notice or both,
might result in a default or loss of any right thereunder or the creation of any
Lien upon any of the assets or properties of the Company or any Company
Subsidiary, except with respect to clauses (ii) and (iii) hereof, where the
breach, violation, default, loss of benefit, acceleration or loss of right would
not have a material adverse effect on the financial condition of the Company and
the Company Subsidiaries, taken as a whole, or on the ability of the parties to
consummate the transactions contemplated by this Agreement.
Section 4.06. Approvals. The execution and delivery of this
---------
Agreement and the consummation of the transactions contemplated by this
Agreement by the Company will not require the consent, approval, order or
authorization of any Governmental Entity or any other Person under any
agreement, indenture or other instrument to which the Company or any
13
Company Subsidiary is a party or to which any of its properties is subject,
other than the items disclosed in Schedule 4.06, and no declaration, filing or
-------------
registration with any Governmental Entity is required by the Company or any
Company Subsidiary in connection with the execution and delivery of this
Agreement and the consummation of transactions contemplated by this Agreement,
except for (i) the filing of the Certificate of Merger as required by the DGCL
and the filing of appropriate documents with the relevant authorities of other
states in which the Company or any Company Subsidiary is qualified to do
business, (ii) the filing pursuant to the HSR Act, as amended, and the
expiration or termination of the applicable waiting period under such Act, (iii)
compliance with any applicable requirements of the Securities Act, the Exchange
Act or any other applicable securities laws, (iv) those that may be required
solely by reason of Purchaser's participation in the transactions contemplated
by this Agreement, (v) those the failure of which to obtain would not have a
material adverse effect on the financial condition of the Company and the
Company Subsidiaries, taken as a whole, or on the ability of the parties to
consummate the transactions contemplated by this Agreement, and (vi) filings and
notices not required to be made or given until after the Effective Time.
Section 4.07. Periodic SEC Filings; Financial Statements. (a)
------------------------------------------
Since December 1, 1994, the Company has timely filed all forms, reports and
documents with the SEC that were required to be filed by the Company under the
Securities Act and the Exchange Act. As of their respective filing dates, all
of such forms, reports and documents (the "SEC Filings") complied in all
-----------
material respects with all applicable requirements of the Exchange Act and,
where applicable, the Securities Act. As of their respective filing dates, none
of the SEC Filings, including without limitation any financial statements or
schedules included therein, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent that such statements have been
modified or superseded by a later filed SEC Filing.
(b) The audited consolidated financial statements and unaudited
interim consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 1, 1996
and its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 2,
1997, June 1, 1997 and August 31, 1997 have been prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
the Exchange Act), applied on a consistent basis during the periods involved
(except as may be set forth in the notes thereto), and fairly present in all
material respects the consolidated financial position of the Company and the
consolidated Company Subsidiaries as at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended, subject, in the case of the unaudited interim condensed consolidated
financial statements, to normal year-end adjustments and any other adjustments
described therein, none of which would have a material effect on such interim
financial information.
(c) Except as set forth on Schedule 4.07(c), neither the Company nor
-------------------
any Company Subsidiary has any Liabilities, other than Liabilities (i) that have
been specifically disclosed or provided for in the most recent audited
consolidated balance sheet of the Company filed with the SEC, (ii) that have
been specifically disclosed or provided for in the most recent consolidated
balance sheet of the Company filed with the SEC, (iii) that have been incurred
in the
14
ordinary course of business consistent with past practice since the date of the
most recent audited consolidated balance sheet of the Company filed with the
SEC, (iv) that are not required by GAAP to have been included in the Company's
consolidated balance sheet and would not in the aggregate have a material
adverse effect on the financial condition of the Company and its Subsidiaries,
taken as a whole, or (v) liabilities which in the aggregate are not in excess of
$1,000,000.
(d) Schedule 4.07(d) sets forth all obligations of the Company and
----------------
the Company Subsidiaries as of the date of this Agreement for borrowed money.
(e) Attached hereto as Schedule 4.07(e) is a true and complete copy
----------------
of the latest projections of the consolidated income and cash flows of the
Company for the fiscal years ending November 1997, November 1998, November 1999,
November 2000 and November 2001. Such projections are based on assumptions
which on the whole the Company reasonably believed at the time such projections
were prepared to be fair and reasonable in light of the historical financial
performance of the Company and the Company Subsidiaries and of current and
reasonably foreseeable business conditions.
Section 4.08. Absence of Certain Transactions. Except as set forth
-------------------------------
in the SEC filings and on Schedule 4.08, and except for actions taken by the
-------------
Company in preparation for the transactions contemplated by this Agreement
(which actions have been previously disclosed to Purchaser), and except for the
execution of this Agreement or as otherwise specifically contemplated or
permitted by this Agreement, since December 1, 1996 through the date of this
Agreement:
(a) Ordinary Course. The Company and each Company Subsidiary
---------------
has carried on its business in the usual and ordinary course consistent
with past practice.
(b) Dividends; Securities. Neither the Company nor any Company
---------------------
Subsidiary has (i) declared or paid any dividend or made any other
distribution with respect to Company Stock or the capital stock of any
Company Subsidiary, (ii) redeemed, purchased, canceled or otherwise
acquired, directly or indirectly, any outstanding shares of Company Stock
or any shares of capital stock of any Company Subsidiary, (iii) issued
additional stock (other than upon the exercise or conversion of outstanding
options, warrants or convertible securities), warrants, options or any
other similar rights to acquire Company Stock or any shares of capital
stock of any Company Subsidiary, or (iv) split, combined or reclassified
any shares of Company Stock or any shares of capital stock of any Company
Subsidiary or issued or authorized the issuance of any other securities in
respect of, in lieu of or in substitution for shares of, shares of Company
Stock or any shares of capital stock of any Company Subsidiary.
(c) Certain Transactions. Neither the Company nor any Company
--------------------
Subsidiary has merged or consolidated, reorganized, restructured,
recapitalized, liquidated or filed a voluntary petition in bankruptcy.
15
(d) Indebtedness. Neither the Company nor any Company
------------
Subsidiary has incurred any obligation for borrowed money, incurred any
account payable, or entered into or modified any material contract,
agreement, commitment or arrangement with respect to the foregoing, except
in the ordinary course of business consistent with past practice.
(e) Employee Compensation. Neither the Company nor any Company
---------------------
Subsidiary has granted any increase in compensation to any salaried
employees or paid any bonus, except for increases in salary or wages in the
ordinary course of business consistent with past practice.
(f) Prohibited Dispositions. Other than provision of services
-----------------------
or sales in the ordinary course of business and consistent with past
practices, neither the Company nor any Company Subsidiary has (i) sold,
leased, licensed, transferred or otherwise disposed of any of its assets or
property having a book or market value, individually, in excess of
$250,000, or in the aggregate, in excess of $1,000,000, or (ii) entered
into, or consented to the entering into of, any agreement granting a
preferential right to sell, lease or otherwise dispose of any of such
assets.
(g) Lines of Business and Capital Expenditures. Neither the
------------------------------------------
Company nor any Company Subsidiary has (i) entered into any new line of
business, (ii) changed its investment, liability management or other
material policies in any material respect, (iii) incurred or committed to
incur any capital expenditures, obligations or liabilities in connection
therewith other than capital expenditures, obligations or liabilities that
do not exceed, individually, $500,000 or, in the aggregate, $1,000,000,
(iv) acquired or agreed to acquire by merging or consolidating with, or
acquired or agreed to acquire by purchasing a substantial portion of the
assets of, or in any other manner, any business or Person, or (v) otherwise
acquired or agreed to acquire any other assets or made any lease
commitments for a total individual consideration in excess of $500,000 or
in the aggregate in excess of $1,000,000.
(h) Accounting Methods. Neither the Company nor any Company
------------------
Subsidiary has changed its methods of accounting or keeping its books of
account or accounting practice in effect at December 1, 1996, except as
required by GAAP as concurred in by the Company's independent auditors.
(i) Miscellaneous. Except as set forth on Schedule 4.08(i),
------------- ----------------
neither the Company nor any Company Subsidiary has (i) made any
cancellation or waiver of (A) any right material to the operation of the
business of the Company or any Company Subsidiary or (B) any debts or
claims against any Affiliate of the Company (other than any Company
Subsidiary), (ii) made any disposition of, or failed to keep in effect any
material rights in, to or for the use of any material patent, trademark,
service mark, trade name, copyright or trade secret of the Company or any
Company Subsidiary, or (iii) entered into any agreement, arrangement or
transaction with any Affiliate of the Company (other than any Company
Subsidiary).
16
Section 4.09. Taxes.
-----
(a) Each of the Company and the Company Subsidiaries has timely filed
all Tax Returns it was required to file by applicable Law. All such Tax Returns
were prepared in compliance with applicable Law, and all such Tax Returns are
correct and complete in all material respects, except to the extent modified,
superseded or amended by subsequently filed amended Tax Returns. All Taxes owed
by any of the Company or the Company Subsidiaries (whether or not shown on a Tax
Return) have been paid or reserved on the books of the Company or the relevant
Company Subsidiary. Each of the Company and the Company Subsidiaries has
withheld or paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party. The unpaid Taxes of the Company and the
Company Subsidiaries did not, as of August 31, 1997, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet for the quarter ended on that date as referenced in Section 4.07
(rather than in any notes thereto), and do not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company and the Company Subsidiaries in filing their
Tax Returns.
(b) Except as disclosed on Schedule 4.09 hereto:
-------------
(i) none of the Company and the Company Subsidiaries is
currently the beneficiary of an extension of time within which to file any
Tax Return;
(ii) none of the Company and the Company Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency;
(iii) there is no dispute or claim concerning any Tax
liability of the Company and the Company Subsidiaries either (x) claimed or
raised by any authority in writing or (y) as to which any of the directors
and officers (and employees responsible for Tax matters) of the Company and
the Company Subsidiaries has knowledge based upon personal contact with any
agent of such authority;
(iv) each of the Company and the Company Subsidiaries has
disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Code (S)6662;
(v) from December 1, 1994 through the date of this
Agreement, no claim that has not been resolved has been made by a taxing
authority in a jurisdiction where any of the Company and the Company
Subsidiaries does not file Tax Returns that the Company or any Company
Subsidiary is or may be subject to taxation in such jurisdiction;
(vi) none of the Company and the Company Subsidiaries has
filed a consent concerning collapsible corporations under Code (S)341(f)
(or any corresponding provision of state, local or foreign income Tax law);
17
(vii) there are no liens on any assets of the Company and
the Company Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any material Tax:
(viii) none of the Company and the Company Subsidiaries will
be required as a result of (A) a change in method of accounting for a
taxable period ending on or prior to the Closing Date, to include any
adjustment in taxable income for any taxable period (or portion thereof)
ending after the Closing Date, (B) any "closing agreement", as described in
Section 7121 of the Code (or any corresponding provision of state, local or
foreign income Tax law), to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date, or (C) any deferred intercompany
gain described in Treasury Regulation Section 1.1502-13 or any excess loss
account described in Treasury Regulation Sections 1.1502-19 (or any
corresponding or similar provision or administrative rule of federal,
state, local or foreign income tax law), to include any item of income in
taxable income for any taxable period (or portion thereof) ending after the
Closing Date;
(ix) since December 31, 1986, none of the Company and the
Company Subsidiaries has been a member of an Affiliated Group other than
one of which the Company was the common parent, or filed or been included
in a combined, consolidated or unitary income Tax Return other than one
filed by the Company;
(x) none of the Company and the Company Subsidiaries is a
party to or bound by any Tax allocation or Tax sharing agreement or has a
current or potential contractual obligation to indemnify any other person
with respect to Taxes;
(xi) none of the Company and the Company Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code (S) 280G (or any
corresponding provision of state, local or foreign income Tax law); and
(xii) none of the Company and the Company Subsidiaries owns
any interest in real property in the State of New York or in any other
jurisdiction in which a Tax (other than a net income or franchise tax) is
imposed on the gain on a transfer of an interest in real property.
(c) The Company has made available to Purchaser true and correct
copies of all federal, state, local and foreign income Tax Returns filed with
respect to any of the Company and the Company Subsidiaries for taxable periods
ending on or after December 31, 1991. Schedule 4.09 lists those Tax Returns that
-------------
are currently being audited. The Company has made available to Purchaser correct
and complete copies of all examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and the Company Subsidiaries
since December 31, 1991.
18
(d) A certification issued by the Company pursuant to Treasury
Regulation Section 1897-2 to the effect that the Company is not a "United States
real property holding corporation" as defined in Code (S)897 shall be delivered
to Purchaser prior to the Closing.
(e) As used in this Agreement, the following terms shall have the
following respective meanings.
(i) "Affiliated Group" means an affiliated group as
defined in Code (S)1504 (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income Tax law) of which the
Company is or has been a member.
(ii) "Tax" means any (A) federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital
stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax, of any kind whatsoever,
whether disputed or not, including any interest, penalties or additions to
tax or additional amounts in respect of the foregoing; (B) liability of any
of the Company and the Company Subsidiaries for the payment of any amounts
of the type described in clause (A) arising as a result of being (or
ceasing to be) a member of any Affiliated Group (or being included (or
required to be included) in any Tax Return relating thereto); and (C)
liability of any of the Company and the Company Subsidiaries for the
payment of any amounts of the type described in clause (A) as a transferee
or successor by contract (including as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability of
any other person), or otherwise; and
(iii) "Tax Returns" means returns, declarations, reports,
claims for refund, information returns or other documents (including any
related or supporting schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
Section 4.10. Litigation. Except as set forth on Schedule 4.10,
---------- -------------
there is no Proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary by or before any Governmental
Entity or by any Person, which, if adversely determined, would reasonably be
expected to (i) result in a judgment against the Company or one of the Company
Subsidiaries in an amount in excess of $250,000, (ii) materially interfere with
the conduct of the business of the Company or the Company Subsidiaries or (iii)
have a material adverse effect on the financial condition of the Company and the
Company Subsidiaries, taken as a whole. Except as set forth on Schedule 4.10,
-------------
neither the Company nor any Company Subsidiary is a party to or, to the
knowledge of the Company, bound by any Judgment. Schedule 4.10 lists all single
-------------
instances of any Proceeding or series of related Proceedings against the Company
or any Company Subsidiary or any predecessor (whether arising out of similar
facts or circumstances, a consistent or pervasive course of conduct or practice
or otherwise) which have been settled (x) in the last five years for settlements
which
19
have, or have had, a material adverse effect on the Company and the Company
Subsidiaries, taken as a whole, (y) since January 1, 1995, for amounts paid by
the Company and the Company Subsidiaries in excess of $500,000, or (z) to the
knowledge of the Company, since January 1, 1995, for amounts paid by the Company
and the Company Subsidiaries in excess of $100,000.
Section 4.11. Environmental Matters.
---------------------
(a) Except as set forth on Schedule 4.11(a): (i) to the Company's
----------------
knowledge, the Company and the Company Subsidiaries have been, and are, in
material compliance with all applicable Environmental Laws; (ii) to the
Company's knowledge, the Company and each Company Subsidiary has obtained all
material Environmental Permits necessary for the operation of the business of
the Company and the Company Subsidiaries; and (iii) there are no outstanding
notices or claims against the Company or any Company Subsidiary for damages,
penalties or other obligations or liabilities relating to the presence,
generation, transportation, treatment, storage or disposal of Hazardous
Materials in, at, under or from any property owned, leased or operated by the
Company or any Company Subsidiary.
(b) Except as set forth on Schedule 4.11(b), to the Company's
----------------
knowledge, there are no underground storage tanks on any property currently
owned or leased by the Company or any Company Subsidiary, or any property
formerly owned or leased by the Company or any Company Subsidiary for which
either the Company or any Company Subsidiary has responsibility or liability.
(c) Except as specified on the various reports and other documents
set forth on Schedule 4.11(c), to the Company's knowledge, there is no asbestos
----------------
or asbestos-containing material at, on, or in any real property or improvement
currently owned or leased by the Company or any Company Subsidiary, or any
property formerly owned or leased by the Company or any Company Subsidiary for
which either the Company or any Company Subsidiary has responsibility or
liability.
(d) Except as set forth on Schedule 4.11(a), to the Company's
----------------
knowledge, neither the Company nor any Company Subsidiary has treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled, or
released any Hazardous Materials or owned or operated any property or facility
(and no such property or facility is contaminated by any Hazardous Materials) in
a manner that has given or will give rise to material liabilities to the Company
or any Company Subsidiary, including any material liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to CERCLA, RCRA or any other Environmental
Law.
(e) Except as set forth on Schedule 4.11(a), to the Company's
----------------
knowledge, neither the Company nor any Company Subsidiary has, either expressly
or by operation of law, assumed, undertaken or otherwise become subject to any
liability of any other Person relating to Environmental Law, including without
limitation any obligation for corrective or remedial action.
20
Section 4.12. Real Property.
-------------
(a) Schedule 4.12 identifies by street address all real estate
-------------
leased, subleased or otherwise occupied pursuant to an agreement (the "Leases")
------
by the Company or any Company Subsidiary (the "Leased Premises") or owned by the
---------------
Company or any Company Subsidiary ("Owned Property", and, collectively with the
--------------
Leased Premises, the "Real Property"). The Leased Premises are leased to the
-------------
Company or such Company Subsidiary pursuant to written leases, copies of which
have been made available to Purchaser. With respect to each Lease: (i) the
Company or the applicable Company Subsidiary has a good and valid leasehold
interest in and to all of the Leased Premises, and, to the Company's knowledge,
such leasehold interest is subject to no Liens other than those listed on
Schedule 4.12; (ii) each Lease is in full force and effect and is enforceable in
- -------------
accordance with its terms and none of the Company or any Company Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in such Lease; (iii) there exists no default or condition which, with
the giving of notice, the passage of time or both, could become a default under
any Lease; and (iv) no consent, waiver, approval or authorization is required
from the landlord under any Lease as a result of the execution of this Agreement
or the consummation of the transactions contemplated hereby. Except as set
forth on Schedule 4.12, there are no outstanding options or rights of first
-------------
refusal to purchase the Owned Property or any portion thereof or interest
therein. The Company or a Company Subsidiary has good and marketable title in
and to the Owned Property, free and clear of all Liens, except (i) for general
real estate taxes and special assessments not yet delinquent, easements, rights
of parties in possession, covenants, conditions and restrictions and other
matters of record which do not materially impair the occupancy or use of the
Real Property for the purposes for which it is currently used in connection with
the Company's business, utility easements, building restrictions, zoning
restrictions and other easements and restrictions, whether or not recorded,
existing generally with respect to properties of a similar character and which
are not violated in any material respect by the current use and operation of the
Real Property and (ii) as otherwise set forth on Schedule 4.12.
-------------
(b) The Real Property constitutes all of the real properly owned,
leased, occupied or otherwise utilized in connection with the business of the
Company and the Company Subsidiaries. Other than the Company and the Company
Subsidiaries, there are no parties in possession or parties having any current
or future right to occupy any of the Real Property, except tenants under any
leases disclosed on Schedule 4.12 who are in possession of space to which they
-------------
are entitled. The Real Property is in good condition and repair (subject to
normal wear and tear) and is sufficient and appropriate for the conduct of the
Company's and the Company Subsidiaries' business. To the Company's knowledge
(i) all permits, licenses and other approvals necessary to the current occupancy
and use of the Real Property (excluding Environmental Permits as described in
Section 4.11) have been obtained, are in full force and effect and have not been
violated in any material respect and (ii) there exists no violation of any
material covenant, condition, restriction, easement, agreement or order
affecting any portion of the Real Property. All improvements located on the
Real Property have direct access to a public road adjoining such Real Property.
All facilities located on the Real Property are supplied with adequate utilities
and other services necessary for the operation of such facilities, including
gas, electricity, water, telephone, sanitary sewer and storm sewer. There is no
pending or, to the knowledge of the Company, threatened condemnation proceeding,
or material lawsuit or
21
administrative action affecting any portion of the Real Property to which the
Company or any of the Company Subsidiaries is a named party.
Section 4.13. Personal Property.
-----------------
(a) The Company or a Company Subsidiary has good and merchantable
title to all personalty of any kind or nature which the Company or a Company
Subsidiary purports to own, free and clear of all Liens, except for (i) Liens
identified on Schedule 4.13, (ii) Liens for non-delinquent ad valorem taxes and
-------------
non-delinquent statutory liens arising other than by reason of default, (iii)
statutory Liens of landlords, Liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not yet due,
(iv) Liens incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other types of
social security, (v) purchase money Liens, and (vi) minor irregularities of
title which do not materially detract from the value or use of said personalty.
The Company or a Company Subsidiary as lessee has the right under valid and
subsisting leases to use, possess and control all personalty leased by and
material to the Company or such Company Subsidiary as now used, possessed and
controlled by the Company or such Company Subsidiary.
(b) All machinery, equipment and other tangible assets currently
being used by the Company or any Company Subsidiary which are owned or leased by
the Company or any Company Subsidiary are in good operating condition,
maintenance and repair, ordinary wear and tear excepted, are usable in the
ordinary course of business and are reasonably adequate and suitable for the
uses to which they are being put, except where any other condition of any
machinery, equipment or other tangible asset would not have a material adverse
effect on the financial condition of the Company and the Company Subsidiaries,
taken as a whole.
Section 4.14. Contracts. Schedule 4.14 is a complete list of all
--------- -------------
written agreements of the Company or any Company Subsidiary (other than
contracts for the sale in the ordinary course of business of products
manufactured by the Company or any Company Subsidiary) that are currently in
effect (except for those set forth in clause (x) below) and that are (i) leases,
sales contracts and other agreements with respect to any property, real or
personal, of the Company and the Company Subsidiaries which provide for the
receipt or expenditure by the Company or any Company Subsidiary after the date
of this Agreement, of more than $100,000; (ii) contracts or commitments for
capital expenditures or acquisitions in excess of $100,000 for one project or
set of related projects; (iii) guarantees of third party obligations; (iv)
agreements (including non competition agreements) which restrict the kinds of
businesses in which the Company or any of the Company Subsidiaries may engage or
the geographical area in which any of them may conduct their business; (v)
indentures, mortgages, loan agreements or other agreements relating to the
borrowing of money, the granting of Liens or lines of credit; (vi) collective
bargaining agreements; (vii) material licenses, agreements, assignments or
contracts (whether as licensor or licensee, assignor or assignee) relating to
any patent and trademark rights; (viii) brokerage or finder's agreements; (ix)
joint venture agreements, partnership agreements or similar agreements; (x)
stock purchase agreements, asset purchase agreements or other acquisition or
divestiture agreements executed within the last five years; (xi) employment,
consulting or management agreements; (xii) agreements or other arrangements with
any director, officer,
22
employee or shareholder of the Company or any Company Subsidiary or any
Affiliate of any of the foregoing (other than customary at will employment
arrangements); or (xiii) any agreement or contract which is not of the foregoing
type and is material to the Company or any of the Company Subsidiaries (all
items required to be identified in Schedule 4.14 being hereinafter referred to
-------------
as "Contracts"). True and correct copies of all the Contracts identified in
---------
Schedule 4.14 have been made available to Purchaser. Except as set forth on
- -------------
Schedule 4.14, (i) all Contracts are valid and subsisting and in full force and
- -------------
effect, and the Company and the Company Subsidiaries have duly performed their
obligations thereunder in all material respects to the extent such obligations
have accrued, and (ii) no breach or default thereunder by the Company or any
Company Subsidiary or, to the Company's knowledge, by any other party thereto,
has occurred, except where such breach or default would not reasonably be
expected to have a material adverse effect on the financial condition of the
Company and the Company Subsidiaries, taken as a whole.
Section 4.15. Employee and Labor Matters and Plans.
------------------------------------
(a) Schedule 4.15(a) lists each of the following plans and contracts
----------------
which is sponsored, maintained or contributed to by the Company or any Company
Subsidiary for the benefit of any current or former employee, director or other
personnel: (i) any "employee benefit plan," as such term is defined in Section
3(3) of ERISA, whether or not subject to the provisions of ERISA; and (ii) any
other employment, consulting, collective bargaining, stock option, stock bonus,
stock purchase, phantom stock, incentive, bonus, deferred compensation,
retirement, severance, vacation, medical or dental contract, policy or
arrangement which is not an employee benefit plan as defined in Section 3(3) of
ERISA (each such plan, contract, policy and arrangement being herein referred to
as an "Employee Plan").
-------------
(b) With respect to each Employee Plan, except for any multiemployer
plan within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan") and
------------------
except as set forth on Schedule 4.15(b), the Company has made available to
----------------
Purchaser true and complete copies of each contract, plan document, policy
statement, summary plan description and other written material governing or
describing the Employee Plan (including, without limitation, any related trust
agreement or insurance company contract) or, if there are no such written
materials, a summary description of the Employee Plan. With respect to each
Employee Plan which is a pension plan (as defined in Section 3(2) of ERISA) and
also is a Multiemployer Plan, the Company has identified each such plan on
Schedule 4.15(b).
- ----------------
(c) With respect to each Employee Plan which is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
which is prohibited by Section 406 of ERISA or which constitutes a "prohibited
transaction" under Section 4975(c) of the Code and with respect to which a
prohibited transaction exception has not been granted and is not currently in
effect except where such "Prohibited Transaction" would not have a material
adverse effect on the financial condition of the Company and the Company
Subsidiaries, taken as a whole.
(d) Schedule 4.15(d) identifies each funded Employee Plan which is an
----------------
employee pension plan within the meaning of Section 3(2) of ERISA (other than a
multiemployer plan
23
within the meaning of Section 3(37) of ERISA). With respect to each such funded
Employee Plan: (i) the Employee Plan is a qualified plan under Section 401(a) or
403(a) of the Code, and its related trust is exempt from federal income taxation
under Section 501(a) of the Code; (ii) a request for favorable IRS determination
letter has been made and, since the date of such request, the Employee Plan has
not been amended or operated in a manner which would materially adversely affect
its qualified status and no event has occurred which has caused or could cause
the loss of such status; (iii) to the knowledge of the Company, there has been
no termination or partial termination within the meaning of Section 411(d)(3) of
the Code; (iv) no such Employee Plan (other than the Sealy Retirement Plan) is
covered by Section 412 of the Code; and (v) no such Employee Plan (other than
the Sealy Retirement Plan) is covered by Title IV of ERISA. The Company has not
ceased operations at a facility so as to become subject to the provisions of
Section 4068(f) of ERISA, withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA, withdrawn as a sponsor of a
multiemployer plan within the meaning of Section 3(37) of ERISA, or ceased
making contributions on or before the Closing Date to any Employee Plan which is
a pension plan subject to Section 4064(a) of ERISA. Except as set forth on
Schedule 4.15(d), as of October 21, 1997, the Company is not aware of any
- ----------------
withdrawal liability claims against the Company or any Company Subsidiary in
connection with plant closings or other activity.
(e) Except as set forth on Schedule 4.15(e), the consummation of the
----------------
transactions contemplated by this Agreement will not entitle any employee or
other person to receive severance or other compensation which would not
otherwise be payable absent the consummation of the transactions contemplated by
this Agreement or cause the acceleration of the time of payment or vesting of
any award or entitlement under any Employee Plan.
(f) Except as set forth on Schedule 4.15(f), to the knowledge of the
----------------
Company, since December 1, 1995, there have been no governmental audits of the
equal employment opportunity practices of the Company or any Company Subsidiary.
There is no unfair labor practice charge or complaint against the Company or any
Company Subsidiary pending before the National Labor Relations Board or strike,
dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company that is likely to have a material
adverse effect on the Company and the Company Subsidiaries, taken as a whole,
and none has occurred since December 1, 1995.
(g) Each Employee Plan (and each related trust or insurance contract)
complies in form and in operation in all material respects with the applicable
requirements of ERISA, the Code and any other applicable laws. All required
reports and descriptions (including Form 5500 Annual Reports, Summary Annual
Reports, PBGC-l'S, and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each Employee Plan. All contributions (including
all employer contributions and employee salary reduction contributions),
premiums, reimbursements and accruals which related to or arise from any period
ending on or prior to the Closing Date have been paid or accrued.
Section 4.16. Insurance Policies. Schedule 4.16 contains a summary
------------------ -------------
description of all material insurance policies of the Company and the Company
Subsidiaries and each such policy is in full force and effect. All premiums
with respect to the insurance policies listed on
24
Schedule 4.16 which are due and payable prior to the Effective Time have been
- -------------
paid or will be paid prior to the Effective Time, and no written notice of
cancellation or termination has been received by the Company with respect to any
such policy. To the knowledge of the Company, there are no pending claims
against such insurance by the Company or any Company Subsidiary as to which the
insurers have denied coverage or otherwise reserved rights. Neither the Company
nor any Company Subsidiary has been refused any insurance with respect to its
assets or operations during the past five years. The Company's Risk and
Investment Guide, which has been made available to Purchaser, describes any
self-insurance or risk retention arrangements currently in effect for the
Company or any Company Subsidiary other than customary deductibles.
Section 4.17. Intellectual Properties.
-----------------------
(a) "Intellectual Property" shall mean all patents, patent
---------------------
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); all trademarks, service marks, trade
dress, trade names and all the goodwill associated therewith; all registered and
unregistered copyrights; all registrations, applications and renewals for any
other foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research information, drawings, specifications, designs, plans, improvements,
proposals, technical and computer data, documentation and software, financial,
business and marketing plans, customer and supplier lists and related
information, marketing materials and all other intellectual property rights.
(b) Schedule 4.17 contains a complete list of all domestic and
-------------
foreign patents, patent applications, patent licenses, trade names, trademarks
and service marks ("Trademarks"), Trademark registrations and applications,
----------
copyright registrations and applications owned (in whole or in part), licensed
to any extent or used by the Company or any of the Company Subsidiaries.
(c) (i) The Company or a Company Subsidiary, as the case may be, is
the owner of or is duly licensed to use pursuant to a valid and enforceable
license agreement the Intellectual Property used in the conduct of its business;
(ii) each item constituting part of the Intellectual Property in which the
Company or a Company Subsidiary has an ownership interest has been, to the
extent indicated in Schedule 4.17, duly registered with, filed in or issued by,
-------------
as the case may be, the United States Patent and Trademark Office or such other
Governmental Entities, domestic or foreign, as are indicated in Schedule 4.17;
-------------
and (iii) each Trademark registration, copyright registration and patent owned
by the Company or a Company Subsidiary has been maintained in good standing, and
remains in full force and effect.
(d) No claim of infringement or misappropriation of Intellectual
Property of any other Person or contesting the validity, enforceability, use or
ownership of any Intellectual Property owned or used by the Company or any
Company Subsidiary has been made against the Company or any Company Subsidiary,
and neither the Company nor any Company Subsidiary is infringing or
misappropriating any Intellectual Property of any other Person. Without
limiting the foregoing, except as set forth on Schedule 4.17 no claim is pending
-------------
or, to the knowledge of the Company, threatened to the effect that the conduct
by the Company or any Company Subsidiary of its business conflicts with or
infringes in any way upon any Intellectual Property owned by any
25
other Person that the Company or any Company Subsidiary needs to or should enter
into a license arrangement so as to continue the conduct of its business without
infringing such other Person's Intellectual Property or that any of the
Trademarks set forth on Schedule 4.17 has been abandoned. The Company actively
-------------
defends its Intellectual Property from infringement and misappropriation by
other Persons. All Intellectual Properly owned or used by the Company or any
Company Subsidiary immediately prior to the Closing will be owned or available
for use by the Company and the Company Subsidiaries on identical terms and
conditions immediately subsequent to the Closing.
(e) Without limiting any other provisions hereof, except as set forth
on Schedule 4.17, neither the Company nor any Company Subsidiary has granted any
-------------
license, franchise or permit to any Person to use any of the Intellectual
Property of the Company or the Company Subsidiaries, and no other Person has the
right to use the same Trademarks, service marks or trade names owned by the
Company or the Company Subsidiaries or any similar trademarks, service marks or
trade name in connection with the same or similar applications as those of the
Company and the Company Subsidiaries
Section 4.18. Permits. The Company and the Company Subsidiaries
-------
have all Permits, except for those Permits the failure to have would not,
individually or in the aggregate, have a material adverse effect on the Company
and the Company Subsidiaries, taken as a whole. Schedule 4.18 contains a
-------------
complete list of the material Permits, exclusive of any Environmental Permits
and Permits with respect to state or local sales, use or other Taxes. To the
knowledge of the Company, all of the Permits are in full force and effect except
where the failure to be so in effect would not have a material adverse effect on
the financial condition of the Company and the Company Subsidiaries, taken as a
whole. No outstanding notice of cancellation or termination has been delivered
to the Company or any Company Subsidiary in connection with any such Permit nor,
to the knowledge of the Company, has any such cancellation or termination been
threatened. To the knowledge of the Company, no application, action or
proceeding for the modification of any such Permits is pending or threatened
that may result in the revocation, modification, nonrenewal or suspension of any
material Permits. Each of the Company and each Company Subsidiary has filed
when due all documents required to be filed with any Governmental Entity in
connection with such Permits and, at the time of the filing thereof, all such
filings were accurate and complete in all material respects.
Section 4.19. Compliance with Laws. Except for matters relating to
--------------------
Environmental Laws (which are the subject of Section 4.11), neither the Company
nor any Company Subsidiary is in violation of or has violated or failed to
comply with any Law or Judgment applicable to its business or operations, except
for violations and failures to comply that would not, individually or in the
aggregate, be reasonably likely to result in a material adverse effect on the
financial condition of the Company and the Company Subsidiaries, taken a whole.
Section 4.20. Brokerage Fees. Except as set forth on Schedule 4.20,
-------------- -------------
neither the Company nor the Shareholder has retained any financial advisor,
broker, agent or finder or agreed to pay an financial advisor, broker, agent or
finder on account of this Agreement or any transaction contemplated hereby or
any transaction of like nature that would give rise to any valid
26
claim against Purchaser for any broker's or finder's fee or similar compensation
in connection with the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to Purchaser as
follows:
Section 5.01. Authorization. The Shareholder has the requisite
-------------
partnership power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized,
and no other partnership proceedings on the part of the Shareholder are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Shareholder and
(assuming due authorization, execution and delivery by Purchaser) constitutes a
legal, valid and binding obligation of the Shareholder, enforceable against the
Shareholder in accordance with its terms, except as such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to creditors' rights generally and (ii)
general principles of equity (whether applied in a proceeding at law or in
equity).
Section 5.02. No Violation. The execution and delivery of this
------------
Agreement by the Shareholder do not, and the consummation by the Shareholder of
the transactions contemplated hereby will not, (i) conflict with or violate the
partnership agreement of the Shareholder, (ii) subject to making the filings and
obtaining the approvals identified in Section 5.03, conflict with or violate any
Law or Judgment applicable to the Shareholder or by which the Shareholder or any
Owned Shares is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of purchase or sale, or any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a Lien on any Owned Shares pursuant to any contract, agreement or
other instrument or obligation to which the Shareholder is a party or by which
the Shareholder or any property or asset of the Shareholder is bound or
affected.
Section 5.03. Approvals. The execution and delivery of this
---------
Agreement by the Shareholder do not, and the performance of this Agreement and
the consummation by the Shareholder of the transactions contemplated hereby will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity, except for (i) the filing of the
Certificate of Merger as required by the DGCL and the filing of appropriate
documents with the relevant authorities of other states in which the Company or
any Company Subsidiary is qualified to do business, (ii) applicable
requirements, if any, of the Exchange Act and (iii) the notification
requirements under the HSR Act.
Section 5.04. Ownership of Owned Shares. The Shareholder is the
-------------------------
sole record and beneficial owner of the Owned Shares, free and clear of any
Liens and free of any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of
27
the Owned Shares or any interest therein) except pursuant to this Agreement.
The Owned Shares constitute all of the Company Common Stock owned of record or
beneficially (within the meaning of Rule 13d-3 under the Exchange Act) by the
Shareholder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company and the
Shareholder as follows:
Section 6.01. Organization. Purchaser is a corporation duly
------------
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
conduct its business as it is now being conducted and to own, operate or lease
the properties and assets it currently owns, operates or holds under lease.
Purchaser is duly qualified or licensed to do business and is in good standing
as a foreign corporation in each jurisdiction where such qualification or
licensing is necessary, except where the failure to so qualify or be licensed
would not have a material adverse effect on the financial condition of Purchaser
and its Subsidiaries, taken as a whole.
Section 6.02 Authorization. Purchaser has all requisite corporate
-------------
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by the Board of
Directors of Purchaser, and by the Investors as the stockholders of Purchaser,
and no other corporate proceeding on the part of Purchaser is necessary to
authorize the Merger, this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Purchaser and (assuming
due authorization, execution and delivery by the Company and the Shareholder)
constitutes the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except as such enforcement may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to creditors' rights generally and (ii)
general principles of equity (whether applied in a proceeding at law or in
equity).
Section 6.03. No Violation. The execution and delivery of this
------------
Agreement by Purchaser does not, and the consummation by Purchaser of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation of or default or loss of any benefit under, any
provision of Purchaser's Certificate of Incorporation or By-laws; (ii) except as
otherwise set forth in Schedule 6.03 hereto and subject to the matters described
-------------
in Section 6.04 hereof, conflict with or result in any violation of or default
or loss of any benefit under, any Law or Judgment of any Governmental Entity to
which Purchaser is a party or to which any of its property is subject; or (iii)
except as otherwise set forth in Schedule 6.03, conflict with, or result in a
-------------
breach or violation of or default or loss of any benefit under, or accelerate
the performance required by, the terms of any agreement, contract, indenture or
other instrument to which Purchaser is a party or to which any of its property
is subject, or constitute a default or loss of any right thereunder or an event
which, with the lapse of time or notice or both, might result in a default or
loss of any right thereunder or the creation of any lien, charge or encumbrance
upon
28
any of the assets or properties of Purchaser, except with respect to clauses
(ii) and (iii) hereof, where the breach, violation, default, loss of benefit,
acceleration or loss of right would not have a material adverse effect on the
financial condition of Purchaser and its Subsidiaries, taken as a whole, or on
the ability of the parties to consummate the transactions contemplated by this
Agreement.
Section 6.04. Approvals. The execution and delivery of this
---------
Agreement and the consummation of the transactions contemplated by this
Agreement by Purchaser will not require the consent, approval, order or
authorization of any Governmental Entity or any other Person under any
agreement, indenture or other instrument to which Purchaser is a party or to
which any of its properties is subject, other than the items disclosed in
Schedule 6.04, and no declaration, filing or registration with any Governmental
- -------------
Entity is required by Purchaser in connection with the execution and delivery of
this Agreement and the consummation of transactions contemplated by this
Agreement, except for (i) the delivery and filing of the Certificate of Merger
as required by the DGCL and the filing of appropriate documents with the
relevant authorities of other states in which Purchaser is qualified to do
business, (ii) the filing pursuant to the HSR Act, and the expiration or
termination of the applicable waiting period under such Act, (iii) compliance
with any applicable requirements of the Securities Act, the Exchange Act and any
other applicable securities laws, (iv) those the failure of which to obtain
would not have a material adverse effect on the financial condition of Purchaser
and its Subsidiaries, taken as a whole, or on the ability of the parties to
consummate the transactions contemplated by this Agreement, and (v) filings and
notices not required to be made or given until after the Effective Time.
Section 6.05. Litigation. Except as set forth on Schedule 6.05,
---------- -------------
there is no Proceeding pending or, to the knowledge of Purchaser, threatened
against Purchaser by or before any Governmental Entity or by any Person, which,
if adversely determined, would reasonably be expected to (i) result in a
judgment against Purchaser in an amount in excess of $250,000, (ii) materially
interfere with the conduct of the business of Purchaser or (iii) have a material
adverse effect on the financial condition of Purchaser. Except as set forth on
Schedule 6.05, Purchaser is not a party to or, to the knowledge of Purchaser,
- -------------
bound by any Judgment.
Section 6.06. Financing. Purchaser has received and has furnished to
---------
the Company a copy of (i) a commitment letter from Goldman Sachs Credit Partners
L.P., dated October 29, 1997, pursuant to which Goldman Sachs Credit Partners
L.P. has committed to provide or cause to be provided up to $435 million of term
and $50 million of revolving senior debt financing and (ii) a commitment letter
from Goldman, Sachs & Co. dated October 29, 1997, pursuant to which Goldman,
Sachs & Co. has committed to place or cause to be placed up to $165 million of
senior subordinated notes and $75 million of senior subordinated discount
debentures (collectively, the "Commitment Letters"). The Commitment Letters are
------------------
in full force and effect on the date of this Agreement and Purchaser believes it
will be able to obtain the financing (the "Debt Financing") described in the
--------------
Commitment Letters on the terms and conditions provided in the Commitment
Letters. The Investors have committed, subject only to the conditions set forth
in Sections 8.01 and 8.02 hereof, to capitalize Purchaser with $135 million of
equity (the "Equity Financing") which, subject to Section 7.15 hereof, may
----------------
include common and preferred stock in the discretion of the Investors. The Debt
Financing and the Equity Financing, if, as and when received, will provide the
funds necessary to pay the cash consideration payable in the Merger pursuant to
29
Section 3.01(a) hereof, the Company Expenses, the Warrant and Option Charges and
the repayment or refinancing of Indebtedness, including the Senior Sub Notes,
and accrued interest thereon, plus expenses incurred in connection therewith.
Section 6.07. Brokerage Fees. Except as set forth on Schedule 6.07,
-------------- -------------
Purchaser has not retained any financial advisor, broker, agent or finder or
agreed to pay any financial advisor, broker, agent or finder on account of this
Agreement or any transaction contemplated hereby or any transaction of like
nature that would give rise to any valid claim against the Company or the
Shareholder for any broker's or finder's fee or similar compensation in
connection with the transactions contemplated hereby.
Section 6.08. Purchaser Activities. Purchaser was organized solely
--------------------
for the purpose of entering into this Agreement and consummating the
transactions contemplated hereby and has not engaged in any activities or
business, and has incurred no liabilities or obligations whatsoever, in each
case, other than those incident to its organization and the execution of this
Agreement and the consummation of the transactions contemplated hereby.
Section 6.09. Capitalization. On the Closing Date, the authorized
--------------
capital stock of Purchaser will consist of shares of Common Stock, par value
$0.01 per share, shares of Class L Common Stock, par value $0.01 per share, and
shares of blank-check preferred stock. Except as provided in, or contemplated
by, this Agreement, there are no authorized or outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights or
agreements or instruments or understandings of any character, to which Purchaser
is a party or by which Purchaser is bound, obligating Purchaser to issue,
deliver or sell, or cause to be issued, delivered or sold, contingently or
otherwise, additional shares of capital stock of Purchaser or any securities or
obligations convertible into or exchangeable for such shares or to grant, extend
or enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right or agreement.
ARTICLE VII
COVENANTS
Section 7.01. Interim Operations of the Company . During the period
---------------------------------
from the date of this Agreement to the Effective Time, except as specifically
contemplated by this Agreement (including upon the conversion of Company Common
Stock into Preference Stock and the steps taken to extinguish, repurchase or
refinance the Indebtedness, options and warrants, all as contemplated hereby) or
as set forth on Schedule 7.01 or as otherwise consented to in writing by
-------------
Purchaser, the Company will and will cause each Company Subsidiary to:
(a) carry on its business in, and only in, the ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts to (i) preserve
intact its present business organization, (ii) keep available the services
of its present officers and employees, (iii) preserve its relationships
with clients, suppliers, customers, distributors, licensees, licensors and
others having
30
business dealings with it, (iv) maintain all assets other than those
disposed of in the ordinary course of business in good repair and
condition, (v) maintain all insurance, (vi) maintain its books of account
and records in the usual, regular and ordinary manner, and (vii) maintain
and protect all of their Intellectual Property so as not to affect
adversely the validity or enforceability thereof;
(b) not amend its Certificate of Incorporation or By-laws or
other governing document or agreement;
(c) not acquire by merging or consolidating with, or purchasing
all or substantially all of the assets of, or otherwise acquiring, any
business of any corporation, partnership, association or other business
organization or division thereof, in each case for consideration having a
value in excess of $1,000,000;
(d) not split, combine or reclassify its outstanding capital
stock or declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock (in cash or otherwise) other than (i)
dividends paid by the Company's wholly-owned Subsidiaries to the Company or
its wholly-owned Subsidiaries and (ii) the issuance of Preference Stock to
the Shareholder (as contemplated by Section 8.02(j));
(e) not issue or sell (or agree to issue or sell) any shares of
its capital stock of any class or series, or any options, warrants,
conversion or other rights to purchase any such shares or any securities
convertible into or exchangeable for such shares (other than upon the
exercise or conversion of options, warrants or convertible securities
outstanding on the date hereof), or grant, or agree to grant, any such
options or modify or alter the terms of any of the above;
(f) not, other than in the ordinary course of business, (i)
incur any indebtedness for borrowed money or vary the material terms of any
existing debt securities, (ii) issue or sell any debt securities, (iii)
acquire or dispose of any assets having a book or market value in excess of
$500,000, (iv) enter into any material contract, or (v) modify in any
material respect or terminate any material Contract;
(g) not take any steps to mortgage or pledge to secure any
material obligation, or to subject to any material Lien, any of its
material properties, other than in the ordinary course of business
consistent with prior practice and following prior notice to and
consultation with Purchaser;
(h) not grant to any director or officer, or, except in the
ordinary course of business, consultant or other employee any increase in
compensation in any form, or any severance or termination pay, or make any
loan to or enter into any employment agreement, collective bargaining
agreement or arrangement with any such person, except in each case as may
be legally required pursuant to any existing Employee Plan;
(i) not adopt, enter into, amend in any material respect,
announce any intention to adopt or terminate, any Employee Plan or other
employee benefit plan,
31
program or arrangement of general applicability, except as required by
applicable Law or as disclosed on any disclosure schedule pursuant to
Section 4.15;
(j) not discharge or satisfy any material Lien or pay or satisfy
any material obligation or Liability (fixed or contingent) except in the
ordinary course of business consistent with past practice, or commence any
voluntary petition, proceeding or action under any bankruptcy, insolvency
or other similar Laws;
(k) not make or institute any change in its accounting
procedures or practices unless mandated by GAAP;
(l) not make any Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
(m) not enter into any transaction which would have been
required to be listed on Schedule 4.08 had such transaction occurred during
-------------
the period between December 1, 1996 and the date of this Agreement;
(n) not enter into any agreement or other arrangement with any
director, officer, employee or shareholder of the Company or any Company
Subsidiary or any Affiliate of any of the foregoing, except in the ordinary
course of business or as disclosed on Schedule 4.08;
-------------
(o) not take any action or omit to take any action which would
result in a violation of any applicable law or would cause a breach of any
agreement, contract or commitment, which violation or breach would have a
material adverse effect on the financial condition of the Company and its
Subsidiaries, taken as a whole; or
(p) not authorize or propose, or agree to take, any of the
actions set forth in the foregoing subparagraphs (b) through (o).
Section 7.02. Access to Information; Assistance with Financing . (a)
------------------------------------------------
The Company shall (and shall cause each Company Subsidiary to) afford to the
officers, employees, accountants, counsel and other representatives of
Purchaser, reasonable access, during normal business hours, during the period
prior to the Effective Time, to all of the properties, books, contracts,
commitments, records, officers, personnel and accountants of the Company and the
Company Subsidiaries and will furnish to Purchaser all such documents and copies
of documents and financial records and all information with respect to the
affairs of the Company and the Company Subsidiaries as Purchaser may reasonably
request. Purchaser and such representatives will hold any such information
which is non-public in confidence in accordance with the provisions of the
existing confidentiality agreement between the Company and Purchaser dated as of
August 8, 1997. Notwithstanding the preceding sentence, the Company
acknowledges that Purchaser may cause an information memorandum to be prepared
and used in connection with the consummation of the Purchaser's financing of the
transactions contemplated hereby and agrees to use commercially reasonable
efforts to furnish Purchaser with access to, and to permit the use of, all
information necessary and to furnish Purchaser with access to, and to cause the
cooperation of,
32
all personnel necessary for Purchaser to consummate such financing (it being
understood that such financing shall not require the filing of any registration
statement with the Securities and Exchange Commission prior to the Closing). In
addition, the Company shall request its accountants to consent to the inclusion
of their report or reports in, and to issue a comfort letter in connection with,
any offering memoranda or filings required by such financing.
(b) If required by Purchaser's financing sources, with respect to any
parcel of Owned Property, the Company shall use its commercially reasonable
efforts to deliver to Purchaser title insurance and/or a survey or surveys for
such parcel of Owned Property, in each case, in form and substance reasonably
acceptable to Purchaser. If required by Purchaser's financing sources, with
respect to each leased parcel of Real Property, the Company shall use its
commercially reasonable efforts to deliver to Purchaser a nondisturbance
agreement, a consent and waiver and/or an estoppel letter executed by the
landlord, lessor, landlord and/or licensor of such leased Real Property, in each
case, in form and substance reasonably acceptable to Purchaser. Any fees and
expenses paid or payable by, or incurred by the Company or any of the Company
Subsidiaries in connection with this Section 7.02(b) shall not be deemed to be
Company Expenses.
Section 7.03. Acquisition Proposals. The Company and the
---------------------
Shareholder shall not, and the Company shall cause the Company Subsidiaries not
to, directly or indirectly, (i) solicit, initiate or encourage the submission of
any inquiries, discussions or proposals or offers from any other Person relating
to a possible disposition of the stock or any material portion of the assets of
the Company or any Company Subsidiary, (ii) continue, propose, solicit,
initiate, encourage or enter into negotiations or discussions relating to a
possible disposition of the stock or any material portion of the assets of the
Company or any Company Subsidiary, (iii) enter into or consummate any agreement
or understanding providing for the disposition of the stock or any material
portion of the assets of the Company or any Company Subsidiary, or (iv) assist,
participate in, facilitate or encourage any effort or attempt by any other
Person to do or seek any of the foregoing. The Company shall promptly notify
Purchaser of, and communicate to Purchaser the terms of, any such inquiry,
proposal or request for information received by, or negotiations or discussions
sought with, the Company or the Company Subsidiaries.
Section 7.04. Consents and Approvals . Each of the Company and
----------------------
Purchaser 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 in connection with Requisite Approvals,
and will promptly cooperate with and furnish information 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 Purchaser will, and will cause its Subsidiaries
to, take all reasonable actions necessary to obtain any Requisite Approvals.
Section 7.05. Employment Matters . (a) After the Effective Time,
------------------
Purchaser shall either continue the existing Employee Plans of the Company and
the Company Subsidiaries or shall provide, or cause the Surviving Corporation to
provide, benefits to employees of the Company and the Company Subsidiaries that
are no less favorable in the aggregate to such
33
employees than the existing Employee Plans of the Company and the Company
Subsidiaries and shall remain at existing levels for the one-year period
immediately following the Effective Time. For purposes of any such benefit
plans: (i) Purchaser and the Surviving Corporation shall grant all employees of
the Company credit for all service with the Company and the Company Subsidiaries
prior to the Effective Time for all purposes for which such service was
recognized by the Company; (ii) any pre-existing conditions shall be waived; and
(iii) expenses incurred on or before the Effective Time shall be taken into
account for purposes of establishing satisfaction of any applicable deductible,
coinsurance and maximum out-of-pocket provisions.
(b) From and after the Effective Time, Purchaser shall cause the
Surviving Corporation to honor the Company's existing severance plan and
severance agreements in accordance with the terms thereof.
Section 7.06. Publicity . So long as this Agreement is in effect,
---------
none of the Company, Purchaser, the Shareholder or any of their agents shall
issue or cause the publication of any press release or other public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of all the parties hereto, except as
may be required by Law, and in such case shall use all reasonable efforts to
consult with all the parties hereto prior to such release or announcement being
issued.
Section 7.07. Notification of Certain Matters . The Company and the
-------------------------------
Shareholder shall give prompt notice to Purchaser, and Purchaser shall give
prompt notice to the Company and the Shareholder, 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 and (ii) any material failure of the Company,
the Shareholder or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, in each case, to the extent such event or circumstance is or becomes
known to the party required to give such notice.
Section 7.08. Directors' and Officers' Indemnification . (a) The
----------------------------------------
Company agrees that, for the six-year period immediately following the Effective
Time, it or the Surviving Corporation shall indemnify each Person who is now, or
has been at any time prior to the date hereof, a director or officer of the
Company or of any Company Subsidiary or a Person entitled to indemnification
(individually a "Covered Party," and collectively the "Covered Parties"), to the
------------- ---------------
same extent and in the same manner as is now provided in the respective
Certificate of Incorporation or By-laws of the Company and such Company
Subsidiaries in effect on the date hereof, with respect to any claims and/or
Damages (as defined below) based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time.
(b) The Company agrees that, for the three-year period immediately
following the Effective Time, it or the Surviving Corporation shall maintain in
effect the director and officer insurance coverage on terms substantially no
less advantageous to the insureds than the director and officer insurance
coverage currently maintained by the Company for the Covered Parties; provided,
--------
however, that in the event the annual premium for such coverage exceeds an
- -------
amount equal to twice the aggregate annual premiums currently paid by the
Company and the Company
34
Subsidiaries for such coverage, the Surviving Corporation shall notify the
Covered Parties who shall then elect as a group either (i) to continue coverage
under the policy then maintained by the Surviving Corporation, in which event
each of the Covered Parties shall be severally (but not jointly) liable to the
Surviving Corporation for their pro rata share of such excess, or (ii) to seek
coverage from another carrier, in which event the Surviving Corporation shall
reimburse the Covered Parties the cost of such alternate coverage up to an
amount equal to twice the aggregate annual premiums currently paid by the
Company and the Company Subsidiaries for such coverage.
Section 7.09. Stockholder Approval . The Company shall take all
--------------------
action necessary in accordance with the DGCL and its Certificate of
Incorporation and By-laws to obtain the requisite approval and adoption of this
Agreement and the Merger by the Company Stockholders by written consent pursuant
to Section 228 of the DGCL and shall take such other actions as may be required
by such Section (including giving prompt notice of such written consent to those
Company Stockholders who have not consented in writing).
Section 7.10. Consent by Shareholder . In accordance with the DGCL,
----------------------
the Shareholder hereby approves this Agreement and the Merger.
Section 7.11. Further Assurances . Subject to the terms and
------------------
conditions herein provided, each of the parties hereto (including the
Shareholder) agrees to use all commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable, whether under applicable Law (including the HSR Act) or
otherwise, 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, including the taking of all
appropriate actions by Purchaser and the Company in furtherance of the
consummation of the financing of the transactions contemplated hereby by
Purchaser and the refinancing of Indebtedness.
Section 7.12. Noncompetition; Nonsolicitation . For a period of
-------------------------------
three (3) years from and after the Closing, the Shareholder shall not, directly
or indirectly, (i) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, as stockholder or partner or any
other similar capacity with any business which is in competition with or
potential competition with the Company, the Surviving Corporation, any of the
Company Subsidiaries or any successor to any of the foregoing, or (ii) solicit,
employ, retain as a consultant, interfere with or attempt to entice away from
the Company, the Surviving Corporation, any of the Company Subsidiaries or any
successor to any of the foregoing, any individual who is, has agreed to be or
within one year of such solicitation, employment, retention, interference or
enticement has been, employed or retained by the Company, the Surviving
Corporation, any of the Company Subsidiaries or any successor to any of the
foregoing in a supervisory or more senior capacity. Ownership of not more than
2% of the outstanding stock of any publicly traded company shall not, in and of
itself, be a violation of this Section 7.12. The restrictive covenant contained
in this Section 7.12 is a covenant independent of any other provision of this
Agreement, and the existence of any claim which the Shareholder may allege
against Purchaser, the Company, the Surviving Corporation or any of their
Affiliates, whether based on this Agreement or otherwise, shall not prevent the
enforcement of this covenant. The Shareholder agrees that a breach of this
35
Section 7.12 shall cause irreparable harm to Purchaser, the Company, the
Surviving Corporation and their Affiliates, that Purchaser's, the Company's and
the Surviving Corporation's remedies at law for any breach or threat of breach
of the provisions of this Section 7.l2 shall be inadequate, and that Purchaser,
the Company and/or the Surviving Corporation shall be entitled to an injunction
or injunctions to prevent breaches of this Section 7.12 and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Purchaser, the Company and/or the Surviving Corporation may be entitled at
law or in equity. The three year period shall be tolled during any period of
violation of this Section 7.12 and during any other period required for
litigation during which Purchaser, the Company and/or the Surviving Corporation
seeks to enforce this covenant. In the event that this Section 7.12 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the longest period of time for which it may be
enforceable, and/or over the largest geographical area as to which it may be
enforceable and/or to the maximum extent in all other aspects as to which it may
be enforceable, all as determined by such court in such action.
Section 7.13. Warrants. (a) The Company shall take such steps as
--------
it deems appropriate to extinguish or redeem the Merger Warrants prior to
Closing or to cause the Merger Warrants to be exercisable at and after the
Closing only for cash in an amount equal to the amount which such holder would
have been entitled to receive upon or as a result of the Merger had such warrant
been exercised immediately prior to the Effective Time.
(b) As soon as reasonably practicable after the date hereof, the
Company shall cause the warrant agent under the Warrant Agreement dated November
6, 1991 to deliver an effective notice of redemption to each holder of
Restructure Warrants which notice shall contemplate the redemption by the
Company of all of the outstanding Restructure Warrants.
(c) The Company shall provide to Purchaser (i) a copy of each notice
to be delivered to any warrant agent of the Company or to any holder of Merger
Warrants or Restructure Warrants two days prior to such delivery and (ii) a copy
of any written correspondence received from any holder of Merger Warrants or
Restructure Warrants within two days after such receipt.
(d) From and after the Effective Time until December 31, 2001, the
Shareholder shall indemnify the Surviving Corporation from and against any and
all Warrant Losses. "Warrant Losses" shall mean any amounts required to be paid
--------------
by the Surviving Corporation (including all legal, accounting and other fees)
(i) in excess of the per warrant redemption amount set forth in the notice
delivered to such holder pursuant to Section 4.5 of the Warrant Agreement dated
November 6, 1991, in connection with the Restructure Warrants, and (ii) in
excess of the spread on the Merger Warrants, which spread shall be valued as the
difference between the cash that a holder of the Merger Warrants would have been
entitled to receive in the Merger had such Merger Warrants been exercised
immediately prior to the Effective Time minus the exercise price of such Merger
Warrants, in connection with the Merger Warrants. Any such indemnity shall be
paid to the Surviving Corporation in cash within 30 days after receipt of
notice from the Surviving Corporation (with supporting documentation) that it
has suffered a Warrant Loss.
36
(e) In the event that any claim, demand or Proceeding is asserted
against the Surviving Corporation which could give rise to Warrant Losses, the
Surviving Corporation shall with reasonable promptness send to the Shareholder a
written notice specifying the nature of such claim, demand or Proceeding and the
amount or estimated amount (and the basis of such estimated amount) of the
Warrant Loss; provided that the failure to give such notice shall not affect the
--------
indemnification hereunder except to the extent the Shareholder shall have been
actually prejudiced as a result of such failure. Following receipt of such
notice, the Shareholder shall be entitled to assume and control the defense of
such claim, demand or Proceeding with counsel of its choice, in which case the
Shareholder shall not be required to pay the fees and disbursements of separate
counsel to the Surviving Corporation with regard thereto. If requested by the
Shareholder, the Surviving Corporation agrees to cooperate with the Shareholder
and its counsel in contesting any claim or demand which the Shareholder defends,
or, if appropriate and related to the claim in question, in making any
counterclaim against the Person asserting such claim or demand, or any cross-
complaint against any Person. No claim, demand or Proceeding for which
indemnity is sought hereunder may be settled without the consent of the
Shareholder.
Section 7.14. Information Statement. The Company will cause a
---------------------
notice (the "Information Statement") to be sent within 30 days after the date
---------------------
hereof to the stockholders of the Company pursuant to Section 262(d)(2) of the
DGCL. The Information Statement shall comply in all respects with the
requirements of the DGCL and other applicable law.
Section 7.15. Preferred Stock of Purchaser. The parties hereto
----------------------------
acknowledge that the provisions contained herein as of the date hereof with
respect to the conversion of Preference Stock into securities of the Surviving
Corporation as of the Effective Time assumes that the Equity Financing will
consist solely of the issuance of Surviving Corporation Common Stock and/or
Rollover Options. Purchaser may determine to issue preferred stock as part of
the Equity Financing; provided that in the event preferred stock is included in
--------
the Equity Financing, (i) such preferred stock shall be in amounts and on terms
reasonably acceptable to the Shareholder, (ii) Purchaser shall not so issue
preferred stock unless the parties hereto have amended this Agreement (which
amendment the parties agree to negotiate in good faith) in a manner that will
maintain the general economic intent of this Agreement as of the date hereof,
and (iii) no such amendment shall provide that Bain or any of its Affiliates
shall be issued any such preferred stock unless the Shareholder is also issued
such preferred stock.
Section 7.16. Assistance with Financing. In order to assist
-------------------------
Purchaser with its financing of the transactions contemplated hereby, at or
prior to Closing, the Company shall take such commercially reasonable steps as
are necessary to cause the following to occur:
(a) At any time prior to the Closing, Purchaser may request that, at
the Closing, the Company shall have only one direct wholly-owned Subsidiary (the
"First Tier Subsidiary"). If Purchaser makes such request, then (i) prior to
---------------------
the Closing, Purchaser shall select, by written notice to the Company, which of
the Company Subsidiaries shall be the First Tier Subsidiary; provided, that the
--------
Company Subsidiary selected by Purchaser to be the First Tier Subsidiary must be
one of the direct wholly-owned Subsidiaries of the Company as of the date
hereof, and (ii) at or immediately prior to the Closing, the Company shall
contribute all of the issued and outstanding capital stock of each of the
Company Subsidiaries directly owned by the Company
37
(other than the issued and outstanding capital stock of the First Tier
Subsidiary) to the capital of the First Tier Subsidiary.
(b) At Purchaser's request, the Company shall prepare or shall cause
to be prepared prior to the Closing any financial statements required in
connection with Purchaser's financing of the transactions contemplated hereby.
(c) If requested by Purchaser, the Company shall take all steps
necessary to permit a merger of a wholly-owned Subsidiary of Purchaser with the
First Tier Subsidiary at the Closing.
(d) At Purchaser's request, the Company shall take or cause to be
taken any other actions, including a restructuring of the Company Subsidiaries,
necessary for Purchaser to consummate its financing of the transactions
contemplated hereby.
(e) No actions taken by or on behalf of the Company in connection
with its obligations under this Section 7.16 or arising as a result of the
taking of such action shall constitute a breach of any representation or
warranty of the Company contained in this Agreement for any purpose hereunder,
including without limitation Sections 8.02(a) and 9.02(iii) of this Agreement.
ARTICLE VIII
CONDITIONS
Section 8.01. Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of each of the Company, the Shareholder and Purchaser to consummate
the Merger are subject to the satisfaction (or, if permissible, waiver by the
party for whose benefit such conditions exist) of the following conditions:
(a) there shall not be any Judgment or Law restraining,
enjoining or prohibiting the consummation of the Merger; and
(b) all waiting periods under the HSR Act shall have expired or
been terminated.
Section 8.02. Conditions to the Obligations of Purchaser. The
------------------------------------------
obligations of Purchaser to consummate the Merger are subject to the
satisfaction (or waiver by Purchaser) of the following further conditions prior
to or concurrent with the Closing:
(a) the representations and warranties of the Company contained
in this agreement which are qualified as to materiality shall be true and
correct and all such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, in
each case when made and at and as of the Closing Date as if made at and as
of the Closing Date (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period);
38
provided that this paragraph (a) shall be deemed satisfied so long as the
--------
failure of all such representations and warranties to be true and correct
in the aggregate does not have a material adverse effect on the Company and
the Company Subsidiaries, taken as a whole;
(b) the Company shall have performed in all material respects
its material obligations hereunder required to be performed by it at or
prior to the Closing Date;
(c) the Company shall have delivered to Purchaser a certificate
(dated as of the Closing Date), signed by an officer or officers with
authority to bind the Company as to compliance with the conditions set
forth in paragraphs (a) and (b) of this Section 8.02 and the Shareholder
shall have delivered to Purchaser a certificate (dated as of the Closing
Date), signed by an officer with authority to bind the Shareholder, as to
compliance with the conditions set forth in paragraphs (d) and (e) of this
Section 8.02;
(d) the representations and warranties of the Shareholder
contained in this agreement which are qualified as to materiality shall be
true and correct and all such representations and warranties that are not
qualified as to materiality shall be true and correct in all material
respects, in each case when made and at and as of the Closing Date as if
made at and as of the Closing Date (except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate
as of such date or with respect to such period);
(e) the Shareholder shall have performed in all material
respects its material obligations hereunder required to be performed by it
at or prior to the Closing Date;
(f) the Shareholder shall have executed and delivered a
Shareholders Agreement in form and substance reasonably satisfactory to
Purchaser, containing the terms set forth in the term sheet annexed hereto
as Exhibit B;
(g) Purchaser shall have obtained the debt financing described
in the Commitment Letters on the terms and conditions set forth therein or
otherwise obtained debt financing sufficient to consummate the transactions
contemplated hereby on terms reasonably satisfactory to Purchaser;
(h) except for the indebtedness for borrowed money listed on
Schedule 8.02(h) hereto, (i) all outstanding indebtedness for borrowed
----------------
money of the Company and the Company Subsidiaries ("Indebtedness") shall be
------------
paid in full, (ii) any outstanding letters of credit issued by lenders who
hold Indebtedness shall be terminated, and (iii) the Company shall have
obtained (x) the release of all Liens on the capital stock of the Company
and each of the Company Subsidiaries and all assets securing such
Indebtedness and (y) the release of all guarantees with respect to such
Indebtedness. At the Closing, the Company shall provide or arrange to be
provided to Purchaser all releases and other documents in form and
substance reasonably satisfactory to Purchaser demonstrating the release of
such Liens and guarantees;
39
(i) since the date of this Agreement, no event shall have
occurred which has or which would reasonably be expected to have a material
adverse effect on the financial condition or business of the Company and
the Company Subsidiaries taken as a whole;
(j) of the Company Common Stock owned by Shareholder as of the
date of this Agreement, the Shareholder shall have converted into
Preference Stock a number of shares equal to the quotient of $40,000,000
divided by the Common Stock Per Share Amount (calculated assuming that the
----------
Common Stock Purchase Price is increased by $40,000,000 and assuming that
the Company Common Stock so converted will be converted into the right to
receive cash as of the Effective Time pursuant to Section 3.01(a) hereof)
which shall be the only Preference Stock outstanding immediately prior to
Closing;
(k) all outstanding options of the Company (other than the
Rollover Options) shall be extinguished and, as of immediately prior to the
Closing, the Company shall have no Liabilities with respect to such
options;
(l) the Company shall have taken such steps as are contemplated
by Section 7.13(a) with respect to the Merger Warrants;
(m) the Company shall have (i) delivered to the warrant agent
under the Warrant Agreement dated November 6, 1991 a certified copy of the
Board resolution authorizing the redemption of all warrants issued and
outstanding under such Warrant Agreement as contemplated by, and in
compliance with, Section 4.3 of such Warrant Agreement and (ii) caused the
warrant agent under such Warrant Agreement to have mailed a notice of such
redemption at least 30 days prior to Closing to each holder of such
warrants as contemplated by, and in compliance with, Section 4.5 of such
Warrant Agreement;
(n) the Company shall have delivered to Purchaser the opinion of
counsel to the Company and the Shareholder reasonably acceptable to
Purchaser, with respect to the matters described on Exhibit C hereto in a
form reasonably acceptable to Purchaser;
(o) the Company shall have obtained all consents,
authorizations, approvals and waivers from third parties, in form
reasonably acceptable to Purchaser, which are necessary in order to enable
(i) the consummation of the transactions contemplated hereby and (ii) the
Company and its Subsidiaries to conduct their business in all material
respects after the Closing Date on the same basis as conducted prior to the
date hereof, in each case except for those the failure of which to obtain
would not have a material adverse effect on the financial condition of the
Company and the Company Subsidiaries, taken as a whole; and
(p) the number of Dissenting Shares shall not exceed five
percent (5%) of the total number shares of Company Common Stock outstanding
immediately prior to the conversion referred to in paragraph (j) of this
Section 8.02.
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Section 8.03. Conditions to the Obligations of the Company and the
----------------------------------------------------
Shareholder. The obligations of the Company and the Shareholder to consummate
- -----------
the Merger are subject to the satisfaction (or waiver by the Company or the
Shareholder, as the case may be) of the following further conditions prior to or
concurrent with the Closing:
(a) the representations and warranties of Purchaser contained in
this agreement which are qualified as to materiality shall be true and
correct and all such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, in
each case when made and at and as of the Closing Date as if made at and as
of the Closing Date (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period);
(b) Purchaser shall have performed in all material respects all
of its material obligations hereunder required to be performed by Purchaser
at or prior to the Closing Date;
(c) Purchaser shall have delivered to the Company and the
Shareholder certificates (dated as of the Closing Date), signed by an
officer or officers with authority to bind Purchaser, as to compliance with
the conditions set forth in paragraphs (a) and (b) of this Section 8.03;
(d) Investors shall have executed and delivered a Shareholders
Agreement in form and substance reasonably satisfactory to the Shareholder,
containing the terms set forth in the term sheet annexed hereto as Exhibit
B;
(e) Purchaser shall have provided to the Company and the
Shareholder either (i) a copy, addressed to the Company and the
Shareholder, of the opinion as to the solvency of the Surviving Corporation
as of the Effective Time that is obtained and provided to the lenders in
connection with the financing of the transactions contemplated hereby, or
(ii) if no such opinion is provided to such Lenders, an opinion, addressed
to the Company and the Shareholder, from a nationally recognized valuation
firm, which firm and opinion are both reasonably satisfactory to the
Company, as to the solvency of the Surviving Corporation as of the
Effective Time, and taking into account the transactions contemplated
hereby which opinion shall be a Company Expense; and
(f) Purchaser shall have delivered to the Company an opinion of
counsel reasonably acceptable to the Company with respect to the matters
described in Exhibit D hereto in a form reasonably acceptable to the
Company.
ARTICLE IX
CLOSING; TERMINATION
Section 9.01. Closing. Unless this Agreement shall have been
-------
terminated and the Merger abandoned, the closing of the transactions
contemplated hereby (the "Closing") shall take
-------
41
place at the offices of Cleary, Gottlieb, Steen & Hamilton, 153 East 53rd
Street, New York, New York, on the third business day following the satisfaction
of all conditions precedent to Closing (or at such other place and on such other
date as shall be agreed to by the parties hereto). At the Closing, the parties
shall exchange the documents referred to in Article VIII hereof and all
necessary filings with the Secretary of State to consummate the Merger under the
DGCL shall be made.
Section 9.02. Termination. Anything herein or elsewhere to the
-----------
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time:
(i) with the consent of each of the parties hereto;
(ii) by the Shareholder, the Company or Purchaser if the Merger
shall not have occurred on or prior to February 15, 1998; provided,
--------
however, that the right to terminate this Agreement and abandon the Merger
-------
under this clause (ii) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or prior to such date;
(iii) by Purchaser, at any time prior to the Closing, following
written notice by Purchaser to the Company or the Shareholder, as the case
may be, of a breach of any representation, warranty or covenant of the
Company or the Shareholder contained in this Agreement such that the
conditions set forth in Section 8.02(a) or Section 8.02(b) cannot be
satisfied, if such breach is not cured by the Company or the Shareholder,
as the case may be, within thirty (30) days after receiving notice thereof;
or
(iv) by the Company, at any time prior to the Closing,
following written notice by the Company to the Purchaser, as the case may
be, of a breach of any representation, warranty or covenant of Purchaser
contained in this Agreement such that the condition set forth in Section
8.03(a) or Section 8.03(b) cannot be satisfied, if such breach is not cured
by Purchaser within thirty (30) days after receiving notice thereof.
Section 9.03. Effect of Termination. In the event of the
---------------------
termination of this Agreement as provided in Section 9.02 hereof, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become null and void, and there shall be no liability on the
part of any of the parties hereto except (i) for fraud or for willful breach of
this Agreement and (ii) as set forth in Section 10.02.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Non-Survival. No representation or warranty
------------
contained in this agreement shall survive the Closing.
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Section 10.02. Costs and Expenses. Whether or not the transactions
------------------
contemplated by this Agreement are consummated, Purchaser shall bear the costs
and expenses incurred by Purchaser and, subject to the calculation of the Common
Stock Purchase Price as provided in this Agreement, the Company shall bear the
costs and expenses incurred by the Company or the Shareholder in connection with
the negotiation, preparation, execution and closing of this Agreement and the
transactions contemplated hereby. No later than five days prior to Closing, the
Shareholder and the Company shall provide to Purchaser their best estimate of
Company Expenses and the parties hereto shall agree, prior to Closing, to the
final amount of Company Expenses.
Section 10.03. Notices. All notices or other communications required
-------
or permitted by this Agreement shall be effective upon receipt and shall be in
writing and delivered personally or by overnight courier, or sent by facsimile,
as follows:
(i) if to Purchaser, to:
Sandman Merger Corporation
Two Copley Place
Boston, MA 02116
Attention: Josh Bekenstein and Paul Edgerley
Facsimile: (617) 572-3274
with a copy to:
Kirkland & Ellis
153 East 53d Street
New York, NY 10022
Attention: Lance C. Balk, Esq.
Facsimile: (212) 446-4900
(ii) if to the Company or the Shareholder, to:
Sealy Corporation
c/o Sealy, Inc.
1228 Euclid Avenue
Cleveland, OH 44115
Attention: Ronald Jones
Facsimile: (216) 522-1976
43
and to:
Zell/Chilmark Fund, L.P.
Two North Riverside Plaza
Suite 1500
Chicago, IL 60606
Attention: Rod F. Dammeyer
Facsimile: (312) 902-1512
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 1601
Chicago, Illinois 60606
Attention: Alisa Singer, Esq.
Facsimile: (312) 454-0335
and to:
Calfee, Halter & Griswold, L.L.P.
Suite 1800
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Lawrence Schultz, Esq.
Facsimile: (216) 241-0816
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
Facsimile: (212) 225-3999
or to such other address as hereafter shall be furnished as provided in this
Section 10.03 by any of the parties hereto to the other parties hereto.
Section 10.04. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single instrument.
Section 10.05. Entire Agreement. This Agreement (including the
----------------
Schedules referred to herein), and the Confidentiality Agreement referred to in
Section 7.02, sets forth the entire understanding and agreement between the
parties as to the matters covered herein and
44
supersedes and replaces any prior understanding, agreement or statement of
intent, in each case, written or oral, of any and every nature with respect
thereto.
Section 10.06. Independent Investigation. Purchaser acknowledges
-------------------------
hereby that it has conducted its own independent review and analysis of the
Company and the Company Subsidiaries and their assets and businesses and that it
has been provided sufficient access to the properties, records and personnel of
the Company and the Company Subsidiaries for such purpose. Except for the
representations and warranties expressly made by the Company or the Shareholder
in this Agreement or in any statement contained in the Schedules hereto or any
certificate furnished pursuant to this Agreement, Purchaser acknowledges that
there are no representations or warranties, express or implied, as to the
financial condition, assets, liabilities, equity, operations, business or
prospects of the Company or Company Subsidiaries.
Section 10.07. Governing Law. This Agreement shall be governed in
-------------
all respects, by the laws of the State of Delaware, including validity,
interpretation and effect, without regard to principles of conflicts of law.
Section 10.08. Third Party Rights; Assignment. This Agreement is
------------------------------
intended to be solely for the benefit of the parties hereto and is not intended
to confer any benefits upon, or create any rights in favor of, any Person other
than the parties hereto and shall not be assignable without the prior written
consent of the other party; provided, however, that Purchaser may assign its
rights and obligations hereunder in whole or in part to any Affiliate of
Purchaser and Purchaser and the Company may assign their respective rights and
obligations hereunder as collateral security to any Person providing financing
to Purchaser and/or the Company.
Section 10.09. Waivers and Amendments. No modification of or
----------------------
amendment to this Agreement shall be valid unless in a writing signed by the
parties hereto referring specifically to this Agreement and stating the parties'
intention to modify or amend the same. Any waiver of any term or condition of
this Agreement must be in a writing signed by the party sought to be charged
with such waiver referring specifically to the term or condition to be waived,
and no such waiver shall be deemed to constitute the waiver of any other breach
of the same or of any other term or condition of this Agreement.
Section 10.10. Schedules. For purposes of this Agreement, any
---------
matter that is clearly disclosed in a Schedule to this Agreement in such a way
as to make its relevance to the information called for by another Schedule to
this Agreement readily apparent shall be deemed to have been included in such
other Schedule, notwithstanding the omission of an appropriate cross-reference
thereto. Disclosure of any fact or item in any Schedule shall not necessarily
mean that such item or fact is material to the Company or a Company Subsidiary
individually or to the Company and the Company Subsidiaries taken as a whole.
45
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first written above.
SANDMAN MERGER CORPORATION
By:/s/ PAUL EDGERLEY
___________________________________
Name: Paul Edgerley
Title: Vice President and Secretary
SEALY CORPORATION
By:/s/ RONALD L. JONES
___________________________________
Name: Ronald L. Jones
Title: President and CEO
ZELL/CHILMARK FUND, L.P.
By ZC Limited Partnership, general partner
By ZC Partnership, general partner
By ZC Inc., a partner
By:/s/ ROD DAMMEYER
___________________________________
Name: Rod Dammeyer
Title: Vice President
46