1
EXHIBIT 2.1
------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
PILLOWTEX CORPORATION
PEGASUS MERGER SUB, INC.
and
FIELDCREST CANNON, INC.
dated as of September 10, 1997
------------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Merger. . . . . . . . . . . . . . . . . 1
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Effective Time . . . . . . . . . . . . . . 2
SECTION 1.4 Effects of the Merger . . . . . . . . . . . 2
SECTION 1.5 Certificate of Incorporation;
By-laws . . . . . . . . . . . . . . . . . 2
SECTION 1.6 Directors; Officers . . . . . . . . . . . . 3
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS . . . . 3
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . 3
SECTION 2.2 Stock Options . . . . . . . . . . . . . . . 5
SECTION 2.3 Share Purchase Rights . . . . . . . . . . . 7
SECTION 2.4 Failure To Approve Share Issuance . . . . . 7
SECTION 2.5 Stock Appreciation Rights . . . . . . . . . 7
ARTICLE III - PAYMENT FOR SHARES . . . . . . . . . . . . . . 8
SECTION 3.1 Payment For Shares . . . . . . . . . . . . 8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES . . . . . . . . . 12
SECTION 4.1 Representations and Warranties of
Company . . . . . . . . . . . . . . . . . 12
SECTION 4.2 Representations and Warranties of
Parent and Purchaser . . . . . . . . . . 27
ARTICLE V - COVENANTS . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.1 Conduct of Business of Company and
Parent . . . . . . . . . . . . . . . . . . 34
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 36
SECTION 6.1 Preparation of the Proxy Statement
and the Form S-4; Accountant's
Letters . . . . . . . . . . . . . . . . . 36
SECTION 6.2 Stockholders Meetings . . . . . . . . . . . 38
SECTION 6.3 Access to Information;
Confidentiality . . . . . . . . . . . . . 38
SECTION 6.4 Reasonable Best Efforts . . . . . . . . . . 39
i
3
Page
----
SECTION 6.5 Indemnification; Directors' and
Officers Insurance . . . . . . . . . . . 39
SECTION 6.6 Public Announcements . . . . . . . . . . . 42
SECTION 6.7 No Solicitation; Acquisition
Proposals . . . . . . . . . . . . . . . 42
SECTION 6.8 Consents, Approvals and Filings . . . . . 43
SECTION 6.9 Board Action Relating to Stock Option
Plans . . . . . . . . . . . . . . . . . 45
SECTION 6.10 Employment and Employee Benefit
Matters . . . . . . . . . . . . . . . . 45
SECTION 6.11 Affiliates and Certain Stockholders . . . 46
SECTION 6.12 NYSE Listing . . . . . . . . . . . . . . . 47
SECTION 6.13 Certain Company Indebtedness . . . . . . . 47
ARTICLE VII - CONDITIONS PRECEDENT . . . . . . . . . . . . . 48
SECTION 7.1 Conditions to Each Party's
Obligation to Effect the Merger . . . . . 48
SECTION 7.2. Conditions to Obligations of Parent
and Purchaser . . . . . . . . . . . . . . 48
SECTION 7.3. Conditions to Obligation of Company . . . 49
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER . . . . . . 50
SECTION 8.1 Termination . . . . . . . . . . . . . . . 50
SECTION 8.2 Effect of Termination . . . . . . . . . . 52
SECTION 8.3 Amendment . . . . . . . . . . . . . . . . 52
SECTION 8.4 Extension; Waiver . . . . . . . . . . . . 53
SECTION 8.5 Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . 53
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . 53
SECTION 9.1 Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . 53
SECTION 9.2 Fees and Expenses . . . . . . . . . . . . 53
SECTION 9.3 Definitions . . . . . . . . . . . . . . . 54
SECTION 9.4 Notices . . . . . . . . . . . . . . . . . 55
SECTION 9.5 Interpretation . . . . . . . . . . . . . . 56
SECTION 9.6 Counterparts . . . . . . . . . . . . . . . 56
SECTION 9.7 Entire Agreement; Third-Party
Beneficiaries . . . . . . . . . . . . . . 56
SECTION 9.8 Governing Law . . . . . . . . . . . . . . 56
SECTION 9.9 Assignment . . . . . . . . . . . . . . . . 56
SECTION 9.10 Enforcement . . . . . . . . . . . . . . . 57
SECTION 9.11 Severability . . . . . . . . . . . . . . . 57
ii
4
AGREEMENT AND PLAN OF MERGER, dated as of September 10, 1997, among
PILLOWTEX CORPORATION, a Texas corporation ("Parent"), PEGASUS MERGER SUB,
INC., a Delaware corporation and wholly-owned subsidiary of Parent
("Purchaser"), and FIELDCREST CANNON, INC., a Delaware corporation ("Company").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Purchaser and
Company have determined that it would be advisable and in the best interests of
their respective stockholders for Parent to acquire Company, by means of a
merger of Purchaser with and into Company (the "Merger"), pursuant and subject
to the terms and conditions set forth in this Agreement; and
WHEREAS, Parent, Purchaser and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), the Merger shall be effected and
Purchaser shall be merged with and into Company at the Effective Time (as
hereinafter defined in Section 1.3). At the Effective Time, the separate
existence of Purchaser shall cease and Company shall continue as the surviving
corporation (sometimes herein referred to as the "Surviving Corporation").
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Article VIII, and subject to the satisfaction or waiver (to the
extent permissible) of all of the conditions set forth in Article VII, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
fifth business day following satisfaction or waiver (to the extent
5
permissible) of all of the conditions set forth in Article VII, other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions (the "Closing Date"),
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New
York, unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.3 Effective Time. The parties hereto will file with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
on the date of the Closing (or on such other date as Parent and Company may
agree) a certificate of merger or other appropriate documents, executed in
accordance with the relevant provisions of the DGCL, and make all other filings
or recordings required under the DGCL in connection with the Merger. The
Merger shall become effective upon the filing of the certificate of merger with
the Delaware Secretary of State, or at such later time as is specified in the
certificate of merger (the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of Company and
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of Company and Purchaser shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation; By-laws. At the Effective
Time, the certificate of incorporation of Purchaser as in effect at the
Effective Time shall, from and after the Effective Time, be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law. At the Effective
Time, the by-laws of Purchaser as in effect at the Effective Time shall, from
and after the Effective Time, be the by-laws of the Surviving Corporation until
thereafter changed or amended in accordance with the provisions thereof and
applicable law.
2
6
SECTION 1.6 Directors; Officers. From and after the Effective Time,
(a) the directors of Purchaser shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be, and
(b) the officers of Company shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of shares
of Company's common stock, $1.00 par value per share (the "Shares"), or any
other capital stock of Company or any shares of capital stock of Purchaser:
(a) Common Stock of Purchaser. Each share of common stock,
par value $0.01 per share, of Purchaser issued and outstanding immediately
prior to the Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, $0.01 par value per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Shares and Parent-Owned Shares.
Each Share and each share of Company's $3.00 Series A Convertible Preferred
Stock (individually, a "Preferred Share" and collectively the "Preferred
Shares") issued and outstanding immediately prior to the Effective Time that is
owned by Company or any Subsidiary of Company or by Parent, Purchaser or any
other Subsidiary of Parent (other than shares in trust accounts, managed
accounts, custodial accounts and the like that are beneficially owned by third
parties) shall automatically be cancelled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Shares. Each Share issued and
outstanding immediately prior to the Effective Time (other than Shares to be
cancelled in accordance with Section 2.1(b) and any Dissenting Shares (as
hereinafter defined)) shall be converted into the right to receive the Merger
3
7
Consideration (as defined below) upon surrender of the certificate formerly
representing such Share in accordance with this Agreement.
(d) Conversion of Preferred Shares. Each Preferred Share
issued and outstanding immediately prior to the Effective Time (other than
Preferred Shares to be cancelled in accordance with Section 2.1(b) and any
Dissenting Shares) shall be converted into the right to receive the Preferred
Merger Consideration (as defined below) upon surrender of the certificate
formerly representing such Preferred Share in accordance with this Agreement.
(e) Merger Consideration; Preferred Merger Consideration.
(i) "Merger Consideration" shall mean, subject to Section 2.4 below, (A) a
cash payment in an amount equal to $27.00 and (B) a number of fully paid and
nonassessable shares of Parent's common stock, $0.01 par value per share
("Parent Common Stock"), equal to the Conversion Number, meaning the quotient,
rounded to the third decimal place, obtained by dividing $7.00 by the average
of the closing sales prices of Parent Common Stock as reported on the NYSE (as
hereinafter defined in Section 9.3) Composite Transactions List for each of the
20 consecutive trading days immediately preceding the fifth trading day prior
to the Closing Date (the "Determination Price"); provided, that if the actual
quotient obtained thereby is less than 0.269, the Conversion Number shall be
0.269 and if the actual quotient obtained thereby is more than 0.333, the
Conversion Number shall be 0.333; provided, further that if the Determination
Price is less than $21.00, Parent shall have the right to give written notice
to Company (a "Top-Up Intent Notice") that Parent elects to increase the cash
portion of the Merger Consideration and/or the Conversion Number such that the
sum of (i) the cash portion of the Merger Consideration and (ii) the product of
the Conversion Number and the Determination Price shall equal $34.00. Any
Top-Up Intent Notice shall be delivered to Company no later than 2:00 p.m. New
York City time on the third business day prior to the Closing Date. If, in
such case, Parent does not deliver a Top-Up Intent Notice, Company shall have
the right to give written notice to Parent (a "Termination Notice") that
Company elects to terminate this Agreement. Any Termination Notice shall be
delivered to Parent no later than 2:00 p.m. New York City time on the business
day prior to the Closing Date.
4
8
(ii) "Preferred Merger Consideration" shall mean,
subject to Section 2.4 below, (A) a cash payment equal to the product of (1)
the cash portion of the Merger Consideration and (2) 1.7094 and (B) a number of
fully paid and nonassessable shares of Parent Common Stock equal to the product
of (1) the Conversion Number and (2) 1.7094.
(f) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares or Preferred Shares issued and outstanding
immediately prior to the Effective Time held by a holder (if any) who has the
right to demand, and who properly demands, an appraisal of such Shares or
Preferred Shares in accordance with Section 262 of the DGCL (or any successor
provision) ("Dissenting Shares") shall not be converted into a right to receive
the Merger Consideration or the Preferred Merger Consideration, as applicable,
unless such holder fails to perfect or otherwise loses such holder's right to
such appraisal, if any. If, after the Effective Time, such holder fails to
perfect or loses any such right to appraisal, each such Share or Preferred
Share of such holder shall be treated as a Share or Preferred Share that had
been converted as of the Effective Time into the right to receive the Merger
Consideration or the Preferred Merger Consideration, as applicable, in
accordance with this Section 2.1. At the Effective Time, any holder of
Dissenting Shares shall cease to have any rights with respect thereto, except
the rights provided in Section 262 of the DGCL (or any successor provision) and
as provided in the immediately preceding sentence. Company shall give prompt
notice to Parent of any demands received by Company for appraisal of Shares or
Preferred Shares, and Parent shall have the right to participate in and direct
all negotiations and proceedings with respect to such demands. Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 2.2 Stock Options. (a) Each holder of a then outstanding
option to purchase Shares (collectively, "Options") under Company's Director
Stock Option Plan, 1995 Employee Stock Option Plan or Stock Option Agreement,
dated as of September 11, 1991, with James M. Fitzgibbons (collectively, the
"Stock Option Plans"), whether or not then exercisable or fully vested, may
elect, prior to the Effective Time, in settlement thereof, to receive from
Company immediately prior to the Effective Time for each Share subject to such
Option an amount in cash equal to the
5
9
difference between $34.00 and the per share exercise price of such Option, to
the extent $34.00 is greater than the per share exercise price of such Option
(such excess amount, the "Option Consideration").
(b) At the Effective Time, each outstanding Option other than
Options for which an election to receive cash in settlement thereof has been
made pursuant to Section 2.2(a), shall be assumed by Parent and shall
constitute an option to acquire, on substantially the same terms and subject to
substantially the same conditions as were applicable under such Option,
including, without limitation, term, exercisability, status as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and termination provisions, the number of shares of
Parent Common Stock, rounded up to the nearest whole share, determined by
multiplying the number of Shares subject to such Option immediately prior to
the Effective Time by the Option Conversion Number at an exercise price per
share of Parent Common Stock (increased to the nearest whole cent) equal to the
exercise price per share of Shares subject to such Option divided by the Option
Conversion Number; provided, however, that in the case of any Option to which
Section 421 of the Code applies by reason of its qualification as an incentive
stock option under Section 422 of the Code, the conversion formula shall be
adjusted if necessary to comply with Section 424(a) of the Code. "Option
Conversion Number" shall mean the quotient, rounded to the third decimal place,
obtained by dividing $34.00 by the Determination Price; provided, that if the
actual quotient obtained thereby is less than 1.308, the Option Conversion
Number shall be 1.308, and if the actual quotient obtained thereby is more than
1.619, the Option Conversion Number shall be 1.619; provided, further, that if
a Top-Up Intent Notice has been delivered to Company pursuant to Section
2.1(e), the Option Conversion Number shall be increased such that the product
of the Option Conversion Notice and the Determination Price shall equal $34.00.
(c) Not later than 30 days prior to the Effective Time,
Company shall provide each holder of an Option an election form pursuant to
which each such holder may make the election specified in Section 2.2(a).
Company also shall use its best efforts to obtain all necessary waivers,
consents or releases from holders of Options under the Stock Option Plans and
take any such other action as may be reasonably necessary to give effect to the
transactions contemplated by this Section 2.2 and, with respect to the
6
10
Options for which an election to receive cash in settlement thereof has been
made, to cause each such Option to be surrendered to Company and cancelled,
whether or not any Option Consideration is payable with respect thereto, at the
Effective Time. The surrender of an Option to Company shall be deemed a
release of any and all rights the holder had or may have had in such Option,
other than the right to receive the Option Consideration in respect thereof.
(d) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of substitute Options pursuant to the terms set forth in
Section 2.2(b). As soon as practicable after the Effective Time, the shares of
Parent Common Stock subject to Options will be covered by an effective
registration statement on Form S-8 (or any successor form) or another
appropriate form and Parent shall use its reasonable best efforts to maintain
the effectiveness of such registration statements for so long as the substitute
Options remain outstanding. In addition, Parent shall use all reasonable
efforts to cause the shares of Parent Common stock subject to Options to be
listed on the NYSE and such other exchanges as Parent shall determine.
SECTION 2.3 Share Purchase Rights. Each reference in this Article II
and in Article III to a "Share" is a reference to such Share together with the
Right (as hereinafter defined in Section 4.1(b)), if any, associated with such
Share.
SECTION 2.4 Failure To Approve Share Issuance. If Parent's
stockholders fail to approve the Share Issuance (as hereinafter defined in
Section 4.2(c)) at the Parent Stockholders Meeting (as hereinafter defined in
Section 6.2(b)), then, notwithstanding anything set forth herein to the
contrary, (i) the Merger Consideration shall be a cash payment in an amount
equal to $34.00, (ii) the Preferred Merger Consideration shall be a cash
payment in an amount equal to $58.12, (iii) the provisions of Section 2.2(a)
shall apply to all Options outstanding immediately prior to the Effective Time
and the provisions of Section 2.2(b) shall have no further force or effect, and
(iv) Sections 7.1(a)(ii) and 7.1(c) hereof shall be deemed to be deleted.
SECTION 2.5 Stock Appreciation Rights. At or immediately prior to
the Effective Time, Company shall pay to each holder of a stock appreciation
right issued by
7
11
Company pursuant to the Director Stock Option Plan or its salary reduction plan
a cash amount equal to the product of (i) the difference between $34.00 and the
grant price of such stock appreciation right and (ii) the number of shares
subject to such stock appreciation right.
ARTICLE III
PAYMENT FOR SHARES
SECTION 3.1 Payment For Shares. (a) Payment Fund. Concurrently
with the Effective Time, Parent shall deposit, or shall cause to be deposited,
with or for the account of a bank or trust company designated by Parent, which
shall be reasonably satisfactory to Company (the "Paying Agent"), for the
benefit of the holders of Shares and Preferred Shares, (i) certificates for the
shares of Parent Common Stock representing the aggregate stock portion of the
Merger Consideration and the Preferred Merger Consideration and (ii) cash in an
aggregate amount sufficient to pay the aggregate cash portion of the Merger
Consideration and the Preferred Merger Consideration (hereinafter collectively
referred to as the "Payment Fund").
(b) Letters of Transmittal; Surrender of Certificates.
As soon as reasonably practicable after the Effective Time, Parent shall
instruct the Paying Agent to mail to each holder of record (other than Company
or any of its Subsidiaries or Parent, Purchaser or any of their Subsidiaries)
of a certificate or certificates which, immediately prior to the Effective
Time, evidenced outstanding Shares or Preferred Shares (the "Certificates"),
(i) a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment therefor. Upon surrender of a Certificate for cancellation to the
Paying Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in respect thereof (A)
a certificate representing that number of whole shares of Parent Common Stock
(and cash in lieu of fractional shares of Parent Common Stock as contemplated
by
8
12
this Section 3.1) which the aggregate number of Shares or Preferred Shares, as
applicable, previously represented by such certificate or certificates
surrendered shall have been converted into the right to receive pursuant to
Section 3.1 of this Agreement and (B) cash in an amount equal to the product of
(1) the number of Shares or Preferred Shares, as applicable, theretofore
represented by such Certificate and (2) the cash portion of the Merger
Consideration or the Preferred Merger Consideration, as applicable, and, in
either case, the Certificate so surrendered shall forthwith be canceled. No
interest shall be paid or accrued on the Merger Consideration or the Preferred
Merger Consideration payable upon the surrender of any Certificate. If payment
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be promptly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the surrendered Certificate or established to the
satisfaction of Parent and the Surviving Corporation that such tax has been
paid or is not applicable.
(c) Cancellation and Retirement of Shares; No Further
Rights. As of the Effective Time, all Shares and Preferred Shares (other than
Shares and Preferred Shares to be cancelled in accordance with Section 2.1(b)
and any Dissenting Shares if applicable) issued and outstanding immediately
prior to the Effective Time, shall cease to be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a Certificate theretofore representing any such Shares or Preferred
Shares shall cease to have any rights with respect thereto (including, without
limitation, the right to vote), except the right to receive the Merger
Consideration or the Preferred Merger Consideration, as applicable, without
interest, upon surrender of such Certificate in accordance with this Article
III, and until so surrendered, each such Certificate shall represent for all
purposes only the right, subject to Section 2.1(f), if applicable, to receive
the Merger Consideration or the Preferred Merger Consideration, as applicable,
without interest. The Merger Consideration or the Preferred Merger
Consideration, as applicable, paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article III shall be deemed
to have been issued and paid in full satisfaction of
9
13
all rights pertaining to the Shares or Preferred Shares theretofore represented
by such Certificates.
(d) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of certificates that immediately prior to the Effective
Time represented Shares or Preferred Shares which have been converted pursuant
to Section 2.1, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) In lieu of any such fractional shares, each
holder of Shares or Preferred Shares who would otherwise have been entitled to
a fraction of a Parent Common Stock upon surrender of Certificates for exchange
pursuant to this Section 3.1 will be paid an amount in cash (without interest),
rounded to the nearest cent, determined by multiplying (A) the per share
closing price on the NYSE of Parent Common Stock (as reported on the NYSE
Composite Transactions List) on the date on which the Effective Time occurs
(or, if Parent Common Stock does not trade on the NYSE on such date, the first
date of trading of Parent Common Stock on the NYSE after the Effective Time) by
(B) the fractional interest to which such holder otherwise would be entitled.
Promptly upon request from the Paying Agent, Parent will make available to the
Paying Agent the cash necessary for this purpose.
(e) Investment of Payment Fund. The Paying Agent shall
invest the cash portion of the Payment Fund, as directed by Parent, in (i)
direct obligations of the United States of America, (ii) obligations for which
the full faith and credit of the United States of America is pledged to provide
for the payment of principal and interest, (iii) commercial paper rated the
highest quality by either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or (iv) certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $500 million.
Any net earnings with respect to the Payment Fund shall be the property of and
paid over to Parent as and when requested by Parent; provided, however, that
any such investment or any such payment of earnings shall not delay the receipt
by holders of Certificates of the Merger Consideration or the Preferred Merger
Consideration, as applicable, or otherwise impair such holders' respective
rights hereunder.
10
14
(f) Termination of Payment Fund. Any portion of the
Payment Fund which remains undistributed to the holders of Certificates for 180
days after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Certificates that have not theretofore complied with this
Article III shall thereafter look only to Parent, and only as general creditors
thereof, for payment of their claim for any Merger Consideration or Preferred
Merger Consideration, as applicable.
(g) No Liability. None of Parent, Purchaser, the
Surviving Corporation or the Paying Agent shall be liable to any person in
respect of any payments or distributions payable from the Payment Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration or Preferred Merger
Consideration, as applicable, in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Entity (as hereinafter
defined), any amounts payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) Withholding Rights. Parent shall be entitled to
deduct and withhold, or cause to be deducted or withheld, from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares, Preferred Shares, Options or Certificates such amounts as are required
to be deducted and withheld with respect to the making of such payment under
the Code, or any provision of applicable state, local or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to such holders in
respect of which such deduction and withholding was made.
11
15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of Company. Company
represents and warrants to Parent and Purchaser as follows:
(a) Organization, Standing and Corporate Power. Each of
Company and each Subsidiary of Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on
its business as now being conducted. Each of Company and each Subsidiary of
Company is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed would not, individually or in the aggregate, have a Material Adverse
Effect (as hereinafter defined in Section 9.3) on Company. Company has
delivered to Parent complete and correct copies of the certificate of
incorporation and by-laws or comparable governing documents of Company and each
of its Subsidiaries, in each case as amended to the date of this Agreement.
(b) Capital Structure. The authorized capital stock of
Company consists of (i) 25,000,000 shares of common stock, $1.00 par value per
share (the "Common Stock"), (ii) 15,000,000 shares of class B common stock,
$1.00 par value per share, and (iii) 10,000,000 shares of preferred stock, $.01
par value per share. At the close of business on September 5, 1997: (i)
9,224,258 shares of Common Stock were issued and outstanding, (ii) 435,300
shares of Common Stock were reserved for issuance pursuant to outstanding
Options under the Stock Option Plans, (iii) 2,564,100 shares of Common Stock
were reserved for issuance pursuant to conversion of Preferred Shares, (iv)
2,632,248 shares of Common Stock were reserved for issuance pursuant to
conversion of Company's 6% Convertible Subordinated Debentures due 2012 (the
"Convertible Debentures"), (v) 1,500,000 Preferred Shares were issued and
outstanding and (vi) 500,000 shares of Company's Series B Junior Participating
Preferred Stock were authorized for issuance solely pursuant to the exercise of
the preferred stock purchase rights (the "Rights") issued pursuant to the
Rights
12
16
Agreement, dated as of November 24, 1993, between Company and The First
National Bank of Boston, as rights agent (the "Company Rights Agreement").
Except as set forth in the immediately preceding sentence, at the close of
business on September 5, 1997, no shares of capital stock (including, without
limitation, class B common stock or preferred stock) or other equity securities
of Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of Company are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. Except as
referred to above, no bonds, debentures, notes or other indebtedness of Company
or any Subsidiary of Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
the stockholders of Company or any Subsidiary of Company may vote are issued or
outstanding. No adjustment to the conversion price at which Preferred Shares
are convertible into Shares or the conversion price at which Convertible
Debentures are convertible into Shares has been made since the respective date
of the first issuance of such securities, and there are no accrued and unpaid
dividends, whether or not declared, on the Preferred Shares. Except as
disclosed in Section 4.1(b) of the disclosure schedule delivered by each party
to the other simultaneously with the execution of this Agreement (the
"Disclosure Schedule"), all the outstanding shares of capital stock of each
Subsidiary of Company have been validly issued and are fully paid and
nonassessable and are owned by Company, by one or more Subsidiaries of Company
or by Company and one or more such Subsidiaries, free and clear of Liens (as
hereinafter defined in Section 9.3). Except as set forth above or in Section
4.1(b) of the Disclosure Schedule, neither Company nor any Subsidiary of
Company has or, at or after the Effective Time will have, any outstanding
option, warrant, call, subscription or other right, agreement or commitment
which (i) obligates Company or any Subsidiary of Company to issue, sell or
transfer, repurchase, redeem or otherwise acquire any shares, of the capital
stock of Company or any Subsidiary of Company, (ii) restricts the transfer of
any shares of capital stock of Company or any of its Subsidiaries or (iii)
relates to the voting of any shares of Company or any of its Subsidiaries.
(c) Authority; Noncontravention. Company has the
requisite corporate power and authority to enter into this Agreement. The
execution and delivery of this Agreement by Company and the consummation by
Company of the transactions
13
17
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Company, subject, in the case of the Merger, to the approval of
this Agreement by its stockholders as set forth in Section 6.2(a). This
Agreement has been duly executed and delivered by Company and, assuming this
Agreement constitutes the valid and binding agreement of Parent and Purchaser,
constitutes a valid and binding obligation of Company, enforceable against
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity. Except as disclosed in Section 4.1(c) of the Disclosure Schedule, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof will not, (i) conflict with any of the provisions of the restated
certificate of incorporation (including the provisions of any certificate of
designations which constitute a part of such restated certificate of
incorporation) or by-laws of Company or the comparable documents of any
Subsidiary of Company, (ii) subject to the governmental filings and other
matters referred to in the following sentence, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under, or
require the consent of any person under, any indenture or other agreement,
permit, concession, franchise, license or similar instrument or undertaking to
which Company or any of its Subsidiaries is a party or by which Company or any
of its Subsidiaries or any of their assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, contravene any domestic or foreign law, rule or regulation
or any order, writ, judgment, injunction, decree, determination or award
currently in effect, which, in the case of clauses (ii) and (iii) above, singly
or in the aggregate, would have a Material Adverse Effect on Company. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any domestic or foreign governmental agency or regulatory authority (a
"Governmental Entity") which has not been received or made is required by or
with respect to Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Company or the consummation by
Company of the transactions contemplated hereby, except for (i) the
14
18
filing of premerger notification and report forms under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the Merger, (ii) the filing with the SEC of (A) a joint proxy statement
relating to the approval and adoption by the stockholders of Company of this
Agreement and approval by the stockholders of Parent of the Share Issuance (as
hereinafter defined in Section 4.2(c)) (such joint proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the certificate of merger
with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Company is qualified to do
business, (iv) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 4.1(c) of the Disclosure Schedule and (v)
any other filings, authorizations, consents or approvals the failure to make or
obtain which, individually or in the aggregate, would not have a Material
Adverse Effect on Company.
(d) SEC Documents. (i) Company has filed all required
reports, schedules, forms, statements and other documents with the Securities
and Exchange Commission (the "SEC") since January 1, 1994 (such reports,
schedules, forms, statements and other documents are hereinafter referred to as
the "SEC Documents"); (ii) as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents as of such
dates contained any untrue statements of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (iii) the consolidated financial statements of Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as
15
19
may otherwise be indicated in the notes thereto) and fairly present the
consolidated financial position of Company and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
(e) Information Supplied. None of the information
supplied or to be supplied by Company specifically for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance by Parent of
shares of Parent Common Stock in the Merger (the "Form S-4") will, at the time
the Form S-4 is filed with the SEC, at any time that it is amended or
supplemented and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Proxy Statement will, at the time it is filed with
the SEC, at any time that it is amended or supplemented, at the time it is
mailed to the stockholders of Company and Parent and at the time of the Company
Stockholders Meeting referred to in Section 6.2(a) and the Parent Stockholders
Meeting referred to in Section 6.2(b), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Company with respect to statements made
or incorporated by reference therein based on information supplied by Parent or
Purchaser specifically for inclusion or incorporation by reference in such
documents.
(f) Absence of Certain Changes or Events; No Undisclosed
Material Liabilities.
(i) Except as disclosed in the SEC Documents filed
and publicly available prior to the date of this Agreement (the "Filed SEC
Documents") or in Section 4.1(f) of the Disclosure Schedule, since the date of
the most recent audited financial statements included in the Filed SEC
Documents, Company and its Subsidiaries have conducted their business only in
the ordinary course, and there has
16
20
not been (A) any change, event or occurrence particular to Company and its
Subsidiaries (excluding industry, economic, financial and other matters
generally affecting businesses other than and in addition to Company and its
Subsidiaries) which has had or would have, individually or in the aggregate, a
Material Adverse Effect on Company; (B) any declaration, setting aside or
payment of any dividend or other distribution in respect of shares of Company's
capital stock, other than dividends on the Preferred Shares in accordance with
their terms, or any redemption or other acquisition by Company of any shares of
its capital stock; (C) any increase in the rate or terms of compensation
payable or to become payable by Company or its Subsidiaries to their directors,
officers or key employees, except increases occurring in the ordinary course of
business consistent with past practices; (D) any entry into, or increase in the
rate or terms of, any bonus, insurance, severance, pension or other employee or
retiree benefit plan, payment or arrangement made to, for or with any such
directors, officers or employees, except increases occurring in the ordinary
course of business consistent with past practices or as required by applicable
law; (E) any entry into any agreement, commitment or transaction by Company or
any of its Subsidiaries which is material to Company and its Subsidiaries taken
as a whole, except for agreements, commitments or transactions entered into in
the ordinary course of business; (F) any change by Company in accounting
methods, principles or practices except as required or permitted by generally
accepted accounting principles; (G) any write-off or write-down of, or any
determination to write-off or write-down, any asset of Company or any of its
Subsidiaries or any portion thereof which write-off, write-down, or
determination exceeds $5 million individually or $15 million in the aggregate;
or (H) any agreements by Company or any of its Subsidiaries to do any of the
things described in the preceding clauses (A) through (G) other than as
expressly contemplated or provided for herein.
(ii) Except as set forth in or disclosed in the
Filed SEC Documents or Section 4.1(f) of the Disclosure Schedule and
liabilities incurred in the ordinary course of business since the date of the
most recent financial statements included in the Filed SEC Documents, as of the
date hereof, there are no liabilities of Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, due, to become due,
determined, determinable or otherwise, having or which would have,
17
21
individually or in the aggregate, a Material Adverse Effect on Company.
(g) Absence of Changes in Benefit Plans. Except as
disclosed in the Filed SEC Documents or in Section 4.1(g) of the Disclosure
Schedule, since the date of the most recent audited financial statements
included in the Filed SEC Documents, neither Company nor any of its
Subsidiaries has adopted or amended or agreed to adopt or amend in any material
respect any collective bargaining agreement or any Benefit Plan (as defined in
Section 4.1(h)).
(h) Benefit Plans. With respect to all the employee
benefit plans (as that phrase is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) maintained for
the benefit of any current or former employee, officer or director of the
Company or any of its Subsidiaries ("Company ERISA Plans") and any other
benefit or compensation plan, program or arrangement maintained for the benefit
of any current or former employee, officer or director of the Company or any of
its Subsidiaries (the Company ERISA Plans and such plans being referred to as
the "Company Plans"), except as set forth in Section 4.1(h) of the Disclosure
Schedule:
(i) none of the Company ERISA Plans is a
"multiemployer plan" within the meaning of ERISA;
(ii) none of the Company Plans promises or provides
retiree life insurance benefits to any person;
(iii) none of the Company Plans provides for payment
of a benefit, the increase of a benefit amount, the payment of a contingent
benefit, or the acceleration of the payment or vesting of a benefit by reason
of the execution of this Agreement or the consummation of the transactions
contemplated by this Agreement;
(iv) neither the Company nor any of its Subsidiaries
has an obligation to adopt, or is considering the adoption of, any new Company
Plan or, except as required by law, the amendment of an existing Company Plan;
(v) each Company ERISA Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified and, to the knowledge
of the Company, nothing has occurred since the date of such letter that could
reasonably
18
22
be expected to affect the qualified status of such Company ERISA Plan;
(vi) each Company Plan has been operated in accordance
with its terms and the requirements of all applicable law;
(vii) neither the Company nor any of its Subsidiaries or
members of their "controlled group" has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or withdrawal from, any Company ERISA Plan
or other retirement plan or arrangement, and, to the knowledge of the Company,
no fact or event exists that could reasonably be expected to give rise to any
such liability;
(viii) the aggregate accumulated benefit obligations of
each Company ERISA Plan subject to Title IV of ERISA (as of the date of the
most recent actuarial valuation prepared for such Company ERISA Plan and based
on a discount rate of 7.75%, the rate used in such valuation) do not exceed the
fair market value of the assets of such Company ERISA Plan (as of the date of
such valuation); and
(ix) the Company is not aware of any claims relating to
the Company Plans;
provided, however, that the failure of the representations set forth in clauses
(v), (vi), (vii) and (ix) to be true and correct shall not be deemed to be a
breach of any such representation unless such failures, individually or in the
aggregate, would have a Material Adverse Effect on Company.
(i) Taxes. Except as set forth in Section 4.1(i) of
the Disclosure Schedule:
(A) Except where the failure to do so would not have
a Material Adverse Effect on Company, each of Company and each Subsidiary of
Company (and any affiliated or unitary group of which any such person was a
member) has (1) timely filed all federal, state, local and foreign returns,
declarations, reports, estimates, information returns and statements
("Returns") required to be filed by or for it in respect of any Taxes (as
defined below) and has caused such Returns as so filed to be true, complete and
correct, (2) established reserves that are reflected in Company's most recent
financial statements included in the Filed SEC Documents and that as so
reflected are adequate
19
23
for the payment of all Taxes not yet due and payable with respect to the
results of operations of Company and its Subsidiaries through the date hereof,
and (3) timely withheld and paid over to the proper governmental authorities
all Taxes and other amounts required to be so withheld and paid over. Each of
Company and each Subsidiary of Company (and any affiliated or unitary group of
which any such person was a member) has timely paid all Taxes that are shown as
being due on the Returns referred to in the immediately preceding sentence.
(B) (1) There has been no taxable period since 1991
for which a Return of Company or any of its Subsidiaries has been examined by
the Internal Revenue Service ("IRS"), (2) all examinations described in clause
(1) have been completed without the assertion of material deficiencies, and (3)
except for alleged deficiencies which have been finally and irrevocably
resolved, Company has not received formal or informal notification that any
deficiency for any Taxes, the amount of which, individually or in the
aggregate, could have a Material Adverse Effect on Company, has been or will be
proposed, asserted or assessed against Company or any of its Subsidiaries by
any federal, state, local or foreign taxing authority or court with respect to
any period.
(C) Neither Company nor any of its Subsidiaries has
executed or entered into with the IRS or any other taxing authority (1) any
agreement or other document that continues in force and effect beyond the
Effective Time and that extends or has the effect of extending the period for
assessments or collection of any federal, state, local or foreign Taxes, (2)
any closing agreement or other similar agreement (nor has Company or any of its
Subsidiaries received any ruling, technical advice memorandum or similar
determination) affecting the determination of Taxes required to be shown on any
Return not yet filed, or (3) requested any extension of time to be granted to
file after the Effective Date any return required by applicable law to be filed
by it.
(D) Neither Company nor any of its Subsidiaries has
made an election under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by Company or any
of its Subsidiaries. None of the assets of Company or any of its Subsidiaries
is required to be treated
20
24
as being owned by any other person pursuant to the "safe harbor" leasing
provisions of section 168(f)(8) of the Internal Revenue Code of 1954 as
formerly in effect.
(E) Neither Company nor any of its Subsidiaries is a
party to, is bound by or has any obligation under any tax sharing agreement or
similar agreement or arrangement.
(F) Company has not agreed to make, nor is it
required to make, any material adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(G) Neither Company nor any of its Subsidiaries is,
or has been, a United States Real Property Holding Corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii).
For purposes of this Agreement, "Taxes" shall mean all
Federal, state, local, foreign income, property, sales, excise, employment,
payroll, franchise, withholding and other taxes, tariffs, charges, fees,
levies, imposts, duties, licenses or other assessments of every kind and
description, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
(j) Voting Requirements. Assuming Parent is not an
"interested stockholder" for purposes of Section 203 of the DGCL, the
affirmative vote of two-thirds of the votes entitled to be cast by the holders
of Shares entitled to vote thereon at the Company Stockholders Meeting
described in Section 6.2(a) with respect to the approval and adoption of this
Agreement is the only vote of the holders of any class or series of Company's
capital stock or other securities required in connection with the consummation
by Company of the Merger and the other transactions contemplated hereby to be
consummated by Company.
(k) Compliance with Applicable Laws. All federal, state,
local and foreign governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights ("Permits,"
including, without limitation, Permits required under Environmental Laws)
necessary for each of Company and its Subsidiaries to own, lease or operate its
properties and assets and to carry on
21
25
its business as now conducted have been obtained or made, and there has
occurred no default under any such Permit, except for the lack of Permits and
for defaults under Permits which lack or default individually or in the
aggregate would not have a Material Adverse Effect on Company. Except as
disclosed in the Filed SEC Documents or in Section 4.1(k) of the Disclosure
Schedule, Company and its Subsidiaries are in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Entity, except for non-compliance which individually or in the aggregate would
not have a Material Adverse Effect on Company.
(l) Written Opinion of Financial Advisor. Company has
received the written opinion of Credit Suisse First Boston Corporation
("CSFB"), dated September 10, 1997 (a true and complete copy of which has been
delivered to Parent by Company), to the effect that, based upon and subject to
the matters set forth therein and as of the date hereof, the consideration to
be received by the holders of Shares in the Merger was fair to such
stockholders from a financial point of view, and such opinion has not been
withdrawn or modified.
(m) Brokers. No broker, investment banker, financial
advisor or other person, other than CSFB, the fees and expenses of which will
be paid by Company, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Company.
(n) Litigation, etc. As of the date hereof, except as
disclosed in Section 4.1(n) of the Disclosure Schedule, (i) there is no suit,
claim, action or proceeding (at law or in equity) or investigation pending or,
to the knowledge of Company, threatened against Company or any of its
Subsidiaries (including, without limitation, any product liability claims)
before any court or governmental or regulatory authority or body, and (ii)
neither Company nor any of its Subsidiaries is subject to any outstanding
order, writ, judgement, injunction, decree or arbitration order or award that,
in any such case described in clauses (i) and (ii), has had or would have,
individually or in the aggregate, a Material Adverse Effect on Company. As of
the date hereof, there are no suits, actions, claims, proceedings or
investigations pending or, to the knowledge of Company, threatened, seeking to
prevent, hinder, modify
22
26
or challenge the transactions contemplated by this Agreement.
(o) Environmental Laws. (i) For purposes of this
Agreement, the following terms shall have the following meanings: (A)
"Hazardous Substances" means (1) those substances defined in or regulated under
the following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (2)
petroleum and petroleum products including crude oil and any fractions thereof;
(3) natural gas, synthetic gas, and any mixtures thereof; (4) radon; (5) any
other contaminant; and (6) any substance with respect to which a federal, state
or local agency requires environmental investigation, monitoring, reporting or
remediation; and (B) "Environmental Laws" means any federal, state or local law
relating to (1) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (2) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (3) otherwise relating to
pollution of the environment or the protection of human health.
(ii) To the knowledge of Company, except as
disclosed in Section 4.1(o) of the Disclosure Schedule and except as would not,
individually or in the aggregate, have a Material Adverse Effect on Company:
(A) neither Company nor any of its Subsidiaries has violated or is in violation
of any Environmental Law; (B) none of the properties owned or leased by Company
or any of its Subsidiaries (including, without limitation, soils and surface
and ground waters) are contaminated with any Hazardous Substance in quantities
which require investigation or remediation under Environmental Laws; (C)
neither Company nor any of its Subsidiaries is liable for any off-site
contamination; (D) neither Company nor any of its Subsidiaries has any
liability or remediation obligation under any Environmental Law; (E) no assets
of Company or any of its Subsidiaries are subject to pending or threatened
Liens under any Environmental Law; (F) Company and its Subsidiaries have all
permits, licenses and other authorizations required under any Environmental Law
("Environmental Permits"); and (G)
23
27
Company and its Subsidiaries are in compliance with their respective
Environmental Permits.
(p) Material Contracts. There have been made available
to Parent, its affiliates and their representatives true and complete copies of
all of the following contracts to which Company or any of its Subsidiaries is a
party or by which any of them is bound (collectively, the "Material
Contracts"): (i) contracts with any current officer or director of Company or
any of its Subsidiaries; (ii) contracts for the sale of any of the assets of
Company or any of its Subsidiaries other than contracts relating to
non-operating property or entered into in the ordinary course of business or
for the grant to any person of any preferential rights to purchase any of its
assets other than inventory in the ordinary course of business; (iii) contracts
containing covenants of Company or any of its Subsidiaries not to compete in
any line of business or with any person in any geographical area or covenants
of any other person not to compete with Company or any of its Subsidiaries in
any line of business or in any geographical area; (iv) material indentures,
credit agreements, mortgages, promissory notes, and all contracts relating to
the borrowing of money; and (v) all other agreements, contracts or instruments
entered into outside of the ordinary course of business and which, in the
reasonable opinion of Company, are material to Company. The Company has
discussed with Parent the Company's purchase orders for raw materials
(including cotton and polyester), supplies, expense items, and equipment, and
the purchase orders from the Company's customers as well as the Company's
acknowledgments of those orders, but the Company has not provided copies of all
of these documents to Parent. Except as set forth on Schedule 4.1(p), all of
the Material Contracts are in full force and effect and are the legal, valid
and binding obligation of Company and/or its Subsidiaries, enforceable against
them in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth on Section 4.1(p) of the
Disclosure Schedule, neither Company nor any Subsidiary is in default in any
material respect under any Material Contract nor, to the knowledge of Company,
is any other party to any Material Contract in default thereunder in any
material respect.
24
28
(q) Labor Matters. (i) Except as set forth on Section
4.1(q)(i) of the Disclosure Schedule, neither Company nor any of its
Subsidiaries is a party to any employment, labor or collective bargaining
agreement (excluding consulting agreements with independent contractors entered
into in the ordinary course of business), and there are no employment, labor or
collective bargaining agreements which pertain to employees of Company or any
of its Subsidiaries. Company has heretofore made available to Parent true,
complete and correct copies of the (A) employment agreements listed on Section
4.1(q)(i) of the Disclosure Schedule and (B) labor or collective bargaining
agreements listed on such Schedule, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(ii) Except as set forth in Section 4.1(q)(ii) of
the Disclosure Schedule, no employees of Company or any of its Subsidiaries are
represented by any labor organization; to the knowledge of Company, no labor
organization or group of employees of Company or any of its Subsidiaries has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority and to the knowledge of Company, there are no
organizing activities involving Company or any of its Subsidiaries pending with
any labor organization or group of employees of Company or any of its
Subsidiaries.
(iii) Except as set forth on Section 4.1(q)(iii) of
the Disclosure Schedule, there are no (A) unfair labor practice charges,
grievances or complaints pending or threatened in writing by or on behalf of
any employee or group of employees of Company or any of its Subsidiaries which,
if resolved against Company or any of its Subsidiaries, as the case may be,
would, individually or in the aggregate, have a Material Adverse Effect on
Company, or (B) complaints, charges or claims against Company or any of its
Subsidiaries pending, or threatened in writing to be brought or filed, with any
Governmental Entity or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment of any
individual by Company or any of its Subsidiaries which, if resolved against
Company or any of its Subsidiaries, as
25
29
the case may be, would, individually or in the aggregate, have a Material
Adverse Effect on Company.
(r) Rights Plan Matters. The Company's Board of
Directors has approved and Company will enter into an amendment to the Company
Rights Agreement so that (i) the execution and delivery of this Agreement, the
public announcement or consummation of the transactions contemplated hereby and
the other matters provided for herein will not result in (A) Parent or
Purchaser or any of their respective Affiliates or Associates being an
Acquiring Person, (B) the occurrence of a Distribution Date, a Stock
Acquisition Date or a Triggering Event or (C) the Rights becoming exercisable
(the terms "Acquiring Person," "Affiliate," "Associate," "Distribution Date,"
"Stock Acquisition Date," and "Triggering Event" having the respective meanings
ascribed thereto in the Company Rights Agreement) and (ii) the common stock,
$0.01 par value per share, of the Surviving Corporation will not constitute
"Common Stock" within the meaning of Section 1(g) of the Company Rights
Agreement. A true, correct and complete copy of the Company Rights Agreement
(including all amendments thereto) is included in the Filed SEC Documents.
(s) Real Property; Other Assets. (i) Section 4.1(s)(i)
of the Disclosure Schedule sets forth all of the real property owned in fee by
Company and its Subsidiaries (the "Owned Real Property"). Each of Company and
its Subsidiaries has good and marketable title to each parcel of Owned Real
Property free and clear of all Liens except (A) those reflected or reserved
against in the latest balance sheet of Company included in the Filed SEC
Documents, (B) taxes and general and special assessments not in default and
payable without penalty and interest, and (C) Liens of record and other Liens
which individually or in the aggregate would not have a Material Adverse Effect
on Company (collectively "Permitted Liens").
(ii) Company has heretofore made available to Parent
true, correct and complete lists of all leases, subleases and other agreements
(the "Real Property Leases") under which Company or any of its Subsidiaries
uses or occupies or has the right to use or occupy, now or in the future, any
real property or facility (the "Leased Real Property") (including all
modifications, amendments and supplements thereto). Except in each case where
the failure individually or in the aggregate would not have a Material Adverse
Effect on Company (A) each Real Property Lease is
26
30
valid and binding on Company and in full force and effect, (B) all rent and
other sums and charges payable by Company and its Subsidiaries as tenants
thereunder are current in all material respects, and (C) no termination event
or condition or uncured default of a material nature on the part of Company or
any such Subsidiary or, to Company's knowledge, the landlord, exists under any
Real Property Lease. Except as would not individually or in the aggregate have
a Material Adverse Effect on Company, each of Company and its Subsidiaries has
a good and valid leasehold interest in each parcel of Leased Real Property free
and clear of all Liens, except for Permitted Liens.
SECTION 4.2 Representations and Warranties of Parent and Purchaser.
Parent and Purchaser represent and warrant to Company as follows:
(a) Organization, Standing and Corporate Power. Each of
Parent and Purchaser and each other Subsidiary of Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Parent
and Purchaser and each other Subsidiary of Parent is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Parent has delivered to
Company true and complete copies of the restated articles of incorporation and
by-laws of Parent and certificate of incorporation and by-laws of Purchaser, as
amended to the date of this Agreement.
(b) Capital Structure. The authorized capital stock of
Parent consists of (i) 30,000,000 shares of Parent Common Stock, and (ii)
20,000,000 shares of preferred stock, par value $.01 per share. At the close
of business on September 5, 1997, (i) 10,751,497 shares of Parent Common Stock
were issued and outstanding and (ii) 613,390 shares of Parent Common Stock were
reserved for issuance pursuant to outstanding options to purchase shares of
Parent Common Stock granted under Parent's stock option plans. Except as set
forth in the immediately preceding sentence, at the close of business on
September 5, 1997, no shares of capital stock or other equity securities of
Parent were issued,
27
31
reserved for issuance or outstanding. All outstanding shares of capital stock
of Parent are, and all shares of Parent Common Stock which may be issued
pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. The
authorized capital stock of Purchaser consists of 100 shares of common stock,
$0.01 par value per share, 100 of which have been validly issued, are fully
paid and nonassessable and are owned by Parent. No bonds, debentures, notes or
other indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
the stockholders of Parent may vote are issued or outstanding. Except as set
forth above, Parent does not have any outstanding option, warrant, subscription
or other right, agreement or commitment which (i) obligates Parent to issue,
sell or transfer, repurchase, redeem or otherwise acquire any shares of the
capital stock of Parent, (ii) restricts the transfer of Parent Common Stock or
(iii) relates to the voting of Parent Common Stock.
(c) Authority; Noncontravention. Parent and Purchaser
have the requisite corporate power and authority to enter into this Agreement.
The execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly authorized by the boards of directors of Parent and Purchaser
and have been duly approved by Parent as sole stockholder of Purchaser, and no
other corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby,
other than, with respect to the issuance of Parent Common Stock as required by
the terms of this Agreement or upon conversion of the Company's 6% Convertible
Subordinated Debentures after the Effective Time and the issuances of equity
securities of Parent contemplated by Section 4.2(g) (collectively, the "Share
Issuance"), the approval and adoption of the Share Issuance by the affirmative
vote of the holders of a majority of the shares of Parent Common Stock entitled
to vote on the matter, present in person or represented by proxy at the meeting
of Parent's stockholders called for such purpose. This Agreement has been duly
executed and delivered by each of Parent and Purchaser and, assuming this
Agreement constitutes the valid and binding agreement of Company, constitutes a
valid and binding obligation of each of Parent and Purchaser, enforceable
against each such party in accordance with its terms, subject to applicable
bankruptcy,
28
32
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principals of
equity. Except as disclosed in Section 4.2(c) of the Disclosure Schedule, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not (i) conflict with any of the provisions of the
restated articles of incorporation or by-laws of Parent or certificate of
incorporation or by-laws of Purchaser, (ii) subject to the governmental filings
and other matters referred to in the following sentence, conflict with, result
in a breach of or default (with or without notice or lapse of time, or both)
under, or give rise to a material obligation, a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which Parent or Purchaser is a party or by which Parent or
Purchaser or any of their assets is bound or affected, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
contravene any law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clauses (ii) and (iii) above, singly or in the aggregate, would have a
Material Adverse Effect on Parent. No consent, approval or authorization of,
or declaration or filing with, or notice to, any Governmental Entity which has
not been received or made is required by or with respect to Parent or Purchaser
in connection with the execution and delivery of this Agreement by Parent or
Purchaser or the consummation by Parent or Purchaser, as the case may be, of
any of the transactions contemplated by this Agreement, except for (i) the
filing of premerger notification and report forms under the HSR Act with
respect to the Merger, (ii) the filing with the SEC of (A) the Form S-4 and (B)
such other reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (iii) the
filing of the certificate of merger with the Delaware Secretary of State, and
appropriate documents with the relevant authorities of other states in which
Company is qualified to do business, (iv) state "blue-sky" filings, (v) NYSE
approvals, (vi) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 4.2(c) of the Disclosure Schedule and (vii)
any other applicable filings, authorizations, consents or
29
33
approvals the failure to make or obtain which, in the aggregate, would not have
a Material Adverse Effect on Parent.
(d) SEC Documents. Parent has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1994 (the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(e) Information Supplied. None of the information
supplied or to be supplied by Parent or Purchaser specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) the
Proxy Statement will, at the time it is filed with the SEC, at any time that it
is amended or supplemented, mailed to the stockholders of Company and Parent
and at the time of the Company Stockholders Meeting referred to in Section
6.2(a) and the Parent Stockholders Meeting referred to in Section 6.2(b),
contain any untrue statement of a material fact or omit to state any material
fact required to
30
34
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Form
S-4 and the Proxy Statement will comply as to form in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation or
warranty is made by Parent or Purchaser with respect to statements made or
incorporated by reference in such documents based on information supplied by or
on behalf of Company specifically for inclusion or incorporation by reference
therein.
(f) Absence of Certain Changes of Events; No Undisclosed
Material Liabilities. (i) Except as disclosed in the Parent SEC Documents
filed and publicly available prior to the date of this Agreement (the "Filed
Parent SEC Documents") or in Section 4.2(f) of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
Parent SEC Documents, Parent and its Subsidiaries have conducted their business
only in the ordinary course, and there has not been (A) any change, event or
occurrence particular to Parent and its Subsidiaries (excluding industry,
economic, financial and other matters generally affecting businesses other than
and in addition to Parent and its Subsidiaries) which has had or would have,
individually or in the aggregate, a Material Adverse Effect on Parent, (B) any
declaration, setting aside or payment of any dividend or distribution in
respect of any of Parent's outstanding capital stock (other than regular
quarterly cash dividends of $.05 per share on Parent Common Stock in accordance
with usual record and payment dates and in accordance with the Parent's present
dividend policy) or any redemption or other acquisition by Parent of any shares
of its capital stock, (C) any entry into any agreement, commitment or
transaction by Parent or any of its Subsidiaries which is material to Parent
and its Subsidiaries taken as a whole, except for agreements, commitments or
transactions entered into in the ordinary course of business, (D) any change by
Parent in accounting methods, principles or practices except as required or
permitted by generally accepted accounting principles or (E) any agreements by
Parent or any of its Subsidiaries to do any of the things described in the
preceding clauses (A) through (D) other than as expressly contemplated or
provided for herein.
(ii) Except as set forth in or disclosed in the
Filed Parent SEC Documents or Section 4.2(f) of the
31
35
Disclosure Schedule and liabilities incurred in the ordinary course of business
since the date of the most recent financial statements included in the Filed
Parent SEC Documents, as of the date hereof, there are no liabilities of Parent
or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, due, to become due, determined, determinable or otherwise, having or
which would, individually or in the aggregate, have a Material Adverse Effect
on Parent.
(g) Purchaser; Financing. (i) Parent owns all of the
outstanding capital stock of Purchaser. At all times prior to the Effective
Time, no person other than Parent has owned, or will own, any of the
outstanding capital stock of Purchaser. Purchaser was formed by Parent solely
for the purpose of engaging in the transactions contemplated by this Agreement.
Except as contemplated by this Agreement, Purchaser has not incurred, and will
not incur, directly or through any Subsidiary, any liabilities or obligations
for borrowed money or otherwise, except incidental liabilities or obligations
not for borrowed money incurred in connection with its organization and except
in connection with obtaining financing in connection with the Merger. Except
as contemplated by this Agreement, Purchaser has not engaged, directly or
through any Subsidiary, in any business activities of any type or kind
whatsoever.
(ii) Parent has received written commitments
(collectively, the "Financing Commitments") (copies of which are attached as
Section 4.2(g) of the Disclosure Schedule) from financial institutions and
investors to provide, subject to the terms and conditions of such commitments,
debt and equity financing sufficient, together with other funds available to
Parent, to effect the Merger and the other transactions contemplated hereby and
to pay all related fees and expenses.
(h) Brokers. No broker, investment banker, financial advisor
or other person, other than those identified in Section 4.2(h) of the
Disclosure Schedule, the fees and expenses of which will be paid by Parent, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
(i) Compliance with Applicable Laws. Each of Parent and its
Subsidiaries has in effect all Permits
32
36
including, without limitation, Permits required under Environmental Laws
necessary for it to own, lease or operate its properties and assets and to
carry on its business as now conducted, and there has occurred no default under
any such Permit, except for the lack of Permits and for defaults under Permits
which lack or default individually or in the aggregate would not have a
Material Adverse Effect on Parent. Except as disclosed in the Filed Parent SEC
Documents or in Section 4.2(i) of the Disclosure Schedule, Parent and its
Subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for
non-compliance which individually or in the aggregate would not have a Material
Adverse Effect on Parent.
(j) Environmental Laws. To the knowledge of Parent, except
as disclosed in Section 4.2(j) of the Disclosure Schedule and except as would
not have a Material Adverse Effect on Parent: (i) neither Parent nor its
Subsidiaries has violated or is in violation of any Environmental Law; (ii)
none of the properties owned or leased by Parent or any of its Subsidiaries
(including, without limitation, soils and surface and ground waters) are
contaminated with any Hazardous Substance in quantities which require
investigation or remediation under Environmental Laws; (iii) neither Parent nor
its Subsidiaries is liable for any off-site contamination; (iv) neither Parent
nor its Subsidiaries has any liability or remedial obligation under any
Environmental Law; (v) no assets of Parent or its Subsidiaries are subject to
pending or threatened Liens; (vi) Parent and its Subsidiaries have all
Environmental Permits; and (vii) Parent and its Subsidiaries are in compliance
with their respective Environmental Permits.
(k) Litigation, etc. As of the date hereof, except as
disclosed in Section 4.2(k) of the Disclosure Schedule, (i) there is no suit,
claim, action, proceeding (at law or in equity) or investigation pending or, to
the knowledge of Parent, threatened against Parent or any of its Subsidiaries
(including, without limitation, any product liability claims) before any court
or governmental or regulatory authority or body, and (ii) neither Parent nor
any of its Subsidiaries is subject to any outstanding order, writ, judgement,
injunction, order, decree or arbitration award or order that, in any such case
described in clauses (i) and (ii), has had or would have, individually or in
the aggregate, a Material Adverse Effect on Parent. As of the
33
37
date hereof, there are no suits, actions, claims, proceedings or investigations
pending or, to the knowledge of Parent, threatened, seeking to prevent, hinder,
modify or challenge the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of Company and Parent. Except as
contemplated by this Agreement (or, in the case of Parent and its Subsidiaries,
as contemplated by the Financing Commitments), during the period from the date
of this Agreement to the Effective Time, Company and Parent shall, and shall
cause their respective Subsidiaries to, act and carry on their respective
businesses only in the ordinary course of business and, to the extent
consistent therewith, use reasonable efforts to preserve intact their current
business organizations, keep available the services of their current key
officers and employees and preserve the goodwill of those engaged in material
business relationships with them, and to that end, without limiting the
generality of the foregoing, Parent and Company shall not, and shall not permit
their respective Subsidiaries to, without the prior consent of the other:
(i) (A) declare, set aside or pay any dividends
on, or make any other distributions (whether in cash, stock or property) in
respect of, any of its outstanding capital stock (other than as provided in
Section 4.1(f)(i)(B) and 4.2(f)(i)(B) above and, with respect to a Subsidiary,
to its corporate parent), (B) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (C) with respect to Company and its Subsidiaries
only, purchase, redeem or otherwise acquire any shares of outstanding capital
stock or any rights, warrants or options to acquire any such shares except, in
the case of clause (C), for the acquisition of shares from holders of options
in full or partial payment of the exercise price payable by such holder upon
exercise of options;
(ii) with respect to Company and its Subsidiaries
only, issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting
34
38
securities or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible or exchangeable securities other than upon the exercise of options
issued pursuant to employee benefit plans or pursuant to Company's "matching
obligations" under and in accordance with its 401(k) savings plan or, in
respect of Company, conversion of Preferred Shares and Convertible Debentures;
(iii) amend its articles or restated certificate of
incorporation, by-laws or other comparable charter or organizational documents;
(iv) with respect to Company and its Subsidiaries
only, directly or indirectly acquire, make any investment in, or make any
capital contributions to, any person (other than any direct or indirect
wholly-owned Subsidiary) other than in the ordinary course of business;
(v) with respect to the Company and its
Subsidiaries only, directly or indirectly sell or otherwise dispose of any of
its properties or assets that are material to its business, except for sales or
dispositions in the ordinary course of business;
(vi) with respect to Company and its Subsidiaries
only, (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, other than indebtedness owing to or guarantees
of indebtedness owing to Company or any direct or indirect wholly-owned
Subsidiary of Company or (B) make any loans or advances to any other person,
other than to Company or to any direct or indirect wholly-owned Subsidiary of
Company and other than routine advances to employees, except, in the case of
clause (A) for borrowings under existing credit facilities described in the
Filed SEC Documents in the ordinary course of business;
(vii) with respect to Company and its Subsidiaries
only, grant or agree to grant to any employee any increase in wages or bonus,
severance, profit sharing, retirement, deferred compensation, insurance or
other compensation or benefits, or establish any new compensation or benefit
plans or arrangements, or amend or agree to amend any existing Employee Benefit
Plans, except as may be required under existing agreements (including
collective bargaining agreements) or normal, regularly scheduled
35
39
increases in nonofficer employees consistent with past practices or as required
by law;
(viii) with respect to Company and its Subsidiaries
only, enter into or amend any employment, consulting, severance or similar
agreement with any individual except with respect to new hires in the ordinary
course of business consistent with past practice;
(ix) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization or any agreement relating to
an Acquisition Proposal (other than as expressly permitted pursuant to this
Agreement);
(x) with respect to Company and its Subsidiaries
only, make any tax election or settle or compromise any income tax liability of
Company or of any of its Subsidiaries involving on an individual basis more
than $1 million;
(xi) with respect to Company and its Subsidiaries
only, make any change in any method of accounting or accounting practice or
policy except as required by any changes in generally accepted accounting
principles;
(xii) with respect to Company and its Subsidiaries
only, enter into any agreement, understanding or commitment that restrains,
limits or impedes Company's ability to compete with or conduct any business or
line of business, except for any such agreement, understanding or commitment
entered into in the ordinary course of business consistent with past practice;
or
(xiii) authorize any of, or commit or agree to take
any of, the foregoing actions in respect of which it is restricted by the
provisions of this Section 5.1.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of the Proxy Statement and the Form S-4;
Accountant's Letters. (a) As soon as practicable following the date hereof:
36
40
(i) Company and Parent shall jointly prepare for
inclusion in the Form S-4, as soon as practicable after the date hereof, a
proxy statement (the "Proxy Statement") relating to the Merger and the Share
Issuance in accordance with the Exchange Act and the rules and regulations
under the Exchange Act, with respect to the transactions contemplated by this
Agreement. Company, Parent and Purchaser shall cooperate with each other in
the preparation of the Proxy Statement. Company and Parent shall use all
reasonable efforts to respond promptly to any comments made by the SEC with
respect to the Proxy Statement, and to cause the Proxy Statement to be mailed
to the stockholders of Company and Parent at the earliest practicable date
after the Form S-4 is declared effective by the SEC.
(ii) Parent shall prepare and file with the SEC,
as soon as practicable after the date hereof, the Form S-4. Each of Company
and Parent shall use all reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such
filing. Parent also shall take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger, and Company shall furnish all
information concerning Company and the holders of the Shares as may be
reasonably requested in connection with any such action.
(b) Company shall use its best efforts to cause to be
delivered to Parent a letter of Ernst & Young LLP, Company's independent public
accountants, dated a date within two business days before the date on which the
Form S-4 shall become effective, and a letter of Ernst & Young LLP, dated a
date within two business days before the Closing Date, each addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary
in scope and substance for letters delivered by independent accountants in
connection with registration statements similar to the Form S-4.
(c) Parent shall use its best efforts to cause to be
delivered to Company a letter of KPMG Peat Marwick LLP, Parent's independent
public accountants, dated a date within two business days before the date on
which the Form S-4 shall become effective and a letter of KPMG Peat Marwick
LLP, dated a date within two business days before the Closing Date, each
addressed to Company, in form and
37
41
substance reasonably satisfactory to Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
SECTION 6.2 Stockholders Meetings. (a) Subject to Company's right
to terminate this Agreement pursuant to Section 8.1(a)(v), Company shall take
all action necessary, in accordance with the DGCL, the Exchange Act and other
applicable law, the rules of the NYSE, and its certificate of incorporation and
by-laws, to convene a special meeting of the stockholders of Company (the
"Company Stockholders Meeting") as promptly as practicable after the
effectiveness of the Form S-4 for the purpose of considering and voting upon
this Agreement. Subject to Company's right to terminate this Agreement
pursuant to Section 8.1(a)(v), the Board of Directors of Company shall
recommend that the holders of the Shares vote in favor of the approval and
adoption of this Agreement at the Company Stockholders Meeting and such
recommendation shall be included in the Proxy Statement. At the Company
Stockholders Meeting, Parent and Purchaser shall vote all Shares beneficially
owned by them in favor of the adoption and approval of this Agreement.
(b) Parent shall take all action necessary in accordance
with Exchange Act and other applicable law, the rules of the NYSE, and its
restated articles of incorporation and by-laws, to convene a special meeting of
the stockholders of Parent (the "Parent Stockholders Meeting") as promptly as
practicable after the effectiveness of the Form S-4 for the purpose of
considering and voting upon the Share Issuance. The Board of Directors of
Parent shall recommend that the holders of the Parent Common Stock vote in
favor of and approve the Share Issuance at the Parent Stockholders Meeting.
SECTION 6.3 Access to Information; Confidentiality. Company shall,
and shall cause each of its Subsidiaries to, afford to Parent and to Parent's
officers, employees, counsel, financial advisors, financing providers
(including counsel of such financing providers) and other representatives
reasonable access during normal business hours during the period prior to the
Effective Time to all its owned and leased properties, books, contracts,
commitments, tax returns, personnel and records and, during such period,
Company shall, and shall cause each of its Subsidiaries to, furnish as promptly
as practicable to
38
42
Parent such information concerning its business, properties, financial
condition, operations and personnel as Parent may from time to time reasonably
request. Parent shall, and shall cause each of its Subsidiaries to, afford to
Company and to Company's officers, employees, counsel, financial advisors and
other representatives reasonable access during normal business hours during the
period prior to the Effective Time to all its books, contracts, commitments,
tax returns, personnel and records and during such period, parent shall, and
shall cause each of its Subsidiaries to, furnish as promptly as practicable to
Company such information concerning its business, properties, financial
condition, operations and personnel as Company may from time to time reasonably
request. Any such investigation by Parent or Company shall not affect the
representations or warranties contained in this Agreement. Except as required
by law, Parent and Company will hold, and will cause their respective
directors, officers, partners, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any non-public
information obtained from the other party in confidence to the extent required
by, and in accordance with the provisions of the letter agreements between
Parent and Company with respect to confidentiality and other matters.
SECTION 6.4 Reasonable Best Efforts. Upon the terms and subject to
the conditions and other agreements set forth in this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including the
satisfaction of the respective conditions set forth in Article VII.
SECTION 6.5 Indemnification; Directors' and Officers Insurance. (a)
The certificate of incorporation and by- laws of the Surviving Corporation
shall contain the provisions with respect to indemnification set forth in the
restated certificate of incorporation and by-laws of Company on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of Company in respect of
actions or omissions
39
43
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law.
(b) Company shall, and from and after the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Effective Time, an officer or director
of Company (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director or
officer of Company whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case, to the full extent a corporation is permitted under the
DGCL to indemnify its own directors or officers, as the case may be, and Parent
or the Surviving Corporation, as the case may be, will pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by law).
(c) Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel reasonably satisfactory to Company
(or to Parent and the Surviving Corporation after the Effective Time) and
Company (or after the Effective Time, Parent and the Surviving Corporation)
shall pay all fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (ii) Company (or after the
Effective Time, Parent and the Surviving Corporation) shall use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
neither Company, Parent nor the Surviving Corporation shall be liable for any
settlement effected without its
40
44
prior written consent, which shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.5, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Company (or after the Effective Time, Parent and the Surviving
Corporation) (but the failure so to notify shall not relieve a party from any
liability which it may have under this Section 6.5 except to the extent such
failure prejudices such party), and shall deliver to Company (or after the
Effective Time, Parent and the Surviving Corporation) the undertaking
contemplated by Section 145(e) of the DGCL. The Indemnified Parties as a group
may retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties. Company, Parent and Purchaser agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
(d) For a period of four years after the Effective Time,
Parent shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Company (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous in any
material respect to the Indemnified Parties) with respect to matters arising
before the Effective Time, provided that Parent shall not be required to pay an
annual premium for such insurance in excess of 200% of the last annual premium
paid by Company prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
(e) The provisions of this Section 6.5 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, Purchaser, Company and the Surviving
Corporation.
41
45
SECTION 6.6 Public Announcements. Parent and Purchaser, on the one
hand, and Company, on the other hand, will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release, SEC filing or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 6.7 No Solicitation; Acquisition Proposals. (a) Until the
termination of this Agreement in accordance with Section 8.1, Company shall
not, and shall not authorize or permit any of its Subsidiaries, or any of its
or their affiliates, officers, directors, employees, agents or representatives
(including, without limitation, any investment banker, financial advisor,
attorney or accountant retained by Company or any of its Subsidiaries), to,
directly or indirectly, initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries, any expression of interest, or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain an
Acquisition Proposal or agree to or endorse any Acquisition Proposal; provided,
however, that nothing in this Agreement shall prohibit the Board of Directors
of Company from furnishing information to, or entering into, maintaining or
continuing discussions or negotiations with, any person that makes an
unsolicited Acquisition Proposal after the date hereof, if, and to the extent
that, the Board of Directors of Company, after consultation with and based upon
the advice of independent legal counsel, determines in good faith that (a) such
Acquisition Proposal would be more favorable to Company's stockholders than the
Merger and (b) the failure to take such action would result in a breach by the
Board of Directors of Company of its fiduciary duties to Company's stockholders
under applicable law, and, prior to furnishing any non-public information to
such person, Company receives from such person an executed confidentiality
agreement with provisions no less favorable to Company than the letter
agreement relating to the furnishing of confidential information of Company to
Parent referred to in the last sentence of Section 6.3. Company
42
46
shall promptly notify Parent if it is prepared to provide access to the
properties, books or records of Company or any of its Subsidiaries to any
person who has made an Acquisition Proposal, and Company shall at such time
inform Parent of the material terms of any such Acquisition Proposal.
(b) For purposes of this Agreement, "Acquisition
Proposal" means an inquiry, offer or proposal regarding any of the following
(other than the transactions contemplated by this Agreement with Parent or
Purchaser) involving Company: (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all
or substantially all the assets of Company and its Subsidiaries, taken as a
whole, in a single transaction or series of related transactions; (iii) any
tender offer or exchange offer for 33-1/3 percent or more of the outstanding
shares of capital stock of Company or the filing of a registration statement
under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(c) Nothing contained in this Section 6.7 shall prohibit
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Company's stockholders which, in the good faith judgment of the
Board of Directors of Company based on the advice of outside counsel, is
required under applicable law.
SECTION 6.8 Consents, Approvals and Filings.
(a) Upon the terms and subject to the conditions hereof,
each of the parties hereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act, the
Securities Act and the Exchange Act, with respect to the Merger and the other
transactions contemplated herein (together, the "Transactions") and (b) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable best efforts
to
43
47
obtain all licenses, permits (including, without limitation, Environmental
Permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with Company and its
Subsidiaries as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action.
(b) Parent hereby agrees to use its best efforts to
obtain any government clearances required for completion of the Merger
(including through compliance with the HSR Act), to respond to any government
requests for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an "Order") that restricts, prevents or
prohibits the consummation of the Merger, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal
and all available legislative action. Parent also hereby agrees to take any
and all of the following actions to the extent necessary to obtain the approval
of any governmental entity with jurisdiction over the enforcement of any
applicable laws regarding the Merger: entering into negotiations; providing
information; substantially complying with any second request for information
pursuant to the HSR Act; entering into and performing agreements or submitting
to judicial or administrative orders and selling or otherwise disposing of, or
holding separate (through the establishment of a trust or otherwise) particular
assets or categories of assets, or businesses of Parent, Company or any of
their affiliates; provided, however, that notwithstanding the foregoing, Parent
would not be required hereby to take any such action that would have a Material
Adverse Effect on Parent and its Subsidiaries (including the Surviving
Corporation) taken as a whole following the Effective Time. The parties hereto
will consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or in behalf of any party hereto in connection with proceedings
under or relating to
44
48
the HSR Act or any other federal, state or foreign antitrust or fair trade law.
SECTION 6.9 Board Action Relating to Stock Option Plans. As soon as
practicable following the date of this Agreement, the Board of Directors of
Company (or, if appropriate, any committee administering a Stock Option Plan)
shall adopt such resolutions or take such actions as may be required to adjust
the terms of all outstanding Options in accordance with Section 2.2 and shall
make such other changes to Stock Option Plans as it deems appropriate to give
effect to the Merger (subject to the approval of Parent, which shall not be
unreasonably withheld).
SECTION 6.10 Employment and Employee Benefit Matters.
(a) Parent shall, and shall cause its Subsidiaries
following the Effective Time (including the Surviving Corporation) to:
(i) honor and provide for payment of all obligations
and benefits under all Company Plans in accordance with their terms;
(ii) provide employee benefits which are
substantially comparable in the aggregate to the level of employee benefits
provided by the Company and its Subsidiaries under the Company ERISA Plans in
effect as of the Closing Date for the benefit of employees or former employees
who are or had been employees of the Company or any of its Subsidiaries on or
before the Closing Date ("Covered Employees"), until the earlier of December
31, 1999 or the second anniversary of the Closing Date (the "Benefits
Maintenance Period");
(iii) honor and provide for the payment of all
obligations and benefits under all employment or severance agreements between
the Company and any Covered Employee in accordance with their terms; and
(iv) provide until the first anniversary of the
Closing Date for the benefit of Covered Employees who remain in the employ of
the Surviving Corporation or Parent or any of its affiliates employee
compensation that is in the aggregate at a level substantially comparable to
the compensation (including base pay and incentive-type compensation) provided
by the Company and its Subsidiaries
45
49
under the compensation arrangements in effect as of the Closing Date.
(b) Parent hereby agrees that the Surviving Corporation
shall maintain the Company's Short-Term Incentive Compensation Plan without
adverse change until the end of the 1997 calendar year.
(c) Parent hereby agrees that the Surviving Corporation
shall continue without adverse change the severance plan maintained by the
Company and its Subsidiaries as of the date hereof until the first anniversary
of the Closing Date.
(d) If Covered Employees are included in any benefit plan
(including without limitation, provision for vacation) of Parent or its
Subsidiaries, Parent agrees that the Covered Employees shall receive credit as
employees of the Company and its Subsidiaries for service prior to the Closing
Date with the Company and its Subsidiaries to the same extent such service was
counted under similar Company Plans for purposes of eligibility, vesting,
eligibility for retirement and, with respect to vacation, disability and
severance, benefit accrual. If Covered Employees are included in any medical,
dental or health plan other than the plan or plans they participated in on the
Closing Date, Parent agrees that any such plans shall not include pre-existing
condition exclusions, except to the extent such exclusions were applicable
under the similar Company Plan on the Closing Date, and shall provide credit
for any deductibles and co- payments applied or made with respect to each
Covered Employee in the calendar year of the change.
(e) The parties acknowledge that nothing herein shall be
deemed to be a commitment on the part of Parent or the Surviving Corporation to
provide employment to any person for any period of time and, except as
otherwise provided in this Section 6.10, nothing herein shall be deemed to
prevent Parent or the Surviving Corporation from amending or terminating any
Company Plan in accordance with its terms.
SECTION 6.11 Affiliates and Certain Stockholders. Prior to the
Closing Date, Company shall deliver to Parent a letter identifying all persons
who are, at the time the Merger is submitted for approval to the stockholders
of Company, "affiliates" of Company for purposes of Rule 145 under the
Securities Act. Company shall use its best efforts
46
50
to cause each such person to deliver to Parent on or prior to the Closing Date
a written agreement substantially in the form attached as Exhibit A hereto.
Parent shall not be required to maintain the effectiveness of the Form S-4 or
any other registration statement under the Securities Act for the purposes of
resale of Parent Common Stock by such affiliates, and the certificates
representing Parent Common Stock received by such affiliates in the Merger
shall bear a customary legend regarding applicable Securities Act restrictions.
SECTION 6.12 NYSE Listing. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 6.13 Certain Company Indebtedness. At the Closing, (i)
Company shall execute and deliver to the trustee under the Indenture pursuant
to which the Convertible Debentures were issued a supplemental indenture, to
become effective at the Effective Time, providing that the holder of each
Convertible Debenture outstanding immediately following the Effective Time
shall have the right thereafter, during the period such Convertible Debenture
shall be convertible as specified in such Indenture, to convert such
Convertible Debenture only into the amount of cash and Parent Common Stock
receivable by reason of the Merger by a holder of the number of Shares into
which such Convertible Debenture might have been converted immediately prior to
the Effective Time (subject to subsequent adjustment as provided in such
Indenture) and (ii) Parent shall execute and deliver to such trustee, as part
of such supplemental indenture, an undertaking (A) to reserve and keep
available out of its authorized but unissued capital stock, a number of shares
of Parent Common Stock sufficient to permit the conversion of all outstanding
Convertible Debentures and (B) to cause to be issued and delivered to Company
for subsequent delivery by Company in accordance with such supplemental
indenture and Indenture shares of Parent Common Stock upon the conversion of
any Convertible Debenture.
47
51
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or written waiver on or prior to the Closing Date
of the following conditions:
(a) Stockholder Approvals. (i) This Agreement shall
have been approved and adopted by the affirmative vote of the requisite number
of stockholders of Company in the manner required pursuant to Company's
restated certificate of incorporation and by-laws, the DGCL and other
applicable law, and the rules of the NYSE.
(ii) The Share Issuance shall have been approved
by the affirmative vote of the requisite number of stockholders of Parent in
the manner required pursuant to Parent's restated articles of incorporation and
by- laws, the Texas Business Corporation Act and other applicable law and the
rules of the NYSE.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the party invoking this condition shall have complied with its
obligations under Section 6.8.
(c) NYSE Listing. The shares of Parent Common Stock
issuable to Company's stockholders pursuant to the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(d) Form S-4. The Form S-4 shall have been declared
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) HSR Act. All necessary waiting periods under the HSR
Act applicable to the Merger shall have expired or been terminated.
SECTION 7.2. Conditions to Obligations of Parent and
Purchaser. The obligation of Parent and Purchaser to
48
52
effect the Merger is further subject to satisfaction or written waiver on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Company contained in this Agreement, which representations
and warranties shall be deemed for purposes of this Section 7.2 not to include
any qualification or limitation with respect to materiality (whether by
reference to "Material Adverse Effect" or otherwise), shall be true and correct
as of the Closing Date, except where the matters in respect of which such
representations and warranties are not true and correct, in the aggregate, has
not had or would not have a Material Adverse Effect on Company, with the same
effect as though such representations and warranties were made as of the
Closing Date, and Parent and Purchaser shall have received a certificate signed
on behalf of Company by an authorized officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent and Purchaser shall have received a certificate signed on behalf of
Company by an authorized officer of Company to such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, Company and its Subsidiaries, taken as a whole, shall not have
experienced any change, event or occurrence particular to them (excluding
industry, economic, financial and other matters generally affecting businesses
other than and in addition to Company and its Subsidiaries) that has had or
would have a Material Adverse Effect on Company, other than resulting from any
matter disclosed in any Filed SEC Document or in Section 7.2(c) of the
Disclosure Schedule.
SECTION 7.3. Conditions to Obligation of Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations
and warranties of each of Parent and Purchaser contained in this Agreement,
which representations and warranties shall be deemed for purposes of this
49
53
Section 7.3 not to include any qualification or limitation with respect to
materiality (whether by reference to "Material Adverse Effect" or otherwise),
shall be true and correct as of the Closing Date (except where the matters in
respect of which such representations and warranties are not true and correct,
in the aggregate, has not had a Material Adverse Effect on Purchaser), with the
same effect as though such representations and warranties were made as of the
Closing Date, and Company shall have received a certificate signed on behalf of
Parent and Purchaser by an authorized officer of Parent to such effect.
(b) Performance of Obligations of Parent and Purchaser.
Each of Parent and Purchaser shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an authorized officer of Parent to such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, Parent and its Subsidiaries, taken as a whole, shall not have
experienced any change or occurrence particular to them (excluding industry,
economic, financial and other matters generally affecting businesses other than
and in addition to Parent and its Subsidiaries), that has had or would have a
Material Adverse Effect on Parent, other than resulting from any matter
disclosed in any Parent SEC Document or in Section 7.3(c) of the Disclosure
Schedule.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. (a) This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval and adoption thereof by the
stockholders of Company, in any one of the following circumstances:
(i) By mutual written consent duly authorized by
the Boards of Directors of Parent and Company.
(ii) By Parent or Company, if, without any
material breach by such terminating party of its obligations
50
54
under this Agreement, the Effective Time shall not have occurred on or before
December 31, 1997.
(iii) By Parent or Company, if any federal or state
court of competent jurisdiction or other Governmental Entity shall have issued
an order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable, provided that neither
party may terminate this Agreement pursuant to this clause (iii) if it has not
complied with its obligations under Section 6.8.
(iv) By Parent or Company, if the Company
Stockholders Meeting shall have been held and this Agreement shall not have
been approved and adopted by the affirmative vote of the requisite number of
stockholders of Company.
(v) By Company, if it shall have received an
Acquisition Proposal and shall have advised Parent in writing that Company's
Board of Directors, after consultation with and based upon the advice of
independent legal counsel, determined in good faith that failure to accept such
Acquisition Proposal would result in a breach by the Board of Directors of
Company of its fiduciary duties to Company's stockholders under applicable law;
provided, however, that this Agreement shall not be terminated pursuant to this
Section 8.1(a)(v) unless simultaneously with the termination Company shall have
made the payment to Parent of the Fee required to be paid pursuant to Section
8.1(b).
(vi) By Parent, if the Board of Directors of
Company shall have (1) withdrawn, modified or amended in any adverse respect
its approval or recommendation of this Agreement, the Merger or the other
transactions contemplated hereby, (2) approved, endorsed or recommended to its
stockholders an Acquisition Proposal or (3) resolved to do any of the
foregoing.
(vii) By Parent or Company, if (A) the other party
shall have failed to comply in any material respect with any of the material
covenants and agreements contained in this Agreement to be complied with or
performed by such party at or prior to such date of termination, and such
failure continues for 20 business days after the actual receipt by such party
of a written notice from the other party setting forth in detail the nature of
such failure, or
51
55
(B) a representation or warranty of the other party contained in this Agreement
shall have been untrue in any respect on the date when made (or in the case of
any representations and warranties that are made as of a different date, as of
such different date) and the matters in respect of which such representation or
warranty shall have been untrue has had or would have a Material Adverse Effect
on such other party.
(viii) By Company pursuant to Section 2.1(e) hereof.
(b) If this Agreement is terminated pursuant to:
(i) Section 8.1(a)(v), or
(ii) Section 8.1(a)(vi);
then, in such event, Company shall pay to Parent prior to such termination, if
such termination is pursuant to Section 8.1(a)(v), or promptly (but in no event
later than three business days after the first of such events shall have
occurred), if such termination is pursuant to Section 8.1(a)(vi), a fee of
Fifteen Million Dollars ($15,000,000) (the "Fee"), which amount shall be
payable in immediately available funds and upon payment of such Fee Company
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement.
SECTION 8.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 8.1(a) hereof, this
Agreement (except for the provisions of the last sentence of Section 6.3, and
Sections 4.1(m), 4.2(h), 6.6, this Section 8.2, Article IX and paragraph (b) of
Section 8.1) shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its directors, officers or
stockholders; provided, however, that nothing in this Section 8.2 shall relieve
any party to this Agreement of liability for any willful or intentional breach
of this Agreement.
SECTION 8.3 Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval and adoption of this Agreement by the stockholders of Company, no
amendment shall be made
52
56
which would reduce the amount or change the type of consideration into which
each Share or Preferred Share shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
SECTION 8.5 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 8.1, an amendment
of this Agreement pursuant to Section 8.3 or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of Parent,
Purchaser or Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.2 Fees and Expenses. Except as provided otherwise in
Section 8.1(b), whether or not the Merger shall be consummated, each party
hereto shall pay its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
53
57
contemplated hereby, other than the expenses incurred in connection with
printing and mailing proxy materials to stockholders, which shall be shared
equally by Parent and Company. The Surviving Corporation shall pay any and all
property or transfer taxes imposed on the Surviving Corporation or the
stockholders of the Company by reason of the Merger.
SECTION 9.3 Definitions. For purposes of this Agreement: (a) an
"affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person;
(b) "business day" means any day other than Saturday,
Sunday or any other day on which banks in the City of New York are required or
permitted to close;
(c) "knowledge" means the actual knowledge of any
executive officer of Company or Parent, as the case may be;
(d) "Liens" means, collectively, all pledges, claims,
liens, charges, mortgages, conditional sale or title retention agreements,
hypothecations, collateral assignments, security interests, easements and other
encumbrances of any kind or nature whatsoever;
(e) a "Material Adverse Effect" with respect to any
person means a material adverse effect on (i) the ability of such person to
perform its obligations hereunder or consummate the transactions contemplated
hereby or (ii) the condition (financial or otherwise), assets, business,
liabilities (actual or contingent) or operations of such person and its
Subsidiaries taken as a whole;
(f) the "NYSE" means the New York Stock Exchange;
(g) a "person" means an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity; and
(h) a "Subsidiary" of any person means any other person
of which (i) the first mentioned person or any Subsidiary thereof is a general
partner, (ii) voting power to elect a majority of the board of directors or
others performing similar functions with respect to such other person is held
by the first mentioned person and/or by any one or more of its Subsidiaries, or
(iii) at least 50% of
54
58
the equity interests of such other person is, directly or indirectly, owned or
controlled by such first mentioned person and/or by any one or more of its
Subsidiaries.
SECTION 9.4 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Parent, to
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Attention: John H. Karnes, Jr., Esq.
Telecopy: (214) 467-0823
with a copy (which shall not constitute
notice) to:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mark E. Betzen, Esq.
Telecopy: (214) 969-5100
(ii) if to Company, to
Fieldcrest Cannon, Inc.
One Lake Circle Drive
Kannapolis, North Carolina 28081
Attention: Mark R. Townsend, Esq.
Telecopy: (704) 939-4623
with a copy (which shall not constitute
notice) to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
Telecopy: (212) 310-8007
55
59
SECTION 9.5 Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of, or
a Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
SECTION 9.6 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.7 Entire Agreement; Third-Party Beneficiaries. This
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter of this Agreement (except for the letter agreements
referenced in the last sentence of Section 6.3). This Agreement is not
intended to confer upon any person (including, without limitation, any
employees of Company), other than the parties hereto and the third party
beneficiaries referred to in the following sentence, any rights or remedies.
The parties hereto expressly intend the provisions of Sections 6.5 and 6.10 to
confer a benefit upon and be enforceable by, as third party beneficiaries of
this Agreement, the third persons referred to in, or intended to be benefitted
by, such provisions.
SECTION 9.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, and any such assignment
that is not consented to shall be null and void, except that Parent and/or
Purchaser may assign this Agreement to any direct wholly-owned Subsidiary of
Parent without the prior consent of Company; provided that Parent
56
60
shall remain liable for all of its obligations and all obligations of any of
its Subsidiaries or any of its assignees under this Agreement. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware, this being in addition to any other remedy to
which they are entitled at law or in equity.
SECTION 9.11 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
[signature page follows]
57
61
IN WITNESS WHEREOF, Parent, Purchaser and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PILLOWTEX CORPORATION
By: /s/ CHARLES M. HANSEN, JR.
-----------------------------------
Name: Charles M. Hansen, Jr.
Title: Chairman of the Board and
Chief Executive Officer
PEGASUS MERGER SUB, INC.
By: /s/ CHARLES M. HANSEN, JR.
-----------------------------------
Name: Charles M. Hansen, Jr.
Title: Chairman of the Board and
Chief Executive Officer
FIELDCREST CANNON, INC.
By: /s/ JAMES M. FITZGIBBONS
-----------------------------------
Name: James M. Fitzgibbons
Title: Chairman of the Board and
Chief Executive Officer
58