Exhibit 10.29
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of March 1, 2004, by and among INTEGRITY MEDIA, INC., a Delaware
corporation (the "COMPANY"), KONA ACQUISITION CORP., a Delaware corporation
("KONA") and P. Michael Coleman ("COLEMAN").
WHEREAS, the respective Boards of Directors of the Company and Kona
have deemed it advisable and in the best interests of their respective
corporations and stockholders to consummate the statutory merger, on the terms
and subject to the conditions set forth in this Agreement, of Kona with and into
the Company (the "MERGER");
WHEREAS, the respective Boards of Directors of the Company and Kona
have approved, in accordance with the applicable provisions of the laws of the
State of Delaware ("DELAWARE LAW"), this Agreement and the transactions
contemplated hereby, including the Merger;
WHEREAS, based on the recommendation of the Special Committee (as
defined in Section 3.01(e)(ii)), the Board of Directors of the Company has
resolved to recommend to its stockholders approval and adoption of this
Agreement, approval of the Merger, and approval of the conversion of each issued
and outstanding share of the Company's Class A common stock, $0.01 par value per
share (the "COMPANY CLASS A COMMON STOCK"), other than those issued and
outstanding shares of Company Class A Common Stock Held (as defined in Section
8.13) by the Continuing Stockholders (as defined in Section 8.13), to the right
to receive a cash payment from the Surviving Corporation (as defined in Section
1.01);
WHEREAS, Coleman beneficially owns 55,100 shares of Company Class A
Common Stock and 3,385,000 shares of the Company's Class B common stock, $0.01
par value per share (the "COMPANY CLASS B COMMON STOCK");
WHEREAS, Coleman is the sole stockholder of Kona;
WHEREAS, the sole stockholder of Kona has approved and adopted this
Agreement and approved the Merger;
WHEREAS, Coleman has informed the Company that the shares of Company
Class A Common Stock and Company Class B Common Stock of which he has a
pecuniary interest are not for sale, and that Coleman has no intention of
selling, transferring or otherwise disposing of such shares of Company Class A
Common Stock and Company Class B Common Stock; and
WHEREAS, the Company, Kona and Coleman 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 foregoing and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. 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"), Kona shall be merged with and into the
Company at the Effective Time (as defined in Section 1.03). At the Effective
Time, the separate corporate existence of Kona shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION").
SECTION 1.02. CLOSING. The closing of the Merger (the "CLOSING") will
take place at 11:00 a.m., Atlanta time, on a date to be specified by the
parties, which shall be not later than the second Business Day (as defined in
Section 8.13) after satisfaction or waiver of the conditions set forth in
Article VI (other than those that by their terms are to be satisfied or waived
at the Closing), at the offices of Alston & Bird LLP, 1201 West Peachtree
Street, Atlanta, Georgia, 30309, unless another time, date, or place is agreed
to in writing by Kona and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "CLOSING DATE."
SECTION 1.03. EFFECTIVE TIME OF THE MERGER. As soon as practicable on
or after the Closing Date, the parties shall: (a) file a certificate of merger
(the "CERTIFICATE OF MERGER") in such form as is required by, and executed and
acknowledged in accordance with, the relevant provisions of the DGCL; and (b)
make all other filings or recordings required under the DGCL to effect the
Merger. The Merger shall become effective at such date and time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or at such subsequent date and time as Kona and the Company shall agree
and specify in the Certificate of Merger. The date and time at which the Merger
becomes effective is referred to in this Agreement as the "EFFECTIVE TIME."
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION.
(a) At the Effective Time, the Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation from
and after the Effective Time until thereafter changed or amended as provided
therein or by applicable Delaware Law.
(b) The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
from and after the
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Effective Time until thereafter changed or amended as provided therein or by
applicable Delaware Law.
SECTION 1.06. DIRECTORS OF SURVIVING CORPORATION. The directors of the
Company immediately prior to the Effective Time 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.
SECTION 1.07. OFFICERS OF SURVIVING CORPORATION. The officers of the
Company immediately prior to the Effective Time 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
CONVERSION OF SECURITIES
SECTION 2.01. CONVERSION OF SECURITIES.
(a) At the Effective Time, on the terms and subject to
the conditions set forth in this Agreement, by virtue of the Merger and without
any action on the part of Kona, the Company or any of their respective
securityholders:
(i) COMPANY CLASS A COMMON STOCK.
(A) Non-Continuing Stockholders. Each
share of Company Class A Common Stock, other than those shares of Company Class
A Common Stock Held by the Dissenting Stockholders (as defined in Section
2.01(a)(vii)), outstanding at the Effective Time Held by a Non-Continuing
Stockholder (as defined in Section 8.13), shall be deemed canceled and converted
into the right to receive cash in an amount equal to $6.50, without interest
(the "PER SHARE CASH MERGER CONSIDERATION"), and each such share shall no longer
be outstanding and shall automatically be canceled and shall cease to exist, and
each certificate that immediately prior to the Effective Time evidenced a
Non-Continuing Stockholder's ownership of shares of Company Class A Common Stock
shall cease to have any rights with respect thereto, except the right to receive
the Per Share Cash Merger Consideration.
(B) Continuing Stockholders. Each share
of Company Class A Common Stock, other than those shares of Company Class A
Common Stock Held by the Dissenting Stockholders, outstanding at the Effective
Time Held by a Continuing Stockholder, shall continue to represent one share of
Class A common stock of the Surviving Corporation, and each certificate that
immediately prior to the Effective Time evidenced a Continuing Stockholder's
ownership of shares of Company Class A Common Stock shall continue to evidence
ownership of the same number of shares of Class A common stock of the Surviving
Corporation.
(ii) SURVIVING CORPORATION CLASS A SHARES. Each
share of Company Class B Common Stock outstanding at the Effective Time shall be
converted into the right to receive one fully paid and nonassessable share of
Class A common stock
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of the Surviving Corporation. All shares of Class A common stock of the
Surviving Corporation issued pursuant to this Section 2.01(a)(ii) (the
"SURVIVING CORPORATION CLASS A SHARES") shall be duly authorized and validly
issued and free of preemptive rights, with no personal liability attaching to
ownership thereof.
(iii) COMPANY OPTIONS.
(A) Non-Continuing Stockholders.
Promptly following the execution and delivery of this Agreement, the
Compensation Committee of the Board of Directors of the Company shall adopt
appropriate resolutions and take all other actions necessary and appropriate to
provide, and the Company shall cause (a) on the Business Day prior to the
Effective Time, each unvested and unexercisable Company Option (as defined in
Section 8.13) held by a Non-Continuing Stockholder to become fully vested and
exercisable and (b) immediately prior to the Effective Time, each such unexpired
and unexercised Company Option granted under the Integrity Incorporated 1999
Long-Term Incentive Plan and Integrity Media, Inc. 2001 Long-Term Incentive Plan
to be cancelled either (i) if the Company Option has an exercise price per share
of the Company Class A Common Stock previously subject to such Company Option
that is less than the Per Share Cash Merger Consideration (an "ELIGIBLE
OPTION"), in consideration of the right to receive cash in an amount equal to
the excess of the Per Share Cash Merger Consideration over the exercise price
(the "OPTION PAYMENT") or (ii) if the exercise price of the Company Option is
greater than the Per Share Cash Merger Consideration (an "INELIGIBLE OPTION"),
without the payment of cash or issuance of other securities. From and after the
Effective Time, any such cancelled Company Option shall no longer be exercisable
by the former holder thereof and shall be of no further force and effect. With
regard to any Company Option granted under the Integrity Music, Inc. Long-Term
Incentive Plan adopted in 1994, Integrity Music, Inc. 1994 Stock Option Plan for
Outside Directors and Integrity Media, Inc. 2002 Stock Option Plan for Outside
Directors, the Company shall use its reasonable best efforts to cause (x) each
Non-Continuing Stockholder who is also a holder of an Eligible Option to
exercise such Eligible Option prior to the Effective Time or to agree to the
cancellation of such Eligible Option in exchange for the right to receive an
Option Payment as provided for hereinabove and (y) each Non-Continuing
Stockholder who is also a holder of an Ineligible Option to consent to the
termination of such Ineligible Option prior to the Effective Time (each, an
"OPTION TERMINATION CONSENT"). Each Option Termination Consent shall include a
confirmation from the holder that, upon the effectiveness of such cancellation
or termination, he or she will have no rights relating to such Company Option,
except to the extent contemplated hereinabove.
(B) Continuing Stockholders. Each
Company Option outstanding at the Effective Time held by a Continuing
Stockholder shall remain outstanding and become an obligation of the Surviving
Corporation.
(iv) KONA COMMON STOCK. Each share of common
stock of Kona, par value $0.01 per share, issued and outstanding immediately
prior to the Effective Time, shall automatically be cancelled and retired and
shall cease to exist, and
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no cash or other consideration shall be delivered or deliverable in exchange
therefore (other than the refund to Coleman of his initial $100 capital
contribution).
(v) FRACTIONAL SHARES. No fraction of a share of
Company Class A Common Stock will be issued in the Merger, but in lieu thereof,
any holder who would otherwise be entitled to a fraction of a share of Company
Class A Common Stock (after aggregating all fractional shares of Company Class A
Common Stock to be received by such holder) shall be entitled to receive from
the Company an amount of cash (rounded to the nearest whole cent) equal to the
product of (A) such fraction, multiplied by (B) Per Share Cash Merger
Consideration.
(vi) ADJUSTMENTS TO MERGER CONSIDERATION. In the
event of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Company Class A Common
Stock or Company Class B Common Stock), reorganization, reclassification,
combination, recapitalization, or other like change with respect to Company
Class A Common Stock or Company Class B Common Stock occurring after the date
hereof and prior to the Effective Time, then each of the Per Share Cash Merger
Consideration and the Surviving Corporation Class A Shares shall be equitably
adjusted to the extent necessary to provide the parties the same economic effect
as contemplated by this Agreement prior to such stock split, reverse stock
split, stock dividend, reorganization, reclassification, combination,
recapitalization or other like change.
(vii) DISSENTING STOCKHOLDERS. Any holder of
shares of Company Class A Common Stock who perfects such holder's dissenters'
rights in accordance with and as contemplated by Section 262 of the DGCL (a
"DISSENTING STOCKHOLDER") shall be entitled to receive from the Surviving
Corporation the value of such shares in cash as determined pursuant to such
provision of Delaware Law; provided, that no such payment shall be made to a
Dissenting Stockholder unless and until such Dissenting Stockholder has complied
with the applicable provisions of Section 262 of the DGCL and surrendered to the
Company the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a Dissenting
Stockholder fails to perfect, or effectively withdraws or loses, such Dissenting
Stockholder's right to appraisal of and payment for such holder's shares, the
Surviving Corporation shall issue and deliver the consideration to which such
Dissenting Stockholder is entitled under this Article 2 (without interest) upon
surrender by such Dissenting Stockholder of the certificate or certificates
representing the shares of Company Class A Common Stock held by such Dissenting
Stockholder. If and to the extent required by applicable law, the Surviving
Corporation will establish (or cause to be established) an escrow account with
an amount sufficient to satisfy the maximum aggregate payment that may be
required to be paid to Dissenting Stockholders. Upon satisfaction of all claims
of Dissenting Stockholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to the Surviving
Corporation. The Company shall serve prompt notice to Kona of any demands for
appraisal of any shares of Company Class A Common Stock, withdrawals of such
demands and any other instruments served pursuant to the DGCL received by the
Company, and Kona shall have the right to participate in and direct all
negotiations and
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proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Kona (which consent
shall not be withheld unreasonably), make any payment with respect to, or settle
or offer to settle, any such demands, or agree to do or commit to do any of the
foregoing.
SECTION 2.02. SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. The Company's transfer agent shall
act as exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PROVISION OF TOTAL CASH MERGER CONSIDERATION. Subject
to the conditions set forth in Article VI of this Agreement, the total amount of
cash to be paid in respect of the shares of Company Class A Common Stock
pursuant to Section 2.01(a)(i)(A) and the Eligible Options pursuant to Section
2.01(a)(iii)(A) (the "TOTAL CASH MERGER CONSIDERATION") shall be provided to the
Exchange Agent in cash prior to the Effective Time.
(c) EXCHANGE PROCEDURES.
(i) Within two Business Days following the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of (i) Company Class A Common
Stock converted into the right to receive the Per Share Cash Merger
Consideration pursuant to Section 2.01(a)(i)(A) (the "COMPANY CERTIFICATES"),
and (ii) Company Class B Common Stock converted into the right to receive the
Surviving Corporation Class A Shares pursuant to Section 2.01(a)(ii) (the "CLASS
B CERTIFICATES," together with the Company Certificates, the "CERTIFICATES"):
(A) a form of letter of transmittal (the "LETTER OF TRANSMITTAL"); and (B)
instructions for use of the Letter of Transmittal in effecting the surrender of
either the Company Certificates in exchange for such holder's pro rata portion
of the Total Cash Merger Consideration or the Class B Certificates in exchange
for such holder's pro rata portion of the Surviving Corporation Class A Shares.
The Letter of Transmittal shall specify that delivery of the Certificates shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon receipt thereof by the Exchange Agent and shall be in such form and have
such other provisions as the Surviving Corporation may reasonably specify. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by the Surviving Corporation, together
with a properly completed and duly executed Letter of Transmittal, (i) the
holder of record of such Certificate shall be entitled to receive: (A) if it is
a Company Certificate, a check in the amount equal to such holder's pro rata
portion of the Total Cash Merger Consideration as calculated pursuant to Section
2.01(a)(i)(A) hereof in respect of such Certificate; or (B) if it is a Class B
Certificate, a certificate representing the number of whole shares of Class A
common stock of the Surviving Corporation to which such holder is entitled
pursuant to Section 2.01(a)(ii) and cash in lieu of fractional shares (if any),
to which such holder is entitled pursuant to Section 2.01(a)(v); and (ii) such
Certificate shall be canceled. Until so surrendered, each Certificate shall be
deemed from and after the Effective Time to represent only the right to receive
such holder's pro rata
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portion of either (x) the Total Cash Merger Consideration contemplated by
Section 2.01(a)(i)(A), or (y) the Surviving Corporation Class A Shares
contemplated by Section 2.01(a)(ii). Notwithstanding anything contained herein
to the contrary, no interest shall be paid or shall accrue on any cash payable
to any holder of a Certificate pursuant to the provisions of this Article II.
(ii) Within two Business Days following the
Effective Time, each holder of an Eligible Option converted into the right to
receive the Option Payment pursuant to Section 2.01(a)(iii)(A) shall be entitled
to receive from the Exchange Agent a check in the amount equal to such holder's
pro rata portion of the Total Cash Merger Consideration as calculated pursuant
to Section 2.01(a)(iii)(A) hereof. Notwithstanding anything contained herein to
the contrary, no interest shall be paid or shall accrue on any cash payable to
any holder of an Eligible Option pursuant to the provisions of this Article II.
(d) NO LIABILITY. Notwithstanding anything to the
contrary in this Section 2.02, none of the Exchange Agent, the Surviving
Corporation, or any party hereto shall be liable to any Person (as defined in
Section 8.13) for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat, or similar law. If any Certificate has
not been surrendered prior to the fifth anniversary of the Effective Time (or
immediately prior to such earlier date on which the pro rata portion of the
Total Cash Merger Consideration contemplated by Section 2.01(a)(i)(A) in respect
of such Certificate would otherwise escheat to or become the property of any
Governmental Entity (as such term is defined in Section 8.13)), 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 interests of any Person previously entitled thereto.
SECTION 2.03. NO FURTHER OWNERSHIP RIGHTS IN COMPANY CLASS A COMMON
STOCK OR COMPANY CLASS B COMMON STOCK. The Per Share Cash Merger Consideration
issued or issuable following the surrender for exchange of the Company
Certificates in accordance with the terms hereof shall be issued or issuable in
full satisfaction of all rights pertaining to the shares of Company Class A
Common Stock represented by the Company Certificates, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
such shares of Company Class A Common Stock that were issued and outstanding
immediately prior to the Effective Time. The Surviving Corporation Class A
Shares issued or issuable following the surrender for exchange of Class B
Certificates representing shares of Company Class B Common Stock in accordance
with the terms hereof shall be issued or issuable in full satisfaction of all
rights pertaining to such shares of Company Class B Common Stock, and there
shall be no further registration of transfers on the records of the Company of
such shares of Company Class B Common Stock that were issued and outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificate for shares of Company Class A Common Stock or Company Class B Common
Stock converted into the right to receive Per Share Cash Merger Consideration or
the Surviving Corporation Class A Shares, as the case may be, is presented to
the Surviving
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Corporation for any reason, such Certificate shall be canceled and exchanged as
provided in this Article II.
SECTION 2.04. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate representing shares of Company Class A Common Stock held of record
by a Non-Continuing Stockholder shall have been lost, stolen, or destroyed, the
Exchange Agent shall issue in exchange for such Certificate, following the
making of an affidavit of that fact by the record holder thereof, such holder's
pro rata portion of the Total Cash Merger Consideration as may be required
pursuant to Section 2.01(a)(i)(A) in respect of such Certificate; PROVIDED,
HOWEVER, that the Surviving Corporation, in its discretion and as a condition
precedent to the delivery thereof, may require the record holder of such
Certificate to deliver a bond in such sum as the Company may reasonably direct
as indemnity against any claim that may be made against the Surviving
Corporation, the Exchange Agent, or any of their respective representatives or
agents with respect to such Certificate.
SECTION 2.05. WITHHOLDING RIGHTS. The Surviving Corporation shall be
entitled to deduct and withhold from the Per Share Cash Merger Consideration or
Option Payment otherwise deliverable under this Agreement, and from any other
payments otherwise required pursuant to this Agreement, to any Non-Continuing
Stockholders, such amounts as the Surviving Corporation is required to deduct
and withhold with respect to any such deliveries and payments under the Internal
Revenue Code of 1986, as amended (the "CODE"), or any provision of state, local,
provincial 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 delivered and paid to such holders in respect of which such deduction and
withholding was made.
SECTION 2.06. TERMINATION OF EXCHANGE AGENT FUNDING. Any portion of
funds (including any interest earned thereon) held by the Exchange Agent that
has not been delivered to Non-Continuing Stockholders pursuant to this Article
II within six months after the Effective Time shall promptly be paid to the
Surviving Corporation, and thereafter each holder of a Certificate who has not
theretofore complied with the exchange procedures set forth in and contemplated
by Section 2.02(c) shall look only to the Surviving Corporation (subject to
abandoned property, escheat, and similar laws) for its claim for such holder's
pro rata portion of the Total Cash Merger Consideration only as a general
creditor thereof.
SECTION 2.07. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement or to vest the Surviving Corporation
with full right, title, and interest in, to and under, or possession of, all
assets, property, rights, privileges, powers, and franchises of Kona, the
officers and directors of the Surviving Corporation are fully authorized in the
name and on behalf of the Company or otherwise, to take all lawful action
necessary or desirable to accomplish such purpose or acts, so long as such
action is not inconsistent with this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth in the letter (with specific reference to the section of this
Agreement to which the information stated in such disclosure relates) delivered
by the Company to Kona prior to the execution of this Agreement (the "DISCLOSURE
LETTER"), the Company represents and warrants to Kona as follows:
(a) ORGANIZATION, POWER, AND STANDING. The Company and
each Subsidiary (as defined in Section 8.13) of the Company: (i) is a
corporation or other entity duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization (except, in the
case of good standing, for entities organized under the laws of any jurisdiction
that does not recognize such concept); (ii) has all requisite corporate,
company, or partnership power and authority to carry on its business as now
being conducted; and (iii) to the Knowledge (as defined in Section 8.13) of the
Company, is duly qualified or licensed to do business and is in good standing in
each jurisdiction (except, in the case of good standing, any jurisdiction that
does not recognize such concept) in which the nature of its business or the
ownership, leasing, or operation of its properties makes such qualification or
licensing necessary, other than where the failure to be so organized, existing,
qualified, or licensed or in good standing (except in the case of clause (i)
above with respect to the Company), individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect (as defined in Section
8.13). Each Subsidiary of the Company is listed in Section 3.01(a) of the
Disclosure Letter. Each jurisdiction in which the Company and any Subsidiary of
the Company is qualified to do business is set forth in Section 3.01(a) of the
Disclosure Letter.
(b) CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. The
Company has all requisite corporate power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby, subject, in the
case of the Merger, to obtaining the Requisite Approval (as defined in Section
3.01(e)), and to comply with the provisions of this Agreement. All corporate
action on the part of the Company, its officers, directors, and stockholders
necessary for: (i) the authorization, execution, and delivery of this Agreement;
(ii) the performance of all obligations of the Company under this Agreement;
(iii) the authorization, issuance, and delivery of the Surviving Corporation
Class A Shares; and (iv) the consummation of the transactions contemplated by
this Agreement, subject in the case of the Merger, to obtaining the Requisite
Approval, has been taken, and this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights generally, or by general equitable principles.
(c) NO CONFLICT. The execution and delivery by the
Company of this Agreement, consummation of the transactions contemplated hereby,
and the performance by the Company of its obligations hereunder, do not and will
not: (A) violate the
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Company's Certificate of Incorporation or Bylaws; or (B) violate any order,
writ, injunction, decree, judgment, ruling, law, rule, or regulation of any
Governmental Entity applicable to the Company, any Subsidiary of the Company,
the business or assets of the Company, except for such violations which would
not, individually or in the aggregate, have a Material Adverse Effect.
(d) CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 7,500,000 shares of Company Class A Common Stock, of
which 2,384,783 shares are issued and outstanding; (ii) 10,500,000 shares of the
Company Class B Common Stock, of which 3,385,000 shares are issued and
outstanding; and (iii) 500,000 shares of the Company's preferred stock, $0.01
par value per share, none of which are issued and outstanding. There are no
other issued and outstanding shares of capital stock or voting securities of the
Company. All outstanding shares of the Company's capital stock have been duly
authorized, and are validly issued, fully paid, and nonassessable. No party has
any preemptive (whether statutory or contractual) rights in any capital stock of
the Company. Except as disclosed in the Company SEC Documents (as defined in
Section 3.01(g)(i)), there are no outstanding convertible securities,
subscriptions, options, warrants, calls, rights, commitments, or any other
agreement to which the Company or any Subsidiary of the Company is a party, or
by which the Company or any Subsidiary of the Company is bound that, directly or
indirectly, obligate the Company or any Subsidiary of the Company to issue,
deliver or sell or cause to be issued, delivered or sold any additional
securities or any other capital stock of the Company or any Subsidiary of the
Company, or any other securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for any such securities
or any other capital stock of the Company or any Subsidiary of the Company.
Neither the Company nor any Subsidiary of the Company is a party to any
agreement or understanding regarding the voting or the registration under
federal or state law of any shares of the Company's capital stock or the equity
voting interests of any Subsidiary of the Company. All of the outstanding
capital stock or other equity interests in each of the Subsidiaries is owned by
the entities reflected in Section 3.01(d) of the Disclosure Letter, free and
clear of all liens, claims, charges, or encumbrances. All outstanding shares of
capital stock of each corporate Subsidiary have been validly issued and are
fully paid and nonassessable. All equity interests of each other Subsidiary have
been validly issued and are fully paid.
(e) VOTE REQUIRED; SPECIAL INDEPENDENT COMMITTEE; BOARD
APPROVAL.
(i) The adoption of this Agreement at the
Stockholders' Meeting (as defined in Section 5.01(a)), or any adjournment or
postponement thereof, by a majority of the outstanding stock of the Company
entitled to vote at the Stockholders' Meeting (the "REQUISITE APPROVAL"), is the
only approval of the holders of any class or series of the Company's capital
stock necessary to adopt this Agreement and consummate the transactions
contemplated by this Agreement under Delaware Law.
(ii) The special independent committee of the
Board of Directors of the Company, comprised of William A. Jolly, Heeth Varnedoe
III and Jimmy M. Woodward (the "SPECIAL COMMITTEE"), at a meeting duly called
and held at
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which all members of the Special Committee were present, duly and unanimously
adopted resolutions (which have not been modified or rescinded): (A) approving
and declaring advisable the Merger, this Agreement, and the transactions
contemplated by this Agreement; (B) declaring that (I) it is in the best
interests of the Disinterested Stockholders (as defined in Section 8.13) that
the Company enter into this Agreement and consummate the Merger on the terms and
subject to the conditions set forth in this Agreement, and (II) the terms and
conditions of this Agreement and the Merger are fair to the Disinterested
Stockholders; and (C) recommending to the Board of Directors of the Company that
(I) this Agreement be submitted to a vote for adoption at the Stockholders'
Meeting, and (II) it recommend that the Company's stockholders adopt this
Agreement.
(iii) The Board of Directors of the Company, at a
meeting duly called and held at which all directors of the Company were present,
duly and unanimously adopted (with Coleman and Jean C. Coleman abstaining)
resolutions (which have not been modified or rescinded): (A) approving and
declaring advisable the Merger, this Agreement, and the transactions
contemplated by this Agreement; (B) declaring that it is in the best interests
of the Company's stockholders that the Company enter into this Agreement and
consummate the Merger on the terms and subject to the conditions set forth in
this Agreement; (C) directing that this Agreement be submitted to a vote for
adoption at the Stockholders' Meeting; and (iv) recommending that the Company's
stockholders adopt this Agreement.
(f) OPINION OF FINANCIAL ADVISOR. SunTrust Capital
Markets, Inc., through its SunTrust Robinson Humphrey Capital Markets Division
(the "FINANCIAL ADVISOR") has delivered its opinion, dated March 1, 2004, to the
Special Committee, to the effect that subject to the assumptions, qualifications
and limitations set forth therein the Per Share Cash Merger Consideration to be
received by the Disinterested Stockholders is fair, from a financial point of
view. A true, correct, and complete copy of such opinion has been provided to
Kona prior to or on the date hereof.
(g) COMPANY SEC DOCUMENTS; FINANCIAL STATEMENTS;
LIABILITIES AND OBLIGATIONS OF THE COMPANY.
(i) Since December 31, 2002, the Company has
timely filed with the SEC all forms, reports, schedules, statements, and other
documents required to be filed by it with the SEC (collectively, the "COMPANY
SEC DOCUMENTS") pursuant to the Exchange Act, the Securities Act, and the SEC's
rules and regulations thereunder. The Company has furnished, or otherwise made
available, the Company SEC Documents to Kona. No Subsidiary of the Company is
required to file any forms, reports, schedules, statements, or other document
with the SEC. As of their respective dates, each of the Company 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 Company SEC Document, and none of the
Company SEC Documents at the time it was filed 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.
11
(ii) The financial statements (including the
related notes) of the Company included in the Company SEC Documents (including,
in each case, balance sheets, statements of operations, and statements of cash
flows) (collectively, the "COMPANY FINANCIAL STATEMENTS"): (A) comply as to form
in all material respects with the accounting requirements applicable at the time
the Company SEC Documents were filed and the published rules and regulations of
the SEC with respect thereto; (B) have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q, applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto));
(C) are consistent with the books and records of the Company in all material
respects; (D) fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments which are immaterial in amount); and (E)
disclose all liabilities of the Company, whether absolute, contingent, accrued
or otherwise, existing as of the date thereof that are of a nature required to
be reflected in financial statements prepared in accordance with GAAP, and
except for liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect.
(iii) Neither the Company nor any Subsidiary of
the Company has any liability or obligation (whether accrued, absolute,
contingent or otherwise) that has arisen or accrued or otherwise been incurred
since December 31, 2002, including any liability that might result from an audit
of its tax returns by any taxing authority, except for: (A) liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect; (B)
the liabilities and obligations of the Company and each Subsidiary of the
Company that are disclosed or reserved against in the balance sheet of the most
recent date contained in the Company SEC Documents, to the extent and in the
amounts so disclosed or reserved against; and (C) liabilities incurred or
accrued in the ordinary course of business thereafter, and liabilities incurred
in connection with the transactions contemplated hereby.
(iv) Except as disclosed in the most recent
Company Financial Statements, neither the Company nor any Subsidiary of the
Company is in default with respect to any liability or obligation that has
arisen or accrued or otherwise been incurred since December 31, 2002, except for
defaults that, individually or in the aggregate would not have a Material
Adverse Effect, and all such liabilities or obligations shown or reflected in
the most recent Company Financial Statements and such liabilities incurred or
accrued thereafter were incurred in the ordinary course of business, and except
for liabilities and obligations, that, individually or in the aggregate, would
not have a Material Adverse Effect.
(h) ABSENCE OF CERTAIN CHANGES. Except as disclosed in
the Company SEC Documents, since December 31, 2002, the Company and each
Subsidiary of the Company have conducted its business only in the ordinary
course of such business and, to the Knowledge of the Company, neither the
Company nor any Subsidiary of the Company has: (i) suffered a Material Adverse
Effect, or become aware of any
12
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to its assets (regardless
of whether such assets are insured), except for losses that, individually or in
the aggregate, would not have a Material Adverse Effect; (ii) incurred any
material obligations, except in the ordinary course of business consistent with
past practices; (iii) permitted or allowed any assets to be mortgaged, pledged,
or subjected to any lien or encumbrance, except for liens for taxes not yet due
and payable and liens and encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect; (iv) written down the value of any
inventory, contract or other intangible asset, or written off as uncollectible
any notes or accounts receivable or any portion thereof, except for write-downs
and write-offs in the ordinary course of business, consistent with past practice
and at a rate no greater than during the latest completed fiscal year; cancelled
any other debts or claims, or waived any rights of substantial value, or sold or
transferred any of its material properties or assets, real, personal, or mixed,
tangible or intangible, except in the ordinary course of business and consistent
with past practice and except for those that, individually or in the aggregate,
would not have a Material Adverse Effect; (v) sold, licensed or transferred or
agreed to sell, license or transfer, any of its assets, except in the ordinary
course of business and consistent with past practice; (vi) to the Company's
Knowledge, received notice of any pending or threatened adverse claim or an
alleged infringement of proprietary material, whether such claim or infringement
is based on trademark, copyright, patent, license, trade secret, contract, or
other restrictions on the use or disclosure of proprietary materials; (vii)
incurred obligations to refund money to customers, except in the ordinary course
of business, all of which will have no Material Adverse Effect; (viii) become
aware of any event, condition, or other circumstance relating solely to its
assets (as opposed to any such event, condition, or circumstance which is, for
example, national or industry-wide in nature) which might reasonably be expected
to have a Material Adverse Effect; (ix) made any capital expenditures or
commitments, any one of which is more than $500,000, for additions to property,
plant, or equipment without prior approval of the Board of Directors of the
Company; (x) made any material change in any method of accounting or accounting
practice; (xi) paid, loaned, guaranteed, or advanced any material amount to, or
sold, transferred, or leased any material properties or assets (real, personal,
or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of its officers or directors, or any
business or entity in which any officer or director of the Company, or any
affiliate or associate of any of such Persons has any direct or' indirect
interest; or (xii) agreed to take any action described in this Section 3.01(h).
(i) LITIGATION. Except as disclosed in the Company SEC
Documents, there are no claims, actions, proceedings or governmental
investigations pending or, to the Knowledge of the Company, threatened against
the Company or any Subsidiary of the Company, by or before any court or other
Governmental Entity, which, if adversely determined, would individually or in
the aggregate have a Material Adverse Effect. As of the date hereof, no action
or proceeding has been instituted or, to the Knowledge of the Company,
threatened before any court or other Governmental Entity by any Person seeking
to restrain or prohibit the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby.
13
(j) BROKERS AND FINDERS. Except for payment obligations
to the Financial Advisor, as set forth in the engagement letter dated as of
December 8, 2003, a true, correct and complete copy of which has been provided
to Kona prior to the date hereof, the Company has not, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
(k) SCHEDULE 13E-3 AND PROXY STATEMENT. Neither the
Schedule 13E-3 nor the Proxy Statement will, at the respective times filed with
the SEC or first published, sent or given to stockholders, or, in the case of
the Proxy Statement, at the date mailed to the Company's stockholders and at the
time of the Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Schedule 13E-3 and the Proxy
Statement will, when filed by the Company with the SEC, comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on information supplied by or on behalf of Kona
or any of its affiliates specifically for inclusion therein.
(l) ACCURACY OF REPRESENTATIONS. No representation or
warranty by the Company contained in this Agreement and no statement contained
in any certificate or schedule furnished to Kona pursuant to the provisions
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF KONA AND COLEMAN. Kona
and Coleman, jointly and severally, represent and warrant to the Company as
follows:
(a) ORGANIZATION. Kona is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization, and has all requisite corporate power and authority to carry on
its business as now being conducted.
(b) CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION.
Kona has all requisite corporate power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby, and to comply
with the provisions of this Agreement. All corporate action on the part of Kona,
its officers, directors, and stockholders necessary for: (ii) the authorization,
execution and delivery of this Agreement; (ii) the performance of all
obligations of Kona under this Agreement; and (iii) the consummation of the
transactions contemplated by this Agreement has been taken, and this Agreement
constitutes a valid and legally binding obligation of Kona, enforceable against
Kona in accordance with its terms, except as enforceability thereof
14
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting creditors' rights generally, or by general
equitable principles.
(c) NO CONFLICT; CONSENTS. Except for the filing of the
Certificate of Merger as provided in Section 1.03, the execution and delivery by
Kona of this Agreement, consummation of the transactions contemplated hereby,
and the performance by Kona of its obligations hereunder, do not and will not:
(A) require the consent, approval, action, order, declaration, or authorization
of, any filing or notice to, or any registration with, any Person under any
statute, law, rule, regulation, permit, license, agreement, indenture, or other
instrument to which Kona is a party, or to which any of its respective
properties are subject; (B) violate the terms of any instrument, document, or
agreement to which Kona is a party or by which Kona, or the Property of Kona is
bound, or be in conflict with, result in a breach of, or constitute (upon the
giving of notice or lapse of time or both) a default under any such instrument,
document or agreement or result in the creation of a lien upon any of the
property or assets of Kona, except for such violations, conflicts, breaches, and
defaults which individually or in the aggregate, would not have a material
adverse effect on Kona; (C) violate Kona's Certificate of Incorporation or
Bylaws; or (D) violate any order, writ, injunction, decree, judgment, ruling,
law, rule, or regulation of any Governmental Entity applicable to Kona, the
business or assets of Kona, except for such violations which would not,
individually or in the aggregate, have a material adverse effect on Kona.
(d) CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of Kona consists of 1,000 shares of Common Stock, of
which 100 shares are issued and outstanding. As of the date of this Agreement,
there are no other issued and outstanding shares of capital stock or voting
securities of Kona. All outstanding shares of Kona's capital stock have been
duly authorized, and are validly issued, fully paid and nonassessable. No party
has any preemptive (whether statutory or contractual) rights in any capital
stock of Kona. There are no outstanding convertible securities, subscriptions,
options, warrants, calls, rights, commitments, or any other agreement to which
Kona is a party, or by which Kona is bound that, directly or indirectly,
obligates Kona to issue, deliver or sell or cause to be issued, delivered or
sold, any additional securities or any other capital stock of Kona, or any other
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any such securities or any other capital stock of
Kona.
(e) SCHEDULE 13E-3 AND PROXY STATEMENT. No document filed
or to be filed by or on behalf of Kona with the SEC or any other Governmental
Entity in connection with the transactions contemplated by this Agreement nor
any information supplied by or on behalf of Kona specifically for inclusion in
the Schedule 13E-3 or the Proxy Statement will, at the respective times filed
with the SEC or other Governmental Entity, or at any time thereafter when the
information included therein is required to be updated pursuant to applicable
law, or, in the case of the Proxy Statement, at the date mailed to the Company's
stockholders and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the
15
foregoing, Kona makes no representation or warranty with respect to the
statements made in the foregoing documents based on information supplied by or
on behalf of the Company or any Subsidiary of the Company, or affiliates (other
than Kona) specifically for inclusion therein.
(f) INTERIM OPERATIONS OF KONA. Kona was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and has engaged in no business other than in connection with the transactions
contemplated by this Agreement.
(g) FINANCING ARRANGEMENTS. Kona has delivered to the
Company a true and complete copy of:
(i) the commitment letter, dated February 27,
2004, addressed to the Company (the "SENIOR DEBT COMMITMENT Letter") from
LaSalle Bank National Association ("LBNA"), pursuant to which LBNA has indicated
that it is committed to provide $22,636,666 in debt financing (the "SENIOR DEBT
FINANCING"), subject to the terms and conditions therein, for purposes of
consummating the transactions contemplated hereby. As of the date hereof, the
Senior Debt Commitment Letter has not been amended, modified or withdrawn and is
in full force and effect. All commitment fees required to be paid thereunder
have been paid in full or will be duly paid in full when due, and no event has
occurred that (with or without notice, lapse of time, or both) would constitute
a default thereunder on the part of the Company or LBNA, as the case may be. As
of the date hereof, LBNA has not advised Kona of any facts or circumstances, and
Kona knows of no facts or circumstances, that cause Kona to believe the
financing contemplated by the Senior Debt Commitment Letter will not be
consummated substantially in accordance with the terms thereof.
(ii) the commitment letter, dated February 18,
2004, addressed to Kona (the "SUBORDINATED DEBT COMMITMENT Letter") from Key
Principal Partners, LLC ("KPP"), pursuant to which KPP has indicated that it is
committed to provide $15,000,000 in debt financing (the "SUBORDINATED DEBT
FINANCING"), subject to the terms and conditions therein, for purposes of
consummating the transactions contemplated hereby. As of the date hereof, the
Subordinated Debt Commitment Letter has not been amended, modified or withdrawn
and is in full force and effect. All commitment fees required to be paid
thereunder have been paid in full or will be duly paid in full when due, and no
event has occurred that (with or without notice, lapse of time, or both) would
constitute a default thereunder on the part of Kona or KPP, as the case may be.
As of the date hereof, KPP has not advised Kona of any facts or circumstances,
and Kona knows of no facts or circumstances, that cause Kona to believe the
financing contemplated by the Subordinated Debt Commitment Letter will not be
consummated substantially in accordance with the terms thereof.
(iii) The aggregate proceeds of the financings
contemplated by the Senior Debt Commitment Letter and the Subordinated Debt
Commitment Letter, when taken together, are sufficient to pay the Total Cash
Merger Consideration.
16
(h) SOLVENCY. Kona is able to pay its debts generally as
they become due and is solvent and will not be, nor will the Surviving
Corporation be, as of the Effective Time, rendered insolvent as a result of the
transactions contemplated hereby, including the Merger. Kona has not, nor will
have the Surviving Corporation as of the Effective Time, either voluntarily or
involuntarily, (i) admitted in writing that it is or may become unable to pay
its debts generally as they become due, (ii) filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of an
insolvency act, (iii) made an assignment for the benefit of its creditors, (iv)
consented to the appointment of a receiver for itself or for the whole or any
substantial part of its property, (v) had a petition in bankruptcy filed against
it, (vi) been adjudged as bankrupt or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any law or
statute of the United States of America or any other jurisdiction, or (vii)
incurred or reasonably should have believed it would incur, debts that are or
will be beyond its ability to pay as such debts mature. Kona is not engaged, nor
currently contemplating being engaged through the Surviving Corporation, in a
business or transaction for which any property remaining with it would be
insufficient to continue to operate its businesses or to pay its debts generally
as they come due.
SECTION 3.03. SEVERAL REPRESENTATIONS AND WARRANTIES OF COLEMAN.
Coleman represents and warrants to the Company as follows:
(a) HOLDINGS OF COMPANY CAPITAL STOCK. Coleman
beneficially owns an aggregate of 55,100 shares of Company Class A Common Stock
and an aggregate of 3,385,000 shares of Company Class B Common Stock.
(b) TITLE TO KONA CAPITAL STOCK. Coleman is the sole
holder of record and beneficial owner of all of the outstanding capital stock of
Kona.
(c) CAPACITY; DUE AUTHORIZATION. Coleman has capacity to
enter into this Agreement, to consummate the transactions contemplated hereby,
and to comply with the provisions of this Agreement. This Agreement constitutes
a valid and legally binding obligation of Coleman, enforceable against him in
accordance with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting creditors' rights generally, or by general equitable principles.
(d) REFUSAL TO SELL. Except as set forth in Section
3.03(d) of the Disclosure Letter, Coleman is unwilling to, and will not, sell,
transfer or otherwise dispose of shares of Class A Common Stock or Class B
Common Stock that he beneficially owns to a third party.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS OF THE COMPANY. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Effective Time, except as otherwise
required or contemplated
17
hereunder or pursuant to that certain Credit Agreement, dated April 25, 2001, by
and between the Company and LBNA, as amended, or as required by applicable law,
without the prior consent of Kona (which consent shall not be withheld
unreasonably), the Company shall, and shall cause each Subsidiary of the Company
to:
(a) use all reasonable efforts to conduct its business in
all material respects only in the ordinary course of business and consistent
with past practice;
(b) not amend its Certificate or Articles of
Incorporation or Bylaws or declare, set aside or pay any dividend, or other
distribution or payment in cash, stock, or property in respect of its capital
stock or acquire, directly or indirectly, any of its capital stock;
(c) not issue, grant, sell, or pledge or authorize the
issuance, grant, sale, or pledge of any shares of, or rights of any kind to
acquire any shares of, its capital stock other than the conversion of any
convertible securities outstanding on or prior to the date of this Agreement;
(d) not, without the prior approval of the Board of
Directors of the Company, (i) sell, transfer, lease, or otherwise dispose of or
encumber any assets which are material, individually or in the aggregate, to the
Company's business, taken as a whole, except in the ordinary course of business
and consistent with past practice; or (ii) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its business, taken as a whole, or acquire or agree to acquire
any equity securities of any Person;
(e) use all commercially reasonable efforts to preserve
intact its business organizations and to keep available the services of its
present key officers and employees;
(f) not, without the prior approval of the Board of
Directors of the Company, enter into or amend any contract, agreement,
commitment or instrument that requires (or is reasonably expected to require)
payments or provides (or is reasonably expected to provide) for receipts in
excess of $500,000 on an annual basis (a "MATERIAL CONTRACT"), except in the
ordinary course of business and consistent with past practice;
(g) not adopt a plan of complete or partial liquidation
or adopt resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring, or recapitalization of the
Company;
(h) except in the ordinary course of business and
consistent with past practice, not grant any severance or termination pay
(otherwise than pursuant to policies or contracts in effect on the date hereof
and described in the Disclosure Letter) to, or enter into any employment
agreement with, any of its executive officers or directors;
18
(i) not: (i) increase, except as consistent with past
practice in the ordinary course of business, the compensation payable or to
become payable to its officers or employees; (ii) enter into any contract or
other binding commitment in respect of any such increase with any of its
directors, officers or other employees, except in the ordinary course of
business and consistent with past practice; or (iii) establish, adopt, enter
into, make any new grants or awards under, or amend any collective bargaining
agreement or "employee benefit plan" (as defined by Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended), except as required by
applicable law, including any obligation to engage in good faith collective
bargaining, to maintain tax-qualified status or as may be required by any
employee benefit plan as of the date hereof;
(j) not, without the prior approval of the Board of
Directors of the Company, settle or compromise any material claims or litigation
or, except in the ordinary course of business consistent with past practice,
modify, amend, or terminate any of its Material Contracts or waive, release, or
assign any material rights or claims, or make any payment, direct or indirect,
of any material liability before the same becomes due and payable in accordance
with its terms;
(k) not take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice
with respect to accounting policies or procedures (including tax accounting
policies and procedures), except as may be required by the SEC, the Financial
Accounting Standards Board or GAAP;
(l) not adjust, split, combine, or reclassify its capital
stock;
(m) not create or acquire any subsidiaries;
(n) not make any material tax election or settle or
compromise any material tax liability; and
(o) not authorize, or enter into any agreement or
arrangement to do any of the foregoing, or otherwise to take any of the
foregoing actions, or any action that could reasonably be expected to make any
of the Company's representations or warranties contained in this Agreement
untrue or incorrect or prevent the Company from performing or cause the Company
not to perform one or more covenants required hereunder to be performed by the
Company.
SECTION 4.02. SUPERIOR PROPOSALS.
(a) At any time prior to obtaining the Requisite
Approval, the Board of Directors of the Company may, in response to a Superior
Proposal:
(i) withdraw or modify in a manner adverse to
Kona, or propose publicly to withdraw or modify in a manner adverse to Kona, the
recommendation or declaration of advisability by such Board of Directors of this
Agreement or the Merger or recommend, or propose publicly to recommend, the
approval
19
or adoption of any Superior Proposal or resolve or agree to take such action (an
"ADVERSE RECOMMENDATION"); and
(ii) cause the Company to terminate this
Agreement;
PROVIDED, HOWEVER, that the Company shall not terminate this Agreement pursuant
to this Section 4.02(a), and any purported termination shall be void and of no
force or effect, unless the Company shall have complied with all the provisions
of this Section 4.02, including the notification provisions in this Section
4.02, and with all applicable requirements of Section 5.08(d) (including the
payment of the Kona Expense Reimbursement (as defined in Section 5.08(d)) prior
to or concurrently with such termination) in connection with such Superior
Proposal; and PROVIDED FURTHER, HOWEVER, that the Company shall not exercise its
right to terminate this Agreement pursuant to this Section 4.02(a) until after
the fifth Business Day following Kona's receipt of written notice (a "NOTICE OF
SUPERIOR PROPOSAL") from the Company advising Kona that the Board of Directors
of the Company has received a Superior Proposal, specifying the terms and
conditions of the Superior Proposal, identifying the person making such Superior
Proposal, stating that the Board of Directors of the Company intends to exercise
its right to terminate this Agreement pursuant to this Section 4.02(a), and
including copies of all documents and written communications relating to such
Superior Proposal exchanged between the Company or any of its officers,
directors, investment bankers, attorneys, accountants, or other advisors, on the
one hand, and the party making a Superior Proposal or any of its officers,
directors, investment banks, attorneys, accountants, or other advisors, on the
other hand (it being understood and agreed that, prior to any such termination
taking effect, any amendment to the price or any other material term of a
Superior Proposal shall require a new Notice of Superior Proposal and a new five
Business Day period). For purposes of this Agreement, the term "SUPERIOR
PROPOSAL" means any bona fide written offer made by a third party which, if
consummated, would result in such third party (or in the case of a direct merger
between such third party and the Company, the stockholders of such third party)
acquiring, directly or indirectly, more than 38.44% of the voting power of the
Company or all or substantially all the assets of the Company and its
subsidiaries, taken as a whole, for consideration consisting of cash and/or
securities that the Special Committee determines in its good faith judgment to
have a higher value per share than the Per Share Cash Merger Consideration
payable in the Merger and which proposal is determined in good faith by the
Special Committee to be more favorable to the Disinterested Stockholders than
the Merger, in each case taking into account any changes to the terms of this
Agreement proposed by Kona in response to such Superior Proposal or otherwise.
(b) Nothing contained in this Section 4.02 or elsewhere
in this Agreement shall prohibit the Company from: (i) taking and disclosing to
its stockholders a position contemplated by Rule l4d-9 and Rule 14e-2(a)
promulgated under the Exchange Act; or (ii) making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company, failure so to disclose would be inconsistent with applicable
Delaware Law.
20
SECTION 4.03. COMPANY BOARD ACTIONS. Any action to be taken by the
Board of Directors of the Company, or any committee thereof whose members
include Coleman or Jean C. Coleman, pertaining to this Agreement or any
transaction or action contemplated hereby (including, without limitation, the
Merger or actions authorized by Section 4.02(a)) shall be taken by the
affirmative vote of a majority of the disinterested directors as contemplated by
Section 144 of the DGCL.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. STOCKHOLDERS' MEETING. Subject to applicable law and the
other provisions of this Agreement, the Company shall, in accordance with
Delaware Law, its Certificate of Incorporation and its Bylaws: (a) duly call,
give notice of, convene, and hold a special meeting of its stockholders as soon
as reasonably practicable for the purpose of considering and taking action upon
this Agreement (the "STOCKHOLDERS' MEETING"); (b) include in the proxy statement
or information statement prepared by the Company for distribution to
stockholders of the Company in advance of the Stockholders' Meeting (the "PROXY
STATEMENT") in accordance with Regulation 14A or Regulation 14C promulgated
under the Exchange Act, the recommendation of the Board of Directors that the
stockholders of the Company adopt this Agreement; and (c) use all reasonable
efforts: (i) to obtain and furnish the information required to be included by it
in the Proxy Statement, including any information required to be disclosed on
Schedule 13E-3 and, after consultation with Kona, respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any preliminary
version thereof and cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable time; and (ii) to obtain the necessary approvals by
its stockholders of this Agreement and the transactions contemplated thereby.
Kona and Coleman will promptly provide the Company with the information
concerning Kona and Coleman required to be included in the Proxy Statement,
including any information required to be disclosed on Schedule 13E-3.
SECTION 5.02. PREPARATION OF PROXY STATEMENT AND SCHEDULE 13E-3.
(a) The Company shall, as soon as reasonably practicable,
prepare a preliminary form of the Proxy Statement (the "PRELIMINARY PROXY
STATEMENT") and the Schedule 13E-3. The Company shall: (i) file the Preliminary
Proxy Statement and the Schedule 13E-3 with the SEC promptly after it has been
prepared in a form reasonably satisfactory to Kona; (ii) use reasonable efforts
to promptly prepare any amendments to the Preliminary Proxy Statement or the
Schedule 13E-3 required in response to comments of the SEC or its staff or that
the Company or the Special Committee deems necessary or advisable; and (iii) use
reasonable efforts to cause the Proxy Statement to be mailed to the Company's
stockholders as soon as reasonably practicable after the Preliminary Proxy
Statement, as so amended, is cleared by the SEC. After the Proxy Statement shall
have been mailed to the Company's stockholders, the Company, if required, shall
promptly circulate amended or supplemental proxy material and, if required in
connection therewith, resolicit proxies; provided, however, that no such amended
or supplemental proxy material will be mailed by the Company without
consultation with
21
and review by Kona and the Special Committee. In addition, the Company shall:
(i) promptly notify Kona of the receipt of the comments of the SEC and of any
request from the SEC for amendments or supplements to the preliminary proxy
statement or Proxy Statement or for additional information, and will promptly
supply Kona and the Special Committee with copies of all written correspondence
between the Company or its representatives, on the one hand, and the SEC or
members of its staff, on the other hand, with respect to the Preliminary Proxy
Statement, the Proxy Statement, the Schedule 13E-3 or the Merger; and (ii)
promptly inform Kona and the Special Committee if at any time prior to the
Stockholders' Meeting any event should occur that is required by applicable law
to be set forth in an amendment of, or a supplement to, the Proxy Statement, in
which case the Company, in consultation with Kona and the Special Committee,
will, upon learning of such event, promptly prepare and mail such amendment or
supplement.
(b) It is expressly understood and agreed that: (i) Kona
and the Company will consult with each other in connection with all aspects of
the preparation, filing, and clearance by the SEC of the Proxy Statement,
Preliminary Proxy Statement, and Schedule 13E-3 (including any and all
amendments or supplements thereto); (ii) the Company shall give Kona and the
Special Committee the reasonable opportunity to review and comment on each of
the Proxy Statement, Preliminary Proxy Statement and Schedule 13E-3 prior to
filing with the SEC and shall give Kona and the Special Committee the reasonable
opportunity to review and comment on all amendments and supplements to each of
the Proxy Statement, Preliminary Proxy Statement, and Schedule 13E-3 and all
responses to requests for additional information and replies to comments prior
to filing with the SEC and each of the Company and Kona agrees to use all
reasonable efforts, after consultation with the other, to respond promptly to
all such comments of and requests by the SEC; and (iii) to the extent
practicable and desired by Kona and the Special Committee, the Company and the
Special Committee shall permit Kona to participate in all communications with
the SEC and its staff (including all meetings and telephone conferences)
relating to each of the Proxy Statement, Preliminary Proxy Statement, and
Schedule 13E-3 or any of the transactions contemplated thereby (provided that
Kona shall not separately communicate with the SEC and in the event that such
participation by Kona is not practicable or desired by Kona, the Company shall
promptly inform Kona of the content of all such communications and the
participants involved therein).
SECTION 5.03. ACCESS TO INFORMATION.
(a) During the period commencing on the date hereof and
continuing until the earlier of the termination of this Agreement and the
Effective Time, the Company shall: (i) afford Kona and its accountants, counsel,
and other representatives reasonable access during normal business hours to (A)
all of the Company's properties, books, contracts, commitments, and records, and
(B) all other information concerning the business, properties, and personnel of
the Company as Kona may reasonably request; and (ii) the Company shall provide
to Kona and its accountants, counsel and other representatives true, correct and
complete copies of internal financial statements promptly upon request.
22
(b) Subject to compliance with applicable law, from the
date hereof until the earlier of the termination of this Agreement and the
Effective Time, the Company shall confer from time to time as requested by Kona
with one or more representatives of Kona to discuss any material changes or
developments in the operational matters of the Company and the general status of
the ongoing operations of the Company.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.03 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties hereto to consummate the Merger.
SECTION 5.04. PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Kona and the Company shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (regardless of whether it is in response
to an inquiry) regarding the terms of this Agreement or the transactions
contemplated hereby, and neither party shall issue any such press release or
make any such statement or disclosure without the prior approval of the other
(which approval shall not be unreasonably withheld), including any press release
or public statement or disclosure required by law, by judicial process or by
obligations pursuant to any listing agreement with any national securities
exchange. If compliance with both of the preceding provisions of this Section
5.04 and such law, judicial process or listing agreement is impractical, the
party proposing to issue such press release or make such public statement or
disclosure shall use its commercially reasonable efforts to consult with the
other party before issuing such press release or making such public statement or
disclosure.
SECTION 5.05. CONSENTS; COOPERATION.
(a) Each of Kona and the Company shall promptly after the
execution of this Agreement apply for or otherwise seek, and use its
commercially reasonable efforts to obtain, all consents and approvals required
to be obtained by it for the consummation of the Merger.
(b) As soon as practicable after the date hereof, the
Company shall use its commercially reasonable efforts to obtain prior to the
Closing, and deliver to Kona at or prior to the Closing, all consents, waivers
and approvals under each contract listed or described in Section 5.05(b) of the
Disclosure Letter, each such contract to be that which the Company is a party in
respect of which the failure to obtain a novation or consent to assignment in
connection with the Merger or any other transaction contemplated by this
Agreement, individually or in the aggregate, could reasonably be expected to
materially and adversely affect the Company's ability to operate the business of
the Company in the same manner as such business was operated by the Company
prior to the Effective Time, or required to be obtained in connection with the
consummation of the transactions contemplated hereby for the assignment thereof
or otherwise.
23
SECTION 5.06. LEGAL REQUIREMENTS. Each of the parties hereto shall: (a)
take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on him or it with respect to the consummation
of the transactions contemplated by this Agreement; (b) cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement; and (c) take all reasonable
actions necessary to obtain (and shall cooperate with the other parties hereto
in obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity, required to
be obtained or made in connection with the taking of any action contemplated by
this Agreement.
SECTION 5.07. COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES. On
the terms and subject to the conditions set forth in this Agreement, each of the
parties hereto shall use his or its commercially reasonable efforts, and shall
cooperate with each other party hereto, to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, appropriate or
desirable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated hereby,
including the satisfaction of the respective conditions set forth in Article VI.
Without limiting the generality or effect of the foregoing, in the event an
injunction or other order preventing the consummation of the Merger shall have
been issued by a court of competent jurisdiction, each party hereto shall its
use commercially reasonable efforts to have such injunction or other order
lifted. Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or reasonably desirable for effecting
completely the consummation of the Merger and the other transactions
contemplated hereby.
SECTION 5.08. FEES AND EXPENSES.
(a) Except as expressly set forth in this Section 5.08
and as provided for in Section 8.09, all fees and expenses incurred in
connection with this Agreement, the Merger, and the other transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
(b) In the event that this Agreement is terminated by
Kona, Coleman or the Company pursuant to Section 7.01(d), then the Company shall
pay to Kona upon demand, payable in same day funds, fifty percent (50%) of the
actual, documented out-of-pocket costs and expenses of Kona reasonably incurred
in connection with this Agreement and the transactions contemplated by this
Agreement (including any financing fees, costs and expenses, and the reasonable
fees of attorneys, accountants, brokers, investment advisors and other
representatives and advisors).
(c) In the event that this Agreement is terminated by the
Company pursuant to Section 7.01(f)(i) and the Company shall not have breached
any representation, warranty or covenant contained herein in any material
respect, then Kona shall pay to the Company upon demand, payable in same day
funds, the actual,
24
documented out-of-pocket costs and expenses of the Company reasonably incurred
in connection with this Agreement and the transactions contemplated by this
Agreement (including the reasonable fees of attorneys, accountants, brokers,
investment advisors and other representatives and advisors), up to an amount not
to exceed $100,000.
(d) In the event that this Agreement is terminated by (i)
Kona or Coleman pursuant to Section 7.01(e)(i), Section 7.01(e)(ii), Section
7.01(e)(iii) or Section 7.01(e)(iv) and neither Kona nor Coleman shall have
breached any representation, warranty or covenant contained herein in any
material respect or (ii) the Company pursuant to Section 7.01(f)(ii), then the
Company shall pay to Kona upon demand, payable in same day funds, the actual,
documented out-of-pocket costs and expenses of Kona reasonably incurred in
connection with this Agreement and the transactions contemplated by this
Agreement (including the reasonable fees of attorneys, accountants, brokers,
investment advisors and other representatives and advisors), up to an amount not
to exceed $400,000 (the "KONA EXPENSE REIMBURSEMENT").
SECTION 5.09. [INTENTIONALLY OMITTED]
SECTION 5.10. COMPANY CLASS B COMMON STOCK RESTRICTIONS. Until the
earlier of the Effective Time or the termination of this Agreement according to
its terms, no holder of Company Class B Common Stock shall, directly or
indirectly, (i) sell, transfer or otherwise dispose of any shares of Company
Class B Common Stock; and (ii) convert any shares of Company Class B Common
Stock into shares of Company Class A Common Stock.
SECTION 5.11. INDEMNIFICATION AND INSURANCE.
(a) All rights to indemnification existing in favor of
the present or former directors, officers and employees (or any person who
served at the Company's or any of its subsidiaries' request as an officer,
director or agent) of the Company or any of its subsidiaries (or any other
entity or enterprise, such as, a partnership, joint venture, trust or employee
benefit plan) as provided in the Company's Certificate of Incorporation or
Bylaws, or the articles of organization, bylaws or similar documents of any of
the Company's subsidiaries or other entity or enterprise and the indemnification
agreements, if any, with such person or persons, as in effect as of the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect without
modification (other than modifications that would enlarge the indemnification
rights) for a period of not less than five years following the Effective Time,
and the Surviving Corporation shall comply fully with its obligations hereunder
and thereunder. The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall not be amended, repealed or otherwise modified for the period
set forth in the preceding sentence in any manner that would adversely affect
the rights thereunder of individuals who as of the date hereof were directors,
officers or employees of the Company or otherwise entitled to indemnification
under the Certificate of Incorporation or Bylaws of the Company (the
"INDEMNIFIED PARTIES"). It is understood and agreed that the Company shall, to
the fullest extent permitted under applicable law and regardless of whether the
Merger becomes effective, indemnify, defend and hold harmless, and after
25
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable law, indemnify, defend and hold harmless, each
Indemnified Party against any costs or expenses (including reasonable attorney's
fees), judgments, fines, losses, claims, damages, liabilities, and amounts paid
in settlement entered into with the consent of the Surviving Corporation (which
consent shall not be unreasonably withheld) in connection with any claim,
action, suit, proceeding or investigation, including without limitation,
liabilities arising out of this Agreement and the transactions contemplated
hereby, to the extent that it was based on the fact that such Indemnified Party
is or was a director, officer or employee of the Company and arising out of
actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time, and in the event of any such claim, action, suit proceeding
or investigation (whether arising before or after the Effective Time), (i) the
Company or the Surviving Corporation, as applicable, shall pay the reasonable
fees and expenses of one counsel (provided that if different Indemnified Parties
are subject to different claims, actions, suits, proceedings or investigations,
each Indemnified Party may select his or her own counsel which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation), promptly
as statements therefor are received and (ii) the Company and the Surviving
Corporation will cooperate in the defense of such matter.
(b) The Company shall maintain in effect until the
Effective Time, in respect of acts or omissions occurring prior to the Effective
Time and in the current coverage amounts, policies of directors' and officers'
liability insurance and fiduciary insurance covering the persons described in
Section 5.11(a). For a period of five years following the Effective Time, the
Surviving Corporation shall maintain officers' and directors' liability
insurance and fiduciary insurance covering the Indemnified Parties who currently
or at the Effective Time are covered by the Company's officers' and directors'
liability insurance and fiduciary insurance policies on terms not less favorable
than those in effect on the date hereof in terms of coverage and amounts;
PROVIDED, HOWEVER, that if the aggregate annual premiums for such insurance at
any time during such period exceed 300% of the premium paid by the Company for
such insurance as of the date hereof, then the Surviving Corporation shall
provide the maximum coverage that will then be available at an annual premium
equal to 300% of such per annum rate as of the date hereof.
(c) The Surviving Corporation shall pay all reasonable
costs and expenses, including attorney's fees, that may be incurred by any
Indemnified Parties in enforcing the indemnity and other obligations provided
for in this Section 5.11.
(d) Notwithstanding Section 8.01, this Section 5.11 shall
survive the consummation of the Merger and, notwithstanding Section 8.03, is
intended to benefit, and shall be enforceable by, any person or entity entitled
to be indemnified hereunder. If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its assets
to any Person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 5.11.
26
SECTION 5.12. NO FURTHER REPRESENTATIONS OR WARRANTIES; LIMITATION OF
LIABILITY; KNOWLEDGE OF KONA AND COLEMAN. In entering into this Agreement, Kona
and Coleman: (i) acknowledge that, other than as set forth in this Agreement,
the Disclosure Letter or the other documents required to be delivered by the
Company or referred to herein, none of the Company, its subsidiaries or any of
their respective directors, officers, employees, affiliates, agents or
representatives makes any representation or warranty, either express or implied,
as to the accuracy or completeness of any of the information provided or made
available to Kona or Coleman or their agents or representatives; (ii) agree, to
the fullest extent permitted by law (except with respect to fraud), that none of
the Company, its subsidiaries or any of their respective directors, officers,
employees, stockholders, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Kona or Coleman on any basis
(including without limitation in contract, tort or otherwise) based upon any
information provided or made available, or statements made, to Kona or Coleman;
and (iii) acknowledge that, as of the date hereof, neither they nor any
Continuing Stockholder have any knowledge of any representation or warranty of
the Company being untrue or inaccurate in any material respect.
SECTION 5.13. FINANCING.
(a) In the event that the Senior Debt Commitment Letter
or the Subordinated Debt Commitment Letter is terminated under circumstances
where the conditions set forth in Article VI are otherwise satisfied (other than
conditions that can only be satisfied at Closing), Kona shall use its
commercially reasonable efforts to obtain alternative debt funding in an amount
equal to the amount to be provided pursuant to the Senior Debt Commitment Letter
and the Subordinated Debt Commitment Letter, in each case on terms and
conditions substantially comparable to those provided in the Senior Debt
Commitment Letter or the Subordinated Debt Commitment Letter, as applicable.
(b) Following the date hereof, any amendment,
modification, termination or cancellation of the Senior Debt Financing or the
Subordinated Financing, or any information (other than information which is
known generally in the financial markets) that becomes known to Coleman or to
Kona or any of its officers or directors that makes any such Person reasonably
believe that it will be unlikely that the Senior Debt Financing or the
Subordinated Debt Financing will be obtained on the terms set forth in the
Senior Debt Commitment Letter or the Subordinated Debt Commitment Letter,
respectively, shall be promptly disclosed to the Special Committee. Neither
Coleman nor Kona or any of its officers or directors will knowingly attempt,
directly or indirectly, to induce or encourage LBNA or KPP or any other
applicable entity not to fund any of the financing provided for in the Senior
Debt Commitment Letter or the Subordinated Debt Commitment Letter, as
applicable.
(c) In no event shall the proceeds of the financings
contemplated by the Senior Debt Commitment Letter and the Subordinated Debt
Commitment Letter be used by the Company or the Surviving Corporation directly
or indirectly to purchase or redeem shares of (i) Company Class A Common Stock
held by the Continuing Stockholders, (ii) Company Class B Common Stock, or (iii)
Class A common stock of
27
the Surviving Corporation held by the Continuing Stockholders, Jean C. Coleman
or The Coleman Limited Partnership.
SECTION 5.14. CONTINUING STOCKHOLDERS. Coleman shall vote all shares of
Company Class A Common Stock and Company Class B Common Stock that he
beneficially owns (including, without limitation, shares held of record by The
Coleman Limited Partnership, The Coleman Charitable Foundation and Jean C.
Coleman) in favor of the Merger at the Stockholders' Meeting. Coleman shall use
his best efforts to ensure that all other Continuing Stockholders vote all of
their shares of Company Class A Common Stock and Company Class B Common Stock in
favor of the Merger at the Stockholders' Meeting.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party hereto to consummate the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing (such waiver by the Company based solely on approval by the
Special Committee), by agreement of all the parties hereto (it being understood
that each such condition is solely for the benefit of the parties hereto and may
be waived in writing by their mutual agreement without notice, liability, or
obligation to any Person):
(a) STOCKHOLDER APPROVAL. The Requisite Approval shall
have been obtained.
(b) DISINTERESTED STOCKHOLDER APPROVAL. The Company shall
have received the affirmative vote of the holders of a majority of the
outstanding shares of Company Class A Common Stock Held by the Disinterested
Stockholders entitled to vote at the Stockholders' Meeting.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by a Governmental Entity seeking any of
the foregoing be pending. No action taken by any Governmental Entity, and no
statute, rule, regulation or order shall have been enacted, entered, enforced,
or deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
(d) GOVERNMENTAL APPROVALS. All consents, authorizations,
orders, and approvals of (or filings or registrations with) any Governmental
Entity or any other Person required to be obtained or made prior to the
Effective Time in connection with the execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby
shall have been obtained or made, except for the filing of the Certificate of
Merger pursuant to Section 1.03.
28
(e) [INTENTIONALLY OMITTED]
(f) OPINION OF FINANCIAL ADVISOR. The Financial Advisor
shall not have withdrawn its opinion delivered to the Special Committee of the
Company, dated March 1, 2004, or its consent for the Company to include the name
of the Financial Advisor and a description of such opinion in the Company's
Schedule 13E-3 and Proxy Statement.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, by the Company,
such waiver based solely on approval by the Special Committee (it being
understood that each such condition is solely for the benefit of the Company and
may be waived in writing by the Company in its sole discretion without notice,
liability or obligation to any Person):
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. For
purposes of this Section 6.02(a), the accuracy of the representations and
warranties of Kona and Coleman set forth in this Agreement shall be assessed as
of the date of this Agreement and as of the Closing with the same effect as
though all such representations and warranties had been made on and as of the
Closing (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). There shall not exist
inaccuracies in the representations and warranties of Kona and Coleman set forth
in this Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a material adverse effect on (A) the business,
assets, liabilities, operations, results of operations, properties (including
intangible properties), regulatory status or condition (financial or otherwise)
of Kona or of the Surviving Corporation; (B) the legality, validity, binding
effect or enforceability of this Agreement, or (C) the ability of Kona to
perform its obligations under this Agreement; PROVIDED THAT, for purposes of
this sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or to the "Knowledge" of
any Person shall be deemed not to include such qualifications. Kona shall have
performed and complied in all material respects with all covenants, obligations,
and conditions of this Agreement required to be performed and complied with by
it at or prior to the Closing.
(b) RECEIPT OF CERTIFICATES OF KONA. The Company shall
have received certificates executed (i) on behalf of Kona by an authorized
officer of Kona and (ii) by Coleman, each certifying that the conditions set
forth in Section 6.02(a) shall have been satisfied.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF KONA AND COLEMAN.
The obligations of Kona and Coleman to consummate the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions, any of which may be waived, in writing, by Kona, on
its behalf and on behalf of Coleman (it being understood that each such
condition is solely for the benefit of Kona and Coleman and may be waived in
writing by Kona in its sole
29
discretion, on its behalf and on behalf of Coleman, without notice, liability or
obligation to any Person):
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. For
purposes of this Section 6.03(a), the accuracy of the representations and
warranties of the Company set forth in this Agreement shall be assessed as of
the date of this Agreement and as of the Closing with the same effect as though
all such representations and warranties had been made on and as of the Closing
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). There shall not exist inaccuracies in
the representations and warranties of the Company set forth in Sections 3.01(b),
3.01(d) (solely as it relates to the authorized and outstanding capitalization
of the Company), 3.01(e), and 3.01(f). There shall not exist any inaccuracies in
the other representations and warranties of the Company set forth in this
Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect; PROVIDED THAT, for
purposes of this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" or to the
"knowledge" of any Person shall be deemed not to include such qualifications.
The Company shall have performed and complied in all material respects with all
covenants, obligations, and conditions of this Agreement required to be
performed and complied with by it at or prior to the Closing.
(b) RECEIPT OF CERTIFICATE OF THE COMPANY. Kona shall
have received a certificate executed on behalf of the Company by an authorized
officer of the Company certifying that the conditions set forth in Section
6.03(a) shall have been satisfied.
(c) THIRD PARTY CONSENTS. Kona shall have received
evidence satisfactory to it of the consent or approval of those Persons whose
consent or approval shall be required in connection with the Merger under each
contract listed in Section 6.03(c) of the Disclosure Letter.
(d) NO MATERIAL ADVERSE EFFECT. There shall not have
occurred after the date hereof any change, event or condition that, individually
or in the aggregate with any other changes, events and conditions, has resulted
in, or that could reasonably be expected to result in, a Material Adverse
Effect.
(e) DISSENTERS. The aggregate number of shares of Class A
Common Stock Held by the Dissenting Stockholders, other than Dissenting
Stockholders who are also Continuing Stockholders, shall not exceed 10% of the
total number of shares of Company Class A Common Stock on the Closing Date.
(f) FINANCING ARRANGEMENTS. Kona shall have consummated
borrowings from one or more lenders (the "LENDER(S)") under terms satisfactory
to Kona, which borrowings, when taken in the aggregate with other funds
available to Kona, are received from the Lenders sufficient to pay the Total
Cash Merger Consideration and all expenses and fees of Kona arising out of the
negotiation, documentation, and consummation of the transactions contemplated
hereby.
30
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated and the
Merger abandoned:
(a) by mutual written consent duly authorized by the
respective Boards of Directors of Kona and the Company;
(b) by either Kona, Coleman or the Company, if the
Effective Time shall not have occurred on or before 182 days from the date
hereof, PROVIDED, HOWEVER, that the right to terminate this Agreement under this
paragraph (b) shall not be available to any party whose misrepresentation in
this Agreement or whose failure to perform any of its covenants and agreements
or to satisfy any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date;
(c) by either Kona, Coleman or the Company, if any
federal, state or foreign court of competent jurisdiction or other Governmental
Entity shall have issued any judgment, injunction, order or decree prohibiting,
enjoining or otherwise restraining the transactions contemplated by this
Agreement and such judgment, injunction, order or decree shall have become final
and nonappealable (provided however, that the party seeking to terminate this
Agreement pursuant to this paragraph (c) shall have used reasonable efforts to
remove such judgment injunction, order or decree) or if any statute, rule,
regulation or executive order promulgated or enacted by any federal or state
governmental authority after the date of this Agreement which prohibits the
consummation of the Merger shall be in effect;
(d) by either Kona, Coleman or the Company, if (i) the
Requisite Approval is not obtained and (ii) the condition set forth in Section
6.01(b) has not been satisfied, in each case at the Stockholders' Meeting
(including any adjournment or postponement thereof permitted by this Agreement);
(e) by Kona or Coleman, if: (i) the Company shall have
breached any representation, warranty, or covenant contained herein in any
material respect, and (A) such breach shall not have been cured within ten
Business Days after receipt by the Company of written notice of such breach
(PROVIDED, HOWEVER, that no such cure period shall be available or applicable to
any such breach that by its nature cannot be cured), and (B) if not cured at or
prior to the Closing, such breach would result in the failure of any of the
conditions set forth in Section 6.03(a) to be satisfied; (ii) the Stockholders'
Meeting shall not have occurred on or before 180 days from the date hereof;
(iii) an Adverse Recommendation has occurred, or (iv) a Material Adverse Effect
shall have occurred; and
(f) by the Company: (i) if Kona or Coleman shall have
breached any representation, warranty or covenant contained herein in any
material respect, and (A) such breach shall not have been cured within ten
Business Days after receipt by Kona of written notice of such breach (PROVIDED,
HOWEVER, that no such cure period shall be
31
available or applicable to any such breach that by its nature cannot be cured),
and (B) if not cured at or prior to the Closing, such breach would result in the
failure of any of the conditions set forth in Section 6.02(a) to be satisfied;
or (ii) in accordance with the terms and subject to the conditions of Section
4.02(a).
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company, Coleman or Kona as provided in Section
7.01, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of the Company, Coleman or Kona, other than
Section 5.08, Section 5.11 this Section 7.02 and Article VIII and except for any
material willful breach of this Agreement by any party hereto (which material
willful breach and liability therefor shall not be affected by termination of
this Agreement).
SECTION 7.03. EXTENSION, WAIVER. At any time prior to the Effective
Time, any party hereto may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto; (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party. Without
limiting the generality or effect of the preceding sentence, no delay in
exercising any right under this Agreement shall constitute a waiver of such
right, and no waiver of any breach or default shall be deemed a waiver of any
other breach or default of the same or any other provision in this Agreement. No
such waiver by the Company shall be valid unless approved in advance by the
Special Committee.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NON SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
warranties, representations and covenants of the Company, Kona and Coleman
contained in or made pursuant to this Agreement shall not survive the Effective
Time; PROVIDED, HOWEVER, that this Section 8.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 8.02. INDEMNITY BY THE COMPANY.
(a) INDEMNIFICATION. The Company shall indemnify, defend,
and hold harmless Kona, its officers, directors, and stockholders, and their
respective successors and permitted assigns (each solely in their capacity as
such) and their representatives, attorneys, consultants and agents
(individually, an "INDEMNIFIED PARTY" and collectively, the "INDEMNIFIED
PARTIES") from and against any and all actual damages, costs, and expenses
actually incurred (including reasonable attorneys' fees but excluding claims for
consequential damages or claims for lost profit) ("DAMAGES") resulting from,
arising from, or caused by any claims of current or former stockholders of the
Company against Kona or its directors made in connection with or related to the
Merger or any other transaction contemplated by this Agreement, or the execution
and delivery of this
32
Agreement; PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not
apply to any Damages to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by Kona expressly for use in the
Preliminary Proxy Statement, Proxy Statement, or the Schedule 13E-3 (or any
amendment or supplement thereto).
(b) CLAIMS PROCEDURES.
(i) If any claim, action at law, or suit in
equity is instituted by a current or former stockholder of the Company against
an Indemnified Party with respect to which an Indemnified Party would qualify
for indemnification for any Damages under paragraph (a) of this Section 8.02 (an
"ASSERTION"), such Indemnified Party shall give written notice to the Company of
such Assertion with reasonable promptness. The failure to give the notice
required by this paragraph (b) with reasonable promptness shall not relieve the
Company of its indemnification obligations hereunder except to the extent that
the Company is actually prejudiced as a result of the failure to give such
notice.
(ii) The Company shall have the right to defend
the Indemnified Party by appropriate proceedings and shall have the sole power
to direct and control the defense of such Assertion. If any Indemnified Party
desires to participate in any such defense it may do so at its sole cost and
expense; PROVIDED, HOWEVER, that if the defendants in any such action shall
include the Company and/or its officers or directors as well as an Indemnified
Party and such Indemnified Party shall have received the written advice of
counsel that there exist defenses available to such Indemnified Party that are
materially different from those available to the Company and/or such officers or
directors, the Indemnified Party shall have the right to select one separate
counsel (and one local counsel in such jurisdictions as are necessary),
reasonably acceptable to the Company, to participate in the defense of such
action on its behalf, at the expense of the Company.
(iii) The Indemnified Party and the Company shall
cooperate with each other to the fullest extent possible in regard to all
matters relating to the Assertion, including corrective actions required by
applicable law, assertion of defenses, the determination, mitigation,
negotiation and settlement of all amounts, costs, actions, penalties, damages
and the like related thereto, access to the books and records of the Company and
its Subsidiaries, and, if necessary, providing the Company and its counsel with
any powers of attorney or other documents required to permit the Company and its
counsel to act on behalf of the Indemnified Party.
(iv) Neither the Indemnified Party nor the
Company shall settle any Assertion without the consent of the other party, which
consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that if such
settlement involves the payment of money only and the release of all claims and
the Indemnified Party is completely indemnified therefore and nonetheless
refuses to consent to such settlement, the Company shall cease to be obligated
for such Assertion. Any compromise or settlement
33
of the Assertion under this paragraph (b) shall include as an unconditional term
thereof the giving by the claimant in question to the Company and the
Indemnified Party of a release of all liabilities in respect of such Assertion.
(c) With respect to any Assertion hereunder, the amount
recoverable by any Indemnified Party shall take into account any reimbursements
realized by such Indemnified Party from insurance policies or other
indemnification sources, arising from the same incident or set of facts or
circumstances giving rise to the claim for indemnification. Upon the payment of
any Damages by the Company to any Indemnified Party, the Company shall have a
right of subrogation with respect to any insurance proceeds or other rights to
third party reimbursement for such claims held by such Indemnified Party.
SECTION 8.03. ASSIGNMENT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY
BENEFICIARIES. Neither this Agreement nor any of the rights, interests, or
obligations hereunder 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. Subject to the preceding sentence, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
SECTION 8.04. GOVERNING LAW. This Agreement shall be governed by and
construed under the Delaware Law, without regard to the conflict of law
principles of said State.
SECTION 8.05. 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 hereto and delivered to the other parties hereto.
SECTION 8.06. TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
SECTION 8.07. NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
delivered: (a) by hand; (b) by U.S. mail, certified mail, return receipt
requested; or (c) by facsimile to the party to be notified, at the following
address or facsimile number indicated for such party, or at such other address
or facsimile number as such party may designate by ten (10) days' advance
written notice to the other parties:
If to the Company or the Special Committee:
Integrity Media, Inc.
34
1000 Cody Road
Mobile, Alabama 36695
Attention: Jerry W. Weimer
Facsimile Number: (251) 776-5199
Jimmy M. Woodward
c/o Flowers Foods
1919 Flowers Circle
Thomasville, Georgia 31757
Facsimile Number: (229) 225-3808
with copies to:
(prior to April 12, 2004)
Jones Day
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Lizanne Thomas
Facsimile Number: (404) 581-8330
(after April 12, 2004)
Jones Day
Pershing Park Plaza
Suite 800
1420 Peachtree Street, N.E.
Atlanta, Georgia 30309-3053
Attention: Lizanne Thomas
Facsimile Number: (404) 581-8330
If to Kona or Coleman:
Kona Acquisition Corp.
c/o Integrity Media, Inc.
1000 Cody Road
Mobile, Alabama 36695
Attention: P. Michael Coleman
Facsimile Number: (251) 776-5199
with copies to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Alexander W. Patterson
35
Facsimile Number: (404) 253-8289
Notices shall be deemed to have been given and served: (i) where delivered by
hand, at time of delivery; (ii) where delivered by U.S. mail, on acknowledgment
of receipt as shown by the date indicated on the return receipt as having been
received; and (iii) where delivered by facsimile, 24 hours after transmission
confirmation by the transmitting machine unless, within those 24 hours the
intended recipient has informed the sender that the transmission was received in
an incomplete or garbled form, or the transmission report of the sender
indicates a faulty or incomplete transmission. If such receipt is on a day that
is not a working day or is later than 5 p.m. (local time) on a working day, the
notice shall be deemed to have been given and served on the next working day.
SECTION 8.08. DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power, or remedy accruing to Kona or Coleman, on one hand, or the Company
on the other hand, upon any breach or default of the other party or parties
under this Agreement shall impair any such right, power, or remedy of the
non-breaching or non-defaulting party, nor shall it be construed to be a waiver
of any such breach or default or an acquiescence thereto, or to any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of Kona or Coleman, on one hand, or the Company on the
other hand, of any breach or default under this Agreement, or any waiver on the
part of Kona or Coleman, on one hand, or the Company on the other hand, of any
provisions or conditions of this Agreement, must be made in writing and shall be
effective only to the extent specifically set forth in such writing.
SECTION 8.09. EXPENSES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
SECTION 8.10. AMENDMENTS AND WAIVERS. This Agreement may be amended by
the parties at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
upon obtaining the Requisite Approval, no amendment shall be made that by law
requires further approval by the stockholders of the Company, without such
approval. This Agreement may not be amended or modified except by an instrument
in writing signed on behalf of each of the parties hereto. At any time prior to
the Effective Time, Kona or the Company may, to the extent legally allowed,
extend the time specified herein for the performance of any of the obligations
or other acts of the other, waive any inaccuracies in the representations and
warranties of the other contained herein or in any document delivered pursuant
hereto, or waive compliance by the other with any of the agreements or covenants
of such other party or parties (as the case may be) contained herein. Any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of the party or parties to be bound thereby. No such extension
or waiver by the Company shall be valid unless approved in advance by the
Special Committee. No such extension or waiver shall constitute a waiver of, or
estoppel with respect to, any
36
subsequent or other breach or failure to strictly comply with the provisions of
this Agreement. The failure of any party to insist on strict compliance with
this Agreement or to assert any of its rights or remedies hereunder or with
respect hereto shall not constitute a waiver of such rights or remedies.
SECTION 8.11. SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
SECTION 8.12. ENTIRE AGREEMENT. This Agreement, the documents referred
to herein and the documents delivered in connection herewith constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
SECTION 8.13. 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) a "BUSINESS DAY" means a day other than a Saturday,
Sunday or federal holiday;
(c) a "COMPANY OPTION" means an option to purchase shares
of Company Class A Common Stock issued pursuant to the Integrity Media, Inc.
2002 Stock Option Plan for Outside Directors, Integrity Media, Inc. 2001
Long-Term Incentive Plan, Integrity Incorporated 1999 Long-Term Incentive Plan,
Integrity Music, Inc. Long-Term Incentive Plan adopted in 1994 and Integrity
Music, Inc. 1994 Stock Option Plan for Outside Directors;
(d) a "CONTINUING STOCKHOLDER" means the following
holders of Company Class A Common Stock and/or Company Options: Coleman, Jerry
W. Weimer, Donald J. Moen, Daniel D. McGuffey, Keith J. Manwaring, Chris E.
Thomason, Robert E. Rist, Donald S. Ellington, Jeff Friend, Robert Brenner, Todd
Burkhalter, Debra Mayes, Doug Meduna and Joyce O'Connor;
(e) a "DISINTERESTED STOCKHOLDER" means a holder of
Company Class A Common Stock that is neither (i) affiliated with the Company as
an officer or director, (ii) a Continuing Stockholder, nor (iii) The Coleman
Charitable Foundation;
(f) a "GOVERNMENTAL ENTITY" means any supranational,
national, state, municipal, local or foreign government, any court, tribunal,
arbitrator, administrative agency, commission or other governmental official,
authority or instrumentality, in each case whether domestic or foreign, any
stock exchange or similar self-regulatory organization or any quasi-governmental
or private body exercising any regulatory, taxing or other governmental or
quasi-governmental authority;
37
(g) "HELD" means having the power to vote or dispose, or
to direct the voting or disposition, of Company Class A Common Stock or Company
Class B Common Stock, PROVIDED, HOWEVER, that no Person will be deemed to have
Held shares of Company Class A Common Stock or Company Class B Common Stock with
respect to which such Person has an obligation to forward communications to
beneficial owners pursuant to Rule 14b-1 or Rule 14b-2 promulgated under the
Exchange Act;
(h) "HELD OF RECORD" has the meaning assigned in Rule
12g5-1 under the Exchange Act, as interpreted by the SEC;
(i) as it relates to the Company, "KNOWLEDGE" or "KNOWN"
means, with respect to any matter in question, or refers to, the actual
knowledge of the Continuing Stockholders;
(j) a "MATERIAL ADVERSE EFFECT" on or with respect to the
Company means any state of facts, change, development, effect or occurrence (any
such item, an "EFFECT") that is, or is likely to be, materially adverse to (i)
the business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole; (ii) the
legality, validity, binding effect or enforceability of this Agreement, or (iii)
the ability of the Company to perform its obligations under this Agreement;
PROVIDED, HOWEVER, that for purposes of clause (i) of this definition, an Effect
shall be deemed to be "materially adverse" only if it will, or would reasonably
be expected to, cost the Company (or reduce its value by) an amount equal to or
in excess of $750,000; PROVIDED, FURTHER, that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor shall any of
the following be taken into account in determining whether there has been, or
will be, a material adverse effect on or with respect to the Company: (A)
actions or omissions of the Company or any Subsidiary of the Company taken with
the prior consent of Kona or Coleman; (B) any change in the price or trading
volume of Company Class A Common Stock in and of itself (but not any Effect
underlying such change); (C) any Effect to the extent (I) resulting from changes
affecting the United States economy in general or (II) generally affecting the
industries in which the Company operates, except, in the case of this clause
(C)(II), if the impact on the Company's business is materially disproportionate
to the impact on the business of other entities operating in such industries;
(D) any Effect to the extent resulting from changes affecting general worldwide
economic or capital market conditions; (E) any Effect to the extent resulting
from the announcement or pendency of the Merger (except for any suit, action,
investigation or proceeding if the underlying claim is not dependent on the
announcement or pendency of the Merger); or (F) any changes from the date of
this Agreement in any laws, orders, rules or regulations of any Governmental
Entity, or accounting regulations and principles, applicable to the Company;
(k) a "PERSON" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
Governmental Entity, unincorporated organization or other entity;
38
(l) a "NON-CONTINUING STOCKHOLDER" means any holder of
Company Class A Common Stock or Company Options that is not a Continuing
Stockholder; and
(m) a "SUBSIDIARY" of any Person means another Person (i)
of which 50% or more of any class of capital stock, voting securities, other
voting ownership or voting partnership interests (or, if there are no such
voting interests, 50% or more of the equity interests) are owned or controlled,
directly or indirectly, by such first Person or (ii) of which such first Person
is a general partner.
SECTION 8.14. INTERPRETATION. When a reference is made in this
Agreement to an Article or to a Section, Subsection, Exhibit or Schedule, such
reference shall be to an Article of, a Section or Subsection of, or an Exhibit
or Schedule to, this Agreement unless otherwise indicated. The 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. The words "hereof,"
"hereto," "hereby," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The words "date hereof' shall refer to
the date of this Agreement. The term "or" is not exclusive. The word "extent" in
the phrase "to the extent" shall mean the degree to which a subject or other
thing extends, and such phrase shall not mean simply "if." The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms. Any agreement or instrument defined or referred to herein
or in any agreement or instrument that is referred to herein means such
agreement or instrument as from time to time amended, modified or supplemented.
References to a person are also to its permitted successors and assigns.
SECTION 8.15. CONSENT TO JURISDICTION. Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the exclusive jurisdiction of any Delaware State court, or federal court of the
United States of America, sitting in Delaware, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the transactions
contemplated hereby or thereby or for recognition or enforcement of any judgment
relating thereto, and each of the parties hereby irrevocably and unconditionally
(A) agrees not to commence any such action or proceeding except in such courts,
(B) agrees that any claim in respect of any such action or proceeding may be
heard and determined in such Delaware State court or, to the extent permitted by
law, in such federal court, (C) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
federal court, and (D) waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such Delaware State or federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.07. Nothing
in this
39
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 8.16. WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.16.
[SIGNATURE PAGE FOLLOWS ]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed personally or by a duly authorized representative
thereof, all as of the date first written above.
COMPANY:
Integrity Media, Inc.
By: /s/ Donald S. Ellington
----------------------------------
Donald S. Ellington
Senior Vice President of Finance
and Administration
KONA:
Kona Acquisition Corp.
By: /s/ P. Michael Coleman
----------------------------------
P. Michael Coleman
President
COLEMAN:
/s/ P. Michael Coleman
-------------------------------------
P. Michael Coleman
41